MIDLAND, Texas--(BUSINESS WIRE)-- Concho Resources Inc. (NYSE: CXO) (the “Company” or “Concho”) today reported financial and operating results for the second quarter of 2017.

Second-Quarter 2017 Highlights

• Increased production 27% year-over-year to 184.7 MBoepd.
• Delivered 8^th consecutive quarter in which cash flows from operations exceeded capital expenditures.
• Continued delineation of the stacked oil resource in the Northern Delaware Basin.
• Achieved record well performance in the Southern Delaware Basin.
• Acquired 12,400 net acres, enhancing the Company’s Midland Basin assets in Andrews and Martin counties, Texas.
• Raised annual production growth outlook to a midpoint of 25% and expect oil production to increase by more than 25%.
• Full-year 2017 capital expenditures, excluding acquisitions, tracking the midpoint of the guidance range of $1.6 billion to $1.8 billion.
• Reported quarterly net income of $152 million, or $1.02 per diluted share. Adjusted net income totaled $77 million, or $0.52 per diluted share (non-GAAP).
• Generated $461 million of EBITDAX (non-GAAP).

See “Supplemental Non-GAAP Financial Measures” at the end of this press release for a description of non-GAAP measures adjusted net income, adjusted earnings per share and EBITDAX and a reconciliation of these measures to the associated GAAP measure.

Tim Leach, Chairman and Chief Executive Officer, commented, “Strong companies that are able to navigate and capitalize on commodity price volatility will win in this environment. Our ability to deliver excellent performance while balancing capital investment and cash flow over the last two years demonstrates our execution strength and high-quality assets. This quarter’s solid operating results are supported by the capital efficiency of our program, which we see improving further as we move to large-scale development. Going forward, we will continue to focus on executing a disciplined capital program funded within cash flow. I am confident that this discipline will continue to distinguish Concho as an industry leader.”

Second-Quarter 2017 Operations Summary

Production for the second quarter of 2017 averaged 184.7 thousand Boe per day (MBoepd), an increase of approximately 27% from the second quarter of 2016. Crude oil production for the second quarter of 2017 totaled 113.2 thousand barrels per day (MBopd), an increase of approximately 27% from the second quarter of 2016. Average daily natural gas production for the second quarter of 2017 totaled 428.8 million cubic feet (MMcf).

Concho averaged 21 rigs in the second quarter of 2017. The Company is currently running 19 rigs and expects to average 17 rigs in the second half of 2017. During the second quarter of 2017, Concho commenced drilling or participated in a total of 87 gross wells (60 operated wells) and completed 76 gross wells. The table below summarizes the Company’s drilling activity by core area for the second quarter of 2017.

Northern Delaware Basin

Concho added 12 horizontal wells in the Northern Delaware Basin with at least 30 days of production during the second quarter of 2017 and an average lateral length of 6,045 feet. The average peak 30-day and 24-hour rates for these wells were 1,394 Boepd (66% oil) and 1,700 Boepd, respectively. The Company currently has seven rigs drilling in the Northern Delaware Basin.

Delineating the Stacked Oil Resource in Red Hills and Deep Areas

In the Red Hills area, Concho recently completed the Viking Helmet 1H well. This well targeted the Wolfcamp Sands, an over-pressured zone that sits above the Wolfcamp Shale at a depth of approximately 12,000 feet. While early in production, the Company is encouraged by the performance of this well, which achieved an average peak 20-day rate of 3,050 Boepd (85% oil) and a 24-hour rate of 3,444 Boepd from a lateral length of 6,838 feet.

The Company continued to advance its delineation efforts of the multi-zone resource in the Deep area. In the second quarter of 2017, Concho added the Blue Jay Federal 2H, a 3^rd Bone Spring well with a peak 30-day rate of 2,233 Boepd (83% oil) from a 4,279 feet lateral. In addition, the Company added the Mas Federal 4H well, which achieved a peak 30-day rate of 1,470 Boepd (80% oil) from a lateral length of 4,392 feet. This well is the Company’s first test of the Wolfcamp Sands in the Deep area.

Southern Delaware Basin

Concho added eight horizontal wells in the Southern Delaware Basin with at least 30 days of production during the second quarter of 2017. The average peak 30-day and 24-hour rates for these wells were 1,740 Boepd (77% oil) and 2,165 Boepd, respectively. This performance and the average lateral length of 8,852 feet represent Company records for the Southern Delaware Basin. The Company currently has six rigs drilling in the Southern Delaware Basin.

Optimizing Development of the 3^rd Bone Spring and Upper Wolfcamp

Concho is testing the co-development of the 3^rd Bone Spring and Upper Wolfcamp in the Southern Delaware Basin. Included in results for the second quarter of 2017 were three 3^rd Bone Spring wells, which achieved an average peak 30-day rate of 2,068 Boepd (73% oil) from an average lateral length of 9,967 feet. These wells were co-developed with the Upper Wolfcamp. Simultaneous development of the zones will optimize recoveries and enhance overall value of the Company’s Southern Delaware Basin position.

Midland Basin

Concho added 31 horizontal wells in the Midland Basin with at least 30 days of production during the second quarter of 2017 and an average lateral length of 9,995 feet. The average peak 30-day and 24-hour rates for these wells were 923 Boepd (87% oil) and 1,078 Boepd, respectively. The Company currently has five rigs drilling in the Midland Basin.

Outstanding Performance in the Lower Spraberry

Concho continued to achieve outstanding performance from the Lower Spraberry zone in the Midland Basin. During the second quarter of 2017, seven new wells were brought online with an average peak 30-day and 24-hour rates of 1,032 Boepd (87% oil) and 1,233 Boepd, respectively from an average lateral length of 10,289 feet.

Strategic Midland Basin Acquisition

On July 31, 2017, Concho acquired approximately 12,400 net acres with an average 100% working interest in Andrews and Martin counties, Texas. The acquired properties include approximately 3 MBoepd (73% oil) of legacy production. The acreage is contiguous with the Mabee Ranch leasehold Concho acquired from Reliance in the fourth quarter of 2016, enhancing the assets for large-scale, long-lateral development. The purchase price was $600 million, and the transaction was funded with cash on hand.

Regarding the recent acquisition, Mr. Leach commented, “This strategic acquisition complements the Midland Basin acreage we acquired last year and is consistent with our focus on high-grading our portfolio through trades, acquisitions and divestitures. We believe one of the best ways to create value is by owning large, contiguous positions with high ownership in the Permian.”

New Mexico Shelf

In the New Mexico Shelf, Concho added 13 horizontal wells with at least 30 days of production during the second quarter of 2017. The average peak 30-day and 24-hour rates for these wells were 396 Boepd (84% oil) and 553 Boepd, respectively. The average lateral length for these wells was 5,061 feet, which sets a Company record. The Company currently has one rig drilling in the New Mexico Shelf.

Second-Quarter 2017 Financial Summary

Concho’s average realized price for crude oil and natural gas for the second quarter of 2017, excluding the effect of commodity derivatives, was $44.75 per Bbl and $2.71 per Mcf, respectively, compared with $41.68 per Bbl and $1.88 per Mcf, respectively, for the second quarter of 2016.

Net income for the second quarter of 2017 was $152 million, or $1.02 per diluted share, compared to net loss of $266 million, or $2.04 per diluted share, for the second quarter of 2016. Adjusted net income (non-GAAP), which excludes non-cash and unusual items, for the second quarter of 2017 was $77 million, or $0.52 per diluted share, compared with adjusted net income (non-GAAP) of $34 million, or $0.26 per diluted share, for the second quarter of 2016.

EBITDAX (non-GAAP) for the second quarter of 2017 totaled $461 million, compared to $413 million for the second quarter of 2016.

Financial Position and Liquidity

At June 30, 2017, Concho had cash of $662 million and long-term debt of $2.7 billion. Concho currently has no outstanding borrowings under its credit facility. Adjusted for the Midland Basin acquisition, the Company had cash of $122 million and long-term debt of $2.7 billion at June 30, 2017.

Outlook

For the third quarter of 2017, Concho expects production to average between 186 MBoepd and 190 MBoepd.

For full-year 2017, Concho raised its production growth guidance to a range of 24% to 26% and expects oil production to grow by more than 25%. The Company expects capital expenditures, excluding acquisitions, will approximate the midpoint of the guidance range of $1.6 billion to $1.8 billion. Additionally, for the second half of 2017, the Company expects oil and natural gas production expense will be at the high end of the guidance range of $5.50 per Boe to $6.00 per Boe, with production expense tracking the midpoint of the range for full-year 2017. The Company lowered full-year 2017 guidance for depletion, depreciation and amortization expense to a range of $16 per Boe to $18 per Boe, as compared to previous guidance of $17 per Boe to $19 per Boe.

Commodity Derivatives Update

The Company enters into commodity derivatives to manage its exposure to commodity price fluctuations. For the second half of 2017, Concho has crude oil price swap contracts covering approximately 96.5 MBopd at a weighted average price of $51.18 per Bbl. The Company also has crude oil price swaps for 2018 and 2019, covering approximately 74.7 MBopd and 48.9 MBopd at a weighted average price of $51.35 per Bbl and $52.70 per Bbl, respectively. Please see the table under “Derivatives Information” below for detailed information about the Company’s current derivatives positions.

Conference Call

Concho will discuss second quarter 2017 results on a conference call tomorrow, August 3, 2017, at 8:00 AM CT (9:00 AM ET). The telephone number and passcode to access the conference call are provided below:

Dial-in: (844) 263-8298
Intl. dial-in: (478) 219-0007
Participant Passcode: 31529221

To access the live webcast and view the related earnings presentation, visit the Company’s website at www.concho.com. The replay will also be available on Concho’s website under the “Investors” section.

Upcoming Conferences

The Company will participate in the following upcoming conferences:

The presentations will be available on the Company’s website on or prior to the day of the first conference under the Investors section of the Company’s website, www.concho.com.

Concho Resources Inc.

Concho Resources Inc. is an independent oil and natural gas company engaged in the acquisition, development, exploration and production 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 the Company’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, oil and natural gas reserves, drilling program, 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 that convey the uncertainty of future events or outcomes are intended to identify forward-looking statements, which generally are not historical in nature. However, the absence of these words does not mean that the statements are not forward-looking. These statements are based on certain assumptions and analyses made by the Company based on management’s experience, expectations and perception of historical trends, current conditions, 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 risks include, without limitation, the risk factors discussed or referenced in the Company’s most recent Annual Report on Form 10-K and in the Company’s Quarterly Report on Form 10-Q; risks relating to declines in, or the sustained depression of, the prices the Company receives for its oil and natural gas; uncertainties about the estimated quantities of oil and natural gas reserves; drilling, completion and operating risks; the effects of government regulation, permitting and other legal requirements, including new legislation or regulation of hydraulic fracturing and the export of oil and natural gas; environmental hazards, such as uncontrollable flows of oil, natural gas, brine, well fluids, toxic gas or other pollution into the environment, including groundwater contamination; 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; the costs and availability of equipment, resources, services and qualified personnel required to perform the Company’s drilling, completion and operating activities; potential financial losses or earnings reductions from the Company’s commodity price risk-management program; risks and liabilities associated with acquired properties or businesses; uncertainties about the Company’s ability to successfully execute its business and financial plans and strategies; the adequacy of the Company’s capital resources and liquidity including, but not limited to, access to additional borrowing capacity under the Company’s credit facility; the impact of potential changes in the Company’s credit ratings; cybersecurity risks, such as those involving unauthorized access, malicious software, data privacy breaches by employees or others with authorized access, cyber or phishing-attacks, ransomware and other security issues; uncertainties about the Company’s ability to replace reserves and economically develop its current reserves; general economic and business conditions, either internationally or domestically; 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.

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.

The Company reports its financial results in accordance with the United States generally accepted accounting principles (GAAP). However, the Company believes certain non-GAAP performance measures may provide financial statement users with additional meaningful comparisons between current results, the results of its peers and of prior periods. In addition, the Company believes these measures are used by analysts and others in the valuation, rating and investment recommendations of companies within the oil and natural gas exploration and production industry. See the reconciliations throughout this release of GAAP financial measures to non-GAAP financial measures for the periods indicated.

Reconciliation of Net Income (Loss) to Adjusted Net Income and Adjusted Earnings per Share

The Company’s presentation of adjusted net income and adjusted earnings per share that exclude the effect of certain items are non-GAAP financial measures. Adjusted net income and adjusted earnings per share represent earnings and diluted earnings per share determined under GAAP without regard to certain non-cash and unusual items. The Company believes these measures provide useful information to analysts and investors for analysis of its operating results on a recurring, comparable basis from period to period. Adjusted net income and adjusted earnings per share should not be considered in isolation or as a substitute for earnings or diluted earnings per share as determined in accordance with GAAP and may not be comparable to other similarly titled measures of other companies.

The following table provides a reconciliation from the GAAP measure of net income (loss) to adjusted net income (non-GAAP), both in total and on a per diluted share basis, for the periods indicated:

Reconciliation of Net Income (Loss) to EBITDAX

EBITDAX (as defined below) is presented herein and reconciled from the GAAP measure of net income (loss) 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 (loss), 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, (7) net cash receipts from derivatives, (8) (gain) loss on disposition of assets, net, (9) interest expense, (10) loss on extinguishment of debt and (11) federal and state income tax expense (benefit). EBITDAX is not a measure of net income (loss) or cash flows as determined by GAAP.

The Company’s EBITDAX measure provides additional information which may be used to better understand the Company’s operations, and it is also a material component of one of the financial covenants under the Company’s credit facility. 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 (loss) 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 and depletable assets. 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, including by lenders pursuant to a covenant in the Company’s credit facility. 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. Further, under the Company’s credit facility, an event of default could arise if it were not able to satisfy and remain in compliance with its specified financial ratio, defined as the maintenance of a quarterly ratio of total debt to consolidated last twelve months EBITDAX of no greater than 4.25 to 1.0. Non-compliance with this ratio could trigger an event of default under the Company’s credit facility, which then could trigger an event of default under its indentures. At June 30, 2017, the Company was in compliance with the covenants under all of its debt instruments.

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

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Source: Concho Resources Inc.

MIDLAND, Texas--(BUSINESS WIRE)-- Concho Resources Inc. (NYSE: CXO) (the “Company” or “Concho”) today announced that Joe Wright, the Company’s Executive Vice President and Chief Operating Officer, has been appointed to the Board of Directors. Mr. Wright has announced his intention to retire as an officer of the Company in January 2019.

Tim Leach, Chairman of the Board and Chief Executive Officer, commented, “Joe has played an instrumental role in building the culture and success of Concho since inception. Though his daily presence will be missed after his retirement, I look forward to continued leadership from Joe in his new role as a board member.”

In addition, Jack Harper, currently Executive Vice President and Chief Financial Officer, has been named President and Chief Financial Officer. Will Giraud will continue to serve as Executive Vice President until January 2019, when he will succeed Mr. Wright as Chief Operating Officer. Effective immediately, Mr. Giraud is responsible for the Company’s four asset teams as well as business development and strategy.

The Company also announced the promotions of Gayle Burleson, Travis Counts, Price Moncrief, Erick Nelson and Brenda Schroer. As a result of these promotions, the executive management team now consists of:

• Tim Leach, Chairman of the Board and Chief Executive Officer
• Jack Harper, President and Chief Financial Officer
• Joe Wright, Executive Vice President and Chief Operating Officer
• Will Giraud, Executive Vice President
• Gayle Burleson, Senior Vice President of Business Development
• Travis Counts, Senior Vice President, General Counsel and Corporate Secretary
• Steve Guthrie, Senior Vice President of Business Operations and Engineering
• Price Moncrief, Senior Vice President of Finance and Strategy
• Erick Nelson, Senior Vice President of Operations and Production
• Brenda Schroer, Senior Vice President, Chief Accounting Officer and Treasurer

Additional leadership changes include the promotion of James Caputo, presently Director of Business Development, to Vice President of Business Development, and the promotion of Chris Spies, presently Chief Geoscientist, to Vice President of Geoscience and Technology.

“I am proud to announce the promotion of these individuals and to highlight the strong talent across our organization. We have built a team with experience, industry knowledge and a common vision for Concho to remain a leader in the industry. With the most robust drilling inventory in our company’s history, a relentless focus on our strategy and this exceptional team to lead us in our next period of growth, we are well positioned to deliver long-term shareholder value,” stated Mr. Leach.

Concho Resources Inc.

Concho Resources Inc. is an independent oil and natural gas company engaged in the acquisition, development, exploration and production 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 the Company’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 regarding the roles of certain individuals in the current and future governance of the Company. Statements containing words such as “will” are not historical in nature and are based on current expectations and 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.

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.

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Source: Concho Resources Inc.