Delivered 26% Crude Oil Growth Year Over
Year
Completed Acquisition of RSP Permian,
Inc.
Concho Resources Inc. (NYSE: CXO) (the “Company” or
“Concho”) today reported financial and operating results for
second-quarter 2018.
Second-Quarter 2018 Highlights
- Produced a record 229 MBoepd, in line
with the high end of the Company’s guidance range.
- Increased oil production 26% year over
year.
- Advanced large-scale development in the
Northern Delaware Basin, with impressive results from the Company’s
Wolfcamp development project.
- Delivered excellent performance in the
Midland Basin, where the Company is realizing cost savings and
productivity improvements.
- Reduced controllable cash costs quarter
over quarter, led by an 8% decrease in cash interest expense.
- Executed a disciplined capital program,
with cash flow from operating activities exceeding capital
expenditures, excluding acquisitions.
- Reported net income of $137 million, or
$0.92 per diluted share. Adjusted net income totaled $185 million,
or $1.24 per diluted share (non-GAAP).
- Generated $592 million of EBITDAX
(non-GAAP).
Recent Events & 2018 Outlook
- Completed the acquisition of RSP
Permian, Inc., which enhances the Company’s scale advantage and
development platform, enabling Concho to deliver continued
performance and returns over the long term.
- Refinanced $1.2 billion of RSP’s senior
notes, resulting in pro forma annual interest expense savings of
more than $15 million.
- Updated the Company’s 2018 outlook to
reflect the RSP transaction.
See “Supplemental Non-GAAP Financial Measures” at the end of
this press release for a description of non-GAAP measures adjusted
net income, adjusted net income per diluted share and EBITDAX as
well as a reconciliation of these measures to the associated GAAP
measure.
Tim Leach, Chairman and Chief Executive Officer, commented, “We
delivered a solid second quarter as our teams advance large-scale
development across the portfolio. Through our outstanding asset
performance and focus on cost control, we continue to drive strong
cash flow that again exceeded our drilling and completion capital.
The RSP transaction is consistent with our strategy of acquiring
large, contiguous, high-quality assets in the Permian Basin. With
the transaction complete, we are excited about bringing together
the talent from both organizations to capture the benefits of this
powerful combination.”
Second-Quarter 2018 Operations Summary
Production for second-quarter 2018 was 21 million barrels of oil
equivalent (MMBoe), or an average of 229 thousand Boe per day
(MBoepd), an increase of approximately 24% from second-quarter
2017. Average daily crude oil production for second-quarter 2018
totaled 143 thousand barrels per day (MBopd), an increase of
approximately 26% from second-quarter 2017. Natural gas production
for second-quarter 2018 totaled 515 million cubic feet per day
(MMcfpd).
During second-quarter 2018, Concho averaged 21 rigs, compared to
20 rigs in first-quarter 2018. The table below summarizes the
Company’s gross drilling and completion activity by core area for
second-quarter 2018.
Number of Wells Drilled
Number ofOperated Wells
Drilled
Number of Wells
Completed
Number ofOperated
WellsCompleted
Northern Delaware Basin 44 32 35 17 Southern Delaware Basin 11 7 7
3 Midland Basin 26 15 21 19 New Mexico Shelf 4 2 3 3 Total 85 56 66
42
Following the closing of the RSP transaction, Concho is running
32 horizontal rigs, including 16 rigs in the Northern Delaware
Basin, six rigs in the Southern Delaware Basin, nine rigs in the
Midland Basin and one in the New Mexico Shelf. Additionally, Concho
is currently utilizing ten completion crews.
Northern Delaware Basin
In the Northern Delaware Basin, Concho added 16 wells with at
least 60 days of production as of the end of second-quarter 2018.
The average 30-day and 60-day peak rates for these wells were 1,987
Boepd (73% oil) and 1,859 Boepd (72% oil), respectively, from an
average lateral length of 7,326 feet.
Quickly Advancing Large-Scale Development
Following the strong success of the Vast and Windward
development projects, Concho recently completed a four-well
development project, the Columbus, targeting the Wolfcamp A zone
with long-laterals. The average per well 30-day peak rate for the
Columbus project was 3,163 Boepd (77% oil) from an average lateral
length of approximately 9,550 feet.
Current drilling activity is also focused on large-scale
development of the Company’s assets in the Northern Delaware Basin,
with nine out of 16 rigs working on multi-well projects. The
largest project underway is the Dominator, which consists of 23
wells targeting five distinct landings within a single section.
Concho is currently running six rigs on this project.
Southern Delaware Basin
In the Southern Delaware Basin, Concho added five wells with at
least 60 days of production as of the end of second-quarter 2018.
The average 30-day and 60-day peak rates for these wells were 1,463
Boepd (80% oil) and 1,297 Boepd (80% oil), respectively. The
lateral length for these wells averaged 7,461 feet.
Midland Basin
In the Midland Basin, Concho added 21 wells with at least 60
days of production as of the end of second-quarter 2018. The
average 30-day and 60-day peak rates for these wells were 1,294
Boepd (86% oil) and 1,137 Boepd (86% oil), respectively, with an
average lateral length of 9,800 feet.
Maximizing Scale Advantage
Several factors underpin Concho’s shift to manufacturing mode in
the Midland Basin, including the large, contiguous nature of the
Company’s assets, Concho’s strategic infrastructure systems and the
broad extent of the Company’s impressive well performance.
The Vanessa and Karen project highlights Concho’s success with
optimizing lateral placement and completion design to improve
project economics and performance. The project includes a total of
six wells. The average per well 30-day and 60-day peak rates for
these wells were 1,250 Boepd (87% oil) and 1,076 Boepd (86% oil),
respectively, with an average lateral length of 10,261 feet.
Right-sizing key completion design variables, including stage
spacing and fluid volumes, drove outstanding results, and Concho
expects to capture well cost savings as a result of the design
changes.
Second-Quarter 2018 Financial Summary
Concho’s average realized price for crude oil and natural gas
for second-quarter 2018, excluding the effect of commodity
derivatives, was $60.98 per Bbl and $3.19 per Mcf, respectively,
compared to $44.75 per Bbl and $2.71 per Mcf, respectively, for
second-quarter 2017.
Net income for second-quarter 2018 was $137 million, or $0.92
per diluted share, compared to net income of $152 million, or $1.02
per diluted share, for second-quarter 2017. Adjusted net income
(non-GAAP), which excludes non-cash and unusual items, for
second-quarter 2018 was $185 million, or $1.24 per diluted share,
compared with adjusted net income for second-quarter 2017 was $77
million, or $0.52 per diluted share.
EBITDAX (non-GAAP) for second-quarter 2018 totaled $592 million,
compared to $461 million for second-quarter 2017.
Concho’s effective income tax rate for second-quarter 2018 was
23%, compared to 38% for second-quarter 2017, primarily due to the
reduction of the U.S. federal statutory corporate income tax rate
from 35% to 21%.
In the six months ended June 30, 2018, cash flow from operating
activities was approximately $1.1 billion, exceeding $941 million
in capital expenditures (additions to oil and natural gas
properties).
Maintaining a Strong Financial Position
At June 30, 2018, Concho had cash of $55 million and long-term
debt of $2.4 billion, with no outstanding borrowings under its
credit facility.
As previously reported, in July 2018, Concho closed its offering
of $1.6 billion aggregate principal amount of senior unsecured
notes, consisting of $1.0 billion aggregate principal amount of
4.3% senior unsecured notes due 2028 and $600 million aggregate
principal amount of 4.85% senior unsecured notes due 2048. The
proceeds from the offering were used to redeem RSP’s 6.625% senior
notes due 2022 and 5.25% senior notes due 2025 for approximately
$1.2 billion, as well as repay a portion of the outstanding balance
under RSP’s existing credit facility. Concho repaid the remaining
balance under RSP’s credit facility with borrowings under Concho’s
$2.0 billion credit facility. After giving effect to this use of
proceeds upon the closing of the RSP transaction and associated
transaction costs, the Company had long-term debt of $4.2 billion
at June 30, 2018, including approximately $160 million of
outstanding borrowings under its credit facility.
Concho maintains a strong financial position following the RSP
transaction, with investment-grade ratings, a low leverage ratio
and substantial liquidity.
Outlook
Concho updated its 2018 production and capital program outlook
to reflect the RSP transaction. The Company’s guidance for
third-quarter and full-year 2018 includes production (on a
two-stream basis) and capital from RSP beginning on the acquisition
closing date of July 19, 2018. For third-quarter 2018, Concho
expects production to average 280 to 285 MBoepd (65% oil); and for
full-year 2018, Concho expects production to average 260 to 263
MBoepd (64% oil).
A key benefit of the RSP transaction lies in the large-scale
development potential of the assets. Concho plans to begin drilling
several development projects on the acquired acreage in the second
half of 2018. In addition, Concho will complete several
infrastructure and facility projects in Loving County, Texas, that
facilitate large-scale development. The Company’s updated full-year
2018 capital program of $2.5 billion to $2.6 billion includes this
activity. Importantly, Concho’s framework for executing a
disciplined capital program within cash flow remains unchanged, and
the Company expects 2018 capital spending to be fully funded with
cash flow from operating activities.
Detailed guidance for full-year 2018 is provided under “2018
Guidance” at the end of the release. The Company’s capital guidance
for 2018 excludes acquisitions and is subject to change without
notice depending upon a number of factors, including commodity
prices and industry conditions.
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. Please see the table under “Derivatives Information”
below for detailed information about Concho’s current derivatives
positions, including the commodity derivatives contracts assumed by
the Company in connection with the RSP transaction.
Conference Call
Concho will host a conference call tomorrow, August 2, 2018, at
8:00 AM CT (9:00 AM ET) to discuss second-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: 7088648
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 Barclays’ CEO Energy-Power
Conference on September 5, 2018 at 8:45 AM CT (9:45 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
August 29, 2018 Simmons & Company European Energy Conference
September 18, 2018 J.P. Morgan U.S. All Stars Conference
The Company’s presentation will be available on the Company’s
website prior to the Company’s appearance at each conference.
About Concho Resources
Concho Resources (NYSE: CXO) is the largest unconventional shale
producer in the Permian Basin, with operations focused on
acquiring, exploring, developing, and producing oil and natural gas
resources. Concho is at the forefront of applying advanced
technology and large-scale development to safely and efficiently
maximize resource recovery while delivering attractive, long-term
economic returns. We are working today to deliver a better tomorrow
for our shareholders, people and communities. For more information
about Concho, visit www.concho.com.
Forward-Looking Statements and Cautionary Statements
The foregoing contains “forward-looking statements” within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. All statements, other
than statements of historical fact, included in this press release
that address activities, events or developments that the Company
expects, believes or anticipates will or may occur in the future
are forward-looking statements. Forward-looking statements
contained in this press release specifically include statements
relating to benefits of the acquisition of RSP. The words
“estimate,” “project,” “predict,” “believe,” “expect,”
“anticipate,” “potential,” “could,” “may,” “enable,” “foresee,”
“plan,” “will,” “guidance,” “outlook,” “goal” or other similar
expressions that convey the uncertainty of future events or
outcomes are intended to identify forward-looking statements, which
generally are not historical in nature. However, the absence of
these words does not mean that the statements are not
forward-looking. These statements are based on certain assumptions
and analyses made by the Company based on management’s experience,
expectations and perception of historical trends, current
conditions, anticipated future developments and other factors
believed to be appropriate. Forward-looking statements are not
guarantees of performance. Although the Company believes the
expectations reflected in its forward-looking statements are
reasonable and are based on reasonable assumptions, no assurance
can be given that these assumptions are accurate or that any of
these expectations will be achieved (in full or at all) or will
prove to have been correct. Moreover, such statements are subject
to a number of assumptions, risks and uncertainties, many of which
are beyond the control of the Company, which may cause actual
results to differ materially from those implied or expressed by the
forward-looking statements. These include the risk factors and
other information discussed or referenced in the Company’s most
recent Annual Report on Form 10-K and other filings with the SEC.
Any forward-looking statement speaks only as of the date on which
such statement is made, and the Company undertakes no obligation to
correct or update any forward-looking statement, whether as a
result of new information, future events or otherwise, except as
required by applicable law.
Concho Resources Inc.
Consolidated Balance Sheets Unaudited
June 30, December 31, (in millions, except share
and per share amounts) 2018
2017 Assets Current assets: Cash and cash
equivalents $ 55 $ - Accounts receivable, net of allowance for
doubtful accounts: Oil and natural gas 410 331 Joint operations and
other 245 212 Inventory 17 14 Derivative instruments 173 - Prepaid
costs and other 50 35 Total current
assets 950 592 Property and equipment:
Oil and natural gas properties, successful efforts method 22,518
21,267 Accumulated depletion and depreciation (8,962 )
(8,460 ) Total oil and natural gas properties, net 13,556
12,807 Other property and equipment, net 235
234 Total property and equipment, net 13,791
13,041 Deferred loan costs, net 12 13 Intangible
assets, net 21 26 Other assets 19 60
Total assets $ 14,793 $ 13,732
Liabilities and
Stockholders’ Equity Current liabilities: Accounts payable -
trade $ 51 $ 43 Bank overdrafts - 116 Revenue payable 226 183
Accrued drilling costs 354 330 Derivative instruments 358 277 Other
current liabilities 257 216 Total
current liabilities 1,246 1,165
Long-term debt 2,371 2,691 Deferred income taxes 981 687 Noncurrent
derivative instruments 168 102 Asset retirement obligations and
other long-term liabilities 136 172 Stockholders’ equity: Common
stock, $0.001 par value; 300,000,000 authorized; 150,194,743 and
149,324,849 shares issued at June 30, 2018 and December 31, 2017,
respectively - - Additional paid-in capital 7,177 7,142 Retained
earnings 2,812 1,840 Treasury stock, at cost; 813,347 and 598,049
shares at June 30, 2018 and December 31, 2017, respectively
(98 ) (67 ) Total stockholders’ equity 9,891
8,915 Total liabilities and stockholders’ equity $
14,793 $ 13,732
Concho Resources Inc.
Consolidated Statements of Operations Unaudited
Three Months Ended
Six Months Ended June 30, June 30, (in
millions, except per share amounts)
2018 2017 2018
2017 Operating revenues: Oil
sales $ 795 $ 461 $ 1,588 $ 963 Natural gas sales 150
106 304 216 Total
operating revenues 945 567 1,892
1,179
Operating costs and expenses: Oil
and natural gas production 130 100 260 187 Production and ad
valorem taxes 70 44 140 92 Gathering, processing and transportation
9 - 20 - Exploration and abandonments 8 20 26 35 Depreciation,
depletion and amortization 310 281 627 564 Accretion of discount on
asset retirement obligations 2 2 4 4 General and administrative
(including non-cash stock-based compensation of $18 and $14 for the
three months ended June 30, 2018 and 2017, respectively, and $35
and $26 for the six months ended June 30, 2018 and 2017,
respectively) 72 60 137 116 (Gain) loss on derivatives 133 (209 )
168 (495 ) Gain on disposition of assets, net (1 ) -
(724 ) (654 ) Total operating costs and
expenses 733 298 658
(151 )
Income from operations 212
269 1,234 1,330
Other
income (expense): Interest expense (27 ) (39 ) (57 ) (79 ) Loss
on extinguishment of debt - (1 ) - (1 ) Other, net (8 )
16 89 16 Total other
income (expense) (35 ) (24 ) 32
(64 )
Income before income taxes 177 245 1,266 1,266 Income
tax expense (40 ) (93 ) (294 ) (464 )
Net income $ 137 $ 152 $ 972 $ 802
Earnings per share: Basic net income $ 0.92 $ 1.02 $
6.52 $ 5.41 Diluted net income $ 0.92 $ 1.02 $ 6.50 $ 5.39
Concho Resources Inc. Consolidated Statements of
Cash Flows Unaudited
Six Months Ended June 30, (in millions)
2018 2017 CASH
FLOWS FROM OPERATING ACTIVITIES: Net income $ 972 $ 802
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation, depletion and amortization 627
564 Accretion of discount on asset retirement obligations 4 4
Exploration and abandonments, including dry holes 14 24 Non-cash
stock-based compensation expense 35 26 Deferred income taxes 294
454 Gain on disposition of assets, net (724 ) (654 ) (Gain) loss on
derivatives 168 (495 ) Net settlements received from (paid on)
derivatives (194 ) 96 Loss on extinguishment of debt - 1 Other (95
) 1 Changes in operating assets and liabilities, net of
acquisitions and dispositions: Accounts receivable (56 ) (24 )
Prepaid costs and other (22 ) (3 ) Inventory (3 ) 1 Accounts
payable 5 (2 ) Revenue payable 43 (2 ) Other current liabilities
22 12 Net cash provided by operating
activities 1,090 805
CASH FLOWS FROM
INVESTING ACTIVITIES: Additions to oil and natural gas
properties (941 ) (624 ) Acquisitions of oil and natural gas
properties (19 ) (239 ) Additions to property, equipment and other
assets (11 ) (30 ) Proceeds from the disposition of assets 261 803
Direct transaction costs for disposition of assets (3 ) (18 ) Funds
held in escrow - (60 ) Distribution from equity method investment
148 - Net cash used in investing
activities (565 ) (168 )
CASH FLOWS FROM FINANCING
ACTIVITIES: Proceeds from issuance of debt 1,222 105 Payments
of debt (1,544 ) (105 ) Payments for loan costs (1 ) (7 ) Purchase
of treasury stock (31 ) (21 ) Decrease in bank overdrafts
(116 ) - Net cash used in financing activities
(470 ) (28 ) Net increase in cash and cash equivalents 55
609 Cash and cash equivalents at beginning of period -
53 Cash and cash equivalents at end of period
$ 55 $ 662
NON-CASH INVESTING AND FINANCING
ACTIVITIES: Issuance of common stock for business combinations
$ - $ 291
Concho Resources Inc. Summary Production and Price
Data Unaudited
The following table sets forth summary
information concerning production and operating data for the
periods indicated:
Three Months Ended Six Months Ended June
30, June 30,
2018 2017 2018
2017 Production
and operating data:
Net production volumes:
Oil (MBbl) 13,029 10,303 25,968 20,527 Natural gas (MMcf) 46,837
39,018 92,285 75,615 Total (MBoe) 20,835 16,806 41,349 33,130
Average daily production volumes: Oil (Bbl) 143,176
113,220 143,470 113,409 Natural gas (Mcf) 514,692 428,769 509,862
417,762 Total (Boe) 228,958 184,682 228,447 183,036
Average prices per unit: Oil, without derivatives (Bbl) $
60.98 $ 44.75 $ 61.13 $ 46.91 Oil, with derivatives (Bbl) (a) $
54.34 $ 51.60 $ 53.47 $ 51.86 Natural gas, without derivatives
(Mcf) $ 3.19 $ 2.71 $ 3.29 $ 2.85 Natural gas, with derivatives
(Mcf) (a) $ 3.29 $ 2.67 $ 3.34 $ 2.78 Total, without derivatives
(Boe) $ 45.31 $ 33.73 $ 45.74 $ 35.57 Total, with derivatives (Boe)
(a) $ 41.37 $ 37.84 $ 41.04 $ 38.48
Operating costs and
expenses per Boe: (b) Oil and natural gas production $ 6.24 $
5.91 $ 6.28 $ 5.64 Production and ad valorem taxes $ 3.37 $ 2.62 $
3.39 $ 2.77 Gathering, processing and transportation $ 0.45 $ - $
0.49 $ - Depreciation, depletion and amortization $ 14.88 $ 16.69 $
15.16 $ 17.02 General and administrative $ 3.37 $ 3.70 $ 3.35 $
3.54
(a)
Includes the effect of net cash receipts from (payments on)
derivatives:
Three Months
Ended Six Months Ended June 30, June 30,
(in millions) 2018
2017 2018 2017
Net cash receipts from (payments on) derivatives: Oil
derivatives $ (86 ) $ 70 $ (199 ) $ 101 Natural gas derivatives
4 (2 ) 5 (5 ) Total $ (82
) $ 68 $ (194 ) $ 96
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 Six Months
Ended June 30, June 30, (in millions)
2018 2017
2018 2017
Property acquisition costs: Proved $ - $ 12 $ - $ 139
Unproved 5 87 18 393 Exploration 335 238 578 473 Development
166 145 373 303 Total costs incurred for oil
and natural gas properties $ 506 $ 482 $ 969 $ 1,308
Concho Resources Inc. Derivatives Information
Unaudited
The table below provides data associated with the Company’s
derivatives at August 1, 2018, for the periods indicated. The table
also includes the commodity derivative contracts assumed by the
Company in connection with the RSP transaction.
2018 Third
Quarter
Fourth
Quarter
Total 2019 2020 Oil Price Swaps:
(a) Volume (Bbl) 12,574,318 11,666,007 24,240,325 38,768,000
16,726,000 Price per Bbl $ 56.76 $ 56.63 $ 56.70 $ 55.48 $ 56.76
Oil Three-Way Collars: (a) Volume (Bbl) 1,319,000
1,227,000 2,546,000 - - Ceiling price per Bbl $ 60.56 $ 60.96 $
60.75 $ - $ - Floor price per Bbl $ 47.79 $ 48.00 $ 47.89 $ - $ -
Short put price per Bbl $ 37.79 $ 38.00 $ 37.89 $ - $ -
Oil Costless Collars: (a) Volume (Bbl) 1,212,000 1,058,000
2,270,000 4,741,500 - Ceiling price per Bbl $ 60.10 $ 60.11 $ 60.11
$ 63.83 $ - Floor price per Bbl $ 46.33 $ 46.52 $ 46.42 $ 55.96 $ -
Oil Basis Swaps: (b) Volume (Bbl) 10,295,000
10,517,000 20,812,000 44,676,500 31,110,000 Price per Bbl $ (0.77 )
$ (0.77 ) $ (0.77 ) $ (2.99 ) $ (0.78 )
Natural Gas Price
Swaps: (c) Volume (MMBtu) 19,420,000 18,458,000 37,878,000
28,790,992 12,808,000 Price per MMBtu $ 3.01 $ 3.00 $ 3.00 $ 2.81 $
2.70
(a) The oil derivative contracts are settled 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 Net Income per Diluted 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 Six Months Ended June
30, June 30, (in millions, except per share
amounts) 2018
2017 2018 2017
Net income - as reported $ 137 $ 152 $ 972 $ 802
Adjustments for certain non-cash and unusual items:
(Gain) loss on derivatives 133 (209 ) 168 (495 ) Net cash receipts
from (payments on) derivatives (82 ) 68 (194 ) 96 Leasehold
abandonments 4 18 14 24 Loss on extinguishment of debt - 1 - 1
(Gain) loss on disposition of assets and other 3 - (716 ) (654 )
Gain on equity method investment distribution - - (103 ) - RSP
transaction costs 6 - 10 - Tax impact (15 ) 45 190 378 Excess tax
deficiency (benefit) (1 ) 2 (3 )
(6 )
Adjusted net income $ 185 $ 77 $ 338
$ 146
Net income per diluted share - as
reported $ 0.92 $ 1.02 $ 6.50 $ 5.39
Adjustments for
certain non-cash and unusual items per diluted share: (Gain)
loss on derivatives 0.89 (1.40 ) 1.12 (3.33 ) Net cash receipts
from (payments on) derivatives (0.55 ) 0.46 (1.30 ) 0.65 Leasehold
abandonments 0.03 0.12 0.09 0.16 Loss on extinguishment of debt -
0.01 - 0.01 (Gain) loss on disposition of assets and other 0.02 -
(4.78 ) (4.40 ) Gain on equity method investment distribution - -
(0.69 ) - RSP transaction costs 0.04 - 0.07 - Tax impact (0.10 )
0.30 1.27 2.54 Excess tax deficiency (benefit) (0.01 )
0.01 (0.02 ) (0.04 )
Adjusted net
income per diluted share $ 1.24 $ 0.52 $ 2.26
$ 0.98
Adjusted earnings per share:
Basic net income $ 1.24 $ 0.52 $ 2.26 $ 0.99 Diluted net income $
1.24 $ 0.52 $ 2.26 $ 0.98
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) loss on extinguishment of debt, (10) gain
on equity method investment distribution and (11) 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 Six Months Ended June 30, June 30,
(in millions) 2018
2017 2018 2017
Net income $ 137 $ 152 $ 972 $ 802 Exploration and
abandonments 8 20 26 35 Depreciation, depletion and amortization
310 281 627 564 Accretion of discount on asset retirement
obligations 2 2 4 4 Non-cash stock-based compensation 18 14 35 26
(Gain) loss on derivatives 133 (209 ) 168 (495 ) Net cash receipts
from (payments on) derivatives (82 ) 68 (194 ) 96 Gain on
disposition of assets, net (1 ) - (724 ) (654 ) Interest expense 27
39 57 79 Loss on extinguishment of debt - 1 - 1 Gain on equity
method investment distribution - - (103 ) - Income tax expense
40 93 294 464
EBITDAX $ 592 $ 461 $ 1,162 $
922
Concho Resources Inc. 2018
Guidance
The following table summarizes the Company’s operational and
financial guidance for 2018, which includes the impact of the RSP
acquisition as of the transaction closing date of July 19,
2018.
2018 Production
Production (MBoepd) 260 - 263 Crude oil production mix 64%
Price realizations, excluding commodity derivatives Crude
oil differential ($/Bbl) (Relative to NYMEX – WTI) ($1.50) -
($2.00) Natural gas (per Mcf) (% of NYMEX – Henry Hub) 100% - 110%
Operating costs and expenses ($/Boe, unless noted)
Lease operating expense and workover costs $6.00 - $6.50 Gathering,
processing and transportation $0.50 - $0.60 Oil & natural gas
taxes (% of oil & natural gas revenues) 7.75% General and
administrative (“G&A”) expense: Cash G&A expense $2.40 -
$2.60 Non-cash stock-based compensation $0.80 - $1.00 Depletion,
depreciation and amortization expense $15.00 - $16.00 Exploration
and other $0.25 - $0.75 Interest expense ($ in millions): Cash $150
- $160 Non-cash $6 Income tax rate (%) 25%
Capital
program ($ in billions) $2.5 - $2.6
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180801005988/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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