A major oil and gas producer in the Permian Basin planned to sell off some of its older assets in the region for almost a billion dollars.
Midland-based Concho Resources announced Tuesday that it would sell its New Mexico assets in the basin for $925 million to Houston-based Spur Energy Partners, read a Concho news release.
The sale included about 100,000 acres in the company’s New Mexico Shelf, which produce about 25,000 barrels of oil equivalent per day.
The company also planned to start a repurchase program of up to $1.5 billion in of the Concho’s shares of common stock, the release read.
Concho Chief Executive Officer Tim Leach said the move would allow the company to leverage itself into newer assets in the booming Permian Basin, while also protecting shareholders’ bottom lines.
“Proactively managing our asset portfolio has long been a key part of our strategy,” Leach said. “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.”
The proceeds from the sale would be used to pay back loans and initiate the repurchase program.
“Over the past decade, our Shelf team has done an excellent job of working safely and maximizing the value of these assets, and we are grateful for their hard work,” Leach said. “The share repurchase program demonstrates our continued confidence in our strategy to generate sustainable oil growth and strong cash flow and reflects our commitment to delivering long-term value to our shareholders.”
Following the sale, the Concho planned to maintain a “large presence” and development program in southeast New Mexico.
Another oil and gas company also upped its Permian presence as Cimarex Energy announced its plans to build a new field office in Carlsbad, per a report from Carlsbad Mayor Dale Janway.
Janway said the office was planned for a location off National Parks Highway, near Derrick Road.
The $2.9 million project would include 24 offices, and a 140-seat auditorium, Janway said.
The building would be about 16,000 square feet.
“This is another massive development in the epicenter of our nation’s oil boom,” Janway said.
The news came as New Mexico held on to its position as the third-largest oil producing state in the nation at 885,000 barrels per day as of June, per recent data from the federal Energy Information Administration (EIA).
New Mexico was behind North Dakota with about 1.4 million barrels per day, records show and Texas with about 4.9 million barrels per day.
Oklahoma was fourth at 547,000 barrels per day, and Colorado was fifth with 516,000 barrels per day, per the data.
Oil prices dip as trade tensions continue
September started with a significant drop in domestic oil prices, per data from NASDAQ, as the price per barrel of West Texas Intermediate (WTI) – a grade of crude oil used as a domestic pricing benchmark – fell to about $53 per barrel.
That drop followed continued fluctuations throughout August, as WTI peaked at about $57 per barrel, but a hit its lowest point early in the month at about $51 per barrel.
That was the lowest WTI traded at since January when the price per barrel dropped to just $45.
A report from Drillinginfo blamed the drastic price fluctuations on global market tensions as China and the U.S. struggled to come to a compromise during the ongoing trade war.
“The developments around the US–China trade war continue to drive price movements in both directions, and the sentiment on the issue is changing rather fast, although no resolution and no deal between the world’s two largest economies seem to be possible anytime soon,” read the report.
“Prices in the last two weeks have swung in both directions on this issue.”
The market was supported by comments from U.S. President Donald Trump that he would engage with the Chinese on trade negotiations, while extending a deal that allowed China’s Huawei Technologies to buy productions from American companies, the report read.
That support was short-lived, read the report, as China announced it would impose “retaliatory” tariffs on $75 billion in imports from the U.S., including crude oil.
A potential deal between the U.S. and Iran, leading to an increase in Iranian production, could push prices higher, read the report, but domestic oil would likely continue struggling to reach $60 per barrel for the coming months.
“Prices can be further pressured in the near term if the US and Iran make any progress toward a deal and if US–China trade tensions worsen and further deteriorate global economic and demand growth,” the report read.
Adrian Hedden can be reached at 575-628-5516, email@example.com or @AdrianHedden on Twitter.
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