Concho Resources Inc. Provides 2012 Operational Update and Increases 2013 Production Guidance

  Concho Resources Inc. Provides 2012 Operational Update and Increases 2013
  Production Guidance

Business Wire

MIDLAND, Texas -- February 7, 2013

Concho Resources Inc. (NYSE: CXO) (“Concho” or the “Company”) today provided a
2012 operational update, including full-year production, year-end estimated
proved reserves and updated 2013 production guidance. Highlights include:

  *Full-year production of 29.8 million barrels of oil equivalent (“MMBoe”),
    a 26% increase over 2011
  *Year-end estimated proved reserves of 447.2 MMBoe, a 16% increase over
    year end 2011
  *Reserve replacement ratio^1 of 422%
  *Over 12,200 identified gross drilling opportunities, including over 4,200
    in the northern Delaware Basin
  *Increased 2013 production guidance range to 33.4 – 34.8 MMboe

^1 The Company uses the reserve 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. It should be noted that the reserve replacement ratio is a
statistical indicator that has limitations. The ratio 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 imbed 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 422% was calculated by
dividing net proved reserve additions of 125.7 MMBoe (the sum of extensions,
discoveries, revisions and purchases) by production of 29.8 MMBoe.

Since 2007, the same year Concho completed its initial public offering,
through 2012 total proved reserves have grown at a five-year compounded annual
growth rate of 37%. Proved reserves growth in 2012 was constrained by the
limited development history in the Delaware Basin, Concho’s most significant
area of capital investment. At year-end 2012, estimated proved reserves in the
Delaware Basin increased 64% over year-end 2011, but represented only 18% of
the Company’s total estimated proved reserves.

“We are in the very early stages of driving proved reserves and production
growth in the Delaware Basin,” commented Tim Leach, Chairman, Chief Executive
Officer and President. “Our drilling inventory in the northern Delaware Basin
has expanded rapidly to over 4,200 gross locations, only 250 of which are
currently identified as proved. Going forward, I expect that the robust
returns from this deep inventory will continue to drive organic production and
proved reserves growth for years to come.”

During 2012, the Company enhanced the sustainability of its long-term growth
strategy through a combination of its development and exploration program, as
well as the Three Rivers acquisition and subsequent non-core asset
divestiture. “We have expanded the opportunity to reinvest capital across the
Permian Basin without having to sacrifice returns,” said Tim Leach. At
year-end 2012, gross acreage across the Permian Basin increased to 1.2 million
acres, a 24% increase over the previous year. Much of that growth occurred in
the Delaware Basin, where the Company now has exposure to over 475,000 gross
acres.

(The following information is unaudited and preliminary. Final results will be
provided in the Annual Report on Form 10-K for the year ended December 31,
2012.)

Full-Year and Fourth Quarter 2012 Production and Revised 2013 Production
Guidance

Concho’s production for 2012 totaled 29.8 MMBoe (18.0 MMBbls of crude oil and
70.6 Bcf of natural gas), a 26% increase over 2011 production of 23.6 MMBoe
and represents achievement of the upper-end of the Company’s 2012 full-year
guidance. Crude oil production in 2012 grew 23% over 2011 and represented 60%
of total production.

Adjusting for acquisitions during the year, organic production in 2012 totaled
28.5 MMBoe (61% crude oil), a 21% increase over total production in 2011. Tim
Leach commented, “Concho has delivered over 20% organic production growth
every year as a public company while spending largely within cash flow. That
is a significant accomplishment and reflects the high-quality nature of our
assets in the oil-rich Permian Basin.”

Production in the fourth quarter 2012 was 8.2 MMBoe (5.0 MMBbls of crude oil
and 19.6 Bcf of natural gas), a 26% increase over the comparable prior-year
period. Sequentially, Concho’s total fourth quarter 2012 production increased
5.3% over the previous quarter and crude oil production during the fourth
quarter increased 7.2% over the previous quarter.

The Delaware Basin core area, where the Company has an active horizontal
drilling program targeting the Avalon shale, Bone Spring sands and Wolfcamp
shale, was the most significant contributor of total production growth in
2012. The Company expects to allocate over 50% of its total 2013 drilling and
completion budget to the Delaware Basin.

As a result of the Company’s strong production growth in the fourth quarter of
2012, Concho has revised its 2013 annual production guidance range as follows:

                          Previous      New
2013 Production (MMBoe)     32.9 - 34.3     33.4 - 34.8
                                            

2012 Year-end Estimated Proved Reserves and Costs Incurred

Concho’s year-end estimated proved reserves increased to 447.2 MMBoe. Year-end
proved reserves were determined utilizing an average 2012 WTI posted oil price
of $91.21 per barrel and an average 2012 Henry Hub spot market natural gas
price of $2.76 per MMBtu. Substantially all of the Company’s proved reserves
are located in the Permian Basin, which remains one of the most active and
prolific oil basin in the continental U.S. The PV-10 of proved reserves at
December 31, 2012 was $8.3 billion. Please refer to the attached table for a
reconciliation of PV-10 to the standardized measure of discounted future net
cash flows.

Crude oil represented over 61% of year-end estimated proved reserves,
consistent with year-end 2011, despite a significant natural gas-weighted
acquisition and an oil-weighted divestiture during 2012. In addition, 61% of
Concho’s year-end estimated proved reserves were proved developed, consistent
with year-end 2011 and reflective of the Company’s ability to consistently
convert unproved resources into proved reserves.

The following reconciliation of Concho’s estimated proved oil and natural gas
reserves for year-end 2012 are based on reports prepared by Cawley, Gillespie
& Associates, Inc. and Netherland, Sewell & Associates, Inc., independent
petroleum engineers.

                                      MMBoe
Proved reserves at December 31, 2011   386.5
Purchase of minerals-in-place            56.5
Sales of minerals-in-place               (35.3 )
Extensions and discoveries               91.9
Revisions of previous estimates^1        (22.6 )
Production                              (29.8 )
Proved reserves at December 31, 2012    447.2 

^1 Includes 5.1 MMBoe of negative revisions due to price.

Concho’s costs incurred (including asset retirement costs) are as follows:

                                                 Years Ended December 31,
                                                   2011          2012
                                                   (In thousands)
Property acquisition costs                         $ 524,979     $ 1,298,878
Exploration                                          562,679         781,174
Development                                         744,481        741,206
Total costs incurred for oil and natural gas       $ 1,832,139     $ 2,821,258
properties
                                                                     

For 2012, drill-bit finding and development costs, defined as the total costs
incurred for oil and natural gas properties, less property acquisition costs,
divided by extensions and discoveries, were $16.56 per Boe, as compared to
$15.11 per Boe in 2011.

Operations

During 2012, Concho was once again one of the most active drillers in the
Permian Basin. The Company drilled or participated in 840 wells and exited the
year operating 30 rigs, half of which were drilling horizontally. “A major new
theme that emerged in 2012 was our horizontal development efforts across our
portfolio,” said Tim Leach. “I expect Concho’s horizontal activity will
continue to increase as areas like the Delaware Basin and other emerging
opportunities evolve into full-scale development.”

The table below summarizes the Company’s gross drilling activities by core
area for the fourth quarter and full-year 2012:

                  Total Wells^1      Operated Wells     Completed Wells
                   4Q 2012  FY 2012   4Q 2012  FY 2012   4Q 2012  FY 2012
New Mexico Shelf   73        360       29        251       85        348
Delaware Basin     45        154       29        87        47        134
Texas Permian      78        326       77        319       78        316
Total              196       840       135       657       210       798

^1 Includes five wells that were plugged and abandoned in 2012.

The success of Concho’s acquisitions and 2012 exploration and development
program resulted in the addition of over 3,300 new gross drilling locations,
bringing the total to 12,269. The following table highlights 2012 year-end
gross drilling locations and estimated proved reserves by core area.

                     Gross       YE Proved Reserves (MMBoe)
                       Locations     2011            2012
New Mexico Shelf:      2,083         210.3            224.5
Yeso (Vertical)        1,044
Yeso (Horizontal)      676
Other                  363
Delaware Basin:        4,212         49.7             81.7
Avalon shale           1,016
Bone Spring sands      2,462
Other                  734
Texas Permian:         5,974         126.5            141.0
Wolfberry 40 acres     1,955
Wolfberry 20 acres     2,486
Shallow Wolfcamp       1,410
Other                  123
Total                  12,269        386.5            447.2
                                                      

During 2012, the Company increased its Delaware Basin drilling inventory by
over 2,300 after taking into account the 154 Delaware Basin wells drilled in
2012. The inventory in the Delaware Basin does not include any locations in
the southern Delaware Basin where the Company has an active exploration
program. It also does not significantly include any locations targeting zones
in the Delaware sands or Penn shale, which the Company plans to further test
during 2013.

Estimated proved reserves in the Delaware Basin at year-end 2012 grew 64% over
the previous year but only accounted for 18% of the Company’s total estimated
proved reserves. Also of note, only 6% of the Company’s year-end 2012 Delaware
Basin drilling locations were booked as proved. Concho anticipates that
capital spending in 2013 in the Delaware Basin will be approximately $760
million, over 50% more than in 2012, and will drill approximately 175 wells.

Fourth Quarter and Full-Year 2012 Realized Prices

In the fourth quarter of 2012, the average discount on the Midland-to-Cushing
WTI oil basis differential was approximately $3.57 per Bbl. This historically
wide discount had an adverse effect on the Company’s unhedged crude oil
realization during the quarter; however, the Company’s full-year 2012 unhedged
crude oil realization remained within annual guidance. The table below
summarizes average unhedged realized crude oil and natural gas prices for the
fourth quarter and full-year 2012:

                                               4Q 2012   FY 2012
                                                             
NYMEX crude oil (Bbl)                            $ 88.17     $ 94.19
Realized crude oil, excluding hedges (Bbl)       $ 81.28     $ 88.01
                                                             
NYMEX natural gas (Mcf)                          $ 3.35      $ 2.83
Realized natural gas, excluding hedges (Mcf)     $ 5.06      $ 5.03
                                                               

Derivative Update

The Company maintains an active hedging program and has added to its
derivative positions. In addition to incremental crude oil swaps, Concho has
added hedges that limit the Company’s exposure to the Midland-to-Cushing
differential. Concho has hedged 7.7 MMBbls of the basis differential at an
average price of $1.25 per Bbl from April 2013 to December 2013. Please see
the “Derivatives Information” table at the end of this press release for more
detailed information about the Company’s current derivative positions.

Credit Facility

At December 31, 2012, the Company had borrowings outstanding under the credit
facility of $304.0 million, and the availability under the credit facility was
approximately $2.2 billion.

About Concho Resources Inc.

Concho Resources Inc. is an independent oil and natural gas company engaged in
the acquisition, development and exploration 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 Concho’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
facts, 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. Without limiting the
generality of the foregoing, forward-looking statements contained in this
press release specifically include statements, estimates and projections
regarding the Company's future financial position, liquidity and capital
resources, operations, performance, production growth, acquisitions, returns,
capital expenditure budgets, oil and natural gas reserves, number of
identified drilling locations, drilling program, derivative activities, costs
and other guidance included in this press release. These statements are based
on certain assumptions made by the Company based on management's experience,
expectations and perception of historical trends, current conditions,
anticipated future developments and other factors believed to be appropriate.
Forward-looking statements are not guarantees of performance. Although the
Company believes the expectations reflected in its forward-looking statements
are reasonable and are based on reasonable assumptions, no assurance can be
given that these assumptions are accurate or that any of these expectations
will be achieved (in full or at all) or will prove to have been correct.
Moreover, such statements are subject to a number of assumptions, risks and
uncertainties, many of which are beyond the control of the Company, which may
cause actual results to differ materially from those implied or expressed by
the forward-looking statements. These include the factors discussed or
referenced in the "Risk Factors" section of the Company's most recent Form
10-K and 10-Q filings and risks relating to declines in the prices we receive
for our oil and natural gas; uncertainties about the estimated quantities of
reserves; risks related to the integration of acquired assets; the effects of
government regulation, permitting and other legal requirements, including new
legislation or regulation of hydraulic fracturing; drilling and operating
risks; the adequacy of our capital resources and liquidity; risks related to
the concentration of our operations in the Permian Basin; the results of our
hedging program; weather; litigation; shortages of oilfield equipment,
services and qualified personnel and increases in costs for such equipment,
services and personnel; uncertainties about our ability to replace reserves
and economically develop our current reserves; competition in the oil and
natural gas industry; our existing indebtedness; 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.
                          Non-GAAP Financial Measure
                                  Unaudited

PV-10 is derived from the standardized measure of discounted future net cash
flows, which is the most directly comparable GAAP financial measure. PV-10 is
a computation of the standardized measure of discounted future net cash flows
on a pre-tax basis. PV-10 is equal to the standardized measure of discounted
future net cash flows at the applicable date, before deducting future income
taxes, discounted at 10 percent. The Company believes that the presentation of
the PV-10 is relevant and useful to investors because it presents the
discounted future net cash flows attributable to our estimated net proved
reserves prior to taking into account future corporate income taxes, and it is
a useful measure for evaluating the relative monetary significance of our oil
and natural gas properties. Further, investors may utilize the measure as a
basis for comparison of the relative size and value of our reserves to other
companies. The Company uses this measure when assessing the potential return
on investment related to our oil and natural gas properties. PV-10, however,
is not a substitute for the standardized measure of discounted future net cash
flows. The Company’s PV-10 measure and the standardized measure of discounted
future net cash flows do not purport to present the fair value of our oil and
natural gas reserves.

The following table provides a reconciliation of PV-10 to the standardized
measure of discounted future net cash flows at December 31, 2011 and 2012:

                                                   December 31,
                                                      2011       2012   
                                                     (In millions)
PV-10                                                $ 8,400      $ 8,327
Present value of future income taxes discounted       (2,699 )      (2,539 )
at 10%
Standardized measure of discounted future net        $ 5,701       $ 5,788  
cash flows
                                                                             

                            Concho Resources Inc.
                           Derivatives Information
                                  Unaudited

The table below provides data associated with our derivatives at February 7,
2013.

              2013                                                                                                               
               First        Second         Third Quarter  Fourth         Total            2014           2015          2016        2017
               Quarter       Quarter                         Quarter
Oil Swaps:
Volume (Bbl)     4,116,000     3,801,000       3,446,000       3,188,000       14,551,000       10,928,000     1,076,000     429,000     168,000
NYMEX price    $ 95.84       $ 95.84         $ 95.57         $ 95.34         $ 95.67          $ 91.57        $ 86.69       $ 88.31     $ 87.00
(Bbl) (a)
                                                                                                                                       
Oil Basis
Swaps:
Volume (Bbl)     -             2,548,000       2,576,000       2,576,000       7,700,000        -              -             -           -
Price
differential     -           $ (1.26     )   $ (1.25     )   $ (1.25     )   $ (1.25      )   $ -            $ -           $ -         $ -
($/Bbl) (b)

(a) The index prices for the oil contracts are based on the NYMEX-West Texas
Intermediate monthly average futures prices.

(b) The basis differential price is between Midland-West Texas Intermediate
and Cushing-West Texas Intermediate.

Contact:

Concho Resources Inc.
Price Moncrief, 432-683-7443
Vice President of Capital Markets and Strategy
 
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