CXO Concho Resources Inc

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): February 25, 2015

Concho Resources Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)

Registrant’s telephone number, including area code: (432) 683-7443

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

⃞ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

⃞ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

⃞ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

⃞ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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TABLE OF CONTENTS

Item 2.02 Results of Operations and Financial Condition
Item 9.01 Financial Statements and Exhibits
SIGNATURES
EXHIBIT INDEX
EX-99.1
EX-99.2

Item 2.02 Results of Operations and Financial Condition.

     On February 25, 2015, Concho Resources Inc. (the “Company”) issued a press release announcing its results for the quarter and year ended December 31, 2014 (the “Earnings Release”). The Company also issued a press release announcing its estimated proved reserves and production for the year ended December 31, 2014 (the “Reserves Release”). A copy of the Company’s Earnings Release and Reserves Release are furnished as Exhibit 99.1 and 99.2, respectively, to this Current Report on Form 8-K.

Item 9.01 Financial Statements and Exhibits.

     (d) Exhibits.

     THE INFORMATION CONTAINED IN THIS CURRENT REPORT, INCLUDING THE EXHIBITS ATTACHED HERETO, SHALL NOT BE DEEMED “FILED” FOR THE PURPOSES OF SECTION 18 OF THE SECURITIES AND EXCHANGE ACT OF 1934, NOR SHALL THEY BE DEEMED INCORPORATED BY REFERENCE INTO ANY REGISTRATION STATEMENT OR OTHER FILING PURSUANT TO THE SECURITIES ACT OF 1933, EXCEPT AS OTHERWISE EXPRESSLY STATED IN SUCH FILING.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

EXHIBIT INDEX

Exhibit 99.1

Concho Resources Inc. Reports Fourth Quarter and Full-Year 2014 Results

MIDLAND, Texas--(BUSINESS WIRE)--February 25, 2015--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 20^th 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.

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.

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.

CONTACT:
Concho Resources Inc.
Investor Relations
Megan P. Hays, 432-685-2533
Director of Investor Relations
or
Jere Thompson, 432-221-0383
Financial Analyst

Exhibit 99.2

Concho Resources Inc. Reports 2014 Proved Reserves

MIDLAND, Texas--(BUSINESS WIRE)--February 25, 2015--Concho Resources Inc. (NYSE:CXO) (the “Company” or “Concho”) today reported proved reserves for 2014.

Highlights

• Concho increased proved reserves to a record 637 million Boe, up 134 million Boe, or 27%, over year-end 2013 proved reserves.
• Strong results from the Company’s horizontal development program in 2014 more than doubled horizontal proved reserves and increased total resource potential to 3.7 billion Boe.
• The Company achieved 428% reserve replacement at $14.02 per Boe drill-bit finding and development cost.
• Full-year 2014 production increased 22% over 2013, to 40.9 million Boe. Crude oil production increased 25% year-over-year.

For an explanation of how we calculate and use the reserve replacement ratio and drill-bit finding and development cost, please see “Supplemental Non-GAAP Financial Measures” below.

Tim Leach, Chairman, Chief Executive Officer and President, commented, “Concho delivered outstanding reserves growth for 2014 at low finding costs and replaced 428% of production. We also delivered on our annual production target, achieving 22% year-over-year growth with crude oil production up 25%. These results demonstrate the strength of our technically-driven team, the benefits of operating one of the Permian’s largest and most efficient drilling programs and the realization of our ongoing efforts to optimize well performance. The technical enhancements we are applying across our Permian assets continue to expand our resource base, which is now approximately 3.7 billion Boe.”

2014 Proved Reserves

At December 31, 2014, the Company’s estimated proved reserves totaled 637 million barrels of oil equivalent (MMBoe), up 27% from year-end 2013. The Company’s proved reserves are approximately 58% crude oil and 42% natural gas. Proved developed reserves increased 24% year-over-year and represented 59% of total proved reserves. The present value of the Company’s proved reserves, discounted at 10% (“PV-10”), increased 26% to $11.4 billion at year-end 2014. For an explanation of how we calculate and use PV-10 (non-GAAP), please see “Supplemental Non-GAAP Financial Measures” below.

Concho’s robust drilling program and positive results from optimized drilling and completion techniques drove a 107% increase in the Company’s horizontal proved reserves over year-end 2013. The Company’s horizontal proved reserves accounted for 57% of total proved reserves as of December 31, 2014, reflecting Concho’s transition to large-scale horizontal development across its assets in the Permian Basin. During 2014, Concho started drilling or participated in 595 gross wells, of which 69% were horizontal. Proved horizontal reserves have increased by more than 25x since Concho initiated its horizontal development program in 2010.

The Delaware Basin continues to be Concho’s most significant area of capital investment and growth. The Company’s proved reserves in the Delaware Basin at year-end 2014 increased 77% over year-end 2013 and accounted for 38% of total proved reserves.

The table below summarizes changes in estimated proved reserves during the year ended December 31, 2014:

In 2014, Concho added 182 MMBoe of proved reserves as a result of its drilling and completion program in the Permian Basin. Negative revisions to previous estimates of 13 MMBoe were primarily due to the reclassification of approximately 36 MMBoe of proved undeveloped reserves attributable to vertical locations that the Company does not plan to drill within five years of their initial recording as required by SEC rules, partially offset by 23 MMBoe of net positive revisions, resulting from performance and technical evaluations.

Full-Year 2014 Production

Production for full-year 2014 totaled 40.9 MMBoe, or an average of 112.0 MBoepd, up 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.

Costs Incurred

Costs incurred excluding acquisitions for 2014 were in-line with the Company’s annual capital budget of $2.6 billion. Costs incurred for property acquisitions were approximately $390 million for 2014. For a summary of costs incurred for the year ended December 31, 2014, see “Costs Incurred” below.

Drill-bit finding and development cost was $14.02 per Boe for 2014, compared to $16.79 per Boe for 2013. At December 31, 2014, the Company’s three-year average drill-bit finding and development cost was $15.40 per Boe. For an explanation of how we calculate and use drill-bit finding and development cost, please see “Supplemental Non-GAAP Financial Measures” below.

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.

We may use the terms “unproved reserves,” “resource potential,” “estimated ultimate recovery (‘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.

Supplemental Non-GAAP Financial Measures
(Unaudited)

Reserve Replacement

The Company uses the reserve replacement ratio as an indicator of the Company’s ability to replenish annual production volumes and grow its reserves, thereby providing some information on the sources of future production. It should be noted that the reserve replacement ratio is a statistical indicator that has limitations. The ratio is limited because it typically varies widely based on the extent and timing of discoveries and property acquisitions. Its predictive and comparative value is also limited for the same reasons. In addition, since the ratio does not embed the cost or timing of future production of new reserves, it cannot be used as a measure of value creation. The reserve replacement ratio of 428% was calculated by dividing net proved reserve additions of 175.1 MMBoe (the sum of extensions, discoveries, revisions and purchases) by production of 40.9 MMBoe.

Finding and Development Cost

Finding and development cost is a non-GAAP measure used to assist in an evaluation of how much it costs the Company, on a per Boe basis, to add proved reserves. Drill-bit finding and development costs are calculated by dividing the sum of exploration costs and development costs of $2.6 billion by total reserve extensions and discoveries of 182 MMBoe. This calculation does not include the future development costs required for the development of proved undeveloped reserves.

PV-10

The present value of our proved reserves, discounted at 10% (“PV-10”), was estimated at $11.4 billion at December 31, 2014, and was calculated based on the first-of-the-month, twelve-month average prices for crude oil and natural gas of $91.48 per Bbl of crude oil and $4.35 per MMBtu of natural gas.

PV-10 is derived from the standardized measure of discounted future net cash flows, which is the most directly comparable GAAP financial measure. PV-10 is a computation of the standardized measure of discounted future net cash flows on a pre-tax basis. PV-10 is equal to the standardized measure of discounted future net cash flows at the applicable date, before deducting future income taxes, discounted at 10 percent. The Company believes that the presentation of the PV-10 is relevant and useful to investors because it presents the discounted future net cash flows attributable to our estimated net proved reserves prior to taking into account future corporate income taxes, and it is a useful measure for evaluating the relative monetary significance of our oil and natural gas properties. Further, investors may utilize the measure as a basis for comparison of the relative size and value of our reserves to other companies. The Company uses this measure when assessing the potential return on investment related to our oil and natural gas properties. PV-10, however, is not a substitute for the standardized measure of discounted future net cash flows. The Company’s PV-10 measure and the standardized measure of discounted future net cash flows do not purport to present the fair value of our oil and natural gas reserves.

The following table provides a reconciliation of PV-10 to the standardized measure of discounted future net cash flows at December 31, 2014 and 2013, respectively:

CONTACT:
INVESTOR RELATIONS
Concho Resources Inc.
Megan P. Hays, 432-685-2533
Director of Investor Relations
Jere Thompson, 432-221-0383
Financial Analyst