Too Big to Sell? Concho Now Bigger Than Hess and Continental

(Bloomberg) -- Concho Resources Inc. may have become too big to sell just months after its richest-ever acquisition.

Mizuho Securities USA LLC analyst Paul Sankey asked executives on a conference call Wednesday whether the company had altered its view about putting the company up for sale. “The big idea, I think two or three years ago, maybe longer, was that you would sell the company,” Sankey said. “Is the idea now to run it higher for cash returns?”

“That wasn’t my big idea, Paul,” Concho Chief Executive Officer Tim Leach responded. “I think that may have been your idea,” he said to laughter. Leach said the company had sought to “create a business model that has never existed before,” one that would attract new investors, and then touted the company’s growth prospects.

“I guess you’re getting too big to sell yourselves, right?” Sankey asked.

“I don’t know,” an unidentifiable Concho executive said. “Go on to your next topic.”

Concho tumbled 7.1 percent to $112.45 in New York for the steepest dive in almost 11 months. The decline made Concho the day’s second-worst performer in the S&P 500 Index.

Consolidation has been a hot topic in Concho’s main theater of operations, the Permian Basin, especially after oil prices slid in the fourth quarter and squeezed smaller drillers.

Oil majors, especially Royal Dutch Shell Plc, have been looking to bolster their footprint in the region that produces more crude than any other field in North America. Shell is teaming up with a Canadian pension fund on a potential takeover of privately held Endeavor Energy Resources LP, a deal that could be valued as much as $8 billion, according to people with knowledge of the matter.

But Concho is a lot bigger than Endeavor, thanks in part to its $7.6 billion billion purchase of RSP Permian Inc. last year. The Midland, Texas,-based producer now has a market value of about $23 billion, exceeding that of Hess Corp. and Harold Hamm’s Continental Resources Inc., according to data compiled by Bloomberg.

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