Concho Resources Inc. Reports Fourth-Quarter and Full-Year 2017 Results and Provides 2018 Outlook
Exceeds Crude Oil and Total Production Growth Guidance
Increases Total Resource Potential to an Estimated 10 Billion
Barrels of Oil Equivalent
Provides New Long-Term Growth Outlook to 2020
Accelerates Value with Recent Portfolio Management Activities
Concho Resources Inc. (NYSE: CXO) (the “Company” or “Concho”)
today reported financial and operating results for fourth-quarter and
full-year 2017.
Fourth-Quarter & Full-Year 2017 Highlights
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For fourth quarter, delivered crude oil production of 130 MBopd and
total production of 211 MBoepd, exceeding the high end of the
Company’s guidance range.
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For 2017, grew crude oil production 29% and total production 28% on a
$1.7 billion capital program, excluding acquisitions, which was fully
funded by cash flows from operations.
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Reported fourth quarter net income of $267 million, or $1.79 per
diluted share. Adjusted net income totaled $98 million, or $0.66 per
diluted share (non-GAAP). For 2017, net income totaled $956 million,
or $6.41 per diluted share, and adjusted net income was $311 million,
or $2.09 per diluted share (non-GAAP).
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Generated $513 million of EBITDAX (non-GAAP) in the fourth quarter and
$1.9 billion for 2017.
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Delivered outstanding results from the Company’s large-scale
development projects in the Northern and Southern Delaware Basin and
in the Midland Basin.
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Increased estimated proved reserves 17% to 840 MMBoe, driven by a 26%
increase in proved developed reserves to 588 MMBoe.
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Achieved a 275% reserves replacement ratio at $8.68 per Boe proved
developed finding costs.
2018 Outlook & Recent Events
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For 2018, expecting crude oil production growth of approximately 20%
and total production growth of 16% to 20% on a $2 billion capital
program at the midpoint. The capital program is consistent with
Concho’s strategy of delivering returns-based, capital-efficient
growth within cash flows from operations.
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Provided new three-year production growth outlook of 20% CAGR over the
2017 to 2020 time period.
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Enhanced asset position and accelerated value realization with recent
portfolio management actions. Divestiture proceeds of $280 million
reinforce balance sheet strength and flexibility. Strategic asset
trade enhances core leasehold in Midland Basin and New Mexico Shelf.
See “Supplemental Non-GAAP Financial Measures” and “Supplemental
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. An explanation of how we calculate and use the reserves
replacement ratio and proved developed finding costs also can be found
at the end of the press release.
Tim Leach, Chairman and Chief Executive Officer, commented, “The fourth
quarter was an excellent end to a great year for Concho. Our operational
and financial performance demonstrated our ability to consistently
execute, control costs and capitalize on opportunities that strengthen
our competitive position. For the year, crude oil production exceeded
our target, increasing 29% year-over-year, and our disciplined capital
program was fully funded by operating cash flow. We have a powerful
portfolio that continues to outperform. The depth and quality of our
resource base is unmatched throughout our history and allows us to
assemble multi-year programs capable of delivering premium value within
cash flow. We continue to complement our development program with active
portfolio management that accelerates value and improves capital
efficiency. Our high-quality resource base, scale advantage and
execution strength uniquely position Concho to navigate a dynamic
operating environment while maximizing returns and building sustainable
value for our shareholders.”
Fourth-Quarter and Full-Year 2017 Operations Summary
Production for fourth-quarter 2017 was 19 million barrels of oil
equivalent (MMBoe), or an average of 211 thousand Boe per day (MBoepd),
an increase of approximately 28% from fourth-quarter 2016 and 9% from
third-quarter 2017. Average daily crude oil production for
fourth-quarter 2017 totaled 130 thousand barrels per day (MBopd), an
increase of approximately 30% from fourth-quarter 2016 and 9% from
third-quarter 2017. Natural gas production for fourth-quarter 2017
totaled 487 million cubic feet per day (MMcfpd).
For full-year 2017, total production increased 28% to 70 MMBoe, or 193
MBoepd, driven by a 29% increase in crude oil production to 119 MBopd.
Natural gas production for full-year 2017 was 441 MMcfpd.
During fourth-quarter 2017, Concho averaged 16 rigs, compared to 19 rigs
in third-quarter 2017. The table below summarizes the Company’s gross
drilling and completion activity by core area for fourth-quarter and
full-year 2017.
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Number of
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Number of
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Number of
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Number of
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Operated Wells
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Wells
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Operated Wells
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Wells Drilled
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Drilled
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Completed
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Completed
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4Q17
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FY17
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4Q17
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FY17
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4Q17
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FY17
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4Q17
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FY17
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Northern Delaware Basin
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38
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149
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20
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83
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30
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126
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14
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65
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Southern Delaware Basin
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14
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61
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11
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44
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24
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53
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17
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36
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Midland Basin
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14
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58
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14
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58
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22
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78
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22
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75
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New Mexico Shelf
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5
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43
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4
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32
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15
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48
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5
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35
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Total
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71
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311
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49
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217
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91
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305
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58
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211
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The Company is currently running 19 rigs, including eight rigs in the
Northern Delaware Basin, six rigs in the Southern Delaware Basin and
five rigs in the Midland Basin. Additionally, the Company is currently
utilizing six completion crews.
Northern Delaware Basin
In the Northern Delaware Basin, Concho added 24 wells with at least 60
days of production as of the end of fourth-quarter 2017. The average
30-day peak and average 60-day peak rates for these wells were 1,805
Boepd (68% oil) and 1,703 Boepd (67% oil), respectively. The Company
also achieved a record average lateral length of 6,685 feet during
fourth-quarter 2017.
Maximizing Recovery and Returns with Large-Scale Development Projects
Concho continues to see strong performance from the Vast and Windward
projects, two large-scale development projects in the Red Hills area.
The Vast project includes seven wells targeting the Wolfcamp Sands and
Wolfcamp A Shale, and the Windward project includes eight wells
targeting the Avalon Shale. The Vast and Windward projects have produced
an aggregate 3 MMBoe (71% oil) in the first four months of their
production.
From these projects, Concho is collecting valuable data that helps the
Company optimize lateral placement, completion design and facilities
planning. In addition, both projects delivered improvements in drilling
days and stages completed per day.
Southern Delaware Basin
In the Southern Delaware Basin, Concho added three wells targeting the
Wolfcamp A with at least 60 days of production as of the end of
fourth-quarter 2017. The average 30-day peak and average 60-day peak
rates for these wells were 1,644 Boepd (71% oil) and 1,474 Boepd (71%
oil), respectively, and the average lateral length of 10,354 feet set a
Company record for the Southern Delaware Basin.
Optimizing Development of Stacked Resource
Concho also recently completed a large-scale, multi-well project in the
Southern Delaware Basin. The Brass Monkey project, originally an
eight-well project, includes 10 wells testing simultaneous development
of the 3rd Bone Spring, Wolfcamp A and Wolfcamp B with an
average lateral length of 9,700 feet. The average 30-day peak rate for
the project was 26 MBoepd (73% oil).
Midland Basin
Concho added six wells targeting the Wolfcamp A and Wolfcamp B in the
Midland Basin during fourth-quarter 2017. The average 30-day peak and
average 60-day peak rates for these wells were 1,272 Boepd (82% oil) and
1,195 Boepd (83% oil), respectively, and the average lateral length of
11,656 feet set a Company record for the Midland Basin.
Improving Capital Productivity from Technology Deployed at the Mabee
Ranch Project
Concho recently completed the 13-well, two-mile Mabee Ranch project
located in Andrews County, Texas. The early production results are
strong, as the Mabee Ranch project has achieved an initial 24-hour peak
rate of approximately 15 MBoepd (85% oil). Additionally, Concho is
utilizing leading-edge technologies, including fiber optic monitoring,
to collect valuable proprietary data with real-time and long-term
implications for full-field optimization. The Company expects to
transfer these techniques to other assets across the portfolio.
Fourth-Quarter and Full-Year 2017 Financial Summary
Concho’s average realized price for crude oil and natural gas for
fourth-quarter 2017, excluding the effect of commodity derivatives, was
$52.84 per Bbl and $3.33 per Mcf, respectively, compared with $45.66 per
Bbl and $2.93 per Mcf, respectively, for fourth-quarter 2016. For 2017,
Concho’s average realized price for crude oil and natural gas, excluding
the effect of commodity derivatives, was $48.13 per Bbl and $3.07 per
Mcf, respectively, compared with $39.90 per Bbl and $2.23 per Mcf,
respectively, for 2016.
Net income for fourth-quarter 2017 was $267 million, or $1.79 per
diluted share, compared to net loss of $125 million, or $0.86 per
diluted share, for fourth-quarter 2016. Adjusted net income (non-GAAP),
which excludes non-cash and unusual items, for fourth-quarter 2017 was
$98 million, or $0.66 per diluted share, compared with adjusted net
income (non-GAAP) of $28 million, or $0.20 per diluted share, for
fourth-quarter 2016.
Net income for full-year 2017 was $956 million, or $6.41 per diluted
share, compared to net loss of $1.5 billion, or $10.85 per diluted
share, for full-year 2016. Adjusted net income (non-GAAP), which
excludes non-cash and unusual items, for full-year 2017 was $311
million, or $2.09 per diluted share, compared with adjusted net income
(non-GAAP) of $111 million, or $0.81 per diluted share, for full-year
2016.
Net income for fourth-quarter and full-year 2017 reflected income tax
changes related to the Tax Cuts and Jobs Act. Due to the reduction of
the U.S. federal corporate income tax rate and subsequent re-measurement
of the Company’s net deferred tax liability, the Company recorded a
provisional non-cash decrease to its income tax provision of $398
million and a corresponding provisional reduction to its net non-current
deferred tax liability. For 2018, the Company estimates an effective tax
rate of approximately 25%, including state taxes, before discrete items.
EBITDAX (non-GAAP) for fourth-quarter 2017 totaled $513 million,
compared to $396 million for fourth-quarter 2016. EBITDAX (non-GAAP) for
full-year 2017 was $1.9 billion, compared to $1.6 billion for full-year
2016.
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 measures.
2017 Proved Reserves and Resource Potential
At December 31, 2017, Concho’s estimated proved reserves totaled 840
MMBoe, an increase of 17% from year-end 2016. The Company’s proved
reserves are approximately 60% crude oil and 40% natural gas. Proved
developed reserves totaled 588 MMBoe, an increase of 26% from year-end
2016. The Company’s proved developed reserves represent approximately
70% of total proved reserves.
During 2017, Concho added 194 MMBoe of proved reserves primarily from
drilling and completion operations, resulting in a reserve replacement
ratio of 275%. The Company’s proved developed finding and development
cost was $8.68 per Boe for 2017.
Concho estimates current net resource potential to be approximately 10
billion Boe, including total proved reserves, an increase of 25% from
year-end 2016. Concho’s current resource potential is attributable to
approximately 21,000 gross horizontal drilling locations, underscoring
the Company’s large-scale horizontal development potential in the
Permian Basin.
For a summary of estimated proved reserves, please see “Estimated
Year-End Proved Reserves” below, and for an explanation of how the
Company calculates and uses the reserves replacement ratio and finding
and development costs, please see “Supplemental Measures” below.
Active Portfolio Management
During first-quarter 2018, Concho completed the sale of non-core
leasehold in Ward and Reeves Counties, Texas, for approximately $280
million. The leasehold covers approximately 40,000 gross (20,000 net)
acres. These assets were primarily non-operated with low working
interest and not conducive to long-lateral development. Proved reserves
and net production associated with these assets was minimal.
Additionally, the Company recently completed a strategic trade with a
large integrated oil company. For Concho, the trade enhances its core
development area in Mabee Ranch in the 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.
These portfolio optimization activities accelerate value, enhance
Concho’s core leasehold position and further improve capital allocation.
Financial Position and Liquidity
At December 31, 2017, Concho had total long-term debt of $2.7 billion,
including approximately $320 million of borrowings outstanding under its
credit facility. Adjusted for divestiture proceeds received in
first-quarter 2018, the Company had total long-term debt of $2.5 billion
at December 31, 2017.
Outlook
High-quality acreage and scale within the Permian Basin enables Concho
to efficiently allocate capital while continuing to advance
manufacturing-style development with leading-edge drilling and
completion techniques.
Concho expects 2018 capital spending to be at the midpoint of its
capital guidance range of $1.9 billion to $2.1 billion, which reflects
the Company’s current outlook for service cost inflation. The 2018
capital program is expected to be funded with cash flows from operations
and generate 20% crude oil growth and 16% to 20% total production growth
year-over-year. Approximately 93% of the capital program is allocated to
drilling and completion activities, with approximately 65% of that
capital directed towards large-scale manufacturing projects. The
Company’s 2018 capital program is allocated among the following areas:
Northern Delaware Basin (40%), Southern Delaware Basin (25%), Midland
Basin (30%) and the New Mexico Shelf (5%).
Detailed guidance for the first quarter and 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.
The Company provided a new three-year production growth outlook. Concho
expects to grow total production at a compound annual growth rate of 20%
from 2017 to 2020. The outlook reflects the Company’s high-quality
production base and strong operating momentum. Additionally, the Company
expects to deliver this growth within cash flows from operations at an
average crude oil price (WTI) in the low-to-mid $50 per barrel range
over the duration of the outlook.
As with the Company’s 2018 outlook, growth over the three-year period
from 2017 to 2020 is the output of reinvesting high-margin cash flow
into its drilling program. To facilitate execution of the program,
Concho has secured sand and associated transportation logistics. The
sand will be sourced from several regional mines in the Permian Basin.
In addition to reducing operational risks across the supply chain, the
Company expects to capture well cost savings from locking in a key
component of completion operations.
Commodity Derivatives Update
The Company enters into commodity derivatives to manage its exposure to
commodity price fluctuations. For 2018, Concho has crude oil swap
contracts covering approximately 105 MBopd at a weighted average price
of $52.98 per Bbl. Please see the table under “Derivatives Information”
below for detailed information about the Company’s current derivatives
positions.
Conference Call
Concho will host a conference call tomorrow, February 21, 2018, at 8:00
AM CT (9:00 AM ET) to discuss fourth quarter and full-year 2017 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: 2989439
To access the live webcast and view the related earnings presentation,
visit Concho’s website at www.concho.com.
The replay will also be available on the Company’s website under the
“Investors” section.
Upcoming Conferences
The Company will participate in the following upcoming conferences:
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Conference Date
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Conference
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Presentation Time
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March 5, 2018
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Raymond James 39th Annual Institutional Investors
Conference
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8:15 AM CT
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March 26, 2018
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Scotia Howard Weil 46th Annual Energy Conference
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10:55 AM CT
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The presentations will be available on the Company’s website on or prior
to the day of the first conference.
Concho Resources Inc.
Concho Resources Inc. is an independent oil and natural gas company
engaged in the acquisition, development, exploration and production of
oil and natural gas properties. The Company’s operations are focused in
the Permian Basin of Southeast New Mexico and West Texas. For more
information, visit the Company’s website at www.concho.com.
Forward-Looking Statements and Cautionary Statements
The foregoing contains “forward-looking statements” within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of
the Securities Exchange Act of 1934. All statements, other than
statements of historical fact, included in this press release that
address activities, events or developments that the Company expects,
believes or anticipates will or may occur in the future are
forward-looking statements. Forward-looking statements contained in this
press release specifically include statements, estimates, 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 relating to
declines in, or the sustained depression of, the prices the Company
receives for its oil and natural gas, or future prices that are lower
than those assumed; uncertainties about the estimated quantities of oil
and natural gas reserves; drilling, completion and operating risks; the
adequacy of the Company’s capital resources and liquidity including, but
not limited to, access to additional borrowing capacity under its credit
facility; the effects of government regulation, permitting and other
legal requirements, including new legislation or regulation of hydraulic
fracturing, 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;
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; risks associated with acquisitions, including
costs and the ability to realize expected benefits; the impact of
potential changes in the Company’s credit ratings; environmental
hazards, such as uncontrollable flows of oil, natural gas, brine, well
fluids, toxic gas or other pollution into the environment, including
groundwater contamination; difficult and adverse conditions in the
domestic and global capital and credit markets; risks related to the
concentration of the Company’s operations in the Permian Basin of
southeast New Mexico and west Texas; disruptions to, capacity
constraints in or other limitations on the pipeline systems that deliver
the Company’s oil, natural gas and natural gas liquids and other
processing and transportation considerations; the costs and availability
of equipment, resources, services and qualified personnel required to
perform the Company’s drilling completion and operating activities;
potential financial losses or earnings reductions from the Company’s
commodity price risk-management program; risks and liabilities
associated with acquired properties or businesses; uncertainties about
the Company’s ability to successfully execute its business and financial
plans and strategies; 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.
Cautionary Statements Regarding Resource
The Company may use the term “resource potential” and similar phrases
to describe estimates of potentially recoverable hydrocarbons that SEC
rules prohibit from being included in filings with the SEC. These are
based on analogy to the Company’s existing models applied to additional
acres, additional zones and tighter spacing and are the Company’s
internal estimates of hydrocarbon quantities that may be potentially
discovered through exploratory drilling or recovered with additional
drilling or recovery techniques. These quantities may not constitute
“reserves” within the meaning of the Society of Petroleum Engineer’s
Petroleum Resource Management System or SEC rules. Such estimates and
identified drilling locations have not been fully risked by Company
management and are inherently more speculative than proved reserves
estimates. Actual locations drilled and quantities that may be
ultimately recovered from the Company’s interests could differ
substantially from these estimates. There is no commitment by the
Company to drill all of the drilling locations that have been attributed
to these quantities. Factors affecting ultimate recovery include the
scope of the Company’s ongoing drilling program, which will be directly
affected by the availability of capital, drilling and production costs,
availability of drilling services and equipment, drilling results, lease
expirations, transportation constraints, regulatory approvals, actual
drilling results, including geological and mechanical factors affecting
recovery rates, and other factors. Such estimates may change
significantly as development of the Company’s oil and natural gas assets
provide additional data. The Company’s production forecasts and
expectations for future periods are dependent upon many assumptions,
including estimates of production decline rates from existing wells and
the undertaking and outcome of future drilling activity, which may be
affected by significant commodity price declines or drilling cost
increases or other factors that are beyond the Company’s control.
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Concho Resources Inc.
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Consolidated Balance Sheets
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Unaudited
|
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|
|
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December 31,
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(in millions, except share and per share amounts)
|
|
2017
|
|
2016
|
Assets
|
Current assets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
-
|
|
|
$
|
53
|
|
|
Accounts receivable, net of allowance for doubtful accounts:
|
|
|
|
|
|
|
|
|
Oil and natural gas
|
|
|
331
|
|
|
|
220
|
|
|
|
Joint operations and other
|
|
|
212
|
|
|
|
238
|
|
|
Inventory
|
|
|
14
|
|
|
|
16
|
|
|
Derivative instruments
|
|
|
-
|
|
|
|
4
|
|
|
Prepaid costs and other
|
|
|
35
|
|
|
|
31
|
|
|
|
|
Total current assets
|
|
|
592
|
|
|
|
562
|
|
Property and equipment:
|
|
|
|
|
|
|
|
Oil and natural gas properties, successful efforts method
|
|
|
21,267
|
|
|
|
18,476
|
|
|
Accumulated depletion and depreciation
|
|
|
(8,460
|
)
|
|
|
(7,390
|
)
|
|
|
Total oil and natural gas properties, net
|
|
|
12,807
|
|
|
|
11,086
|
|
|
Other property and equipment, net
|
|
|
234
|
|
|
|
216
|
|
|
|
Total property and equipment, net
|
|
|
13,041
|
|
|
|
11,302
|
|
Funds held in escrow
|
|
|
-
|
|
|
|
43
|
|
Deferred loan costs, net
|
|
|
13
|
|
|
|
11
|
|
Intangible assets, net
|
|
|
26
|
|
|
|
24
|
|
Other assets
|
|
|
60
|
|
|
|
177
|
|
|
Total assets
|
|
$
|
13,732
|
|
|
$
|
12,119
|
|
Liabilities and Stockholders’ Equity
|
Current liabilities:
|
|
|
|
|
|
|
|
Accounts payable - trade
|
|
$
|
43
|
|
|
$
|
28
|
|
|
Bank overdrafts
|
|
|
116
|
|
|
|
-
|
|
|
Revenue payable
|
|
|
183
|
|
|
|
132
|
|
|
Accrued drilling costs
|
|
|
330
|
|
|
|
359
|
|
|
Derivative instruments
|
|
|
277
|
|
|
|
82
|
|
|
Other current liabilities
|
|
|
216
|
|
|
|
152
|
|
|
|
|
Total current liabilities
|
|
|
1,165
|
|
|
|
753
|
|
Long-term debt
|
|
|
2,691
|
|
|
|
2,741
|
|
Deferred income taxes
|
|
|
687
|
|
|
|
766
|
|
Noncurrent derivative instruments
|
|
|
102
|
|
|
|
96
|
|
Asset retirement obligations and other long-term liabilities
|
|
|
172
|
|
|
|
140
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
Common stock, $0.001 par value; 300,000,000 authorized;
149,324,849 and 146,488,685 shares issued at December 31, 2017 and
2016, respectively
|
|
|
-
|
|
|
|
-
|
|
|
Additional paid-in capital
|
|
|
7,142
|
|
|
|
6,783
|
|
|
Retained earnings
|
|
|
1,840
|
|
|
|
884
|
|
|
Treasury stock, at cost; 598,049 and 429,708 shares at December
31, 2017 and 2016, respectively
|
|
|
(67
|
)
|
|
|
(44
|
)
|
|
|
|
Total stockholders’ equity
|
|
|
8,915
|
|
|
|
7,623
|
|
|
Total liabilities and stockholders’ equity
|
|
$
|
13,732
|
|
|
$
|
12,119
|
|
|
|
|
|
|
|
|
|
|
Concho Resources Inc.
|
Consolidated Statements of Operations
|
Unaudited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Years Ended
|
|
|
|
|
December 31,
|
|
December 31,
|
(in millions, except per share amounts)
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil sales
|
|
$
|
631
|
|
|
$
|
421
|
|
|
$
|
2,092
|
|
|
$
|
1,350
|
|
|
Natural gas sales
|
|
|
149
|
|
|
|
104
|
|
|
|
494
|
|
|
|
285
|
|
|
|
Total operating revenues
|
|
|
780
|
|
|
|
525
|
|
|
|
2,586
|
|
|
|
1,635
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and natural gas production
|
|
|
115
|
|
|
|
80
|
|
|
|
408
|
|
|
|
320
|
|
|
Production and ad valorem taxes
|
|
|
59
|
|
|
|
42
|
|
|
|
199
|
|
|
|
131
|
|
|
Exploration and abandonments
|
|
|
17
|
|
|
|
23
|
|
|
|
59
|
|
|
|
77
|
|
|
Depreciation, depletion and amortization
|
|
|
298
|
|
|
|
277
|
|
|
|
1,146
|
|
|
|
1,167
|
|
|
Accretion of discount on asset retirement obligations
|
|
|
2
|
|
|
|
2
|
|
|
|
8
|
|
|
|
7
|
|
|
Impairments of long-lived assets
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,525
|
|
|
General and administrative (including non-cash stock-based
compensation of $17 and $16 for the three months ended December
31, 2017 and 2016, respectively, and $60 and $59 for the years
ended December 31, 2017 and 2016, respectively)
|
|
|
64
|
|
|
|
66
|
|
|
|
244
|
|
|
|
226
|
|
|
Loss on derivatives
|
|
|
415
|
|
|
|
193
|
|
|
|
126
|
|
|
|
369
|
|
|
Gain on disposition of assets, net
|
|
|
(11
|
)
|
|
|
(9
|
)
|
|
|
(678
|
)
|
|
|
(118
|
)
|
|
|
Total operating costs and expenses
|
|
|
959
|
|
|
|
674
|
|
|
|
1,512
|
|
|
|
3,704
|
|
Income (loss) from operations
|
|
|
(179
|
)
|
|
|
(149
|
)
|
|
|
1,074
|
|
|
|
(2,069
|
)
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(28
|
)
|
|
|
(42
|
)
|
|
|
(146
|
)
|
|
|
(204
|
)
|
|
Loss on extinguishment of debt
|
|
|
-
|
|
|
|
(28
|
)
|
|
|
(66
|
)
|
|
|
(56
|
)
|
|
Other, net
|
|
|
1
|
|
|
|
-
|
|
|
|
19
|
|
|
|
(9
|
)
|
|
|
Total other expense
|
|
|
(27
|
)
|
|
|
(70
|
)
|
|
|
(193
|
)
|
|
|
(269
|
)
|
Income (loss) before income taxes
|
|
|
(206
|
)
|
|
|
(219
|
)
|
|
|
881
|
|
|
|
(2,338
|
)
|
|
Income tax benefit
|
|
|
473
|
|
|
|
94
|
|
|
|
75
|
|
|
|
876
|
|
Net income (loss)
|
|
$
|
267
|
|
|
$
|
(125
|
)
|
|
$
|
956
|
|
|
$
|
(1,462
|
)
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income (loss)
|
|
$
|
1.80
|
|
|
$
|
(0.86
|
)
|
|
$
|
6.44
|
|
|
$
|
(10.85
|
)
|
|
Diluted net income (loss)
|
|
$
|
1.79
|
|
|
$
|
(0.86
|
)
|
|
$
|
6.41
|
|
|
$
|
(10.85
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Concho Resources Inc.
|
Consolidated Statements of Cash Flows
|
Unaudited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
(in millions)
|
|
2017
|
|
2016
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
956
|
|
|
$
|
(1,462
|
)
|
|
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
Depreciation, depletion and amortization
|
|
|
1,146
|
|
|
|
1,167
|
|
|
|
Accretion of discount on asset retirement obligations
|
|
|
8
|
|
|
|
7
|
|
|
|
Impairments of long-lived assets
|
|
|
-
|
|
|
|
1,525
|
|
|
|
Exploration and abandonments, including dry holes
|
|
|
27
|
|
|
|
57
|
|
|
|
Non-cash stock-based compensation expense
|
|
|
60
|
|
|
|
59
|
|
|
|
Deferred income taxes
|
|
|
(71
|
)
|
|
|
(864
|
)
|
|
|
Gain on disposition of assets, net
|
|
|
(678
|
)
|
|
|
(118
|
)
|
|
|
Loss on derivatives
|
|
|
126
|
|
|
|
369
|
|
|
|
Net settlements received from derivatives
|
|
|
79
|
|
|
|
625
|
|
|
|
Loss on extinguishment of debt
|
|
|
66
|
|
|
|
56
|
|
|
|
Other non-cash items
|
|
|
(1
|
)
|
|
|
14
|
|
|
Changes in operating assets and liabilities, net of acquisitions and
dispositions:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(126
|
)
|
|
|
32
|
|
|
|
|
Prepaid costs and other
|
|
|
(9
|
)
|
|
|
6
|
|
|
|
|
Inventory
|
|
|
-
|
|
|
|
2
|
|
|
|
|
Accounts payable
|
|
|
14
|
|
|
|
15
|
|
|
|
|
Revenue payable
|
|
|
52
|
|
|
|
(38
|
)
|
|
|
|
Other current liabilities
|
|
|
46
|
|
|
|
(68
|
)
|
|
|
|
|
Net cash provided by operating activities
|
|
|
1,695
|
|
|
|
1,384
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
Additions to oil and natural gas properties
|
|
|
(1,581
|
)
|
|
|
(1,046
|
)
|
|
Acquisitions of oil and natural gas properties
|
|
|
(908
|
)
|
|
|
(1,351
|
)
|
|
Additions to property, equipment and other assets
|
|
|
(44
|
)
|
|
|
(61
|
)
|
|
Proceeds from the disposition of assets
|
|
|
803
|
|
|
|
332
|
|
|
Deposits on dispositions of oil and natural gas properties
|
|
|
29
|
|
|
|
-
|
|
|
Direct transaction costs for disposition of assets
|
|
|
(18
|
)
|
|
|
-
|
|
|
Funds held in escrow
|
|
|
-
|
|
|
|
(43
|
)
|
|
Contributions to equity method investments
|
|
|
-
|
|
|
|
(56
|
)
|
|
|
|
|
Net cash used in investing activities
|
|
|
(1,719
|
)
|
|
|
(2,225
|
)
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
Proceeds from issuance of debt
|
|
|
2,795
|
|
|
|
600
|
|
|
Payments of debt
|
|
|
(2,829
|
)
|
|
|
(1,200
|
)
|
|
Debt extinguishment costs
|
|
|
(63
|
)
|
|
|
(42
|
)
|
|
Excess tax deficiency from stock-based compensation
|
|
|
-
|
|
|
|
(1
|
)
|
|
Net proceeds from issuance of common stock
|
|
|
-
|
|
|
|
1,327
|
|
|
Payments for loan costs
|
|
|
(25
|
)
|
|
|
(7
|
)
|
|
Purchase of treasury stock
|
|
|
(23
|
)
|
|
|
(12
|
)
|
|
Increase in bank overdrafts
|
|
|
116
|
|
|
|
-
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(29
|
)
|
|
|
665
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
|
(53
|
)
|
|
|
(176
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
53
|
|
|
|
229
|
|
Cash and cash equivalents at end of period
|
|
$
|
-
|
|
|
$
|
53
|
|
SUPPLEMENTAL CASH FLOWS:
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
139
|
|
|
$
|
232
|
|
|
Cash paid for income taxes
|
|
$
|
13
|
|
|
$
|
-
|
|
NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
Issuance of common stock for business combinations
|
|
$
|
291
|
|
|
$
|
768
|
|
|
|
|
|
|
|
|
|
Concho Resources Inc.
|
Summary Production and Price Data
|
Unaudited
|
The following table sets forth summary information concerning production
and operating data for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Years Ended
|
|
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
|
|
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production and operating data:
|
|
|
|
|
|
|
|
|
|
|
Net production volumes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil (MBbl)
|
|
|
11,945
|
|
|
|
9,220
|
|
|
43,472
|
|
|
33,840
|
|
|
|
Natural gas (MMcf)
|
|
|
44,848
|
|
|
|
35,394
|
|
|
161,089
|
|
|
127,481
|
|
|
|
Total (MBoe)
|
|
|
19,420
|
|
|
|
15,119
|
|
|
70,320
|
|
|
55,087
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average daily production volumes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil (Bbl)
|
|
|
129,837
|
|
|
|
100,217
|
|
|
119,101
|
|
|
92,459
|
|
|
|
Natural gas (Mcf)
|
|
|
487,478
|
|
|
|
384,717
|
|
|
441,340
|
|
|
348,309
|
|
|
|
Total (Boe)
|
|
|
211,083
|
|
|
|
164,337
|
|
|
192,658
|
|
|
150,511
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average prices per unit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil, without derivatives (Bbl)
|
|
$
|
52.84
|
|
|
$
|
45.66
|
|
$
|
48.13
|
|
$
|
39.90
|
|
|
|
Oil, with derivatives (Bbl) (a)
|
|
$
|
48.55
|
|
|
$
|
50.32
|
|
$
|
49.93
|
|
$
|
57.90
|
|
|
|
Natural gas, without derivatives (Mcf)
|
|
$
|
3.33
|
|
|
$
|
2.93
|
|
$
|
3.07
|
|
$
|
2.23
|
|
|
|
Natural gas, with derivatives (Mcf) (a)
|
|
$
|
3.39
|
|
|
$
|
2.93
|
|
$
|
3.06
|
|
$
|
2.36
|
|
|
|
Total, without derivatives (Boe)
|
|
$
|
40.18
|
|
|
$
|
34.70
|
|
$
|
36.78
|
|
$
|
29.68
|
|
|
|
Total, with derivatives (Boe) (a)
|
|
$
|
37.69
|
|
|
$
|
37.55
|
|
$
|
37.88
|
|
$
|
41.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses per Boe: (b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and natural gas production
|
|
$
|
5.92
|
|
|
$
|
5.31
|
|
$
|
5.80
|
|
$
|
5.81
|
|
|
|
Production and ad valorem taxes
|
|
$
|
3.02
|
|
|
$
|
2.80
|
|
$
|
2.82
|
|
$
|
2.38
|
|
|
|
Depreciation, depletion and amortization
|
|
$
|
15.33
|
|
|
$
|
18.32
|
|
$
|
16.29
|
|
$
|
21.19
|
|
|
|
General and administrative
|
|
$
|
3.19
|
|
|
$
|
4.30
|
|
$
|
3.46
|
|
$
|
4.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Includes the effect of net cash receipts from (payments on)
derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Years Ended
|
|
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
|
(in millions)
|
|
2017
|
|
2016
|
|
2017
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash receipts from (payments on) derivatives:
|
|
|
|
|
Oil derivatives
|
|
$
|
(50
|
)
|
|
$
|
43
|
|
$
|
79
|
|
$
|
609
|
|
|
|
|
Natural gas derivatives
|
|
|
3
|
|
|
|
-
|
|
|
-
|
|
|
16
|
|
|
|
|
Total
|
|
$
|
(47
|
)
|
|
$
|
43
|
|
$
|
79
|
|
$
|
625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
|
Estimated Year-End Proved Reserves
|
Unaudited
|
The table below provides a summary of changes in total proved reserves
for the year ended December 31, 2017, as well as proved developed
reserves at the beginning and end of the year.
|
|
|
|
|
|
|
(MMBoe)
|
|
2017
|
|
|
|
|
|
|
|
|
Total proved reserves
|
|
|
|
|
|
Balance, January 1
|
|
|
720
|
|
|
Purchases of minerals-in-place
|
|
|
34
|
|
|
Sales of minerals-in-place
|
|
|
(4
|
)
|
|
Extensions and discoveries
|
|
|
174
|
|
|
Revisions:
|
|
|
|
|
|
Other non-price related revisions
|
|
|
(43
|
)
|
|
Price-related revisions
|
|
|
29
|
|
|
Production
|
|
|
(70
|
)
|
|
Balance, December 31
|
|
|
840
|
|
|
|
|
|
|
Proved developed reserves
|
|
|
|
|
|
Balance, January 1
|
|
|
466
|
|
|
Balance, December 31
|
|
|
588
|
|
|
|
|
|
|
|
Concho Resources Inc.
|
Costs Incurred
|
Unaudited
|
The table below provides the costs incurred for oil and natural gas
producing activities for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Years Ended
|
|
|
|
|
December 31,
|
|
December 31,
|
(in millions)
|
|
2017
|
|
2016
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property acquisition costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proved
|
|
$
|
2
|
|
$
|
725
|
|
$
|
303
|
|
$
|
982
|
|
Unproved
|
|
|
40
|
|
|
982
|
|
|
905
|
|
|
1,154
|
Exploration
|
|
|
296
|
|
|
189
|
|
|
1,021
|
|
|
701
|
Development
|
|
|
175
|
|
|
162
|
|
|
653
|
|
|
449
|
|
Total costs incurred for oil and natural gas properties
|
|
$
|
513
|
|
$
|
2,058
|
|
$
|
2,882
|
|
$
|
3,286
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Concho Resources Inc.
|
Derivatives Information
|
Unaudited
|
The table below provides data associated with the Company’s derivatives
at February 20, 2018, for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Total
|
|
|
2019
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil Price Swaps: (a)
|
|
|
|
|
|
|
|
|
Volume (Bbl)
|
|
|
11,038,629
|
|
|
|
10,178,170
|
|
|
|
8,944,318
|
|
|
|
8,106,007
|
|
|
|
38,267,124
|
|
|
|
27,306,500
|
|
|
|
4,026,000
|
|
|
|
Price (Bbl)
|
|
$
|
53.01
|
|
|
$
|
53.30
|
|
|
$
|
52.98
|
|
|
$
|
52.53
|
|
|
$
|
52.98
|
|
|
$
|
52.95
|
|
|
$
|
54.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil Basis Swaps: (b)
|
|
|
|
|
|
|
|
|
Volume (Bbl)
|
|
|
10,674,000
|
|
|
|
9,492,000
|
|
|
|
8,465,000
|
|
|
|
7,757,000
|
|
|
|
36,388,000
|
|
|
|
26,064,500
|
|
|
|
8,784,000
|
|
|
|
Price (Bbl)
|
|
$
|
(0.75
|
)
|
|
$
|
(0.81
|
)
|
|
$
|
(0.85
|
)
|
|
$
|
(0.89
|
)
|
|
$
|
(0.82
|
)
|
|
$
|
(0.97
|
)
|
|
$
|
(0.09
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural Gas Price Swaps: (c)
|
|
|
|
|
|
|
|
|
Volume (MMBtu)
|
|
|
17,833,000
|
|
|
|
16,979,000
|
|
|
|
15,740,000
|
|
|
|
14,778,000
|
|
|
|
65,330,000
|
|
|
|
17,840,992
|
|
|
|
-
|
|
|
|
Price (MMBtu)
|
|
$
|
3.05
|
|
|
$
|
3.04
|
|
|
$
|
3.04
|
|
|
$
|
3.03
|
|
|
$
|
3.04
|
|
|
$
|
2.86
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
The index prices for the oil price swaps are based on the New York
Mercantile Exchange (“NYMEX”) – West Texas Intermediate (“WTI”)
monthly average futures price.
|
|
|
(b)
|
|
The basis differential price is between Midland – WTI and Cushing –
WTI.
|
(c)
|
|
The index prices for the natural gas price swaps are based on the
NYMEX – Henry Hub last trading day futures price.
|
|
|
|
Concho Resources Inc.
|
Supplemental Non-GAAP Financial Measures
|
Unaudited
|
The Company reports its financial results in accordance with the United
States generally accepted accounting principles (GAAP). However, the
Company believes certain non-GAAP performance measures may provide
financial statement users with additional meaningful comparisons between
current results, the results of its peers and of prior periods. In
addition, the Company believes these measures are used by analysts and
others in the valuation, rating and investment recommendations of
companies within the oil and natural gas exploration and production
industry. See the reconciliations throughout this release of GAAP
financial measures to non-GAAP financial measures for the periods
indicated.
Reconciliation of Net Income (Loss) to Adjusted Net Income and
Adjusted Earnings per Share
The Company’s presentation of adjusted net income and adjusted earnings
per share that exclude the effect of certain items are non-GAAP
financial measures. Adjusted net income and adjusted earnings per share
represent earnings and diluted earnings per share determined under GAAP
without regard to certain non-cash and unusual items. The Company
believes these measures provide useful information to analysts and
investors for analysis of its operating results on a recurring,
comparable basis from period to period. Adjusted net income and adjusted
earnings per share should not be considered in isolation or as a
substitute for earnings or diluted earnings per share as determined in
accordance with GAAP and may not be comparable to other similarly titled
measures of other companies.
The following table provides a reconciliation from the GAAP measure of
net income (loss) to adjusted net income (non-GAAP), both in total and
on a per diluted share basis, for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Years Ended
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
(in millions, except per share amounts)
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) - as reported
|
|
$
|
267
|
|
|
$
|
(125
|
)
|
|
$
|
956
|
|
|
$
|
(1,462
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments for certain non-cash and unusual items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on derivatives
|
|
|
415
|
|
|
|
193
|
|
|
|
126
|
|
|
|
369
|
|
|
Net cash receipts from (payments on) derivatives
|
|
|
(47
|
)
|
|
|
43
|
|
|
|
79
|
|
|
|
625
|
|
|
Impairments of long-lived assets
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,525
|
|
|
Leasehold abandonments
|
|
|
3
|
|
|
|
20
|
|
|
|
27
|
|
|
|
60
|
|
|
Loss on extinguishment of debt
|
|
|
-
|
|
|
|
28
|
|
|
|
66
|
|
|
|
56
|
|
|
Gain on disposition of assets and other
|
|
|
(9
|
)
|
|
|
(9
|
)
|
|
|
(678
|
)
|
|
|
(117
|
)
|
|
Tax impact
|
|
|
(133
|
)
|
|
|
(101
|
)
|
|
|
139
|
|
|
|
(924
|
)
|
|
Excess tax benefit
|
|
|
-
|
|
|
|
-
|
|
|
|
(6
|
)
|
|
|
-
|
|
|
Changes in deferred taxes for enacted tax law changes and other
estimates
|
|
|
(398
|
)
|
|
|
(21
|
)
|
|
|
(398
|
)
|
|
|
(21
|
)
|
Adjusted net income
|
|
$
|
98
|
|
|
$
|
28
|
|
|
$
|
311
|
|
|
$
|
111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per diluted share - as reported
|
|
$
|
1.79
|
|
|
$
|
(0.86
|
)
|
|
$
|
6.41
|
|
|
$
|
(10.85
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments for certain non-cash and unusual items per diluted
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on derivatives
|
|
|
2.77
|
|
|
|
1.33
|
|
|
|
0.85
|
|
|
|
2.73
|
|
|
Net cash receipts from (payments on) derivatives
|
|
|
(0.32
|
)
|
|
|
0.30
|
|
|
|
0.52
|
|
|
|
4.63
|
|
|
Impairments of long-lived assets
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11.30
|
|
|
Leasehold abandonments
|
|
|
0.02
|
|
|
|
0.14
|
|
|
|
0.18
|
|
|
|
0.44
|
|
|
Loss on extinguishment of debt
|
|
|
-
|
|
|
|
0.20
|
|
|
|
0.44
|
|
|
|
0.42
|
|
|
Gain on disposition of assets and other
|
|
|
(0.06
|
)
|
|
|
(0.06
|
)
|
|
|
(4.54
|
)
|
|
|
(0.86
|
)
|
|
Tax impact
|
|
|
(0.89
|
)
|
|
|
(0.70
|
)
|
|
|
0.93
|
|
|
|
(6.85
|
)
|
|
Excess tax benefit
|
|
|
-
|
|
|
|
-
|
|
|
|
(0.04
|
)
|
|
|
-
|
|
|
Changes in deferred taxes for enacted tax law changes and other
estimates
|
|
|
(2.65
|
)
|
|
|
(0.15
|
)
|
|
|
(2.66
|
)
|
|
|
(0.15
|
)
|
Adjusted net income per diluted share
|
|
$
|
0.66
|
|
|
$
|
0.20
|
|
|
$
|
2.09
|
|
|
$
|
0.81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income
|
|
$
|
0.67
|
|
|
$
|
0.20
|
|
|
$
|
2.10
|
|
|
$
|
0.81
|
|
|
Diluted net income
|
|
$
|
0.66
|
|
|
$
|
0.20
|
|
|
$
|
2.09
|
|
|
$
|
0.81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
The Company defines EBITDAX as net income (loss), plus (1) exploration
and abandonments expense, (2) depreciation, depletion and amortization
expense, (3) accretion of discount on asset retirement obligations
expense, (4) impairments of long-lived assets, (5) non-cash stock-based
compensation expense, (6) loss on derivatives, (7) net cash receipts
from (payments on) derivatives, (8) gain on disposition of assets, net,
(9) interest expense, (10) loss on extinguishment of debt and (11)
federal and state income tax 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. 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. 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 (loss) to EBITDAX (non-GAAP) for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Years Ended
|
|
|
|
|
December 31,
|
|
December 31,
|
(in millions)
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
$
|
267
|
|
|
$
|
(125
|
)
|
|
$
|
956
|
|
|
$
|
(1,462
|
)
|
|
Exploration and abandonments
|
|
|
17
|
|
|
|
23
|
|
|
|
59
|
|
|
|
77
|
|
|
Depreciation, depletion and amortization
|
|
298
|
|
|
|
277
|
|
|
|
1,146
|
|
|
|
1,167
|
|
|
Accretion of discount on asset retirement obligations
|
|
2
|
|
|
|
2
|
|
|
|
8
|
|
|
|
7
|
|
|
Impairments of long-lived assets
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,525
|
|
|
Non-cash stock-based compensation
|
|
17
|
|
|
|
16
|
|
|
|
60
|
|
|
|
59
|
|
|
Loss on derivatives
|
|
415
|
|
|
|
193
|
|
|
|
126
|
|
|
|
369
|
|
|
Net cash receipts from (payments on) derivatives
|
|
(47
|
)
|
|
|
43
|
|
|
|
79
|
|
|
|
625
|
|
|
Gain on disposition of assets, net
|
|
(11
|
)
|
|
|
(9
|
)
|
|
|
(678
|
)
|
|
|
(118
|
)
|
|
Interest expense
|
|
28
|
|
|
|
42
|
|
|
|
146
|
|
|
|
204
|
|
|
Loss on extinguishment of debt
|
|
-
|
|
|
|
28
|
|
|
|
66
|
|
|
|
56
|
|
|
Income tax benefit
|
|
(473
|
)
|
|
|
(94
|
)
|
|
|
(75
|
)
|
|
|
(876
|
)
|
EBITDAX
|
|
$
|
513
|
|
|
$
|
396
|
|
|
$
|
1,893
|
|
|
$
|
1,633
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Concho Resources Inc.
|
Supplemental Measures
|
Unaudited
|
Reserves Replacement Ratio
The Company uses the reserves replacement ratio as an indicator of the
Company’s ability to replenish annual production volumes and grow its
reserves, thereby providing some information on the sources of future
production. The reserves replacement ratio is a statistical indicator
that is limited because it typically varies widely based on the extent
and timing of discoveries and property acquisitions. Its predictive and
comparative value is also limited for the same reasons. In addition,
since the ratio does not embed the cost or timing of future production
of new reserves, it cannot be used as a measure of value creation. The
reserve replacement ratio of approximately 275% was calculated by
dividing net proved reserve additions of 194 MMBoe (the sum of
purchases, extensions and discoveries and total revisions) by production
of 70 MMBoe.
Proved Developed Finding and Development (“F&D”) Cost
Proved developed F&D cost is an indicator used to assist in an
evaluation of how much it costs the Company, on a per Boe basis, to add
proved reserves. The Company’s proved developed F&D cost of $8.68 is
calculated by dividing the sum of exploration and development costs
incurred of $1.7 billion by the change in proved developed reserves
year-over-year, excluding current year production, of 192 MMBoe. This
calculation does not include the future development costs required for
the development of proved undeveloped reserves.
Concho Resources Inc.
|
2018 Guidance
|
For 2018, the Company is providing “gathering, processing and
transportation” expense guidance. This line item includes gathering,
processing and transportation expense on assets that have specific
marketing arrangements with fees prior to the transfer of control of the
crude oil and natural gas that we produce. Gathering, processing and
transportation expense is the result of the Company’s adoption and
application of the new revenue recognition standard ASU No. 2014-09,
“Revenue from Contracts with Customers” (Topic 606). The majority of the
Company’s gathering, processing and transportation expense continues to
be recorded within the Company’s realized crude oil and natural gas
price realizations.
For the first quarter of 2018, Concho expects production to average
between 215 MBoepd and 219 MBoepd.
The following table summarizes the Company’s operational and financial
guidance for 2018.
|
|
|
|
|
2018
|
Production
|
|
|
Total production growth
|
|
16% - 20%
|
Crude oil production growth
|
|
20%
|
|
|
|
Price realizations, excluding commodity derivatives
|
|
|
Crude oil differential to NYMEX ($/Bbl)
|
|
($2.00) - ($2.50)
|
Natural gas (per Mcf) (% of NYMEX)
|
|
90% - 100%
|
|
|
|
Operating costs and expenses
|
|
|
Lease operating expense and workover costs ($/Boe)
|
|
$6.00 - $6.50
|
Gathering, processing and transportation
|
|
$0.50 - $0.60
|
Oil & natural gas taxes (% of oil and natural gas revenues)
|
|
7.75%
|
General and administrative (“G&A”) expense ($/Boe):
|
|
|
Cash G&A expense
|
|
$2.50 - $2.80
|
Non-cash stock-based compensation
|
|
$0.80 - $1.00
|
Depletion, depreciation and amortization expense ($/Boe)
|
|
$15.00 - $16.00
|
Exploration and other ($/Boe)
|
|
$0.25 - $0.75
|
Interest expense ($ in millions):
|
|
|
Cash
|
|
$110 - $120
|
Non-cash
|
|
$6
|
Income tax rate
|
|
25%
|
|
|
|
Capital program ($ in billions)
|
|
$1.9 - $2.1
|
|
|
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20180220006541/en/
Copyright Business Wire 2018