ConocoPhillips Will Acquire Concho Resources

The Largest US Oil Deal Since Before the Pandemic

ConocoPhillips (COP) has reached an agreement to acquire Concho Resources (CXO) for $9.7 billion in an all-stock transaction. This will be the largest oil deal in the US since the COVID-19 pandemic began.

ConocoPhillips is the top oil producer in Alaska. Its acquisition of Concho Resources will give the company a more significant presence in the Permian Basin of Texas and New Mexico. When the deal closes, the new combined entity will be the biggest US oil independent and will pump 1.5 million barrels of oil per day.

Other Oil Industry Tie-Ups

The US oil industry has seen an uptick in merger and acquisition activity recently as companies continue to struggle with sparse demand and low prices. Since June, oil prices have stayed at about $40 per barrel, which is lower than what many companies need to make a profit on new shale wells.

Last month, Devon Energy (DVN) agreed to a $2.6 billion merger with WPX Energy (WPX). In July, Chevron (CVX) agreed to purchase Noble Energy for $5 billion. These were both all-stock deals, like the ConocoPhillips-Concho Resources deal.

The Advantage of Joining Forces

Both ConocoPhillips and Concho have faced significant challenges this year. As of the end of last week, Concho’s shares have dropped by about 25% over the past year while the S&P 500 index climbed by 17%. ConocoPhillips’ share price has fallen by about 38% during the same period.

The companies are hoping that joining forces will help them better respond to changes in the oil industry. ConocoPhillips said the combined company will be able to reduce costs by $500 million per year by 2022. The companies also plan to use their combined efforts to lower greenhouse gas emissions. The deal is expected to close early in 2021.

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