Concho Resources Inc. Reports Second Quarter 2014 Financial and Operating Results

  Concho Resources Inc. Reports Second Quarter 2014 Financial and Operating
  Results

Business Wire

MIDLAND, Texas -- August 6, 2014

Concho Resources Inc. (NYSE: CXO) (“Concho” or the “Company”) today reported
financial and operating results for the second quarter and first half of 2014.
Highlights for the second quarter of 2014 include:

  *Average production totaled 107.8 thousand barrels of oil equivalent per
    day (“MBoepd”) for the second quarter of 2014, at the high end of its
    previously announced quarterly guidance range of 104 - 108 MBoepd
  *Announced third quarter 2014 production guidance range of 113 - 116 MBoepd
  *Added 31 new wells in the northern Delaware Basin with strong average
    30-day and 24-hour peak rates of 931 and 1,420 Boepd, respectively
  *Entered into agreements to acquire approximately 13,000 net acres for $95
    million in the northern Delaware Basin^1
  *Net income of $11.8 million, or $0.11 per diluted share, for the second
    quarter of 2014, as compared to net income of $84.7 million, or $0.81 per
    diluted share, for the second quarter of 2013
  *Adjusted net income^2 (non-GAAP) of $113.8 million, or $1.04 per diluted
    share, for the second quarter of 2014, as compared to $102.5 million, or
    $0.98 per diluted share, for the second quarter of 2013
  *EBITDAX^3 (non-GAAP) of $504.0 million for the second quarter of 2014, a
    19% increase over the second quarter of 2013

^1 Includes agreements entered into through August 6, 2014.

^2 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.

^3 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.

Second Quarter 2014 Financial Results

Production for the second quarter of 2014 totaled 9.8 million barrels of oil
equivalent (“MMBoe”) (6.2 million barrels of oil (“MMBbls”) and 21.5 billion
cubic feet of natural gas (“Bcf”)), an increase of 18% as compared to 8.3
MMBoe (5.2 MMBbls of crude oil and 18.6 Bcf of natural gas) produced in the
second quarter of 2013. Sequentially, Concho’s average daily production in the
second quarter of 2014 increased 6% as compared to the previous quarter of
101.6 MBoepd.

“The second quarter was another exceptional quarter, demonstrating the
strength of our team as we continue to execute on our Two-by-Three Growth
Plan, which calls for doubling our production in three years,” commented Tim
Leach, Chairman, Chief Executive Officer and President. “The advantage of
running one of the Permian Basin’s largest horizontal operations is
translating into operational efficiencies and improved returns.We are
focusing on optimizing our well design and stimulation techniques.
Efficiencies of scale and drilling and completion optimization are driving
greater capital productivity as well as industry-leading well performance
across the Permian Basin.”

For the second quarter of 2014, the Company reported net income of $11.8
million, or $0.11 per diluted share, as compared to net income of $84.7
million, or $0.81 per diluted share, for the second quarter of 2013. The
Company’s second quarter 2014 results were impacted by several non-cash and
unusual items including: (1) a $164.7 million loss on derivatives not
designated as hedges, (2) $26.1 million in cash payments on commodity
derivatives, (3) $11.2 million of leasehold abandonments, (4) a $4.3 million
loss on extinguishment of debt and (5) a $9.6 million loss on disposition of
assets. Excluding these items and their tax effects, second quarter 2014
adjusted net income (non-GAAP) was $113.8 million, or $1.04 per diluted share.
Excluding similar non-cash and unusual items and their tax effects, adjusted
net income (non-GAAP) for the second quarter of 2013 was $102.5 million, or
$0.98 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 (non-GAAP) was $504.0 million in the second quarter of 2014, an
increase of 19% from $424.8 million in the second quarter of 2013. 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 for the second quarter of 2014 totaled $704.7
million and increased 25% compared to oil and natural gas sales of $562.8
million for the second quarter of 2013. The increase was attributable to an
18% increase in production in the second quarter of 2014 compared to the
second quarter of 2013, and a 4% and 12% increase in the Company’s unhedged
realized oil and gas price, respectively, in the second quarter of 2014
compared to the second quarter of 2013.

Oil and natural gas production expense for the second quarter of 2014,
including oil and natural gas taxes, totaled $134.9 million, or $13.76 per
barrel of oil equivalent (“Boe”), a 6% increase per Boe from the second
quarter of 2013. This increase was due primarily to higher lease operating
expenses (“LOE”) and workover costs, which averaged $8.15 per Boe in the
second quarter of 2014 as compared to $7.25 per Boe in the second quarter of
2013.

Depreciation, depletion and amortization expense (“DD&A”) for the second
quarter of 2014 totaled $237.4 million, or $24.20 per Boe, a 6% increase per
Boe from the second quarter of 2013.

General and administrative expense (“G&A”) for the second quarter of 2014
totaled $49.5 million, or $5.05 per Boe, as compared to $41.0 million, or
$4.94 per Boe, in the second quarter of 2013. Cash G&A expenses for the second
quarter of 2014 totaled $39.8 million. The increase in per Boe expense for the
second quarter of 2014 over the second quarter of 2013 was primarily due to an
increase in staffing across the company, and was partially offset by an 18%
increase in production.

The Company’s cash flow from operating activities (GAAP) was $854.7 million
for the first six months of 2014, as compared to $487.1 million for the first
six months of 2013, an increase of 75%. Adjusted cash flows (non-GAAP), which
are cash flows from operating activities (GAAP) adjusted for settlements on
derivatives not designated as hedges, were $813.8 million for the first six
months of 2014, as compared to $494.7 million for the first six months of
2013, an increase of 65%. 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 the quarter ended June 30, 2014, the Company started drilling or
participated in a total of 134 gross wells (107 operated) and completed 107
wells as producers. The table below summarizes the Company’s gross drilling
activities by core area for the second quarter of 2014:

                   2Q 2014
                     Total Wells   Operated Wells   Completed Wells
Delaware Basin       75              60                 48
New Mexico Shelf     24              12                 29
Texas Permian        35             35                30       
Total                134            107               107      
                                                        
% Horizontal         78     %        79       %         68       %

The Company currently is operating 34 drilling rigs; 17 of these rigs are
drilling in the northern Delaware Basin, 6 are drilling in the southern
Delaware Basin, 2 are drilling in the New Mexico Shelf and 9 are drilling in
the Texas Permian. Of the Company’s 34 operated rigs, 30 are drilling
horizontally, including 17 in the northern Delaware Basin, 6 in the southern
Delaware Basin, 2 in the New Mexico Shelf and 5 in the Texas Permian.

Delaware Basin

Of the 75 wells drilled in the Delaware Basin during the second quarter of
2014, 53 were Bone Spring sands wells, 14 were Wolfcamp shale wells, 5 were
Brushy Canyon wells and 3 were Avalon shale wells. The Company’s net
production in the second quarter of 2014 from horizontal Delaware Basin wells
averaged approximately 49.1 MBoepd, a 55% increase over the second quarter of
2013 and an increase of 16% over the first quarter of 2014.

In the northern Delaware Basin, 31 new wells had at least 30 days of
production by the end of the second quarter of 2014 and set new average
production-rate records with an average 30-day rate of 931 Boepd (81% oil) and
an average 24-hour peak rate of 1,420 Boepd from an average lateral length of
5,034 feet.

In the southern Delaware Basin, 8 new wells had at least 30 days of production
by the end of the second quarter of 2014, with an average 30-day rate of 1,093
Boepd (81% oil) and an average 24-hour peak rate of 1,301 Boepd from an
average lateral length of 5,401 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.

Guidance Update

For the third quarter of 2014, the Company expects production to average
between 113 - 116 MBoepd.

Following the close of Concho’s equity offering in May 2014 and subsequent
repayment of borrowings under the credit facility, the Company’s full-year
2014 cash interest expense guidance range has been reduced to $210 - $215
million and the Company’s non-cash interest expense guidance has been reduced
to $10 million.

In the second quarter of 2014, the average discount on the Midland-to-Cushing
West Texas Intermediate (“WTI”) oil basis differential was approximately $8.37
per Bbl. The average discount for the months of July and August was $6.60 and
$10.58 per Bbl, respectively. The Company’s unhedged crude oil realization
during the third quarter of 2014 is expected to be 88% - 90% of NYMEX crude
oil. As a result of the widening of the Midland-to-Cushing WTI oil
differential in the second and third quarters of 2014, the Company’s full-year
2014 unhedged crude oil realization guidance range has been reduced to 90% -
92% of NYMEX crude oil.

Conference Call and Presentation Information

The Company will host a conference call on Thursday, August 7, 2014, at 8:30
a.m. CDT to further discuss information regarding second quarter 2014
financial and operating results. Interested parties may listen to the
conference call via the Company’s website at www.concho.com or by dialing
(866) 318-8619 (passcode: 39034276). The earnings 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: 39351777).

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
fact, included in this press release that address activities, events or
developments that the Company expects, believes or anticipates will or may
occur in the future are forward-looking statements. Forward-looking statements
contained in this press release specifically include statements, estimates and
projections regarding the Company's future financial position, operations,
performance, business strategy, capital expenditure budget, liquidity and
capital resources, the timing and success of specific projects, outcomes and
effects of litigation, claims and disputes, derivative activities and
potential financing. The words “estimate,” “project,” “predict,” “believe,”
“expect,” “anticipate,” “potential,” “could, “may,” “foresee,” “plan,” “goal”
or other similar expressions are intended to identify forward-looking
statements, which generally are not historical in nature. However, the absence
of these words does not mean that the statements are not forward-looking.
These statements are based on certain assumptions 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 Form 10-Q filings and risks relating to declines in
the prices the Company receives for its oil and natural gas; uncertainties
about the estimated quantities of oil and natural gas reserves; drilling and
operating risks, including risks related to properties where we do not serve
as the operator and risks related to hydraulic fracturing activities; the
adequacy of the Company’s capital resources and liquidity including, but not
limited to, access to additional borrowing capacity under our credit facility;
the effects of government regulation, permitting and other legal requirements,
including new legislation or regulation of hydraulic fracturing; difficult and
adverse conditions in the domestic and global capital and credit markets;
risks related to the concentration of the Company’s operations in the Permian
Basin of Southeast New Mexico and West Texas; disruptions to, capacity
constraints in or other limitations on the pipeline systems that deliver the
Company’s oil, natural gas liquids and natural gas and other processing and
transportation considerations; shortages of oilfield equipment, services and
qualified personnel and increases in costs for such equipment, services and
personnel; potential financial losses or earnings reductions from the
Company’s commodity price management program; risks related to the integration
of acquired assets; uncertainties about the Company’s ability to successfully
execute our business and financial plans and strategies; uncertainties about
the Company’s ability to replace reserves and economically develop its current
reserves; general economic and business conditions; competition in the oil and
natural gas industry; uncertainty concerning the Company’s assumed or possible
future results of operations; 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

                                                           
                                             June 30,           December 31,
(in thousands, except share and per         2014           2013       
share amounts)
Assets
Current assets:
Cash and cash equivalents                    $ 365,488          $ 21
Accounts receivable, net of allowance
for doubtful accounts:
Oil and natural gas                            273,789            223,790
Joint operations and other                     315,766            247,945
Derivative instruments                         -                  590
Deferred income taxes                          76,089             30,069
Prepaid costs and other                       22,782           18,460     
Total current assets                          1,053,914        520,875    
Property and equipment:
Oil and natural gas properties,                12,280,195         11,215,373
successful efforts method
Accumulated depletion and depreciation        (2,833,157 )      (2,384,108 )
Total oil and natural gas properties,          9,447,038          8,831,265
net
Other property and equipment, net             116,974          114,783    
Total property and equipment, net             9,564,012        8,946,048  
Deferred loan costs, net                       73,303             73,048
Intangible asset - operating rights, net       27,884             28,615
Inventory                                      14,096             19,682
Noncurrent derivative instruments              -                  966
Other assets                                  22,454           1,930      
Total assets                                 $ 10,755,663      $ 9,591,164  
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable - trade                     $ 50,685           $ 13,936
Bank overdrafts                                -                  36,718
Revenue payable                                195,288            177,617
Accrued and prepaid drilling costs             410,726            318,296
Derivative instruments                         162,479            53,701
Other current liabilities                     164,119          156,600    
Total current liabilities                     983,297          756,868    
Long-term debt                                 3,379,138          3,630,421
Deferred income taxes                          1,415,624          1,334,653
Noncurrent derivative instruments              63,185             14,088
Asset retirement obligations and other         99,085             97,185
long-term liabilities
Stockholders’ equity:
Common stock, $0.001 par value;
300,000,000 authorized; 113,139,212 and
105,222,765 shares issued at June 30,          113                105
2014 and December 31, 2013, respectively
Additional paid-in capital                     2,986,105          2,027,162
Retained earnings                              1,844,642          1,741,566
Treasury stock, at cost; 167,108 and
127,305 shares at June 30, 2014 and
December 31,
2013, respectively                            (15,526    )      (10,884    )
Total stockholders’ equity                    4,815,334        3,757,949  
Total liabilities and stockholders’          $ 10,755,663      $ 9,591,164  
equity
                                                                   



Concho Resources Inc.
Consolidated Statements of Operations
Unaudited

                                                            
                   Three Months Ended              Six Months Ended
                   June 30,                        June 30,
(in thousands,
except per        2014        2013        2014          2013      
share amounts)
                                                                     
Operating
revenues:
Oil sales          $ 580,772       $ 466,611       $ 1,120,629       $ 859,819
Natural gas         123,930       96,175        245,032         175,094   
sales
Total
operating           704,702       562,786       1,365,661       1,034,913 
revenues
Operating
costs and
expenses:
Oil and
natural gas          134,944         107,219         261,868           208,064
production
Exploration
and                  28,288          8,398           53,663            26,805
abandonments
Depreciation,
depletion and        237,445         188,730         458,837           357,150
amortization
Accretion of
discount on
asset                1,722           1,442           3,393             2,836
retirement
obligations
Impairments of
long-lived           -               65,375          -                 65,375
assets
General and
administrative
(including
non-cash
stock-based
compensation
of
$9,775 and
$8,588 for the
three months
ended June 30,
2014 and 2013,
respectively,
and $21,207
and $15,355
for the six
months ended
June 30, 2014
and 2013,            49,535          40,991          97,285            84,284
respectively)
(Gain) loss on
derivatives         164,707       (70,324 )      200,322         (11,307   )
not designated
as hedges
Total
operating           616,641       341,831       1,075,368       733,207   
costs and
expenses
Income from         88,061        220,955       290,293         301,706   
operations
Other income
(expense):
Interest             (55,388 )       (54,079 )       (111,523  )       (106,185  )
expense
Loss on
extinguishment       (4,316  )       (28,616 )       (4,316    )       (28,616   )
of debt
Other, net          (9,529  )      244           (8,988    )      135       
Total other         (69,233 )      (82,451 )      (124,827  )      (134,666  )
expense
Income from
continuing
operations           18,828          138,504         165,466           167,040
before income
taxes
Income tax          (7,059  )      (53,351 )      (62,390   )      (64,328   )
expense
Income from
continuing           11,769          85,153          103,076           102,712
operations
Income (loss)
from
discontinued        -             (453    )      -               12,081    
operations,
net of tax
Net income         $ 11,769       $ 84,700       $ 103,076        $ 114,793   
Basic earnings
per share:
Income from
continuing         $ 0.11          $ 0.81          $ 0.96            $ 0.98
operations
Income (loss)
from
discontinued        -             -             -               0.12      
operations,
net of tax
Net income         $ 0.11         $ 0.81         $ 0.96           $ 1.10      
Diluted
earnings per
share:
Income from
continuing         $ 0.11          $ 0.81          $ 0.96            $ 0.98
operations
Income (loss)
from
discontinued        -             -             -               0.11      
operations,
net of tax
Net income         $ 0.11         $ 0.81         $ 0.96           $ 1.09      
                                                             



Concho Resources Inc.
Consolidated Statements of Cash Flows
Unaudited
                                                           
                                             Six Months Ended
                                             June 30,
(in thousands)                              2014           2013       
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                   $ 103,076          $ 114,793
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation, depletion and amortization       458,837            357,150
Accretion of discount on asset                 3,393              2,836
retirement obligations
Impairments of long-lived assets               -                  65,375
Exploration and abandonments, including        41,762             5,412
dry holes
Non-cash stock-based compensation              21,207             15,355
expense
Deferred income taxes                          34,951             50,346
(Gain) loss on disposition of assets,          9,457              (132       )
net
(Gain) loss on derivatives not                 200,322            (11,307    )
designated as hedges
Discontinued operations                        -                  (12,250    )
Other non-cash items                           9,418              14,330
Changes in operating assets and
liabilities, net of acquisitions and
dispositions:
Accounts receivable                            (83,061    )       (55,577    )
Prepaid costs and other                        (6,154     )       (661       )
Inventory                                      4,782              (647       )
Accounts payable                               36,626             (11,972    )
Revenue payable                                17,671             12,962
Other current liabilities                     2,441            (58,884    )
Net cash provided by operating                854,728          487,129    
activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures on oil and natural        (1,054,000 )       (880,653   )
gas properties
Additions to property, equipment and           (20,456    )       (9,900     )
other assets
Proceeds from the disposition of assets        394                15,434
Contribution to equity method investment       (10,050    )       -
Settlements received from (paid on)           (40,891    )      7,591      
derivatives not designated as hedges
Net cash used in investing activities         (1,125,003 )      (867,528   )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt                 1,578,000          2,548,475
Payments of debt                               (1,828,000 )       (2,194,500 )
Exercise of stock options                      1,289              2,068
Excess tax benefit from stock-based            4,000              4,163
compensation
Net proceeds from issuance of common           932,455            -
stock
Payments for loan costs                        (10,642    )       (14,075    )
Purchase of treasury stock                     (4,642     )       (3,309     )
Bank overdrafts                               (36,718    )      34,744     
Net cash provided by financing                635,742          377,566    
activities
Net increase (decrease) in cash and cash       365,467            (2,833     )
equivalents
Cash and cash equivalents at beginning        21               2,880      
of period
Cash and cash equivalents at end of          $ 365,488         $ 47         
period
                                                                   



Concho Resources Inc.
Summary Production and Price Data
Unaudited

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

                       Three Months Ended          Six Months Ended
                           June 30,                      June 30,
                     2014          2013        2014          2013
                                                                    
Production and
operating data:
  Net production
  volumes:
        Oil (MBbl)           6,229           5,192         12,075          9,959
        Natural gas          21,485          18,615        41,285          36,413
        (MMcf)
        Total (MBoe)         9,810           8,295         18,956          16,028
                                                                         
  Average daily
  production volumes:
        Oil (Bbl)            68,451          57,055        66,713          55,022
        Natural gas          236,099         204,560       228,094         201,177
        (Mcf)
        Total (Boe)          107,801         91,148        104,729         88,552
                                                                         
  Average prices:
        Oil, without
        derivatives        $ 93.24         $ 89.87       $ 92.81         $ 86.34
        (Bbl)
        Oil, with
        derivatives        $ 89.29         $ 90.13       $ 89.96         $ 87.07
        (Bbl) (a)
        Natural gas,
        without            $ 5.77          $ 5.17        $ 5.94          $ 4.81
        derivatives
        (Mcf)
        Natural gas,
        with               $ 5.70          $ 5.18        $ 5.78          $ 4.82
        derivatives
        (Mcf) (a)
        Total, without
        derivatives        $ 71.84         $ 67.85       $ 72.04         $ 64.57
        (Boe)
        Total, with
        derivatives        $ 69.18         $ 68.04       $ 69.89         $ 65.04
        (Boe) (a)
                                                                         
  Operating costs and
  expenses per Boe:
        Lease
        operating          $ 8.15          $ 7.25        $ 8.11          $ 7.48
        expenses and
        workover costs
        Oil and
        natural gas        $ 5.61          $ 5.68        $ 5.70          $ 5.50
        taxes
        Depreciation,
        depletion and      $ 24.20         $ 22.75       $ 24.21         $ 22.29
        amortization
        General and        $ 5.05          $ 4.94        $ 5.13          $ 5.26
        administrative
                                                          
  (a)   Includes the effect of cash settlements received from (paid on) commodity
        derivatives not designated as hedges:
                                                             
                           Three Months Ended            Six Months Ended
                           June 30,                      June 30,
        (in thousands)   2014          2013        2014          2013
                                                                         
        Cash receipts
        from (payments
        on)
        derivatives
        not designated
        as hedges:
        Oil                $ (24,569 )     $ 1,320       $ (34,338 )     $ 7,336
        derivatives
        Natural gas         (1,485  )      255          (6,553  )      255
        derivatives
        Total              $ (26,054 )     $ 1,575       $ (40,891 )     $ 7,591
                                                             
        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 loss on derivatives not designated as
        hedges in the statements of operations. 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            Six Months Ended
                         June 30,                        June 30,
(in thousands,
except per share        2014        2013        2014        2013    
amounts)
                                                                    
Net income - as          $ 11,769        $ 84,700        $ 103,076       $ 114,793
reported
                                                                         
Adjustments for
certain non-cash and
unusual items:
      (Gain) loss on
      derivatives          164,707         (70,324 )       200,322         (11,307 )
      not designated
      as hedges
      Cash receipts
      from (payments
      on)                  (26,054 )       1,575           (40,891 )       7,591
      derivatives
      not designated
      as hedges
      Impairments of
      long-lived           -               65,375          -               65,375
      assets
      Leasehold            11,193          2,940           15,138          7,327
      abandonments
      Loss on
      extinguishment       4,316           28,616          4,316           28,616
      of debt
      Loss on
      disposition of       9,603           -               9,457           -
      assets, net
      Discontinued
      operations:
      (Gain) loss on
      disposition of       -               764             -               (19,599 )
      assets
      Tax impact (a)      (61,739 )      (11,144 )      (71,005 )      (30,031 )
Adjusted net income      $ 113,795      $ 102,502      $ 220,413      $ 162,765 
                                                                         
Adjusted earnings
per share:
      Basic              $ 1.04          $ 0.98          $ 2.06          $ 1.55
      Diluted            $ 1.04          $ 0.98          $ 2.05          $ 1.55
                                                                         
                                                                         
Effective tax rates        37.7    %       38.5    %       37.7    %       38.5    %
                                                           
                                                                         
(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:

                                                               
                                                   Six Months Ended
                                                     June 30,
(in thousands)                                     2014          2013
                                                                  
Cash flows from operating activities                 $ 854,728       $ 487,129
Settlements received from (paid on) derivatives       (40,891 )      7,591
not designated as hedges (a)
Adjusted cash flows                                  $ 813,837      $ 494,720
                                                               
                                                                     
(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            Six Months Ended
                   June 30,                        June 30,
(in thousands)    2014        2013        2014        2013    
                                                              
Net income         $ 11,769        $ 84,700        $ 103,076       $ 114,793
Exploration
and                  28,288          8,398           53,663          26,805
abandonments
Depreciation,
depletion and        237,445         188,730         458,837         357,150
amortization
Accretion of
discount on
asset                1,722           1,442           3,393           2,836
retirement
obligations
Impairments of
long-lived           -               65,375          -               65,375
assets
Non-cash
stock-based          9,775           8,588           21,207          15,355
compensation
(Gain) loss on
derivatives          164,707         (70,324 )       200,322         (11,307 )
not designated
as hedges
Cash receipts
from (payments
on)                  (26,054 )       1,575           (40,891 )       7,591
derivatives
not designated
as hedges
(Gain) loss on
disposition of       9,603           (137    )       9,457           (132    )
assets, net
Interest             55,388          54,079          111,523         106,185
expense
Loss on
extinguishment       4,316           28,616          4,316           28,616
of debt
Income tax
expense from         7,059           53,351          62,390          64,328
continuing
operations
Discontinued        -             453           -             (12,081 )
operations
EBITDAX            $ 504,018      $ 424,846      $ 987,293      $ 765,514 




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        Six Months Ended
                         June 30,                    June 30,
(in thousands)         2014        2013        2014          2013
                                                                
Property
acquisition costs:
      Proved             $ 2,137       $ 652         $ 22,627        $ 2,537
      Unproved             11,382        16,945        36,070          44,841
Exploration                342,424       283,254       666,921         549,944
Development               193,163      220,588      404,842        395,310
      Total costs
      incurred for
      oil and            $ 549,106     $ 521,439     $ 1,130,460     $ 992,632
      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          Six Months Ended
                         June 30,                    June 30,
      (in              2014        2013        2014          2013
      thousands)
                                                                     
      Exploration        $ 562         $ 820         $ 1,120         $ 1,554
      costs
      Development         339          5,832        1,304          7,362
      costs
      Total asset
      retirement         $ 901         $ 6,652       $ 2,424         $ 8,916
      obligations
                                                       

                                                                                             
                                                                                                          
Concho Resources Inc.
Derivatives Information
Unaudited
                                                                                                          
The table below provides data associated with the Company’s derivatives at August 6, 2014:
                                                                                             
                2014
                Third Quarter     Fourth            Total              2015               2016            2017
                                  Quarter
                                                                                                          
Oil Swaps:
(a)
    Volume        5,221,000         4,633,000         9,854,000          15,262,000         7,329,000       168,000
    (Bbl)
    Price       $ 92.96           $ 92.49           $ 92.74            $ 87.73            $ 90.62         $ 87.00
    (Bbl)
                                                                                                          
Oil Basis
Swaps: (b)
    Volume        3,956,000         3,956,000         7,912,000          7,122,000          -               -
    (Bbl)
    Price       $ (0.99     )     $ (1.07     )     $ (1.03      )     $ (3.41      )     $ -             $ -
    (Bbl)
                                                                                                          
Natural Gas
Swaps: (c)
    Volume        2,576,000         2,053,000         4,629,000          23,725,000         -               -
    (MMBtu)
    Price       $ 4.23            $ 4.24            $ 4.23             $ 4.16             $ -             $ -
    (MMBtu)
                                                                                                          
Natural Gas
Collars:
(d)
    Volume        5,520,000         5,520,000         11,040,000         -                  -               -
    (MMBtu)
    Ceiling
    Price       $ 4.40            $ 4.40            $ 4.40             $ -                $ -             $ -
    (MMBtu)
    Floor
    Price       $ 3.85            $ 3.85            $ 3.85             $ -                $ -             $ -
    (MMBtu)
                                                                                                          
Natural Gas
Basis
Swaps: (e)
    Volume        7,360,000         7,360,000         14,720,000         -                  -               -
    (MMBtu)
    Price       $ (0.09     )     $ (0.09     )     $ (0.09      )     $ -                $ -             $ -
    (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 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.
(e) The basis differential price is between the El Paso Permian delivery point and NYMEX – Henry Hub delivery
    point.
   

Contact:

Concho Resources Inc.
Price Moncrief, 432-683-7443
Vice President of Capital Markets and Strategy
or
Megan P. Hays, 432-685-2533
Director of Investor Relations
 
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