$9.5 Billion Purchase by Concho Is Latest Sign of West Texas Oil Boom
- 6 years ago
$9.5 Billion Purchase by Concho Is Latest Sign of West Texas Oil Boom
“It’s just a lot easier to drill wells than it is to install the requisite pipeline capacity.”
But Steven Gray, RSP’s chief executive, said the combined company “will have the vision
and necessary financial strength to efficiently develop the tremendous resource potential of these assets with large-scale projects.”
The timing of the Concho-RSP deal reflects the sentiment among local oil executives
that the potential pipeline shortage will eventually be resolved as new pipelines are completed to take product across Texas to Gulf Coast refineries and export terminals.
The move by Concho Resources to purchase RSP Permian for $9.5 billion will make it the biggest shale oil
and natural gas producer in the Permian Basin, the oil-rich area.
Much larger companies, like Exxon Mobil and Chevron, are also increasing their investments in the Permian Basin, where output has doubled
to roughly three million barrels a day over the last five years, making it the principal driver of the domestic oil production boom.
Oil companies are generally out of favor on Wall Street,
and the Permian Basin is not without problems at a time when oil prices remain well below the $100-a-barrel levels of recent years.
That would drive down the price of local crude, and force companies to either slow
production or transport crude by truck or rail, adding to company expenses.
But it has taken off over the last five years as hydraulic fracturing and horizontal drilling made shale production possible on a large scale.
“It’s just a lot easier to drill wells than it is to install the requisite pipeline capacity.”
But Steven Gray, RSP’s chief executive, said the combined company “will have the vision
and necessary financial strength to efficiently develop the tremendous resource potential of these assets with large-scale projects.”
The timing of the Concho-RSP deal reflects the sentiment among local oil executives
that the potential pipeline shortage will eventually be resolved as new pipelines are completed to take product across Texas to Gulf Coast refineries and export terminals.
The move by Concho Resources to purchase RSP Permian for $9.5 billion will make it the biggest shale oil
and natural gas producer in the Permian Basin, the oil-rich area.
Much larger companies, like Exxon Mobil and Chevron, are also increasing their investments in the Permian Basin, where output has doubled
to roughly three million barrels a day over the last five years, making it the principal driver of the domestic oil production boom.
Oil companies are generally out of favor on Wall Street,
and the Permian Basin is not without problems at a time when oil prices remain well below the $100-a-barrel levels of recent years.
That would drive down the price of local crude, and force companies to either slow
production or transport crude by truck or rail, adding to company expenses.
But it has taken off over the last five years as hydraulic fracturing and horizontal drilling made shale production possible on a large scale.