Concho Resources Inc. Reports First Quarter 2017 Results
Delivered 13% Organic Crude Oil Growth Quarter-Over-Quarter
Raised Full-Year 2017 Production Growth Target to a Range of 21% -
25%
Concho Resources Inc. (NYSE: CXO) (the “Company” or “Concho”)
today reported financial and operating results for the first quarter of
2017.
First-Quarter 2017 Highlights
-
Delivered quarterly production of 181.4 MBoepd, exceeding the high end
of the Company’s guidance range. Raised full-year 2017 production
outlook to a range of 21% - 25% annual growth and maintained capital
expenditure outlook.
-
Increased crude oil production to 113.6 MBopd, up 28% year-over-year.
-
Achieved record well performance in the Company’s Delaware Basin and
New Mexico Shelf assets.
-
Making the shift to manufacturing mode with large-scale development
projects in the Delaware Basin and in the Midland Basin.
-
Reduced per-unit production expense and interest expense 27% and 42%,
respectively, year-over-year. Lowered full-year 2017 guidance for
per-unit production and depreciation, depletion and amortization
expenses.
-
Continued to execute a disciplined capital program with cash flows
exceeding capital expenditures for the seventh consecutive quarter.
-
Reported quarterly net income of $650 million, or $4.37 per diluted
share. Adjusted net income totaled $72 million, or $0.49 per diluted
share (non-GAAP).
-
Generated $461 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, Chief Executive Officer and President, commented,
“First quarter was an outstanding start to the year in which we
anticipate strong growth within cash flow. We delivered exceptional
production growth while preserving our low cost structure. As activity
rapidly accelerates in the Permian Basin, our execution strength and
scale are great advantages that together provide a tight grip on costs
and logistics as well as a solid platform for creating long-term
shareholder value.”
First-Quarter 2017 Operations Summary
Production for the first quarter of 2017 was an average of 181.4
thousand Boe per day (MBoepd), an increase of approximately 30% from the
first quarter of 2016 and 10% from the fourth quarter of 2016. Crude oil
production for the first quarter of 2017 totaled 113.6 thousand barrels
per day (MBopd), an increase of approximately 28% from the first quarter
of 2016 and 13% from the fourth quarter of 2016. Average daily natural
gas production for the first quarter of 2017 totaled 406.6 million cubic
feet (MMcf).
During the first quarter of 2017, Concho averaged 21 rigs, compared to
18 rigs in the fourth quarter of 2016. Concho commenced drilling or
participated in a total of 73 gross wells (57 operated wells) and
completed 65 gross wells during the first quarter of 2017. The table
below summarizes the Company’s drilling activity by core area for the
first quarter of 2017.
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Number of Wells Drilled (Gross)
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Number of Operated Wells Drilled (Gross)
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|
Number of Wells Completed (Gross)
|
Northern Delaware Basin
|
|
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34
|
|
|
23
|
|
|
29
|
Southern Delaware Basin
|
|
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13
|
|
|
8
|
|
|
7
|
Midland Basin
|
|
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16
|
|
|
16
|
|
|
27
|
New Mexico Shelf
|
|
|
10
|
|
|
10
|
|
|
2
|
Total
|
|
|
73
|
|
|
57
|
|
|
65
|
|
|
|
|
|
|
|
|
|
|
Manufacturing Growth
Large-scale development projects will play an increasingly important
role in the Company’s capital program. The strategic shift to
manufacturing growth is enabled by our large, contiguous acreage
positions in the Midland Basin, Delaware Basin and New Mexico Shelf.
Manufacturing mode includes targeting multiple intervals with long
lateral wells and batch completions and will further power
capital-efficient development of our high-quality resource.
Concho is currently drilling the Mabee Ranch development project in
Andrews County, Texas. The project includes 13 two-mile wells targeting
five landings across the Spraberry and Wolfcamp zones. The development
pattern implies 32 wells per section. Concho is utilizing leading edge
technology, including fiber optic monitoring, to assess lateral
placement, well spacing and completion design of the project.
In the Northern Delaware Basin, the Company has eight development
projects with at least four wells each, including the Windward project
in Red Hills. This project targets the Avalon Shale with two-mile
lateral wells. The Brass Monkey project in the Southern Delaware Basin
is an eight-well project testing simultaneous development of the 3rd
Bone Spring and Wolfcamp with long lateral wells.
Northern Delaware Basin
Concho added 16 horizontal wells in the Northern Delaware Basin with at
least 30 days of production as of the end of the first quarter of 2017
and an average lateral length of 5,084 feet. The wells delivered record
performance on both an absolute and lateral-length normalized basis with
an average 30-day peak rate of 1,473 Boepd (75% oil), which equates to
productivity of 290 Boepd per one-thousand feet of lateral. The average
peak 24-hour rate for the wells was 1,825 Boepd. The Company currently
has eight horizontal rigs in the Northern Delaware Basin.
Extending Robust Oil Plays into the Company’s Deep Area
Outstanding well results in the Company’s Deep area extend the robust
oil plays further north from the Red Hills area in Lea County, New
Mexico. In the Deep area, Concho is actively developing the Bone Spring
and Wolfcamp formations with an emphasis on optimizing lateral placement
and spacing between wells. During the first quarter of 2017, the Company
added three wells in the Bone Spring with an average lateral length of
4,274 feet and average peak 30-day rate of 2,112 Boepd (81% oil).
In addition, Concho’s oil-rich Red Hills acreage continues to deliver
excellent results. During the first quarter of 2017, the Company added
five wells. The wells were drilled to an average lateral length of 5,745
feet and produced at an average peak 30-day rate of 1,980 Boepd (78%
oil). Here the Company is focused on delineating pay zones by refining
lateral placement as well as spacing between wells.
Southern Delaware Basin
Concho added nine horizontal wells in the Southern Delaware Basin with
at least 30 days of production as of the end of the first quarter of
2017. The average peak 30-day and 24-hour rates for these wells were
1,632 Boepd (73% oil) and 2,156 Boepd, respectively. The average 30-day
peak rate and the average lateral length for these wells of 8,184 feet
both represent Company records for the Southern Delaware Basin. The
Company currently has six horizontal rigs in the Southern Delaware Basin.
Delivering Strong Results in the 3rd Bone Spring Formation
The Company continues to demonstrate success in the 3rd Bone
Spring formation in the Southern Delaware Basin. Concho added two 3rd
Bone Spring horizontal wells during the first quarter of 2017 with an
average peak 30-day and 24-hour rate of 2,412 Boepd (70% oil) and 2,985
Boepd, respectively. The average lateral length for these wells was
10,003 feet.
Midland Basin
Concho added 21 horizontal wells in the Midland Basin with at least 30
days of production as of the end of the first quarter of 2017. The
average peak 30-day and 24-hour rates for these wells were 1,164 Boepd
(88% oil) and 1,453 Boepd, respectively. The average lateral length for
these wells was 9,910 feet. The Company currently has five horizontal
rigs in the Midland Basin.
New Mexico Shelf
In the New Mexico Shelf, Concho added seven horizontal wells with at
least 30 days of production as of the end of the first quarter of 2017.
The average peak 30-day and 24-hour rates for these wells were 546 Boepd
(84% oil) and 701 Boepd, respectively. The average lateral length for
these wells was 4,517 feet. The Company currently has two horizontal
rigs in the New Mexico Shelf.
Improving Recoveries in Legacy Oil Play
Concho completed the Sneed 9 Federal Com #11H, a 5,490 foot horizontal
well targeting the Paddock formation. The well achieved peak 30-day and
24-hour rates of 1,039 Boepd (84% oil) and 1,227 Boepd, respectively.
Overall, the Company’s program in the New Mexico Shelf is generating
excellent rates of return due to lean capital costs and advancements in
completion design.
First-Quarter 2017 Financial Summary
Concho’s average realized price for crude oil and natural gas for the
first quarter of 2017, excluding the effect of commodity derivatives,
was $49.08 per Bbl and $3.00 per Mcf, respectively, compared with $29.90
per Bbl and $1.50 per Mcf, respectively, for the first quarter of 2016.
Net income for the first quarter of 2017 was $650 million, or $4.37 per
diluted share, compared to net loss of $1.0 billion, or $7.95 per
diluted share, for the first quarter of 2016. During the first quarter
of 2017, Concho completed the sale of its ownership interests in Alpha
Holding Company, LLC, the owner of the Alpha Crude Connector system
(“ACC”), for $803 million. Net income for the first quarter of 2017
included a gain of $654 million primarily related to the sale of ACC.
Adjusted net income (non-GAAP), which excludes non-cash and unusual
items, for the first quarter of 2017 was $72 million, or $0.49 per
diluted share, compared with adjusted net loss (non-GAAP) of $6 million,
or $0.05 per diluted share, for the first quarter of 2016.
EBITDAX (non-GAAP) for the first quarter of 2017 totaled $461 million,
compared to $383 million for the first quarter of 2016.
Financial Position and Liquidity
At March 31, 2017, Concho had cash of $771 million and long-term debt of
$2.7 billion. Concho completed the annual redetermination of its credit
facility in April 2017. The Company amended its credit facility to
extend the maturity date three years to May 2022 and increase the
borrowing base from $2.8 billion to $3.0 billion. Additionally, the
Company elected to reduce the commitment amount from $2.5 billion to
$2.0 billion. Concho currently has no outstanding borrowings under its
credit facility.
Outlook
For the second quarter of 2017, Concho expects production to average
between 182 MBoepd and 186 MBoepd. In addition, Concho updated its
full-year 2017 outlook for certain items. The following table summarizes
the Company’s current guidance for those items, as compared to the
Company’s prior guidance.
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Full Year 2017
|
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|
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Prior
|
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Current
|
Annual production growth
|
|
|
20% - 24%
|
|
|
21% - 25%
|
Oil and natural gas production expense (per Boe)
|
|
|
$5.75 - $6.25
|
|
|
$5.50 - $6.00
|
Depletion, depreciation and amortization expense (per Boe)
|
|
|
$18.00 - $20.00
|
|
|
$17.00 - $19.00
|
|
|
|
|
|
|
|
Commodity Derivatives Update
The Company enters into commodity derivatives to manage its exposure to
commodity price fluctuations. For the remainder of 2017, Concho has
crude oil swap contracts covering approximately 86.7 MBopd at a weighted
average price of $53.48 per Bbl. The Company also has crude oil swaps
for 2018 and 2019, covering approximately 59.0 MBopd and 24.3 MBopd at a
weighted average price of $51.86 per Bbl and $55.14 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 first quarter 2017 results on a conference call
tomorrow, May 4, 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) 263-8298
Intl. dial-in: (478) 219-0007
Participant
Passcode: 98507949
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 Conferences
The Company will participate in the following upcoming conferences:
Conference Date
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Conference
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May 17, 2017
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Stephens Energy Executive Summit
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June 7, 2017
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RBC Capital Markets Global Energy Conference
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June 21, 2017
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Tudor, Pickering, Holt & Co. Hotter ‘N Hell Energy Conference
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June 26, 2017
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J.P. Morgan Energy Equity Investor Conference
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The presentations will be available on the Company’s website on or prior
to the day of the first conference 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 include the risk factors discussed or
referenced in the Company’s most recent Annual Report on Form 10-K and
in the Company’s Quarterly Report on Form 10-Q for the quarter ended
March 31, 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 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.
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Concho Resources Inc.
|
Consolidated Balance Sheets
|
Unaudited
|
|
|
|
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|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
(in millions, except share and per share amounts)
|
|
|
2017
|
|
|
2016
|
Assets
|
Current assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
771
|
|
|
|
$
|
53
|
|
Accounts receivable, net of allowance for doubtful accounts:
|
|
|
|
|
|
|
Oil and natural gas
|
|
|
|
239
|
|
|
|
|
220
|
|
Joint operations and other
|
|
|
|
248
|
|
|
|
|
238
|
|
Derivative instruments
|
|
|
|
55
|
|
|
|
|
4
|
|
Prepaid costs and other
|
|
|
|
40
|
|
|
|
|
31
|
|
Total current assets
|
|
|
|
1,353
|
|
|
|
|
546
|
|
Property and equipment:
|
|
|
|
|
|
|
Oil and natural gas properties, successful efforts method
|
|
|
|
19,287
|
|
|
|
|
18,476
|
|
Accumulated depletion and depreciation
|
|
|
|
(7,667
|
)
|
|
|
|
(7,390
|
)
|
Total oil and natural gas properties, net
|
|
|
|
11,620
|
|
|
|
|
11,086
|
|
Other property and equipment, net
|
|
|
|
209
|
|
|
|
|
216
|
|
Total property and equipment, net
|
|
|
|
11,829
|
|
|
|
|
11,302
|
|
Funds held in escrow
|
|
|
|
-
|
|
|
|
|
43
|
|
Deferred loan costs, net
|
|
|
|
10
|
|
|
|
|
11
|
|
Intangible asset - operating rights, net
|
|
|
|
24
|
|
|
|
|
24
|
|
Inventory
|
|
|
|
14
|
|
|
|
|
16
|
|
Noncurrent derivative instruments
|
|
|
|
42
|
|
|
|
|
-
|
|
Other assets
|
|
|
|
47
|
|
|
|
|
177
|
|
Total assets
|
|
|
$
|
13,319
|
|
|
|
$
|
12,119
|
|
Liabilities and Stockholders’ Equity
|
Current liabilities:
|
|
|
|
|
|
|
Accounts payable - trade
|
|
|
$
|
35
|
|
|
|
$
|
28
|
|
Revenue payable
|
|
|
|
139
|
|
|
|
|
132
|
|
Accrued and prepaid drilling costs
|
|
|
|
445
|
|
|
|
|
359
|
|
Derivative instruments
|
|
|
|
10
|
|
|
|
|
82
|
|
Other current liabilities
|
|
|
|
151
|
|
|
|
|
152
|
|
Total current liabilities
|
|
|
|
780
|
|
|
|
|
753
|
|
Long-term debt
|
|
|
|
2,741
|
|
|
|
|
2,741
|
|
Deferred income taxes
|
|
|
|
1,122
|
|
|
|
|
766
|
|
Noncurrent derivative instruments
|
|
|
|
3
|
|
|
|
|
96
|
|
Asset retirement obligations and other long-term liabilities
|
|
|
|
141
|
|
|
|
|
140
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
Common stock, $0.001 par value; 300,000,000 authorized;
148,752,676 and 146,488,685 shares issued at March 31, 2017 and
December 31, 2016, respectively
|
|
|
|
-
|
|
|
|
|
-
|
|
Additional paid-in capital
|
|
|
|
7,061
|
|
|
|
|
6,783
|
|
Retained earnings
|
|
|
|
1,534
|
|
|
|
|
884
|
|
Treasury stock, at cost; 578,633 and 429,708 shares at March 31,
2017 and December 31, 2016, respectively
|
|
|
|
(63
|
)
|
|
|
|
(44
|
)
|
Total stockholders’ equity
|
|
|
|
8,532
|
|
|
|
|
7,623
|
|
Total liabilities and stockholders’ equity
|
|
|
$
|
13,319
|
|
|
|
$
|
12,119
|
|
|
|
Concho Resources Inc.
|
Consolidated Statements of Operations
|
Unaudited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
(in millions, except per share amounts)
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
Operating revenues:
|
|
|
|
|
|
|
Oil sales
|
|
|
$
|
502
|
|
|
|
$
|
242
|
|
Natural gas sales
|
|
|
|
110
|
|
|
|
|
42
|
|
Total operating revenues
|
|
|
|
612
|
|
|
|
|
284
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
Oil and natural gas production
|
|
|
|
87
|
|
|
|
|
92
|
|
Production and ad valorem taxes
|
|
|
|
48
|
|
|
|
|
23
|
|
Exploration and abandonments
|
|
|
|
15
|
|
|
|
|
23
|
|
Depreciation, depletion and amortization
|
|
|
|
283
|
|
|
|
|
310
|
|
Accretion of discount on asset retirement obligations
|
|
|
|
2
|
|
|
|
|
2
|
|
Impairments of long-lived assets
|
|
|
|
-
|
|
|
|
|
1,525
|
|
General and administrative (including non-cash stock-based
compensation of $12 and $16 for the three months ended March 31,
2017 and 2016, respectively)
|
|
|
|
56
|
|
|
|
|
54
|
|
Gain on derivatives
|
|
|
|
(286
|
)
|
|
|
|
(81
|
)
|
Gain on disposition of assets, net
|
|
|
|
(654
|
)
|
|
|
|
(111
|
)
|
Total operating costs and expenses
|
|
|
|
(449
|
)
|
|
|
|
1,837
|
|
Income (loss) from operations
|
|
|
|
1,061
|
|
|
|
|
(1,553
|
)
|
Other income (expense):
|
|
|
|
|
|
|
Interest expense
|
|
|
|
(40
|
)
|
|
|
|
(54
|
)
|
Other, net
|
|
|
|
-
|
|
|
|
|
(7
|
)
|
Total other expense
|
|
|
|
(40
|
)
|
|
|
|
(61
|
)
|
Income (loss) before income taxes
|
|
|
|
1,021
|
|
|
|
|
(1,614
|
)
|
Income tax (expense) benefit
|
|
|
|
(371
|
)
|
|
|
|
594
|
|
Net income (loss)
|
|
|
$
|
650
|
|
|
|
$
|
(1,020
|
)
|
Earnings per share:
|
|
|
|
|
|
|
Basic net income (loss)
|
|
|
$
|
4.39
|
|
|
|
$
|
(7.95
|
)
|
Diluted net income (loss)
|
|
|
$
|
4.37
|
|
|
|
$
|
(7.95
|
)
|
|
|
Concho Resources Inc.
|
Consolidated Statements of Cash Flows
|
Unaudited
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
(in millions)
|
|
|
2017
|
|
|
2016
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net income (loss)
|
|
|
$
|
650
|
|
|
|
$
|
(1,020
|
)
|
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
|
|
|
|
|
|
|
Depreciation, depletion and amortization
|
|
|
|
283
|
|
|
|
|
310
|
|
Accretion of discount on asset retirement obligations
|
|
|
|
2
|
|
|
|
|
2
|
|
Impairments of long-lived assets
|
|
|
|
-
|
|
|
|
|
1,525
|
|
Exploration and abandonments, including dry holes
|
|
|
|
6
|
|
|
|
|
21
|
|
Non-cash stock-based compensation expense
|
|
|
|
12
|
|
|
|
|
16
|
|
Deferred income taxes
|
|
|
|
363
|
|
|
|
|
(584
|
)
|
Gain on disposition of assets, net
|
|
|
|
(654
|
)
|
|
|
|
(111
|
)
|
Gain on derivatives
|
|
|
|
(286
|
)
|
|
|
|
(81
|
)
|
Net settlements received from derivatives
|
|
|
|
28
|
|
|
|
|
259
|
|
Other non-cash items
|
|
|
|
1
|
|
|
|
|
4
|
|
Changes in operating assets and liabilities, net of acquisitions and
dispositions:
|
|
|
|
|
|
|
Accounts receivable
|
|
|
|
(6
|
)
|
|
|
|
68
|
|
Prepaid costs and other
|
|
|
|
(8
|
)
|
|
|
|
(5
|
)
|
Accounts payable
|
|
|
|
7
|
|
|
|
|
8
|
|
Revenue payable
|
|
|
|
8
|
|
|
|
|
(44
|
)
|
Other current liabilities
|
|
|
|
1
|
|
|
|
|
2
|
|
Net cash provided by operating activities
|
|
|
|
407
|
|
|
|
|
370
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
Capital expenditures on oil and natural gas properties
|
|
|
|
(457
|
)
|
|
|
|
(380
|
)
|
Additions to property, equipment and other assets
|
|
|
|
(2
|
)
|
|
|
|
(9
|
)
|
Proceeds from the disposition of assets
|
|
|
|
806
|
|
|
|
|
292
|
|
Direct transaction costs for disposition of assets
|
|
|
|
(17
|
)
|
|
|
|
-
|
|
Contributions to equity method investments
|
|
|
|
-
|
|
|
|
|
(25
|
)
|
Net cash provided by (used in) investing activities
|
|
|
|
330
|
|
|
|
|
(122
|
)
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
Proceeds from issuance of debt
|
|
|
|
105
|
|
|
|
|
-
|
|
Payments of debt
|
|
|
|
(105
|
)
|
|
|
|
-
|
|
Excess tax deficiency from stock-based compensation
|
|
|
|
-
|
|
|
|
|
(1
|
)
|
Purchase of treasury stock
|
|
|
|
(19
|
)
|
|
|
|
(9
|
)
|
Net cash used in financing activities
|
|
|
|
(19
|
)
|
|
|
|
(10
|
)
|
Net increase in cash and cash equivalents
|
|
|
|
718
|
|
|
|
|
238
|
|
Cash and cash equivalents at beginning of period
|
|
|
|
53
|
|
|
|
|
229
|
|
Cash and cash equivalents at end of period
|
|
|
$
|
771
|
|
|
|
$
|
467
|
|
NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
Issuance of common stock for business combinations
|
|
|
$
|
258
|
|
|
|
$
|
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
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production and operating data:
|
|
|
|
|
|
|
|
|
|
Average daily production volumes:
|
|
|
|
|
|
|
|
|
|
|
|
Oil (Bbl)
|
|
|
|
113,600
|
|
|
|
|
89,011
|
|
|
|
|
|
Natural gas (Mcf)
|
|
|
|
406,633
|
|
|
|
|
302,824
|
|
|
|
|
|
Total (Boe)
|
|
|
|
181,372
|
|
|
|
|
139,482
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average prices per unit:
|
|
|
|
|
|
|
|
|
|
|
|
Oil, without derivatives (Bbl)
|
|
|
$
|
49.08
|
|
|
|
$
|
29.90
|
|
|
|
|
|
Oil, with derivatives (Bbl) (a)
|
|
|
$
|
52.12
|
|
|
|
$
|
60.90
|
|
|
|
|
|
Natural gas, without derivatives (Mcf)
|
|
|
$
|
3.00
|
|
|
|
$
|
1.50
|
|
|
|
|
|
Natural gas, with derivatives (Mcf) (a)
|
|
|
$
|
2.90
|
|
|
|
$
|
1.75
|
|
|
|
|
|
Total, without derivatives (Boe)
|
|
|
$
|
37.47
|
|
|
|
$
|
22.34
|
|
|
|
|
|
Total, with derivatives (Boe) (a)
|
|
|
$
|
39.15
|
|
|
|
$
|
42.66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses per Boe:
|
|
|
|
|
|
|
|
|
|
|
|
Oil and natural gas production
|
|
|
$
|
5.35
|
|
|
|
$
|
7.28
|
|
|
|
|
|
Production and ad valorem taxes
|
|
|
$
|
2.93
|
|
|
|
$
|
1.78
|
|
|
|
|
|
Depreciation, depletion and amortization
|
|
|
$
|
17.36
|
|
|
|
$
|
24.43
|
|
|
|
|
|
General and administrative
|
|
|
$
|
3.36
|
|
|
|
$
|
4.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Includes the effect of net cash receipts from (payments on)
derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
|
|
|
(in millions)
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash receipts from (payments on) derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil derivatives
|
|
|
$
|
31
|
|
|
|
$
|
252
|
|
|
|
|
|
|
Natural gas derivatives
|
|
|
|
(3
|
)
|
|
|
|
7
|
|
|
|
|
|
|
Total
|
|
|
$
|
28
|
|
|
|
$
|
259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
March 31,
|
(in millions)
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
Property acquisition costs:
|
|
|
|
|
|
|
Proved
|
|
|
$
|
127
|
|
|
$
|
252
|
Unproved
|
|
|
|
306
|
|
|
|
139
|
Exploration
|
|
|
|
235
|
|
|
|
170
|
Development
|
|
|
|
158
|
|
|
|
83
|
Total costs incurred for oil and natural gas properties
|
|
|
$
|
826
|
|
|
$
|
644
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Concho Resources Inc.
|
Derivatives Information
|
Unaudited
|
|
The table below provides data associated with the Company’s
derivatives at May 3, 2017, for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter
|
|
|
Third Quarter
|
|
|
Fourth Quarter
|
|
|
Total
|
|
|
2018
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil Swaps: (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume (Bbl)
|
|
|
|
8,679,480
|
|
|
|
|
7,966,370
|
|
|
|
|
7,188,080
|
|
|
|
|
23,833,930
|
|
|
|
|
21,537,124
|
|
|
|
|
8,854,000
|
|
|
|
Price per Bbl
|
|
|
$
|
56.46
|
|
|
|
$
|
51.69
|
|
|
|
$
|
51.87
|
|
|
|
$
|
53.48
|
|
|
|
$
|
51.86
|
|
|
|
$
|
55.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil Basis Swaps: (b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume (Bbl)
|
|
|
|
6,141,500
|
|
|
|
|
5,290,000
|
|
|
|
|
5,290,000
|
|
|
|
|
16,721,500
|
|
|
|
|
15,695,000
|
|
|
|
|
2,555,000
|
|
|
|
Price per Bbl
|
|
|
$
|
(1.03
|
)
|
|
|
$
|
(0.49
|
)
|
|
|
$
|
(0.49
|
)
|
|
|
$
|
(0.69
|
)
|
|
|
$
|
(1.00
|
)
|
|
|
$
|
(1.25
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural Gas Swaps: (c)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume (MMBtu)
|
|
|
|
14,814,642
|
|
|
|
|
14,665,441
|
|
|
|
|
14,043,000
|
|
|
|
|
43,523,083
|
|
|
|
|
33,370,000
|
|
|
|
|
-
|
|
|
|
Price per MMBtu
|
|
|
$
|
3.08
|
|
|
|
$
|
3.10
|
|
|
|
$
|
3.09
|
|
|
|
$
|
3.09
|
|
|
|
$
|
3.04
|
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 (Loss) and
Adjusted Earnings per Share
The Company’s presentation of adjusted net income (loss) and adjusted
earnings per share that exclude the effect of certain items are non-GAAP
financial measures. Adjusted net income (loss) and adjusted earnings per
share represent earnings and diluted earnings per share determined under
GAAP without regard to certain non-cash and unusual items. The Company
believes these measures provide useful information to analysts and
investors for analysis of its operating results on a recurring,
comparable basis from period to period. Adjusted net income (loss) and
adjusted earnings per share should not be considered in isolation or as
a substitute for earnings or diluted earnings per share as determined in
accordance with GAAP and may not be comparable to other similarly titled
measures of other companies.
The following table provides a reconciliation from the GAAP measure of
net income (loss) to adjusted net income (loss) (non-GAAP), both in
total and on a per diluted share basis, for the periods indicated:
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
(in millions, except per share amounts)
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
Net income (loss) - as reported
|
|
|
$
|
650
|
|
|
|
$
|
(1,020
|
)
|
|
|
|
|
|
|
|
Adjustments for certain non-cash and unusual items:
|
|
|
|
|
|
|
Gain on derivatives
|
|
|
|
(286
|
)
|
|
|
|
(81
|
)
|
Net cash receipts from derivatives
|
|
|
|
28
|
|
|
|
|
259
|
|
Impairments of long-lived assets
|
|
|
|
-
|
|
|
|
|
1,525
|
|
Leasehold abandonments
|
|
|
|
6
|
|
|
|
|
21
|
|
Gain on disposition of assets and other
|
|
|
|
(654
|
)
|
|
|
|
(109
|
)
|
Tax impact
|
|
|
|
336
|
|
|
|
|
(601
|
)
|
Excess tax benefit
|
|
|
|
(8
|
)
|
|
|
|
-
|
|
Adjusted net income (loss)
|
|
|
$
|
72
|
|
|
|
$
|
(6
|
)
|
|
|
|
|
|
|
|
Net income (loss) per diluted share - as reported
|
|
|
$
|
4.37
|
|
|
|
$
|
(7.95
|
)
|
|
|
|
|
|
|
|
Adjustments for certain non-cash and unusual items per diluted
share:
|
|
|
|
|
|
|
Gain on derivatives
|
|
|
|
(1.92
|
)
|
|
|
|
(0.62
|
)
|
Net cash receipts from derivatives
|
|
|
|
0.18
|
|
|
|
|
2.01
|
|
Impairments of long-lived assets
|
|
|
|
-
|
|
|
|
|
11.88
|
|
Leasehold abandonments
|
|
|
|
0.04
|
|
|
|
|
0.16
|
|
Gain on disposition of assets and other
|
|
|
|
(4.40
|
)
|
|
|
|
(0.86
|
)
|
Tax impact
|
|
|
|
2.27
|
|
|
|
|
(4.67
|
)
|
Excess tax benefit
|
|
|
|
(0.05
|
)
|
|
|
|
-
|
|
Adjusted net income (loss) per diluted share
|
|
|
$
|
0.49
|
|
|
|
$
|
(0.05
|
)
|
|
|
|
|
|
|
|
Adjusted earnings per share:
|
|
|
|
|
|
|
Basic net income (loss)
|
|
|
$
|
0.49
|
|
|
|
$
|
(0.05
|
)
|
Diluted net income (loss)
|
|
|
$
|
0.49
|
|
|
|
$
|
(0.05
|
)
|
|
|
|
|
|
|
|
|
|
|
|
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 on derivatives,
(7) net cash receipts from derivatives, (8) gain on disposition of
assets, net, (9) interest expense and (10) federal and state income tax
expense (benefit). EBITDAX is not a measure of net income (loss) or cash
flows as determined by GAAP.
The Company’s EBITDAX measure provides additional information which may
be used to better understand the Company’s operations, and it is also a
material component of one of the financial covenants under the Company’s
credit facility. EBITDAX is one of several metrics that the Company uses
as a supplemental financial measurement in the evaluation of its
business and should not be considered as an alternative to, or more
meaningful than, net income (loss) as an indicator of operating
performance. Certain items excluded from EBITDAX are significant
components in understanding and assessing a company’s financial
performance, such as a company’s cost of capital and tax structure, as
well as the historic cost of depreciable and depletable assets. EBITDAX,
as used by the Company, may not be comparable to similarly titled
measures reported by other companies. The Company believes that EBITDAX
is a widely followed measure of operating performance and is one of many
metrics used by the Company’s management team and by other users of the
Company’s consolidated financial statements, including by lenders
pursuant to a covenant in the Company’s credit facility. For example,
EBITDAX can be used to assess the Company’s operating performance and
return on capital in comparison to other independent exploration and
production companies without regard to financial or capital structure,
and to assess the financial performance of the Company’s assets and the
Company without regard to capital structure or historical cost basis.
Further, under the Company’s credit facility, an event of default could
arise if it were not able to satisfy and remain in compliance with its
specified financial ratio, defined as the maintenance of a quarterly
ratio of total debt to consolidated last twelve months EBITDAX of no
greater than 4.25 to 1.0. Non-compliance with this ratio could trigger
an event of default under the Company’s credit facility, which then
could trigger an event of default under its indentures. At March 31,
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
|
|
|
|
March 31,
|
(in millions)
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
$
|
650
|
|
|
|
$
|
(1,020
|
)
|
Exploration and abandonments
|
|
|
|
15
|
|
|
|
|
23
|
|
Depreciation, depletion and amortization
|
|
|
|
283
|
|
|
|
|
310
|
|
Accretion of discount on asset retirement obligations
|
|
|
|
2
|
|
|
|
|
2
|
|
Impairments of long-lived assets
|
|
|
|
-
|
|
|
|
|
1,525
|
|
Non-cash stock-based compensation
|
|
|
|
12
|
|
|
|
|
16
|
|
Gain on derivatives
|
|
|
|
(286
|
)
|
|
|
|
(81
|
)
|
Net cash receipts from derivatives
|
|
|
|
28
|
|
|
|
|
259
|
|
Gain on disposition of assets, net
|
|
|
|
(654
|
)
|
|
|
|
(111
|
)
|
Interest expense
|
|
|
|
40
|
|
|
|
|
54
|
|
Income tax expense (benefit)
|
|
|
|
371
|
|
|
|
|
(594
|
)
|
EBITDAX
|
|
|
$
|
461
|
|
|
|
$
|
383
|
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20170503006602/en/
Copyright Business Wire 2017