Concho Resources Inc. (NYSE: CXO) (the “Company” or
“Concho”) today reported financial and operating results for the
fourth quarter and full year 2015.
Highlights
- Full-year 2015 production increased 28%
year-over-year, with crude oil production up 31%.
- Exploration and development capital
expenditures were $1.8 billion during 2015, down 28% from
2014.
- Year-end 2015 estimated proved reserves
totaled 623.5 MMBoe.
- Reserves replaced at a ratio of 291%,
excluding price revisions, and at a drill-bit finding and
development cost of $11.66 per Boe.
- Total resource potential estimated at
approximately 5 billion Boe, up from 3.7 billion Boe at year end
2014.
- 2016 capital lowered to $1.2 billion
from $1.4 billion.
See “Supplemental Non-GAAP Financial Measures” at the end of
this press release for an explanation of how we calculate and use
the reserves replacement ratio and finding and development
costs.
Tim Leach, Chairman, Chief Executive Officer and President,
commented, “Concho achieved record operating performance in 2015.
This performance demonstrates our ability to adapt to challenging
conditions and generate greater capital productivity across our
assets, while strengthening our portfolio. Looking ahead to 2016,
we plan to execute a disciplined capital program focused on
capturing operational efficiencies and optimizing development. Our
near-term strategy, high-quality resource base and strong balance
sheet uniquely position Concho to build long-term value for our
shareholders.”
Fourth Quarter and Full-Year 2015 Operations Summary
Production for the fourth quarter of 2015 was 13.2 million
barrels of oil equivalent (MMBoe), or an average of 144.0 thousand
Boe per day (MBoepd), an increase of 15% from the fourth quarter of
2014 and above the high-end of the Company’s guidance.
Production for full year 2015 totaled 52.3 MMBoe, or an average
of 143.3 MBoepd, an increase of 28% over full year 2014. Full-year
2015 production was comprised of 66% oil and 34% natural gas.
During the fourth quarter of 2015, Concho averaged 12 rigs,
compared to 15 rigs in the third quarter of 2015. Concho started
drilling or participating in a total of 67 gross wells (41
operated) and completed 62 gross wells during the fourth quarter of
2015. The table below summarizes the Company’s drilling activity by
core area for the fourth quarter and full year 2015.
Number of Wells Number of
Operated Number of Wells Drilled Wells
Drilled Completed (Gross) (Gross)
(Gross) 4Q15 FY15 4Q15
FY15 4Q15 FY15 Delaware Basin 41 204 28
159 33 228 Midland Basin 7 58 6 52 10 97 New Mexico Shelf 19
99 7 55 19 115 Total
67
361 41 266 62 440 Percent Horizontal 96% 86% 100% 86% 94%
79%
Delaware Basin
Production from horizontal wells in the Delaware Basin totaled
84.4 MBoepd in the fourth quarter of 2015, up approximately 31%
over the fourth quarter of 2014. During the fourth quarter of 2015,
Concho drilled 28 wells in the Delaware Basin, including nine wells
targeting the Avalon Shale, 10 wells targeting the Bone Spring
Sands and nine wells targeting the Wolfcamp.
Concho added 24 new horizontal wells in the northern Delaware
Basin with at least 30 days of production as of the end of the
fourth quarter of 2015. The average peak 30-day and 24-hour rates
for these wells were 957 Boe per day (Boepd) (74% oil) and 1,445
Boepd, respectively. The average lateral length for these wells was
4,785 feet.
Concho added five new horizontal wells in the southern Delaware
Basin with at least 30 days of production as of the end of the
fourth quarter of 2015. The average peak 30-day and 24-hour rates
for these wells were 1,199 Boepd (78% oil) and 1,498 Boepd,
respectively. The average lateral length for these wells was 6,867
feet, setting a new record for Concho in the southern Delaware
Basin.
The Company currently has eight horizontal rigs in the Delaware
Basin, with six horizontal rigs in the northern Delaware Basin and
two horizontal rigs in the southern Delaware Basin.
Midland Basin
Concho added five new horizontal wells with at least 30 days of
production as of the end of the fourth quarter of 2015. The average
peak 30-day and 24-hour rates for these wells were 835 Boepd (85%
oil) and 1,099 Boepd, respectively, from an average lateral length
of 6,634 feet.
The Company currently has one horizontal rig in the Midland
Basin.
New Mexico Shelf
On the New Mexico Shelf, Concho added 10 new horizontal wells
with at least 30 days of production as of the end of the fourth
quarter of 2015. The average peak 30-day and 24-hour rates for
these wells were 354 Boepd (81% oil) and 497 Boepd,
respectively.
The Company currently has one horizontal rig on the New Mexico
Shelf.
Fourth-Quarter 2015 Financial Summary
Concho’s average realized price for oil and natural gas for the
fourth quarter of 2015, excluding the effect of commodity
derivatives, was $29.38 per Boe, compared with $51.77 per Boe for
the fourth quarter of 2014.
Net loss for the fourth quarter of 2015 was $0.8 million, or
$0.01 per diluted share, compared to net income of $129.9 million,
or $1.15 per diluted share, for the fourth quarter of 2014.
Adjusted net loss (non-GAAP), which excludes non-cash and unusual
items, for the fourth quarter of 2015 was $9.4 million, or $0.07
per diluted share, compared with adjusted net income (non-GAAP) of
$99.7 million, or $0.88 per diluted share, for the fourth quarter
of 2014.
EBITDAX (non-GAAP) for the fourth quarter of 2015 totaled $401.4
million, compared to $509.6 million for the fourth quarter of
2014.
Full-Year 2015 Financial Summary
The Company’s average realized price for oil and natural gas for
full year 2015, excluding the effect of commodity derivatives, was
$34.49 per Boe, compared with $65.08 per Boe for full year
2014.
Net income for full year 2015 was $65.9 million, or $0.54 per
diluted share, compared to net income of $538.2 million, or $4.88
per diluted share, for full year 2014. Adjusted net income
(non-GAAP), which excludes non-cash and unusual items, for full
year 2015 was $110.8 million, or $0.91 per diluted share, compared
with adjusted net income (non-GAAP) of $443.6 million, or $4.02 per
diluted share, for full year 2014.
EBITDAX (non-GAAP) for 2015 totaled $1.7 billion, compared to
$2.0 billion for full year 2014.
Cash flows generated from operating activities for full year
2015 totaled $0.9 billion, compared with $1.7 billion for full year
2014. Adjusted cash flows (non-GAAP), which are cash flows from
operating activities adjusted for settlements on derivatives, were
$1.5 billion for full year 2015, as compared to $1.7 billion for
full year 2014.
Costs incurred for exploration and development activities were
$1.8 billion, and costs incurred for property acquisitions were
$0.3 billion for full year 2015. For a summary of costs incurred
for the year ended December 31, 2015, see “Costs Incurred”
below.
See “Supplemental Non-GAAP Financial Measures” at the end of
this press release for a description of non-GAAP measures adjusted
net income (loss), adjusted earnings per share, EBITDAX and
adjusted cash flows and a reconciliation of these measures to the
associated GAAP measures.
2015 Proved Reserves
At December 31, 2015, Concho’s estimated proved reserves totaled
623.5 MMBoe. The Company’s proved reserves are approximately 59%
crude oil and 41% natural gas. Proved developed reserves represent
approximately 57% of total proved reserves.
During 2015, Concho added 152.2 MMBoe of proved reserves due to
drilling and completion operations and acquisitions, resulting in a
reserve replacement ratio of 291%, excluding price revisions.
Drill-bit finding and development cost was $11.66 per Boe for 2015,
compared to $14.02 per Boe for 2014. At December 31, 2015, the
Company’s three-year average drill-bit finding and development cost
was $13.84 per Boe.
Concho estimates current resource potential at approximately 5
billion Boe, including total proved reserves. Concho’s current
resource potential is attributable to approximately 18,000
horizontal drilling locations, underscoring the Company’s
transition to large-scale horizontal development in the Permian
Basin.
Each of Concho’s core areas contributed to resource expansion.
In the northern Delaware Basin, the Avalon Shale and Wolfcamp were
the biggest contributors to increasing resource due to successful
delineation wells and downspacing pilots. Concho’s recent
transactions in the southern Delaware Basin combined with
industry-leading results targeting the upper Wolfcamp drove a
substantial increase in year-end resource. In the Midland Basin,
Concho’s horizontal development program continues to exceed
expectations. Consistently strong results in the Wolfcamp as well
as successful delineation wells in the Lower Spraberry provide
confidence around the high-quality resource potential in the
Midland Basin. The shallow oil play on the New Mexico Shelf
continues to deliver impressive returns, and Concho is extending
the life of our legacy oil play with horizontal drilling and
completion techniques.
Commenting on the Company’s expanded resource potential and
drilling inventory, Mr. Leach said:
“Over the past two years, our drilling program and technical
teams delineated a significant amount of resource that, when
combined with our efforts to actively manage our portfolio,
provides Concho a solid platform for future growth.”
For a summary of estimated proved reserves, please see
“Estimated Year-End Proved Reserves” below, and for an explanation
of how we calculate and use the reserves replacement ratio and
finding and development costs, please see “Supplemental Non-GAAP
Financial Measures” below.
Outlook
First Quarter 2016
Production for the first quarter of 2016 is expected to be 130
MBoepd to 134 MBoepd. The outlook for first-quarter 2016 production
is a result of reducing drilling and completion activity to align
capital spending with cash flow in the second half of 2015 as well
as recent operational constraints. These operational constraints,
which include a third-party natural gas plant that remains
inoperable and a winter storm in the last week of December that
affected our operations in southeast New Mexico, are expected to
negatively impact production for the first quarter of 2016 by 6
MBoepd. Additionally, weather-related repairs are expected to
contribute to an increase in lease operating expense for the first
quarter of 2016; as a result, lease operating expense is expected
to be $7.75 per Boe to $8.00 per Boe. The crude oil price
differential relative to NYMEX is expected to be ($4.50) per Bbl to
($4.70) per Bbl for the first quarter of 2016 and ($3.75) per Bbl
to ($4.25) per Bbl for full year 2016.
Full Year 2016
The Company continues to scale capital spending with cash flow
due to persistently low commodity prices and currently expects to
execute a $1.1 billion to $1.3 billion capital plan in 2016, with
approximately 90% for drilling and completion activity. Concho
expects full-year 2016 production will be flat-to-down
approximately 5% as compared to 2015. The Company’s 2016 production
outlook is primarily driven by the reduction in activity
year-over-year, shifting to pad drilling and the timing of
completion activity.
Commenting on the Company’s updated 2016 capital plan, Mr. Leach
said:
“By appropriately scaling our capital program we preserve our
high-quality drilling projects for a better environment, keep the
balance sheet strong and remain well-positioned to capture unique
opportunities in our core operating areas. We plan to manage
capital spending around anticipated cash flow and retain
significant flexibility to adjust our plan as we progress through
2016. Our improving operational efficiency and high-quality
drilling inventory provide increasing confidence that we can do
more with less. For 2017, we believe we can continue to balance
capital spending and cash flow and deliver double-digit production
growth, based on the current commodity price outlook.”
Concho’s 2016 capital plan excludes acquisitions and is subject
to change depending upon a number of factors, including commodity
prices and industry conditions. Please see the table under “2016
Guidance” below for detailed information about the Company’s
outlook for full year 2016.
Financial Position and Liquidity
At December 31, 2015, Concho had long-term debt of $3.3 billion
and cash of $0.2 billion. Concho’s net debt-to-EBITDAX ratio was
1.8 times at year end 2015. In addition, Concho has a revolving
credit facility with $2.5 billion in commitments from its bank
group. At December 31, 2015, Concho had no outstanding borrowings
on its credit facility, providing the Company with total liquidity
of $2.7 billion.
Commodity Derivatives Update
The Company enters into commodity derivatives to manage its
exposure to commodity price fluctuations. For 2016, Concho has
crude oil swap contracts covering approximately 63.4 MBopd at a
weighted average price of $70.13 per Bbl. Please see the table
under “Derivatives Information” below for detailed information
about the Company’s current derivatives positions.
Conference Call
Concho will discuss fourth quarter and full-year 2015 results on
a conference call tomorrow, February 25, 2016, at 8:30 AM CT (9:30
AM ET). The telephone number and passcode to access the conference
call are provided below:
Dial-in: (855) 445-9894Intl. dial-in: (330) 863-3281Participant
Passcode: 25031593
To access the live webcast and view the related earnings
presentation, visit Concho’s website at www.concho.com. The
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:
Conference Date Conference
Presentation Time February 29, 2016 J.P. Morgan Global High
Yield & Leveraged Finance Conference 8:00 AM CT (9:00 AM ET)
March 4, 2016 Simmons 16th Annual Energy Conference 1:00 PM CT
(2:00 PM ET) March 7, 2016 Raymond James & Associates’ 37th
Annual Institutional Investors Conference 8:50 AM CT (9:50 AM ET)
March 21, 2016 Scotia Howard Weil 2016 Energy Conference 9:15 AM CT
(10:15 AM ET)
The Company’s presentation at the Raymond James & Associates
37th Annual Institutional Investors Conference will be webcast and
accessible on the “Events & Presentations” page under the
“Investors” section of the Company’s website. The Company will
refer to its March 2016 Investor Presentation. The presentation
will be available on the Company’s website on or prior to the day
of the first conference.
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 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 risk factors
discussed or referenced in the Company’s most recent Annual Report
on Form 10-K and Current Reports on Form 8-K; risks relating to
declines in the prices the Company receives, or sustained depressed
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; 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; the impact of potential changes in the Company’s
credit ratings; 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 personnel
required to perform the Company’s drilling 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; 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) 2015 2014
(a) Assets Current assets: Cash and cash equivalents $
228,550 $ 21 Accounts receivable, net of allowance for doubtful
accounts: Oil and natural gas 203,972 250,600 Joint operations and
other 190,608 409,665 Derivative instruments 652,498 490,351
Prepaid costs and other 38,922 37,759
Total current assets 1,314,550 1,188,396
Property and equipment: Oil and natural gas properties,
successful efforts method 15,846,307 13,867,831 Accumulated
depletion and depreciation (5,047,810 ) (3,790,953 ) Total
oil and natural gas properties, net 10,798,497 10,076,878 Other
property and equipment, net 178,450 129,136
Total property and equipment, net 10,976,947
10,206,014 Deferred loan costs, net 15,585 20,260
Intangible asset - operating rights, net 25,693 27,154 Inventory
19,118 14,435 Noncurrent derivative instruments 167,038 262,349
Other assets 122,945 33,172 Total
assets $ 12,641,876 $ 11,751,780
Liabilities and
Stockholders’ Equity Current liabilities: Accounts payable -
trade $ 13,200 $ 20,380 Bank overdrafts - 92,541 Revenue payable
169,787 238,098 Accrued and prepaid drilling costs 228,523 718,300
Other current liabilities 184,910 195,308
Total current liabilities 596,420
1,264,627 Long-term debt 3,332,188 3,469,137 Deferred income
taxes 1,630,373 1,600,751 Asset retirement obligations and other
long-term liabilities 140,344 136,477 Stockholders’ equity:
Common stock, $0.001 par value;
300,000,000 authorized; 129,444,042 and 113,264,918 shares issued
at December 31, 2015 and 2014, respectively
129 113 Additional paid-in capital 4,628,390 3,027,412 Retained
earnings 2,345,641 2,279,741
Treasury stock, at cost; 306,061 and
260,124 shares at December 31, 2015 and 2014, respectively
(31,609 ) (26,478 ) Total stockholders’ equity
6,942,551 5,280,788 Total liabilities and
stockholders’ equity $ 12,641,876 $ 11,751,780
(a)
The following reclassifications have been
made to the 2014 amounts in order to conform to the 2015
presentation and for the retrospective application resulting from
the early adoption of Accounting Standards Update No. 2015-03 and
2015-17:
• $48.2 million of net deferred loan costs
reclassified as a direct deduction from long-term debt; and
• $162.6 million of current deferred
income tax liability reclassified as a noncurrent deferred income
tax liability.
Concho Resources Inc. Consolidated Statements of
Operations Unaudited
Three Months Ended Years
Ended December 31, December 31, (in thousands,
except per share amounts) 2015 2014
2015 2014 Operating
revenues: Oil sales $ 327,480 $ 492,832 $ 1,539,917 $ 2,189,072
Natural gas sales 61,672 101,391
263,656 471,075 Total operating revenues
389,152 594,223 1,803,573
2,660,147
Operating costs and expenses: Oil
and natural gas production 135,434 135,781 541,359 538,374
Exploration and abandonments 26,281 214,176 58,847 284,821
Depreciation, depletion and amortization 321,779 264,138 1,223,253
979,740 Accretion of discount on asset retirement obligations 1,706
1,910 7,600 7,072 Impairments of long-lived assets 52,941 431,675
60,529 447,151
General and administrative (including
non-cash stock-based compensation of $15,801 and $12,458 for the
three months ended December 31, 2015 and 2014, respectively, and
$63,073 and $47,130 for the years ended December 31, 2015 and 2014,
respectively)
50,958 54,113 230,734 204,161 Gain on derivatives (318,681 )
(765,010 ) (699,752 ) (890,917 ) Total
operating costs and expenses 270,418 336,783
1,422,570 1,570,402
Income
from operations 118,734 257,440
381,003 1,089,745
Other income
(expense): Interest expense (54,581 ) (52,537 ) (215,384 )
(216,661 ) Loss on extinguishment of debt - - - (4,316 ) Loss on
disposition of assets, net (52,201 ) (611 ) (53,789 ) (9,308 )
Other, net (6,684 ) (5,364 ) (14,559 )
(3,500 ) Total other expense (113,466 ) (58,512 )
(283,732 ) (233,785 )
Income before income
taxes 5,268 198,928 97,271 855,960 Income tax expense
(6,056 ) (69,032 ) (31,371 ) (317,785 )
Net
income (loss) $ (788 ) $ 129,896 $ 65,900 $
538,175
Earnings per share: Basic net income (loss) $
(0.01 ) $ 1.15 $ 0.54 $ 4.89 Diluted net
income (loss) $ (0.01 ) $ 1.15 $ 0.54
$ 4.88
Concho Resources Inc. Consolidated Statements of Cash
Flows Unaudited
Years Ended December 31, (in
thousands) 2015 2014 CASH FLOWS
FROM OPERATING ACTIVITIES: Net income $ 65,900 $ 538,175
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation, depletion and amortization
1,223,253 979,740 Accretion of discount on asset retirement
obligations 7,600 7,072 Impairments of long-lived assets 60,529
447,151 Exploration and abandonments, including dry holes 43,737
265,064 Non-cash stock-based compensation expense 63,073 47,130
Deferred income taxes 29,622 296,167 Loss on disposition of assets
and other 53,789 9,308 Gain on derivatives (699,752 ) (890,917 )
Other non-cash items 14,639 18,379 Changes in operating assets and
liabilities, net of acquisitions and dispositions: Accounts
receivable 117,716 (104,988 ) Prepaid costs and other (3,726 )
(23,628 ) Inventory (5,154 ) 2,441 Accounts payable (17,689 ) 1,566
Revenue payable (68,311 ) 60,481 Other current liabilities
12,279 20,646 Net cash provided by operating
activities 897,505 1,673,787
CASH
FLOWS FROM INVESTING ACTIVITIES: Capital expenditures on oil
and natural gas properties (2,443,704 ) (2,554,914 ) Additions to
property, equipment and other assets (67,699 ) (34,320 ) Proceeds
from the disposition of assets 104 1,305 Contributions to equity
method investments (91,342 ) (30,050 ) Settlements received from
derivatives 632,916 71,983 Net cash
used in investing activities (1,969,725 ) (2,545,996
)
CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from
issuance of debt 1,490,900 2,081,000 Payments of debt (1,630,400 )
(2,191,500 ) Exercise of stock options 59 4,659 Excess tax benefit
from stock-based compensation 2,150 16,480 Net proceeds from
issuance of common stock 1,535,712 931,989 Payments for loan costs
- (10,648 ) Purchase of treasury stock (5,131 ) (15,594 ) Increase
(decrease) in bank overdrafts (92,541 ) 55,823
Net cash provided by financing activities 1,300,749
872,209 Net increase in cash and cash equivalents
228,529 - Cash and cash equivalents at beginning of period
21 21 Cash and cash equivalents at end of
period $ 228,550 $ 21
SUPPLEMENTAL CASH FLOWS:
Cash paid for interest $ 211,443 $ 211,342
Cash paid for income taxes $ 3,950 $ 27,844
Concho Resources Inc.Summary
Production and Price DataUnaudited
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,
2015 2014
2015 2014 Production and operating
data: Net production volumes: Oil (MBbl) 8,415 7,555
34,457 26,319 Natural gas (MMcf) 28,973 23,538 106,987 87,336 Total
(MBoe) 13,244 11,478 52,288 40,875
Average daily
production volumes: Oil (Bbl) 91,467 82,120 94,403 72,107
Natural gas (Mcf) 314,924 255,848 293,115 239,277 Total (Boe)
143,954 124,761 143,256 111,987
Average prices: Oil,
without derivatives (Bbl) $ 38.92 $ 65.23 $ 44.69 $ 83.17 Oil, with
derivatives (Bbl) (a) $ 60.10 $ 77.99 $ 62.03 $ 86.07 Natural gas,
without derivatives (Mcf) $ 2.13 $ 4.31 $ 2.46 $ 5.39 Natural gas,
with derivatives (Mcf) (a) $ 2.52 $ 4.38 $ 2.80 $ 5.34 Total,
without derivatives (Boe) $ 29.38 $ 51.77 $ 34.49 $ 65.08 Total,
with derivatives (Boe) (a) $ 43.69 $ 60.32 $ 46.60 $ 66.84
Operating costs and expenses per Boe: Lease operating
expenses and workover costs $ 7.67 $ 7.77 $ 7.46 $ 8.05 Oil and
natural gas taxes $ 2.55 $ 4.06 $ 2.90 $ 5.12 Depreciation,
depletion and amortization $ 24.29 $ 23.01 $ 23.40 $ 23.97 General
and administrative $ 3.84 $ 4.71 $ 4.42 $ 4.99
(a)
Includes the following effects of cash receipts from (payments on)
derivatives:
Three Months Ended Years Ended December 31,
December 31, (in thousands) 2015
2014 2015 2014 Cash
receipts from (payments on) derivatives: Oil derivatives $
178,250 $ 96,402 $ 597,297 $ 76,335 Natural gas derivatives
11,225 1,755 35,619 (4,352 ) Total $ 189,475 $
98,157 $ 632,916 $ 71,983
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.Estimated
Year-End Proved ReservesUnaudited
The table below provides a summary of changes in total proved
reserves for the year ended December 31, 2015, as well as proved
developed reserves at the beginning and end of the year.
(MMBoe) 2015
Total proved reserves Balance, January 1 637.2
Purchases of minerals-in-place 11.7 Sales of minerals-in-place (1.4
) Extensions and discoveries 157.1 Revisions: Other non-price
related revisions (16.6 ) Price-related revisions (112.2 )
Production (52.3 ) Balance, December 31 623.5
Proved developed reserves Balance, January 1 376.9
Balance December 31 358.3
Concho Resources Inc.Costs Incurred
(a)Unaudited
The table below provides the costs incurred for oil and natural
gas producing activities for the periods indicated:
Three Months
Ended Years Ended December 31, December
31, (in thousands) 2015 2014
2015 2014 Property
acquisition costs: Proved $ (1,689 ) $ 39,003 $ 57,190 $ 99,362
Unproved 10,243 184,378 206,214 292,363 Exploration 148,630 479,027
1,122,587 1,615,238 Development 86,444 327,711
709,088 937,491 Total costs incurred for oil
and natural gas properties $ 243,628 $ 1,030,119 $ 2,095,079
$ 2,944,454
(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) 2015 2014
2015 2014 Exploration costs $
183 $ 739 $ 1,820 $ 2,589 Development costs (1,695 )
1,463 (9,084 ) 7,488 Total asset retirement
obligations (b) $ (1,512 ) $ 2,202 $ (7,264 ) $ 10,077
(b) The downward revision to the
Company’s asset retirement estimates for the quarter and year ended
December 31, 2015 is primarily due to a reduction in future
estimated abandonment costs.
Concho Resources Inc.Derivatives
InformationUnaudited
The table below provides data associated with the Company’s
derivatives at February 24, 2016, for the periods indicated:
2016 First
Second Third Fourth
Quarter Quarter Quarter Quarter
Total 2017 Oil Swaps: (a) Volume (Bbl)
6,722,000 5,985,000 5,460,000 5,054,000 23,221,000 15,642,000 Price
(Bbl) $ 71.99 $ 73.38 $ 74.21 $ 59.38 $ 70.13 $ 57.39
Oil
Basis Swaps: (b) Volume (Bbl) 6,155,000 5,914,000 5,520,000
5,060,000 22,649,000 14,276,000 Price (Bbl) $ (1.46 ) $ (1.46 ) $
(1.46 ) $ (1.48 ) $ (1.46 ) $ (0.90 )
Natural Gas Swaps:
(c) Volume (MMBtu) 7,280,000 7,280,000 7,360,000 7,360,000
29,280,000 - Price (MMBtu) $ 3.02 $ 3.02 $ 3.02 $ 3.02 $ 3.02 $ -
(a) The index prices for the oil price swaps
are based on the New York Mercantile Exchange (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.
Concho Resources Inc.Supplemental
Non-GAAP Financial MeasuresUnaudited
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 (loss) and
earnings per share to exclude certain non-cash and unusual items
and cash flows from operating activities to adjust for settlements
on derivatives.
Adjusted Net Income (Loss) and Adjusted Earnings per
Share
The following table provides a reconciliation from the United
States generally accepted accounting principles (GAAP) measure of
net income (loss) to adjusted net income (loss) (non-GAAP) for the
periods indicated:
Three
Months Ended Years Ended December 31,
December 31, (in thousands, except per share amounts)
2015 2014
2015 2014 Net income
(loss) - as reported $ (788 ) $ 129,896 $ 65,900 $ 538,175
Adjustments for certain non-cash and unusual items:
Gain on derivatives (318,681 ) (765,010 ) (699,752 ) (890,917 )
Cash receipts from derivatives 189,475 98,157 632,916 71,983
Impairments of long-lived assets 52,941 431,675 60,529 447,151
Leasehold abandonments 17,886 197,570 34,532 217,326 Loss on
extinguishment of debt - - - 4,316 Loss on disposition of assets
and other 56,083 1,692 57,671 10,389 Tax impact 854 13,648 (31,953
) 53,106 Change in statutory effective income tax rates
(7,200 ) (7,945 ) (9,026 ) (7,945 )
Adjusted net income (loss) $ (9,430 ) $ 99,683 $
110,817 $ 443,584
Adjusted earnings per
share: Basic net income (loss) $ (0.07 ) $ 0.88 $ 0.92 $ 4.03
Diluted net income (loss) $ (0.07 ) $ 0.88 $ 0.91 $ 4.02
Tax rates 37.2 % 38.0 %
37.2 % 38.0 %
Adjusted Cash Flows
The following table provides a reconciliation of the GAAP
measure of cash flows from operating activities to adjusted cash
flows (non-GAAP) for the periods indicated:
Years Ended December 31, (in thousands)
2015 2014 Cash flows from
operating activities $ 897,505 $ 1,673,787 Settlements received
from derivatives (a) 632,916 71,983 Adjusted cash
flows $ 1,530,421 $ 1,745,770
(a) Amounts are presented in
cash flows from investing activities for GAAP purposes.
EBITDAX
EBITDAX (as defined below) is presented herein and reconciled
from the 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 on derivatives, (7) cash receipts from derivatives, (8)
loss on disposition of assets and other, (9) interest expense, (10)
loss on extinguishment of debt and (11) federal and state income
taxes. EBITDAX is not a measure of net income 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.
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 the GAAP
measure of net income (loss) to EBITDAX (non-GAAP) for the periods
indicated:
Three Months Ended Years Ended December
31, December 31, (in thousands)
2015 2014 2015
2014 Net income (loss) $ (788) $ 129,896 $
65,900 $ 538,175 Exploration and abandonments 26,281 214,176 58,847
284,821 Depreciation, depletion and amortization 321,779 264,138
1,223,253 979,740 Accretion of discount on asset retirement
obligations 1,706 1,910 7,600 7,072 Impairments of long-lived
assets 52,941 431,675 60,529 447,151 Non-cash stock-based
compensation 15,801 12,458 63,073 47,130 Gain on derivatives
(318,681) (765,010) (699,752) (890,917) Cash receipts from
derivatives 189,475 98,157 632,916 71,983 Loss on disposition of
assets and other 52,201 611 53,789 9,308 Interest expense 54,581
52,537 215,384 216,661 Loss on extinguishment of debt - - - 4,316
Income tax expense 6,056 69,032 31,371
317,785
EBITDAX $ 401,352 $ 509,580 $ 1,712,910 $ 2,033,225
Reserves Replacement Ratio
The Company uses the reserves 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. The reserves replacement ratio is a
statistical indicator that 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 approximately 291% was calculated by dividing net proved
reserve additions of 152.2 MMBoe (the sum of extensions,
discoveries, revisions other than price-related revisions and
purchases) by production of 52.3 MMBoe.
Drill-Bit Finding and Development Cost
Drill-bit 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 $1.8 billion by total reserve
extensions and discoveries of 157.1 MMBoe. This calculation does
not include the future development costs required for the
development of proved undeveloped reserves.
Three-Year Drill-Bit Finding and Development Cost
Three-year drill-bit 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 for full-year 2013, 2014
and 2015 of $6.2 billion by total reserve extensions and
discoveries during full-year 2013, 2014 and 2015 of 444.5 MMBoe.
This calculation does not include the future development costs
required for the development of proved undeveloped reserves.
The following table summarizes the Company’s operational and
financial guidance for 2016. The Company’s capital plan guidance
for 2016 excludes acquisitions.
Concho Resources Inc.2016
Guidance
2016 Production Annual growth -5% - 0% Oil mix
60% - 64%
Price realizations, excluding commodity
derivatives Crude oil differential to NYMEX ($/Bbl) ($3.75) –
($4.25) Natural gas (per Mcf) (% of NYMEX) 80% - 85%
Operating costs and expenses Lease operating expense ($/Boe)
$7.50 - $8.00 Oil & natural gas taxes (% of oil and natural gas
revenues) 8.25% General and administrative (“G&A”) expense
($/Boe): Cash G&A expense $3.10 - $3.50 Non-cash stock-based
compensation $1.35 - $1.45 Depletion, depreciation and amortization
expense ($/Boe)
$24.00 - $26.00
Exploration and other ($/Boe) $1.00 - $2.00
Interest expense ($ in millions):
Cash $205 - $215 Non-cash $10 Income tax rate 38%
Current taxes ($ in millions)
$0 - $10
Capital plan ($ in billions) $1.1 - $1.3
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version on businesswire.com: http://www.businesswire.com/news/home/20160224006486/en/
Concho Resources Inc.Megan P. Hays, 432-685-2533Director
of Investor RelationsorMary Tennant, 432-221-0477Senior
Financial AnalystorGabriel Middendorf, 432-685-2577Financial
Analyst
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