The assets being divested by Concho Resources have a current production of around 25,000 barrels of oil equivalent per day
Texas-based oil and gas firm Concho Resources has agreed to offload its assets in the New Mexico Shelf to an affiliate of Spur Energy Partners for $925m (£764.42m).
The sale includes acreage of nearly 100,000 gross acres which are currently producing close to 25,000 barrels of oil equivalent per day.
After the sale, Concho Resources will have a large footprint and development program in southeastern New Mexico.
The oil and gas firm plans to use the proceeds from the deal to pay down borrowings on its revolving credit facility and also begin a share repurchase program.
Why Concho Resources is selling the assets
Concho Resources chairman and CEO Tim Leach said: “Proactively managing our asset portfolio has long been a key part of our strategy. Divesting our New Mexico Shelf position enables us to accelerate the value of these legacy assets, while focusing our portfolio on opportunities with the highest potential for strong returns.
“Further, the transaction reduces our cost structure and allows us to achieve the leverage target we communicated earlier this year, while delivering additional returns to shareholders under an initial $1.5 billion share repurchase program.”
Subject to customary terms and conditions, the transaction is likely to be closed in November 2019.
Concho Resources focuses on the Permian Basin of Southeast New Mexico and West Texas. The company is engaged in the acquisition, development and exploration of oil and natural gas assets.
The buyer of its New Mexico Shelf assets – Spur Energy Partners, is a recently formed company that focuses on acquiring and developing oil and gas assets across the Lower 48 in US. The company targets assets which have base production and substantial low-cost development inventory.
Spur Energy Partners formed a partnership with global investment firm KKR in May 2019 to pursue oil and gas opportunities in the US. The partnership signed a deal around the same time to acquire the Permian Northwest Shelf assets of Percussion Petroleum.
As part of the acquisition, Spur Energy Partners gains interests in nearly 380 gross producing wells and 22,000 net acres located in the core of the Yeso formation in Eddy and Lea counties in New Mexico, along with associated water and midstream assets.