Concho Resources Inc. agreed to divest its assets in the New Mexico Shelf to an affiliate of Houston-based Spur Energy Partners LLC for $925 million as part of efforts to streamline its portfolio.
The assets include about 100,000 gross acres with current production of about 25,000 barrels of oil equivalent per day. With the sale, Concho expects to reduce its cost structure and focus its portfolio on higher-return opportunities, even as it maintains a presence and development program in southeastern New Mexico, according to CEO and Chairman Timothy Leach.
In addition, the Permian Basin-focused producer's board approved a share repurchase program of up to $1.5 billion.
Leach said during Concho's second-quarter earnings call that the company plans to take a "more modest" approach to production growth and capital spending as it focuses on free cash flow and returning money to investors. Concho would look to sell off noncore assets and operate within a smaller budget range, according to Leach.
Proceeds from the sale would be used to repay borrowings under its revolving credit facility and to initiate the buyback program.
The deal is scheduled to close in November. RBC Richardson Barr served as financial adviser on the deal.
