Concho Resources Inc. (NYSE: CXO) (the “Company” or
“Concho”) today reported financial and operating results for the
third quarter of 2017.
Third-Quarter 2017 Highlights
- Delivered quarterly production of 193.2
MBoepd, exceeding the high end of the Company’s guidance
range.
- Increased crude oil production by 31%
year-over-year and 6% quarter-over-quarter to 119.6 MBopd.
- Advanced multi-zone delineation in the
Delaware Basin.
- Achieved investment grade credit
ratings.
- Prudently managed the balance sheet,
resulting in approximately $580 million in debt reduction since
June 30, 2016, and significant annual interest expense
savings.
- Executed a disciplined capital program
with year-to-date cash flows from operations approximating capital
expenditures, excluding acquisitions.
- Full-year 2017 production expected to
exceed the high end of annual growth guidance range of 24% to 26%;
targeting crude oil production growth of more than 27% over
2016.
- Reported a net loss of $113 million, or
$0.77 per diluted share. Adjusted net income totaled $67 million,
or $0.45 per diluted share (non-GAAP).
- Generated $458 million of EBITDAX
(non-GAAP).
See “Supplemental Non-GAAP Financial Measures” at the end of
this press release for a description of non-GAAP measures adjusted
net income, adjusted earnings per share and EBITDAX and a
reconciliation of these measures to the associated GAAP
measure.
Tim Leach, Chairman and Chief Executive Officer, commented,
“Strong third quarter results highlight the Company’s execution
strength, asset quality and scale advantage. Production for the
quarter exceeded our guidance range and was driven by excellent
results from our drilling program. Additionally, our credit rating
was upgraded to investment grade, giving us the opportunity to
further enhance our financial position and reduce annual interest
expense. A lower cost of capital and improving returns from large
scale project development underpin a solid outlook for continued
capital discipline and differentiated per share growth.”
Third-Quarter 2017 Operations Summary
Production for the third quarter of 2017 averaged 193.2 thousand
Boe per day (MBoepd), an increase of approximately 26% from the
third quarter of 2016. Crude oil production for the third quarter
of 2017 totaled 119.6 thousand barrels per day (MBopd), an increase
of approximately 31% from the third quarter of 2016. Average daily
natural gas production for the third quarter of 2017 totaled 441.6
million cubic feet (MMcf).
Concho averaged 19 rigs in the third quarter of 2017. The table
below summarizes the Company’s gross drilling and completion
activity by core area for the third quarter of 2017.
Number of
Number of Number of Number of
Operated Wells Operated Wells Wells
Drilled Wells Drilled Completed Completed
Northern Delaware Basin 40 19 41 21 Southern Delaware Basin 11 9 7
4 Midland Basin 16 16 8 8 New Mexico Shelf 13 7 17 14 Total 80 51
73 47
The Company is currently running 15 rigs, including six rigs in
the Northern Delaware Basin, four rigs in the Southern Delaware
Basin, four rigs in the Midland Basin and one rig in the New Mexico
Shelf. Additionally, the Company is currently utilizing eight
completion crews.
Concho continues to demonstrate leadership in the Northern
Delaware Basin with multi-zone and large-scale development. In the
Red Hills area the Broadcaster 4H, a 3rd Bone Spring well, produced
at an average peak 30-day rate of 1,934 Boepd (77% oil). In the
State Line area in Eddy County, the Company brought online a
two-well, stacked test targeting the 2nd Bone Spring. These wells,
the Road Runner 1H and Road Runner 11H, produced at average peak
30-day rates of 2,234 Boepd (77% oil) and 2,321 Boepd (78% oil),
respectively.
The Company recently completed two large-scale projects in the
Northern Delaware Basin: the Vast project includes seven wells
targeting the Wolfcamp Sands and Wolfcamp Shale and the Windward
project includes eight wells targeting the Avalon Shale. While
early in production, the Company is encouraged by the performance
of both projects. Concho is collecting valuable data that will
further optimize lateral placement, completion design and
facilities planning. In addition, the Company is tracking
efficiency gains realized from manufacturing style development.
Both projects had improvements to drilling days and stages
completed per day.
In the Southern Delaware Basin, the Company completed a Wolfcamp
B delineation well, the Whatcha Want 7376H, a 10,948 foot
horizontal well with an average peak 30-day rate of 1,894 Boepd
(65% oil). Continued success in the Wolfcamp B has the potential to
add a third landing zone to the Company’s development program in
the Southern Delaware Basin.
Concho’s third quarter 2017 activity in the Midland Basin was
highlighted by strong performance from the Lower Spraberry and
Wolfcamp B zones. The Company added seven Lower Spraberry wells and
five Wolfcamp B wells with average peak 30-day rates of 1,360 Boepd
(87% oil) and 1,252 Boepd (81% oil), respectively. The average
lateral length for all 12 wells was 10,187 feet.
Additional details on Concho’s operations are included in its
3Q17 Earnings Presentation available on the Company’s website at
www.concho.com.
Third-Quarter 2017 Financial Summary
Concho’s average realized price for crude oil and natural gas
for the third quarter of 2017, excluding the effect of commodity
derivatives, was $45.29 per Bbl and $3.18 per Mcf, respectively,
compared with $41.52 per Bbl and $2.42 per Mcf, respectively, for
the third quarter of 2016.
Net loss for the third quarter of 2017 was $113 million, or
$0.77 per diluted share, compared to net loss of $51 million, or
$0.38 per diluted share, for the third quarter of 2016. Adjusted
net income (non-GAAP), which excludes non-cash and unusual items,
for the third quarter of 2017 was $67 million, or $0.45 per diluted
share, compared with adjusted net income (non-GAAP) of $44 million,
or $0.32 per diluted share, for the third quarter of 2016.
EBITDAX (non-GAAP) for the third quarter of 2017 totaled $458
million, compared to $441 million for the third quarter of
2016.
Financial Position and Liquidity
During the third quarter of 2017, Concho completed its debut
investment grade bond offering. The Company issued $1.8 billion of
senior notes, consisting of $1 billion of 3.75% senior notes due
2027 and $800 million of 4.875% senior notes due 2047. Net proceeds
from the offering were used to repurchase a total of $2.15 billion
of senior notes, consisting of $600 million of its 5.5% senior
notes due 2022 and $1.55 billion of its 5.5% senior notes due
2023.
These transactions reinforced the Company’s strong financial
position by decreasing the Company’s annual interest expense and
extending its average maturity from six to 16 years. Since the
second quarter of 2016, Concho has reduced long-term debt by
approximately $580 million and refinanced all of its remaining
senior notes. As a result, the Company reduced the average interest
rate on its senior notes outstanding to 4.3% from 5.9%, equating to
approximately $90 million in annual interest expense savings.
Additionally, the Company elected to convert its $2 billion
credit facility to an unsecured facility. The Company ended the
third quarter of 2017 with total long-term debt of $2.7 billion,
including approximately $370 million outstanding under its credit
facility.
Outlook
Concho expects production to average approximately 200 MBoepd to
204 MBoepd, with a 62% oil mix, in the fourth quarter of 2017.
Additionally, for the fourth quarter of 2017, the Company expects
oil and natural gas production expense will be at the high end of
the guidance range of $5.50 per Boe to $6.00 per Boe, with
production expense tracking the midpoint of the range for full-year
2017. The Company expects production growth above the high end of
its annual production growth guidance range of 24% to 26%, with oil
production growth expected to exceed 27%, for full-year 2017.
Concho continues to expect that capital expenditures, excluding
acquisitions, will approximate the midpoint of the guidance range
of $1.6 billion to $1.8 billion.
Commodity Derivatives Update
The Company enters into commodity derivatives to manage its
exposure to commodity price fluctuations. The Company has crude oil
price swaps for 2018 and 2019, covering approximately 86.9 MBopd
and 65.1 MBopd at a weighted average price of $51.41 per Bbl and
$52.33 per Bbl, respectively. Please see the table under
“Derivatives Information” below for detailed information about the
Company’s current derivatives positions.
Conference Call
Concho will discuss third quarter 2017 results on a conference
call tomorrow, November 1, 2017, at 8:00 AM CT (9:00 AM ET). The
telephone number and passcode to access the conference call are
provided below:
Dial-in: (844) 263-8298Intl. dial-in: (478) 219-0007Participant
Passcode: 75203686
To access the live webcast and view the related earnings
presentation, visit the Company’s website at www.concho.com.
The replay will also be available on Concho’s website under the
“Investors” section.
Upcoming Conference
The Company will participate in the Bank of America Merrill
Lynch 2017 Global Energy Conference on November 16, 2017 at 1:05 PM
CT (2:05 PM ET). The presentation will be webcast, and the webcast
and slides will be accessible on the Events & Presentations
page under the Investors section of the Company’s website,
www.concho.com.
Concho Resources Inc.
Concho Resources Inc. is an independent oil and natural gas
company engaged in the acquisition, development, exploration and
production of oil and natural gas properties. The Company’s
operations are focused in the Permian Basin of Southeast New Mexico
and West Texas. For more information, visit the Company’s website
at www.concho.com.
Forward-Looking Statements and Cautionary Statements
The foregoing contains “forward-looking statements” within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. All statements, other
than statements of historical fact, included in this press release
that address activities, events or developments that the Company
expects, believes or anticipates will or may occur in the future
are forward-looking statements. Forward-looking statements
contained in this press release specifically include statements,
estimates and projections regarding the Company’s future financial
position, operations, performance, business strategy, oil and
natural gas reserves, drilling program, capital expenditure budget,
liquidity and capital resources, the timing and success of specific
projects, outcomes and effects of litigation, claims and disputes,
derivative activities and potential financing. The words
“estimate,” “project,” “predict,” “believe,” “expect,”
“anticipate,” “potential,” “could,” “may,” “foresee,” “plan,”
“goal” or other similar expressions that convey the uncertainty of
future events or outcomes are intended to identify forward-looking
statements, which generally are not historical in nature. However,
the absence of these words does not mean that the statements are
not forward-looking. These statements are based on certain
assumptions and analyses made by the Company based on management’s
experience, expectations and perception of historical trends,
current conditions, anticipated future developments and other
factors believed to be appropriate. Forward-looking statements are
not guarantees of performance. Although the Company believes the
expectations reflected in its forward-looking statements are
reasonable and are based on reasonable assumptions, no assurance
can be given that these assumptions are accurate or that any of
these expectations will be achieved (in full or at all) or will
prove to have been correct. Moreover, such statements are subject
to a number of assumptions, risks and uncertainties, many of which
are beyond the control of the Company, which may cause actual
results to differ materially from those implied or expressed by the
forward-looking statements. These risks include, without
limitation, the risk factors discussed or referenced in the
Company’s most recent Annual Report on Form 10-K and in the
Company’s Quarterly Report on Form 10-Q for the quarter ended
September 30, 2017; risks relating to declines in, or the sustained
depression of, the prices the Company receives for its oil and
natural gas; uncertainties about the estimated quantities of oil
and natural gas reserves; drilling, completion and operating risks;
the effects of government regulation, permitting and other legal
requirements, including new legislation or regulation of hydraulic
fracturing and the export of oil and natural gas; environmental
hazards, such as uncontrollable flows of oil, natural gas, brine,
well fluids, toxic gas or other pollution into the environment,
including groundwater contamination; difficult and adverse
conditions in the domestic and global capital and credit markets;
risks related to the concentration of the Company’s operations in
the Permian Basin of southeast New Mexico and west Texas;
disruptions to, capacity constraints in or other limitations on the
pipeline systems that deliver the Company’s oil, natural gas
liquids and natural gas and other processing and transportation
considerations; the costs and availability of equipment, resources,
services and qualified personnel required to perform the Company’s
drilling, completion and operating activities; potential financial
losses or earnings reductions from the Company’s commodity price
risk-management program; risks and liabilities associated with
acquired properties or businesses; uncertainties about the
Company’s ability to successfully execute its business and
financial plans and strategies; the adequacy of the Company’s
capital resources and liquidity including, but not limited to,
access to additional borrowing capacity under the Company’s credit
facility; the impact of potential changes in the Company’s credit
ratings; cybersecurity risks, such as those involving unauthorized
access, malicious software, data privacy breaches by employees or
others with authorized access, cyber or phishing-attacks,
ransomware and other security issues; uncertainties about the
Company’s ability to replace reserves and economically develop its
current reserves; general economic and business conditions, either
internationally or domestically; competition in the oil and natural
gas industry; uncertainty concerning the Company’s assumed or
possible future results of operations; and other important factors
that could cause actual results to differ materially from those
projected.
Any forward-looking statement speaks only as of the date on
which such statement is made, and the Company undertakes no
obligation to correct or update any forward-looking statement,
whether as a result of new information, future events or otherwise,
except as required by applicable law.
Concho Resources Inc. Consolidated Balance
Sheets Unaudited
September 30, December 31, (in millions, except
share and per share amounts) 2017
2016 Assets
Current assets: Cash and cash equivalents $ - $ 53 Accounts
receivable, net of allowance for doubtful accounts: Oil and natural
gas 271 220 Joint operations and other 223 238 Derivative
instruments 4 4 Prepaid costs and other 37 31
Total current assets 535 546
Property and equipment: Oil and natural gas properties, successful
efforts method 20,754 18,476 Accumulated depletion and depreciation
(8,167 ) (7,390 ) Total oil and natural gas
properties, net 12,587 11,086 Other property and equipment, net
232 216 Total property and equipment,
net 12,819 11,302 Funds held in escrow
- 43 Deferred loan costs, net 14 11 Intangible asset - operating
rights, net 24 24 Inventory 15 16 Noncurrent derivative instruments
28 - Other assets 47 177 Total assets $
13,482 $ 12,119
Liabilities and Stockholders’
Equity Current liabilities: Accounts payable - trade $ 36 $ 28
Bank overdrafts 68 - Revenue payable 135 132 Accrued drilling costs
381 359 Derivative instruments 37 82 Other current liabilities
153 152 Total current liabilities
810 753 Long-term debt 2,738 2,741
Deferred income taxes 1,150 766 Noncurrent derivative instruments 6
96 Asset retirement obligations and other long-term liabilities 147
140 Stockholders’ equity: Common stock, $0.001 par value;
300,000,000 authorized; 149,297,932 and 146,488,685 shares issued
at September 30, 2017 and December 31, 2016, respectively - -
Additional paid-in capital 7,125 6,783 Retained earnings 1,573 884
Treasury stock, at cost; 597,551 and 429,708 shares at September
30, 2017 and December 31, 2016, respectively (67 )
(44 ) Total stockholders’ equity 8,631 7,623
Total liabilities and stockholders’ equity $ 13,482 $
12,119
Concho Resources Inc.
Consolidated Statements of Operations Unaudited
Three Months Ended Nine Months Ended September
30, September 30, (in millions, except per share
amounts) 2017
2016 2017
2016 Operating
revenues: Oil sales $ 498 $ 348 $ 1,461 $ 929 Natural gas sales
129 82 345 181
Total operating revenues 627 430
1,806 1,110
Operating costs and
expenses: Oil and natural gas production 106 71 293 240
Production and ad valorem taxes 48 33 140 89 Exploration and
abandonments 7 10 42 54 Depreciation, depletion and amortization
284 299 848 890 Accretion of discount on asset retirement
obligations 2 2 6 5 Impairments of long-lived assets - - - 1,525
General and administrative (including non-cash stock-based
compensation of $17 and $15 for the three months ended September
30, 2017 and 2016, respectively, and $43 for each of the nine
months ended September 30, 2017 and 2016) 64 53 180 160 (Gain) loss
on derivatives 206 (41 ) (289 ) 176 (Gain) loss on disposition of
assets, net (13 ) 1 (667 ) (109
) Total operating costs and expenses 704 428
553 3,030
Income (loss) from
operations (77 ) 2 1,253
(1,920 )
Other income (expense): Interest expense (39
) (53 ) (118 ) (162 ) Loss on extinguishment of debt (65 ) (28 )
(66 ) (28 ) Other, net 2 (2 ) 18
(9 ) Total other expense (102 ) (83 )
(166 ) (199 )
Income (loss) before income taxes (179
) (81 ) 1,087 (2,119 ) Income tax (expense) benefit 66
30 (398 ) 782
Net
income (loss) $ (113 ) $ (51 ) $ 689 $ (1,337 )
Earnings per share: Basic net income (loss) $ (0.77 ) $
(0.38 ) $ 4.64 $ (10.18 ) Diluted net income (loss) $ (0.77 ) $
(0.38 ) $ 4.63 $ (10.18 )
Concho Resources
Inc. Consolidated Statements of Cash Flows
Unaudited Nine Months
Ended September 30, (in millions)
2017 2016
CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $
689 $ (1,337 ) Adjustments to reconcile net income (loss) to net
cash provided by operating activities: Depreciation, depletion and
amortization 848 890 Accretion of discount on asset retirement
obligations 6 5 Impairments of long-lived assets - 1,525
Exploration and abandonments, including dry holes 29 47 Non-cash
stock-based compensation expense 43 43 Deferred income taxes 392
(768 ) Gain on disposition of assets, net (667 ) (109 ) (Gain) loss
on derivatives (289 ) 176 Net settlements received from derivatives
126 582 Loss on extinguishment of debt 66 28 Other non-cash items 1
10 Changes in operating assets and liabilities, net of acquisitions
and dispositions: Accounts receivable (61 ) 61 Prepaid costs and
other (1 ) 7 Inventory (1 ) 2 Accounts payable 7 9 Revenue payable
5 (57 ) Other current liabilities (8 ) (95 ) Net cash
provided by operating activities 1,185 1,019
CASH FLOWS FROM INVESTING ACTIVITIES: Capital
expenditures on oil and natural gas properties (1,958 ) (927 )
Additions to property, equipment and other assets (34 ) (20 )
Proceeds from the disposition of assets 803 296 Direct transaction
costs for disposition of assets (18 ) - Funds held in escrow - (81
) Contributions to equity method investments -
(51 ) Net cash used in investing activities (1,207 )
(783 )
CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from
issuance of debt 2,267 - Payments of debt (2,255 ) (600 ) Debt
extinguishment costs (63 ) (21 ) Excess tax deficiency from
stock-based compensation - (1 ) Net proceeds from issuance of
common stock - 1,327 Payments for loan costs (25 ) - Purchase of
treasury stock (23 ) (11 ) Increase in bank overdrafts 68
- Net cash provided by (used in) financing
activities (31 ) 694 Net increase (decrease)
in cash and cash equivalents (53 ) 930 Cash and cash equivalents at
beginning of period 53 229 Cash and
cash equivalents at end of period $ - $ 1,159
NON-CASH INVESTING AND FINANCING ACTIVITIES: Issuance of
common stock for business combinations $ 291 $ 231
Concho Resources Inc.
Summary Production and Price
Data
Unaudited
The following table sets forth summary information concerning
production and operating data for the periods indicated:
Three Months
Ended Nine Months Ended September
30, September 30,
2017 2016
2017 2016
Production and operating data: Average daily
production volumes: Oil (Bbl) 119,565 91,120 115,484 89,854
Natural gas (Mcf) 441,587 370,609 425,791 336,084 Total (Boe)
193,163 152,888 186,449 145,868
Average prices per
unit: Oil, without derivatives (Bbl) $ 45.29 $ 41.52 $ 46.34 $
37.75 Oil, with derivatives (Bbl) (a) $ 47.81 $ 59.87 $ 50.45 $
60.74 Natural gas, without derivatives (Mcf) $ 3.18 $ 2.42 $ 2.96 $
1.97 Natural gas, with derivatives (Mcf) (a) $ 3.22 $ 2.46 $ 2.94 $
2.14 Total, without derivatives (Boe) $ 35.29 $ 30.61 $ 35.47 $
27.78 Total, with derivatives (Boe) (a) $ 36.96 $ 41.65 $ 37.95 $
42.35
Operating costs and expenses per Boe: Oil and
natural gas production $ 5.99 $ 4.98 $ 5.76 $ 6.00 Production and
ad valorem taxes $ 2.70 $ 2.38 $ 2.75 $ 2.23 Depreciation,
depletion and amortization $ 16.00 $ 21.27 $ 16.66 $ 22.27 General
and administrative $ 3.60 $ 3.80 $ 3.56 $ 4.02
(a) Includes the
effect of net cash receipts from (payments on) derivatives:
Three Months Ended
Nine Months Ended September 30, September 30,
(in millions) 2017
2016 2017 2016
Net cash receipts from (payments on) derivatives: Oil
derivatives $ 28 $ 154 $ 129 $ 566 Natural gas derivatives 2
1 (3 ) 16 Total $ 30 $ 155 $ 126 $ 582
The presentation
of average prices with derivatives is a result of including the net
cash receipts from (payments on) commodity derivatives that are
presented in our statements of cash flows. This presentation of
average prices with derivatives is a means by which to reflect the
actual cash performance of our commodity derivatives for the
respective periods and presents oil and natural gas prices with
derivatives in a manner consistent with the presentation generally
used by the investment community.
Concho Resources
Inc. Costs Incurred Unaudited
The table below provides the costs incurred for oil and natural
gas producing activities for the periods indicated:
Three Months Ended Nine Months Ended September
30, September 30, (in millions)
2017 2016 2017
2016 Property acquisition costs: Proved
$ 162 $ 1 $ 301 $ 257 Unproved 472 14 865 172 Exploration 252 177
725 513 Development 175 97 478 287
Total costs incurred for oil and natural gas properties $ 1,061 $
289 $ 2,369 $ 1,229
Concho Resources Inc.
Derivatives Information Unaudited
The table below provides data associated with the Company’s
derivatives at October 31, 2017, for the periods indicated:
2018
Fourth Quarter First Second Third
Fourth 2017 Quarter Quarter
Quarter Quarter Total 2019
Oil Price Swaps: (a) Volume (Bbl) 10,216,080 9,133,629
8,146,170 7,471,318 6,972,007 31,723,124 23,759,500 Price per Bbl $
51.33 $ 51.54 $ 51.45 $ 51.36 $ 51.26 $ 51.41 $ 52.33
Oil
Basis Swaps: (b) Volume (Bbl) 10,007,000 8,476,000 8,067,000
7,237,000 6,960,000 30,740,000 23,067,500 Price per Bbl $ (0.65 ) $
(0.97 ) $ (0.96 ) $ (0.99 ) $ (0.98 ) $ (0.97 ) $ (1.05 )
Natural Gas Price Swaps: (c) Volume (MMBtu) 18,333,000
16,556,000 16,101,000 14,819,000 14,504,000 61,980,000 17,840,992
Price per MMBtu $ 3.08 $ 3.05 $ 3.04 $ 3.04 $ 3.03 $ 3.04 $ 2.86
(a) The index
prices for the oil price swaps are based on the New York Mercantile
Exchange (“NYMEX”) – West Texas Intermediate (“WTI”) monthly
average futures price. (b) The basis differential price is between
Midland – WTI and Cushing – WTI. (c) The index prices for the
natural gas price swaps are based on the NYMEX – Henry Hub last
trading day futures price.
Concho Resources
Inc. Supplemental Non-GAAP Financial Measures
Unaudited
The Company reports its financial results in accordance with the
United States generally accepted accounting principles (GAAP).
However, the Company believes certain non-GAAP performance measures
may provide financial statement users with additional meaningful
comparisons between current results, the results of its peers and
of prior periods. In addition, the Company believes these measures
are used by analysts and others in the valuation, rating and
investment recommendations of companies within the oil and natural
gas exploration and production industry. See the reconciliations
throughout this release of GAAP financial measures to non-GAAP
financial measures for the periods indicated.
Reconciliation of Net Income (Loss) to Adjusted Net Income
and Adjusted Earnings per Share
The Company’s presentation of adjusted net income and adjusted
earnings per share that exclude the effect of certain items are
non-GAAP financial measures. Adjusted net income and adjusted
earnings per share represent earnings and diluted earnings per
share determined under GAAP without regard to certain non-cash and
unusual items. The Company believes these measures provide useful
information to analysts and investors for analysis of its operating
results on a recurring, comparable basis from period to period.
Adjusted net income and adjusted earnings per share should not be
considered in isolation or as a substitute for earnings or diluted
earnings per share as determined in accordance with GAAP and may
not be comparable to other similarly titled measures of other
companies.
The following table provides a reconciliation from the GAAP
measure of net income (loss) to adjusted net income (non-GAAP),
both in total and on a per diluted share basis, for the periods
indicated:
Three Months Ended Nine Months Ended September
30, September 30, (in millions, except per share
amounts) 2017
2016 2017
2016 Net income (loss)
- as reported $ (113 ) $ (51 ) $ 689 $ (1,337 )
Adjustments for certain non-cash and unusual items: (Gain)
loss on derivatives 206 (41 ) (289 ) 176 Net cash receipts from
derivatives 30 155 126 582 Impairments of long-lived assets - - -
1,525 Leasehold abandonments - 8 24 40 Loss on extinguishment of
debt 65 28 66 28 (Gain) loss on disposition of assets and other (15
) 1 (669 ) (108 ) Tax impact (106 ) (56 ) 274 (834 ) Excess tax
benefit - - (6 ) -
Adjusted net income $ 67 $ 44 $ 215 $
72
Net income (loss) per diluted share - as
reported $ (0.77 ) $ (0.38 ) $ 4.63 $ (10.18 )
Adjustments for certain non-cash and unusual items per diluted
share: (Gain) loss on derivatives 1.40 (0.31 ) (1.95 ) 1.33 Net
cash receipts from derivatives 0.20 1.15 0.85 4.43 Impairments of
long-lived assets - - - 11.60 Leasehold abandonments - 0.06 0.16
0.30 Loss on extinguishment of debt 0.44 0.20 0.44 0.21 (Gain) loss
on disposition of assets and other (0.10 ) 0.01 (4.49 ) (0.82 ) Tax
impact (0.72 ) (0.41 ) 1.84 (6.34 ) Excess tax benefit -
- (0.04 ) -
Adjusted
net income per diluted share $ 0.45 $ 0.32 $ 1.44
$ 0.53
Adjusted earnings per share:
Basic net income $ 0.45 $ 0.32 $ 1.44 $ 0.53 Diluted net income $
0.45 $ 0.32 $ 1.44 $ 0.53
Reconciliation of Net Income (Loss) to EBITDAX
EBITDAX (as defined below) is presented herein and reconciled
from the GAAP measure of net income (loss) because of its wide
acceptance by the investment community as a financial indicator of
a company’s ability to internally fund exploration and development
activities.
The Company defines EBITDAX as net income (loss), plus (1)
exploration and abandonments expense, (2) depreciation, depletion
and amortization expense, (3) accretion expense, (4) impairments of
long-lived assets, (5) non-cash stock-based compensation expense,
(6) (gain) loss on derivatives, (7) net cash receipts from
derivatives, (8) (gain) loss on disposition of assets, net, (9)
interest expense, (10) loss on extinguishment of debt and (11)
federal and state income tax expense (benefit). EBITDAX is not a
measure of net income (loss) or cash flows as determined by
GAAP.
The Company’s EBITDAX measure provides additional information
which may be used to better understand the Company’s operations,
and it is also a material component of one of the financial
covenants under the Company’s credit facility. EBITDAX is one of
several metrics that the Company uses as a supplemental financial
measurement in the evaluation of its business and should not be
considered as an alternative to, or more meaningful than, net
income (loss) as an indicator of operating performance. Certain
items excluded from EBITDAX are significant components in
understanding and assessing a company’s financial performance, such
as a company’s cost of capital and tax structure, as well as the
historic cost of depreciable and depletable assets. EBITDAX, as
used by the Company, may not be comparable to similarly titled
measures reported by other companies. The Company believes that
EBITDAX is a widely followed measure of operating performance and
is one of many metrics used by the Company’s management team and by
other users of the Company’s consolidated financial statements,
including by lenders pursuant to a covenant in the Company’s credit
facility. For example, EBITDAX can be used to assess the Company’s
operating performance and return on capital in comparison to other
independent exploration and production companies without regard to
financial or capital structure, and to assess the financial
performance of the Company’s assets and the Company without regard
to capital structure or historical cost basis. Further, under the
Company’s credit facility, an event of default could arise if it
were not able to satisfy and remain in compliance with its
specified financial ratio, defined as the maintenance of a
quarterly ratio of consolidated total debt to consolidated last
twelve months EBITDAX of no greater than 4.25 to 1.0.
Non-compliance with this ratio could trigger an event of default
under the Company’s credit facility, which then could trigger an
event of default under its indentures. At September 30, 2017, the
Company was in compliance with the covenants under all of its debt
instruments.
The following table provides a reconciliation of the GAAP
measure of net income (loss) to EBITDAX (non-GAAP) for the periods
indicated:
Three Months Ended Nine Months Ended September
30, September 30, (in millions)
2017 2016
2017
2016 Net income (loss) $ (113 ) $ (51 )
$ 689 $ (1,337 ) Exploration and abandonments 7 10 42 54
Depreciation, depletion and amortization 284 299 848 890 Accretion
of discount on asset retirement obligations 2 2 6 5 Impairments of
long-lived assets - - - 1,525 Non-cash stock-based compensation 17
15 43 43 (Gain) loss on derivatives 206 (41 ) (289 ) 176 Net cash
receipts from derivatives 30 155 126 582 (Gain) loss on disposition
of assets, net (13 ) 1 (667 ) (109 ) Interest expense 39 53 118 162
Loss on extinguishment of debt 65 28 66 28 Income tax expense
(benefit) (66 ) (30 ) 398 (782 )
EBITDAX $ 458 $ 441 $ 1,380 $ 1,237
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171031006478/en/
Concho Resources Inc.Investor RelationsMegan P.
Hays, 432-685-2533Vice President of Investor Relations and
Public AffairsorMary T. Starnes, 432-221-0477Investor
Relations Manager
Concho Resources (NYSE:CXO)
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