Delivered 27% Crude Oil Growth
Year-over-Year
Raised Full-Year 2018 Production Growth
Outlook
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 ofWells Drilled
Number ofOperatedWells
Drilled
Number
ofWellsCompleted
Number ofOperated
WellsCompleted
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
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180501006788/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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