Quarterly / Earnings Reports | Third Quarter (3Q) Update

Concho Reports 3Q 2019 Update

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   |    Tuesday,October 29,2019

Concho Resource reported financial and operating results for third-quarter 2019.

Third-Quarter 2019 Highlights

• Delivered total production of 330 MBoepd, exceeding the high end of the Company's guidance range.
• Achieved oil production volumes of 206 MBopd.
• Reduced controllable cash costs per unit 3% year over year.
• Surpassed year-end 2019 well cost reduction target with 20% lower well costs versus first-half 2019, led by a significant reduction in Delaware Basin well costs.
• Announced strategic New Mexico Shelf divestiture for total cash consideration of $925 million, subject to customary closing and post-closing adjustments.
• Authorized initiation of a $1.5 billion share repurchase program.
• Generated cash flow from operating activities of $665 million; operating cash flow before working capital changes (non-GAAP) was $706 million, exceeding exploration and development costs incurred of $670 million.
• Reported net income of $558 million, or $2.78 per share. Adjusted net income (non-GAAP) totaled $122 million, or $0.61 per share.
• Generated $757 million of adjusted EBITDAX (non-GAAP).

See “Supplemental Non-GAAP Financial Measures” below for descriptions of the above non-GAAP measures as well as a reconciliation of these measures to the associated GAAP (as defined herein) measures.

Tim Leach, Chairman and Chief Executive Officer, commented, “The fundamentals of our business are solid, as demonstrated by our strong operational and financial performance in the third quarter. We achieved our production targets and materially reduced well costs, enabling us to surpass our well cost targets for the year and generate operating cash flow that exceeded capital spending. We also made significant progress on other important initiatives, including the sale of our New Mexico Shelf assets. The transaction was an important step in high-grading our portfolio, and we will use the proceeds to achieve our debt reduction target and accelerate the return of capital to shareholders. Through our focus on enhancing capital efficiency, improving costs and actively managing our portfolio, Concho is positioned to deliver sustainable, competitive growth and superior returns for investors.”

Third-Quarter 2019 Summary

Third-quarter 2019 oil production volumes increased 12% year over year to 206 thousand barrels per day (MBopd). Natural gas production for third-quarter 2019 totaled 744 million cubic feet per day (MMcfpd). The Company’s total production for third-quarter 2019 grew 15% year over year to 330 thousand barrels of oil equivalent per day (MBoepd).

Net income for third-quarter 2019 was $558 million, or $2.78 per share. Special items impacting earnings for the quarter included a $101 million impairment, primarily related to the Company’s New Mexico Shelf assets held for sale, and a $299 million gain on the disposition of assets as a result of the previously-announced contribution of assets to a water infrastructure joint venture. Excluding these and other special items, third-quarter 2019 adjusted net income (non-GAAP) was $122 million, or $0.61 per share. Concho’s average realized price for oil and natural gas for third-quarter 2019, excluding the effect of commodity derivatives, was $54.01 per Bbl and $1.34 per Mcf, respectively. Controllable cash costs, which include lease operating and workover expenses, cash general and administrative expenses and cash interest expense, totaled $9.57 per Boe, representing a 3% decrease year over year. The Company is targeting controllable cash costs of $9.00 per Boe by year-end 2020.

For third-quarter 2019, cash flow from operating activities was $665 million, including $41 million in working capital changes. Operating cash flow before working capital changes (non-GAAP) was $706 million, exceeding third quarter costs incurred for exploration and development activities of $670 million. During third-quarter 2019, the Company materially improved well costs and surpassed its year-end 2019 well cost reduction target of 10%. Drilling, completion & equipment (DC&E) costs totaled $955 per foot, representing a 20% reduction from first-half 2019. DC&E costs were $1,118 per foot in the Delaware Basin and $791 per foot in the Midland Basin.