[Context: On March 28, RSP Permian (NYSE: RSPP) announced a plan to be acquired by Concho Resources (NYSE: CXO) for $9.5bn. In March 2017, Kayne Anderson held around 17% of RSP Permain–what would now be worth about $1.6bn–as a result of the sale of Silver Hill Energy and Silver Hill Energy II in 2016 for $2.4bn. According to SEC filings, Kayne had sold down its position to around 7% by May 2017. Between March 2017 and May 2017, RSP stock traded in the low $40s or upper $30s. By comparison, Concho is offering $50.24 per share. Further details on Concho’s proposed RSP acquisition are below.]


KAYNE ANDERSON | SILVER HILL ENERGY | RSP PERMIAN

Concho Resources Inc. to Acquire RSP Permian, Inc. in All-Stock Transaction; Transaction Creates Largest Unconventional Shale Producer in the Permian Basin

Midland, Texas and Dallas, Texas, March 28, 2018 – Concho Resources Inc. (NYSE: CXO) and RSP Permian, Inc. (NYSE: RSPP) today announced they have entered into a definitive agreement under which Concho will acquire RSP in an all-stock transaction valued at approximately $9.5 billion, inclusive of RSP’s net debt. The consideration will consist of 0.320 shares of Concho common stock for each share of RSP common stock. The transaction was unanimously approved by the board of directors of each company.

Highlights
> Large, highly-complementary acreage expands Concho’s strategic portfolio in the Permian Basin to approximately 640,000 net acres
> Reinforces leadership position as the premier Permian pure-play company and creates the largest crude oil and natural gas producer from unconventional shale in the Permian Basin
> Combined company to run the largest drilling program in the Permian Basin with 27 rigs
> Meaningfully expands premium resource base
> Drives significant operational synergies through development optimization, shared infrastructure and capital efficiencies, with a present value of more than $2 billion
> Expect to realize over $60 million in annual corporate level savings
> Immediately accretive to key per-share metrics, including net asset value, earnings, cash flow and debt-adjusted growth
> Expect to maintain investment grade credit ratings
> Enhances Concho’s three-year annualized production growth outlook within cash flow from operations

Tim Leach, Chairman and Chief Executive Officer of Concho, commented, “This transaction provides a compelling opportunity for both Concho and RSP shareholders to benefit from the strength of our combined company. The RSP team built an exceptional high-margin asset portfolio consistent with our playbook – large, contiguous positions in the core of the Permian Basin. And they did so with a strategy of maximizing well performance and returns, which provides substantial running room for continuous development with large-scale projects. This combination allows us to consolidate premier assets that seamlessly fold into our drilling program, enhance our scale advantage and reinforce our leadership position in the Permian Basin, all while strengthening our platform for delivering predictable growth and returns. We look forward to welcoming RSP’s employees as members of the Concho team.”

Steve Gray, Chief Executive Officer of RSP, commented, “I am extremely proud of the RSP team and the high-quality position we built in the Permian Basin. As RSP has grown and we have seen the resource play develop in the Permian, we have come to recognize that combining with a company with the scale, investment grade balance sheet and operational excellence of Concho will unlock even more value for shareholders. 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 acquisition will add approximately 92,000 net acres that strongly complement Concho’s existing acreage position in the Permian Basin. The combined position will cover more than 640,000 net acres. In fourth-quarter 2017, production on RSP’s assets totaled approximately 55.5 thousand barrels of oil equivalent (Boe) per day on a two-stream basis, of which approximately 80% was crude oil and 20% was natural gas. The transaction adds 2.2 billion Boe of resource potential, of which more than two-thirds is premium resource.

The combined company will run the largest drilling and completion program in the Permian Basin. With a focused portfolio and substantial scale advantage, the benefits of this transaction are expected to drive corporate level savings and operational synergies by combining the complementary assets and the technical skills of both company’s employees. Specific operational synergies include: asset optimization, directing capital to high-return manufacturing-style projects and utilizing shared infrastructure systems. The present value of corporate and operational synergies is expected to exceed $2 billion.

The acquisition is expected to be accretive in the first year to Concho’s key per-share metrics, including net asset value, earnings, cash flow and debt-adjusted growth. In addition, the transaction is expected to enhance Concho’s three-year outlook for annualized production growth on a capital program within cash flow from operations.

Transaction Details

Under the terms of the definitive merger agreement, shareholders of RSP will receive 0.320 shares of Concho common stock in exchange for each share of RSP common stock, representing consideration to each RSP shareholder of $50.24 per share based on the closing price of Concho common stock on March 27, 2018. The consideration represents an approximately 29% premium to RSP’s closing price of $38.92 on March 27, 2018. Upon closing of the transaction, Concho shareholders will own approximately 74.5% of the combined company, and RSP shareholders will own approximately 25.5%. The resulting capital structure is consistent with Concho’s long-term strategy of maintaining a strong financial position.

The transaction, which is expected to be completed in the third quarter of 2018, is subject to the approval of both Concho and RSP shareholders, the satisfaction of certain regulatory approvals and other customary closing conditions.
Upon closing, Concho’s board will be expanded to 11 directors, to include one independent member of the RSP board. Concho will continue to be headquartered in Midland, Texas.

Advisors

Morgan Stanley & Co. LLC is acting as exclusive financial advisor to Concho, and Sullivan & Cromwell LLP and Gibson, Dunn & Crutcher LLP are acting as legal advisors to Concho. Tudor, Pickering, Holt & Co. is acting as exclusive financial advisor to RSP, and Vinson & Elkins LLP is acting as legal advisor to RSP.

Concho Resources Inc.

Concho is an independent oil and natural gas company engaged in the acquisition, development, exploration and production of oil and natural gas properties. Concho’s operations are focused in the Permian Basin of Southeast New Mexico and West Texas. For more information, visit the Concho’s website at www.concho.com.

RSP Permian, Inc.

RSP is an independent oil and natural gas company focused on the acquisition, exploration, development and production of unconventional oil and associated liquids-rich natural gas reserves in the Permian Basin of West Texas. The vast majority of RSP’s acreage is located on large, contiguous acreage blocks in the core of the Midland and Delaware Basins, sub-basins of the Permian Basin.

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