Market Overview

Concho Resources Inc. Reports Second-Quarter 2018 Results

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Delivered 26% Crude Oil Growth Year Over Year

Completed Acquisition of RSP Permian, Inc.

Concho Resources Inc. (NYSE:CXO) (the "Company" or "Concho")
today reported financial and operating results for second-quarter 2018.

Second-Quarter 2018 Highlights

  • Produced a record 229 MBoepd, in line with the high end of the
    Company's guidance range.
  • Increased oil production 26% year over year.
  • Advanced large-scale development in the Northern Delaware Basin, with
    impressive results from the Company's Wolfcamp development project.
  • Delivered excellent performance in the Midland Basin, where the
    Company is realizing cost savings and productivity improvements.
  • Reduced controllable cash costs quarter over quarter, led by an 8%
    decrease in cash interest expense.
  • Executed a disciplined capital program, with cash flow from operating
    activities exceeding capital expenditures, excluding acquisitions.
  • Reported net income of $137 million, or $0.92 per diluted share.
    Adjusted net income totaled $185 million, or $1.24 per diluted share
    (non-GAAP).
  • Generated $592 million of EBITDAX (non-GAAP).

Recent Events & 2018 Outlook

  • Completed the acquisition of RSP Permian, Inc., which enhances the
    Company's scale advantage and development platform, enabling Concho to
    deliver continued performance and returns over the long term.
  • Refinanced $1.2 billion of RSP's senior notes, resulting in pro forma
    annual interest expense savings of more than $15 million.
  • Updated the Company's 2018 outlook to reflect the RSP transaction.

See "Supplemental Non-GAAP Financial Measures" at the end of this press
release for a description of non-GAAP measures adjusted net income,
adjusted net income per diluted share and EBITDAX as well as a
reconciliation of these measures to the associated GAAP measure.

Tim Leach, Chairman and Chief Executive Officer, commented, "We
delivered a solid second quarter as our teams advance large-scale
development across the portfolio. Through our outstanding asset
performance and focus on cost control, we continue to drive strong cash
flow that again exceeded our drilling and completion capital. The RSP
transaction is consistent with our strategy of acquiring large,
contiguous, high-quality assets in the Permian Basin. With the
transaction complete, we are excited about bringing together the talent
from both organizations to capture the benefits of this powerful
combination."

Second-Quarter 2018 Operations Summary

Production for second-quarter 2018 was 21 million barrels of oil
equivalent (MMBoe), or an average of 229 thousand Boe per day (MBoepd),
an increase of approximately 24% from second-quarter 2017. Average daily
crude oil production for second-quarter 2018 totaled 143 thousand
barrels per day (MBopd), an increase of approximately 26% from
second-quarter 2017. Natural gas production for second-quarter 2018
totaled 515 million cubic feet per day (MMcfpd).

During second-quarter 2018, Concho averaged 21 rigs, compared to 20 rigs
in first-quarter 2018. The table below summarizes the Company's gross
drilling and completion activity by core area for second-quarter 2018.

                 

Number of
Wells Drilled

Number of
Operated
Wells Drilled

Number of
Wells
Completed

Number of
Operated Wells
Completed

Northern Delaware Basin 44 32 35 17
Southern Delaware Basin 11 7 7 3
Midland Basin 26 15 21 19
New Mexico Shelf 4 2 3 3
Total 85 56 66 42
 

Following the closing of the RSP transaction, Concho is running 32
horizontal rigs, including 16 rigs in the Northern Delaware Basin, six
rigs in the Southern Delaware Basin, nine rigs in the Midland Basin and
one in the New Mexico Shelf. Additionally, Concho is currently utilizing
ten completion crews.

Northern Delaware Basin

In the Northern Delaware Basin, Concho added 16 wells with at least 60
days of production as of the end of second-quarter 2018. The average
30-day and 60-day peak rates for these wells were 1,987 Boepd (73% oil)
and 1,859 Boepd (72% oil), respectively, from an average lateral length
of 7,326 feet.

Quickly Advancing Large-Scale Development

Following the strong success of the Vast and Windward development
projects, Concho recently completed a four-well development project, the
Columbus, targeting the Wolfcamp A zone with long-laterals. The average
per well 30-day peak rate for the Columbus project was 3,163 Boepd (77%
oil) from an average lateral length of approximately 9,550 feet.

Current drilling activity is also focused on large-scale development of
the Company's assets in the Northern Delaware Basin, with nine out of 16
rigs working on multi-well projects. The largest project underway is the
Dominator, which consists of 23 wells targeting five distinct landings
within a single section. Concho is currently running six rigs on this
project.

Southern Delaware Basin

In the Southern Delaware Basin, Concho added five wells with at least 60
days of production as of the end of second-quarter 2018. The average
30-day and 60-day peak rates for these wells were 1,463 Boepd (80% oil)
and 1,297 Boepd (80% oil), respectively. The lateral length for these
wells averaged 7,461 feet.

Midland Basin

In the Midland Basin, Concho added 21 wells with at least 60 days of
production as of the end of second-quarter 2018. The average 30-day and
60-day peak rates for these wells were 1,294 Boepd (86% oil) and 1,137
Boepd (86% oil), respectively, with an average lateral length of 9,800
feet.

Maximizing Scale Advantage

Several factors underpin Concho's shift to manufacturing mode in the
Midland Basin, including the large, contiguous nature of the Company's
assets, Concho's strategic infrastructure systems and the broad extent
of the Company's impressive well performance.

The Vanessa and Karen project highlights Concho's success with
optimizing lateral placement and completion design to improve project
economics and performance. The project includes a total of six wells.
The average per well 30-day and 60-day peak rates for these wells were
1,250 Boepd (87% oil) and 1,076 Boepd (86% oil), respectively, with an
average lateral length of 10,261 feet. Right-sizing key completion
design variables, including stage spacing and fluid volumes, drove
outstanding results, and Concho expects to capture well cost savings as
a result of the design changes.

Second-Quarter 2018 Financial Summary

Concho's average realized price for crude oil and natural gas for
second-quarter 2018, excluding the effect of commodity derivatives, was
$60.98 per Bbl and $3.19 per Mcf, respectively, compared to $44.75 per
Bbl and $2.71 per Mcf, respectively, for second-quarter 2017.

Net income for second-quarter 2018 was $137 million, or $0.92 per
diluted share, compared to net income of $152 million, or $1.02 per
diluted share, for second-quarter 2017. Adjusted net income (non-GAAP),
which excludes non-cash and unusual items, for second-quarter 2018 was
$185 million, or $1.24 per diluted share, compared with adjusted net
income for second-quarter 2017 was $77 million, or $0.52 per diluted
share.

EBITDAX (non-GAAP) for second-quarter 2018 totaled $592 million,
compared to $461 million for second-quarter 2017.

Concho's effective income tax rate for second-quarter 2018 was 23%,
compared to 38% for second-quarter 2017, primarily due to the reduction
of the U.S. federal statutory corporate income tax rate from 35% to 21%.

In the six months ended June 30, 2018, cash flow from operating
activities was approximately $1.1 billion, exceeding $941 million in
capital expenditures (additions to oil and natural gas properties).

Maintaining a Strong Financial Position

At June 30, 2018, Concho had cash of $55 million and long-term debt of
$2.4 billion, with no outstanding borrowings under its credit facility.

As previously reported, in July 2018, Concho closed its offering of $1.6
billion aggregate principal amount of senior unsecured notes, consisting
of $1.0 billion aggregate principal amount of 4.3% senior unsecured
notes due 2028 and $600 million aggregate principal amount of 4.85%
senior unsecured notes due 2048. The proceeds from the offering were
used to redeem RSP's 6.625% senior notes due 2022 and 5.25% senior notes
due 2025 for approximately $1.2 billion, as well as repay a portion of
the outstanding balance under RSP's existing credit facility. Concho
repaid the remaining balance under RSP's credit facility with borrowings
under Concho's $2.0 billion credit facility. After giving effect to this
use of proceeds upon the closing of the RSP transaction and associated
transaction costs, the Company had long-term debt of $4.2 billion at
June 30, 2018, including approximately $160 million of outstanding
borrowings under its credit facility.

Concho maintains a strong financial position following the RSP
transaction, with investment-grade ratings, a low leverage ratio and
substantial liquidity.

Outlook

Concho updated its 2018 production and capital program outlook to
reflect the RSP transaction. The Company's guidance for third-quarter
and full-year 2018 includes production (on a two-stream basis) and
capital from RSP beginning on the acquisition closing date of July 19,
2018. For third-quarter 2018, Concho expects production to average 280
to 285 MBoepd (65% oil); and for full-year 2018, Concho expects
production to average 260 to 263 MBoepd (64% oil).

A key benefit of the RSP transaction lies in the large-scale development
potential of the assets. Concho plans to begin drilling several
development projects on the acquired acreage in the second half of 2018.
In addition, Concho will complete several infrastructure and facility
projects in Loving County, Texas, that facilitate large-scale
development. The Company's updated full-year 2018 capital program of
$2.5 billion to $2.6 billion includes this activity. Importantly,
Concho's framework for executing a disciplined capital program within
cash flow remains unchanged, and the Company expects 2018 capital
spending to be fully funded with cash flow from operating activities.

Detailed guidance for full-year 2018 is provided under "2018 Guidance"
at the end of the release. The Company's capital guidance for 2018
excludes acquisitions and is subject to change without notice depending
upon a number of factors, including commodity prices and industry
conditions.

Commodity Derivatives Update

The Company enters into commodity derivatives to manage its exposure to
commodity price fluctuations, including regional price dislocations such
as the Midland/Cushing crude oil price differential. Please see the
table under "Derivatives Information" below for detailed information
about Concho's current derivatives positions, including the commodity
derivatives contracts assumed by the Company in connection with the RSP
transaction.

Conference Call

Concho will host a conference call tomorrow, August 2, 2018, at 8:00 AM
CT (9:00 AM ET) to discuss second-quarter 2018 results. The telephone
number and passcode to access the conference call are provided below:

 
Dial-in: (844) 263-8298
Intl. dial-in: (478) 219-0007
Participant Passcode: 7088648
 

To access the live webcast and view the related earnings presentation,
visit Concho's website at www.concho.com.
The replay will also be available on the Company's website under the
"Investors" section.

Upcoming Conferences

The Company will present at the Barclays' CEO Energy-Power Conference on
September 5, 2018 at 8:45 AM CT (9:45 AM ET). The presentation will be
webcast and accessible on the Events & Presentations page under the
Investors section of the Company's website, www.concho.com.

Additionally, Concho will participate in the following upcoming
conferences:

     
Conference Date Conference
August 29, 2018 Simmons & Company European Energy Conference
September 18, 2018 J.P. Morgan U.S. All Stars Conference
 

The Company's presentation will be available on the Company's website
prior to the Company's appearance at each conference.

About Concho Resources

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