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Investor News

07.19.18 Concho Resources Inc. Completes Acquisition of RSP Permian, Inc.

MIDLAND, Texas--(BUSINESS WIRE)-- Concho Resources Inc. (NYSE: CXO) (“Concho” or the “Company”) today announced that it has completed its acquisition of RSP Permian, Inc. (NYSE: RSPP) (“RSP”). The transaction creates the largest unconventional shale producer in the Permian Basin.

Tim Leach, Chairman and Chief Executive Officer of Concho, commented, “We are excited to complete this transaction and welcome the RSP team to Concho. By combining two great companies focused on the highest quality resources in the Permian Basin, we are creating a compelling enterprise with the scale and technical expertise necessary to compete globally. The transition to large-scale development has been one of our most important operational and strategic priorities. RSP’s incredible asset base enhances our development platform within the Permian Basin to drive continued performance, innovation and stronger returns for our shareholders.

“Concho’s solid financial position, which includes a low cost of capital and investment-grade ratings, underpins our scale advantage and enables Concho to accelerate value across the combined portfolio through capital efficient, large-scale development,” Mr. Leach continued.

Acquisition Details

Under the terms of the merger, each share of RSP common stock was converted into the right to receive 0.320 shares of Concho common stock. As a result, Concho expects to issue approximately 51 million shares of common stock in connection with the merger. In addition, RSP common stock will no longer be listed for trading on NYSE, and RSP will no longer have reporting obligations under the Securities Exchange Act of 1934.

In connection with the closing of the transaction, Concho announced the appointment of Steve Gray, formerly Chief Executive Officer of RSP, to the Company’s Board of Directors.

Maintaining a Strong Financial Position

Concho recently closed its previously announced offering of $1,600 million aggregate principal amount of senior unsecured notes, consisting of $1,000 million aggregate principal amount of 4.300% senior unsecured notes due 2028 and $600 million aggregate principal amount of 4.850% senior unsecured notes due 2048. The proceeds from the offering were used to redeem RSP’s 6.625% senior notes due 2022 and 5.250% senior notes due 2025 for approximately $1.2 billion as well as repay a portion of the outstanding balance under RSP’s existing credit facility. Concho repaid the remaining balance under RSP’s credit facility with borrowings under Concho’s credit facility.

Concho plans to provide an update to its 2018 outlook with second quarter 2018 results.

About Concho Resources

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 relating to benefits of the acquisition of RSP. The words “estimate,” “project,” “predict,” “believe,” “expect,” “anticipate,” “potential,” “could,” “may,” “foresee,” “plan,” “will,” “guidance,” “outlook,” “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 other filings with the SEC. 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.
Megan P. Hays, 432-685-2533
Vice President of Investor Relations and Public Affairs
or
Mary T. Starnes, 432-221-0477
Investor Relations Manager

Source: Concho Resources Inc.

06.14.18 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 $1,600 million aggregate principal amount of senior unsecured notes, consisting of $1,000 million aggregate principal amount of senior unsecured notes due 2028 (the “2028 notes”) and $600 million aggregate principal amount of senior unsecured notes due 2048 (the “2048 notes” and collectively with the 2028 notes, the “notes”). The 2028 notes will bear interest at a rate of 4.300% per annum and will be issued at 99.660% of par, and the 2048 notes will bear interest at a rate of 4.850% per annum and will be issued at 99.740% of par. The notes offering is expected to close on July 2, 2018, subject to the satisfaction of customary closing conditions. Following the closing of the Company’s acquisition of RSP Permian Inc. (“RSP”) through an all-stock transaction (the “RSP Acquisition”), Concho intends to use the net proceeds from this offering to redeem, as previously announced, RSP’s 6.625% senior notes due 2022 and 5.25% senior notes due 2025 (collectively, the “RSP notes”) for approximately $1.2 billion and to repay a portion of the outstanding indebtedness under RSP’s existing credit facility, under which RSP had outstanding borrowings of $445 million as of March 31, 2018. Pending the redemption of the RSP notes and the repayment of a portion of the outstanding indebtedness under RSP’s existing credit facility, the Company intends to invest the net proceeds from this offering primarily in cash, cash equivalents and U.S. government securities.

If the RSP Acquisition is not completed on or prior to December 31, 2018, or is terminated on or prior to completion, the Company will redeem all of the notes at a price equal to 101% of the principal amount of the notes of the applicable series, plus accrued and unpaid interest to the redemption date.

BofA Merrill Lynch, J.P. Morgan and Wells Fargo Securities will act as joint bookrunning 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; J.P. Morgan Securities LLC, 383 Madison Avenue, 3rd Floor, New York, New York 10179, Attention: Investment Grade Syndicate Desk, or via phone at (212) 834-4533; or Wells Fargo Securities, LLC, 608 2nd Ave S, Suite 1000, Minneapolis, MN 55402, Attention: WFS Customer Service, or by e-mailing wfscustomerservice@wellsfargo.com, or via phone at (800) 645-3751.

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 June 14, 2018. This press release is not intended as a notice of redemption. Any such notice has been given to holders of the RSP notes in a manner prescribed in the indentures governing those notes. This communication also does not constitute a solicitation of any vote or approval in any jurisdiction relating to the RSP Acquisition.

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 relating to the Company’s planned offering, the use of the net proceeds from the planned offering, and the pending RSP Acquisition. The words “estimate,” “project,” “predict,” “believe,” “expect,” “anticipate,” “potential,” “could,” “may,” “foresee,” “plan,” “will,” “guidance,” “outlook,” “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; Quarterly Reports on Form 10-Q; risks associated with the RSP Acquisition, including increased expenses, management distraction from the Company’s business, declines in the market price of the Company’s common stock and failure to realize the expected benefits of the RSP Acquisition; failure, difficulties and delays in meeting conditions required for closing set forth in the Agreement and Plan of Merger associated with the RSP Acquisition; risks associated with acquisitions, including liabilities associated with acquired properties or businesses and the ability to realize expected benefits; 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; declines in, or the sustained depression of, the prices the Company receives for its oil and natural gas; risks related to the concentration of the Company’s operations in the Permian Basin of Southeast New Mexico and West Texas; evolving cybersecurity risks, such as those involving unauthorized access, denial-of-service attacks, malicious software, data privacy breaches by employees, insiders or others with authorized access, cyber or phishing-attacks, ransomware, malware, social engineering, physical breaches or other actions; the costs and availability of equipment, resources, services and qualified personnel required to perform the Company’s drilling, completion and operating activities; drilling, completion and operating risks; environmental hazards, such as uncontrollable flows of oil, natural gas, brine, well fluids, toxic gas or other pollution into the environment, including groundwater contamination; the effects of government regulation, permitting and other legal requirements, including new legislation or regulation related to hydraulic fracturing, climate change, derivatives reform or the export of oil and natural gas; the impact of current and potential changes to federal or state tax rules and regulations, including the Tax Cuts and Jobs Act; potential financial losses or earnings reductions from the Company’s commodity price risk management program; difficult and adverse conditions in the domestic and global capital and credit markets; 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; uncertainties about the Company’s ability to successfully execute the Company’s business and financial plans and strategies; uncertainties about the estimated quantities of oil and natural gas reserves; uncertainties about the Company’s ability to replace reserves and economically develop the Company’s 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.

Additional Information and Where to Find It

In connection with the RSP Acquisition, Concho filed with the SEC, on June 4, 2018, an amendment to the registration statement on Form S-4 that was originally filed on April 20, 2018, that includes a joint proxy statement of RSP and Concho that also constitutes a prospectus of Concho. The registration statement was declared effective on June 6, 2018, and RSP and Concho commenced mailing the definitive joint proxy statement/prospectus to stockholders of Concho and RSP on or about June 12, 2018. RSP and Concho will also file other documents with the SEC regarding the RSP Acquisition. This document is not a substitute for the registration statement and joint proxy statement/prospectus filed with the SEC, including any amendments thereto, or any other documents that Concho or RSP may file with the SEC or send to stockholders of Concho or RSP in connection with the RSP Acquisition. INVESTORS AND SECURITY HOLDERS OF RSP AND CONCHO ARE URGED TO READ THE REGISTRATION STATEMENT, THE DEFINITIVE JOINT PROXY STATEMENT/PROSPECTUS, AND ALL OTHER RELEVANT DOCUMENTS THAT ARE FILED OR WILL BE FILED WITH THE SEC BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT THE RSP ACQUISITION AND RELATED MATTERS.

Investors and security holders are able to obtain free copies of the registration statement and the definitive joint proxy statement/prospectus and all other documents filed or that will be filed with the SEC by Concho or RSP through the website maintained by the SEC at www.sec.gov. Copies of documents filed with the SEC by RSP will be made available free of charge on RSP’s website at www.rsppermian.com, under the heading “SEC Filings,” or by contacting RSP’s Investor Relations Department by phone at (214) 252-2700. Copies of documents filed with the SEC by Concho will be made available free of charge on Concho’s website at www.concho.com, under the heading “Investors,” or by contacting Concho’s Investor Relations Department by phone at (432) 221-0477.

Participants in Solicitation

Concho, RSP and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the holders of Concho’s common stock and RSP’s common stock in respect to the RSP Acquisition.

Information regarding RSP’s directors and executive officers is contained in the Form 10-K/A filed with the SEC on April 30, 2018 and in the other documents filed after the date thereof by RSP with the SEC. You can obtain a free copy of this document at the SEC’s website at www.sec.gov or by accessing RSP’s website at www.rsppermian.com. Information regarding Concho’s executive officers and directors is contained in the proxy statement for Concho’s 2018 Annual Meeting of Stockholders filed with the SEC on April 5, 2018 and in the other documents filed after the date thereof by Concho with the SEC. You can obtain a free copy of this document at the SEC’s website at www.sec.gov or by accessing Concho’s website at www.concho.com under the heading “Investors.”

Investors may obtain additional information regarding the interests of those persons and other persons who may be deemed participants in the RSP Acquisition by reading the definitive joint proxy statement/prospectus. You may obtain free copies of these documents as described above.

Concho Resources Inc.
Megan P. Hays,432-685-2533
Vice President of Investor Relations and Public Affairs
or
Mary T. Starnes,432-221-0477
Investor Relations Manager

Source: Concho Resources Inc.

06.14.18 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 2028 (the “2028 notes”) and the other in 2048 (the “2048 notes” and collectively with the 2028 notes, the “notes”). The 2028 notes and the 2048 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 2028 notes and the 2048 notes will be fully and unconditionally guaranteed by certain of Concho’s current subsidiaries. Following the closing of the Company’s acquisition of RSP Permian Inc. (“RSP”) through an all-stock transaction (the “RSP Acquisition”), Concho intends to use the net proceeds from this offering to redeem, as previously announced, RSP’s 6.625% senior notes due 2022 and 5.25% senior notes due 2025 (collectively, the “RSP notes”) for approximately $1.2 billion and to repay a portion of the outstanding indebtedness under RSP’s existing credit facility, under which RSP had outstanding borrowings of $445 million as of March 31, 2018. Pending the redemption of the RSP notes and the repayment of a portion of the outstanding indebtedness under RSP’s existing credit facility, the Company intends to invest the net proceeds from this offering primarily in cash, cash equivalents and U.S. government securities.

If the RSP Acquisition is not completed on or prior to December 31, 2018, or is terminated on or prior to completion, the Company will redeem all of the notes at a price equal to 101% of the principal amount of the notes of the applicable series, plus accrued and unpaid interest to the redemption date.

BofA Merrill Lynch, J.P. Morgan and Wells Fargo Securities will act as joint bookrunning 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; J.P. Morgan Securities LLC, 383 Madison Avenue, 3rd Floor, New York, New York 10179, Attention: Investment Grade Syndicate Desk, or via phone at (212) 834-4533; or Wells Fargo Securities, LLC, 608 2nd Ave S, Suite 1000, Minneapolis, MN 55402, Attention: WFS Customer Service, or by e-mailing wfscustomerservice@wellsfargo.com, or via phone at (800) 645-3751.

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 June 14, 2018. This press release is not intended as a notice of redemption. Any such notice has been given to holders of the RSP notes in a manner prescribed in the indentures governing those notes. This communication also does not constitute a solicitation of any vote or approval in any jurisdiction relating to the RSP Acquisition.

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 relating to the Company’s planned offering, the use of the net proceeds from the planned offering, and the pending RSP Acquisition. The words “estimate,” “project,” “predict,” “believe,” “expect,” “anticipate,” “potential,” “could,” “may,” “foresee,” “plan,” “will,” “guidance,” “outlook,” “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; Quarterly Reports on Form 10-Q; risks associated with the RSP Acquisition, including increased expenses, management distraction from the Company’s business, declines in the market price of the Company’s common stock and failure to realize the expected benefits of the RSP Acquisition; failure, difficulties and delays in meeting conditions required for closing set forth in the Agreement and Plan of Merger associated with the RSP Acquisition; risks associated with acquisitions, including liabilities associated with acquired properties or businesses and the ability to realize expected benefits; 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; declines in, or the sustained depression of, the prices the Company receives for its oil and natural gas; risks related to the concentration of the Company’s operations in the Permian Basin of Southeast New Mexico and West Texas; evolving cybersecurity risks, such as those involving unauthorized access, denial-of-service attacks, malicious software, data privacy breaches by employees, insiders or others with authorized access, cyber or phishing-attacks, ransomware, malware, social engineering, physical breaches or other actions; the costs and availability of equipment, resources, services and qualified personnel required to perform the Company’s drilling, completion and operating activities; drilling, completion and operating risks; environmental hazards, such as uncontrollable flows of oil, natural gas, brine, well fluids, toxic gas or other pollution into the environment, including groundwater contamination; the effects of government regulation, permitting and other legal requirements, including new legislation or regulation related to hydraulic fracturing, climate change, derivatives reform or the export of oil and natural gas; the impact of current and potential changes to federal or state tax rules and regulations, including the Tax Cuts and Jobs Act; potential financial losses or earnings reductions from the Company’s commodity price risk management program; difficult and adverse conditions in the domestic and global capital and credit markets; 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; uncertainties about the Company’s ability to successfully execute the Company’s business and financial plans and strategies; uncertainties about the estimated quantities of oil and natural gas reserves; uncertainties about the Company’s ability to replace reserves and economically develop the Company’s 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.

Additional Information and Where to Find It

In connection with the RSP Acquisition, Concho filed with the SEC, on June 4, 2018, an amendment to the registration statement on Form S-4 that was originally filed on April 20, 2018, that includes a joint proxy statement of RSP and Concho that also constitutes a prospectus of Concho. The registration statement was declared effective on June 6, 2018, and RSP and Concho commenced mailing the definitive joint proxy statement/prospectus to stockholders of Concho and RSP on or about June 12, 2018. RSP and Concho will also file other documents with the SEC regarding the RSP Acquisition. This document is not a substitute for the registration statement and joint proxy statement/prospectus filed with the SEC, including any amendments thereto, or any other documents that Concho or RSP may file with the SEC or send to stockholders of Concho or RSP in connection with the RSP Acquisition. INVESTORS AND SECURITY HOLDERS OF RSP AND CONCHO ARE URGED TO READ THE REGISTRATION STATEMENT, THE DEFINITIVE JOINT PROXY STATEMENT/PROSPECTUS, AND ALL OTHER RELEVANT DOCUMENTS THAT ARE FILED OR WILL BE FILED WITH THE SEC BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT THE RSP ACQUISITION AND RELATED MATTERS.

Investors and security holders are able to obtain free copies of the registration statement and the definitive joint proxy statement/prospectus and all other documents filed or that will be filed with the SEC by Concho or RSP through the website maintained by the SEC at www.sec.gov. Copies of documents filed with the SEC by RSP will be made available free of charge on RSP’s website at www.rsppermian.com, under the heading “SEC Filings,” or by contacting RSP’s Investor Relations Department by phone at (214) 252-2700. Copies of documents filed with the SEC by Concho will be made available free of charge on Concho’s website at www.concho.com, under the heading “Investors,” or by contacting Concho’s Investor Relations Department by phone at (432) 221-0477.

Participants in Solicitation

Concho, RSP and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the holders of Concho’s common stock and RSP’s common stock in respect to the RSP Acquisition.

Information regarding RSP’s directors and executive officers is contained in the Form 10-K/A filed with the SEC on April 30, 2018 and in the other documents filed after the date thereof by RSP with the SEC. You can obtain a free copy of this document at the SEC’s website at www.sec.gov or by accessing RSP’s website at www.rsppermian.com. Information regarding Concho’s executive officers and directors is contained in the proxy statement for Concho’s 2018 Annual Meeting of Stockholders filed with the SEC on April 5, 2018 and in the other documents filed after the date thereof by Concho with the SEC. You can obtain a free copy of this document at the SEC’s website at www.sec.gov or by accessing Concho’s website at www.concho.com under the heading “Investors.”

Investors may obtain additional information regarding the interests of those persons and other persons who may be deemed participants in the RSP Acquisition by reading the definitive joint proxy statement/prospectus. You may obtain free copies of these documents as described above.

Concho Resources Inc.
Megan P. Hays, (432) 685-2533
Vice President of Investor Relations and Public Affairs
or
Mary T. Starnes, (432) 221-0477
Investor Relations Manager

Source: Concho Resources Inc.

06.04.18 Concho Resources Inc. Schedules Second Quarter 2018 Results Conference Call for Thursday, August 2, 2018

MIDLAND, Texas--(BUSINESS WIRE)-- Concho Resources Inc. (NYSE: CXO) (the “Company” or “Concho”) will host a conference call on Thursday, August 2, 2018 at 8:00 AM CT (9:00 AM ET) to discuss second quarter 2018 financial and operating results. The Company plans to announce second quarter 2018 results on Wednesday, August 1, 2018, after close of trading.

Conference Call Information:

Dial-in: (844) 263-8298
Intl. dial-in: (478) 219-0007
Participant Passcode: 7088648

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.

Upcoming Conferences

Jack Harper, Concho’s President and Chief Financial Officer, will present at the Bank of America Merrill Lynch 2018 Energy Credit Conference on Wednesday, June 6, 2018, at 10:30 AM CT (11:30 AM ET).

Additionally, Tim Leach, Concho’s Chairman and Chief Executive Officer, will deliver the keynote presentation at the J.P. Morgan Energy Equity Conference on Monday, June 18, 2018, at 11:30 AM CT (12:30 PM ET).

A live audio webcast of each presentation will be available on the Events & Presentations page under the Investors section of the Company’s website, www.concho.com. The Company’s slide presentation will be available on the Company’s website on or prior to the Company’s appearance at each conference.

The complete schedule for the Company’s upcoming conferences is provided below.

Conference Date     Conference     Presentation Time
June 6, 2018 RBC Capital Markets Global Energy & Power Executive Conference --
June 6, 2018 Bank of America Merrill Lynch 2018 Energy Credit Conference 10:30 AM CT
June 18, 2018 J.P. Morgan Energy Equity Conference 11:30 AM CT
 

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.

Concho Resources Inc.
Megan P. Hays,432-685-2533
Vice President of Investor Relations and Public Affairs
or
Mary T. Starnes,432-221-0477
Investor Relations Manager

Source: Concho Resources Inc.

05.01.18 Concho Resources Inc. Reports First-Quarter 2018 Results

Delivered 27% Crude Oil Growth Year-over-Year

Raised Full-Year 2018 Production Growth Outlook

MIDLAND, Texas--(BUSINESS WIRE)-- Concho Resources Inc. (NYSE: CXO) (the “Company” or “Concho”) today reported financial and operating results for first-quarter 2018.

First-Quarter 2018 Highlights

  • Announced agreement to acquire RSP Permian, Inc.
  • Increased crude oil production volumes by approximately 14 MBopd, or 11%, quarter-over-quarter to 144 MBopd.
  • Delivered total production of 228 MBoepd, exceeding the high end of the Company’s guidance range.
  • Raised full-year 2018 production growth outlook to a range of 18% - 20% and maintained capital expenditure guidance. Concho’s outlook excludes the RSP Permian transaction.
  • Achieved record 30-day production rates in the Company’s Northern and Southern Delaware Basin assets and set a Company record average lateral length in the Northern Delaware Basin.
  • Received $157 million cash distribution from Oryx Southern Delaware Holdings, LLC.
  • Reduced total debt by approximately $320 million from year-end 2017.
  • Reported net income of $835 million, or $5.58 per diluted share. Adjusted net income totaled $149 million, or $1.00 per diluted share (non-GAAP).
  • Generated $570 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 as well as a reconciliation of these measures to the associated GAAP measure.

Tim Leach, Chairman and Chief Executive Officer, commented, “Our team achieved another outstanding quarter of operational and financial results, driving significant production growth while maintaining a disciplined capital program. Our results reflect our focus on large-scale project development, which enables us to maximize ultimate recovery, efficiencies and returns. Looking ahead, we intend to build on our strong momentum and capitalize on our execution strength, cost control and strong balance sheet to extend our track record of delivering growth and returns. We are excited about our pending transaction with RSP, which reinforces our scale advantage. We look forward to completing the acquisition and delivering the value creating benefits of the transaction to the shareholders of both companies.”

First-Quarter 2018 Operations Summary

Production for first-quarter 2018 was 21 million barrels of oil equivalent (MMBoe), or an average of 228 thousand Boe per day (MBoepd), an increase of approximately 26% from first-quarter 2017 and 8% from fourth-quarter 2017. Average daily crude oil production for first-quarter 2018 totaled 144 thousand barrels per day (MBopd), an increase of approximately 27% from first-quarter 2017 and 11% from fourth-quarter 2017. Natural gas production for first-quarter 2018 totaled 505 million cubic feet per day (MMcfpd).

During first-quarter 2018, Concho averaged 20 rigs, compared to 16 rigs in fourth-quarter 2017. The table below summarizes the Company’s gross drilling and completion activity by core area for first-quarter 2018.

                 

Number of
Wells Drilled

Number of
Operated
Wells Drilled

Number of
Wells
Completed

Number of
Operated Wells
Completed

Northern Delaware Basin 33 20 25 12
Southern Delaware Basin 16 15 12 10
Midland Basin 21 21 18 18
New Mexico Shelf 1 1 1 1
Total 71 57 56 41
 

The Company is currently running 20 rigs, including nine rigs in the Northern Delaware Basin, six rigs in the Southern Delaware Basin and five rigs in the Midland Basin. Concho expects to add one rig to the Northern Delaware Basin and one rig to the New Mexico Shelf in May 2018. Additionally, the Company is currently utilizing six completion crews.

Northern Delaware Basin

In the Northern Delaware Basin, Concho added 12 wells with at least 60 days of production as of the end of first-quarter 2018. The average 30-day peak and average 60-day peak rates for these wells were 1,993 Boepd (74% oil) and 1,900 Boepd (73% oil), respectively. The wells delivered record 30-day performance. In addition, ten of the 12 wells added were long-lateral wells, driving a Company record average lateral length in the Northern Delaware Basin of 8,544 feet.

Delineating Lower Second Bone Spring in Eddy County, New Mexico

In the Northern Delaware Basin, Concho continues to optimize lateral placement, completion techniques and well spacing to maximize recovery from the prolific multi-zone resource. During first-quarter 2018, Concho delineated a new target within the 2nd Bone Spring formation in Eddy County, New Mexico, with two successful well results from the Craig Federal 12H and the Road Runner Federal 12H. These two wells, which were landed in the lower 2nd Bone Spring, are part of a stacked development pattern in the 2nd Bone Spring, with the landing zones between these two wells and existing wells separated vertically by 500 feet. Additionally, the average 30-day peak and average 60-day peak rates per well were 2,457 Boepd (74% oil) and 2,322 (72% oil), respectively, from an average lateral length of approximately 9,830 feet.

Southern Delaware Basin

In the Southern Delaware Basin, Concho added 21 wells with at least 60 days of production as of the end of first-quarter 2018. The average 30-day peak and average 60-day peak rates for these wells were 2,070 Boepd (73% oil) and 1,787 Boepd (73% oil), respectively. Notably, the average 30-day peak rate marked a Company record in the Southern Delaware Basin. The average lateral length for these wells was 9,204 feet.

Midland Basin

In the Midland Basin, Concho added 20 wells with at least 60 days of production as of the end of first-quarter 2018. The average 30-day peak and average 60-day peak rates for these wells were 1,156 Boepd (85% oil) and 1,114 Boepd (84% oil), respectively, with an average lateral length of 10,156 feet.

Delivering Outstanding Results from Large-Scale Project Development in the Midland Basin

During fourth-quarter 2017, Concho completed the 13-well, two-mile Mabee Ranch project located in Andrews County, Texas. The project achieved average 30-day peak and average 60-day peak rates of approximately 15 MBoepd (83% oil) and 14 MBoepd (83% oil), respectively. Additionally, through fiber optic monitoring, Concho continues to gather valuable proprietary data with long-term implications for full-field development optimization. The Company has transferred several of these completion techniques to other projects across the portfolio.

First-Quarter 2018 Financial Summary

Concho’s average realized price for crude oil and natural gas for first-quarter 2018, excluding the effect of commodity derivatives, was $61.29 per Bbl and $3.39 per Mcf, respectively, compared to $49.08 per Bbl and $3.00 per Mcf, respectively, for first-quarter 2017.

Net income for first-quarter 2018 was $835 million, or $5.58 per diluted share, compared to net income of $650 million, or $4.37 per diluted share, for first-quarter 2017. Adjusted net income (non-GAAP), which excludes non-cash and unusual items, for first-quarter 2018 was $149 million, or $1.00 per diluted share. Non-cash and unusual items for first-quarter 2018 included (i) a preliminary non-cash gain of approximately $575 million attributable to the Company’s strategic trade with a large integrated oil company, (ii) a gain of approximately $134 million due to the sale of non-core leasehold in Ward and Reeves Counties, Texas, and (iii) a gain of approximately $103 million related to the cash distribution from the Company’s equity method investment. Adjusted net income for first-quarter 2017 was $72 million, or $0.49 per diluted share.

EBITDAX (non-GAAP) for first-quarter 2018 totaled $570 million, compared to $461 million for first-quarter 2017.

Concho’s effective income tax rate for first quarter 2018 was 23%, compared to 36% for first quarter 2017, primarily due to the reduction of the U.S. federal statutory corporate income tax rate from 35% to 21%.

Agreement to Acquire RSP Permian Enhances Scale Advantage

On March 28, 2018, Concho announced that it had entered into a definitive agreement to acquire all of the outstanding shares of RSP Permian, Inc. Under the terms of the agreement, shareholders of RSP will receive 0.320 shares of Concho common stock for each share of RSP common stock. The transaction is expected to be completed in third-quarter 2018, subject to approval of both Concho and RSP shareholders, the satisfaction of certain regulatory approvals and other customary closing conditions.

Strengthening Financial Position

During first-quarter 2018, Concho further strengthened its financial position through several accretive transactions.

As previously reported, Concho completed the sale of non-core leasehold in Ward and Reeves Counties, Texas, for proceeds of approximately $280 million during first-quarter 2018. Additionally, the Company completed a strategic trade with a large integrated oil company. For Concho, the trade enhances its core development area in the Northern Midland Basin and adds working interests to certain operated properties in Upton County, Texas, and in the New Mexico Shelf. In the trade, Concho conveyed its 32,000 acre checker-board leasehold position in Culberson County, Texas.

Concho owns a 23.75% membership interest in Oryx Southern Delaware Holdings, LLC, which operates a crude oil gathering and transportation system in the Southern Delaware Basin. During first-quarter 2018, Oryx obtained a term loan of $800 million, the proceeds from which were used in part to fund a cash distribution to its equity holders. Concho received a distribution of approximately $157 million, which represents an approximate 3.5 times multiple on Concho’s invested capital, and the Company retains its ownership stake in Oryx.

As a result of these transactions and a disciplined capital investment program, Concho reduced its total debt by approximately $320 million in first-quarter 2018 as compared to year-end 2017. At March 31, 2018, Concho had total long-term debt of $2.4 billion, with no borrowings outstanding under its credit facility.

Outlook

Concho’s outlook excludes the pending RSP Permian transaction. Concho expects second-quarter 2018 production to be 226 MBoepd to 230 MBoepd. For full-year 2018, the Company raised its production growth outlook to a range of 18% to 20%, as compared to the prior range of 16% to 20%. Also, the Company updated its guidance for crude oil price realizations for full-year 2018. The updated guidance range of ($1.50) to ($2.00) per barrel reflects pricing deductions and excludes the regional Midland-Cushing price differential. As highlighted below under “Commodity Derivatives Update,” Concho enters into basis hedges to protect against the Midland-Cushing differential.

Commodity Derivatives Update

The Company enters into commodity derivatives to manage its exposure to commodity price fluctuations, including regional price dislocations such as the Midland/Cushing crude oil price differential. For the remainder of 2018, Concho has crude oil swap contracts covering approximately 112 MBopd at a weighted average price of $54.20 per Bbl, and it has Midland/Cushing basis swaps covering approximately 94 MBopd at a weighted average price of ($0.85) per Bbl. Please see the table under “Derivatives Information” below for detailed information about the Company’s current derivatives positions.

Conference Call

Concho will host a conference call tomorrow, May 2, 2018, at 8:00 AM CT (9:00 AM ET) to discuss first-quarter 2018 results. 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: 7175736

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

Upcoming Conferences

The Company will present at the Citi Global Energy & Utilities Conference on Tuesday, May 15, 2018 at 7:45 AM CT (8:45 AM ET). The presentation will be webcast and accessible on the Events & Presentations page under the Investors section of the Company’s website, www.concho.com.

Additionally, Concho will participate in the following upcoming conferences:

Conference Date       Conference
May 16, 2018 Stephens 2nd Annual Energy Executive Summit
May 23, 2018 UBS Global Oil & Gas Conference
 

The Company’s presentation will be available on the Company’s website on or prior to the Company’s appearance at each conference.

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.

No Offer or Solicitation

This press release relates to a proposed business combination transaction (the “Transaction”) between RSP Permian, Inc. (“RSP”) and Concho Resources Inc. (“Concho”). This communication is for informational purposes only and does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval, in any jurisdiction, pursuant to the Transaction or otherwise, nor shall there be any sale, issuance, exchange or transfer of the securities referred to in this document in any jurisdiction in contravention of applicable law. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.

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, guidance and projections regarding the Company’s future financial position, operations, performance, business strategy, oil and natural gas reserves, drilling program, production, 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 sources of financing. The words “estimate,” “project,” “predict,” “believe,” “expect,” “anticipate,” “potential,” “could,” “may,” “foresee,” “plan,” “will,” “guidance,” “outlook,” “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. The guidance capital program and outlook presented herein are subject to change by the Company without notice and the Company has no obligation to affirm or update such information, except as required by law. 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; Quarterly Reports on Form 10-Q and Current Reports on Forms 8-K; risks associated with the Company’s proposed merger with RSP, including increased expenses, management distraction from the Company’s business, declines in the market price of the Company’s common stock and failure to realize the expected benefits of the transaction; failure, difficulties and delays in meeting conditions required for closing set forth in the RSP merger agreement; risks associated with acquisitions, including liabilities associated with acquired properties or businesses and the ability to realize expected benefits; 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; declines in, or the sustained depression of, the prices we receive for the Company’s oil and natural gas; risks related to the concentration of the Company’s operations in the Permian Basin of southeast New Mexico and west Texas; evolving cybersecurity risks, such as those involving unauthorized access, denial-of-service attacks, malicious software, data privacy breaches by employees, insiders or others with authorized access, cyber or phishing-attacks, ransomware, malware, social engineering, physical breaches or other actions; the costs and availability of equipment, resources, services and qualified personnel required to perform the Company’s drilling, completion and operating activities; drilling, completion and operating risks; environmental hazards, such as uncontrollable flows of oil, natural gas, brine, well fluids, toxic gas or other pollution into the environment, including groundwater contamination; the effects of government regulation, permitting and other legal requirements, including new legislation or regulation related to hydraulic fracturing, climate change, derivatives reform or the export of oil and natural gas; the impact of current and potential changes to federal or state tax rules and regulations, including the Tax Cuts and Jobs Act; potential financial losses or earnings reductions from the Company’s commodity price risk-management program; difficult and adverse conditions in the domestic and global capital and credit markets; 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; uncertainties about the Company’s ability to successfully execute the Company’s business and financial plans and strategies; uncertainties about the estimated quantities of oil and natural gas reserves; uncertainties about the Company’s ability to replace reserves and economically develop the Company’s current reserves; general economic and business conditions, either internationally or domestically; competition in the oil and natural gas industry; and 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.

Additional Information and Where to Find It

In connection with the Transaction, Concho filed with the U.S. Securities and Exchange Commission (“SEC”) a registration statement on Form S-4 on April 20, 2018, that includes a preliminary joint proxy statement of RSP and Concho that also constitutes a preliminary prospectus of Concho. RSP and Concho will also file other documents with the SEC regarding the Transaction, including the definitive joint proxy statement/prospectus. The information in the preliminary joint proxy statement/prospectus is not complete and may be changed. The definitive joint proxy statement/prospectus will be sent to the stockholders of Concho and RSP. This document is not a substitute for the registration statement and preliminary joint proxy statement/prospectus filed with the SEC, including any amendments thereto, or any other documents that Concho or RSP may file with the SEC or send to stockholders of Concho or RSP in connection with the Transaction. INVESTORS AND SECURITY HOLDERS OF RSP AND CONCHO ARE URGED TO READ THE REGISTRATION STATEMENT, THE PRELIMINARY JOINT PROXY STATEMENT/PROSPECTUS, THE DEFINITIVE JOINT PROXY STATEMENT/PROSPECTUS WHEN IT BECOMES AVAILABLE, AND ALL OTHER RELEVANT DOCUMENTS THAT ARE FILED OR WILL BE FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT THE TRANSACTION AND RELATED MATTERS.

Investors and security holders are able to obtain free copies of the registration statement and the preliminary joint proxy statement/prospectus and all other documents filed or that will be filed with the SEC by Concho or RSP, including the definitive joint proxy statement/prospectus when it becomes available, through the website maintained by the SEC at www.sec.gov. Copies of documents filed with the SEC by RSP will be made available free of charge on RSP’s website at www.rsppermian.com, under the heading “SEC Filings,” or by contacting RSP’s Investor Relations Department by phone at 214-252-2700. Copies of documents filed with the SEC by Concho will be made available free of charge on Concho’s website at www.concho.com, under the heading “Investors,” or by contacting Concho’s Investor Relations Department by phone at 432-221-0477.

Participants in Solicitation

Concho, RSP and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the holders of Concho’s common stock and RSP’s common stock in respect to the Transaction.

Information regarding RSP’s directors and executive officers is contained in the Form 10-K/A filed with the SEC on April 30, 2018 and in the other documents filed after the date thereof by RSP with the SEC. You can obtain a free copy of this document at the SEC’s website at www.sec.gov or by accessing RSP’s website at www.rsppermian.com. Information regarding Concho’s executive officers and directors is contained in the proxy statement for Concho’s 2018 Annual Meeting of Stockholders filed with the SEC on April 5, 2018 and in the other documents filed after the date thereof by Concho with the SEC. You can obtain a free copy of this document at the SEC’s website at www.sec.gov or by accessing Concho’s website at www.concho.com under the heading “Investors.”

Investors may obtain additional information regarding the interests of those persons and other persons who may be deemed participants in the Transaction by reading the preliminary joint proxy statement/prospectus, including any amendments thereto, as well as the definitive joint proxy statement/prospectus when it becomes available. You may obtain free copies of these documents as described above.

 
Concho Resources Inc.
Consolidated Balance Sheets
Unaudited
 
 
         
March 31, December 31,
(in millions, except share and per share amounts)       2018     2017
Assets
Current assets:
Cash and cash equivalents $ - $ -
Accounts receivable, net of allowance for doubtful accounts:
Oil and natural gas 392 331
Joint operations and other 260 212
Inventory 11 14
Derivative instruments 23 -
Prepaid costs and other   33     35  
Total current assets   719     592  
Property and equipment:
Oil and natural gas properties, successful efforts method 22,023 21,267
Accumulated depletion and depreciation   (8,658 )   (8,460 )
Total oil and natural gas properties, net 13,365 12,807
Other property and equipment, net   246     234  
Total property and equipment, net   13,611     13,041  
Deferred loan costs, net 12 13
Intangible assets, net 22 26
Noncurrent derivative instruments 2 -
Other assets   15     60  
Total assets $ 14,381   $ 13,732  
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable - trade $ 33 $ 43
Bank overdrafts 72 116
Revenue payable 185 183
Accrued drilling costs 307 330
Derivative instruments 248 277
Other current liabilities   264     216  
Total current liabilities   1,109     1,165  
Long-term debt 2,370 2,691
Deferred income taxes 941 687
Noncurrent derivative instruments 79 102
Asset retirement obligations and other long-term liabilities 144 172
Stockholders’ equity:

Common stock, $0.001 par value; 300,000,000 authorized; 149,870,242 and 149,324,849 shares issued at March 31, 2018 and December 31, 2017, respectively

- -
Additional paid-in capital 7,159 7,142
Retained earnings 2,675 1,840

Treasury stock, at cost; 799,644 and 598,049 shares at March 31, 2018 and December 31, 2017, respectively

  (96 )   (67 )
Total stockholders’ equity   9,738     8,915  
Total liabilities and stockholders’ equity $ 14,381   $ 13,732  
 

 
Concho Resources Inc.
Consolidated Statements of Operations
Unaudited
 
               
         
Three Months Ended
March 31,
(in millions, except per share amounts)       2018     2017
 
Operating revenues:
Oil sales $ 793 $ 502
Natural gas sales   154     110  
Total operating revenues   947     612  
Operating costs and expenses:
Oil and natural gas production 130 87
Production and ad valorem taxes 70 48
Gathering, processing and transportation 11 -
Exploration and abandonments 18 15
Depreciation, depletion and amortization 317 283
Accretion of discount on asset retirement obligations 2 2

General and administrative (including non-cash stock-based compensation of $17 and $12 for the three months ended March 31, 2018 and 2017, respectively)

65 56
(Gain) loss on derivatives 35 (286 )
Gain on disposition of assets, net   (723 )   (654 )
Total operating costs and expenses   (75 )   (449 )
Income from operations   1,022     1,061  
Other income (expense):
Interest expense (30 ) (40 )
Other, net   97     -  
Total other income (expense)   67     (40 )
Income before income taxes 1,089 1,021
Income tax expense   (254 )   (371 )
Net income $ 835   $ 650  
Earnings per share:
Basic net income $ 5.60 $ 4.39
Diluted net income $ 5.58 $ 4.37
 

 
Concho Resources Inc.
Consolidated Statements of Cash Flows
Unaudited
 
         
Three Months Ended
March 31,
(in millions)       2018     2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 835 $ 650
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization 317 283
Accretion of discount on asset retirement obligations 2 2
Exploration and abandonments, including dry holes 10 6
Non-cash stock-based compensation expense 17 12
Deferred income taxes 254 363
Gain on disposition of assets, net (723 ) (654 )
(Gain) loss on derivatives 35 (286 )
Net settlements received from (paid on) derivatives (112 ) 28
Other (96 ) 1
Changes in operating assets and liabilities, net of acquisitions and dispositions:
Accounts receivable (81 ) (6 )
Prepaid costs and other (2 ) (8 )
Inventory 3 -
Accounts payable (12 ) 7
Revenue payable 2 8
Other current liabilities   39     1  
Net cash provided by operating activities   488     407  
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and natural gas properties (474 ) (286 )
Acquisitions of oil and natural gas properties (13 ) (171 )
Additions to property, equipment and other assets (6 ) (2 )
Proceeds from the disposition of assets 255 806
Direct transaction costs for disposition of assets (3 ) (17 )
Distribution from equity method investment   148     -  
Net cash provided by (used in) investing activities   (93 )   330  
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt 662 105
Payments of debt (984 ) (105 )
Purchase of treasury stock (29 ) (19 )
Decrease in bank overdrafts   (44 )   -  
Net cash used in financing activities   (395 )   (19 )
Net increase in cash and cash equivalents - 718
Cash and cash equivalents at beginning of period   -     53  
Cash and cash equivalents at end of period $ -   $ 771  
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Issuance of common stock for business combinations $ - $ 258
 

 
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,
        2018     2017
   
Production and operating data:
Net production volumes:
Oil (MBbl) 12,939 10,224
Natural gas (MMcf) 45,448 36,597
Total (MBoe) 20,514 16,324
 
Average daily production volumes:
Oil (Bbl) 143,767 113,600
Natural gas (Mcf) 504,978 406,633
Total (Boe) 227,930 181,372
 
Average prices per unit:
Oil, without derivatives (Bbl) $ 61.29 $ 49.08
Oil, with derivatives (Bbl) (a) $ 52.59 $ 52.12
Natural gas, without derivatives (Mcf) $ 3.39 $ 3.00
Natural gas, with derivatives (Mcf) (a) $ 3.41 $ 2.90
Total, without derivatives (Boe) $ 46.17 $ 37.47
Total, with derivatives (Boe) (a) $ 40.71 $ 39.15
 
Operating costs and expenses per Boe: (b)
Oil and natural gas production $ 6.33 $ 5.35
Production and ad valorem taxes $ 3.40 $ 2.93
Gathering, processing and transportation $ 0.53 $ -
Depreciation, depletion and amortization $ 15.43 $ 17.36
General and administrative $ 3.31 $ 3.36
                     
   

 

(a)

Includes the effect of net cash receipts from (payments on) derivatives:
               
Three Months Ended
March 31,
(in millions)       2018     2017
 
Net cash receipts from (payments on) derivatives:
Oil derivatives $ (113 )

$

31
Natural gas derivatives   1     (3 )
Total $ (112 )

$

28  
               
 

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.

 

 

(b)

Per Boe amounts calculated using dollars and volumes rounded to thousands.
 

 
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
March 31,
(in millions)       2018     2017
 
Property acquisition costs:
Proved $ - $ 127
Unproved 13 306
Exploration 243 235
Development   207   158
Total costs incurred for oil and natural gas properties $ 463 $ 826
 

 
Concho Resources Inc.
Derivatives Information
Unaudited
 

The table below provides data associated with the Company’s derivatives at May 1, 2018, for the periods indicated:

     
      2018        
Second

Quarter

    Third

Quarter

    Fourth

Quarter

    Total 2019 2020
 
Oil Price Swaps: (a)
Volume (Bbl) 11,453,170 10,155,318 9,075,007 30,683,495 30,011,500 10,228,000
Price per Bbl $ 54.50 $ 54.29 $ 53.73 $ 54.20 $ 53.49 $ 55.24
 
Oil Basis Swaps: (b)
Volume (Bbl) 9,492,000 8,465,000 7,757,000 25,714,000 28,619,500 10,980,000
Price per Bbl $ (0.81 ) $ (0.85 ) $ (0.89 ) $ (0.85 ) $ (1.17 ) $ (0.08 )
 
Natural Gas Price Swaps: (c)
Volume (MMBtu) 18,179,000 19,420,000 18,458,000 56,057,000 28,790,992 7,320,000
Price per MMBtu $ 3.03 $ 3.01 $ 3.00 $ 3.01 $ 2.81 $ 2.70
     
 
(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 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 to adjusted net income (non-GAAP), both in total and on a per diluted share basis, for the periods indicated:

               
         
Three Months Ended
March 31,
(in millions, except per share amounts)       2018     2017
 
Net income - as reported $ 835 $ 650
 
Adjustments for certain non-cash and unusual items:
(Gain) loss on derivatives 35 (286 )
Net cash receipts from (payments on) derivatives (112 ) 28
Leasehold abandonments 10 6
Gain on disposition of assets and other (719 ) (654 )
Gain on equity method investment distribution (103 ) -
Tax impact 205 336
Excess tax benefit   (2 )   (8 )
Adjusted net income $ 149   $ 72  
 
Net income per diluted share - as reported $ 5.58 $ 4.37
 
Adjustments for certain non-cash and unusual items per diluted share:
(Gain) loss on derivatives 0.23 (1.92 )
Net cash receipts from (payments on) derivatives (0.75 ) 0.18
Leasehold abandonments 0.07 0.04
Gain on disposition of assets and other (4.80 ) (4.40 )
Gain on equity method investment distribution (0.69 ) -
Tax impact 1.37 2.27
Excess tax benefit   (0.01 )   (0.05 )
Adjusted net income per diluted share $ 1.00   $ 0.49  
 
Adjusted earnings per share:
Basic net income $ 1.00 $ 0.49
Diluted net income $ 1.00 $ 0.49
 

Reconciliation of Net Income to EBITDAX

EBITDAX (as defined below) is presented herein and reconciled from the GAAP measure of net income because of its wide acceptance by the investment community as a financial indicator.

The Company defines EBITDAX as net income, plus (1) exploration and abandonments expense, (2) depreciation, depletion and amortization expense, (3) accretion of discount on asset retirement obligations expense, (4) non-cash stock-based compensation expense, (5) (gain) loss on derivatives, (6) net cash receipts from (payments on) derivatives, (7) gain on disposition of assets, net, (8) interest expense, (9) gain on equity method investment distribution and (10) federal and state income tax expense. EBITDAX is not a measure of net income 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. 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 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. 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.

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

               
         
Three Months Ended
March 31,
(in millions)       2018     2017
 
Net income $ 835 $ 650
Exploration and abandonments 18 15
Depreciation, depletion and amortization 317 283
Accretion of discount on asset retirement obligations 2 2
Non-cash stock-based compensation 17 12
(Gain) loss on derivatives 35 (286 )
Net cash receipts from (payments on) derivatives (112 ) 28
Gain on disposition of assets, net (723 ) (654 )
Interest expense 30 40
Gain on equity method investment distribution (103 ) -
Income tax expense   254     371  
EBITDAX $ 570   $ 461  
 

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

Source: Concho Resources Inc.

03.28.18 Concho Resources Inc. to Acquire RSP Permian, Inc. in All-Stock Transaction

Transaction Creates Largest Unconventional Shale Producer in the Permian Basin

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

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20180328005484/en/

Highlights

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

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

Steve Gray, Chief Executive Officer of RSP, commented, “I am extremely proud of the RSP team and the high-quality position we built in the Permian Basin. As RSP has grown and we have seen the resource play develop in the Permian, we have come to recognize that combining with a company with the scale, investment grade balance sheet and operational excellence of Concho will unlock even more value for shareholders. The combined company will have the vision and necessary financial strength to efficiently develop the tremendous resource potential of these assets with large-scale projects.”

The acquisition will add approximately 92,000 net acres that strongly complement Concho’s existing acreage position in the Permian Basin. The combined position will cover more than 640,000 net acres. In fourth-quarter 2017, production on RSP’s assets totaled approximately 55.5 thousand barrels of oil equivalent (Boe) per day on a two-stream basis, of which approximately 80% was crude oil and 20% was natural gas. The transaction adds 2.2 billion Boe of resource potential, of which more than two-thirds is premium resource.

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

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

Transaction Details

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

The transaction, which is expected to be completed in the third quarter of 2018, is subject to the approval of both Concho and RSP shareholders, the satisfaction of certain regulatory approvals and other customary closing conditions.

Upon closing, Concho’s board will be expanded to 11 directors, to include one independent member of the RSP board. Concho will continue to be headquartered in Midland, Texas.

Advisors

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

Investor and Analyst Conference Call

Concho will host a conference call for investors and analysts at 7:30 AM CT (8:30 AM ET) today, March 28, 2018, to discuss this transaction. 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: 9329028

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

Concho Resources Inc.

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

RSP Permian, Inc.

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

No Offer or Solicitation

This communication relates to a proposed business combination transaction (the “Transaction”) between RSP Permian, Inc. (“RSP”) and Concho Resources Inc. (“Concho”). This communication is for informational purposes only and does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval, in any jurisdiction, pursuant to the Transaction or otherwise, nor shall there be any sale, issuance, exchange or transfer of the securities referred to in this document in any jurisdiction in contravention of applicable law. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.

Additional Information and Where to Find It

In connection with the Transaction, Concho will file with the U.S. Securities and Exchange Commission (“SEC”) a registration statement on Form S-4, that will include a joint proxy statement of RSP and Concho that also constitutes a prospectus of Concho. RSP and Concho may also file other documents with the SEC regarding the Transaction. The definitive joint proxy statement/prospectus will be sent to the stockholders of Concho and RSP. This document is not a substitute for the registration statement and joint proxy statement/prospectus that will be filed with the SEC or any other documents that Concho or RSP may file with the SEC or send to stockholders of Concho or RSP in connection with the Transaction. INVESTORS AND SECURITY HOLDERS OF RSP AND CONCHO ARE URGED TO READ THE REGISTRATION STATEMENT, THE JOINT PROXY STATEMENT/PROSPECTUS AND ALL OTHER RELEVANT DOCUMENTS THAT ARE FILED OR WILL BE FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT THE TRANSACTION AND RELATED MATTERS.

Investors and security holders will be able to obtain free copies of the registration statement and the joint proxy statement/prospectus (when available) and all other documents filed or that will be filed with the SEC by Concho or RSP through the website maintained by the SEC at www.sec.gov. Copies of documents filed with the SEC by RSP will be made available free of charge on RSP’s website at http://www.rsppermian.com, under the heading “SEC Filings,” or by contacting RSP’s Investor Relations Department by phone at 214-252-2790. Copies of documents filed with the SEC by Concho will be made available free of charge on Concho’s website at http://www.concho.com/investors or by contacting Concho’s Investor Relations Department by phone at 432-221-0477.

Participants in Solicitation

Concho, RSP and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the holders of Concho’s common stock and RSP’s common stock in respect to the Transaction.

Information regarding RSP’s directors and executive officers is contained in the proxy statement for RSP’s 2017 Annual Meeting of Stockholders filed with the SEC on April 28, 2017 and in the other documents filed after the date thereof by RSP with the SEC. You can obtain a free copy of this document at the SEC’s website at www.sec.gov or by accessing RSP’s website at http://www.rsppermian.com. Information regarding Concho’s executive officers and directors is contained in the proxy statement for Concho’s 2017 Annual Meeting of Stockholders filed with the SEC on April 5, 2017 and in the other documents filed after the date thereof by Concho with the SEC. You can obtain a free copy of this document at the SEC’s website at www.sec.gov or by accessing Concho’s website at http://www.concho.com/investors.

Investors may obtain additional information regarding the interests of those persons and other persons who may be deemed participants in the Transaction by reading the joint proxy statement/prospectus regarding the Transaction when it becomes available. You may obtain free copies of this document as described above.

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 communication that address activities, events or developments that Concho or RSP expects, believes or anticipates will or may occur in the future are forward-looking statements. Words such as “estimate,” “project,” “predict,” “believe,” “expect,” “anticipate,” “potential,” “create,” “intend,” “could,” “may,” “foresee,” “plan,” “will,” “guidance,” “look,” “outlook,” “goal,” “future,” “assume,” “forecast,” “build,” “focus,” “work,” “continue” or the negative of such terms or other variations thereof and words and terms of similar substance used in connection with any discussion of future plans, actions, or events identify forward-looking statements. However, the absence of these words does not mean that the statements are not forward-looking. These forward-looking statements include, but are not limited to, statements regarding the Transaction, pro forma descriptions of the combined company and its operations, integration and transition plans, synergies, opportunities and anticipated future performance. There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements included in this communication. These include the expected timing and likelihood of completion of the Transaction, including the timing, receipt and terms and conditions of any required governmental and regulatory approvals of the Transaction that could reduce anticipated benefits or cause the parties to abandon the Transaction, the ability to successfully integrate the businesses, the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement, the possibility that stockholders of Concho may not approve the issuance of new shares of common stock in the Transaction or that stockholders of RSP may not approve the merger agreement, the risk that the parties may not be able to satisfy the conditions to the Transaction in a timely manner or at all, risks related to disruption of management time from ongoing business operations due to the Transaction, the risk that any announcements relating to the Transaction could have adverse effects on the market price of Concho’s common stock or RSP’s common stock, the risk that the Transaction and its announcement could have an adverse effect on the ability of Concho and RSP to retain customers and retain and hire key personnel and maintain relationships with their suppliers and customers and on their operating results and businesses generally, the risk the pending Transaction could distract management of both entities and they will incur substantial costs, the risk that problems may arise in successfully integrating the businesses of the companies, which may result in the combined company not operating as effectively and efficiently as expected, the risk that the combined company may be unable to achieve synergies or it may take longer than expected to achieve those synergies and other important factors that could cause actual results to differ materially from those projected. All such factors are difficult to predict and are beyond Concho’s or RSP’s control, including those detailed in Concho’s annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K that are available on its website at http://www.concho.com and on the SEC’s website at http://www.sec.gov, and those detailed in RSP’s annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K that are available on RSP’s website at http://www.rsppermian.com and on the SEC’s website at http://www.sec.gov.

All forward-looking statements are based on assumptions that Concho or RSP believe to be reasonable but that may not prove to be accurate. Any forward-looking statement speaks only as of the date on which such statement is made, and Concho and RSP undertake 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. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof.

Cautionary Statements Regarding Resource

Concho may use the term “resource potential” and similar phrases to describe estimates of potentially recoverable hydrocarbons that SEC rules prohibit from being included in filings with the SEC. These are based on analogy to Concho’s existing models applied to additional acres, additional zones and tighter spacing and are Concho’s internal estimates of hydrocarbon quantities that may be potentially discovered through exploratory drilling or recovered with additional drilling or recovery techniques. These quantities may not constitute “reserves” within the meaning of the Society of Petroleum Engineer’s Petroleum Resource Management System or SEC rules. Such estimates and identified drilling locations have not been fully risked by Concho management and are inherently more speculative than proved reserves estimates. Actual locations drilled and quantities that may be ultimately recovered from Concho’s interests could differ substantially from these estimates. There is no commitment by Concho to drill all of the drilling locations that have been attributed to these quantities. Factors affecting ultimate recovery include the scope of Concho’s ongoing drilling program, which will be directly affected by the availability of capital, drilling and production costs, availability of drilling services and equipment, drilling results, lease expirations, transportation constraints, regulatory approvals, actual drilling results, including geological and mechanical factors affecting recovery rates, and other factors. Such estimates may change significantly as development of Concho’s oil and natural gas assets provide additional data. Concho’s production forecasts and expectations for future periods are dependent upon many assumptions, including estimates of production decline rates from existing wells and the undertaking and outcome of future drilling activity, which may be affected by significant commodity price declines or drilling cost increases or other factors that are beyond Concho’s control. Concho’s use of the term “premium resource” refers to assets with the capacity to produce at an internal rate of return that is greater than thirty-five percent based on fifty-five dollar oil and three dollar gas.

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

Source: Concho Resources Inc.

03.22.18 Concho Resources Inc. Schedules First Quarter 2018 Results Conference Call for Wednesday, May 2, 2018

MIDLAND, Texas--(BUSINESS WIRE)-- Concho Resources Inc. (NYSE: CXO) (the “Company” or “Concho”) will host a conference call on Wednesday, May 2, 2018 at 8:00 AM CT (9:00 AM ET) to discuss first quarter 2018 financial and operating results. The Company plans to announce first quarter 2018 results on Tuesday, May 1, 2018, after close of trading.

Conference Call Information:

Dial-in: (844) 263-8298
Intl. dial-in: (478) 219-0007
Participant Passcode: 7175736

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.

Concho Resources Inc.
Megan P. Hays,432-685-2533
Vice President of Investor Relations and Public Affairs
or
Mary T. Starnes,432-221-0477
Investor Relations Manager

Source: Concho Resources Inc.

02.20.18 Concho Resources Inc. Reports Fourth-Quarter and Full-Year 2017 Results and Provides 2018 Outlook

Exceeds Crude Oil and Total Production Growth Guidance

Increases Total Resource Potential to an Estimated 10 Billion Barrels of Oil Equivalent

Provides New Long-Term Growth Outlook to 2020

Accelerates Value with Recent Portfolio Management Activities

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

Fourth-Quarter & Full-Year 2017 Highlights

  • For fourth quarter, delivered crude oil production of 130 MBopd and total production of 211 MBoepd, exceeding the high end of the Company’s guidance range.
  • For 2017, grew crude oil production 29% and total production 28% on a $1.7 billion capital program, excluding acquisitions, which was fully funded by cash flows from operations.
  • Reported fourth quarter net income of $267 million, or $1.79 per diluted share. Adjusted net income totaled $98 million, or $0.66 per diluted share (non-GAAP). For 2017, net income totaled $956 million, or $6.41 per diluted share, and adjusted net income was $311 million, or $2.09 per diluted share (non-GAAP).
  • Generated $513 million of EBITDAX (non-GAAP) in the fourth quarter and $1.9 billion for 2017.
  • Delivered outstanding results from the Company’s large-scale development projects in the Northern and Southern Delaware Basin and in the Midland Basin.
  • Increased estimated proved reserves 17% to 840 MMBoe, driven by a 26% increase in proved developed reserves to 588 MMBoe.
  • Achieved a 275% reserves replacement ratio at $8.68 per Boe proved developed finding costs.

2018 Outlook & Recent Events

  • For 2018, expecting crude oil production growth of approximately 20% and total production growth of 16% to 20% on a $2 billion capital program at the midpoint. The capital program is consistent with Concho’s strategy of delivering returns-based, capital-efficient growth within cash flows from operations.
  • Provided new three-year production growth outlook of 20% CAGR over the 2017 to 2020 time period.
  • Enhanced asset position and accelerated value realization with recent portfolio management actions. Divestiture proceeds of $280 million reinforce balance sheet strength and flexibility. Strategic asset trade enhances core leasehold in Midland Basin and New Mexico Shelf.

See “Supplemental Non-GAAP Financial Measures” and “Supplemental Measures” at the end of this press release for a description of non-GAAP measures adjusted net income, adjusted earnings per share and EBITDAX as well as a reconciliation of these measures to the associated GAAP measure. An explanation of how we calculate and use the reserves replacement ratio and proved developed finding costs also can be found at the end of the press release.

Tim Leach, Chairman and Chief Executive Officer, commented, “The fourth quarter was an excellent end to a great year for Concho. Our operational and financial performance demonstrated our ability to consistently execute, control costs and capitalize on opportunities that strengthen our competitive position. For the year, crude oil production exceeded our target, increasing 29% year-over-year, and our disciplined capital program was fully funded by operating cash flow. We have a powerful portfolio that continues to outperform. The depth and quality of our resource base is unmatched throughout our history and allows us to assemble multi-year programs capable of delivering premium value within cash flow. We continue to complement our development program with active portfolio management that accelerates value and improves capital efficiency. Our high-quality resource base, scale advantage and execution strength uniquely position Concho to navigate a dynamic operating environment while maximizing returns and building sustainable value for our shareholders.”

Fourth-Quarter and Full-Year 2017 Operations Summary

Production for fourth-quarter 2017 was 19 million barrels of oil equivalent (MMBoe), or an average of 211 thousand Boe per day (MBoepd), an increase of approximately 28% from fourth-quarter 2016 and 9% from third-quarter 2017. Average daily crude oil production for fourth-quarter 2017 totaled 130 thousand barrels per day (MBopd), an increase of approximately 30% from fourth-quarter 2016 and 9% from third-quarter 2017. Natural gas production for fourth-quarter 2017 totaled 487 million cubic feet per day (MMcfpd).

For full-year 2017, total production increased 28% to 70 MMBoe, or 193 MBoepd, driven by a 29% increase in crude oil production to 119 MBopd. Natural gas production for full-year 2017 was 441 MMcfpd.

During fourth-quarter 2017, Concho averaged 16 rigs, compared to 19 rigs in third-quarter 2017. The table below summarizes the Company’s gross drilling and completion activity by core area for fourth-quarter and full-year 2017.

       
Number of Number of Number of

Number of

Operated Wells Wells Operated Wells

Wells Drilled

Drilled Completed Completed
4Q17   FY17 4Q17   FY17 4Q17   FY17 4Q17   FY17
Northern Delaware Basin 38 149 20 83 30 126 14 65
Southern Delaware Basin 14 61 11 44 24 53 17 36
Midland Basin 14 58 14 58 22 78 22 75
New Mexico Shelf 5 43 4 32 15 48 5 35
Total 71 311 49 217 91 305 58 211
 

The Company is currently running 19 rigs, including eight rigs in the Northern Delaware Basin, six rigs in the Southern Delaware Basin and five rigs in the Midland Basin. Additionally, the Company is currently utilizing six completion crews.

Northern Delaware Basin

In the Northern Delaware Basin, Concho added 24 wells with at least 60 days of production as of the end of fourth-quarter 2017. The average 30-day peak and average 60-day peak rates for these wells were 1,805 Boepd (68% oil) and 1,703 Boepd (67% oil), respectively. The Company also achieved a record average lateral length of 6,685 feet during fourth-quarter 2017.

Maximizing Recovery and Returns with Large-Scale Development Projects

Concho continues to see strong performance from the Vast and Windward projects, two large-scale development projects in the Red Hills area. The Vast project includes seven wells targeting the Wolfcamp Sands and Wolfcamp A Shale, and the Windward project includes eight wells targeting the Avalon Shale. The Vast and Windward projects have produced an aggregate 3 MMBoe (71% oil) in the first four months of their production.

From these projects, Concho is collecting valuable data that helps the Company optimize lateral placement, completion design and facilities planning. In addition, both projects delivered improvements in drilling days and stages completed per day.

Southern Delaware Basin

In the Southern Delaware Basin, Concho added three wells targeting the Wolfcamp A with at least 60 days of production as of the end of fourth-quarter 2017. The average 30-day peak and average 60-day peak rates for these wells were 1,644 Boepd (71% oil) and 1,474 Boepd (71% oil), respectively, and the average lateral length of 10,354 feet set a Company record for the Southern Delaware Basin.

Optimizing Development of Stacked Resource

Concho also recently completed a large-scale, multi-well project in the Southern Delaware Basin. The Brass Monkey project, originally an eight-well project, includes 10 wells testing simultaneous development of the 3rd Bone Spring, Wolfcamp A and Wolfcamp B with an average lateral length of 9,700 feet. The average 30-day peak rate for the project was 26 MBoepd (73% oil).

Midland Basin

Concho added six wells targeting the Wolfcamp A and Wolfcamp B in the Midland Basin during fourth-quarter 2017. The average 30-day peak and average 60-day peak rates for these wells were 1,272 Boepd (82% oil) and 1,195 Boepd (83% oil), respectively, and the average lateral length of 11,656 feet set a Company record for the Midland Basin.

Improving Capital Productivity from Technology Deployed at the Mabee Ranch Project

Concho recently completed the 13-well, two-mile Mabee Ranch project located in Andrews County, Texas. The early production results are strong, as the Mabee Ranch project has achieved an initial 24-hour peak rate of approximately 15 MBoepd (85% oil). Additionally, Concho is utilizing leading-edge technologies, including fiber optic monitoring, to collect valuable proprietary data with real-time and long-term implications for full-field optimization. The Company expects to transfer these techniques to other assets across the portfolio.

Fourth-Quarter and Full-Year 2017 Financial Summary

Concho’s average realized price for crude oil and natural gas for fourth-quarter 2017, excluding the effect of commodity derivatives, was $52.84 per Bbl and $3.33 per Mcf, respectively, compared with $45.66 per Bbl and $2.93 per Mcf, respectively, for fourth-quarter 2016. For 2017, Concho’s average realized price for crude oil and natural gas, excluding the effect of commodity derivatives, was $48.13 per Bbl and $3.07 per Mcf, respectively, compared with $39.90 per Bbl and $2.23 per Mcf, respectively, for 2016.

Net income for fourth-quarter 2017 was $267 million, or $1.79 per diluted share, compared to net loss of $125 million, or $0.86 per diluted share, for fourth-quarter 2016. Adjusted net income (non-GAAP), which excludes non-cash and unusual items, for fourth-quarter 2017 was $98 million, or $0.66 per diluted share, compared with adjusted net income (non-GAAP) of $28 million, or $0.20 per diluted share, for fourth-quarter 2016.

Net income for full-year 2017 was $956 million, or $6.41 per diluted share, compared to net loss of $1.5 billion, or $10.85 per diluted share, for full-year 2016. Adjusted net income (non-GAAP), which excludes non-cash and unusual items, for full-year 2017 was $311 million, or $2.09 per diluted share, compared with adjusted net income (non-GAAP) of $111 million, or $0.81 per diluted share, for full-year 2016.

Net income for fourth-quarter and full-year 2017 reflected income tax changes related to the Tax Cuts and Jobs Act. Due to the reduction of the U.S. federal corporate income tax rate and subsequent re-measurement of the Company’s net deferred tax liability, the Company recorded a provisional non-cash decrease to its income tax provision of $398 million and a corresponding provisional reduction to its net non-current deferred tax liability. For 2018, the Company estimates an effective tax rate of approximately 25%, including state taxes, before discrete items.

EBITDAX (non-GAAP) for fourth-quarter 2017 totaled $513 million, compared to $396 million for fourth-quarter 2016. EBITDAX (non-GAAP) for full-year 2017 was $1.9 billion, compared to $1.6 billion for full-year 2016.

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 as well as a reconciliation of these measures to the associated GAAP measures.

2017 Proved Reserves and Resource Potential

At December 31, 2017, Concho’s estimated proved reserves totaled 840 MMBoe, an increase of 17% from year-end 2016. The Company’s proved reserves are approximately 60% crude oil and 40% natural gas. Proved developed reserves totaled 588 MMBoe, an increase of 26% from year-end 2016. The Company’s proved developed reserves represent approximately 70% of total proved reserves.

During 2017, Concho added 194 MMBoe of proved reserves primarily from drilling and completion operations, resulting in a reserve replacement ratio of 275%. The Company’s proved developed finding and development cost was $8.68 per Boe for 2017.

Concho estimates current net resource potential to be approximately 10 billion Boe, including total proved reserves, an increase of 25% from year-end 2016. Concho’s current resource potential is attributable to approximately 21,000 gross horizontal drilling locations, underscoring the Company’s large-scale horizontal development potential in the Permian Basin.

For a summary of estimated proved reserves, please see “Estimated Year-End Proved Reserves” below, and for an explanation of how the Company calculates and uses the reserves replacement ratio and finding and development costs, please see “Supplemental Measures” below.

Active Portfolio Management

During first-quarter 2018, Concho completed the sale of non-core leasehold in Ward and Reeves Counties, Texas, for approximately $280 million. The leasehold covers approximately 40,000 gross (20,000 net) acres. These assets were primarily non-operated with low working interest and not conducive to long-lateral development. Proved reserves and net production associated with these assets was minimal.

Additionally, the Company recently completed a strategic trade with a large integrated oil company. For Concho, the trade enhances its core development area in Mabee Ranch in the Midland Basin and adds working interests to certain operated properties in Upton County, Texas, and in the New Mexico Shelf. In the trade, Concho conveyed its 32,000 acre checker-board leasehold position in Culberson County, Texas.

These portfolio optimization activities accelerate value, enhance Concho’s core leasehold position and further improve capital allocation.

Financial Position and Liquidity

At December 31, 2017, Concho had total long-term debt of $2.7 billion, including approximately $320 million of borrowings outstanding under its credit facility. Adjusted for divestiture proceeds received in first-quarter 2018, the Company had total long-term debt of $2.5 billion at December 31, 2017.

Outlook

High-quality acreage and scale within the Permian Basin enables Concho to efficiently allocate capital while continuing to advance manufacturing-style development with leading-edge drilling and completion techniques.

Concho expects 2018 capital spending to be at the midpoint of its capital guidance range of $1.9 billion to $2.1 billion, which reflects the Company’s current outlook for service cost inflation. The 2018 capital program is expected to be funded with cash flows from operations and generate 20% crude oil growth and 16% to 20% total production growth year-over-year. Approximately 93% of the capital program is allocated to drilling and completion activities, with approximately 65% of that capital directed towards large-scale manufacturing projects. The Company’s 2018 capital program is allocated among the following areas: Northern Delaware Basin (40%), Southern Delaware Basin (25%), Midland Basin (30%) and the New Mexico Shelf (5%).

Detailed guidance for the first quarter and full-year 2018 is provided under “2018 Guidance” at the end of the release. The Company’s capital guidance for 2018 excludes acquisitions and is subject to change without notice depending upon a number of factors, including commodity prices and industry conditions.

The Company provided a new three-year production growth outlook. Concho expects to grow total production at a compound annual growth rate of 20% from 2017 to 2020. The outlook reflects the Company’s high-quality production base and strong operating momentum. Additionally, the Company expects to deliver this growth within cash flows from operations at an average crude oil price (WTI) in the low-to-mid $50 per barrel range over the duration of the outlook.

As with the Company’s 2018 outlook, growth over the three-year period from 2017 to 2020 is the output of reinvesting high-margin cash flow into its drilling program. To facilitate execution of the program, Concho has secured sand and associated transportation logistics. The sand will be sourced from several regional mines in the Permian Basin. In addition to reducing operational risks across the supply chain, the Company expects to capture well cost savings from locking in a key component of completion operations.

Commodity Derivatives Update

The Company enters into commodity derivatives to manage its exposure to commodity price fluctuations. For 2018, Concho has crude oil swap contracts covering approximately 105 MBopd at a weighted average price of $52.98 per Bbl. Please see the table under “Derivatives Information” below for detailed information about the Company’s current derivatives positions.

Conference Call

Concho will host a conference call tomorrow, February 21, 2018, at 8:00 AM CT (9:00 AM ET) to discuss fourth quarter and full-year 2017 results. 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: 2989439

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

Upcoming Conferences

The Company will participate in the following upcoming conferences:

   
Conference Date Conference Presentation Time
March 5, 2018 Raymond James 39th Annual Institutional Investors Conference 8:15 AM CT
March 26, 2018 Scotia Howard Weil 46th Annual Energy Conference 10:55 AM CT
 

The presentations will be available on the Company’s website on or prior to the day of the first conference.

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, guidance and projections regarding the Company’s future financial position, operations, performance, business strategy, oil and natural gas reserves, drilling program, production, 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 sources of financing. The words “estimate,” “project,” “predict,” “believe,” “expect,” “anticipate,” “potential,” “could,” “may,” “foresee,” “plan,” “will,” “guidance,” “outlook,” “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. The guidance capital program and outlook presented herein are subject to change by the Company without notice and the Company has no obligation to affirm or update such information, except as required by law. 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; Quarterly Reports on Form 10-Q and Current Reports on Forms 8-K; risks relating to declines in, or the sustained depression of, the prices the Company receives for its oil and natural gas, or future prices that are lower than those assumed; uncertainties about the estimated quantities of oil and natural gas reserves; drilling, completion and operating risks; the adequacy of the Company’s capital resources and liquidity including, but not limited to, access to additional borrowing capacity under its credit facility; the effects of government regulation, permitting and other legal requirements, including new legislation or regulation of hydraulic fracturing, climate change, derivatives reform or the export of oil and natural gas; the impact of current and potential changes to federal or state tax rules and regulations, including the Tax Cuts and Jobs Act; evolving cybersecurity risks, such as those involving unauthorized access, denial-of-service attacks, malicious software, data privacy breaches by employees, insiders or others with authorized access, cyber or phishing-attacks, ransomware, malware, social engineering, physical breaches or other actions; risks associated with acquisitions, including costs and the ability to realize expected benefits; the impact of potential changes in the Company’s credit ratings; 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 and natural gas liquids 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; 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.

Cautionary Statements Regarding Resource

The Company may use the term “resource potential” and similar phrases to describe estimates of potentially recoverable hydrocarbons that SEC rules prohibit from being included in filings with the SEC. These are based on analogy to the Company’s existing models applied to additional acres, additional zones and tighter spacing and are the Company’s internal estimates of hydrocarbon quantities that may be potentially discovered through exploratory drilling or recovered with additional drilling or recovery techniques. These quantities may not constitute “reserves” within the meaning of the Society of Petroleum Engineer’s Petroleum Resource Management System or SEC rules. Such estimates and identified drilling locations have not been fully risked by Company management and are inherently more speculative than proved reserves estimates. Actual locations drilled and quantities that may be ultimately recovered from the Company’s interests could differ substantially from these estimates. There is no commitment by the Company to drill all of the drilling locations that have been attributed to these quantities. Factors affecting ultimate recovery include the scope of the Company’s ongoing drilling program, which will be directly affected by the availability of capital, drilling and production costs, availability of drilling services and equipment, drilling results, lease expirations, transportation constraints, regulatory approvals, actual drilling results, including geological and mechanical factors affecting recovery rates, and other factors. Such estimates may change significantly as development of the Company’s oil and natural gas assets provide additional data. The Company’s production forecasts and expectations for future periods are dependent upon many assumptions, including estimates of production decline rates from existing wells and the undertaking and outcome of future drilling activity, which may be affected by significant commodity price declines or drilling cost increases or other factors that are beyond the Company’s control.

 
Concho Resources Inc.
Consolidated Balance Sheets
Unaudited
 
     
       
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 331 220
Joint operations and other 212 238
Inventory 14 16
Derivative instruments - 4
Prepaid costs and other   35     31  
Total current assets   592     562  
Property and equipment:
Oil and natural gas properties, successful efforts method 21,267 18,476
Accumulated depletion and depreciation   (8,460 ) (7,390 )
Total oil and natural gas properties, net 12,807 11,086
Other property and equipment, net   234     216  
Total property and equipment, net   13,041     11,302  
Funds held in escrow - 43
Deferred loan costs, net 13 11
Intangible assets, net 26 24
Other assets   60     177  
Total assets $ 13,732   $ 12,119  
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable - trade $ 43 $ 28
Bank overdrafts 116 -
Revenue payable 183 132
Accrued drilling costs 330 359
Derivative instruments 277 82
Other current liabilities   216     152  
Total current liabilities   1,165     753  
Long-term debt 2,691 2,741
Deferred income taxes 687 766
Noncurrent derivative instruments 102 96
Asset retirement obligations and other long-term liabilities 172 140
Stockholders’ equity:

Common stock, $0.001 par value; 300,000,000 authorized; 149,324,849 and 146,488,685 shares issued at December 31, 2017 and 2016, respectively

- -
Additional paid-in capital 7,142 6,783
Retained earnings 1,840 884

Treasury stock, at cost; 598,049 and 429,708 shares at December 31, 2017 and 2016, respectively

 

 

(67

)  

(44

)
Total stockholders’ equity   8,915     7,623  
Total liabilities and stockholders’ equity $ 13,732   $ 12,119  
 

 
Concho Resources Inc.
Consolidated Statements of Operations
Unaudited
 
           
Three Months Ended Years Ended
December 31, December 31,
(in millions, except per share amounts)   2017   2016   2017   2016
 
Operating revenues:
Oil sales $ 631 $ 421 $ 2,092 $ 1,350
Natural gas sales   149     104     494     285  
Total operating revenues   780     525     2,586     1,635  
Operating costs and expenses:
Oil and natural gas production 115 80 408 320
Production and ad valorem taxes 59 42 199 131
Exploration and abandonments 17 23 59 77
Depreciation, depletion and amortization 298 277 1,146 1,167
Accretion of discount on asset retirement obligations 2 2 8 7
Impairments of long-lived assets - - - 1,525

General and administrative (including non-cash stock-based compensation of $17 and $16 for the three months ended December 31, 2017 and 2016, respectively, and $60 and $59 for the years ended December 31, 2017 and 2016, respectively)

64 66 244 226
Loss on derivatives 415 193 126 369
Gain on disposition of assets, net   (11 )   (9 )   (678 )   (118 )
Total operating costs and expenses   959     674     1,512     3,704  
Income (loss) from operations   (179 )   (149 )   1,074     (2,069 )
Other income (expense):
Interest expense (28 ) (42 ) (146 ) (204 )
Loss on extinguishment of debt - (28 ) (66 ) (56 )
Other, net   1     -     19     (9 )
Total other expense   (27 )   (70 )   (193 )   (269 )
Income (loss) before income taxes (206 ) (219 ) 881 (2,338 )
Income tax benefit   473     94     75     876  
Net income (loss) $ 267   $ (125 ) $ 956   $ (1,462 )
Earnings per share:
Basic net income (loss) $ 1.80 $ (0.86 ) $ 6.44 $ (10.85 )
Diluted net income (loss) $ 1.79 $ (0.86 ) $ 6.41 $ (10.85 )
 

 
Concho Resources Inc.
Consolidated Statements of Cash Flows
Unaudited
 
         
Years Ended December 31,
(in millions)   2017   2016
CASH FLOWS FROM OPERATING ACTIVITIES:  
Net income (loss) $ 956 $ (1,462 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization 1,146 1,167
Accretion of discount on asset retirement obligations 8 7
Impairments of long-lived assets - 1,525
Exploration and abandonments, including dry holes 27 57
Non-cash stock-based compensation expense 60 59
Deferred income taxes (71 ) (864 )
Gain on disposition of assets, net (678 ) (118 )
Loss on derivatives 126 369
Net settlements received from derivatives 79 625
Loss on extinguishment of debt 66 56
Other non-cash items (1 ) 14
Changes in operating assets and liabilities, net of acquisitions and dispositions:
Accounts receivable (126 ) 32
Prepaid costs and other (9 ) 6
Inventory - 2
Accounts payable 14 15
Revenue payable 52 (38 )
Other current liabilities   46     (68 )
Net cash provided by operating activities   1,695     1,384  
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and natural gas properties (1,581 ) (1,046 )
Acquisitions of oil and natural gas properties (908 ) (1,351 )
Additions to property, equipment and other assets (44 ) (61 )
Proceeds from the disposition of assets 803 332
Deposits on dispositions of oil and natural gas properties 29 -
Direct transaction costs for disposition of assets (18 ) -
Funds held in escrow - (43 )
Contributions to equity method investments   -     (56 )
Net cash used in investing activities   (1,719 )   (2,225 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt 2,795 600
Payments of debt (2,829 ) (1,200 )
Debt extinguishment costs (63 ) (42 )
Excess tax deficiency from stock-based compensation - (1 )
Net proceeds from issuance of common stock - 1,327
Payments for loan costs (25 ) (7 )
Purchase of treasury stock (23 ) (12 )
Increase in bank overdrafts   116     -  
Net cash provided by (used in) financing activities   (29 )   665  
Net decrease in cash and cash equivalents (53 ) (176 )
Cash and cash equivalents at beginning of period   53     229  
Cash and cash equivalents at end of period $ -   $ 53  
SUPPLEMENTAL CASH FLOWS:
Cash paid for interest $ 139 $ 232
Cash paid for income taxes $ 13 $ -
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Issuance of common stock for business combinations $ 291 $ 768
 

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 Years Ended
December 31, December 31,
            2017   2016   2017   2016
 
Production and operating data:
Net production volumes:
Oil (MBbl) 11,945 9,220 43,472 33,840
Natural gas (MMcf) 44,848 35,394 161,089 127,481
Total (MBoe) 19,420 15,119 70,320 55,087
 
Average daily production volumes:
Oil (Bbl) 129,837 100,217 119,101 92,459
Natural gas (Mcf) 487,478 384,717 441,340 348,309
Total (Boe) 211,083 164,337 192,658 150,511
 
Average prices per unit:
Oil, without derivatives (Bbl) $ 52.84 $ 45.66 $ 48.13 $ 39.90
Oil, with derivatives (Bbl) (a) $ 48.55 $ 50.32 $ 49.93 $ 57.90
Natural gas, without derivatives (Mcf) $ 3.33 $ 2.93 $ 3.07 $ 2.23
Natural gas, with derivatives (Mcf) (a) $ 3.39 $ 2.93 $ 3.06 $ 2.36
Total, without derivatives (Boe) $ 40.18 $ 34.70 $ 36.78 $ 29.68
Total, with derivatives (Boe) (a) $ 37.69 $ 37.55 $ 37.88 $ 41.03
 
Operating costs and expenses per Boe: (b)
Oil and natural gas production $ 5.92 $ 5.31 $ 5.80 $ 5.81
Production and ad valorem taxes $ 3.02 $ 2.80 $ 2.82 $ 2.38
Depreciation, depletion and amortization $ 15.33 $ 18.32 $ 16.29 $ 21.19
General and administrative $ 3.19 $ 4.30 $ 3.46 $ 4.09
                                   
 
(a) Includes the effect of net cash receipts from (payments on) derivatives:
                             
 
Three Months Ended Years Ended
December 31, December 31,
(in millions)   2017   2016   2017 2016
 
Net cash receipts from (payments on) derivatives:
Oil derivatives $ (50 ) $ 43 $ 79 $ 609
Natural gas derivatives   3     -   -   16
Total $ (47 ) $ 43 $ 79 $ 625
                             
 
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.
(b) Per Boe amounts calculated using dollars and volumes rounded to thousands.
 

Concho Resources Inc.
Estimated Year-End Proved Reserves
Unaudited

The table below provides a summary of changes in total proved reserves for the year ended December 31, 2017, as well as proved developed reserves at the beginning and end of the year.

       
(MMBoe)   2017  
 
Total proved reserves
Balance, January 1 720
Purchases of minerals-in-place 34
Sales of minerals-in-place (4 )
Extensions and discoveries 174
Revisions:
Other non-price related revisions (43 )
Price-related revisions 29
Production   (70 )
Balance, December 31   840
 
Proved developed reserves
Balance, January 1   466
Balance, December 31   588
 
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 Years Ended
December 31, December 31,
(in millions)   2017   2016   2017     2016
 
Property acquisition costs:
Proved $ 2 $ 725 $ 303 $ 982
Unproved 40 982 905 1,154
Exploration 296 189 1,021 701
Development   175   162   653   449
Total costs incurred for oil and natural gas properties $ 513 $ 2,058 $ 2,882 $ 3,286
 

Concho Resources Inc.
Derivatives Information
Unaudited

The table below provides data associated with the Company’s derivatives at February 20, 2018, for the periods indicated:

               
2018  
First Second Third Fourth
Quarter Quarter Quarter Quarter Total 2019 2020
 
Oil Price Swaps: (a)
Volume (Bbl) 11,038,629 10,178,170 8,944,318 8,106,007 38,267,124 27,306,500 4,026,000
Price (Bbl) $ 53.01 $ 53.30 $ 52.98 $ 52.53 $ 52.98 $ 52.95 $ 54.80
 
Oil Basis Swaps: (b)
Volume (Bbl) 10,674,000 9,492,000 8,465,000 7,757,000 36,388,000 26,064,500 8,784,000
Price (Bbl) $ (0.75 ) $ (0.81 ) $ (0.85 ) $ (0.89 ) $ (0.82 ) $ (0.97 ) $ (0.09 )
 
Natural Gas Price Swaps: (c)
Volume (MMBtu) 17,833,000 16,979,000 15,740,000 14,778,000 65,330,000 17,840,992 -
Price (MMBtu) $ 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 Years Ended
December 31, December 31,
(in millions, except per share amounts)   2017   2016   2017   2016
 
Net income (loss) - as reported $ 267 $ (125 ) $ 956 $ (1,462 )
 
Adjustments for certain non-cash and unusual items:
Loss on derivatives 415 193 126 369
Net cash receipts from (payments on) derivatives (47 ) 43 79 625
Impairments of long-lived assets - - - 1,525
Leasehold abandonments 3 20 27 60
Loss on extinguishment of debt - 28 66 56
Gain on disposition of assets and other (9 ) (9 ) (678 ) (117 )
Tax impact (133 ) (101 ) 139 (924 )
Excess tax benefit - - (6 ) -
Changes in deferred taxes for enacted tax law changes and other estimates   (398 )   (21 )   (398 )   (21 )
Adjusted net income $ 98   $ 28   $ 311   $ 111  
 
Net income (loss) per diluted share - as reported $ 1.79 $ (0.86 ) $ 6.41 $ (10.85 )
 
Adjustments for certain non-cash and unusual items per diluted share:
Loss on derivatives 2.77 1.33 0.85 2.73
Net cash receipts from (payments on) derivatives (0.32 ) 0.30 0.52 4.63
Impairments of long-lived assets - - - 11.30
Leasehold abandonments 0.02 0.14 0.18 0.44
Loss on extinguishment of debt - 0.20 0.44 0.42
Gain on disposition of assets and other (0.06 ) (0.06 ) (4.54 ) (0.86 )
Tax impact (0.89 ) (0.70 ) 0.93 (6.85 )
Excess tax benefit - - (0.04 ) -
Changes in deferred taxes for enacted tax law changes and other estimates   (2.65 )   (0.15 )   (2.66 )   (0.15 )
Adjusted net income per diluted share $ 0.66   $ 0.20   $ 2.09   $ 0.81  
 
Adjusted earnings per share:
Basic net income $ 0.67 $ 0.20 $ 2.10 $ 0.81
Diluted net income $ 0.66 $ 0.20 $ 2.09 $ 0.81
 

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.

The Company defines EBITDAX as net income (loss), plus (1) exploration and abandonments expense, (2) depreciation, depletion and amortization expense, (3) accretion of discount on asset retirement obligations expense, (4) impairments of long-lived assets, (5) non-cash stock-based compensation expense, (6) loss on derivatives, (7) net cash receipts from (payments on) derivatives, (8) gain on disposition of assets, net, (9) interest expense, (10) loss on extinguishment of debt and (11) federal and state income tax 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. 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. 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.

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 Years Ended
December 31, December 31,
(in millions)   2017   2016   2017   2016
 
Net income (loss) $ 267 $ (125 ) $ 956 $ (1,462 )
Exploration and abandonments 17 23 59 77
Depreciation, depletion and amortization 298 277 1,146 1,167
Accretion of discount on asset retirement obligations 2 2 8 7
Impairments of long-lived assets - - - 1,525
Non-cash stock-based compensation 17 16 60 59
Loss on derivatives 415 193 126 369
Net cash receipts from (payments on) derivatives (47 ) 43 79 625
Gain on disposition of assets, net (11 ) (9 ) (678 ) (118 )
Interest expense 28 42 146 204
Loss on extinguishment of debt - 28 66 56
Income tax benefit   (473 )   (94 )   (75 )   (876 )
EBITDAX $ 513   $ 396   $ 1,893   $ 1,633  
 

Concho Resources Inc.
Supplemental Measures
Unaudited

Reserves Replacement Ratio

The Company uses the reserves replacement ratio as an indicator of the Company’s ability to replenish annual production volumes and grow its reserves, thereby providing some information on the sources of future production. The reserves replacement ratio is a statistical indicator that is limited because it typically varies widely based on the extent and timing of discoveries and property acquisitions. Its predictive and comparative value is also limited for the same reasons. In addition, since the ratio does not embed the cost or timing of future production of new reserves, it cannot be used as a measure of value creation. The reserve replacement ratio of approximately 275% was calculated by dividing net proved reserve additions of 194 MMBoe (the sum of purchases, extensions and discoveries and total revisions) by production of 70 MMBoe.

Proved Developed Finding and Development (“F&D”) Cost

Proved developed F&D cost is an indicator used to assist in an evaluation of how much it costs the Company, on a per Boe basis, to add proved reserves. The Company’s proved developed F&D cost of $8.68 is calculated by dividing the sum of exploration and development costs incurred of $1.7 billion by the change in proved developed reserves year-over-year, excluding current year production, of 192 MMBoe. This calculation does not include the future development costs required for the development of proved undeveloped reserves.

Concho Resources Inc.
2018 Guidance

For 2018, the Company is providing “gathering, processing and transportation” expense guidance. This line item includes gathering, processing and transportation expense on assets that have specific marketing arrangements with fees prior to the transfer of control of the crude oil and natural gas that we produce. Gathering, processing and transportation expense is the result of the Company’s adoption and application of the new revenue recognition standard ASU No. 2014-09, “Revenue from Contracts with Customers” (Topic 606). The majority of the Company’s gathering, processing and transportation expense continues to be recorded within the Company’s realized crude oil and natural gas price realizations.

For the first quarter of 2018, Concho expects production to average between 215 MBoepd and 219 MBoepd.

The following table summarizes the Company’s operational and financial guidance for 2018.

 
2018
Production
Total production growth 16% - 20%
Crude oil production growth 20%
 
Price realizations, excluding commodity derivatives
Crude oil differential to NYMEX ($/Bbl) ($2.00) - ($2.50)
Natural gas (per Mcf) (% of NYMEX)

90% - 100%

 
Operating costs and expenses
Lease operating expense and workover costs ($/Boe) $6.00 - $6.50
Gathering, processing and transportation $0.50 - $0.60
Oil & natural gas taxes (% of oil and natural gas revenues) 7.75%
General and administrative (“G&A”) expense ($/Boe):
Cash G&A expense $2.50 - $2.80
Non-cash stock-based compensation $0.80 - $1.00
Depletion, depreciation and amortization expense ($/Boe) $15.00 - $16.00
Exploration and other ($/Boe) $0.25 - $0.75
Interest expense ($ in millions):
Cash $110 - $120
Non-cash $6
Income tax rate 25%
 
Capital program ($ in billions) $1.9 - $2.1
 

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

Investor Relations Manager

Webcasts

08.02.18 |
Q2 2018 Earnings Call

Dial-in: (844) 263-8298

Intl. dial-in: (478) 219-0007

Participant Passcode: 7088648

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