Concho Resources Inc. Reports 2013 Proved Reserves and Production

  Concho Resources Inc. Reports 2013 Proved Reserves and Production

Business Wire

MIDLAND, Texas -- February 6, 2014

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

  *Full-year production of 33.6 million barrels of oil equivalent (“MMBoe”),
    a 20% increase over 2012 production from continuing operations
  *Year-end estimated proved reserves of 503 MMBoe, a 13% increase over
    year-end 2012
  *Reserve replacement ratio^1 of 266%
  *Drill-bit finding and development (“F&D”) costs of $16.79 per Boe

^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 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 266% was calculated by
dividing net proved reserve additions of 89.4 MMBoe (the sum of extensions,
discoveries, revisions and purchases) by production of 33.6 MMBoe.

During 2013, Concho delivered another strong year of organic reserve
additions. Through extensions and discoveries, the Company added over 105
MMBoe of proved reserves and replaced 266% of full-year 2013 production after
adjusting for revisions. Proved reserves growth in 2013 reflected the
Company’s robust development and exploration activities in the Permian Basin,
where Concho is one of the largest and most active producers.

“We continue to focus our concentration on high-growth, high-return, crude oil
assets across the Permian Basin,” commented Tim Leach, Chairman, Chief
Executive Officer and President. “The success of our drilling program has
unlocked vast resource development opportunities in both the Delaware and
Midland Basins. Going forward, I expect the robust returns from our engineered
drilling inventory, plus the incremental resource potential throughout our
portfolio will continue to drive organic proved reserves growth for years to

The Delaware Basin, in particular, remains Concho’s most significant area of
capital investment and proved reserves growth. While the Company believes the
Delaware Basin is a premier oil play, limited development history currently
constrains the magnitude of proved reserves additions. During 2013, the
Company deployed $1 billion to the Delaware Basin, representing 63% of its
total capital spent. At year-end 2013, estimated proved reserves in the
Delaware Basin had increased 69% over year-end 2012, but represented only 27%
of the Company’s total estimated proved reserves.

“The Delaware Basin will feature prominently in future capital programs,
especially as we embark on our three-year plan to double production by
year-end 2016,” said Tim Leach. “Our confidence in the quality and scale of
the resource opportunity in the Delaware Basin, as well as the Midland Basin,
is rapidly growing as we continue to push the productive boundaries across our
acreage, delineate additional zones and test the potential for increased well
density. Going forward, we plan to provide operational updates with more
detail around resource potential and inventory depth beyond our set of
engineered drilling locations.”

(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,

Full-Year 2013 and Fourth Quarter Production

Concho’s production for 2013 totaled 33.6 MMBoe (21.1 MMBbls of crude oil and
75.1 Bcf of natural gas), a 20% increase over 2012 production from continuing
operations and in line with the Company’s production growth guidance for 2013.

As previously disclosed, the Company experienced volume curtailment in the New
Mexico Shelf core area due to midstream and infrastructure delays, resulting
in an estimated net production loss of over 500,000 Boe during 2013. Adjusting
for the New Mexico Shelf curtailment as well as the severe winter weather
curtailment during the fourth quarter, the Company estimates that it would
have delivered full-year 2013 production within the upper-half of its original
guidance range.

Notably during the year, crude oil production grew 25% over 2012 production
from continuing operations and represented 63% of total production as compared
to 60% in 2012.

Production in the fourth quarter 2013 was 8.9 MMBoe (5.8 MMBbls of crude oil
and 19.0 Bcf of natural gas), or 97.0 MBoe per day, a 14% increase over the
comparable prior-year period. Sequentially, Concho’s total fourth quarter 2013
production increased 3% over the previous quarter and crude oil production
during the fourth quarter increased 7% over the previous quarter, despite the
weather-related curtailments. Fourth quarter 2013 was Concho’s 16th
consecutive quarter to increase crude oil production from continuing
operations over the immediately previous quarter.

2013 Year-end Estimated Proved Reserves and Costs Incurred

Concho’s year-end estimated proved reserves increased to 503 MMBoe. Year-end
proved reserves were determined utilizing an average 2013 WTI posted oil price
of $93.42 per barrel and an average 2013 Henry Hub spot market natural gas
price of $3.67 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 basins in the continental U.S. The PV-10 of proved reserves at
year-end 2013 was $9.0 billion as compared to $8.3 billion at year-end 2012.
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 2012. In addition, 60% of Concho’s year-end estimated
proved reserves were proved developed, consistent with year-end 2012 and
reflective of the Company’s ability to consistently convert unproved resources
into proved reserves.

Exploration and development activity was the primary driver in the Company’s
2013 proved reserves growth, adding 105 MMBoe of proved reserves in the year.
The following reconciliation of Concho’s estimated proved crude oil and
natural gas reserves for year-end 2013 is based on reports prepared by Cawley,
Gillespie & Associates, Inc. and Netherland, Sewell & Associates, Inc.,
independent petroleum engineers.

Proved reserves at December 31, 2012   447
Purchase of minerals-in-place          2
Extensions and discoveries             105
Revisions of previous estimates        (17 )
Production                             (34 )
Proved reserves at December 31, 2013   503 

Concho is currently planning to operate a combined horizontal and vertical
drilling program in the Midland Basin. As a result, the Company does not plan
to drill a portion of its previously recorded vertical PUD (“proved
undeveloped”) locations in accordance with the SEC five-year PUD rule.
Therefore, the Company has reclassified approximately 10 MMBoe of PUD reserves
from the Texas Permian core area. This reduction is reflected in revisions of
previous estimates. Given limited horizontal production data from Concho’s
Texas Permian core area, the Company has not entirely replaced its
reclassified vertical PUD reserves with horizontal PUD reserves, but expects
to gain significant horizontal production data during 2014.

Concho’s total costs incurred in 2013 was $1.87 billion. Excluding $97 million
of acquisitions, the Company invested approximately $1.77 billion through its
exploration and development program, consistent with its full-year 2013
guidance. Concho’s costs incurred (including asset retirement costs) are as

                                                      Years Ended December 31,
                                                      2013          2012
                                                      (in millions)
Property acquisition costs                            $   97         $  1,299
Exploration                                               1,030         781
Development                                              738          741
Total costs incurred for oil and natural gas          $   1,865      $  2,821

For 2013, drill-bit F&D costs, defined as the total costs incurred for oil and
natural gas properties, less property acquisition costs, divided by extensions
and discoveries, were $16.79 per Boe, as compared to $16.56 per Boe in 2012.


During 2013, Concho remained one of the most active drillers in the Permian
Basin with one of the largest horizontal drilling rig fleets. The Company
exited the year with 26 total rigs, 22 of which were drilling horizontally.
Today, Concho is operating 31 rigs, 27 of which are drilling horizontally.

“The Permian Basin is experiencing a dramatic shift to horizontal drilling,
and over the last two years Concho has led the way,” said Tim Leach. “From
2012 to 2013 we significantly increased our horizontal capital allocation from
less than half to over 70%. Going forward, we expect to allocate roughly 90%
of our capital budget to horizontal development across all three of our core

In 2013 the Company drilled or participated in 633 wells (465 operated, 44%
horizontal) and completed 675 wells as producers. The table below summarizes
the Company’s gross drilling activities by core area for the fourth quarter
and full year 2013:

                     Total Wells         Operated Wells      Completed Wells^1
                     4Q 2013  FY 2013   4Q 2013  FY 2013   4Q 2013  FY 2013
New Mexico Shelf     26        197       6         83        34        223
Delaware Basin       63        202       49        149       50        192
Texas Permian        34        234       33        233       38        260
Total                123       633       88        465       122       675

^1 Excludes 4 wells that were plugged and abandoned in 2013.

Derivative Update

The Company maintains an active crude oil and natural gas hedging program and
has continued to add to its derivative positions. Please see the “Derivatives
Information” table at the end of this press release for more detailed
information about the Company’s current derivative positions.

Exploration and Abandonments Expense

Concho expects to incur estimated exploration and abandonments expense in the
fourth quarter of 2013 of approximately $72 million, of which approximately
$67 million is a non-cash charge. The majority of the total costs is related
to leasehold abandonments and dry hole costs from the Company’s Terry County
acreage position. Concho drilled two wells on this acreage which were
uneconomic. The Terry County acreage position was an exploration play and is
not a component of the Company’s previously announced three-year accelerated
growth plan. The table below provides a breakdown of preliminary exploration
and abandonments expense for the fourth quarter of 2013:

                                     Three Months Ended
                                       December 31,
                                       (in millions)
Geological and geophysical             $        4
Exploratory dry hole costs                      31
Leasehold abandonments                          36
Other                                          1
Total exploration and abandonments     $        72

The (i) geological and geophysical costs and (ii) exploratory dry hole costs
components of total exploration and abandonments expense in the fourth quarter
of 2013 are expected to be approximately $35 million and will reduce adjusted
net income (non-GAAP) by this amount. The Company expects the impact to
after-tax adjusted earnings per share (non-GAAP) will be approximately $0.20
per share in the fourth quarter of 2013.

Fourth Quarter 2013 Conference Call

Further information regarding 2013 reserves, engineered inventory and
additional resource potential will be discussed during Concho’s quarterly
conference call scheduled for Thursday, February 20, 2014, at 9:00 a.m. CST,
when Concho will also discuss its fourth quarter and full-year 2013 financial
and operating results with an accompanying presentation.

Individuals who would like to participate should call (877) 415-3186
(passcode: 28809385) approximately 15 minutes before the scheduled conference
call time. To access the live audio webcast and download the accompanying
presentation, please visit the investor relations section of the Company's

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 primarily focused in the Permian
Basin of Southeast New Mexico and West Texas. For more information, visit
Concho's website at

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

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, 2013 and 2012:

                                                     December 31,
                                                       2013        2012
                                                       (in millions)
PV-10                                                  $ 9,030     $ 8,327
Present value of future income taxes discounted at      (2,786 )    (2,539 )
Standardized measure of discounted future net cash     $ 6,244     $ 5,788  

Concho Resources Inc.
Derivatives Information

The table below provides data associated with our derivatives at February 6, 2014.
              1Q              2Q              3Q              4Q              Total             2015          2016       2017
Oil Swaps:
    Volume      5,075,000       4,544,000       4,116,000       3,833,000       17,568,000       12,812,000     429,000     168,000
    Price     $ 93.65         $ 92.69         $ 91.23         $ 91.09         $ 92.27          $ 86.86        $ 88.31     $ 87.00
    per Bbl
Oil Basis
Swaps: (b)
    Volume      2,790,000       3,458,000       3,680,000       3,680,000       13,608,000       -              -           -
    Price     $ (0.46     )   $ (0.72     )   $ (0.92     )   $ (0.92     )   $ (0.78      )   $ -            $ -         $ -
    per Bbl
Natural Gas
Swaps: (c)
    Volume      3,812,000       3,001,000       2,300,000       1,777,000       10,890,000       20,075,000     -           -
    per       $ 4.19          $ 4.18          $ 4.19          $ 4.19          $ 4.19           $ 4.15         $ -         $ -
Natural Gas
    Volume      5,400,000       5,460,000       5,520,000       5,520,000       21,900,000       -              -           -
    Price     $ 4.40          $ 4.40          $ 4.40          $ 4.40          $ 4.40           $ -            $ -         $ -
    Price     $ 3.85          $ 3.85          $ 3.85          $ 3.85          $ 3.85           $ -            $ -         $ -
(a) The index prices for the oil swaps are based on the 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.
(d) The index prices for the natural gas collars are based on the El Paso Permian delivery point.


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