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ConocoPhillips to acquire Concho Resources in all-stock transaction

20 Oct, 2020
119
ConocoPhillips’ Headquarters. Image © ConocoPhillips Company.


On Monday, ConocoPhillips and Concho Resources revealed that they have entered into a definitive agreement to combine companies in an all-stock transaction, valued at $9.7 billion.

Under the terms of the transaction, each share of Concho Resources common stock will be exchanged for a fixed ratio of 1.46 shares of ConocoPhillips common stock, representing a 15 per cent premium to closing share prices on 13 October.

The transaction will create a company with an approximately $60 billion enterprise value that will offer stakeholders a superior investment choice for sustainable performance and returns through cycles.

Chairman and Chief Executive Officer of ConocoPhillips, Ryan Lance, said the transaction is an affirmation of the commitment to lead a structural change for the industry.

“Together, ConocoPhillips and Concho will have unmatched scale and quality across the important value drivers in our business: an enviable low cost of supply asset base, a strong balance sheet, a disciplined capital allocation approach, ESG excellence and great people,” Mr Lance said.

“Importantly, the transaction meets our long-stated and clear criteria for mergers and acquisitions because it is completely consistent with our financial and operational framework.”

Chairman and Chief Executive Officer of Concho Resources, Tim Leach, said the transaction will create more scale and resources to create shareholder value in today’s markets and beyond.

“From our position of strength and in light of market trends, our board of directors and management team evaluated a wide range of options and unanimously ConocoPhillips to Acquire Concho Resources in All-Stock Transaction determined that combining with ConocoPhillips is the best path forward for Concho and our shareholders,” he detailed.

“We look forward to bringing together our complementary operations, teams and cultures to realise the upside potential of this exciting combination.”

Transaction Details

The transaction is subject to the approval of both ConocoPhillips and Concho stockholders, regulatory clearance and other customary closing conditions.

The transaction is expected to close in the first quarter of 2021. In the meantime, an integration planning team consisting of representatives from both companies will be formed to ensure required business processes and programs are implemented seamlessly post-closing.

In light of the pending merger, ConocoPhillips has suspended share repurchases until after the transaction closes.

“Opportunities to consolidate quality on the scale of these two companies do not come along often, so we are seizing this moment to create a company to lead the necessary transformation of our vital sector for the benefit for all stakeholders in the future,” Mr Lance said.

Upon closing, Concho’s Chairman and Chief Executive Officer, Tim Leach, will join ConocoPhillips’ board of directors and executive leadership team as Executive Vice President and President, Lower 48.

Highlights of the transaction include:

  • Two best-in-class asset portfolios that create a combined resource base of approximately 23 billion barrels of oil equivalent with a less than $40 per barrel WTI cost of supply and an average cost of supply below $30 per barrel WTI.
  • A high-quality balance sheet that offers superior sustainability, resilience and flexibility across price cycles;
  • ConocoPhillips and Concho expect to capture $500 million of annual cost and capital savings by 2022;
  • A financial framework that delivers greater than 30 per cent of cash from operations via compelling dividends and additional distributions; and
  • Elevated commitment to environmental, social and governance excellence with a newly adopted Paris Aligned Climate Risk strategy.

The full announcement can be found online here.

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