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