Increased Full-Year 2017 Production Growth
Target to 20%-24%
Increased Total Resource Potential to 8
Billion Barrels of Oil Equivalent
Concho Resources Inc. (NYSE: CXO) (the “Company” or
“Concho”) today reported financial and operating results for the
fourth quarter and full year of 2016.
Fourth-Quarter & Full-Year 2016 Highlights
- Delivered quarterly production of 164.3
MBoepd, up 7% quarter-over-quarter.
- Achieved quarterly crude oil production
in excess of 100 MBopd for the first time in Company history.
- Reported a quarterly net loss of $125.1
million, or $0.86 per diluted share. Adjusted net income totaled
$29.0 million, or $0.20 per diluted share (non-GAAP).
- Generated $397.2 million of EBITDAX
(non-GAAP) in the fourth quarter of 2016.
- Achieved record 30-day production rates
in the Company’s New Mexico Shelf and Midland Basin assets.
- Generated 1 million gross barrels of
oil equivalent in just over 100 days from the Company’s eight well
Windham project.
- Full-year 2016 daily production
averaged 150.5 MBoepd, up 5% from 2015.
- Exploration and development capital
expenditures were $1.1 billion during 2016, down 37% from
2015.
- Year-end 2016 estimated proved reserves
totaled 720 MMBoe, up from 623 MMBoe at year-end 2015.
- Reserves replaced at a ratio of 344%,
excluding price revisions, and a drill-bit finding and development
cost of $9.21 per Boe.
- Total resource potential at year-end
estimated at approximately 8 billion Boe, up 60% from 5 billion Boe
at year-end 2015.
- Raised full-year 2017 production growth
target to 20% to 24%; targeting 25% crude oil production growth
over 2016.
- Recently closed the sale of the Alpha
Crude Connector system netting $803 million in proceeds to
Concho.
See “Supplemental Non-GAAP Financial Measures” at the end of
this press release for a description of non-GAAP measures adjusted
net income (loss), adjusted earnings per share and EBITDAX and a
reconciliation of these measures to the associated GAAP measure.
See “Supplemental Measures” at the end of this press release for an
explanation of how we calculate and use the reserves replacement
ratio and finding and development costs.
Tim Leach, Chairman, Chief Executive Officer and President,
commented, “Concho had an exceptional year. At the start of 2016
our production growth guidance was flat to down 5% over 2015. Over
the course of the year we improved productivity per well, decreased
cash costs and strengthened our balance sheet. As a result, we were
able to increase production by 5% while spending within cash flow.
We remain focused on executing a disciplined capital program and
enhancing the impact of each dollar we deploy. We continue to
benefit from our economies of scale as we run the largest drilling
program in the Permian and are uniquely positioned to generate
differentiated growth within cash flow.”
Fourth Quarter and Full-Year 2016 Operations Summary
Production for the fourth quarter of 2016 was 15.1 million
barrels of oil equivalent (MMBoe), or an average of 164.3 thousand
Boe per day (MBoepd), an increase of approximately 14% from the
fourth quarter of 2015 and 7% from the third quarter of 2016.
Average daily crude oil production for the fourth quarter of 2016
totaled 100.2 thousand barrels, an increase of approximately 10%
from the fourth quarter of 2015 and 10% from the third quarter of
2016. Average daily natural gas production for the fourth quarter
of 2016 totaled 384.7 million cubic feet (MMcf).
Production for full-year 2016 was 55.1 MMBoe, or an average of
150.5 MBoepd, an increase of approximately 5% over full-year 2015.
Average daily crude oil production for full-year 2016 totaled 92.5
thousand barrels, and average daily natural gas production for
full-year 2016 totaled 348.3 MMcf.
During the fourth quarter of 2016, Concho averaged 18 rigs,
compared to 17 rigs in the third quarter of 2016. Concho commenced
drilling, or participated in, a total of 82 gross wells (64
operated wells) and completed 75 gross wells during the fourth
quarter of 2016. The table below summarizes the Company’s drilling
activity by core area for the fourth quarter and full-year
2016.
Number of
WellsDrilled(Gross)
Number of OperatedWells
Drilled(Gross)
Number of
WellsCompleted(Gross)
4Q16 FY16 4Q16
FY16 4Q16 FY16 Northern Delaware
Basin 23 80 11 57 22 95 Southern Delaware Basin 13 41 10 34 15 30
Midland Basin 36 86 33 79 20 42 New Mexico Shelf 10 42
10 40 18 59 Total 82 249
64 210 75 226 Percent
Horizontal 100 % 100 % 100 % 100 % 100 % 98 %
Northern Delaware Basin
Concho added 16 new horizontal wells in the Northern Delaware
Basin with at least 30 days of production as of the end of the
fourth quarter of 2016. The average peak 30-day and 24-hour rates
for these wells were 1,316 Boepd (71% oil) and 1,662 Boepd,
respectively. The average lateral length for these wells was 6,379
feet. The Company currently has eight horizontal rigs in the
Northern Delaware Basin.
Southern Delaware Basin
Concho added six new horizontal wells in the Southern Delaware
Basin with at least 30 days of production as of the end of the
fourth quarter of 2016. The average peak 30-day and 24-hour rates
for these wells were 1,252 Boepd (73% oil) and 1,635 Boepd,
respectively. The average lateral length for these wells was 6,349
feet. The Company currently has five horizontal rigs in the
Southern Delaware Basin.
Midland Basin
Concho added 11 new horizontal wells in the Midland Basin with
at least 30 days of production as of the end of the fourth quarter
of 2016. The average peak 30-day and 24-hour rates for these wells
were 1,299 Boepd (85% oil) and 1,555 Boepd, respectively. The
average lateral length for these wells was 9,601 feet. The Company
currently has six horizontal rigs in the Midland Basin.
New Mexico Shelf
In the New Mexico Shelf, Concho added 18 new horizontal wells
with at least 30 days of production as of the end of the fourth
quarter of 2016. The average peak 30-day and 24-hour rates for
these wells were 556 Boepd (84% oil) and 746 Boepd, respectively.
The average lateral length for these wells was 4,643 feet. The
Company currently has two horizontal rigs in the New Mexico
Shelf.
2016 Proved Reserves and Resource Potential
At December 31, 2016, Concho’s estimated proved reserves totaled
720 MMBoe, an increase of 15% from year-end 2015 despite lower SEC
pricing. The Company’s proved reserves are approximately 59% crude
oil and 41% natural gas. Proved developed reserves totaled 466
MMBoe, an increase of 30% from year-end 2015, representing
approximately 65% of total proved reserves.
During 2016, Concho added 184 MMBoe of proved reserves due to
drilling and completion operations and acquisitions, resulting in a
reserve replacement ratio of 344%, excluding price revisions.
Drill-bit finding and development (F&D) cost was $9.21 per Boe
for 2016, compared to $11.66 per Boe for 2015.
The Midland and Delaware Basins made the largest contributions
to resource expansion. In the Northern Delaware Basin, longer
laterals and successful density tests in the Avalon shale, Upper
Wolfcamp sands and Wolfcamp A shale zones were primary
contributors. In the Southern Delaware Basin, Concho and industry
drilling activity further delineated and defined the Wolfcamp A,
Wolfcamp B and 3rd Bone Spring zones. Concho’s acquisitions also
increased resource potential in the Southern Delaware and Midland
Basins, where the Company targeted new zones and increased well
density.
Concho estimates current net resource potential at year-end 2016
to be approximately 8 billion Boe, including total proved reserves,
an increase of 60% from year-end 2015. Concho’s current resource
potential is attributable to over 19,000 gross horizontal drilling
locations, underscoring the Company’s large-scale horizontal
development in the Permian Basin.
Commenting on the Company’s expanded resource potential, Mr.
Leach said:
“The 60% growth in resource over the past year highlights the
technical progress we have made across our acreage position. By
increasing lateral lengths, decreasing spacing between wells and
delineating new zones we have now identified more resource
available per section than ever before. At the same time, we’ve
actively worked to increase our positions in our core areas, adding
approximately 70,000 net acres and 1 billion barrels of resource
through acquisitions in the past year.”
For a summary of estimated proved reserves, please see
“Estimated Year-End Proved Reserves” below, and for an explanation
of how we calculate and use the reserves replacement ratio and
finding and development costs, please see “Supplemental Measures”
below.
Fourth-Quarter 2016 Financial Summary
Concho’s average realized price for oil and natural gas for the
fourth quarter of 2016, excluding the effect of commodity
derivatives, was $34.70 per Boe, compared with $29.38 per Boe for
the fourth quarter of 2015.
Net loss for the fourth quarter of 2016 was $125.1 million, or
$0.86 per diluted share, compared to net loss of $0.8 million, or
$0.01 per diluted share, for the fourth quarter of 2015. Adjusted
net income (non-GAAP), which excludes non-cash and unusual items,
for the fourth quarter of 2016 was $29.0 million, or $0.20 per
diluted share, compared with adjusted net loss (non-GAAP) of $9.4
million, or $0.07 per diluted share, for the fourth quarter of
2015.
EBITDAX (non-GAAP) for the fourth quarter of 2016 totaled $397.2
million, compared to $401.4 million for the fourth quarter of
2015.
Full-Year 2016 Financial Summary
Concho’s average realized price for oil and natural gas for
full-year 2016, excluding the effect of commodity derivatives, was
$29.68 per Boe, compared with $34.49 per Boe for full-year
2015.
Net loss for full-year 2016 was $1.5 billion, or $10.85 per
diluted share, compared to net income of $65.9 million, or $0.54
per diluted share, for full-year 2015. Adjusted net income
(non-GAAP), which excludes non-cash and unusual items, for
full-year 2016 was $110.7 million, or $0.81 per diluted share,
compared with adjusted net income (non-GAAP) of $110.8 million, or
$0.91 per diluted share, for full-year 2015.
EBITDAX (non-GAAP) for full-year 2016 totaled $1.6 billion,
compared to $1.7 billion for full-year 2015.
Cash flows generated from operating activities for the twelve
months ended December 31, 2016, totaled $1.4 billion, compared with
$1.5 billion for the same period last year.
See “Supplemental Non-GAAP Financial Measures” at the end of
this press release for a description of non-GAAP measures adjusted
net income (loss), adjusted earnings per share and EBITDAX and a
reconciliation of these measures to the associated GAAP
measures.
Recent Events
Concho and our joint interest partner previously announced the
sale of our respective ownership interests in the Alpha Crude
Connector system. The transaction closed in February 2017 for
$1.215 billion. The $803 million in net proceeds received by Concho
from the sale provides further optionality to redeploy capital into
the Company’s drilling program, fund future acquisitions or reduce
long-term debt. The 10-year dedication and transportation
agreement, which includes a tariff structure, will remain in place
until expiration of the agreement in 2025.
Financial Position and Liquidity
Concho continues to reinforce its strong financial position.
During the fourth quarter of 2016, the Company issued $600 million
4.375% senior notes due 2025 at par. The net proceeds from the
offering, along with cash on hand, financed the satisfaction and
discharge of all its outstanding 6.5% senior notes due January
2022.
After adjusting for the ACC sale and previously announced
Northern Delaware Basin acquisition, Concho had pro forma cash of
approximately $749 million, long-term debt of $2.7 billion and net
debt-to-EBITDAX ratio of 1.2x at December 31, 2016. Additionally,
the Company’s pro forma liquidity totaled approximately $3.2
billion, which reflects its undrawn revolving credit facility with
total capacity of $2.5 billion.
Outlook
Full-Year 2017
In November of 2016, the Company announced a 2017 capital plan
ranging from $1.4 to $1.6 billion. Since then, the outlook for
commodity prices has improved and cash flow expectations are
higher. At the same time, industry activity has ramped up quickly,
adding inflationary pressure to service costs. The Company’s plan
to reinvest cash flow has not changed and its current capital
outlook of $1.6 to $1.8 billion is expected to be funded through
cash flow from operations. This plan is expected to deliver
peer-leading production growth of 20% to 24% and crude oil growth
of 25%. While the capital budget assumes current expectations for
higher service costs, this outlook does not contemplate any
additional productivity gains beyond those achieved through 2016 or
the use of proceeds from the ACC sale.
Approximately 90% of capital is expected to be directed to
drilling and completion activity. The Company plans to allocate
approximately 40% of total drilling capital to the Northern
Delaware Basin and operate an average of eight rigs. In the
Southern Delaware Basin, Concho plans to direct approximately 20%
of total drilling capital and operate an average of four rigs
during 2017. The Company plans to invest approximately 30% of its
drilling capital to the Midland Basin to run an average of five
rigs, and Concho plans to maintain a two rig program on the New
Mexico Shelf, deploying approximately 10% of drilling capital.
The following table summarizes the Company’s operational and
financial guidance for 2017. The Company’s capital program guidance
for 2017 excludes acquisitions and is subject to change depending
upon a number of factors, including commodity prices and industry
conditions.
2017 Production Annual growth 20% - 24%
Oil mix 62% - 64%
Price realizations, excluding commodity
derivatives Crude oil differential to NYMEX ($/Bbl) ($3.00) -
($3.50) Natural gas (per Mcf) (% of NYMEX) 90% - 100%
Operating costs and expenses Lease operating expense and
workover costs ($/Boe) $5.75 - $6.25 Oil & natural gas taxes (%
of oil and natural gas revenues) 8.00% General and administrative
(“G&A”) expense ($/Boe): Cash G&A expense $2.60 - $2.90
Non-cash stock-based compensation $1.00 - $1.20 Depletion,
depreciation and amortization expense ($/Boe) $18.00 - $20.00
Exploration and other ($/Boe) $1.00 - $1.50 Interest expense ($ in
millions): Cash $160 - $170 Non-cash $10 Income tax rate 38%
Current taxes ($ in millions) $10 - $20
Capital program
($ in billions) $1.6 - $1.8
First Quarter 2017
For the first quarter of 2017, Concho expects production to
average between 172 MBoepd and 176 MBoepd.
Commodity Derivatives Update
The Company enters into commodity derivatives to manage its
exposure to commodity price fluctuations. For 2017, Concho has
crude oil swap contracts covering approximately 77.7 thousand
barrels of oil per day at a weighted average price of $54.68 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 22, 2017,
at 8:30 AM CT (9:30 AM ET) to discuss fourth quarter and full-year
2016 results. The telephone number and passcode to access the
conference call are provided below:
Dial-in: (844) 263-8298Intl. dial-in: (478) 219-0007Participant
Passcode: 36119722
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 February 27, 2017 J.P. Morgan
Global High Yield & Leveraged Finance Conference 9:20 AM CT
March 2, 2017 Simmons & Company International 17th Annual
Energy Conference 11:15 AM CT March 27, 2017 Scotia Howard Weil
2017 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 and projections regarding the Company’s future financial
position, operations, performance, business strategy, oil and
natural gas reserves, drilling program, capital expenditure budget,
liquidity and capital resources, the timing and success of specific
projects, outcomes and effects of litigation, claims and disputes,
derivative activities and potential financing. The words
“estimate,” “project,” “predict,” “believe,” “expect,”
“anticipate,” “potential,” “could,” “may,” “foresee,” “plan,”
“goal” or other similar expressions that convey the uncertainty of
future events or outcomes are intended to identify forward-looking
statements, which generally are not historical in nature. However,
the absence of these words does not mean that the statements are
not forward-looking. These statements are based on certain
assumptions and analyses made by the Company based on management’s
experience, expectations and perception of historical trends,
current conditions, anticipated future developments and other
factors believed to be appropriate. Forward-looking statements are
not guarantees of performance. Although the Company believes the
expectations reflected in its forward-looking statements are
reasonable and are based on reasonable assumptions, no assurance
can be given that these assumptions are accurate or that any of
these expectations will be achieved (in full or at all) or will
prove to have been correct. Moreover, such statements are subject
to a number of assumptions, risks and uncertainties, many of which
are beyond the control of the Company, which may cause actual
results to differ materially from those implied or expressed by the
forward-looking statements. These include the risk factors
discussed or referenced in the Company’s most recent Annual Report
on Form 10-K and in the Company’s Quarterly Reports on Form 10-Q
for the quarters ended June 30, 2016 and September 30, 2016; risks
relating to declines in, or the sustained depression of, the prices
the Company receives for its oil and natural gas; uncertainties
about the estimated quantities of oil and natural gas reserves;
drilling, completion and operating risks; the 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 and the export of oil and
natural gas; 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 liquids and natural gas and
other processing and transportation considerations; the costs and
availability of equipment, resources, services and qualified
personnel required to perform the Company’s drilling and operating
activities; potential financial losses or earnings reductions from
the Company’s commodity price risk-management program; risks and
liabilities associated with acquired properties or businesses;
uncertainties about the Company’s ability to successfully execute
its business and financial plans and strategies; uncertainties
about the Company’s ability to replace reserves and economically
develop its current reserves; general economic and business
conditions, either internationally or domestically; competition in
the oil and natural gas industry; uncertainty concerning the
Company’s assumed or possible future results of operations; and
other important factors that could cause actual results to differ
materially from those projected.
Any forward-looking statement speaks only as of the date on
which such statement is made, and the Company undertakes no
obligation to correct or update any forward-looking statement,
whether as a result of new information, future events or otherwise,
except as required by applicable law.
Concho Resources Inc. Consolidated Balance
Sheets Unaudited
December 31, (in thousands, except share
and per share amounts) 2016
2015 Assets Current assets: Cash and cash equivalents
$ 53,261 $ 228,550 Accounts receivable, net of allowance for
doubtful accounts: Oil and natural gas 220,152 203,972 Joint
operations and other 238,217 190,608 Derivative instruments 3,551
652,498 Prepaid costs and other 31,313 38,922
Total current assets 546,494 1,314,550
Property and equipment: Oil and natural gas properties,
successful efforts method 18,476,279 15,846,307 Accumulated
depletion and depreciation (7,389,844 ) (5,047,810 )
Total oil and natural gas properties, net 11,086,435 10,798,497
Other property and equipment, net 215,998
178,450 Total property and equipment, net 11,302,433
10,976,947 Funds held in escrow 43,000 -
Deferred loan costs, net 10,909 15,585 Intangible asset - operating
rights, net 24,232 25,693 Inventory 16,303 19,118 Noncurrent
derivative instruments - 167,038 Other assets 175,955
122,945 Total assets $ 12,119,326 $ 12,641,876
Liabilities and Stockholders’ Equity Current
liabilities: Accounts payable - trade $ 28,450 $ 13,200 Revenue
payable 131,592 169,787 Accrued and prepaid drilling costs 359,495
228,523 Derivative instruments 82,079 - Other current liabilities
151,570 184,910 Total current
liabilities 753,186 596,420 Long-term
debt 2,740,580 3,332,188 Deferred income taxes 766,032 1,630,373
Noncurrent derivative instruments 95,870 - Asset retirement
obligations and other long-term liabilities 140,965 140,344
Stockholders’ equity: Common stock, $0.001 par value; 300,000,000
authorized; 146,488,685 and 129,444,042
shares issued at December 31, 2016 and
2015, respectively
146
129 Additional paid-in capital 6,782,914 4,628,390 Retained
earnings 883,195 2,345,641
Treasury stock, at cost; 429,708 and
306,061 shares at December 31, 2016 and 2015, respectively
(43,562
)
(31,609 ) Total stockholders’ equity 7,622,693
6,942,551 Total liabilities and stockholders’ equity
$ 12,119,326 $ 12,641,876
Concho
Resources Inc. Consolidated Statements of Operations
Unaudited
Three Months Ended
Years Ended December 31, December 31, (in
thousands, except per share amounts) 2016
2015 2016
2015 Operating revenues: Oil sales $ 420,984 $
327,480 $ 1,350,367 $ 1,539,917 Natural gas sales 103,593
61,672 284,621 263,656
Total operating revenues 524,577
389,152 1,634,988 1,803,573
Operating costs and expenses: Oil and natural gas production
122,548 135,434 451,304 541,359 Exploration and abandonments 22,976
26,281 77,454 58,847 Depreciation, depletion and amortization
276,951 321,779 1,167,208 1,223,253 Accretion of discount on asset
retirement obligations 1,907 1,706 7,133 7,600 Impairments of
long-lived assets - 52,941 1,524,645 60,529
General and administrative (including
non-cash stock-based compensation of $15,726 and $15,801 for the
three months ended December 31, 2016 and 2015, respectively, and
$58,927 and $63,073 for the years ended December 31, 2016 and 2015,
respectively)
64,908 50,958 225,565 230,734 (Gain) loss on derivatives 193,018
(318,681 ) 368,684 (699,752 ) (Gain) loss on disposition of assets,
net (8,387 ) 52,201 (117,561 )
53,789 Total operating costs and expenses 673,921
322,619 3,704,432
1,476,359
Income (loss) from operations
(149,344 ) 66,533 (2,069,444 ) 327,214
Other income (expense): Interest expense (41,884 )
(54,581 ) (203,518 ) (215,384 ) Loss on extinguishment of debt
(28,766 ) - (56,436 ) - Other, net 1,164
(6,684 ) (9,138 ) (14,559 ) Total other expense
(69,486 ) (61,265 ) (269,092 ) (229,943
)
Income (loss) before income taxes (218,830 ) 5,268
(2,338,536 ) 97,271 Income tax (expense) benefit 93,695
(6,056 ) 876,090 (31,371 )
Net income (loss) $ (125,135 ) $ (788 ) $ (1,462,446 ) $
65,900
Earnings per share: Basic net income (loss) $
(0.86 ) $ (0.01 ) $ (10.85 ) $ 0.54 Diluted net income (loss) $
(0.86 ) $ (0.01 ) $ (10.85 ) $ 0.54
Concho
Resources Inc. Consolidated Statements of Cash Flows
Unaudited Years Ended
December 31, (in thousands) 2016
2015 CASH FLOWS FROM OPERATING
ACTIVITIES: Net income (loss) $ (1,462,446 ) $
65,900 Adjustments to reconcile net income (loss) to net cash
provided by operating activities: Depreciation, depletion and
amortization 1,167,208 1,223,253 Accretion of discount on asset
retirement obligations 7,133 7,600 Impairments of long-lived assets
1,524,645 60,529 Exploration and abandonments, including dry holes
66,621 43,737 Non-cash stock-based compensation expense 58,927
63,073 Deferred income taxes (864,341 ) 29,622 (Gain) loss on
disposition of assets, net (117,561 ) 53,789 (Gain) loss on
derivatives 368,684 (699,752 ) Net settlements received from
derivatives 625,250 632,916 Loss on extinguishment of debt 56,436 -
Other non-cash items 13,942 14,639 Changes in operating assets and
liabilities, net of acquisitions and dispositions: Accounts
receivable 21,958 117,716 Prepaid costs and other 6,063 (3,726 )
Inventory 1,891 (5,154 ) Accounts payable 15,246 (17,689 ) Revenue
payable (37,588 ) (68,311 ) Other current liabilities
(67,620 ) 12,279 Net cash provided by operating
activities 1,384,448 1,530,421
CASH
FLOWS FROM INVESTING ACTIVITIES: Capital expenditures on oil
and natural gas properties (2,397,217 ) (2,443,704 ) Additions to
property, equipment and other assets (60,655 ) (67,699 ) Proceeds
from the disposition of assets 331,966 104 Funds held in escrow
(43,000 ) - Contributions to equity method investments
(55,750 ) (91,342 ) Net cash used in investing activities
(2,224,656 ) (2,602,641 )
CASH FLOWS FROM
FINANCING ACTIVITIES: Proceeds from issuance of debt 600,000
1,490,900 Payments of debt (1,200,000 ) (1,630,400 ) Debt
extinguishment costs (42,450 ) - Exercise of stock options 471 59
Excess tax benefit (deficiency) from stock-based compensation (669
) 2,150 Net proceeds from issuance of common stock 1,327,444
1,535,712 Payments for loan costs (7,924 ) - Purchase of treasury
stock (11,953 ) (5,131 ) Increase (decrease) in bank overdrafts
- (92,541 ) Net cash provided by financing
activities 664,919 1,300,749 Net
increase (decrease) in cash and cash equivalents (175,289 ) 228,529
Cash and cash equivalents at beginning of period 228,550
21 Cash and cash equivalents at end of period
$ 53,261 $ 228,550
SUPPLEMENTAL CASH FLOWS:
Cash paid for interest $ 232,173 $ 211,443 Cash paid for income
taxes $ - $ 3,950
NON-CASH INVESTING AND FINANCING
ACTIVITIES: Issuance of common stock for business combinations
$ 768,368 $ -
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,
2016 2015 2016
2015 Production and operating
data: Net production volumes: Oil (MBbl) 9,220 8,415
33,840 34,457 Natural gas (MMcf) 35,394 28,973 127,481 106,987
Total (MBoe) 15,119 13,244 55,087 52,288
Average daily
production volumes: Oil (Bbl) 100,217 91,467 92,459 94,403
Natural gas (Mcf) 384,717 314,924 348,309 293,115 Total (Boe)
164,337 143,954 150,511 143,256
Average prices per
unit: Oil, without derivatives (Bbl) $ 45.66 $ 38.92 $ 39.90 $
44.69 Oil, with derivatives (Bbl) (a) $ 50.32 $ 60.10 $ 57.90 $
62.03 Natural gas, without derivatives (Mcf) $ 2.93 $ 2.13 $ 2.23 $
2.46 Natural gas, with derivatives (Mcf) (a) $ 2.93 $ 2.52 $ 2.36 $
2.80 Total, without derivatives (Boe) $ 34.70 $ 29.38 $ 29.68 $
34.49 Total, with derivatives (Boe) (a) $ 37.55 $ 43.69 $ 41.03 $
46.60
Operating costs and expenses per Boe: Lease
operating expenses and workover costs $ 5.31 $ 7.67 $ 5.81 $ 7.46
Oil and natural gas taxes $ 2.80 $ 2.55 $ 2.38 $ 2.90 Depreciation,
depletion and amortization $ 18.32 $ 24.29 $ 21.19 $ 23.40 General
and administrative $ 4.30 $ 3.84 $ 4.09 $ 4.42
(a)
Includes the effect of net cash receipts from derivatives:
Three Months Ended
Years Ended December 31, December 31, (in
thousands) 2016 2015
2016 2015 Net
cash receipts from derivatives: Oil derivatives $ 42,929 $
178,250 $ 608,847 $ 597,297 Natural gas derivatives 278
11,225 16,403 35,619 Total $ 43,207 $ 189,475
$ 625,250 $ 632,916
The presentation of average prices with
derivatives is a result of including the net cash receipts from
commodity derivatives that are presented in the Company’s
statements of cash flows. This presentation of average prices with
derivatives is a means by which to reflect the actual cash
performance of the Company’s commodity derivatives for the
respective periods and presents oil and natural gas prices with
derivatives in a manner consistent with the presentation generally
used by the investment community.
Concho Resources Inc. Estimated Year-End
Proved Reserves Unaudited
The table below provides a summary of
changes in total proved reserves for the year ended December 31,
2016, as well as proved developed reserves at the beginning and end
of the year.
(MMBoe)
2016 Total proved reserves Balance,
January 1 623.5 Purchases of minerals-in-place 59.1 Sales of
minerals-in-place (8.3 ) Extensions and discoveries 124.8
Revisions: Other non-price related revisions 5.9 Price-related
revisions (29.9 ) Production (55.1 ) Balance, December 31 720.0
Proved developed reserves Balance, January 1
358.3
Balance, December 31
465.6
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 thousands)
2016 2015 2016
2015 Property acquisition costs: Proved
$ 725,200 $ (1,689 ) $ 981,855 $ 57,190 Unproved 981,937 10,243
1,154,423 206,214 Exploration 188,191 148,630 701,300 1,122,587
Development 161,289 86,444 448,409
709,088 Total costs incurred for oil and natural gas
properties $ 2,056,617 $ 243,628 $ 3,285,987 $ 2,095,079
The
table below provides the amount of asset retirement obligations
included in the costs incurred table shown above:
Three Months Ended
Years Ended December 31, December 31, (in
thousands) 2016 2015
2016 2015
Exploration costs $ 296 $ 183 $ 1,067 $ 1,820 Development costs
343 (1,695 ) 1,046 (9,084 ) Total asset
retirement obligations (a) $ 639 $ (1,512 ) $ 2,113 $ (7,264 )
(a)
The downward revision to the Company’s asset retirement obligation
estimates for the quarter and year ended December 31, 2015 is
primarily due to a reduction in the future estimated abandonment
costs.
Concho
Resources Inc. Derivatives Information Unaudited
The table below provides data associated
with the Company’s derivatives at February 21, 2017, for the
periods indicated:
2017
FirstQuarter
SecondQuarter
ThirdQuarter
FourthQuarter
Total 2018 2019 Oil Swaps: (a)
Volume (Bbl) 7,423,870 7,708,480 6,898,370 6,333,080 28,363,800
21,537,124 8,854,000 Price (Bbl) $ 56.91 $ 57.22 $ 51.87 $ 52.04 $
54.68 $ 51.86 $ 55.14
Oil Basis Swaps: (b) Volume
(Bbl) 6,603,000 6,141,500 5,290,000 5,290,000 23,324,500 9,490,000
- Price (Bbl) $ (1.00 ) $ (1.03 ) $ (0.49 ) $ (0.49 ) $ (0.78 ) $
(0.98 ) $ -
Natural Gas Swaps: (c) Volume (MMBtu)
14,461,315 13,289,642 12,365,441 11,743,000 51,859,398 20,595,000 -
Price (MMBtu) $ 3.07 $ 3.05 $ 3.05 $ 3.04 $ 3.06 $ 3.03 $ -
(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
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 344% was calculated by dividing net proved
reserve additions of 189.8 MMBoe (the sum of extensions,
discoveries, revisions other than price-related revisions and
purchases) by production of 55.1 MMBoe.
Drill-Bit Finding and Development (“F&D”) Cost
Drill-bit 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. Drill-bit F&D cost is calculated by
dividing the sum of exploration and development costs incurred of
$1.15 billion by total reserve extensions and discoveries of 124.8
MMBoe. This calculation does not include the future development
costs required for the development of proved undeveloped
reserves.
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
(Loss) and Adjusted Earnings per Share
The Company’s presentation of adjusted net income (loss) and
adjusted earnings per share that exclude the effect of certain
items are non-GAAP financial measures. Adjusted net income (loss)
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 (loss) 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 (loss)
(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 thousands, except per share amounts)
2016 2015 2016
2015 Net income
(loss) - as reported $ (125,135 ) $ (788 ) $ (1,462,446 ) $
65,900
Adjustments for certain non-cash and unusual
items: (Gain) loss on derivatives 193,018 (318,681 ) 368,684
(699,752 ) Net cash receipts from derivatives 43,207 189,475
625,250 632,916 Impairments of long-lived assets - 52,941 1,524,645
60,529 Leasehold abandonments 19,981 17,886 59,830 34,532 Loss on
extinguishment of debt 28,766 - 56,436 - (Gain) loss on disposition
of assets and other (8,387 ) 56,083 (116,650 ) 57,671 Tax impact
(101,507 ) 854 (924,178 ) (31,953 ) Change in statutory effective
income tax rates (20,909 ) (7,200 ) (20,909 )
(9,026 )
Adjusted net income (loss) $ 29,034 $
(9,430 ) $ 110,662 $ 110,817
Net income
(loss) per diluted share - as reported $ (0.86 ) $ (0.01 ) $
(10.85 ) $ 0.54
Adjustments for certain non-cash and
unusual items per diluted share: (Gain) loss on derivatives
1.33 (2.21 ) 2.73 (5.92 ) Net cash receipts from derivatives 0.30
1.31 4.63 5.35 Impairments of long-lived assets - 0.37 11.30 0.51
Leasehold abandonments 0.14 0.12 0.44 0.29 Loss on extinguishment
of debt 0.20 - 0.42 - (Gain) loss on disposition of assets and
other (0.06 ) 0.39 (0.86 ) 0.49 Tax impact (0.70 ) 0.01 (6.85 )
(0.27 ) Change in statutory effective income tax rates (0.15
) (0.05 ) (0.15 ) (0.08 )
Adjusted net
income (loss) per diluted share $ 0.20 $ (0.07 ) $ 0.81
$ 0.91
Adjusted earnings per share:
Basic net income (loss) $ 0.20 $ (0.07 ) $ 0.81 $ 0.92 Diluted net
income (loss) $ 0.20 $ (0.07 ) $ 0.81 $ 0.91
Reconciliation of Net Income (Loss) to EBITDAX
EBITDAX (as defined below) is presented herein and reconciled
from the GAAP measure of net income (loss) because of its wide
acceptance by the investment community as a financial indicator of
a company’s ability to internally fund exploration and development
activities.
The Company defines EBITDAX as net income (loss), plus (1)
exploration and abandonments expense, (2) depreciation, depletion
and amortization expense, (3) accretion expense, (4) impairments of
long-lived assets, (5) non-cash stock-based compensation expense,
(6) (gain) loss on derivatives, (7) net cash receipts from
derivatives, (8) (gain) loss on disposition of assets, net, (9)
interest expense, (10) loss on extinguishment of debt and (11)
federal and state income tax expense (benefit). EBITDAX is not a
measure of net income (loss) or cash flows as determined by
GAAP.
The Company’s EBITDAX measure provides additional information
which may be used to better understand the Company’s operations,
and it is also a material component of one of the financial
covenants under the Company’s credit facility. EBITDAX is one of
several metrics that the Company uses as a supplemental financial
measurement in the evaluation of its business and should not be
considered as an alternative to, or more meaningful than, net
income (loss) as an indicator of operating performance. Certain
items excluded from EBITDAX are significant components in
understanding and assessing a company’s financial performance, such
as a company’s cost of capital and tax structure, as well as the
historic cost of depreciable and depletable assets. EBITDAX, as
used by the Company, may not be comparable to similarly titled
measures reported by other companies. The Company believes that
EBITDAX is a widely followed measure of operating performance and
is one of many metrics used by the Company’s management team and by
other users of the Company’s consolidated financial statements,
including by lenders pursuant to a covenant in the Company’s credit
facility. For example, EBITDAX can be used to assess the Company’s
operating performance and return on capital in comparison to other
independent exploration and production companies without regard to
financial or capital structure, and to assess the financial
performance of the Company’s assets and the Company without regard
to capital structure or historical cost basis. Further, under the
Company’s credit facility, an event of default could arise if it
were not able to satisfy and remain in compliance with its
specified financial ratio, defined as the maintenance of a
quarterly ratio of total debt to consolidated last twelve months
EBITDAX of no greater than 4.25 to 1.0. Non-compliance with this
ratio could trigger an event of default under the Company’s credit
facility, which then could trigger an event of default under its
indentures. At December 31, 2016, the Company was in compliance
with the covenants under all of its debt instruments.
The following table provides a reconciliation of the GAAP
measure of net income (loss) to EBITDAX (non-GAAP) for the periods
indicated:
Three Months Ended
Years Ended December 31, December
31, (in thousands) 2016
2015 2016
2015 Net income (loss) $
(125,135 ) $ (788 ) $ (1,462,446 ) $ 65,900 Exploration and
abandonments 22,976 26,281 77,454 58,847 Depreciation, depletion
and amortization 276,951 321,779 1,167,208 1,223,253 Accretion of
discount on asset retirement obligations 1,907 1,706 7,133 7,600
Impairments of long-lived assets - 52,941 1,524,645 60,529 Non-cash
stock-based compensation 15,726 15,801 58,927 63,073 (Gain) loss on
derivatives 193,018 (318,681 ) 368,684 (699,752 ) Net cash receipts
from derivatives 43,207 189,475 625,250 632,916 (Gain) loss on
disposition of assets, net (8,387 ) 52,201 (117,561 ) 53,789
Interest expense 41,884 54,581 203,518 215,384 Loss on
extinguishment of debt 28,766 - 56,436 - Income tax expense
(benefit) (93,695 ) 6,056 (876,090 )
31,371
EBITDAX $ 397,218 $ 401,352
$ 1,633,158 $ 1,712,910
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170221006641/en/
Concho Resources Inc.Price Moncrief, 432-221-0310Vice
President of Capital Markets and StrategyorMary Tennant
Starnes, 432-221-0477Senior Financial AnalystorRyan
Thrasher, 432-686-3025Financial Analyst
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