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

MIDLAND, Texas--()--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 Wells
Drilled
(Gross)

 

Number of
Operated Wells
Drilled
(Gross)

 

Number of Wells
Completed

(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  

Contacts

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

Contacts

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