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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: CommanderCricket who wrote (142018)	11/19/2010 11:48:36 AM
From: katytrader	Respond to of 206110

CC, My guess is that this has been planned for a while. If courting Asian investors, it is all part of the usual lengthy courtship...getting to know you, love you (they hope). For such a purpose they really wouldn't need anything new. katytrader

To: CommanderCricket who wrote (142018)	11/20/2010 6:10:18 AM
From: MoneyPenny	3 Recommendations Read Replies (1) \| Respond to of 206110

No one seems to follow Concho here, but it has been a good performer for me this year. Money Penny Oil Producer Finds New Mother Lodes In Old Southwestern Fields By AMY REEVES, INVESTOR'S BUSINESS DAILY Posted 11/19/2010 04:54 PM ET Featured Stocks Bone Spring is a complex formation of ancient rock, deep in the oil-rich region of western Texas and eastern New Mexico called the Permian Basin. The first successful oil well was drilled there in 1962. But much of Bone Spring is what the industry calls a "tight" formation, which made it difficult to drill there until the recent advent of horizontal drilling and fracture techniques. Now that these new methods are available, energy experts believe there could be an ocean of oil for the taking. Not surprisingly, oil producers are moving into Bone Spring in a big way. Concho Resources (CXO) is one of those jostling for position. In October, it closed a $1.65 billion buyout of all the oil and gas assets of Marbob Energy Corp., including 100,000 acres in Bone Spring. Concho has been acquiring property in the Permian ever since its 2004 founding and by midyear was operating more than 3,000 wells. But Chief Executive Tim Leach says the Marbob buy is by far the most important purchase the young company has made. Bone Spring "is potentially one of the largest plays developing in the U.S.," Leach said. "People are talking about recovering oil in the billions of barrels." Of particular interest to industry watchers is the Avalon Shale, a subregion of Bone Spring and a classic candidate for horizontal drilling. In an Oct. 20 review of Permian horizontal plays, Canaccord Genuity analyst Derrick Whitfield wrote that Avalon geologically resembles the Barnett Shale, a tight gas field that has produced reliably since horizontal drilling began there in 2005. Avalon also has a lot of room for development: The first well was just drilled there in 2008. Concho's Marbob buyout included 50,000 acres of the Avalon Shale, on which Concho has identified 1,100 potential drilling locations. This gives it the potential to become a leading player in the area. "In our view, Concho has one of the strongest management teams in the midcap space and is one of the most leveraged producers in the industry to the Bone Spring trend," Whitfield wrote in his report. The acquisition also adds substantial property in Yeso, a Permian region where Concho had already been drilling successfully. Overall, the company says it bought 76 billion barrels of oil equivalent (mmboe) in proven reserves and around 166 mmboe in unproven reserves. The buyout did run into unexpected trouble. On the same day in July that the Marbob deal was announced, BP (BP) announced the sale of $7 billion in assets to Apache (APA). BP had operating agreements with Marbob in the region, and Leach says Concho had "crossing preferential rights" with Apache because of the two deals. As a result, the deal was closed in two parts: the uncontested properties on Oct. 7, and the contested ones on Oct. 15 after a settlement had been reached. Leach says that in his 20-odd years working in the Permian oilfields, he'd never encountered a problem quite like that before. As part of the settlement, Concho granted Apache operatorship over some of the Marbob properties. Nonetheless, analysts were just happy that the uncertainty was over. "While we would have preferred to see (Concho) operate these properties, we assume it is in all parties' interest that the sharing (and heeding) of (Concho)'s expertise in the play will occur," Ladenburg Thalmann analyst Noel Parks wrote in an Oct. 18 note. That expertise is one of Concho's biggest bragging points. While Concho Resources is only six years old, it's the successor to another Concho started back in 1989 by the same management team. Leach and his cohorts sold that company in 2001, then set up a second Concho and sold that in 2004. The present Concho is the largest oil and gas producer that's actually headquartered in the Permian Basin. Leach says that all this dealing has created lasting ties with private producers in the region. This can be lucrative, such as the friendship with the Gray family that led to the Marbob buy. The Gray family owned Marbob before selling it to Concho. "Almost all the big opportunities have been derived from relationships we've had for a long time," Leach said. Concho also has developed relationships with the oilfield services providers that all the producers rely on to get their wells flowing. Concho kept drilling through the recession, even as the larger producers idled their operations to cut costs. It now has 30 rigs operating in the basin — and a lot of loyal drillers. "They give the service companies a lot of business," said analyst Mitchell Wurschmidt of KeyBanc Capital Markets. "They don't have any trouble getting completion." As a result, Concho hasn't had any trouble ramping up production. In the third quarter, before the Marbob buy closed, production rose 36% from a year earlier to 3.9 billion mmboe. Concho drilled 99 net wells in the quarter. Revenue rose 57% to $240.5 million, while profit more than doubled to 77 cents a share. Leach says he expects Concho to keep up its current growth into the foreseeable future, even though it's turned from a small startup to a good-sized player. Concho clearly expects a lot from Bone Spring: Managers plan to devote 20% of 2011's $1.1 billion capital budget to developing that play. At the same time, Concho has stuck to its core principle of treating its properties like a portfolio, which it is always seeking to upgrade. This means that it's also been paring some of its non-core assets even as it's been growing aggressively in others. On Nov. 8, it sold Legacy Reserves (LGCY) $105 million worth of what Leach says were "outlying properties." That approach hasn't made Concho immune to contractions — its profit shrank 20% in 2009. But analysts polled by Thomson Reuters expect things to turn around this year, with 79% growth to $2.71 a share. Next year they see earnings rising 36% to $3.69.