Concho Cruising For Oil by Ruthie Ackerman:
The independent oil and natural gas company announced Thursday it agreed to acquire all the outstanding interests of Henry Petroleum and certain affiliated entities for $565 million in cash.

Investors were pleased. Concho Resources (nyse: CXO - news - people ) shares shot up 11.0%, or $3.58, to $36.11 at the close on Friday.

Meanwhile, light, sweet crude for July delivery hit a new record, soaring $10.75 to close at $138.54 on the New York Mercantile Exchange on Friday, up from its previous close of $127.79 on Thursday.

The latest rise seems to have been driven by a report from Morgan Stanley predicting that oil could reach $150 by July 4. (See "Morgan Stanley's Oil Influence") In mid-May crude prices spiked partly because after billionaire oilman T. Boone Pickens said he expected one barrel to cost $150 by the end of the year. (See: "Boone's Boom") Earlier that month oil rallied after the venerable Goldman Sachs predicted that crude prices could reach $200 in the next two years. (See: "Solar Sector Sucked Into Oil's Wake")

Henry Petroleum is based in Midland, Texas, and has operations located in the Permian Basin of West Texas and Southeast New Mexico. It also has a position in the Spraberry/Wolfcamp oil play in West Texas, where it has drilled more than 500 wells since 2002.

"Henry's properties are a perfect complement to our existing Southeast New Mexico core asset," said Timothy A. Leach, Concho's Chairman and CEO. "This acquisition establishes a second proven growth engine within the Permian Basin for Concho by increasing our portfolio of identified opportunities by 60%."

Leach said that the combined property portfolio should deliver strong cash margins when compared to Concho's rivals in the industry.

Concho said the acquisition includes 163 billion cubic feet equivalent of proved reserves, current production of 33 million cubic feet equivalent a day, and 283 billion cubic feet gas equivalent of identified unproved reserves.

In addition, Concho said it plans to enter into derivative contracts for a significant portion of the current unhedged proved developed producing reserves estimated to be produced in the last five months of 2008 and in 2009, 2010, 2011 and 2012.

Thomson Financial contributed to this article. Back To News

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