Concho Resources (NYSE:CXO) has inked a $1 billion deal to buy all of the oil and natural gas assets of privately-held energy explorer Three Rivers.
Three Rivers has about 200,000 net acres in the Permian Basin, which spans Texas and New Mexico. It also has large positions in the northern Delaware Basin play, the Midland Basin Wolfberry play, and the southern Midland Basin horizontal Wolfcamp and Cline shale plays.
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The purchase highlights the recent boom in the U.S. energy sector as oil prices continue to rise and new technology, such as horizontal drilling, allows companies to extract harder-to-reach oil.
The industry’s growth prospect was underscored earlier this year when private equity firms Riverstone and Apollo Global Management (NYSE:APO) led a consortium that paid $7.15 billion of El Paso’s (NYSE:EP) oil and gas exploration and production business.
Three Rivers has proved reserves of about 58 million barrels of oil equivalent and estimated net production of 7,000 barrels of oil equivalent a day. With the acquisition, Concho also receives 380 horizontal drilling locations and more than 1,100 vertical drilling locations.
“We are pleased to announce our largest and most strategic transaction since the Marbob acquisition nearly two years ago,” Concho CEO Timothy Leach said in a statement. “Combined with our existing portfolio, these assets give the company nearly 750,000 net acres across the Permian Basin, with exposure to some of the most exciting oil plays in the U.S.”
Concho, which is being advised by JPMorgan (NYSE:JPM), said it would finance the deal using a $2 billion credit facility, which had about $1.8 billion remaining as of the end of March, and from the sale of $200 million to $400 million of non-core assets over the next nine months.
The transaction, which is expected to be immediately accretive to earnings, is on track to close in July, subject to regulatory approval and customary closing conditions, Concho said in a statement released Sunday night.