ConocoPhillips aims for consolidation with $9.7 billion Concho Resources acquisition

ConocoPhillips yesterday announced it will buy US shale oil producer Concho Resources for US$9.7 billion, in the latest example of consolidation in the energy sector following depressed oil prices and demand due to the COVID-19 pandemic.

The deal sees 1.46 shares of ConocoPhillips swapped for each Concho share at a premium of about 1.5% on its Friday price. Shares of both companies fell on Monday amid a market sell-off, with Concho down to $47.26. They had sold for as high as $93 a share in January, prior to the market crash.

“Size, scope and scale has become more important,” said Concho chief executive Timothy Leach, who will run the combined company’s US production, excluding Alaska. “This combination with ConocoPhillips was the best thing for our shareholders.”

For ConocoPhillips, the acquisition makes it the largest independent oil and gas producer in the US, pumping 1.5 million barrels per day (bpd), and a major player in the Permian Basin – the prime US shale oil field.

Concho was viewed as a prime takeover target due to its low-cost supply traits, according to ConocoPhillips CEO Ryan Lance. He added that the outfits share a vision for building a business that can endure volatile markets.

The deal, which faces shareholder votes, is expected to provide $500 million in annual cost and capital savings by 2022.