Concho Resources Inc. (NYSE:CXO) (the “Company” or
“Concho”) today reported financial and operating results for fourth
quarter and full year 2014.
Highlights
- Concho delivered record quarterly
production of 11.5 million Boe, or 124.8 MBoepd, and achieved 31%
crude oil production growth over the same quarter a year ago.
- Full-year 2014 production increased 22%
over 2013, to 40.9 million Boe. Crude oil production increased 25%
year-over-year.
- Earnings for the fourth quarter of 2014
totaled $1.15 per diluted share, or $0.88 per diluted share on an
adjusted basis (non-GAAP).
- Fourth quarter EBITDAX (non-GAAP) of
$509.6 million brings full-year 2014 EBITDAX to a record $2.0
billion.
See “Supplemental Non-GAAP Financial Measures” at the end of
this press release for a description of adjusted net income and
EBITDAX (non-GAAP measures) and a reconciliation of these measures
to the associated GAAP measure.
Tim Leach, Chairman, Chief Executive Officer and President,
commented, “Concho achieved another record year of operational and
financial performance. For seven consecutive years, Concho has
increased total production, oil production and cash flow while
maintaining a conservative balance sheet. Our results in 2014
reflect the quality of our assets in the Permian Basin and the
technical and execution strength of our team. By optimizing our
drilling and completion techniques, we are not only improving
recoveries, we are also enhancing the rates of return of our
projects, yielding a more capital efficient program. Despite the
challenging commodity price environment, Concho is in a strong
position to further increase value for our shareholders as we focus
on executing a disciplined, returns-based capital program.”
Fourth Quarter and Full-Year 2014 Production
Production for the fourth quarter of 2014 totaled 11.5 million
barrels of oil equivalent (MMBoe), or an average of 124.8 thousand
Boe per day (MBoepd), up 29% from the fourth quarter of 2013 and up
10% from the third quarter of 2014. Production for the fourth
quarter of 2014 consisted of 7.6 million barrels (MMBbls) of crude
oil and 23.5 billion cubic feet (Bcf) of natural gas. Crude oil
production increased 31% and 13% over the fourth quarter of 2013
and the third quarter of 2014, respectively. The fourth quarter of
2014 marks the 20th consecutive quarter of crude oil production
growth from continuing operations.
Production for full year 2014 totaled 40.9 MMBoe, or an average
of 112.0 MBoepd, an increase of 22% over 2013. Production for 2014
consisted of 26.3 MMBbls of crude oil and 87.3 Bcf of natural gas.
Crude oil production increased 25% over 2013.
Operations Update
During 2014, the Company started drilling or participated in a
total of 595 gross wells, of which 473 were operated by the
Company, and completed 513 gross wells. The table below summarizes
the Company’s drilling activity by core area for the fourth quarter
and full-year 2014.
Number of
WellsDrilled(Gross)
Number ofOperated
WellsDrilled(Gross)
Number of WellsCompleted
(Gross)
4Q14 FY14 4Q14 FY14
4Q14 FY14 Delaware Basin 85 294 71 239 79 247
Texas Permian 45 167 45 157 42 145 New Mexico Shelf 51 134 32 77 42
121 Total 181 595 148 473 163 513 Percent Horizontal 62% 69%
66% 71% 59% 67%
Concho is currently running 29 drilling rigs, including 21
horizontal rigs in the Delaware Basin, five (three horizontal) rigs
in the Texas Permian and three (two horizontal) rigs in the New
Mexico Shelf.
Delaware Basin
During the fourth quarter of 2014, Concho drilled 85 wells in
the Delaware Basin, including 59 wells targeting the Bone Spring
sands, 14 wells targeting the Wolfcamp shale, eight wells targeting
the Avalon shale and four wells targeting the Brushy Canyon.
Production in the fourth quarter of 2014 attributable to horizontal
wells in the Delaware Basin totaled 64.5 MBoepd, up 80% over the
fourth quarter of 2013 and 17% over the third quarter of 2014.
In the northern Delaware Basin, Concho added 36 new horizontal
wells with at least 30 days of production as of December 31, 2014.
The average peak 30-day and 24-hour rates for these wells were 883
Boepd (73% oil) and 1,387 Boepd, respectively. The Company has
consistently delivered improving well results in the northern
Delaware Basin. Horizontal wells added in 2014 delivered an average
peak 30-day rate 18% higher than 2013.
In the southern Delaware Basin, the Company added 11 new
horizontals wells with at least 30 days of production as of
December 31, 2014. These wells targeted the Wolfcamp and had an
average peak 30-day and 24-hour rate of 1,271 Boepd (78% oil) and
1,590 Boepd, respectively. During the fourth quarter of 2014, the
Company increased its focus on drilling longer laterals, with
lateral lengths for the 11 new horizontal wells averaging 6,706
feet, a record for the Company in the southern Delaware Basin.
Texas Permian
Concho’s horizontal well results in the fourth quarter of 2014
reflect the significant improvements the Company has made in
optimizing development in the Midland Basin. Throughout 2014, the
Company targeted longer laterals while refining its completion
method. Concho added 15 new horizontal wells with at least 30 days
of production as of December 31, 2014, with an average lateral
length of 5,835 feet. The average peak 30-day and 24-hour rates for
these wells totaled 846 Boepd (82% oil) and 1,077 Boepd,
respectively.
New Mexico Shelf
The Company continues to unlock new production from its legacy,
shallow-oil resource play in the New Mexico Shelf with successful
horizontal wells. In the fourth quarter of 2014, Concho added 13
new horizontal wells targeting the Yeso formation with at least 30
days of production as of December 31, 2014. The average peak 30-day
and 24-hour rates for these wells were 408 Boepd (83% oil) and 585
Boepd, respectively, with average well costs ranging from $3.0
million to $4.0 million.
Fourth-Quarter 2014 Financial Summary
Net income for the fourth quarter of 2014 was $129.9 million, or
$1.15 per diluted share, compared with net income of $105.8
million, or $1.01 per diluted share, in the fourth quarter of 2013.
Excluding non-cash and unusual items, adjusted net income
(non-GAAP) for the fourth quarter of 2014 was $99.7 million, or
$0.88 per diluted share, compared with adjusted net income
(non-GAAP) of $95.3 million, or $0.91 per diluted share, for the
fourth quarter of 2013.
Fourth quarter of 2014 non-cash and unusual items included a
$765.0 million gain on derivatives and a $98.2 million in cash
receipts from derivatives. Non-cash and unusual items for the
quarter also included impairment and leasehold abandonment charges
of $431.7 million and $197.6 million, respectively, primarily due
to the significant decline in the crude oil and natural gas futures
curves and for certain non-core assets that the Company does not
intend to develop in the current environment.
EBITDAX (non-GAAP) for the fourth quarter of 2014 totaled $509.6
million, an increase of 10% over the fourth quarter of 2013.
The Company’s total realized price during the fourth quarter of
2014, excluding the effect of commodity derivatives, was $51.77 per
Boe, compared with $70.82 per Boe during the fourth quarter of
2013. The lower total realized price in the 2014 period reflects a
sharply lower crude oil price.
Full-Year 2014 Financial Summary
Net income for full-year 2014 was $538.2 million, or $4.88 per
diluted share, compared with net income of $251.0 million, or $2.39
per diluted share, in 2013. Excluding non-cash and unusual items,
adjusted net income (non-GAAP) for 2014 was $443.6 million, or
$4.02 per diluted share, compared with adjusted net income
(non-GAAP) of $368.7 million, or $3.51 per diluted share, for
2013.
EBITDAX (non-GAAP) for 2014 totaled $2.0 billion, an increase of
21% over 2013.
The Company’s total realized price for full-year 2014, excluding
the effect of commodity derivatives, was $65.08 per Boe, compared
with $68.97 per Boe in 2013.
Costs incurred for 2014 were approximately $2.6 billion for
exploration and development activities and approximately $390
million for property acquisitions. During 2014, the Company
expanded its Permian Basin acreage position by approximately 68,500
net acres. At December 31, 2014, the Company’s Permian Basin
acreage position totaled approximately 1.1 million gross (700,000
net) acres.
Commodity Derivatives Update
The Company enters into commodity derivatives to manage its
exposure to commodity price fluctuations. For calendar year 2015,
Concho currently has swap contracts covering approximately 47.2
MBbls per day of expected crude oil production at a weighted
average price of $84.15 per Bbl. Concho also currently has basis
swap contracts covering approximately 40.5 MBbls per day of
expected crude oil production at a weighted average price of $3.44
per Bbl for calendar year 2015. Please see the table under
“Derivatives Information” below for more detailed information about
the Company’s current derivatives positions.
First-Quarter 2015 Outlook
For the first quarter of 2015, the Company expects production to
average between 127 MBoepd and 131 MBoepd.
Additions to Management Group
The Company also announced two management promotions.
Scott Kidwell has been promoted to Vice President of Government
and Public Affairs. Mr. Kidwell came to Concho in 2011 as Senior
Counsel in the legal department and subsequently held roles of
increasing responsibility in that department. In 2013, he was
promoted to Director of Government and Public Affairs. In his
current capacity, he oversees corporate interaction with all local,
state, and federal governments; the media; and local communities.
Before coming to Concho, Mr. Kidwell was a shareholder at Lynch,
Chappell & Alsup PC. Mr. Kidwell holds a Bachelor of Business
Administration from Texas Tech University and a Juris Doctor from
Texas Tech University School of Law.
Kang Chen has been promoted to Vice President and Chief
Information Officer. Mr. Chen came to Concho in 2010 as Director of
Information Technology. Prior to Concho, he served in various
managerial roles with increasing responsibilities for
LyondellBasell. Mr. Chen has past experience in the E&P
industry through his work at Deloitte Consulting where he
advised large E&P and integrated oil companies as clients.
Mr. Chen holds a Bachelor of Science in Finance from Tianjin
University of Finance and Economics, a Master of Science in Finance
from Suffolk University and a Master of Science in Management
Information Systems from Boston University.
Conference Call
Concho will discuss fourth quarter and full-year 2014 results on
a conference call tomorrow, February 26, 2015, at 9:00 AM CT (10:00
AM ET). To participate in the call, dial (877) 703-6106 (passcode:
64578674). To access the live webcast and view the related
presentation, visit www.concho.com. A replay will also be available
on the Company’s website under the “Investors” section.
Upcoming Conferences
The Company will participate in the following upcoming
conferences:
- March 2, 2015 – Raymond James &
Associates Annual Institutional Investors Conference
- March 5, 2015 – Simmons & Company
International Annual Energy Conference
- March 23, 2015 – Scotia Howard Weil
Annual Energy Conference
The Company’s presentation at the Raymond James conference is
scheduled for 1:15 PM CT (2:15 PM ET) on March 2, 2015. The
presentation will be webcast and accessible on the “Events &
Presentations” page under the “Investors” section of the Company’s
website. The slide presentation for each conference mentioned above
will be available on the Company’s website on or prior to the day
of the conference.
Concho Resources Inc.
Concho Resources Inc. is an independent oil and natural gas
company engaged in the acquisition, development and exploration of
oil and natural gas properties. The Company’s operations are
primarily focused in the Permian Basin of Southeast New Mexico and
West Texas. For more information, visit 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, 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 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 include the factors discussed or
referenced in the “Risk Factors” section of the Company’s most
recent Annual Report on Form 10-K; 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 the Company does 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 its
credit facility; 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; 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 and liabilities related to the integration of
acquired properties or businesses; uncertainties about the
Company’s ability to successfully execute its 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, 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.
Concho Resources Inc. Consolidated Balance Sheets
Unaudited
December 31, (in thousands, except share and per
share amounts) 2014
2013 Assets Current assets: Cash and cash
equivalents $ 21 $ 21 Accounts receivable, net of allowance for
doubtful accounts: Oil and natural gas 250,600 223,790 Joint
operations and other 409,665 247,945 Derivative instruments 490,351
590 Deferred income taxes - 30,069 Prepaid costs and other
37,759 18,460 Total current assets
1,188,396 520,875 Property and equipment: Oil
and natural gas properties, successful efforts method 13,867,831
11,215,373 Accumulated depletion and depreciation (3,790,953
) (2,384,108 ) Total oil and natural gas properties, net 10,076,878
8,831,265 Other property and equipment, net 129,136
114,783 Total property and equipment, net
10,206,014 8,946,048 Deferred loan costs, net
68,443 73,048 Intangible asset - operating rights, net 27,154
28,615 Inventory 14,435 19,682 Noncurrent derivative instruments
262,349 966 Other assets 33,172 1,930
Total assets $ 11,799,963 $ 9,591,164
Liabilities and Stockholders’
Equity
Current liabilities: Accounts payable - trade $ 20,380 $ 13,936
Bank overdrafts 92,541 36,718 Revenue payable 238,098 177,617
Accrued and prepaid drilling costs 718,300 318,296 Derivative
instruments - 53,701 Deferred income taxes 162,566 - Other current
liabilities 195,308 156,600 Total
current liabilities 1,427,193 756,868
Long-term debt 3,517,320 3,630,421 Deferred income taxes 1,438,185
1,334,653 Noncurrent derivative instruments - 14,088 Asset
retirement obligations and other long-term liabilities 136,477
97,185 Commitments and contingencies Stockholders’ equity: Common
stock, $0.001 par value; 300,000,000 authorized; 113,264,918 and
105,222,765 shares issued at December 31, 2014 and 2013,
respectively 113 105 Additional paid-in capital 3,027,412 2,027,162
Retained earnings 2,279,741 1,741,566 Treasury stock, at cost;
260,124 and 127,305 shares at December 31, 2014 and 2013,
respectively (26,478 ) (10,884 ) Total stockholders’
equity 5,280,788 3,757,949 Total
liabilities and stockholders’ equity $ 11,799,963 $
9,591,164
Concho Resources Inc.
Consolidated Statements of Operations Unaudited
Three Months Ended Years Ended
December 31, December 31, (in thousands, except
per share amounts) 2014
2013 2014
2013 Operating revenues: Oil
sales $ 492,832 $ 525,546 $ 2,189,072 $ 1,938,433 Natural gas sales
101,391 106,540 471,075
381,486 Total operating revenues 594,223
632,086 2,660,147
2,319,919
Operating costs and expenses: Oil and
natural gas production 135,781 127,141 538,374 455,436 Exploration
and abandonments 214,176 71,752 284,821 109,549 Depreciation,
depletion and amortization 264,138 214,833 979,740 772,608
Accretion of discount on asset retirement obligations 1,910 1,637
7,072 6,047 Impairments of long-lived assets 431,675 - 447,151
65,375 General and administrative (including non-cash stock-based
compensation of $12,458 and $9,800 for the three months ended
December 31, 2014 and 2013, respectively, and $47,130 and $35,078
for the years ended December 31, 2014 and 2013, respectively)
54,113 44,695 204,161 169,815 (Gain) loss on derivatives not
designated as hedges (765,010 ) (33,651 )
(890,917 ) 123,652 Total operating costs and expenses
336,783 426,407 1,570,402
1,702,482
Income from operations
257,440 205,679 1,089,745
617,437
Other income (expense): Interest expense
(52,537 ) (56,401 ) (216,661 ) (218,581 ) Loss on extinguishment of
debt - - (4,316 ) (28,616 ) Other, net (5,975 )
(11,275 ) (12,808 ) (13,081 ) Total other expense
(58,512 ) (67,676 ) (233,785 ) (260,278
)
Income from continuing operations before income taxes
198,928 138,003 855,960 357,159 Income tax expense (69,032 )
(32,214 ) (317,785 ) (118,237 )
Income from
continuing operations 129,896 105,789 538,175 238,922
Income
from discontinued operations, net of tax -
- - 12,081
Net income $
129,896 $ 105,789 $ 538,175 $ 251,003
Basic earnings per share: Income from continuing operations
$ 1.15 $ 1.01 $ 4.89 $ 2.28 Income from discontinued operations,
net of tax - - -
0.11 Net income $ 1.15 $ 1.01 $ 4.89 $
2.39
Diluted earnings per share: Income from
continuing operations $ 1.15 $ 1.01 $ 4.88 $ 2.28 Income from
discontinued operations, net of tax - -
- 0.11 Net income $ 1.15 $ 1.01
$ 4.88 $ 2.39
Concho
Resources Inc. Consolidated Statements of Cash Flows
Unaudited Years
Ended December 31, (in thousands) 2014
2013 CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 538,175 $ 251,003 Adjustments to reconcile net
income to net cash provided by operating activities: Depreciation,
depletion and amortization 979,740 772,608 Accretion of discount on
asset retirement obligations 7,072 6,047 Impairments of long-lived
assets 447,151 65,375 Exploration and abandonments, including dry
holes 265,064 80,714 Non-cash compensation expense 47,130 35,078
Deferred income taxes 296,167 102,427 Loss on disposition of
assets, net 9,308 1,268 (Gain) loss on derivatives not designated
as hedges (890,917 ) 123,652 Discontinued operations - (12,250 )
Other non-cash items 18,379 19,720 Changes in operating assets and
liabilities, net of acquisitions and dispositions: Accounts
receivable (104,988 ) (40,009 ) Prepaid costs and other (23,628 )
4,945 Inventory 2,441 509 Accounts payable 1,566 (18,469 ) Revenue
payable 60,481 28,593 Other current liabilities 20,646
(59,191 ) Net cash provided by operating activities
1,673,787 1,362,020
CASH FLOWS FROM
INVESTING ACTIVITIES: Capital expenditures on oil and natural
gas properties (2,554,914 ) (1,850,992 ) Additions to other
property and equipment (34,320 ) (28,678 ) Proceeds from the
disposition of assets 1,305 15,217 Contributions to equity method
investment (30,050 ) - Settlements received from (paid on)
derivatives not designated as hedges 71,983
(32,341 ) Net cash used in investing activities (2,545,996 )
(1,896,794 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt 2,081,000 3,257,575 Payments of debt
(2,191,500 ) (2,729,700 ) Exercise of stock options 4,659 3,223
Excess tax benefit from stock-based compensation 16,480 6,147 Net
proceeds from issuance of common stock 931,989 - Payments for loan
costs (10,648 ) (14,075 ) Purchase of treasury stock (15,594 )
(3,698 ) Bank overdrafts 55,823 12,443
Net cash provided by financing activities 872,209
531,915 Net increase (decrease) in cash and cash
equivalents - (2,859 ) Cash and cash equivalents at beginning of
period 21 2,880 Cash and cash
equivalents at end of period $ 21 $ 21
SUPPLEMENTAL CASH FLOWS: Cash paid for interest $ 211,342 $
200,961 Cash paid for income taxes $ 27,844 $ 21,376
Concho Resources Inc.
Summary Production and Price
Data
Unaudited
The following table sets forth summary
information concerning production and operating data for the
periods indicated:
Three Months Ended Years Ended
December 31, December 31,
2014 2013 2014
2013 Production and operating data:
Net production volumes: Oil (MBbl) 7,555 5,750 26,319 21,126
Natural gas (MMcf) 23,538 19,048 87,336 75,054 Total (MBoe) 11,478
8,925 40,875 33,635
Average daily production volumes:
Oil (Bbl) 82,120 62,500 72,107 57,879 Natural gas (Mcf) 255,848
207,043 239,277 205,627 Total (Boe) 124,761 97,007 111,987 92,150
Average prices: Oil, without derivatives (Bbl) $
65.23 $ 91.40 $ 83.17 $ 91.76 Oil, with derivatives (Bbl) (a) $
77.99 $ 91.56 $ 86.07 $ 89.79 Natural gas, without derivatives
(Mcf) $ 4.31 $ 5.59 $ 5.39 $ 5.08 Natural gas, with derivatives
(Mcf) (a) $ 4.38 $ 5.83 $ 5.34 $ 5.21 Total, without derivatives
(Boe) $ 51.77 $ 70.82 $ 65.08 $ 68.97 Total, with derivatives (Boe)
(a) $ 60.32 $ 71.42 $ 66.84 $ 68.01
Operating costs and
expenses per Boe: Lease operating expenses and workover costs $
7.77 $ 8.57 $ 8.05 $ 7.85 Oil and natural gas taxes $ 4.06 $ 5.68 $
5.12 $ 5.69 Depreciation, depletion and amortization $ 23.01 $
24.07 $ 23.97 $ 22.97 General and administrative $ 4.71 $ 5.01 $
4.99 $ 5.04
(a) Includes the effect of cash receipts from (payments on)
derivatives not designated as hedges:
Three Months Ended Years Ended
December 31, December 31, (in thousands)
2014 2013 2014
2013 Cash receipts from (payments
on) derivatives not designated as hedges: Oil derivatives $
96,402 $ 912 $ 76,335 $ (41,616 ) Natural gas derivatives
1,755 4,431 (4,352 ) 9,275 Total $
98,157 $ 5,343 $ 71,983 $ (32,341 )
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.
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) 2014 2013
2014 2013 Property acquisition
costs: Proved $ 39,003 $ 9,123 $ 99,362 $ 11,499 Unproved 184,378
26,706 292,363 85,538 Exploration 479,027 250,767 1,615,238
1,029,793 Development 327,711 145,424 937,491
738,430 Total costs incurred for oil and natural gas
properties $ 1,030,119 $ 432,020 $ 2,944,454 $ 1,865,260
(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) 2014 2013
2014 2013 Exploration costs $
739 $ 583 $ 2,589 $ 2,672 Development costs 1,463 304
7,488 9,467 Total asset retirement obligations $
2,202 $ 887 $ 10,077 $ 12,139
Concho Resources Inc.
Derivatives Information
Unaudited
The tables below provide data associated
with the Company’s derivatives at February 25, 2015, for the
periods indicated:
2015 First
Quarter Second Quarter Third Quarter Fourth
Quarter Total Oil Swaps: (a) Volume (Bbl)
4,240,000 4,579,000 4,314,000 4,109,000 17,242,000 Price (Bbl) $
88.32 $ 83.05 $ 82.83 $ 82.47 $ 84.15
Oil Basis Swaps:
(b) Volume (Bbl) 3,915,000 3,836,500 3,634,000 3,404,000
14,789,500 Price (Bbl) $ (3.47 ) $ (3.45 ) $ (3.44 ) $ (3.38 ) $
(3.44 )
Natural Gas Swaps: (c) Volume (MMBtu)
5,850,000 5,915,000 5,980,000 5,980,000 23,725,000 Price (MMBtu) $
4.16 $ 4.16 $ 4.16 $ 4.16 $ 4.16
Natural Gas Basis Swaps:
(d) Volume (MMBtu) 1,350,000 1,365,000 1,380,000 1,380,000
5,475,000 Price (MMBtu) $ (0.13 ) $ (0.13 ) $ (0.13 ) $ (0.13 ) $
(0.13 )
2016 2017 Oil Swaps: (a)
Volume (Bbl) 12,499,000 168,000 Price (Bbl) $ 83.43 $ 87.00
Oil Basis Swaps: (b) Volume (Bbl) 1,464,000 Price (Bbl) $
(2.48 )
(a) The index prices for the oil price swaps are based on
the NYMEX – West Texas Intermediate (“WTI”) monthly average futures
price. (b) The basis differential price is between Midland – WTI
and Cushing – WTI. (c) The index prices for the natural gas price
swaps are based on the NYMEX – Henry Hub last trading day futures
price. (d) The basis differential price is between the El Paso
Permian delivery point and NYMEX – Henry Hub delivery point.
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 share amounts) 2014
2013 2014
2013 Net income - as
reported $ 129,896 $ 105,789 $ 538,175 $ 251,003
Adjustments for certain non-cash and unusual items: (Gain)
loss on derivatives not designated as hedges (765,010 ) (33,651 )
(890,917 ) 123,652 Cash receipts from (payments on) derivatives not
designated as hedges 98,157 5,343 71,983 (32,341 ) Impairments of
long-lived assets 431,675 - 447,151 65,375 Leasehold abandonments
197,570 35,930 217,326 49,758 Loss on extinguishment of debt - -
4,316 28,616 (Gain) loss on disposition of assets, net 611 (449 )
9,308 1,268 Other 1,081 11,393 1,081 11,393 Discontinued
operations: Gain on disposition of assets - - - (19,599 ) Tax
impact (a) 13,648 (7,204 ) 53,106 (88,511 ) Change in statutory
effective income tax rates (7,945 ) (21,876 )
(7,945 ) (21,876 )
Adjusted net income $ 99,683
$ 95,275 $ 443,584 $ 368,738
Adjusted earnings per share: Basic $ 0.88 $ 0.91 $ 4.03 $
3.52 Diluted $ 0.88 $ 0.91 $ 4.02 $ 3.51
Effective tax
rates 38.0 % 38.8 % 38.0 % 38.8 %
(a) The tax impact is computed utilizing the
Company's adjusted statutory effective federal and state income tax
rates shown in the table above.
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)
2014 2013
2014 2013
Net income $ 129,896 $ 105,789 $ 538,175 $ 251,003
Exploration and abandonments 214,176 71,752 284,821 109,549
Depreciation, depletion and amortization 264,138 214,833 979,740
772,608 Accretion of discount on asset retirement obligations 1,910
1,637 7,072 6,047 Impairments of long-lived assets 431,675 -
447,151 65,375 Non-cash stock-based compensation 12,458 9,800
47,130 35,078 (Gain) loss on derivatives not designated as hedges
(765,010 ) (33,651 ) (890,917 ) 123,652 Cash receipts from
(payments on) derivatives not designated as hedges 98,157 5,343
71,983 (32,341 )
(Gain) loss on disposition of assets,
net
611 (449 ) 9,308 1,268 Interest expense 52,537 56,401 216,661
218,581 Loss on extinguishment of debt - - 4,316 28,616 Income tax
expense from continuing operations 69,032 32,214 317,785 118,237
Discontinued operations - - -
(12,081 ) EBITDAX $ 509,580 $ 463,669 $
2,033,225 $ 1,685,592
Concho Resources Inc.Investor RelationsMegan P.
Hays, 432-685-2533Director of Investor RelationsorJere
Thompson, 432-221-0383Financial Analyst
Concho Resources (NYSE:CXO)
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