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10.31.17 Concho Resources Inc. Reports Third Quarter 2017 Results

MIDLAND, Texas--(BUSINESS WIRE)-- Concho Resources Inc. (NYSE: CXO) (the “Company” or “Concho”) today reported financial and operating results for the third quarter of 2017.

Third-Quarter 2017 Highlights

  • Delivered quarterly production of 193.2 MBoepd, exceeding the high end of the Company’s guidance range.
  • Increased crude oil production by 31% year-over-year and 6% quarter-over-quarter to 119.6 MBopd.
  • Advanced multi-zone delineation in the Delaware Basin.
  • Achieved investment grade credit ratings.
  • Prudently managed the balance sheet, resulting in approximately $580 million in debt reduction since June 30, 2016, and significant annual interest expense savings.
  • Executed a disciplined capital program with year-to-date cash flows from operations approximating capital expenditures, excluding acquisitions.
  • Full-year 2017 production expected to exceed the high end of annual growth guidance range of 24% to 26%; targeting crude oil production growth of more than 27% over 2016.
  • Reported a net loss of $113 million, or $0.77 per diluted share. Adjusted net income totaled $67 million, or $0.45 per diluted share (non-GAAP).
  • Generated $458 million of EBITDAX (non-GAAP).

See “Supplemental Non-GAAP Financial Measures” at the end of this press release for a description of non-GAAP measures adjusted net income, adjusted earnings per share and EBITDAX and a reconciliation of these measures to the associated GAAP measure.

Tim Leach, Chairman and Chief Executive Officer, commented, “Strong third quarter results highlight the Company’s execution strength, asset quality and scale advantage. Production for the quarter exceeded our guidance range and was driven by excellent results from our drilling program. Additionally, our credit rating was upgraded to investment grade, giving us the opportunity to further enhance our financial position and reduce annual interest expense. A lower cost of capital and improving returns from large scale project development underpin a solid outlook for continued capital discipline and differentiated per share growth.”

Third-Quarter 2017 Operations Summary

Production for the third quarter of 2017 averaged 193.2 thousand Boe per day (MBoepd), an increase of approximately 26% from the third quarter of 2016. Crude oil production for the third quarter of 2017 totaled 119.6 thousand barrels per day (MBopd), an increase of approximately 31% from the third quarter of 2016. Average daily natural gas production for the third quarter of 2017 totaled 441.6 million cubic feet (MMcf).

Concho averaged 19 rigs in the third quarter of 2017. The table below summarizes the Company’s gross drilling and completion activity by core area for the third quarter of 2017.

        Number of     Number of     Number of
Number of Operated Wells Operated Wells
Wells Drilled Wells Drilled Completed Completed
Northern Delaware Basin 40 19 41 21
Southern Delaware Basin 11 9 7 4
Midland Basin 16 16 8 8
New Mexico Shelf 13 7 17 14
Total 80 51 73 47
 

The Company is currently running 15 rigs, including six rigs in the Northern Delaware Basin, four rigs in the Southern Delaware Basin, four rigs in the Midland Basin and one rig in the New Mexico Shelf. Additionally, the Company is currently utilizing eight completion crews.

Concho continues to demonstrate leadership in the Northern Delaware Basin with multi-zone and large-scale development. In the Red Hills area the Broadcaster 4H, a 3rd Bone Spring well, produced at an average peak 30-day rate of 1,934 Boepd (77% oil). In the State Line area in Eddy County, the Company brought online a two-well, stacked test targeting the 2nd Bone Spring. These wells, the Road Runner 1H and Road Runner 11H, produced at average peak 30-day rates of 2,234 Boepd (77% oil) and 2,321 Boepd (78% oil), respectively.

The Company recently completed two large-scale projects in the Northern Delaware Basin: the Vast project includes seven wells targeting the Wolfcamp Sands and Wolfcamp Shale and the Windward project includes eight wells targeting the Avalon Shale. While early in production, the Company is encouraged by the performance of both projects. Concho is collecting valuable data that will further optimize lateral placement, completion design and facilities planning. In addition, the Company is tracking efficiency gains realized from manufacturing style development. Both projects had improvements to drilling days and stages completed per day.

In the Southern Delaware Basin, the Company completed a Wolfcamp B delineation well, the Whatcha Want 7376H, a 10,948 foot horizontal well with an average peak 30-day rate of 1,894 Boepd (65% oil). Continued success in the Wolfcamp B has the potential to add a third landing zone to the Company’s development program in the Southern Delaware Basin.

Concho’s third quarter 2017 activity in the Midland Basin was highlighted by strong performance from the Lower Spraberry and Wolfcamp B zones. The Company added seven Lower Spraberry wells and five Wolfcamp B wells with average peak 30-day rates of 1,360 Boepd (87% oil) and 1,252 Boepd (81% oil), respectively. The average lateral length for all 12 wells was 10,187 feet.

Additional details on Concho’s operations are included in its 3Q17 Earnings Presentation available on the Company’s website at www.concho.com.

Third-Quarter 2017 Financial Summary

Concho’s average realized price for crude oil and natural gas for the third quarter of 2017, excluding the effect of commodity derivatives, was $45.29 per Bbl and $3.18 per Mcf, respectively, compared with $41.52 per Bbl and $2.42 per Mcf, respectively, for the third quarter of 2016.

Net loss for the third quarter of 2017 was $113 million, or $0.77 per diluted share, compared to net loss of $51 million, or $0.38 per diluted share, for the third quarter of 2016. Adjusted net income (non-GAAP), which excludes non-cash and unusual items, for the third quarter of 2017 was $67 million, or $0.45 per diluted share, compared with adjusted net income (non-GAAP) of $44 million, or $0.32 per diluted share, for the third quarter of 2016.

EBITDAX (non-GAAP) for the third quarter of 2017 totaled $458 million, compared to $441 million for the third quarter of 2016.

Financial Position and Liquidity

During the third quarter of 2017, Concho completed its debut investment grade bond offering. The Company issued $1.8 billion of senior notes, consisting of $1 billion of 3.75% senior notes due 2027 and $800 million of 4.875% senior notes due 2047. Net proceeds from the offering were used to repurchase a total of $2.15 billion of senior notes, consisting of $600 million of its 5.5% senior notes due 2022 and $1.55 billion of its 5.5% senior notes due 2023.

These transactions reinforced the Company’s strong financial position by decreasing the Company’s annual interest expense and extending its average maturity from six to 16 years. Since the second quarter of 2016, Concho has reduced long-term debt by approximately $580 million and refinanced all of its remaining senior notes. As a result, the Company reduced the average interest rate on its senior notes outstanding to 4.3% from 5.9%, equating to approximately $90 million in annual interest expense savings.

Additionally, the Company elected to convert its $2 billion credit facility to an unsecured facility. The Company ended the third quarter of 2017 with total long-term debt of $2.7 billion, including approximately $370 million outstanding under its credit facility.

Outlook

Concho expects production to average approximately 200 MBoepd to 204 MBoepd, with a 62% oil mix, in the fourth quarter of 2017. Additionally, for the fourth quarter of 2017, the Company expects oil and natural gas production expense will be at the high end of the guidance range of $5.50 per Boe to $6.00 per Boe, with production expense tracking the midpoint of the range for full-year 2017. The Company expects production growth above the high end of its annual production growth guidance range of 24% to 26%, with oil production growth expected to exceed 27%, for full-year 2017. Concho continues to expect that capital expenditures, excluding acquisitions, will approximate the midpoint of the guidance range of $1.6 billion to $1.8 billion.

Commodity Derivatives Update

The Company enters into commodity derivatives to manage its exposure to commodity price fluctuations. The Company has crude oil price swaps for 2018 and 2019, covering approximately 86.9 MBopd and 65.1 MBopd at a weighted average price of $51.41 per Bbl and $52.33 per Bbl, respectively. Please see the table under “Derivatives Information” below for detailed information about the Company’s current derivatives positions.

Conference Call

Concho will discuss third quarter 2017 results on a conference call tomorrow, November 1, 2017, at 8:00 AM CT (9:00 AM ET). The telephone number and passcode to access the conference call are provided below:

Dial-in: (844) 263-8298
Intl. dial-in: (478) 219-0007
Participant Passcode: 75203686

To access the live webcast and view the related earnings presentation, visit the Company’s website at www.concho.com. The replay will also be available on Concho’s website under the “Investors” section.

Upcoming Conference

The Company will participate in the Bank of America Merrill Lynch 2017 Global Energy Conference on November 16, 2017 at 1:05 PM CT (2:05 PM ET). The presentation will be webcast, and the webcast and slides will be accessible on the Events & Presentations page under the Investors section of the Company’s website, www.concho.com.

Concho Resources Inc.

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

Forward-Looking Statements and Cautionary Statements

The foregoing contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical fact, included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. Forward-looking statements contained in this press release specifically include statements, estimates and projections regarding the Company’s future financial position, operations, performance, business strategy, oil and natural gas reserves, drilling program, capital expenditure budget, liquidity and capital resources, the timing and success of specific projects, outcomes and effects of litigation, claims and disputes, derivative activities and potential financing. The words “estimate,” “project,” “predict,” “believe,” “expect,” “anticipate,” “potential,” “could,” “may,” “foresee,” “plan,” “goal” or other similar expressions that convey the uncertainty of future events or outcomes are intended to identify forward-looking statements, which generally are not historical in nature. However, the absence of these words does not mean that the statements are not forward-looking. These statements are based on certain assumptions and analyses made by the Company based on management’s experience, expectations and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Forward-looking statements are not guarantees of performance. Although the Company believes the expectations reflected in its forward-looking statements are reasonable and are based on reasonable assumptions, no assurance can be given that these assumptions are accurate or that any of these expectations will be achieved (in full or at all) or will prove to have been correct. Moreover, such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. These risks include, without limitation, the risk factors discussed or referenced in the Company’s most recent Annual Report on Form 10-K and in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017; risks relating to declines in, or the sustained depression of, the prices the Company receives for its oil and natural gas; uncertainties about the estimated quantities of oil and natural gas reserves; drilling, completion and operating risks; the effects of government regulation, permitting and other legal requirements, including new legislation or regulation of hydraulic fracturing and the export of oil and natural gas; environmental hazards, such as uncontrollable flows of oil, natural gas, brine, well fluids, toxic gas or other pollution into the environment, including groundwater contamination; difficult and adverse conditions in the domestic and global capital and credit markets; risks related to the concentration of the Company’s operations in the Permian Basin of southeast New Mexico and west Texas; disruptions to, capacity constraints in or other limitations on the pipeline systems that deliver the Company’s oil, natural gas liquids and natural gas and other processing and transportation considerations; the costs and availability of equipment, resources, services and qualified personnel required to perform the Company’s drilling, completion and operating activities; potential financial losses or earnings reductions from the Company’s commodity price risk-management program; risks and liabilities associated with acquired properties or businesses; uncertainties about the Company’s ability to successfully execute its business and financial plans and strategies; the adequacy of the Company’s capital resources and liquidity including, but not limited to, access to additional borrowing capacity under the Company’s credit facility; the impact of potential changes in the Company’s credit ratings; cybersecurity risks, such as those involving unauthorized access, malicious software, data privacy breaches by employees or others with authorized access, cyber or phishing-attacks, ransomware and other security issues; uncertainties about the Company’s ability to replace reserves and economically develop its current reserves; general economic and business conditions, either internationally or domestically; competition in the oil and natural gas industry; uncertainty concerning the Company’s assumed or possible future results of operations; and other important factors that could cause actual results to differ materially from those projected.

Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.

 
 
Concho Resources Inc.
Consolidated Balance Sheets
Unaudited
 
       
September 30, December 31,
(in millions, except share and per share amounts)       2017         2016  
Assets
Current assets:
Cash and cash equivalents $ - $ 53
Accounts receivable, net of allowance for doubtful accounts:
Oil and natural gas 271 220
Joint operations and other 223 238
Derivative instruments 4 4
Prepaid costs and other   37     31  
Total current assets   535     546  
Property and equipment:
Oil and natural gas properties, successful efforts method 20,754 18,476
Accumulated depletion and depreciation   (8,167 )   (7,390 )
Total oil and natural gas properties, net 12,587 11,086
Other property and equipment, net   232     216  
Total property and equipment, net   12,819     11,302  
Funds held in escrow - 43
Deferred loan costs, net 14 11
Intangible asset - operating rights, net 24 24
Inventory 15 16
Noncurrent derivative instruments 28 -
Other assets   47     177  
Total assets $ 13,482   $ 12,119  
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable - trade $ 36 $ 28
Bank overdrafts 68 -
Revenue payable 135 132
Accrued drilling costs 381 359
Derivative instruments 37 82
Other current liabilities   153     152  
Total current liabilities   810     753  
Long-term debt 2,738 2,741
Deferred income taxes 1,150 766
Noncurrent derivative instruments 6 96
Asset retirement obligations and other long-term liabilities 147 140
Stockholders’ equity:
Common stock, $0.001 par value; 300,000,000 authorized; 149,297,932 and
146,488,685 shares issued at September 30, 2017 and December 31, 2016, respectively - -
Additional paid-in capital 7,125 6,783
Retained earnings 1,573 884
Treasury stock, at cost; 597,551 and 429,708 shares at September 30, 2017 and
December 31, 2016, respectively   (67 )   (44 )
Total stockholders’ equity   8,631     7,623  
Total liabilities and stockholders’ equity $ 13,482   $ 12,119  

 
 
Concho Resources Inc.
Consolidated Statements of Operations
Unaudited
 
               
Three Months Ended Nine Months Ended
September 30, September 30,
(in millions, except per share amounts)       2017         2016         2017         2016  
 
Operating revenues:
Oil sales $ 498 $ 348 $ 1,461 $ 929
Natural gas sales   129     82     345     181  
Total operating revenues   627     430     1,806     1,110  
Operating costs and expenses:
Oil and natural gas production 106 71 293 240
Production and ad valorem taxes 48 33 140 89
Exploration and abandonments 7 10 42 54
Depreciation, depletion and amortization 284 299 848 890
Accretion of discount on asset retirement obligations 2 2 6 5
Impairments of long-lived assets - - - 1,525
General and administrative (including non-cash stock-based compensation of
$17 and $15 for the three months ended September 30, 2017 and
2016, respectively, and $43 for each of the nine months ended
September 30, 2017 and 2016) 64 53 180 160
(Gain) loss on derivatives 206 (41 ) (289 ) 176
(Gain) loss on disposition of assets, net   (13 )   1     (667 )   (109 )
Total operating costs and expenses   704     428     553     3,030  
Income (loss) from operations   (77 )   2     1,253     (1,920 )
Other income (expense):
Interest expense (39 ) (53 ) (118 ) (162 )
Loss on extinguishment of debt (65 ) (28 ) (66 ) (28 )
Other, net   2     (2 )   18     (9 )
Total other expense   (102 )   (83 )   (166 )   (199 )
Income (loss) before income taxes (179 ) (81 ) 1,087 (2,119 )
Income tax (expense) benefit   66     30     (398 )   782  
Net income (loss) $ (113 ) $ (51 ) $ 689   $ (1,337 )
Earnings per share:
Basic net income (loss) $ (0.77 ) $ (0.38 ) $ 4.64 $ (10.18 )
Diluted net income (loss) $ (0.77 ) $ (0.38 ) $ 4.63 $ (10.18 )

 
 
Concho Resources Inc.
Consolidated Statements of Cash Flows
Unaudited
 
       
Nine Months Ended
September 30,
(in millions)       2017         2016  
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 689 $ (1,337 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization 848 890
Accretion of discount on asset retirement obligations 6 5
Impairments of long-lived assets - 1,525
Exploration and abandonments, including dry holes 29 47
Non-cash stock-based compensation expense 43 43
Deferred income taxes 392 (768 )
Gain on disposition of assets, net (667 ) (109 )
(Gain) loss on derivatives (289 ) 176
Net settlements received from derivatives 126 582
Loss on extinguishment of debt 66 28
Other non-cash items 1 10
Changes in operating assets and liabilities, net of acquisitions and dispositions:
Accounts receivable (61 ) 61
Prepaid costs and other (1 ) 7
Inventory (1 ) 2
Accounts payable 7 9
Revenue payable 5 (57 )
Other current liabilities   (8 )   (95 )
Net cash provided by operating activities   1,185     1,019  
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures on oil and natural gas properties (1,958 ) (927 )
Additions to property, equipment and other assets (34 ) (20 )
Proceeds from the disposition of assets 803 296
Direct transaction costs for disposition of assets (18 ) -
Funds held in escrow - (81 )
Contributions to equity method investments   -     (51 )
Net cash used in investing activities   (1,207 )   (783 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt 2,267 -
Payments of debt (2,255 ) (600 )
Debt extinguishment costs (63 ) (21 )
Excess tax deficiency from stock-based compensation - (1 )
Net proceeds from issuance of common stock - 1,327
Payments for loan costs (25 ) -
Purchase of treasury stock (23 ) (11 )
Increase in bank overdrafts   68     -  
Net cash provided by (used in) financing activities   (31 )   694  
Net increase (decrease) in cash and cash equivalents (53 ) 930
Cash and cash equivalents at beginning of period   53     229  
Cash and cash equivalents at end of period $ -   $ 1,159  
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Issuance of common stock for business combinations $ 291 $ 231

 
 

Concho Resources Inc.

Summary Production and Price Data

Unaudited

 

The following table sets forth summary information concerning production and operating data for the periods indicated:

 
            Three Months Ended     Nine Months Ended
September 30, September 30,
                2017     2016     2017     2016
       
Production and operating data:
Average daily production volumes:
Oil (Bbl) 119,565 91,120 115,484 89,854
Natural gas (Mcf) 441,587 370,609 425,791 336,084
Total (Boe) 193,163 152,888 186,449 145,868
 
Average prices per unit:
Oil, without derivatives (Bbl) $ 45.29 $ 41.52 $ 46.34 $ 37.75
Oil, with derivatives (Bbl) (a) $ 47.81 $ 59.87 $ 50.45 $ 60.74
Natural gas, without derivatives (Mcf) $ 3.18 $ 2.42 $ 2.96 $ 1.97
Natural gas, with derivatives (Mcf) (a) $ 3.22 $ 2.46 $ 2.94 $ 2.14
Total, without derivatives (Boe) $ 35.29 $ 30.61 $ 35.47 $ 27.78
Total, with derivatives (Boe) (a) $ 36.96 $ 41.65 $ 37.95 $ 42.35
 
Operating costs and expenses per Boe:
Oil and natural gas production $ 5.99 $ 4.98 $ 5.76 $ 6.00
Production and ad valorem taxes $ 2.70 $ 2.38 $ 2.75 $ 2.23
Depreciation, depletion and amortization $ 16.00 $ 21.27 $ 16.66 $ 22.27
General and administrative $ 3.60 $ 3.80 $ 3.56 $ 4.02
                                   
 
(a) Includes the effect of net cash receipts from (payments on) derivatives:
                             
Three Months Ended Nine Months Ended
September 30, September 30,
(in millions)     2017     2016     2017     2016
 
Net cash receipts from (payments on) derivatives:
Oil derivatives $ 28 $ 154 $ 129 $ 566
Natural gas derivatives   2   1   (3 )   16
Total $ 30 $ 155 $ 126   $ 582
                             
 
The presentation of average prices with derivatives is a result of including the net cash receipts from (payments on) commodity derivatives that are presented in our statements of cash flows. This presentation of average prices with derivatives is a means by which to reflect the actual cash performance of our commodity derivatives for the respective periods and presents oil and natural gas prices with derivatives in a manner consistent with the presentation generally used by the investment community.

 
 
Concho Resources Inc.
Costs Incurred
Unaudited
 

The table below provides the costs incurred for oil and natural gas producing activities for the periods indicated:

 
               
Three Months Ended Nine Months Ended
September 30, September 30,
(in millions)     2017     2016     2017     2016
 
Property acquisition costs:
Proved $ 162 $ 1 $ 301 $ 257
Unproved 472 14 865 172
Exploration 252 177 725 513
Development   175   97   478   287
Total costs incurred for oil and natural gas properties $ 1,061 $ 289 $ 2,369 $ 1,229
 
 
Concho Resources Inc.
Derivatives Information
Unaudited
 

The table below provides data associated with the Company’s derivatives at October 31, 2017, for the periods indicated:

 
                             
2018
Fourth Quarter First Second Third Fourth
2017 Quarter Quarter Quarter Quarter Total 2019
 
Oil Price Swaps: (a)
Volume (Bbl) 10,216,080 9,133,629 8,146,170 7,471,318 6,972,007 31,723,124 23,759,500
Price per Bbl $ 51.33 $ 51.54 $ 51.45 $ 51.36 $ 51.26 $ 51.41 $ 52.33
 
Oil Basis Swaps: (b)
Volume (Bbl) 10,007,000 8,476,000 8,067,000 7,237,000 6,960,000 30,740,000 23,067,500
Price per Bbl $ (0.65 ) $ (0.97 ) $ (0.96 ) $ (0.99 ) $ (0.98 ) $ (0.97 ) $ (1.05 )
 
Natural Gas Price Swaps: (c)
Volume (MMBtu) 18,333,000 16,556,000 16,101,000 14,819,000 14,504,000 61,980,000 17,840,992
Price per MMBtu $ 3.08 $ 3.05 $ 3.04 $ 3.04 $ 3.03 $ 3.04 $ 2.86
                                               
 
(a) The index prices for the oil price swaps are based on the New York Mercantile Exchange (“NYMEX”) – West Texas Intermediate (“WTI”) monthly average futures price.
(b) The basis differential price is between Midland – WTI and Cushing – WTI.
(c) The index prices for the natural gas price swaps are based on the NYMEX – Henry Hub last trading day futures price.

 
 
Concho Resources Inc.
Supplemental Non-GAAP Financial Measures
Unaudited
 

The Company reports its financial results in accordance with the United States generally accepted accounting principles (GAAP). However, the Company believes certain non-GAAP performance measures may provide financial statement users with additional meaningful comparisons between current results, the results of its peers and of prior periods. In addition, the Company believes these measures are used by analysts and others in the valuation, rating and investment recommendations of companies within the oil and natural gas exploration and production industry. See the reconciliations throughout this release of GAAP financial measures to non-GAAP financial measures for the periods indicated.

Reconciliation of Net Income (Loss) to Adjusted Net Income and Adjusted Earnings per Share

The Company’s presentation of adjusted net income and adjusted earnings per share that exclude the effect of certain items are non-GAAP financial measures. Adjusted net income and adjusted earnings per share represent earnings and diluted earnings per share determined under GAAP without regard to certain non-cash and unusual items. The Company believes these measures provide useful information to analysts and investors for analysis of its operating results on a recurring, comparable basis from period to period. Adjusted net income and adjusted earnings per share should not be considered in isolation or as a substitute for earnings or diluted earnings per share as determined in accordance with GAAP and may not be comparable to other similarly titled measures of other companies.

The following table provides a reconciliation from the GAAP measure of net income (loss) to adjusted net income (non-GAAP), both in total and on a per diluted share basis, for the periods indicated:

 
               
Three Months Ended Nine Months Ended
September 30, September 30,
(in millions, except per share amounts)       2017         2016         2017         2016  
 
Net income (loss) - as reported $ (113 ) $ (51 ) $ 689 $ (1,337 )
 
Adjustments for certain non-cash and unusual items:
(Gain) loss on derivatives 206 (41 ) (289 ) 176
Net cash receipts from derivatives 30 155 126 582
Impairments of long-lived assets - - - 1,525
Leasehold abandonments - 8 24 40
Loss on extinguishment of debt 65 28 66 28
(Gain) loss on disposition of assets and other (15 ) 1 (669 ) (108 )
Tax impact (106 ) (56 ) 274 (834 )
Excess tax benefit   -     -     (6 )   -  
Adjusted net income $ 67   $ 44   $ 215   $ 72  
 
Net income (loss) per diluted share - as reported $ (0.77 ) $ (0.38 ) $ 4.63 $ (10.18 )
 
Adjustments for certain non-cash and unusual items per diluted share:
(Gain) loss on derivatives 1.40 (0.31 ) (1.95 ) 1.33
Net cash receipts from derivatives 0.20 1.15 0.85 4.43
Impairments of long-lived assets - - - 11.60
Leasehold abandonments - 0.06 0.16 0.30
Loss on extinguishment of debt 0.44 0.20 0.44 0.21
(Gain) loss on disposition of assets and other (0.10 ) 0.01 (4.49 ) (0.82 )
Tax impact (0.72 ) (0.41 ) 1.84 (6.34 )
Excess tax benefit   -     -     (0.04 )   -  
Adjusted net income per diluted share $ 0.45   $ 0.32   $ 1.44   $ 0.53  
 
Adjusted earnings per share:
Basic net income $ 0.45 $ 0.32 $ 1.44 $ 0.53
Diluted net income $ 0.45 $ 0.32 $ 1.44 $ 0.53
 
 

Reconciliation of Net Income (Loss) to EBITDAX

EBITDAX (as defined below) is presented herein and reconciled from the GAAP measure of net income (loss) because of its wide acceptance by the investment community as a financial indicator of a company’s ability to internally fund exploration and development activities.

The Company defines EBITDAX as net income (loss), plus (1) exploration and abandonments expense, (2) depreciation, depletion and amortization expense, (3) accretion expense, (4) impairments of long-lived assets, (5) non-cash stock-based compensation expense, (6) (gain) loss on derivatives, (7) net cash receipts from derivatives, (8) (gain) loss on disposition of assets, net, (9) interest expense, (10) loss on extinguishment of debt and (11) federal and state income tax expense (benefit). EBITDAX is not a measure of net income (loss) or cash flows as determined by GAAP.

The Company’s EBITDAX measure provides additional information which may be used to better understand the Company’s operations, and it is also a material component of one of the financial covenants under the Company’s credit facility. EBITDAX is one of several metrics that the Company uses as a supplemental financial measurement in the evaluation of its business and should not be considered as an alternative to, or more meaningful than, net income (loss) as an indicator of operating performance. Certain items excluded from EBITDAX are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic cost of depreciable and depletable assets. EBITDAX, as used by the Company, may not be comparable to similarly titled measures reported by other companies. The Company believes that EBITDAX is a widely followed measure of operating performance and is one of many metrics used by the Company’s management team and by other users of the Company’s consolidated financial statements, including by lenders pursuant to a covenant in the Company’s credit facility. For example, EBITDAX can be used to assess the Company’s operating performance and return on capital in comparison to other independent exploration and production companies without regard to financial or capital structure, and to assess the financial performance of the Company’s assets and the Company without regard to capital structure or historical cost basis. Further, under the Company’s credit facility, an event of default could arise if it were not able to satisfy and remain in compliance with its specified financial ratio, defined as the maintenance of a quarterly ratio of consolidated total debt to consolidated last twelve months EBITDAX of no greater than 4.25 to 1.0. Non-compliance with this ratio could trigger an event of default under the Company’s credit facility, which then could trigger an event of default under its indentures. At September 30, 2017, the Company was in compliance with the covenants under all of its debt instruments.

The following table provides a reconciliation of the GAAP measure of net income (loss) to EBITDAX (non-GAAP) for the periods indicated:

 
               
Three Months Ended Nine Months Ended
September 30, September 30,
(in millions)       2017         2016         2017         2016  
 
Net income (loss) $ (113 ) $ (51 ) $ 689 $ (1,337 )
Exploration and abandonments 7 10 42 54
Depreciation, depletion and amortization 284 299 848 890
Accretion of discount on asset retirement obligations 2 2 6 5
Impairments of long-lived assets - - - 1,525
Non-cash stock-based compensation 17 15 43 43
(Gain) loss on derivatives 206 (41 ) (289 ) 176
Net cash receipts from derivatives 30 155 126 582
(Gain) loss on disposition of assets, net (13 ) 1 (667 ) (109 )
Interest expense 39 53 118 162
Loss on extinguishment of debt 65 28 66 28
Income tax expense (benefit)   (66 )   (30 )   398     (782 )
EBITDAX $ 458   $ 441   $ 1,380   $ 1,237  
 
 

Source: Concho Resources Inc.

Concho Resources Inc.

Investor Relations

Megan P. Hays, 432-685-2533

Vice President of Investor Relations and Public Affairs

or

Mary T. Starnes, 432-221-0477

Investor Relations Manager

09.26.17 Concho Resources Inc. Announces Expiration and Results of Cash Tender Offer for Any and All of Its Outstanding 5.5% Senior Notes due 2022 and 5.5% Senior Notes due 2023

MIDLAND, Texas--(BUSINESS WIRE)-- Concho Resources Inc. (NYSE: CXO) (“Concho” or the “Company”) today announced that the cash tender offer (the “offer”) that it commenced on September 13, 2017 to purchase any and all of its outstanding 5.5% Senior Notes due 2022 and 5.5% Senior Notes due 2023 expired at 5:00 PM ET on September 25, 2017.

According to D.F. King & Co., Inc., the tender agent for the offer, valid tenders had been received at the expiration of the offer in the amounts and percentages set forth in the table below.

         

Title of Security

CUSIP
Numbers

Principal Amount
Outstanding

Purchase Price
per $1,000 of
Notes

Principal
Amount
Tendered(1)

Percentage
of Principal
Amount
Tendered(1)

5.5% Senior Notes due 2022

20605PAD3

$600,000,000

$1,029.34

$341,247,000

56.87%

5.5% Senior Notes due 2023 20605PAE1 $1,550,000,000

$891,089,000

57.49%

 

(1) Excludes $281,000 and $15,782,000 of aggregate principal amount, respectively, of 5.5% Senior Notes due 2022 and 5.5% Senior Notes due 2023 that remain subject to guaranteed delivery procedures.

 

Concho expects to accept for payment all notes validly tendered and not validly withdrawn as of the expiration time of the offer, and Concho expects to make payment for these notes later today, which payment will include accrued and unpaid interest thereon from the last interest payment date up to, but not including, September 26, 2017. Concho also expects to accept for payment all notes that remain subject to guaranteed delivery procedures and to make payment for such notes on September 28, 2017, which payment would include accrued and unpaid interest thereon only to, but not including, September 26, 2017.

Concho will apply a portion of the net proceeds from its issuance of 3.750% Senior Notes due 2027 and 4.875% Senior Notes due 2047, which is also expected to close today, to the payment of all notes it purchases in the offer.

As previously announced, Concho exercised, concurrently with the launch of the offer, its right to optionally redeem any notes not purchased by it in the offer with a redemption date of October 13, 2017, at a price equal to 102.75% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date. Concho anticipates satisfying and discharging the indentures governing the 5.5% Senior Notes due 2022 and 5.5% Senior Notes due 2023 prior to September 30, 2017.

Concho retained BofA Merrill Lynch to serve as the exclusive dealer manager for the offer. Questions regarding the terms of the offer may be directed to BofA Merrill Lynch by calling (980) 387-3907 (collect) or (888) 292-0070 (toll-free). Concho also retained D.F. King & Co., Inc. to serve as the tender agent and information agent for the offer.

This press release is neither an offer to purchase nor a solicitation of an offer to sell any notes in the offer. In addition, this press release is not an offer to sell or the solicitation of an offer to buy any securities issued in connection with any contemporaneous notes offering, nor shall there be any sale of the securities issued in such offering in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. Any such securities will be offered only by means of a prospectus, including a prospectus supplement relating to such securities, meeting the requirements of Section 10 of the Securities Act of 1933, as amended.

Concho Resources Inc.

Concho Resources Inc. is an independent oil and natural gas company engaged in the acquisition, development, exploration and production of oil and natural gas properties. The Company’s operations are focused in the Permian Basin of Southeast New Mexico and West Texas.

Forward-Looking Statements and Cautionary Statements

The foregoing contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical fact, included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. Forward-looking statements contained in this press release specifically include statements, estimates and projections regarding the Company’s future financial position, operations, performance, business strategy, oil and natural gas reserves, drilling program, capital expenditure budget, liquidity and capital resources, the timing and success of specific projects, outcomes and effects of litigation, claims and disputes, derivative activities and potential financing. The words “estimate,” “project,” “predict,” “believe,” “expect,” “anticipate,” “potential,” “could,” “may,” “foresee,” “plan,” “goal” or other similar expressions that convey the uncertainty of future events or outcomes are intended to identify forward-looking statements, which generally are not historical in nature. However, the absence of these words does not mean that the statements are not forward-looking. These statements are based on certain assumptions and analyses made by the Company based on management’s experience, expectations and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Forward-looking statements are not guarantees of performance. Although the Company believes the expectations reflected in its forward-looking statements are reasonable and are based on reasonable assumptions, no assurance can be given that these assumptions are accurate or that any of these expectations will be achieved (in full or at all) or will prove to have been correct. Moreover, such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. These risks include, without limitation, the risk factors discussed or referenced in the Company’s most recent Annual Report on Form 10-K and in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017; risks relating to declines in, or the sustained depression of, the prices the Company receives for its oil and natural gas; uncertainties about the estimated quantities of oil and natural gas reserves; drilling, completion and operating risks; the effects of government regulation, permitting and other legal requirements, including new legislation or regulation of hydraulic fracturing and the export of oil and natural gas; environmental hazards, such as uncontrollable flows of oil, natural gas, brine, well fluids, toxic gas or other pollution into the environment, including groundwater contamination; difficult and adverse conditions in the domestic and global capital and credit markets; risks related to the concentration of the Company’s operations in the Permian Basin of southeast New Mexico and west Texas; disruptions to, capacity constraints in or other limitations on the pipeline systems that deliver the Company’s oil, natural gas liquids and natural gas and other processing and transportation considerations; the costs and availability of equipment, resources, services and qualified personnel required to perform the Company’s drilling, completion and operating activities; potential financial losses or earnings reductions from the Company’s commodity price risk-management program; risks and liabilities associated with acquired properties or businesses; uncertainties about the Company’s ability to successfully execute its business and financial plans and strategies; the adequacy of the Company’s capital resources and liquidity including, but not limited to, access to additional borrowing capacity under the Company’s credit facility; the impact of potential changes in the Company’s credit ratings; cybersecurity risks, such as those involving unauthorized access, malicious software, data privacy breaches by employees or others with authorized access, cyber or phishing-attacks, ransomware and other security issues; uncertainties about the Company’s ability to replace reserves and economically develop its current reserves; general economic and business conditions, either internationally or domestically; competition in the oil and natural gas industry; uncertainty concerning the Company’s assumed or possible future results of operations; and other important factors that could cause actual results to differ materially from those projected.

Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.

Source: Concho Resources Inc.

Concho Resources Inc.

Megan P. Hays, 432-685-2533

Vice President of Investor Relations and Public Affairs

or

Mary T. Starnes, 432-221-0477

Senior Financial Analyst

09.13.17 Concho Resources Inc. Announces Pricing of Senior Unsecured Notes

MIDLAND, Texas--(BUSINESS WIRE)-- Concho Resources Inc. (NYSE: CXO) (“Concho” or the “Company”) today announced that it has priced an offering of a total of $1,800 million aggregate principal amount of senior unsecured notes, consisting of $1,000 million aggregate principal amount of senior unsecured notes due 2027 (the “2027 notes”) and $800 million aggregate principal amount of senior unsecured notes due 2047 (the “2047 notes”). The 2027 notes will bear interest at a rate of 3.750% per annum and will be issued at 99.636% of par, and the 2047 notes will bear interest at a rate of 4.875% per annum and will be issued at 99.749% of par. Concho intends to use the net proceeds from the offering, together with cash on hand and borrowings under its credit facility, to fund the purchase of its 5.5% Senior Notes due 2022 and 5.5% Senior Notes due 2023 (collectively, the “5.5% notes”) pursuant to a proposed tender offer and the redemption of any 5.5% notes that remain outstanding after completion or termination of the tender offer. Concho expects to close the sale of the notes on September 26, 2017, subject to customary closing conditions.

BofA Merrill Lynch, Barclays Capital Inc. and Citigroup Global Markets Inc. will act as joint book-running managers for the senior unsecured notes offering. The offering will be made only by means of a preliminary prospectus supplement and the accompanying base prospectus, copies of which may be obtained on the Securities and Exchange Commission (“SEC”) website at www.sec.gov. Alternatively, the underwriters will arrange to send you the preliminary prospectus supplement and related base prospectus if you request them by contacting Merrill Lynch, Pierce, Fenner & Smith Incorporated, 200 North College Street, NC1-004-03-43, Charlotte, NC 28255-0001, Attention: Prospectus Department, or by e-mailing dg.prospectus_requests@baml.com, or via phone at (800) 294-1322; Barclays Capital Inc., c/o Broadridge Financial Solutions, 1155 Long Island Ave., Edgewood, NY 11717, or by e-mailing barclaysprospectus@broadridge.com, or via phone at (888) 603-5847; or Citigroup Global Markets Inc., c/o Broadridge Financial Solutions, 1155 Long Island Ave., Edgewood, NY 11717, or by e-mailing prospectus@citi.com, or via phone at (800) 831-9146.

This press release is neither an offer to sell nor a solicitation of an offer to buy any securities, nor shall there be any sale of any such securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction. A registration statement, as amended, relating to the securities has been filed and became effective August 6, 2015. This press release is not intended as a notice of redemption. Any such notice will be given to holders of the 5.5% notes in a manner prescribed in the indenture governing those notes.

Concho Resources Inc.

Concho Resources Inc. is an independent oil and natural gas company engaged in the acquisition, development, exploration and production of oil and natural gas properties. The Company’s operations are focused in the Permian Basin of Southeast New Mexico and West Texas.

Forward-Looking Statements and Cautionary Statements

The foregoing contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical fact, included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. Forward-looking statements contained in this press release specifically include statements, estimates and projections regarding the Company’s future financial position, operations, performance, business strategy, oil and natural gas reserves, drilling program, capital expenditure budget, liquidity and capital resources, the timing and success of specific projects, outcomes and effects of litigation, claims and disputes, derivative activities and potential financing. The words “estimate,” “project,” “predict,” “believe,” “expect,” “anticipate,” “potential,” “could,” “may,” “foresee,” “plan,” “goal” or other similar expressions that convey the uncertainty of future events or outcomes are intended to identify forward-looking statements, which generally are not historical in nature. However, the absence of these words does not mean that the statements are not forward-looking. These statements are based on certain assumptions and analyses made by the Company based on management’s experience, expectations and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Forward-looking statements are not guarantees of performance. Although the Company believes the expectations reflected in its forward-looking statements are reasonable and are based on reasonable assumptions, no assurance can be given that these assumptions are accurate or that any of these expectations will be achieved (in full or at all) or will prove to have been correct. Moreover, such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. These risks include, without limitation, the risk factors discussed or referenced in the Company’s most recent Annual Report on Form 10-K and in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017; risks relating to declines in, or the sustained depression of, the prices the Company receives for its oil and natural gas; uncertainties about the estimated quantities of oil and natural gas reserves; drilling, completion and operating risks; the effects of government regulation, permitting and other legal requirements, including new legislation or regulation of hydraulic fracturing and the export of oil and natural gas; environmental hazards, such as uncontrollable flows of oil, natural gas, brine, well fluids, toxic gas or other pollution into the environment, including groundwater contamination; difficult and adverse conditions in the domestic and global capital and credit markets; risks related to the concentration of the Company’s operations in the Permian Basin of southeast New Mexico and west Texas; disruptions to, capacity constraints in or other limitations on the pipeline systems that deliver the Company’s oil, natural gas liquids and natural gas and other processing and transportation considerations; the costs and availability of equipment, resources, services and qualified personnel required to perform the Company’s drilling, completion and operating activities; potential financial losses or earnings reductions from the Company’s commodity price risk-management program; risks and liabilities associated with acquired properties or businesses; uncertainties about the Company’s ability to successfully execute its business and financial plans and strategies; the adequacy of the Company’s capital resources and liquidity including, but not limited to, access to additional borrowing capacity under the Company’s credit facility; the impact of potential changes in the Company’s credit ratings; cybersecurity risks, such as those involving unauthorized access, malicious software, data privacy breaches by employees or others with authorized access, cyber or phishing-attacks, ransomware and other security issues; uncertainties about the Company’s ability to replace reserves and economically develop its current reserves; general economic and business conditions, either internationally or domestically; competition in the oil and natural gas industry; uncertainty concerning the Company’s assumed or possible future results of operations; and other important factors that could cause actual results to differ materially from those projected.

Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.

Source: Concho Resources Inc.

Concho Resources Inc.

Megan P. Hays, 432-685-2533

Vice President of Investor Relations and Public Affairs

or

Mary T. Starnes, 432-221-0477

Senior Financial Analyst

09.13.17 Concho Resources Inc. Announces Cash Tender Offer for Any and All of Its Outstanding 5.5% Senior Notes due 2022 and 5.5% Senior Notes due 2023

MIDLAND, Texas--(BUSINESS WIRE)-- Concho Resources Inc. (NYSE: CXO) (“Concho” or the “Company”) today announced that it has commenced a cash tender offer (the “offer”) to purchase any and all of the outstanding senior notes listed in the following table at the cash purchase price shown in the column titled “Purchase Price per $1,000 of Notes.”

               
Issuer Title of Security

CUSIP
Numbers

Principal Amount
Outstanding

Purchase Price
per $1,000 of
Notes

Concho Resources Inc.

5.5% Senior Notes due 2022 20605PAD3 $600,000,000

$1,029.34

5.5% Senior Notes due 2023 20605PAE1 $1,550,000,000
 

Holders whose notes are purchased will also receive accrued and unpaid interest thereon from the last interest payment date up to, but not including, the initial settlement date, which is expected to be September 26, 2017.

The offer is being made pursuant to an Offer to Purchase dated today, a related Letter of Transmittal and a related Notice of Guaranteed Delivery, which set forth the complete terms and conditions of the offer.

The offer will expire at 5:00 PM ET on September 25, 2017, unless extended (the “Expiration Time”). Tendered notes may be withdrawn at any time before the Expiration Time. Holders of notes must validly tender and not validly withdraw their notes (or comply with the procedures for guaranteed late delivery) before the Expiration Time to be eligible to receive the consideration for their notes. Settlement for notes tendered prior to the Expiration Time and accepted for purchase will occur promptly after the Expiration Time. The initial settlement date is expected to be September 26, 2017, assuming that the offer is not extended or earlier terminated. The settlement date for any notes tendered pursuant to a Notice of Guaranteed Delivery is expected to be on September 28, 2017, subject to the same assumption, and payment for such notes would include accrued and unpaid interest thereon only to, but not including, the initial settlement date.

The offer for the notes is conditioned upon the satisfaction of certain conditions, including the completion of a contemporaneous notes offering by Concho on terms and conditions (including, but not limited to, the amount of proceeds raised in such offering) satisfactory to Concho. The offer is not conditioned upon any minimum amount of notes being tendered.

The offer may be amended, extended, terminated or withdrawn in Concho’s sole discretion.

There is no assurance that the offer will be subscribed for in any amount. Concho is exercising, concurrently with the launch of the offer, its right to optionally redeem any notes not purchased by it in the offer, at a price equal to 102.75% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date, conditioned upon and subject to the completion of the contemporaneous notes offering referenced in the second preceding paragraph of this announcement. This announcement does not constitute a notice of redemption under the optional redemption provisions of the indenture governing the notes.

Concho has retained BofA Merrill Lynch to serve as the exclusive dealer manager for the offer. Questions regarding the terms of the offer may be directed to BofA Merrill Lynch by calling (980) 387-3907 (collect) or (888) 292-0070 (toll-free).

Concho has also retained D.F. King & Co., Inc. to serve as the tender agent and information agent for the offer.

The offer is being made pursuant to the terms and conditions contained in the Offer to Purchase, Letter of Transmittal and Notice of Guaranteed Delivery, copies of which may be obtained from D.F. King & Co., Inc., the tender agent and information agent for the offer, by calling (800) 714-3312 (toll free) or, for banks and brokers, (212) 269-5550 or emailing cxo@dfking.com. Copies of the Offer to Purchase, Letter of Transmittal and Notice of Guaranteed Delivery are also available at the following web address: http://www.dfking.com/cxo.

None of Concho, the dealer manager, the tender agent or the information agent makes any recommendation to any holder whether to tender or refrain from tendering any or all of such holder’s notes, and none of them has authorized any person to make any such recommendation. Holders are urged to evaluate carefully all information in the offer documents, consult their own investment and tax advisors and make their own decisions whether to tender notes.

This press release is neither an offer to purchase nor a solicitation of an offer to sell any notes in the offer. In addition, this press release is not an offer to sell or the solicitation of an offer to buy any securities issued in connection with any contemporaneous notes offering, nor shall there be any sale of the securities issued in such offering in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. Any such securities will be offered only by means of a prospectus, including a prospectus supplement relating to such securities, meeting the requirements of Section 10 of the Securities Act of 1933, as amended.

Concho Resources Inc.

Concho Resources Inc. is an independent oil and natural gas company engaged in the acquisition, development, exploration and production of oil and natural gas properties. The Company’s operations are focused in the Permian Basin of Southeast New Mexico and West Texas.

Forward-Looking Statements and Cautionary Statements

The foregoing contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical fact, included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. Forward-looking statements contained in this press release specifically include statements, estimates and projections regarding the Company’s future financial position, operations, performance, business strategy, oil and natural gas reserves, drilling program, capital expenditure budget, liquidity and capital resources, the timing and success of specific projects, outcomes and effects of litigation, claims and disputes, derivative activities and potential financing. The words “estimate,” “project,” “predict,” “believe,” “expect,” “anticipate,” “potential,” “could,” “may,” “foresee,” “plan,” “goal” or other similar expressions that convey the uncertainty of future events or outcomes are intended to identify forward-looking statements, which generally are not historical in nature. However, the absence of these words does not mean that the statements are not forward-looking. These statements are based on certain assumptions and analyses made by the Company based on management’s experience, expectations and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Forward-looking statements are not guarantees of performance. Although the Company believes the expectations reflected in its forward-looking statements are reasonable and are based on reasonable assumptions, no assurance can be given that these assumptions are accurate or that any of these expectations will be achieved (in full or at all) or will prove to have been correct. Moreover, such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. These risks include, without limitation, the risk factors discussed or referenced in the Company’s most recent Annual Report on Form 10-K and in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017; risks relating to declines in, or the sustained depression of, the prices the Company receives for its oil and natural gas; uncertainties about the estimated quantities of oil and natural gas reserves; drilling, completion and operating risks; the effects of government regulation, permitting and other legal requirements, including new legislation or regulation of hydraulic fracturing and the export of oil and natural gas; environmental hazards, such as uncontrollable flows of oil, natural gas, brine, well fluids, toxic gas or other pollution into the environment, including groundwater contamination; difficult and adverse conditions in the domestic and global capital and credit markets; risks related to the concentration of the Company’s operations in the Permian Basin of southeast New Mexico and west Texas; disruptions to, capacity constraints in or other limitations on the pipeline systems that deliver the Company’s oil, natural gas liquids and natural gas and other processing and transportation considerations; the costs and availability of equipment, resources, services and qualified personnel required to perform the Company’s drilling, completion and operating activities; potential financial losses or earnings reductions from the Company’s commodity price risk-management program; risks and liabilities associated with acquired properties or businesses; uncertainties about the Company’s ability to successfully execute its business and financial plans and strategies; the adequacy of the Company’s capital resources and liquidity including, but not limited to, access to additional borrowing capacity under the Company’s credit facility; the impact of potential changes in the Company’s credit ratings; cybersecurity risks, such as those involving unauthorized access, malicious software, data privacy breaches by employees or others with authorized access, cyber or phishing-attacks, ransomware and other security issues; uncertainties about the Company’s ability to replace reserves and economically develop its current reserves; general economic and business conditions, either internationally or domestically; competition in the oil and natural gas industry; uncertainty concerning the Company’s assumed or possible future results of operations; and other important factors that could cause actual results to differ materially from those projected.

Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.

Source: Concho Resources Inc.

Concho Resources Inc.

Megan P. Hays, 432-685-2533

Vice President of Investor Relations and Public Affairs

or

Mary T. Starnes, 432-221-0477

Senior Financial Analyst

09.13.17 Concho Resources Inc. Announces Proposed Offering of Senior Unsecured Notes

MIDLAND, Texas--(BUSINESS WIRE)-- Concho Resources Inc. (NYSE: CXO) (“Concho” or the “Company”) today announced that it intends, subject to market conditions, to publicly offer two new series of its senior unsecured notes, one of which will mature in 2027 (the “2027 notes”) and the other in 2047 (the “2047 notes”). The 2027 notes and the 2047 notes will be issued pursuant to new supplemental indentures to the Company’s existing base indenture, in each case in an aggregate principal amount to be determined at pricing. The 2027 notes and the 2047 notes will be fully and unconditionally guaranteed by all of Concho’s current subsidiaries. Concho intends to use the net proceeds from the offering, together with cash on hand and borrowings under its credit facility, to fund the purchase of its 5.5% Senior Notes due 2022 and 5.5% Senior Notes due 2023 (collectively, the “5.5% notes”) pursuant to a proposed tender offer and the redemption of any 5.5% notes that remain outstanding after completion or termination of the tender offer.

BofA Merrill Lynch, Barclays Capital Inc. and Citigroup Global Markets Inc. will act as joint book-running managers for the senior unsecured notes offering. The offering will be made only by means of a preliminary prospectus supplement and the accompanying base prospectus, copies of which may be obtained on the Securities and Exchange Commission (“SEC”) website at www.sec.gov. Alternatively, the underwriters will arrange to send you the preliminary prospectus supplement and related base prospectus if you request them by contacting Merrill Lynch, Pierce, Fenner & Smith Incorporated, 200 North College Street, NC1-004-03-43, Charlotte, NC 28255-0001, Attention: Prospectus Department, or by e-mailing dg.prospectus_requests@baml.com, or via phone at (800) 294-1322; Barclays Capital Inc., c/o Broadridge Financial Solutions, 1155 Long Island Ave., Edgewood, NY 11717, or by e-mailing barclaysprospectus@broadridge.com, or via phone at (888) 603-5847; or Citigroup Global Markets Inc., c/o Broadridge Financial Solutions, 1155 Long Island Ave., Edgewood, NY 11717, or by e-mailing prospectus@citi.com, or via phone at (800) 831-9146.

This press release is neither an offer to sell nor a solicitation of an offer to buy any securities, nor shall there be any sale of any such securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction. A registration statement, as amended, relating to the securities has been filed and became effective August 6, 2015. This press release is not intended as a notice of redemption. Any such notice will be given to holders of the 5.5% notes in a manner prescribed in the indenture governing those notes.

Concho Resources Inc.

Concho Resources Inc. is an independent oil and natural gas company engaged in the acquisition, development, exploration and production of oil and natural gas properties. The Company’s operations are focused in the Permian Basin of Southeast New Mexico and West Texas.

Forward-Looking Statements and Cautionary Statements

The foregoing contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical fact, included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. Forward-looking statements contained in this press release specifically include statements, estimates and projections regarding the Company’s future financial position, operations, performance, business strategy, oil and natural gas reserves, drilling program, capital expenditure budget, liquidity and capital resources, the timing and success of specific projects, outcomes and effects of litigation, claims and disputes, derivative activities and potential financing. The words “estimate,” “project,” “predict,” “believe,” “expect,” “anticipate,” “potential,” “could,” “may,” “foresee,” “plan,” “goal” or other similar expressions that convey the uncertainty of future events or outcomes are intended to identify forward-looking statements, which generally are not historical in nature. However, the absence of these words does not mean that the statements are not forward-looking. These statements are based on certain assumptions and analyses made by the Company based on management’s experience, expectations and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Forward-looking statements are not guarantees of performance. Although the Company believes the expectations reflected in its forward-looking statements are reasonable and are based on reasonable assumptions, no assurance can be given that these assumptions are accurate or that any of these expectations will be achieved (in full or at all) or will prove to have been correct. Moreover, such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. These risks include, without limitation, the risk factors discussed or referenced in the Company’s most recent Annual Report on Form 10-K and in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017; risks relating to declines in, or the sustained depression of, the prices the Company receives for its oil and natural gas; uncertainties about the estimated quantities of oil and natural gas reserves; drilling, completion and operating risks; the effects of government regulation, permitting and other legal requirements, including new legislation or regulation of hydraulic fracturing and the export of oil and natural gas; environmental hazards, such as uncontrollable flows of oil, natural gas, brine, well fluids, toxic gas or other pollution into the environment, including groundwater contamination; difficult and adverse conditions in the domestic and global capital and credit markets; risks related to the concentration of the Company’s operations in the Permian Basin of southeast New Mexico and west Texas; disruptions to, capacity constraints in or other limitations on the pipeline systems that deliver the Company’s oil, natural gas liquids and natural gas and other processing and transportation considerations; the costs and availability of equipment, resources, services and qualified personnel required to perform the Company’s drilling, completion and operating activities; potential financial losses or earnings reductions from the Company’s commodity price risk-management program; risks and liabilities associated with acquired properties or businesses; uncertainties about the Company’s ability to successfully execute its business and financial plans and strategies; the adequacy of the Company’s capital resources and liquidity including, but not limited to, access to additional borrowing capacity under the Company’s credit facility; the impact of potential changes in the Company’s credit ratings; cybersecurity risks, such as those involving unauthorized access, malicious software, data privacy breaches by employees or others with authorized access, cyber or phishing-attacks, ransomware and other security issues; uncertainties about the Company’s ability to replace reserves and economically develop its current reserves; general economic and business conditions, either internationally or domestically; competition in the oil and natural gas industry; uncertainty concerning the Company’s assumed or possible future results of operations; and other important factors that could cause actual results to differ materially from those projected.

Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.

Source: Concho Resources Inc.

Concho Resources Inc.

Megan P. Hays, 432-685-2533

Vice President of Investor Relations and Public Affairs

or

Mary T. Starnes, 432-221-0477

Senior Financial Analyst

08.23.17 Concho Resources Inc. Schedules Third Quarter 2017 Results Conference Call for Wednesday, November 1, 2017

MIDLAND, Texas--(BUSINESS WIRE)-- Concho Resources Inc. (NYSE: CXO) (the “Company” or “Concho”) will host a conference call on Wednesday, November 1, 2017, at 8:00 AM CT (9:00 AM ET) to discuss third quarter 2017 financial and operating results. The Company plans to announce third quarter 2017 results on Tuesday, October 31, 2017, after close of trading.

Conference Call Information:

Dial-in: (844) 263-8298
Intl. dial-in: (478) 219-0007
Participant Passcode: 75203686

To access the live webcast, visit the Company’s website at www.concho.com. The replay will also be available on Concho’s website under the Investors section.

About Concho Resources Inc.

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

Source: Concho Resources Inc.

Concho Resources Inc.

Investor Relations

Megan P. Hays, 432-685-2533

Vice President of Investor Relations and Public Affairs

or

Mary T. Starnes, 432-221-0477

Senior Financial Analyst

08.02.17 Concho Resources Inc. Reports Second Quarter 2017 Results

MIDLAND, Texas--(BUSINESS WIRE)-- Concho Resources Inc. (NYSE: CXO) (the “Company” or “Concho”) today reported financial and operating results for the second quarter of 2017.

Second-Quarter 2017 Highlights

  • Increased production 27% year-over-year to 184.7 MBoepd.
  • Delivered 8th consecutive quarter in which cash flows from operations exceeded capital expenditures.
  • Continued delineation of the stacked oil resource in the Northern Delaware Basin.
  • Achieved record well performance in the Southern Delaware Basin.
  • Acquired 12,400 net acres, enhancing the Company’s Midland Basin assets in Andrews and Martin counties, Texas.
  • Raised annual production growth outlook to a midpoint of 25% and expect oil production to increase by more than 25%.
  • Full-year 2017 capital expenditures, excluding acquisitions, tracking the midpoint of the guidance range of $1.6 billion to $1.8 billion.
  • Reported quarterly net income of $152 million, or $1.02 per diluted share. Adjusted net income totaled $77 million, or $0.52 per diluted share (non-GAAP).
  • Generated $461 million of EBITDAX (non-GAAP).

See “Supplemental Non-GAAP Financial Measures” at the end of this press release for a description of non-GAAP measures adjusted net income, adjusted earnings per share and EBITDAX and a reconciliation of these measures to the associated GAAP measure.

Tim Leach, Chairman and Chief Executive Officer, commented, “Strong companies that are able to navigate and capitalize on commodity price volatility will win in this environment. Our ability to deliver excellent performance while balancing capital investment and cash flow over the last two years demonstrates our execution strength and high-quality assets. This quarter’s solid operating results are supported by the capital efficiency of our program, which we see improving further as we move to large-scale development. Going forward, we will continue to focus on executing a disciplined capital program funded within cash flow. I am confident that this discipline will continue to distinguish Concho as an industry leader.”

Second-Quarter 2017 Operations Summary

Production for the second quarter of 2017 averaged 184.7 thousand Boe per day (MBoepd), an increase of approximately 27% from the second quarter of 2016. Crude oil production for the second quarter of 2017 totaled 113.2 thousand barrels per day (MBopd), an increase of approximately 27% from the second quarter of 2016. Average daily natural gas production for the second quarter of 2017 totaled 428.8 million cubic feet (MMcf).

Concho averaged 21 rigs in the second quarter of 2017. The Company is currently running 19 rigs and expects to average 17 rigs in the second half of 2017. During the second quarter of 2017, Concho commenced drilling or participated in a total of 87 gross wells (60 operated wells) and completed 76 gross wells. The table below summarizes the Company’s drilling activity by core area for the second quarter of 2017.

             

Number of Wells
Drilled
(Gross)

Number of
Operated Wells
Drilled
(Gross)

Number of Wells
Completed
(Gross)

Northern Delaware Basin 37 21 26
Southern Delaware Basin 23 16 15
Midland Basin 12 12 21
New Mexico Shelf 15 11 14
Total 87 60 76
 

Northern Delaware Basin

Concho added 12 horizontal wells in the Northern Delaware Basin with at least 30 days of production during the second quarter of 2017 and an average lateral length of 6,045 feet. The average peak 30-day and 24-hour rates for these wells were 1,394 Boepd (66% oil) and 1,700 Boepd, respectively. The Company currently has seven rigs drilling in the Northern Delaware Basin.

Delineating the Stacked Oil Resource in Red Hills and Deep Areas

In the Red Hills area, Concho recently completed the Viking Helmet 1H well. This well targeted the Wolfcamp Sands, an over-pressured zone that sits above the Wolfcamp Shale at a depth of approximately 12,000 feet. While early in production, the Company is encouraged by the performance of this well, which achieved an average peak 20-day rate of 3,050 Boepd (85% oil) and a 24-hour rate of 3,444 Boepd from a lateral length of 6,838 feet.

The Company continued to advance its delineation efforts of the multi-zone resource in the Deep area. In the second quarter of 2017, Concho added the Blue Jay Federal 2H, a 3rd Bone Spring well with a peak 30-day rate of 2,233 Boepd (83% oil) from a 4,279 feet lateral. In addition, the Company added the Mas Federal 4H well, which achieved a peak 30-day rate of 1,470 Boepd (80% oil) from a lateral length of 4,392 feet. This well is the Company’s first test of the Wolfcamp Sands in the Deep area.

Southern Delaware Basin

Concho added eight horizontal wells in the Southern Delaware Basin with at least 30 days of production during the second quarter of 2017. The average peak 30-day and 24-hour rates for these wells were 1,740 Boepd (77% oil) and 2,165 Boepd, respectively. This performance and the average lateral length of 8,852 feet represent Company records for the Southern Delaware Basin. The Company currently has six rigs drilling in the Southern Delaware Basin.

Optimizing Development of the 3rd Bone Spring and Upper Wolfcamp

Concho is testing the co-development of the 3rd Bone Spring and Upper Wolfcamp in the Southern Delaware Basin. Included in results for the second quarter of 2017 were three 3rd Bone Spring wells, which achieved an average peak 30-day rate of 2,068 Boepd (73% oil) from an average lateral length of 9,967 feet. These wells were co-developed with the Upper Wolfcamp. Simultaneous development of the zones will optimize recoveries and enhance overall value of the Company’s Southern Delaware Basin position.

Midland Basin

Concho added 31 horizontal wells in the Midland Basin with at least 30 days of production during the second quarter of 2017 and an average lateral length of 9,995 feet. The average peak 30-day and 24-hour rates for these wells were 923 Boepd (87% oil) and 1,078 Boepd, respectively. The Company currently has five rigs drilling in the Midland Basin.

Outstanding Performance in the Lower Spraberry

Concho continued to achieve outstanding performance from the Lower Spraberry zone in the Midland Basin. During the second quarter of 2017, seven new wells were brought online with an average peak 30-day and 24-hour rates of 1,032 Boepd (87% oil) and 1,233 Boepd, respectively from an average lateral length of 10,289 feet.

Strategic Midland Basin Acquisition

On July 31, 2017, Concho acquired approximately 12,400 net acres with an average 100% working interest in Andrews and Martin counties, Texas. The acquired properties include approximately 3 MBoepd (73% oil) of legacy production. The acreage is contiguous with the Mabee Ranch leasehold Concho acquired from Reliance in the fourth quarter of 2016, enhancing the assets for large-scale, long-lateral development. The purchase price was $600 million, and the transaction was funded with cash on hand.

Regarding the recent acquisition, Mr. Leach commented, “This strategic acquisition complements the Midland Basin acreage we acquired last year and is consistent with our focus on high-grading our portfolio through trades, acquisitions and divestitures. We believe one of the best ways to create value is by owning large, contiguous positions with high ownership in the Permian.”

New Mexico Shelf

In the New Mexico Shelf, Concho added 13 horizontal wells with at least 30 days of production during the second quarter of 2017. The average peak 30-day and 24-hour rates for these wells were 396 Boepd (84% oil) and 553 Boepd, respectively. The average lateral length for these wells was 5,061 feet, which sets a Company record. The Company currently has one rig drilling in the New Mexico Shelf.

Second-Quarter 2017 Financial Summary

Concho’s average realized price for crude oil and natural gas for the second quarter of 2017, excluding the effect of commodity derivatives, was $44.75 per Bbl and $2.71 per Mcf, respectively, compared with $41.68 per Bbl and $1.88 per Mcf, respectively, for the second quarter of 2016.

Net income for the second quarter of 2017 was $152 million, or $1.02 per diluted share, compared to net loss of $266 million, or $2.04 per diluted share, for the second quarter of 2016. Adjusted net income (non-GAAP), which excludes non-cash and unusual items, for the second quarter of 2017 was $77 million, or $0.52 per diluted share, compared with adjusted net income (non-GAAP) of $34 million, or $0.26 per diluted share, for the second quarter of 2016.

EBITDAX (non-GAAP) for the second quarter of 2017 totaled $461 million, compared to $413 million for the second quarter of 2016.

Financial Position and Liquidity

At June 30, 2017, Concho had cash of $662 million and long-term debt of $2.7 billion. Concho currently has no outstanding borrowings under its credit facility. Adjusted for the Midland Basin acquisition, the Company had cash of $122 million and long-term debt of $2.7 billion at June 30, 2017.

Outlook

For the third quarter of 2017, Concho expects production to average between 186 MBoepd and 190 MBoepd.

For full-year 2017, Concho raised its production growth guidance to a range of 24% to 26% and expects oil production to grow by more than 25%. The Company expects capital expenditures, excluding acquisitions, will approximate the midpoint of the guidance range of $1.6 billion to $1.8 billion. Additionally, for the second half of 2017, the Company expects oil and natural gas production expense will be at the high end of the guidance range of $5.50 per Boe to $6.00 per Boe, with production expense tracking the midpoint of the range for full-year 2017. The Company lowered full-year 2017 guidance for depletion, depreciation and amortization expense to a range of $16 per Boe to $18 per Boe, as compared to previous guidance of $17 per Boe to $19 per Boe.

Commodity Derivatives Update

The Company enters into commodity derivatives to manage its exposure to commodity price fluctuations. For the second half of 2017, Concho has crude oil price swap contracts covering approximately 96.5 MBopd at a weighted average price of $51.18 per Bbl. The Company also has crude oil price swaps for 2018 and 2019, covering approximately 74.7 MBopd and 48.9 MBopd at a weighted average price of $51.35 per Bbl and $52.70 per Bbl, respectively. Please see the table under “Derivatives Information” below for detailed information about the Company’s current derivatives positions.

Conference Call

Concho will discuss second quarter 2017 results on a conference call tomorrow, August 3, 2017, at 8:00 AM CT (9:00 AM ET). The telephone number and passcode to access the conference call are provided below:

Dial-in: (844) 263-8298
Intl. dial-in: (478) 219-0007
Participant Passcode: 31529221

To access the live webcast and view the related earnings presentation, visit the Company’s website at www.concho.com. The replay will also be available on Concho’s website under the “Investors” section.

Upcoming Conferences

The Company will participate in the following upcoming conferences:

Conference Date       Conference
September 5, 2017 Barclays CEO Energy Conference
September 12, 2017 Raymond James North America Equities Conference
September 19, 2017 J.P. Morgan All Stars Conference
September 28, 2017 Wolfe Research Oil & Gas Leaders Conference
 

The presentations will be available on the Company’s website on or prior to the day of the first conference under the Investors section of the Company’s website, www.concho.com.

Concho Resources Inc.

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

Forward-Looking Statements and Cautionary Statements

The foregoing contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical fact, included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. Forward-looking statements contained in this press release specifically include statements, estimates and projections regarding the Company’s future financial position, operations, performance, business strategy, oil and natural gas reserves, drilling program, capital expenditure budget, liquidity and capital resources, the timing and success of specific projects, outcomes and effects of litigation, claims and disputes, derivative activities and potential financing. The words “estimate,” “project,” “predict,” “believe,” “expect,” “anticipate,” “potential,” “could,” “may,” “foresee,” “plan,” “goal” or other similar expressions that convey the uncertainty of future events or outcomes are intended to identify forward-looking statements, which generally are not historical in nature. However, the absence of these words does not mean that the statements are not forward-looking. These statements are based on certain assumptions and analyses made by the Company based on management’s experience, expectations and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Forward-looking statements are not guarantees of performance. Although the Company believes the expectations reflected in its forward-looking statements are reasonable and are based on reasonable assumptions, no assurance can be given that these assumptions are accurate or that any of these expectations will be achieved (in full or at all) or will prove to have been correct. Moreover, such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. These risks include, without limitation, the risk factors discussed or referenced in the Company’s most recent Annual Report on Form 10-K and in the Company’s Quarterly Report on Form 10-Q; risks relating to declines in, or the sustained depression of, the prices the Company receives for its oil and natural gas; uncertainties about the estimated quantities of oil and natural gas reserves; drilling, completion and operating risks; the effects of government regulation, permitting and other legal requirements, including new legislation or regulation of hydraulic fracturing and the export of oil and natural gas; environmental hazards, such as uncontrollable flows of oil, natural gas, brine, well fluids, toxic gas or other pollution into the environment, including groundwater contamination; difficult and adverse conditions in the domestic and global capital and credit markets; risks related to the concentration of the Company’s operations in the Permian Basin of Southeast New Mexico and West Texas; disruptions to, capacity constraints in or other limitations on the pipeline systems that deliver the Company’s oil, natural gas liquids and natural gas and other processing and transportation considerations; the costs and availability of equipment, resources, services and qualified personnel required to perform the Company’s drilling, completion and operating activities; potential financial losses or earnings reductions from the Company’s commodity price risk-management program; risks and liabilities associated with acquired properties or businesses; uncertainties about the Company’s ability to successfully execute its business and financial plans and strategies; the adequacy of the Company’s capital resources and liquidity including, but not limited to, access to additional borrowing capacity under the Company’s credit facility; the impact of potential changes in the Company’s credit ratings; cybersecurity risks, such as those involving unauthorized access, malicious software, data privacy breaches by employees or others with authorized access, cyber or phishing-attacks, ransomware and other security issues; uncertainties about the Company’s ability to replace reserves and economically develop its current reserves; general economic and business conditions, either internationally or domestically; competition in the oil and natural gas industry; uncertainty concerning the Company’s assumed or possible future results of operations; and other important factors that could cause actual results to differ materially from those projected.

Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.

     
Concho Resources Inc.
Consolidated Balance Sheets
Unaudited
 
               
June 30,     December 31,
(in millions, except share and per share amounts)       2017     2016
Assets
Current assets:
Cash and cash equivalents $ 662 $ 53
Accounts receivable, net of allowance for doubtful accounts:
Oil and natural gas 227 220
Joint operations and other 241 238
Derivative instruments 135 4
Prepaid costs and other   39     31  

Total current assets

  1,304     546  
Property and equipment:
Oil and natural gas properties, successful efforts method 19,710 18,476
Accumulated depletion and depreciation   (7,904 )   (7,390 )
Total oil and natural gas properties, net 11,806 11,086
Other property and equipment, net   234     216  
Total property and equipment, net   12,040     11,302  
Funds held in escrow 60 43
Deferred loan costs, net 15 11
Intangible asset - operating rights, net 24 24
Inventory 14 16
Noncurrent derivative instruments 90 -
Other assets   44     177  
Total assets $ 13,591   $ 12,119  
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable - trade $ 26 $ 28
Revenue payable 129 132
Accrued drilling costs 446 359
Derivative instruments - 82
Other current liabilities   165     152  
Total current liabilities   766     753  
Long-term debt 2,741 2,741
Deferred income taxes 1,212 766
Noncurrent derivative instruments - 96
Asset retirement obligations and other long-term liabilities 143 140
Stockholders’ equity:
Common stock, $0.001 par value; 300,000,000 authorized; 149,314,618 and
146,488,685 shares issued at June 30, 2017 and December 31, 2016, respectively - -
Additional paid-in capital 7,108 6,783
Retained earnings 1,686 884
Treasury stock, at cost; 591,650 and 429,708 shares at June 30, 2017 and
December 31, 2016, respectively   (65 )   (44 )
Total stockholders’ equity   8,729     7,623  
Total liabilities and stockholders’ equity $ 13,591   $ 12,119  
 

 
Concho Resources Inc.
Consolidated Statements of Operations
Unaudited
 
                           
                 
Three Months Ended Six Months Ended
June 30, June 30,
(in millions, except per share amounts)       2017     2016     2017     2016
 
Operating revenues:
Oil sales $ 461 $ 339 $ 963 $ 581
Natural gas sales   106     57     216     99  
Total operating revenues   567     396     1,179     680  
Operating costs and expenses:
Oil and natural gas production 100 77 187 169
Production and ad valorem taxes 44 33 92 56
Exploration and abandonments 20 21 35 44
Depreciation, depletion and amortization 281 281 564 591
Accretion of discount on asset retirement obligations 2 1 4 3
Impairments of long-lived assets - - - 1,525
General and administrative (including non-cash stock-based compensation of
$14 and $12 for the three months ended June 30, 2017 and
2016, respectively, and $26 and $28 for the six months ended
June 30, 2017 and 2016, respectively) 60 53 116 107
(Gain) loss on derivatives (209 ) 298 (495 ) 217
(Gain) loss on disposition of assets, net   -     1     (654 )   (110 )
Total operating costs and expenses   298     765     (151 )   2,602  
Income (loss) from operations   269     (369 )   1,330     (1,922 )
Other income (expense):
Interest expense (39 ) (55 ) (79 ) (109 )
Loss on extinguishment of debt (1 ) - (1 ) -
Other, net   16     -     16     (7 )
Total other expense   (24 )   (55 )   (64 )   (116 )
Income (loss) before income taxes 245 (424 ) 1,266 (2,038 )
Income tax (expense) benefit   (93 )   158     (464 )   752  
Net income (loss) $ 152   $ (266 ) $ 802   $ (1,286 )
Earnings per share:
Basic net income (loss) $ 1.02 $ (2.04 ) $ 5.41 $ (9.94 )
Diluted net income (loss) $ 1.02 $ (2.04 ) $ 5.39 $ (9.94 )
 

 
Concho Resources Inc.
Consolidated Statements of Cash Flows
Unaudited
 
               
      Six Months Ended
June 30,
(in millions)       2017     2016
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net income (loss) $ 802 $ (1,286 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization 564 591
Accretion of discount on asset retirement obligations 4 3
Impairments of long-lived assets - 1,525
Exploration and abandonments, including dry holes 24 39
Non-cash stock-based compensation expense 26 28
Deferred income taxes 454 (740 )
Gain on disposition of assets, net (654 ) (110 )
(Gain) loss on derivatives (495 ) 217
Net settlements received from derivatives 96 427
Loss on extinguishment of debt 1 -
Other non-cash items 1 8
Changes in operating assets and liabilities, net of acquisitions and dispositions:
Accounts receivable (24 ) 60
Prepaid costs and other (3 ) (9 )
Inventory 1 3
Accounts payable (2 ) 7
Revenue payable (2 ) (59 )
Other current liabilities   12     (28 )
Net cash provided by operating activities   805     676  
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures on oil and natural gas properties (863 ) (651 )
Additions to property, equipment and other assets (30 ) (16 )
Proceeds from the disposition of assets 803 294
Direct transaction costs for disposition of assets (18 ) -
Funds held in escrow (60 ) -
Contributions to equity method investments   -     (39 )
Net cash used in investing activities   (168 )   (412 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt 105 -
Payments of debt (105 ) -
Excess tax deficiency from stock-based compensation - (1 )
Payments for loan costs (7 ) -
Purchase of treasury stock   (21 )   (11 )
Net cash used in financing activities   (28 )   (12 )
Net increase in cash and cash equivalents 609 252
Cash and cash equivalents at beginning of period   53     229  
Cash and cash equivalents at end of period $ 662   $ 481  
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Issuance of common stock for business combinations $ 291 $ 231
 

                     

Concho Resources Inc.

Summary Production and Price Data

Unaudited

 
 

The following table sets forth summary information concerning production and operating data for the periods indicated:

 

                             
Three Months Ended Six Months Ended
June 30, June 30,
                      2017     2016     2017     2016
       
Production and operating data:
Average daily production volumes:
Oil (Bbl) 113,220 89,418 113,409 89,214
Natural gas (Mcf) 428,769 334,440 417,762 318,632
Total (Boe) 184,682 145,158 183,036 142,319
 
Average prices per unit:
Oil, without derivatives (Bbl) $ 44.75 $ 41.68 $ 46.91 $ 35.80
Oil, with derivatives (Bbl) (a) $ 51.60 $ 61.46 $ 51.86 $ 61.18
Natural gas, without derivatives (Mcf) $ 2.71 $ 1.88 $ 2.85 $ 1.70
Natural gas, with derivatives (Mcf) (a) $ 2.67 $ 2.13 $ 2.78 $ 1.95
Total, without derivatives (Boe) $ 33.73 $ 30.00 $ 35.57 $ 26.25
Total, with derivatives (Boe) (a) $ 37.84 $ 42.78 $ 38.48 $ 42.72
 
Operating costs and expenses per Boe:
Oil and natural gas production $ 5.91 $ 5.83 $ 5.64 $ 6.54
Production and ad valorem taxes $ 2.62 $ 2.51 $ 2.77 $ 2.15
Depreciation, depletion and amortization $ 16.69 $ 21.27 $ 17.02 $ 22.82
General and administrative $ 3.70 $ 4.04 $ 3.54 $ 4.14
                                         
 
(a) Includes the effect of net cash receipts from (payments on) derivatives:
                               
Three Months Ended Six Months Ended
June 30, June 30,
(in millions)       2017     2016     2017     2016
 
Net cash receipts from (payments on) derivatives:
Oil derivatives $ 70 $ 160 $ 101 $ 412
Natural gas derivatives   (2 )   8   (5 )   15
Total $ 68   $ 168 $ 96   $ 427
                               
 
The presentation of average prices with derivatives is a result of including the net cash receipts from (payments on) commodity derivatives that are presented in our statements of cash flows. This presentation of average prices with derivatives is a means by which to reflect the actual cash performance of our commodity derivatives for the respective periods and presents oil and natural gas prices with derivatives in a manner consistent with the presentation generally used by the investment community.

                 
Concho Resources Inc.
Costs Incurred
Unaudited
 

The table below provides the costs incurred for oil and natural gas producing activities for the periods indicated:

 
                           
Three Months Ended Six Months Ended
June 30, June 30,
(in millions)       2017     2016     2017     2016
 
Property acquisition costs:
Proved $ 12 $ 4 $ 139 $ 256
Unproved 87 19 393 158
Exploration 238 165 473 336
Development   145   107   303   190
Total costs incurred for oil and natural gas properties $ 482 $ 295 $ 1,308 $ 940
 

                       
Concho Resources Inc.
Derivatives Information
Unaudited
 

The table below provides data associated with the Company’s derivatives at August 2, 2017, for the periods indicated:

 
                                     
2017
Third

Quarter

Fourth

Quarter

Total 2018 2019
 
Oil Price Swaps: (a)
Volume (Bbl) 9,219,370 8,542,080 17,761,450 27,277,124 17,832,000
Price per Bbl $ 51.15 $ 51.21 $ 51.18 $ 51.35 $ 52.70
 
Oil Basis Swaps: (b)
Volume (Bbl) 7,217,000 7,682,000 14,899,000 26,550,000 17,410,000
Price per Bbl $ (0.66 ) $ (0.70 ) $ (0.68 ) $ (1.05 ) $ (1.17 )
 
Natural Gas Price Swaps: (c)
Volume (MMBtu) 15,895,441 14,673,000 30,568,441 41,920,000 10,540,992
Price per MMBtu $ 3.12 $ 3.10 $ 3.11 $ 3.05 $ 2.85
                                     
 
(a) The index prices for the oil price swaps are based on the New York Mercantile Exchange (“NYMEX”) – West Texas Intermediate (“WTI”) monthly average futures price.
(b) The basis differential price is between Midland – WTI and Cushing – WTI.
(c) The index prices for the natural gas price swaps are based on the NYMEX – Henry Hub last trading day futures price.
 

 
Concho Resources Inc.
Supplemental Non-GAAP Financial Measures
Unaudited

The Company reports its financial results in accordance with the United States generally accepted accounting principles (GAAP). However, the Company believes certain non-GAAP performance measures may provide financial statement users with additional meaningful comparisons between current results, the results of its peers and of prior periods. In addition, the Company believes these measures are used by analysts and others in the valuation, rating and investment recommendations of companies within the oil and natural gas exploration and production industry. See the reconciliations throughout this release of GAAP financial measures to non-GAAP financial measures for the periods indicated.

Reconciliation of Net Income (Loss) to Adjusted Net Income and Adjusted Earnings per Share

The Company’s presentation of adjusted net income and adjusted earnings per share that exclude the effect of certain items are non-GAAP financial measures. Adjusted net income and adjusted earnings per share represent earnings and diluted earnings per share determined under GAAP without regard to certain non-cash and unusual items. The Company believes these measures provide useful information to analysts and investors for analysis of its operating results on a recurring, comparable basis from period to period. Adjusted net income and adjusted earnings per share should not be considered in isolation or as a substitute for earnings or diluted earnings per share as determined in accordance with GAAP and may not be comparable to other similarly titled measures of other companies.

The following table provides a reconciliation from the GAAP measure of net income (loss) to adjusted net income (non-GAAP), both in total and on a per diluted share basis, for the periods indicated:

                             
        Three Months Ended     Six Months Ended
June 30, June 30,
(in millions, except per share amounts)       2017     2016     2017     2016
       
Net income (loss) - as reported $ 152 $ (266 ) $ 802 $ (1,286 )
 
Adjustments for certain non-cash and unusual items:
(Gain) loss on derivatives (209 ) 298 (495 ) 217
Net cash receipts from derivatives 68 168 96 427
Impairments of long-lived assets - - - 1,525
Leasehold abandonments 18 11 24 32
Loss on extinguishment of debt 1 - 1 -
Gain on disposition of assets and other - - (654 ) (109 )
Tax impact 45 (177 ) 378 (778 )
Excess tax deficiency (benefit)   2     -     (6 )   -  
Adjusted net income $ 77   $ 34   $ 146   $ 28  
 
Net income (loss) per diluted share - as reported $ 1.02 $ (2.04 ) $ 5.39 $ (9.94 )
 
Adjustments for certain non-cash and unusual items per diluted share:
(Gain) loss on derivatives (1.40 ) 2.28 (3.33 ) 1.67
Net cash receipts from derivatives 0.46 1.29 0.65 3.30
Impairments of long-lived assets - - - 11.78
Leasehold abandonments 0.12 0.09 0.16 0.25
Loss on extinguishment of debt 0.01 - 0.01 -
Gain on disposition of assets and other - - (4.40 ) (0.84 )
Tax impact 0.30 (1.36 ) 2.54 (6.01 )
Excess tax deficiency (benefit)   0.01     -     (0.04 )   -  
Adjusted net income per diluted share $ 0.52   $ 0.26   $ 0.98   $ 0.21  
 
Adjusted earnings per share:
Basic net income $ 0.52 $ 0.26 $ 0.99 $ 0.21
Diluted net income $ 0.52 $ 0.26 $ 0.98 $ 0.21
 

Reconciliation of Net Income (Loss) to EBITDAX

EBITDAX (as defined below) is presented herein and reconciled from the GAAP measure of net income (loss) because of its wide acceptance by the investment community as a financial indicator of a company’s ability to internally fund exploration and development activities.

The Company defines EBITDAX as net income (loss), plus (1) exploration and abandonments expense, (2) depreciation, depletion and amortization expense, (3) accretion expense, (4) impairments of long-lived assets, (5) non-cash stock-based compensation expense, (6) (gain) loss on derivatives, (7) net cash receipts from derivatives, (8) (gain) loss on disposition of assets, net, (9) interest expense, (10) loss on extinguishment of debt and (11) federal and state income tax expense (benefit). EBITDAX is not a measure of net income (loss) or cash flows as determined by GAAP.

The Company’s EBITDAX measure provides additional information which may be used to better understand the Company’s operations, and it is also a material component of one of the financial covenants under the Company’s credit facility. EBITDAX is one of several metrics that the Company uses as a supplemental financial measurement in the evaluation of its business and should not be considered as an alternative to, or more meaningful than, net income (loss) as an indicator of operating performance. Certain items excluded from EBITDAX are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic cost of depreciable and depletable assets. EBITDAX, as used by the Company, may not be comparable to similarly titled measures reported by other companies. The Company believes that EBITDAX is a widely followed measure of operating performance and is one of many metrics used by the Company’s management team and by other users of the Company’s consolidated financial statements, including by lenders pursuant to a covenant in the Company’s credit facility. For example, EBITDAX can be used to assess the Company’s operating performance and return on capital in comparison to other independent exploration and production companies without regard to financial or capital structure, and to assess the financial performance of the Company’s assets and the Company without regard to capital structure or historical cost basis. Further, under the Company’s credit facility, an event of default could arise if it were not able to satisfy and remain in compliance with its specified financial ratio, defined as the maintenance of a quarterly ratio of total debt to consolidated last twelve months EBITDAX of no greater than 4.25 to 1.0. Non-compliance with this ratio could trigger an event of default under the Company’s credit facility, which then could trigger an event of default under its indentures. At June 30, 2017, the Company was in compliance with the covenants under all of its debt instruments.

The following table provides a reconciliation of the GAAP measure of net income (loss) to EBITDAX (non-GAAP) for the periods indicated:

                   
Three Months Ended Six Months Ended
June 30, June 30,
(in millions)       2017     2016     2017     2016
 
Net income (loss) $ 152 $ (266 ) $ 802 $ (1,286 )
Exploration and abandonments 20 21 35 44
Depreciation, depletion and amortization 281 281 564 591
Accretion of discount on asset retirement obligations 2 1 4 3
Impairments of long-lived assets - - - 1,525
Non-cash stock-based compensation 14 12 26 28
(Gain) loss on derivatives (209 ) 298 (495 ) 217
Net cash receipts from derivatives 68 168 96 427
(Gain) loss on disposition of assets, net - 1 (654 ) (110 )
Interest expense 39 55 79 109
Loss on extinguishment of debt 1 - 1 -
Income tax expense (benefit)   93     (158 )   464     (752 )
EBITDAX $ 461   $ 413   $ 922   $ 796  

Source: Concho Resources Inc.

Concho Resources Inc.

Investor Relations

Megan P. Hays, 432-685-2533

Vice President of Investor Relations and Public Affairs

or

Mary T. Starnes, 432-221-0477

Senior Financial Analyst

05.30.17 Concho Resources Inc. Schedules Second Quarter 2017 Results Conference Call for Thursday, August 3, 2017

MIDLAND, Texas--(BUSINESS WIRE)-- Concho Resources Inc. (NYSE: CXO) (the “Company” or “Concho”) will host a conference call on Thursday, August 3, 2017, at 8:00 AM CT (9:00 AM ET) to discuss second quarter 2017 financial and operating results. The Company plans to announce second quarter 2017 results on Wednesday, August 2, 2017, after close of trading.

Conference Call Information:

Dial-in: (844) 263-8298
Intl. dial-in: (478) 219-0007
Participant Passcode: 31529221

To access the live webcast, visit the Company’s website at www.concho.com. The replay will also be available on Concho’s website under the Investors section.

Participation in Upcoming Conference

The Company will present at the 2017 Bank of America Merrill Lynch Energy Credit Conference on Wednesday, June 7, 2017, at 7:10 AM CT (8:10 AM ET).  The presentation will be webcast and a link will be available under the Investors section of the Company’s website prior to the event.

About Concho Resources Inc.

Concho Resources Inc. is an independent oil and natural gas company engaged in the acquisition, development, exploration and production of oil and natural gas properties. The Company’s operations are primarily focused in the Permian Basin of southeast New Mexico and west Texas. For more information about the Company, please visit www.concho.com.

Source: Concho Resources Inc.

Concho Resources Inc.

Megan P. Hays, 432-685-2533

Vice President of Investor Relations and Public Affairs

or

Mary Tennant Starnes, 432-221-0477

Senior Financial Analyst

or

Ryan Thrasher, 432-686-3025

Financial Analyst

05.18.17 Concho Resources Inc. Announces Appointment to the Board of Directors and Executive Management Changes

MIDLAND, Texas--(BUSINESS WIRE)-- Concho Resources Inc. (NYSE: CXO) (the “Company” or “Concho”) today announced that Joe Wright, the Company’s Executive Vice President and Chief Operating Officer, has been appointed to the Board of Directors. Mr. Wright has announced his intention to retire as an officer of the Company in January 2019.

Tim Leach, Chairman of the Board and Chief Executive Officer, commented, “Joe has played an instrumental role in building the culture and success of Concho since inception. Though his daily presence will be missed after his retirement, I look forward to continued leadership from Joe in his new role as a board member.”

In addition, Jack Harper, currently Executive Vice President and Chief Financial Officer, has been named President and Chief Financial Officer. Will Giraud will continue to serve as Executive Vice President until January 2019, when he will succeed Mr. Wright as Chief Operating Officer. Effective immediately, Mr. Giraud is responsible for the Company’s four asset teams as well as business development and strategy.

The Company also announced the promotions of Gayle Burleson, Travis Counts, Price Moncrief, Erick Nelson and Brenda Schroer. As a result of these promotions, the executive management team now consists of:

  • Tim Leach, Chairman of the Board and Chief Executive Officer
  • Jack Harper, President and Chief Financial Officer
  • Joe Wright, Executive Vice President and Chief Operating Officer
  • Will Giraud, Executive Vice President
  • Gayle Burleson, Senior Vice President of Business Development
  • Travis Counts, Senior Vice President, General Counsel and Corporate Secretary
  • Steve Guthrie, Senior Vice President of Business Operations and Engineering
  • Price Moncrief, Senior Vice President of Finance and Strategy
  • Erick Nelson, Senior Vice President of Operations and Production
  • Brenda Schroer, Senior Vice President, Chief Accounting Officer and Treasurer

Additional leadership changes include the promotion of James Caputo, presently Director of Business Development, to Vice President of Business Development, and the promotion of Chris Spies, presently Chief Geoscientist, to Vice President of Geoscience and Technology.

“I am proud to announce the promotion of these individuals and to highlight the strong talent across our organization. We have built a team with experience, industry knowledge and a common vision for Concho to remain a leader in the industry. With the most robust drilling inventory in our company’s history, a relentless focus on our strategy and this exceptional team to lead us in our next period of growth, we are well positioned to deliver long-term shareholder value,” stated Mr. Leach.

Concho Resources Inc.

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

Forward-Looking Statements and Cautionary Statements

The foregoing contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical fact, included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. Forward-looking statements contained in this press release specifically include statements regarding the roles of certain individuals in the current and future governance of the Company. Statements containing words such as “will” are not historical in nature and are based on current expectations and conditions, anticipated future developments and other factors believed to be appropriate. Forward-looking statements are not guarantees of performance. Although the Company believes the expectations reflected in its forward-looking statements are reasonable and are based on reasonable assumptions, no assurance can be given that these assumptions are accurate or that any of these expectations will be achieved (in full or at all) or will prove to have been correct. Moreover, such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements.

Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.

Source: Concho Resources Inc.

Concho Resources Inc.

Megan P. Hays, 432-685-2533

Vice President of Investor Relations and Public Affairs

or

Mary Tennant Starnes, 432-221-0477

Senior Financial Analyst

or

Ryan Thrasher, 432-686-3025

Financial Analyst

05.03.17 Concho Resources Inc. Reports First Quarter 2017 Results

Delivered 13% Organic Crude Oil Growth Quarter-Over-Quarter

Raised Full-Year 2017 Production Growth Target to a Range of 21% - 25%

MIDLAND, Texas--(BUSINESS WIRE)-- Concho Resources Inc. (NYSE: CXO) (the “Company” or “Concho”) today reported financial and operating results for the first quarter of 2017.

First-Quarter 2017 Highlights

  • Delivered quarterly production of 181.4 MBoepd, exceeding the high end of the Company’s guidance range. Raised full-year 2017 production outlook to a range of 21% - 25% annual growth and maintained capital expenditure outlook.
  • Increased crude oil production to 113.6 MBopd, up 28% year-over-year.
  • Achieved record well performance in the Company’s Delaware Basin and New Mexico Shelf assets.
  • Making the shift to manufacturing mode with large-scale development projects in the Delaware Basin and in the Midland Basin.
  • Reduced per-unit production expense and interest expense 27% and 42%, respectively, year-over-year. Lowered full-year 2017 guidance for per-unit production and depreciation, depletion and amortization expenses.
  • Continued to execute a disciplined capital program with cash flows exceeding capital expenditures for the seventh consecutive quarter.
  • Reported quarterly net income of $650 million, or $4.37 per diluted share. Adjusted net income totaled $72 million, or $0.49 per diluted share (non-GAAP).
  • Generated $461 million of EBITDAX (non-GAAP).

See “Supplemental Non-GAAP Financial Measures” at the end of this press release for a description of non-GAAP measures adjusted net income, adjusted earnings per share and EBITDAX and a reconciliation of these measures to the associated GAAP measure.

Tim Leach, Chairman, Chief Executive Officer and President, commented, “First quarter was an outstanding start to the year in which we anticipate strong growth within cash flow. We delivered exceptional production growth while preserving our low cost structure. As activity rapidly accelerates in the Permian Basin, our execution strength and scale are great advantages that together provide a tight grip on costs and logistics as well as a solid platform for creating long-term shareholder value.”

First-Quarter 2017 Operations Summary

Production for the first quarter of 2017 was an average of 181.4 thousand Boe per day (MBoepd), an increase of approximately 30% from the first quarter of 2016 and 10% from the fourth quarter of 2016. Crude oil production for the first quarter of 2017 totaled 113.6 thousand barrels per day (MBopd), an increase of approximately 28% from the first quarter of 2016 and 13% from the fourth quarter of 2016. Average daily natural gas production for the first quarter of 2017 totaled 406.6 million cubic feet (MMcf).

During the first quarter of 2017, Concho averaged 21 rigs, compared to 18 rigs in the fourth quarter of 2016. Concho commenced drilling or participated in a total of 73 gross wells (57 operated wells) and completed 65 gross wells during the first quarter of 2017. The table below summarizes the Company’s drilling activity by core area for the first quarter of 2017.

           

Number of Wells
Drilled
(Gross)

Number of
Operated Wells
Drilled
(Gross)

Number of Wells
Completed
(Gross)

Northern Delaware Basin 34 23 29
Southern Delaware Basin 13 8 7
Midland Basin 16 16 27
New Mexico Shelf 10 10 2
Total 73 57 65
 

Manufacturing Growth

Large-scale development projects will play an increasingly important role in the Company’s capital program. The strategic shift to manufacturing growth is enabled by our large, contiguous acreage positions in the Midland Basin, Delaware Basin and New Mexico Shelf. Manufacturing mode includes targeting multiple intervals with long lateral wells and batch completions and will further power capital-efficient development of our high-quality resource.

Concho is currently drilling the Mabee Ranch development project in Andrews County, Texas. The project includes 13 two-mile wells targeting five landings across the Spraberry and Wolfcamp zones. The development pattern implies 32 wells per section. Concho is utilizing leading edge technology, including fiber optic monitoring, to assess lateral placement, well spacing and completion design of the project.

In the Northern Delaware Basin, the Company has eight development projects with at least four wells each, including the Windward project in Red Hills. This project targets the Avalon Shale with two-mile lateral wells. The Brass Monkey project in the Southern Delaware Basin is an eight-well project testing simultaneous development of the 3rd Bone Spring and Wolfcamp with long lateral wells.

Northern Delaware Basin

Concho added 16 horizontal wells in the Northern Delaware Basin with at least 30 days of production as of the end of the first quarter of 2017 and an average lateral length of 5,084 feet. The wells delivered record performance on both an absolute and lateral-length normalized basis with an average 30-day peak rate of 1,473 Boepd (75% oil), which equates to productivity of 290 Boepd per one-thousand feet of lateral. The average peak 24-hour rate for the wells was 1,825 Boepd. The Company currently has eight horizontal rigs in the Northern Delaware Basin.

Extending Robust Oil Plays into the Company’s Deep Area

Outstanding well results in the Company’s Deep area extend the robust oil plays further north from the Red Hills area in Lea County, New Mexico. In the Deep area, Concho is actively developing the Bone Spring and Wolfcamp formations with an emphasis on optimizing lateral placement and spacing between wells. During the first quarter of 2017, the Company added three wells in the Bone Spring with an average lateral length of 4,274 feet and average peak 30-day rate of 2,112 Boepd (81% oil).

In addition, Concho’s oil-rich Red Hills acreage continues to deliver excellent results. During the first quarter of 2017, the Company added five wells. The wells were drilled to an average lateral length of 5,745 feet and produced at an average peak 30-day rate of 1,980 Boepd (78% oil). Here the Company is focused on delineating pay zones by refining lateral placement as well as spacing between wells.

Southern Delaware Basin

Concho added nine horizontal wells in the Southern Delaware Basin with at least 30 days of production as of the end of the first quarter of 2017. The average peak 30-day and 24-hour rates for these wells were 1,632 Boepd (73% oil) and 2,156 Boepd, respectively. The average 30-day peak rate and the average lateral length for these wells of 8,184 feet both represent Company records for the Southern Delaware Basin. The Company currently has six horizontal rigs in the Southern Delaware Basin.

Delivering Strong Results in the 3rd Bone Spring Formation

The Company continues to demonstrate success in the 3rd Bone Spring formation in the Southern Delaware Basin. Concho added two 3rd Bone Spring horizontal wells during the first quarter of 2017 with an average peak 30-day and 24-hour rate of 2,412 Boepd (70% oil) and 2,985 Boepd, respectively. The average lateral length for these wells was 10,003 feet.

Midland Basin

Concho added 21 horizontal wells in the Midland Basin with at least 30 days of production as of the end of the first quarter of 2017. The average peak 30-day and 24-hour rates for these wells were 1,164 Boepd (88% oil) and 1,453 Boepd, respectively. The average lateral length for these wells was 9,910 feet. The Company currently has five horizontal rigs in the Midland Basin.

New Mexico Shelf

In the New Mexico Shelf, Concho added seven horizontal wells with at least 30 days of production as of the end of the first quarter of 2017. The average peak 30-day and 24-hour rates for these wells were 546 Boepd (84% oil) and 701 Boepd, respectively. The average lateral length for these wells was 4,517 feet. The Company currently has two horizontal rigs in the New Mexico Shelf.

Improving Recoveries in Legacy Oil Play

Concho completed the Sneed 9 Federal Com #11H, a 5,490 foot horizontal well targeting the Paddock formation. The well achieved peak 30-day and 24-hour rates of 1,039 Boepd (84% oil) and 1,227 Boepd, respectively. Overall, the Company’s program in the New Mexico Shelf is generating excellent rates of return due to lean capital costs and advancements in completion design.

First-Quarter 2017 Financial Summary

Concho’s average realized price for crude oil and natural gas for the first quarter of 2017, excluding the effect of commodity derivatives, was $49.08 per Bbl and $3.00 per Mcf, respectively, compared with $29.90 per Bbl and $1.50 per Mcf, respectively, for the first quarter of 2016.

Net income for the first quarter of 2017 was $650 million, or $4.37 per diluted share, compared to net loss of $1.0 billion, or $7.95 per diluted share, for the first quarter of 2016. During the first quarter of 2017, Concho completed the sale of its ownership interests in Alpha Holding Company, LLC, the owner of the Alpha Crude Connector system (“ACC”), for $803 million. Net income for the first quarter of 2017 included a gain of $654 million primarily related to the sale of ACC. Adjusted net income (non-GAAP), which excludes non-cash and unusual items, for the first quarter of 2017 was $72 million, or $0.49 per diluted share, compared with adjusted net loss (non-GAAP) of $6 million, or $0.05 per diluted share, for the first quarter of 2016.

EBITDAX (non-GAAP) for the first quarter of 2017 totaled $461 million, compared to $383 million for the first quarter of 2016.

Financial Position and Liquidity

At March 31, 2017, Concho had cash of $771 million and long-term debt of $2.7 billion. Concho completed the annual redetermination of its credit facility in April 2017. The Company amended its credit facility to extend the maturity date three years to May 2022 and increase the borrowing base from $2.8 billion to $3.0 billion. Additionally, the Company elected to reduce the commitment amount from $2.5 billion to $2.0 billion. Concho currently has no outstanding borrowings under its credit facility.

Outlook

For the second quarter of 2017, Concho expects production to average between 182 MBoepd and 186 MBoepd. In addition, Concho updated its full-year 2017 outlook for certain items. The following table summarizes the Company’s current guidance for those items, as compared to the Company’s prior guidance.

   
Full Year 2017
Prior     Current
Annual production growth 20% - 24% 21% - 25%
Oil and natural gas production expense (per Boe) $5.75 - $6.25 $5.50 - $6.00
Depletion, depreciation and amortization expense (per Boe) $18.00 - $20.00 $17.00 - $19.00
 

Commodity Derivatives Update

The Company enters into commodity derivatives to manage its exposure to commodity price fluctuations. For the remainder of 2017, Concho has crude oil swap contracts covering approximately 86.7 MBopd at a weighted average price of $53.48 per Bbl. The Company also has crude oil swaps for 2018 and 2019, covering approximately 59.0 MBopd and 24.3 MBopd at a weighted average price of $51.86 per Bbl and $55.14 per Bbl, respectively. Please see the table under “Derivatives Information” below for detailed information about the Company’s current derivatives positions.

Conference Call

Concho will discuss first quarter 2017 results on a conference call tomorrow, May 4, 2017, at 8:00 AM CT (9:00 AM ET). The telephone number and passcode to access the conference call are provided below:

Dial-in: (844) 263-8298
Intl. dial-in: (478) 219-0007
Participant Passcode: 98507949

To access the live webcast and view the related earnings presentation, visit the Company’s website at www.concho.com. The replay will also be available on Concho’s website under the “Investors” section.

Upcoming Conferences

The Company will participate in the following upcoming conferences:

Conference Date     Conference
May 17, 2017 Stephens Energy Executive Summit
June 7, 2017 RBC Capital Markets Global Energy Conference
June 21, 2017 Tudor, Pickering, Holt & Co. Hotter ‘N Hell Energy Conference
June 26, 2017 J.P. Morgan Energy Equity Investor Conference
 

The presentations will be available on the Company’s website on or prior to the day of the first conference under the Investors section of the Company’s website, www.concho.com.

Concho Resources Inc.

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

Forward-Looking Statements and Cautionary Statements

The foregoing contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical fact, included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. Forward-looking statements contained in this press release specifically include statements, estimates and projections regarding the Company’s future financial position, operations, performance, business strategy, oil and natural gas reserves, drilling program, capital expenditure budget, liquidity and capital resources, the timing and success of specific projects, outcomes and effects of litigation, claims and disputes, derivative activities and potential financing. The words “estimate,” “project,” “predict,” “believe,” “expect,” “anticipate,” “potential,” “could,” “may,” “foresee,” “plan,” “goal” or other similar expressions that convey the uncertainty of future events or outcomes are intended to identify forward-looking statements, which generally are not historical in nature. However, the absence of these words does not mean that the statements are not forward-looking. These statements are based on certain assumptions and analyses made by the Company based on management’s experience, expectations and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Forward-looking statements are not guarantees of performance. Although the Company believes the expectations reflected in its forward-looking statements are reasonable and are based on reasonable assumptions, no assurance can be given that these assumptions are accurate or that any of these expectations will be achieved (in full or at all) or will prove to have been correct. Moreover, such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. These include the risk factors discussed or referenced in the Company’s most recent Annual Report on Form 10-K and in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017; risks relating to declines in, or the sustained depression of, the prices the Company receives for its oil and natural gas; uncertainties about the estimated quantities of oil and natural gas reserves; drilling, completion and operating risks; the effects of government regulation, permitting and other legal requirements, including new legislation or regulation of hydraulic fracturing and the export of oil and natural gas; environmental hazards, such as uncontrollable flows of oil, natural gas, brine, well fluids, toxic gas or other pollution into the environment, including groundwater contamination; difficult and adverse conditions in the domestic and global capital and credit markets; risks related to the concentration of the Company’s operations in the Permian Basin of Southeast New Mexico and West Texas; disruptions to, capacity constraints in or other limitations on the pipeline systems that deliver the Company’s oil, natural gas liquids and natural gas and other processing and transportation considerations; the costs and availability of equipment, resources, services and qualified personnel required to perform the Company’s drilling and operating activities; potential financial losses or earnings reductions from the Company’s commodity price risk-management program; risks and liabilities associated with acquired properties or businesses; uncertainties about the Company’s ability to successfully execute its business and financial plans and strategies; the adequacy of the Company’s capital resources and liquidity including, but not limited to, access to additional borrowing capacity under the Company’s credit facility; the impact of potential changes in the Company’s credit ratings; cybersecurity risks, such as those involving unauthorized access, malicious software, data privacy breaches by employees or others with authorized access, cyber or phishing-attacks, ransomware and other security issues; uncertainties about the Company’s ability to replace reserves and economically develop its current reserves; general economic and business conditions, either internationally or domestically; competition in the oil and natural gas industry; uncertainty concerning the Company’s assumed or possible future results of operations; and other important factors that could cause actual results to differ materially from those projected.

Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.

 
 
Concho Resources Inc.
Consolidated Balance Sheets
Unaudited
 
 
       
March 31, December 31,
(in millions, except share and per share amounts)     2017     2016
Assets
Current assets:
Cash and cash equivalents $ 771 $ 53
Accounts receivable, net of allowance for doubtful accounts:
Oil and natural gas 239 220
Joint operations and other 248 238
Derivative instruments 55 4
Prepaid costs and other   40     31  
Total current assets   1,353     546  
Property and equipment:
Oil and natural gas properties, successful efforts method 19,287 18,476
Accumulated depletion and depreciation   (7,667 )   (7,390 )
Total oil and natural gas properties, net 11,620 11,086
Other property and equipment, net   209     216  
Total property and equipment, net   11,829     11,302  
Funds held in escrow - 43
Deferred loan costs, net 10 11
Intangible asset - operating rights, net 24 24
Inventory 14 16
Noncurrent derivative instruments 42 -
Other assets   47     177  
Total assets $ 13,319   $ 12,119  
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable - trade $ 35 $ 28
Revenue payable 139 132
Accrued and prepaid drilling costs 445 359
Derivative instruments 10 82
Other current liabilities   151     152  
Total current liabilities   780     753  
Long-term debt 2,741 2,741
Deferred income taxes 1,122 766
Noncurrent derivative instruments 3 96
Asset retirement obligations and other long-term liabilities 141 140
Stockholders’ equity:

Common stock, $0.001 par value; 300,000,000 authorized; 148,752,676 and 146,488,685 shares issued at March 31, 2017 and December 31, 2016, respectively

- -
Additional paid-in capital 7,061 6,783
Retained earnings 1,534 884

Treasury stock, at cost; 578,633 and 429,708 shares at March 31, 2017 and December 31, 2016, respectively

  (63 )   (44 )
Total stockholders’ equity   8,532     7,623  
Total liabilities and stockholders’ equity $ 13,319   $ 12,119  

 
 
Concho Resources Inc.
Consolidated Statements of Operations
Unaudited
 
             
       
Three Months Ended
March 31,
(in millions, except per share amounts)     2017     2016
 
Operating revenues:
Oil sales $ 502 $ 242
Natural gas sales   110     42  
Total operating revenues   612     284  
Operating costs and expenses:
Oil and natural gas production 87 92
Production and ad valorem taxes 48 23
Exploration and abandonments 15 23
Depreciation, depletion and amortization 283 310
Accretion of discount on asset retirement obligations 2 2
Impairments of long-lived assets - 1,525

General and administrative (including non-cash stock-based compensation of $12 and $16 for the three months ended March 31, 2017 and 2016, respectively)

56 54
Gain on derivatives (286 ) (81 )
Gain on disposition of assets, net   (654 )   (111 )
Total operating costs and expenses   (449 )   1,837  
Income (loss) from operations   1,061     (1,553 )
Other income (expense):
Interest expense (40 ) (54 )
Other, net   -     (7 )
Total other expense   (40 )   (61 )
Income (loss) before income taxes 1,021 (1,614 )
Income tax (expense) benefit   (371 )   594  
Net income (loss) $ 650   $ (1,020 )
Earnings per share:
Basic net income (loss) $ 4.39 $ (7.95 )
Diluted net income (loss) $ 4.37 $ (7.95 )

 
 
Concho Resources Inc.
Consolidated Statements of Cash Flows
Unaudited
 
 
       
Three Months Ended
March 31,
(in millions)     2017     2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 650 $ (1,020 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization 283 310
Accretion of discount on asset retirement obligations 2 2
Impairments of long-lived assets - 1,525
Exploration and abandonments, including dry holes 6 21
Non-cash stock-based compensation expense 12 16
Deferred income taxes 363 (584 )
Gain on disposition of assets, net (654 ) (111 )
Gain on derivatives (286 ) (81 )
Net settlements received from derivatives 28 259
Other non-cash items 1 4
Changes in operating assets and liabilities, net of acquisitions and dispositions:
Accounts receivable (6 ) 68
Prepaid costs and other (8 ) (5 )
Accounts payable 7 8
Revenue payable 8 (44 )
Other current liabilities   1     2  
Net cash provided by operating activities   407     370  
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures on oil and natural gas properties (457 ) (380 )
Additions to property, equipment and other assets (2 ) (9 )
Proceeds from the disposition of assets 806 292
Direct transaction costs for disposition of assets (17 ) -
Contributions to equity method investments   -     (25 )
Net cash provided by (used in) investing activities   330     (122 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt 105 -
Payments of debt (105 ) -

Excess tax deficiency from stock-based compensation

- (1 )
Purchase of treasury stock   (19 )   (9 )
Net cash used in financing activities   (19 )   (10 )
Net increase in cash and cash equivalents 718 238
Cash and cash equivalents at beginning of period   53     229  
Cash and cash equivalents at end of period $ 771   $ 467  
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Issuance of common stock for business combinations $ 258 $ 231

               
 
Concho Resources Inc.
Summary Production and Price Data
Unaudited
 

The following table sets forth summary information concerning production and operating data for the periods indicated:

 
Three Months Ended
March 31,
                    2017     2016
   
Production and operating data:
Average daily production volumes:
Oil (Bbl) 113,600 89,011
Natural gas (Mcf) 406,633 302,824
Total (Boe) 181,372 139,482
 
Average prices per unit:
Oil, without derivatives (Bbl) $ 49.08 $ 29.90
Oil, with derivatives (Bbl) (a) $ 52.12 $ 60.90
Natural gas, without derivatives (Mcf) $ 3.00 $ 1.50
Natural gas, with derivatives (Mcf) (a) $ 2.90 $ 1.75
Total, without derivatives (Boe) $ 37.47 $ 22.34
Total, with derivatives (Boe) (a) $ 39.15 $ 42.66
 
Operating costs and expenses per Boe:
Oil and natural gas production $ 5.35 $ 7.28
Production and ad valorem taxes $ 2.93 $ 1.78
Depreciation, depletion and amortization $ 17.36 $ 24.43
General and administrative $ 3.36 $ 4.24
                           
 
(a) Includes the effect of net cash receipts from (payments on) derivatives:
                 
Three Months Ended
March 31,
(in millions)     2017     2016
 
Net cash receipts from (payments on) derivatives:
Oil derivatives $ 31 $ 252
Natural gas derivatives   (3 )   7
Total $ 28