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Concho Resources Inc. Reports Fourth Quarter 2013 and Year End Financial and Operating Results



  Concho Resources Inc. Reports Fourth Quarter 2013 and Year End Financial and
  Operating Results

Business Wire

MIDLAND, Texas -- February 19, 2014

Concho Resources Inc. (NYSE: CXO) (“Concho” or the “Company”) today reported
financial and operating results for the three months and year ended December
31, 2013. Highlights for the year ended December 31, 2013 include:

  * Production of 33.6 million barrels of oil equivalent (“MMBoe”) for 2013, a
    20% increase over 2012 production from continuing operations
  * Net income of $251.0 million, or $2.39 per diluted share, for 2013, as
    compared to net income of $431.7 million, or $4.15 per diluted share, in
    2012
  * Adjusted net income^1 (non-GAAP) of $368.7 million, or $3.51 per diluted
    share, for 2013, as compared to $388.9 million, or $3.74 per diluted
    share, for 2012
  * EBITDAX^2 (non-GAAP) of $1,685.6 million for 2013, a 14% increase over
    2012

^1 Adjusted net income (non-GAAP) is comparable to securities analyst
estimates. For an explanation of how we calculate adjusted net income
(non-GAAP) and a reconciliation of net income (GAAP) to adjusted net income
(non-GAAP), please see "Supplemental Non-GAAP Financial Measures" below.

^2 For an explanation of how we calculate and use EBITDAX (non-GAAP) and a
reconciliation of net income (GAAP) to EBITDAX (non-GAAP), please see
"Supplemental Non-GAAP Financial Measures" below.

Financial Results

Production for 2013 totaled 33.6 MMBoe (21.1 million barrels of oil (“MMBbls”)
and 75.1 billion cubic feet of natural gas (“Bcf”)), an increase of 20% as
compared to 28.0 MMBoe (16.9 MMBbls of crude oil and 66.6 Bcf of natural gas)
produced in 2012 from continuing operations.

In the fourth quarter of 2013 production was 8.9 MMBoe (5.8 MMBbls of crude
oil and 19.0 Bcf of natural gas), or 97.0 thousand barrels of oil equivalent
(“MBoe”) per day, a 14% increase over the comparable prior-year period of 7.8
MMBoe (4.7 MMBbls of crude oil and 18.5 Bcf of natural gas). Sequentially,
Concho’s total fourth quarter 2013 production increased 3% as compared to the
previous quarter of 8.7 MBoe (5.4 MMBbls of crude oil and 19.6 Bcf of natural
gas) and crude oil production during the fourth quarter increased 7% over the
previous quarter, despite the winter weather-related curtailments. The fourth
quarter of 2013 was Concho’s 16th consecutive quarter to increase crude oil
production from continuing operations over the immediately previous quarter.

“We are in a unique position of hitting our execution stride just as we are
beginning to define the true depth and scale of the resource potential that
exists across our assets,” commented Tim Leach, Chairman, Chief Executive
Officer and President. “Concho delivered substantial crude oil growth during
2013 while building the largest horizontal development program in the Permian
Basin. As we enter the first year of our acceleration plan to double
production by year-end 2016, we have significant momentum and opportunity to
continue our track record of solid execution and growth.”

For 2013, the Company reported net income of $251.0 million, or $2.39 per
diluted share, as compared to net income of $431.7 million, or $4.15 per
diluted share, for 2012. The Company’s 2013 results were impacted by several
non-cash and unusual items including: (1) a $123.7 million loss on derivatives
not designated as hedges, (2) $32.3 million in cash payments on commodity
derivatives, (3) $65.4 million of impairments of long-lived assets, (4) $49.8
million of leasehold abandonments, (5) a $28.6 million loss on extinguishment
of debt, (6) a $1.3 million loss on disposition of assets, net, (7) $11.4
million of other settlements, (8) a $19.6 million gain related to the
disposition of non-core assets included in discontinued operations and (9) a
$21.9 million benefit for a change in state statutory effective income tax
rate. Excluding these items and their tax effects, the 2013 adjusted net
income (non-GAAP) was $368.7 million, or $3.51 per diluted share. Excluding
similar non-cash items and their tax impact, adjusted net income (non-GAAP)
for 2012 was $388.9 million, or $3.74 per diluted share. For a description and
a reconciliation of net income (GAAP) to adjusted net income (non-GAAP),
please see “Supplemental Non-GAAP Financial Measures” below.

EBITDAX was $1,685.6 million in 2013, an increase of 14% from $1,475.6 million
in 2012. For a description and a reconciliation of net income (GAAP) to
EBITDAX (non-GAAP), please see “Supplemental Non-GAAP Financial Measures”
below.

Oil and natural gas sales from continuing operations for 2013 increased 27%
when compared to 2012. This increase was attributable to a 20% increase in
production from continuing operations in 2013 compared to 2012 and a 4%
increase in the Company’s unhedged realized oil price in 2013 compared to
2012.

Oil and natural gas production expense from continuing operations for 2013,
including oil and natural gas taxes, totaled $455.4 million, or $13.54 per
barrel of oil equivalent (“Boe”), a 10% increase per Boe from 2012. This
increase was due primarily to higher lease operating expenses (“LOE”) and
workover costs, which averaged $7.85 per Boe in 2013 as compared to $6.90 per
Boe in 2012. The increase in LOE and workover costs per Boe during 2013 was
primarily due to increased activity in higher-cost areas with developing
infrastructure, like the Delaware Basin.

Depreciation, depletion and amortization expense (“DD&A”) from continuing
operations for 2013 totaled $772.6 million, or $22.97 per Boe, a 12% increase
per Boe from 2012.

General and administrative expense (“G&A”) from continuing operations for 2013
totaled $169.8 million, or $5.04 per Boe, as compared to $133.8 million, or
$4.79 per Boe, in 2012. Cash G&A expenses for 2013 totaled $134.7 million and
stock-based compensation (non-cash) totaled $35.1 million. The increase in per
Boe expense for 2013 over 2012 was primarily due to a 27% increase in absolute
G&A expenses reflecting increased staffing across the Company, and was
partially offset by a 20% increase in production from continuing operations.

The Company’s cash flow from operating activities (GAAP) was $1,362.0 million
for 2013, as compared to $1,237.5 million for 2012, an increase of 10%.
Adjusted cash flows (non-GAAP), which are cash flows from operating activities
(GAAP) adjusted for settlements on derivatives not designated as hedges, were
$1,329.7 million for 2013, as compared to $1,261.0 million for 2012, an
increase of 5%. For a description of the use of adjusted cash flows (non-GAAP)
and for a reconciliation of cash flows from operating activities (GAAP) to
adjusted cash flows (non-GAAP), please see “Supplemental Non-GAAP Financial
Measures” below.

Operations

For 2013, the Company commenced drilling or participated in a total of 633
gross wells (465 operated, 44% horizontal), 4 of which were unsuccessful, 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         26        197         6         83          34        223
Shelf
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 unsuccessful in 2013.

Currently, the Company is operating 34 drilling rigs; 2 of these rigs are
drilling Yeso wells in the New Mexico Shelf, 11 are drilling in the Texas
Permian and 21 are drilling in the Delaware Basin. Of the 34 operated rigs,
the Company is currently running 30 horizontal drilling rigs, including 21 in
the Delaware Basin, 7 in the Texas Permian and 2 in the New Mexico Shelf.

Year-End 2013 Location Update

At year-end 2013, the Company had identified approximately 22,000 drilling
locations across its 1.2 million gross (605,000 net) acreage position. The
resource potential associated with these 22,000 drilling locations including
what the Company has identified as proved is approximately six times the
Company's year-end 2013 proved reserves of 503 MMBoe.

New Mexico Shelf

At year-end 2013, the Company had identified approximately 2,700 drilling
locations in the New Mexico Shelf. Of these 2,700 drilling locations,
approximately 1,100 locations target the Yeso formation vertically and
approximately 1,250 locations target the Yeso formation horizontally.

As previously disclosed, the New Mexico Shelf experienced natural gas
processing issues during 2013, which the Company estimates to have reduced
full-year volumes by over 500 MBoe. Recently, the Company has seen continued
improvement in line pressures and is monitoring multiple projects designed to
further improve processing and takeaway capacity that are currently being
developed and expected to be operational by mid-2014.

Delaware Basin

At year-end 2013, the Company had identified approximately 10,600 drilling
locations in the Delaware Basin. In the northern Delaware Basin, these
locations include approximately 6,000 locations targeting the Bone Spring
sands, approximately 1,500 targeting the Avalon shale, approximately 1,400
targeting the Wolfcamp, and approximately 850 targeting the Brushy Canyon. In
the southern Delaware Basin, these locations include approximately 800
Wolfcamp and 2^nd Bone Spring sands locations.

Of the 63 wells drilled in the Delaware Basin in the fourth quarter of 2013,
45 were Bone Spring sands wells, 12 were Wolfcamp shale wells, 5 were Brushy
Canyon wells, and 1 was an Avalon shale well. The Company’s net production in
the fourth quarter of 2013 from horizontal Delaware Basin wells averaged
approximately 35.9 MBoe per day, an increase of 70% over the fourth quarter of
2012 and an increase of 7% over the third quarter of 2013.

In the northern Delaware Basin, 26 new wells had at least 30 days of
production by the end of the fourth quarter of 2013, with an average 30-day
rate of 749 barrels of oil equivalent per day (“Boepd”) (77% oil) and an
average 24-hour peak rate of 1,121 Boepd from an average lateral length of
4,327 feet.

In the southern Delaware Basin, 21 wells had at least 30 days of production by
the end of the fourth quarter of 2013, with an average 30-day rate of 984
Boepd (80% oil) and an average 24-hour peak rate of 1,303 Boepd from an
average lateral length of 4,378 feet.

Texas Permian

At year-end 2013, the Company had identified approximately 8,500 drilling
locations. Of these 8,500 drilling locations, approximately 1,800 target the
vertical Wolfberry play on 40-acre spacing, approximately 2,500 target the
vertical Wolfberry play on 20-acre spacing, approximately 1,400 target the
vertical shallow Wolfcamp and approximately 2,500 target the horizontal
Spraberry and Wolfcamp.

In the Texas Permian, 12 horizontal wells had at least 30 days of production
by the end of the fourth quarter of 2013, with an average 30-day rate of 614
Boepd (75% oil) and an average 24-hour peak rate of 915 Boepd (78% oil) from
an average lateral length of 4,415 feet.

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.

Credit Facility

At December 31, 2013, the Company had borrowings outstanding under its credit
facility of $250.0 million, and the availability under the credit facility was
approximately $2.2 billion.

Guidance

The Company’s 2014 production guidance range is 18 - 22% growth over 2013
volumes. For the first quarter of 2014, the Company expects production to
average between 98 - 101 MBoe per day. Additionally, the Company is
forecasting first quarter of 2014 LOE to be above the full year guidance range
of $7.50 - $8.00 per Boe due, in part, to increased costs associated with
restoring production from the winter weather in the fourth quarter of 2013.
However, the Company expects full year 2014 lease operating expense to fall
within the original guidance range of $7.50 - $8.00 per Boe.

Conference Call and Presentation Information

The Company will host a conference call with an accompanying presentation on
Thursday, February 20, 2014, at 9:00 a.m. CST to further discuss information
regarding 2013 reserves, inventory and fourth quarter and full-year 2013
financial and operating results. Interested parties may listen to the
conference call via the Company’s website at www.concho.com or by dialing
(877) 415-3186 (passcode: 28809385). The presentation is also available on the
Company’s website. To access the presentation, visit www.concho.com and select
“Investor Relations,” then “Presentations.”

A replay of the conference call will be available on the Company’s website or
by dialing (888) 286-8010 (passcode: 17690036).

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, operations, performance,
production growth, returns, divestitures, capital expenditure budget, the
proceeds of the sale of the non-core properties, oil and natural gas reserves,
number of identified drilling locations, drilling program, derivative
activities, costs and other guidance. 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; and other important factors that could cause actual
results to differ materially from those projected.

We may use the terms “unproved reserves,” “resource potential,” “EUR” per well
and “upside potential” to describe estimates of potentially recoverable
hydrocarbons that the U.S. Securities and Exchange Commission (“SEC”) rules
prohibit from being included in filings with the SEC. These are based on
analogy to the Company’s existing models applied to additional acres,
additional zones and tighter spacing and are the Company’s internal estimates
of hydrocarbon quantities that may be potentially discovered through
exploratory drilling or recovered with additional drilling or recovery
techniques. These quantities may not constitute “reserves” within the meaning
of the Society of Petroleum Engineer’s Petroleum Resource Management System or
SEC rules. EUR estimates, resource potential and drilling locations have not
been fully risked by Company management and are inherently more speculative
than proved reserves estimates. Actual locations drilled and quantities that
may be ultimately recovered from the Company’s interests could differ
substantially. There is no commitment by the Company to drill all of the
drilling locations which have been attributed to these quantities. Factors
affecting ultimate recovery include the scope of our ongoing drilling program,
which will be directly affected by the availability of capital, drilling and
production costs, availability of drilling services and equipment, drilling
results, lease expirations, transportation constraints, regulatory approvals
and other factors; and actual drilling results, including geological and
mechanical factors affecting recovery rates. Estimates of unproved reserves,
resource potential, per well EUR and upside potential may change significantly
as development of the Company’s oil and natural gas assets provide additional
data. Our production forecasts and expectations for future periods are
dependent upon many assumptions, including estimates of production decline
rates from existing wells and the undertaking and outcome of future drilling
activity, which may be affected by significant commodity price declines or
drilling cost increases.

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
 
                                                               
                                             December 31,
(in thousands, except share and per            2013               2012        
share amounts)
Assets
Current assets:
Cash and cash equivalents                    $ 21               $ 2,880
Accounts receivable, net of allowance
for doubtful accounts:
Oil and natural gas                            223,790            198,053
Joint operations and other                     247,945            202,738
Derivative instruments                         590                35,942
Deferred income taxes                          30,069             -
Prepaid costs and other                        18,460             19,269      
Total current assets                           520,875            458,882     
Property and equipment:
Oil and natural gas properties,                11,215,373         9,455,599
successful efforts method
Accumulated depletion and depreciation         (2,384,108 )       (1,565,316 )
Total oil and natural gas properties,          8,831,265          7,890,283
net
Other property and equipment, net              114,783            103,141     
Total property and equipment, net              8,946,048          7,993,424   
Deferred loan costs, net                       73,048             77,609
Intangible asset - operating rights, net       28,615             30,076
Inventory                                      19,682             20,611
Noncurrent derivative instruments              966                2,769
Other assets                                   1,930              6,066       
Total assets                                 $ 9,591,164        $ 8,589,437   
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable:
Trade                                        $ 13,936           $ 31,144
Related parties                                -                  185
Bank overdrafts                                36,718             24,275
Revenue payable                                177,617            162,073
Accrued and prepaid drilling costs             318,296            351,919
Derivative instruments                         53,701             1,584
Deferred income taxes                          -                  8,566
Other current liabilities                      156,600            160,340     
Total current liabilities                      756,868            740,086     
Long-term debt                                 3,630,421          3,101,103
Deferred income taxes                          1,334,653          1,186,621
Noncurrent derivative instruments              14,088             12,049
Asset retirement obligations and other         97,185             83,382
long-term liabilities
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.001 par value;
300,000,000 authorized; 105,222,765 and
104,668,427
shares issued at December 31, 2013 and         105                105
2012, respectively
Additional paid-in capital                     2,027,162          1,982,714
Retained earnings                              1,741,566          1,490,563
Treasury stock, at cost; 127,305 and
86,861 shares at December 31, 2013 and         (10,884    )       (7,186     )
2012, respectively
Total stockholders’ equity                     3,757,949          3,466,196   
Total liabilities and stockholders’          $ 9,591,164        $ 8,589,437   
equity
 

 
 
Concho Resources Inc.
Consolidated Statements of Operations
Unaudited
 
                                                                    
                   Three Months Ended              Years Ended
                   December 31,                    December 31,
(in thousands,
except per           2013            2012            2013              2012       
share amounts)
                                                                      
Operating
revenues:
Oil sales          $ 525,546       $ 383,494       $ 1,938,433       $ 1,482,998
Natural gas          106,540         94,032          381,486           336,816    
sales
Total
operating            632,086         477,526         2,319,919         1,819,814  
revenues
Operating
costs and
expenses:
Oil and
natural gas          127,141         92,102          455,436           343,743
production
Exploration
and                  71,752          12,505          109,549           39,840
abandonments
Depreciation,
depletion and        214,833         166,453         772,608           575,128
amortization
Accretion of
discount on
asset                1,637           1,361           6,047             4,187
retirement
obligations
Impairments of
long-lived           -               -               65,375            -
assets
General and
administrative
(including
non-cash
stock-based
compensation
of
$9,800 and
$8,438 for the
three months
ended December
31, 2013 and
2012,
respectively,
and $35,078
and $29,872
for the years
ended
December 31,
2013 and 2012,       44,695          37,802          169,815           133,796
respectively)
(Gain) loss on
derivatives          (33,651 )       (17,901 )       123,652           (127,443  )
not designated
as hedges
Total
operating            426,407         292,322         1,702,482         969,251    
costs and
expenses
Income from          205,679         185,204         617,437           850,563    
operations
Other income
(expense):
Interest             (56,401 )       (53,632 )       (218,581  )       (182,705  )
expense
Loss on
extinguishment       -               -               (28,616   )       -
of debt
Other, net           (11,275 )       (3,670  )       (13,081   )       (8,587    )
Total other          (67,676 )       (57,302 )       (260,278  )       (191,292  )
expense
Income from
continuing
operations           138,003         127,902         357,159           659,271
before income
taxes
Income tax           (32,214 )       (46,714 )       (118,237  )       (251,041  )
expense
Income from
continuing           105,789         81,188          238,922           408,230
operations
Income (loss)
from
discontinued         -               (5,901  )       12,081            23,459     
operations,
net of tax
Net income         $ 105,789       $ 75,287        $ 251,003         $ 431,689    
Basic earnings
per share:
Income from
continuing         $ 1.01          $ 0.78          $ 2.28            $ 3.96
operations
Income (loss)
from
discontinued         -               (0.05   )       0.11              0.22       
operations,
net of tax
Net income         $ 1.01          $ 0.73          $ 2.39            $ 4.18       
Diluted
earnings per
share:
Income from
continuing         $ 1.01          $ 0.78          $ 2.28            $ 3.93
operations
Income (loss)
from
discontinued         -               (0.06   )       0.11              0.22       
operations,
net of tax
Net income         $ 1.01          $ 0.72          $ 2.39            $ 4.15       
 

 
 
Concho Resources Inc.
Consolidated Statements of Cash Flows
Unaudited
 
                                            
                                             Years Ended December 31,
(in thousands)                                 2013               2012        
CASH FLOWS FROM OPERATING ACTIVITIES:                          
Net income                                   $ 251,003          $ 431,689
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation, depletion and amortization       772,608            575,128
Accretion of discount on asset                 6,047              4,187
retirement obligations
Impairments of long-lived assets               65,375             -
Exploration and abandonments, including        80,714             19,913
dry holes
Non-cash compensation expense                  35,078             29,872
Deferred income taxes                          102,427            241,819
Loss on disposition of assets, net             1,268              372
(Gain) loss on derivatives not                 123,652            (127,443   )
designated as hedges
Discontinued operations                        (12,250    )       49,011
Other non-cash items                           19,720             12,420
Changes in operating assets and
liabilities, net of acquisitions and
dispositions:
Accounts receivable                            (40,009    )       (23,091    )
Prepaid costs and other                        4,945              (8,200     )
Inventory                                      509                (1,587     )
Accounts payable                               (18,469    )       4,165
Revenue payable                                28,593             16,012
Other current liabilities                      (59,191    )       13,211      
Net cash provided by operating                 1,362,020          1,237,478   
activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures on oil and natural        (1,850,992 )       (2,717,283 )
gas properties
Additions to other property and                (28,678    )       (56,588    )
equipment
Proceeds from the disposition of assets        15,217             492,497
Funds held in escrow                           -                  17,394
Settlements received from (paid on)            (32,341    )       23,536      
derivatives not designated as hedges
Net cash used in investing activities          (1,896,794 )       (2,240,444 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt                 3,257,575          4,262,000
Payments of debt                               (2,729,700 )       (3,241,500 )
Exercise of stock options                      3,223              8,123
Excess tax benefit from stock-based            6,147              18,963
compensation
Payments for loan costs                        (14,075    )       (23,926    )
Purchase of treasury stock                     (3,698     )       (3,190     )
Bank overdrafts                                12,443             (14,966    )
Net cash provided by financing                 531,915            1,005,504   
activities
Net increase (decrease) in cash and cash       (2,859     )       2,538
equivalents
Cash and cash equivalents at beginning         2,880              342         
of period
Cash and cash equivalents at end of          $ 21               $ 2,880       
period
SUPPLEMENTAL CASH FLOWS:
Cash paid for interest and fees              $ 200,961          $ 158,715
Cash paid for income taxes                   $ 21,376           $ 19,674
 
 
 

                            Concho Resources Inc.
                      Summary Production and Price Data
                                  Unaudited

The following table sets forth summary information from our continuing and
discontinued operations concerning our production and operating data for the
periods indicated:

 
                         Three Months Ended          Years Ended
                         December 31,                December 31,
                         2013          2012          2013            2012
                                                                    
Production and operating data from continuing and discontinued operations:
  Net production
  volumes:
      Oil (MBbl)           5,750         4,950         21,126          18,003
      Natural gas          19,048        19,621        75,054          70,591
      (MMcf)
      Total (MBoe)         8,925         8,220         33,635          29,768
                                                                      
  Average daily
  production
  volumes:
      Oil (Bbl)            62,500        53,804        57,879          49,189
      Natural gas          207,043       213,272       205,627         192,872
      (Mcf)
      Total (Boe)          97,007        89,350        92,150          81,334
                                                                      
  Average prices:
      Oil, without
      derivatives        $ 91.40       $ 81.28       $ 91.76         $ 88.01
      (Bbl)
      Oil, with
      derivatives        $ 91.56       $ 87.50       $ 89.79         $ 89.25
      (Bbl) (a)
      Natural gas,
      without            $ 5.59        $ 5.06        $ 5.08          $ 5.03
      derivatives
      (Mcf)
      Natural gas,
      with               $ 5.83        $ 5.07        $ 5.21          $ 5.05
      derivatives
      (Mcf) (a)
      Total, without
      derivatives        $ 70.82       $ 61.02       $ 68.97         $ 65.16
      (Boe)
      Total, with
      derivatives        $ 71.42       $ 64.80       $ 68.01         $ 65.95
      (Boe) (a)
                                                                      
  Operating costs
  and expenses per
  Boe:
      Lease
      operating          $ 8.57        $ 7.17        $ 7.85          $ 7.27
      expenses and
      workover costs
      Oil and
      natural gas        $ 5.68        $ 5.19        $ 5.69          $ 5.43
      taxes
      Depreciation,
      depletion and      $ 24.07       $ 20.73       $ 22.97         $ 20.34
      amortization
      General and        $ 5.01        $ 4.51        $ 5.04          $ 4.40
      administrative
                                                                      
                                                                      
  (a) Includes the effect of cash settlements received from (paid on)
      commodity derivatives not designated as hedges:
                                                                      
                                                                      
                         Three Months Ended          Years Ended
                         December 31,                December 31,
      (in thousands)     2013          2012          2013            2012
                                                                      
      Cash receipts from (payments on) derivatives not designated as hedges:
         Oil             $ 912         $ 30,785      $ (41,616 )     $ 22,411
         derivatives
         Natural gas       4,431         236           9,275           1,125
         derivatives
         Total           $ 5,343       $ 31,021      $ (32,341 )     $ 23,536
                                                                      
                                                                      
      The presentation of average prices with derivatives is a non-GAAP
      measure as a result of including the 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.
       
       

The following table sets forth summary information from our continuing
operations concerning production and operating data for the periods indicated:

 
                         Three Months Ended          Years Ended
                         December 31,                December 31,
                         2013          2012          2013            2012
                                                                    
Production and operating data from continuing operations:
  Net production
  volumes:
      Oil (MBbl)           5,750         4,718         21,126          16,859
      Natural gas          19,048        18,462        75,054          66,613
      (MMcf)
      Total (MBoe)         8,925         7,795         33,635          27,961
                                                                      
  Average daily
  production
  volumes:
      Oil (Bbl)            62,500        51,283        57,879          46,063
      Natural gas          207,043       200,674       205,627         182,003
      (Mcf)
      Total (Boe)          97,007        84,728        92,150          76,397
                                                                      
  Average prices:
      Oil, without
      derivatives        $ 91.40       $ 81.28       $ 91.76         $ 87.96
      (Bbl)
      Oil, with
      derivatives        $ 91.56       $ 87.81       $ 89.79         $ 89.29
      (Bbl) (a)
      Natural gas,
      without            $ 5.59        $ 5.09        $ 5.08          $ 5.06
      derivatives
      (Mcf)
      Natural gas,
      with               $ 5.83        $ 5.11        $ 5.21          $ 5.07
      derivatives
      (Mcf) (a)
      Total, without
      derivatives        $ 70.82       $ 61.26       $ 68.97         $ 65.08
      (Boe)
      Total, with
      derivatives        $ 71.42       $ 65.24       $ 68.01         $ 65.93
      (Boe) (a)
                                                                      
  Operating costs
  and expenses per
  Boe:
      Lease
      operating          $ 8.57        $ 6.64        $ 7.85          $ 6.90
      expenses and
      workover costs
      Oil and
      natural gas        $ 5.68        $ 5.17        $ 5.69          $ 5.39
      taxes
      Depreciation,
      depletion and      $ 24.07       $ 21.35       $ 22.97         $ 20.56
      amortization
      General and        $ 5.01        $ 4.85        $ 5.04          $ 4.79
      administrative
                                                                      
                                                                      
  (a) Includes the effect of cash settlements received from (paid on)
      commodity derivatives not designated as hedges:
                                                                      
                                                                      
                         Three Months Ended          Years Ended
                         December 31,                December 31,
      (in thousands)     2013          2012          2013            2012
                                                                      
      Cash receipts from (payments on) derivatives not designated as hedges:
         Oil             $ 912         $ 30,785      $ (41,616 )     $ 22,411
         derivatives
         Natural gas       4,431         236           9,275           1,125
         derivatives
         Total           $ 5,343       $ 31,021      $ (32,341 )     $ 23,536
                                                                      
                                                                      
      The presentation of average prices with derivatives is a non-GAAP
      measure as a result of including the 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.
                   Supplemental Non-GAAP Financial Measures
                                  Unaudited

The following tables provide information that the Company believes may be
useful to investors who follow the practice of some industry analysts who
adjust reported company net income and cash flows from operating activities to
exclude certain non-cash and unusual items.

Adjusted Net Income

The following table provides a reconciliation of net income (GAAP) to adjusted
net income (non-GAAP) for the periods indicated:

 
                   Three Months Ended              Years Ended
                   December 31,                    December 31,
(in thousands,
except per           2013            2012            2013            2012      
share amounts)
                                                                  
Net income -       $ 105,789       $ 75,287        $ 251,003       $ 431,689
as reported
                                                                    
Adjustments
for certain
non-cash and
unusual items:
(Gain) loss on
derivatives          (33,651 )       (17,901 )       123,652         (127,443 )
not designated
as hedges
Cash receipts
from (payments
on)                  5,343           31,021          (32,341 )       23,536
derivatives
not designated
as hedges
Impairments of
long-lived           -               -               65,375          -
assets
Leasehold            35,930          3,161           49,758          12,395
abandonments
Loss on
extinguishment       -               -               28,616          -
of debt
(Gain) loss on
disposition of       (449    )       87              1,268           372
assets, net
Other                11,393          3,242           11,393          3,242
Discontinued
operations:
(Gain) loss on
disposition of       -               18,704          (19,599 )       18,704
assets
Tax impact (a)       (7,204  )       (13,985 )       (88,511 )       26,363
Change in
state
statutory            (21,876 )       -               (21,876 )       -         
effective
income tax
rate
Adjusted net       $ 95,275        $ 99,616        $ 368,738       $ 388,858   
income
                                                                    
Adjusted
earnings per
share:
Basic              $ 0.91          $ 0.96          $ 3.52          $ 3.77
Diluted            $ 0.91          $ 0.96          $ 3.51          $ 3.74
                                                                    
Effective tax        38.8    %       36.5    %       38.8    %       38.1     %
rates
                                                                    
                                                                    
(a) The tax impact is computed utilizing the Company's adjusted statutory
effective federal and state income tax rates shown in the table above.
 
 
 

Adjusted Cash Flows

The following table provides a reconciliation of cash flows from operating
activities (GAAP) to adjusted cash flows (non-GAAP) for the periods indicated:

                                                                  
                                                 Years Ended December 31,
(in thousands)                                   2013              2012
                                                                    
Cash flows from operating activities             $ 1,362,020       $ 1,237,478
Settlements received from (paid on)                (32,341   )       23,536
derivatives not designated as hedges (a)
Adjusted cash flows                              $ 1,329,679       $ 1,261,014
                                                                    
                                                                    
(a) Amounts are presented in cash flows from investing activities for GAAP
purposes.
 
 
 

EBITDAX

EBITDAX (as defined below) is presented herein, and reconciled from the
generally accepted accounting principles (“GAAP”) measure of net income
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, 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 not
designated as hedges, (7) cash receipts from (payments on) derivatives not
designated as hedges, (8) (gain) loss on disposition of assets, net, (9)
interest expense, (10) loss on extinguishment of debt, (11) federal and state
income taxes on continuing operations and (12) similar items listed above that
are presented in discontinued operations. EBITDAX is not a measure of net
income or cash flows as determined by GAAP.

The Company’s EBITDAX measure (which includes continuing and discontinued
operations) provides additional information which may be used to better
understand the Company’s operations. 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, 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 assets,
none of which are components of EBITDAX. 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. 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.

The following table provides a reconciliation of net income to EBITDAX for the
periods indicated:

 
                                                                    
                   Three Months Ended              Years Ended
                   December 31,                    December 31,
(in thousands)       2013            2012            2013              2012       
                                                                      
Net income         $ 105,789       $ 75,287        $ 251,003         $ 431,689
Exploration
and                  71,752          12,505          109,549           39,840
abandonments
Depreciation,
depletion and        214,833         166,453         772,608           575,128
amortization
Accretion of
discount on
asset                1,637           1,361           6,047             4,187
retirement
obligations
Impairments of
long-lived           -               -               65,375            -
assets
Non-cash
stock-based          9,800           8,438           35,078            29,872
compensation
(Gain) loss on
derivatives          (33,651 )       (17,901 )       123,652           (127,443  )
not designated
as hedges
Cash receipts
from (payments
on)                  5,343           31,021          (32,341   )       23,536
derivatives
not designated
as hedges
(Gain) loss on
disposition of       (449    )       87              1,268             372
assets, net
Interest             56,401          53,632          218,581           182,705
expense
Loss on
extinguishment       -               -               28,616            -
of debt
Income tax
expense from         32,214          46,714          118,237           251,041
continuing
operations
Discontinued         -               21,299          (12,081   )       64,701     
operations
EBITDAX            $ 463,669       $ 398,896       $ 1,685,592       $ 1,475,628  
 

 
 
Concho Resources Inc.
Costs Incurred
Unaudited
 
The table below provides the costs incurred for the periods indicated:
 
Costs incurred for oil and natural gas producing activities (a)
 
                       Three Months Ended          Years Ended
                       December 31,                December 31,
(in thousands)         2013          2012          2013            2012
                                                                  
Property
acquisition costs:
    Proved             $ 9,123       $ 2,063       $ 11,499        $ 857,836
    Unproved             26,706        29,932        85,538          441,042
Exploration              250,767       214,109       1,029,793       781,174
Development              145,424       166,665       738,430         741,206
    Total costs
    incurred for
    oil and            $ 432,020     $ 412,769     $ 1,865,260     $ 2,821,258
    natural gas
    properties
                                                                    
                                                                    
(a) The costs incurred for oil and natural gas producing activities includes
    the following amounts of asset retirement obligations:
                                                                    
                                                                    
                       Three Months Ended          Years Ended
                       December 31,                December 31,
    (in thousands)     2013          2012          2013            2012
                                                                    
    Exploration        $ 583         $ 159         $ 2,672         $ 2,611
    costs
    Development          304           7,234         9,467           15,536
    costs
       Total asset
       retirement      $ 887         $ 7,393       $ 12,139        $ 18,147
       obligations
     

 
 
Concho Resources Inc.
Derivatives Information
Unaudited
 
The tables below provide data associated with the Company’s derivatives at February 19, 2014 for the
periods indicated:
 
                2014
                First Quarter      Second            Third Quarter     Fourth            Total
                                   Quarter                             Quarter
                                                                                          
Oil Swaps: (a)
    Volume        5,075,000          4,544,000         4,116,000         3,833,000         17,568,000
    (Bbl)
    Price       $ 93.65            $ 92.69           $ 91.23           $ 91.09           $ 92.27
    (Bbl)
                                                                                          
Oil Basis Swaps: (b)
    Volume        2,790,000          3,458,000         3,956,000         3,680,000         13,884,000
    (Bbl)
    Price       $ (0.46      )     $ (0.72     )     $ (0.99     )     $ (0.92     )     $ (0.80      )
    (Bbl)
                                                                                          
Natural Gas Swaps: (c)
    Volume        3,812,000          3,001,000         2,300,000         1,777,000         10,890,000
    (MMBtu)
    Price       $ 4.19             $ 4.18            $ 4.19            $ 4.19            $ 4.19
    (MMBtu)
                                                                                          
Natural Gas Collars: (d)
    Volume        5,400,000          5,460,000         5,520,000         5,520,000         21,900,000
    (MMBtu)
    Ceiling
    Price       $ 4.40             $ 4.40            $ 4.40            $ 4.40            $ 4.40
    (MMBtu)
    Floor
    Price       $ 3.85             $ 3.85            $ 3.85            $ 3.85            $ 3.85
    (MMBtu)
                                                                                          
                                                                                          
                                                                                          
                                                                                          
                  2015               2016              2017       
Oil Swaps: (a)
    Volume        12,812,000         429,000           168,000
    (Bbl)
    Price       $ 86.86            $ 88.31           $ 87.00
    (Bbl)
                                                                                          
Natural Gas Swaps: (c)
    Volume        20,075,000         -                 -
    (MMBtu)
    Price       $ 4.15             $ -               $ -
    (MMBtu)
                                                                                          
                                                                                          
(a) The index prices for the oil contracts are based on the NYMEX – West Texas Intermediate (“WTI”)
    monthly average futures price.
(b) The basis differential price is between the Midland – WTI and the 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.

Contact:

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