Market Overview

Concho Resources Inc. Reports Third-Quarter 2018 Results


Exceeds Production Guidance

Provides Outlook for 2019 and 2020

Announces Plan to Initiate Dividend

Concho Resources Inc. (NYSE:CXO) (the "Company" or "Concho")
today reported third-quarter 2018 results.


  • Achieved production of 287 MBoepd, exceeding the high end of the
    Company's guidance range.
  • Delivered crude oil production of 185 MBopd.
  • Generated cash flow from operating activities greater than capital
    expenditures, excluding acquisitions, year-to-date.
  • Recorded a net loss of $199 million, or $1.05 per diluted share.
    Adjusted net income totaled $269 million, or $1.42 per diluted share
  • EBITDAX (non-GAAP) was $829 million.
  • Completed the acquisition of RSP Permian, Inc.
  • Provided 2019 and 2020 outlook for free cash flow, strong crude oil
    growth and improving corporate returns.
  • Announced plans to initiate a regular quarterly dividend of $0.125 per
    share beginning in first-quarter 2019. The indicated annual rate of
    $0.50 per share underscores the Company's commitment to sustainable,
    profitable growth and value creation.

Tim Leach, Chairman and Chief Executive Officer, commented, "Our strong
third quarter results demonstrate Concho's positive momentum following
the acquisition of RSP Permian. We have been disciplined over the last
several years – generating free cash flow, prudently growing oil
production, reducing our cost structure and building for the future with
accretive acquisitions and strategic portfolio management. These efforts
position us well for the next stage of our company, which includes
delivering high-margin oil growth and initiating a return-of-capital
strategy to our shareholders. We are a growth company, and our platform
for delivering growth, demonstrating the benefits of scale and enhancing
shareholder value, has never been better."

Third-Quarter 2018 Operations Summary

Production for third-quarter 2018 was 26 million barrels of oil
equivalent (MMBoe), or an average of 287 thousand Boe per day (MBoepd).
Average daily crude oil production for third-quarter 2018 totaled 185
thousand barrels per day (MBopd). Natural gas production for
third-quarter 2018 totaled 612 million cubic feet per day (MMcfpd).

Concho completed the acquisition of RSP Permian, Inc. (RSP) on July 19,
2018. Following the RSP acquisition, which enhanced the Company's assets
in both the Midland Basin and the Delaware Basin, the Company simplified
its asset structure, changing from four core operating areas to two –
comprising the Midland Basin and the Delaware Basin, which includes the
Northern Delaware Basin, Southern Delaware Basin and the New Mexico

During third-quarter 2018, Concho averaged 31 rigs, and the Company is
currently running 34 horizontal rigs, including 22 rigs in the Delaware
Basin and 12 rigs in the Midland Basin. Additionally, Concho is
currently utilizing 8 completion crews. The table below summarizes the
Company's drilling and completion activity on a gross basis during
third-quarter 2018.


Number of
Wells Drilled

Number of
Wells Drilled

Number of

Number of
Operated Wells

Delaware Basin 85 54 75 51
Midland Basin 36 27 40 28
Total 121 81 115 79

Delaware Basin

In the Delaware Basin, excluding the New Mexico Shelf, Concho added 31
wells with at least 60 days of production as of the end of third-quarter
2018. The average 30-day and 60-day peak rates for these wells were
1,422 Boepd (73% oil) and 1,269 Boepd (73% oil), respectively, from an
average lateral length of 6,685 feet.

Concho's White Falcon project in Lea County, New Mexico, included seven
wells with an average lateral length of 8,772 feet per well. The
project, which targeted intervals in the 3rd Bone Spring and
Wolfcamp A zones, produced average 30-day and 60-day peak rates of 1,804
Boepd (84% oil) and 1,566 Boepd (84% oil) per well, respectively.

Additionally, Concho recently completed the Hollywood & Iceman project
in Reeves County, Texas. The project included eight wells with an
average lateral length of 11,679 feet per well. The Hollywood and Iceman
project, which targeted the 3rd Bone Spring and Wolfcamp A
zones, produced an average 30-day peak rate of 1,765 Boepd (70% oil) per

Midland Basin

In the Midland Basin, Concho added 34 wells with at least 60 days of
production as of the end of third-quarter 2018. The average 30-day and
60-day peak rates for these wells were 1,178 Boepd (86% oil) and 1,066
Boepd (85% oil), respectively, from an average lateral length of 9,686

Concho's Windham B project included 10 wells with an average lateral
length of 10,332 feet per well. The project, which targeted intervals in
the Lower Spraberry, Wolfcamp A, Wolfcamp B and Wolfcamp C zones,
produced average 30-day and 60-day peak rates of 1,238 Boepd (84% oil)
and 1,162 Boepd (84% oil) per well, respectively.

Third-Quarter 2018 Financial Summary

Concho's average realized price for crude oil and natural gas for
third-quarter 2018, excluding the effect of commodity derivatives, was
$56.38 per Bbl and $4.18 per Mcf, respectively, compared to $45.29 per
Bbl and $3.18 per Mcf, respectively, for third-quarter 2017.

Net loss for third-quarter 2018 was $199 million, or $1.05 per diluted
share, compared to net loss of $113 million, or $0.77 per diluted share,
for third-quarter 2017. Adjusted net income (non-GAAP), which excludes
non-cash and unusual items, for third-quarter 2018 was $269 million, or
$1.42 per diluted share, compared with adjusted net income for
third-quarter 2017 of $67 million, or $0.45 per diluted share.

EBITDAX (non-GAAP) for third-quarter 2018 totaled $829 million, compared
to $458 million for third-quarter 2017.

Concho's effective income tax rate for third-quarter 2018 was 26%,
compared to 37% for third-quarter 2017, primarily due to the reduction
of the U.S. federal statutory corporate income tax rate from 35% to 21%.

In the nine months ended September 30, 2018, cash flow from operating
activities was approximately $1.9 billion, exceeding $1.7 billion in
capital expenditures (additions to oil and natural gas properties).

Maintaining a Strong Financial Position

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

As previously reported, during third-quarter 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.

At September 30, 2018, Concho had cash of $24 million and long-term debt
of $4.1 billion, including $193 million of outstanding borrowings under
its credit facility.



For full-year 2018, the Company updated it guidance for natural gas
price realizations as a percent of NYMEX Henry Hub to 110%-120%;
gathering, processing and transportation expense to $0.55-$0.65 per Boe;
cash general and administrative expense to $2.30-$2.50 per Boe; and its
income tax rate to 24%.


Concho has a track record of generating free cash flow and delivering
strong production growth on both an absolute and per debt-adjusted share
basis. The Company's success is driven by its high-quality portfolio and
efficient execution. Concho's transition to manufacturing-style
development – and the transition of RSP's assets to manufacturing mode –
enhances the Company's ability to grow free cash flow, expand
profitability, improve return on capital employed (ROCE) and initiate
capital returns to shareholders.

Capital spending for 2019 is expected to be between $3.4 billion and
$3.6 billion. During 2019, Concho expects to run an average of 34 rigs,
increasing to approximately 38 rigs in 2020. In 2019, approximately 80%
of capital will be allocated to large-scale projects, up from two-thirds
of the Company's capital directed to large-scale projects in 2018.
Additionally, the Company's average lateral length will trend
significantly higher in 2019. The average lateral length for the program
is expected to be approximately 9,700 feet, up more than 20% year over
year. Oil production is expected to grow more than 25% from
fourth-quarter 2018 to fourth-quarter 2019. Further, Concho's planned
activity level is expected to drive two-year crude oil and total
production compound annual growth rates of 30% and 25%, respectively,
from 2018 to 2020. Importantly, disciplined capital allocation and
high-margin oil growth is expected to drive strong free cash flow
generation and improving ROCE in 2019 and 2020.

The Company's outlook for 2019 and 2020 excludes acquisitions and is
subject to change without notice depending upon a number of factors,
including commodity prices and industry conditions.

Capital Returns

Subject to declaration by the Board of Directors, the Company plans to
initiate a quarterly dividend of $0.125 per share in the first quarter
of 2019. The indicated annual rate of $0.50 per share underscores the
Company's outlook for strong free cash flow and its commitment to
sustainable, profitable growth and value creation.

Commodity Derivatives Update

The Company's commodity derivatives strategy is intended to manage its
exposure to commodity price fluctuations. Please see the table under
"Derivatives Information" below for detailed information about Concho's
current derivatives positions.

Conference Call

Concho will host a conference call tomorrow, October 31, 2018, at 8:00
AM CT (9:00 AM ET) to discuss third-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
Passcode: 3856276

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

Upcoming Conferences

The Company will present at the Bank of America Merrill Lynch Global
Energy Conference on November 15, 2018 at 12:20 PM CT (1:20 PM ET). The
presentation will be webcast and accessible on the Events &
Presentations page under the Investors section of the Company's website,

About Concho Resources

Concho Resources (NYSE:CXO) is the largest unconventional shale
producer in the Permian Basin, with operations focused on acquiring,
exploring, developing, and producing oil and natural gas resources.
Concho is at the forefront of applying advanced technology and
large-scale development to safely and efficiently maximize resource
recovery while delivering attractive, long-term economic returns. We are
working today to deliver a better tomorrow for our shareholders, people
and communities. For more information about Concho, visit

Forward-Looking Statements and Cautionary Statements

The foregoing contains "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. All statements, other than statements
of historical fact, included in this press release that address
activities, events or developments that the Company expects, believes or
anticipates will or may occur in the future are forward-looking
statements. Forward-looking statements contained in this press release
specifically include statements relating to benefits of the acquisition
of RSP. The words "estimate," "project," "predict," "believe," "expect,"
"anticipate," "potential," "could," "may," "enable," "foresee," "plan,"
"will," "guidance," "outlook," "goal" or other similar expressions that
convey the uncertainty of future events or outcomes are intended to
identify forward-looking statements, which generally are not historical
in nature. However, the absence of these words does not mean that the
statements are not forward-looking. These statements are based on
certain assumptions and analyses made by the Company based on
management's experience, expectations and perception of historical
trends, current conditions, current plans 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. The declaration and payment of any dividend described in
this release remains fully subject to further approval by the Board of
Directors, and no dividend has been declared or approved. These include
the risk factors and other information discussed or referenced in the
Company's most recent Annual Report on Form 10-K and other filings with
the SEC. Any forward-looking statement speaks only as of the date on
which such statement is made, and the Company undertakes no obligation
to correct or update any forward-looking statement, whether as a result
of new information, future events or otherwise, except as required by
applicable law. Information on Concho's website is not part of this
press release.

Use of Non-GAAP Financial Measures

To supplement the presentation of the company's financial results
prepared in accordance with U.S. generally accepted accounting
principles (GAAP), this press release contains certain financial
measures that are not prepared in accordance with GAAP, including
adjusted net income, adjusted net income per diluted share and EBITDAX.

See "Supplemental Non-GAAP Financial Measures" at the end of this press
release for a description and reconciliation of each non-GAAP measure
presented in this press release to the most directly comparable
financial measure calculated in accordance with GAAP.

The release also contains the non-GAAP term free cash flow. Free cash
flow is cash flow provided by operating activities in excess
of exploration and development costs incurred. The company believes that
free cash flow is useful to investors as it provides measures to compare
cash provided by operating activities and exploration and development
costs across periods on a consistent basis.

Additionally, return on capital employed, or ROCE, is a non-GAAP measure
that is defined as net income plus after-tax interest expense divided by
average stockholders' equity plus average net debt.


Concho Resources Inc.

Consolidated Balance Sheets


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