MIDLAND, Texas--(BUSINESS WIRE)--Concho Resources Inc. (NYSE: CXO) (“Concho” or the “Company”) today reported financial and operating results for the three months ended March 31, 2013. Highlights for the three months ended March 31, 2013 include:
- Production from continuing operations of 7.7 million barrels of oil equivalent (“MMBoe”) for the first quarter of 2013, a 19% increase over the first quarter of 2012
- Net income of $30.1 million, or $0.29 per diluted share, for the first quarter of 2013, as compared to net income of $31.1 million, or $0.30 per diluted share, for the first quarter of 2012
- Adjusted net income1 (non-GAAP) of $60.3 million, or $0.58 per diluted share, for the first quarter of 2013, as compared to $108.2 million, or $1.04 per diluted share, for the first quarter of 2012
- EBITDAX2 (non-GAAP) of $340.7 million for the first quarter of 2013
1 Adjusted net income (non-GAAP) is comparable to securities analyst estimates. For an explanation of how the Company calculates and uses adjusted net income (non-GAAP) and a reconciliation of net income (GAAP) to adjusted net income (non-GAAP), please see "Supplemental Non-GAAP Financial Measures" below.
2 For an explanation of how the Company calculates and uses EBITDAX (non-GAAP) and a reconciliation of net income (GAAP) to EBITDAX (non-GAAP), please see "Supplemental Non-GAAP Financial Measures" below.
First Quarter 2013 Financial Results
Production from continuing operations for the first quarter of 2013 totaled 7.7 MMBoe (4.8 million barrels of oil (“MMBbls”) and 17.8 billion cubic feet of natural gas (“Bcf”)), an increase of 19% as compared to 6.5 MMBoe (3.9 MMBbls and 15.5 Bcf) produced in the first quarter of 2012.
Tim Leach, Concho's Chairman, CEO and President commented, “I am pleased with the operational performance of our business despite the unprecedented widening of the Permian oil basis differential during the quarter. Through the first three months of the year, I believe we are on track to deliver on our annual production guidance and capital budget. We continue to build upon our horizontal success in the Delaware Basin, where production increased 10% over the previous quarter. The Delaware Basin also contributed to overall oil growth of 3% over the previous quarter and will be a key source of oil growth for years to come.”
For the first quarter of 2013, the Company reported net income of $30.1 million, or $0.29 per diluted share, as compared to net income of $31.1 million, or $0.30 per diluted share, for the first quarter of 2012. The Company’s first quarter 2013 results were impacted by several non-cash items including: (1) a $65.0 million unrealized mark-to-market loss on commodity derivatives; (2) $4.4 million of leasehold abandonments; and (3) a $20.4 million gain on sale of assets related to estimates of post-closing adjustments on the December 2012 divestment (included in discontinued operations). Excluding these items and their tax effects, first quarter 2013 adjusted net income (non-GAAP) was $60.3 million, or $0.58 per diluted share. Excluding similar non-cash items and their tax impact, adjusted net income (non-GAAP) for the first quarter of 2012 was $108.2 million, or $1.04 per diluted share. For a description and a reconciliation of net income (GAAP) to adjusted net income (non-GAAP), please see “Supplemental Non-GAAP Financial Measures” below.
EBITDAX was $340.7 million in the first quarter of 2013, a decrease of 6% from $362.1 million reported in the first quarter of 2012. For a description and a reconciliation of net income (GAAP) to EBITDAX (non-GAAP), please see “Supplemental Non-GAAP Financial Measures” below.
Oil and natural gas sales from continuing operations for the first quarter of 2013 decreased 0.3% when compared to the first quarter of 2012. This decrease was attributable to a 16% decrease ($15.61 per barrel) in the Company’s unhedged realized oil price and a 23% decrease ($1.35 per Mcf) in the Company’s unhedged realized natural gas price, which was partially offset by a 19% increase in production from continuing operations.
The Company’s realized oil price for the first quarter of 2013 and fourth quarter of 2012 was adversely affected by the expansion of the Midland-to-Cushing basis differential. The Midland-to-Cushing Basis differential was $7.80 per barrel and $3.57 per barrel for the first quarter of 2013 and fourth quarter of 2012, respectively, compared to $1.48 per barrel in the first quarter of 2012. The Midland-to-Cushing Basis differential for April and May of 2013 was $0.38 and $0.17 per barrel, respectively. The decrease in realized natural gas prices between comparable periods is primarily due to the decrease in the value of the natural gas liquids included in the Company’s natural gas revenues despite an increase between comparable periods in the NYMEX natural gas price.
Oil and natural gas production expense from continuing operations for the first quarter of 2013, including oil and natural gas taxes, totaled $100.8 million, or $13.05 per barrel of oil equivalent (“Boe”), a 4% increase per Boe from the first quarter of 2012. This increase was due primarily to higher lease operating expenses and workover costs, which averaged $7.74 per Boe in the first quarter of 2013 as compared to $6.58 per Boe in the first quarter of 2012, which was partially offset by lower oil and natural gas taxes, which averaged $5.31 per Boe in the first quarter of 2013 as compared to $5.96 per Boe in the first quarter of 2012. The decrease in oil and natural gas taxes per Boe in the first quarter of 2013 as compared to the first quarter of 2012 was primarily due to lower realized oil and natural gas prices.
Depreciation, depletion and amortization expense from continuing operations for the first quarter of 2013 totaled $168.4 million, or $21.79 per Boe, an 11% increase per Boe from the first quarter of 2012.
General and administrative expense (“G&A”) from continuing operations for the first quarter of 2013 totaled $43.3 million, or $5.60 per Boe, as compared to $28.0 million, or $4.30 per Boe, in the first quarter of 2012. Cash G&A for the first quarter of 2013 totaled $36.5 million and stock-based compensation (non-cash) totaled $6.8 million. The increase in per Boe expense for the first quarter of 2013 over the first quarter of 2012 was primarily due to a 55% increase in absolute G&A expenses, including in 2013 an adjustment to the employee bonus accrual for services rendered in 2012 of approximately $5.9 million, or $0.76 per Boe, and was partially offset by a 19% increase in production from continuing operations.
The Company’s cash flow from operating activities (GAAP) was $219.7 million for the first three months of 2013, as compared to $345.9 million for the first three months of 2012, a decrease of 36%. Adjusted cash flows (non-GAAP), which are cash flows from operating activities (GAAP) adjusted for settlements paid on or received from derivatives not designated as hedges, were $225.7 million for the first three months of 2013, as compared to $314.0 million for the first three months of 2012, a decrease of 28%. For a description of the use of adjusted cash flows (non-GAAP) and for a reconciliation of cash flows from operating activities (GAAP) to adjusted cash flows (non-GAAP), please see “Supplemental Non-GAAP Financial Measures” below.
In the first quarter of 2013, the Company collected net cash receipts on derivatives not designated as hedges of $6.0 million and the non-cash unrealized mark-to-market loss on derivatives not designated as hedges was $65.0 million. In comparison, the Company made net cash payments of $31.9 million on derivatives not designated as hedges and reported a $126.2 million non-cash unrealized mark-to-market loss on derivatives not designated as hedges in the first quarter of 2012. To better understand the impact of the Company’s derivative positions and their impact on the statements of operations, please see the “Summary Production and Price Data” and “Derivatives Information” tables at the end of this press release.
Operations
For the quarter ended March 31, 2013, the Company commenced the drilling of or participated in a total of 190 gross wells (143 operated). The company had a 100% success rate on the 164 wells that were completed in the first quarter of 2013.
The table below summarizes the Company’s gross drilling activities by core area for the first quarter of 2013:
| 1Q 2013 | |||||||||
| Total Wells | Operated Wells | Completed Wells | |||||||
| New Mexico Shelf | 64 | 31 | 46 | ||||||
| Texas Permian | 80 | 80 | 79 | ||||||
| Delaware Basin | 46 | 32 | 39 | ||||||
| Total | 190 | 143 | 164 | ||||||
Currently, the Company is operating 31 drilling rigs; 5 of these rigs are drilling in the New Mexico Shelf, 14 are drilling in the Texas Permian and 12 are drilling in the Delaware Basin. Of the Company’s 32 operated rigs, 17 are drilling horizontally, including 3 in the New Mexico shelf, 2 in the Texas Permian and 12 in the Delaware Basin.
Delaware Basin
Of the 46 wells drilled in the Delaware Basin, 39 were Bone Spring sands wells, 2 were Avalon shale wells and 5 were Wolfcamp shale wells. The Company’s net production in the first quarter of 2013 from horizontal Delaware Basin wells averaged approximately 23,200 Boepd, an 87% increase over the first quarter of 2012 and an increase of 10% over the fourth quarter of 2012.
Credit Facility
At March 31, 2013, the Company had borrowings outstanding under the credit facility of $467.4 million, and availability under the credit facility was approximately $2.0 billion.
Derivative Update
The Company maintains an active crude oil hedging program and recently initiated hedge positions on natural gas. In addition, Concho has increased its crude oil basis swaps that limit the Company’s exposure to the Midland-to-Cushing basis differential. Concho has hedged the crude oil basis differential from (1) April 2013 to December 2013 at an average price of $1.13 per barrel and (2) January 2014 to June 2014 at an average price of $0.50 per barrel. Please see the “Derivatives Information” table at the end of this press release for more detailed information about the Company’s current derivative positions.
Guidance Update
Assuming (1) natural gas prices for the remainder of 2013 range from $4.00 per Mcf to $4.75 per Mcf and (2) the value of the natural gas liquids barrel embedded in the Company’s natural gas revenues remains relatively flat to the first quarter of 2013, natural gas differential to the NYMEX natural gas price should range from 120% to 140% compared to previous guidance of 140% to 160%.
Conference Call Information
The Company will host a conference call on Thursday, May 2, 2013 at 9:00 a.m. Central Time to discuss the first quarter 2013 financial and operating results. Interested parties may listen to the conference call via the Company’s website at www.concho.com or by dialing (877) 474-9506 (passcode: 10393063). A replay of the conference call will be available on the Company’s website or by dialing (888) 286-8010 (passcode: 16568973).
About 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 focused in the Permian Basin of Southeast New Mexico and West Texas. For more information, visit Concho’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 facts, 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. Without limiting the generality of the foregoing, forward-looking statements contained in this press release specifically include statements, estimates and projections regarding the Company's future financial position, operations, performance, production growth, returns, divestitures, capital expenditure budget, the timing and estimated proceeds of the closing of the sale of the non-core properties, oil and natural gas reserves, number of identified drilling locations, drilling program, derivative activities, costs and other guidance. These statements are based on certain assumptions 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 Form 10-K filing and risks relating to declines in the prices Concho receives for the Company’s oil and natural gas; uncertainties about the estimated quantities of reserves; risks related to the integration of acquired assets; the effects of government regulation, permitting and other legal requirements, including new legislation or regulation of hydraulic fracturing; drilling and operating risks; the adequacy of the Company’s capital resources and liquidity; risks related to the concentration of the Company’s operations in the Permian Basin; the results of the Company’s hedging program; weather; litigation; shortages of oilfield equipment, services and qualified personnel and increases in costs for such equipment, services and personnel; uncertainties about the Company’s ability to replace reserves and economically develop the Company’s current reserves; competition in the oil and natural gas industry; 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 | ||||||||
|
|
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|
|
March 31, | December 31, | ||||||
|
(in thousands, except share and per share amounts) |
2013 | 2012 | ||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 974 | $ | 2,880 | ||||
| Accounts receivable, net of allowance for doubtful accounts: | ||||||||
| Oil and natural gas | 195,524 | 198,053 | ||||||
| Joint operations and other | 209,057 | 202,738 | ||||||
| Derivative instruments | 7,201 | 35,942 | ||||||
| Deferred income taxes | 16,420 | - | ||||||
| Prepaid costs and other | 17,226 | 19,269 | ||||||
| Total current assets | 446,402 | 458,882 | ||||||
| Property and equipment: | ||||||||
| Oil and natural gas properties, successful efforts method | 9,907,856 | 9,455,599 | ||||||
| Accumulated depletion and depreciation | (1,729,399 | ) | (1,565,316 | ) | ||||
| Total oil and natural gas properties, net | 8,178,457 | 7,890,283 | ||||||
| Other property and equipment, net | 103,578 | 103,141 | ||||||
| Total property and equipment, net | 8,282,035 | 7,993,424 | ||||||
| Deferred loan costs, net | 74,355 | 77,609 | ||||||
| Intangible asset - operating rights, net | 29,711 | 30,076 | ||||||
| Inventory | 20,604 | 20,611 | ||||||
| Noncurrent derivative instruments | 2,908 | 2,769 | ||||||
| Other assets | 7,383 | 6,066 | ||||||
|
Total assets |
$ | 8,863,398 | $ | 8,589,437 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable: | ||||||||
| Trade | $ | 7,333 | $ | 31,144 | ||||
| Related parties | 629 | 185 | ||||||
| Bank overdrafts | 39,000 | 24,275 | ||||||
| Revenue payable | 133,389 | 162,073 | ||||||
| Accrued and prepaid drilling costs | 371,976 | 351,919 | ||||||
| Derivative instruments | 34,029 | 1,584 | ||||||
| Deferred income taxes | - | 8,566 | ||||||
| Other current liabilities | 183,432 | 160,340 | ||||||
| Total current liabilities | 769,788 | 740,086 | ||||||
| Long-term debt | 3,264,626 | 3,101,103 | ||||||
| Deferred income taxes | 1,220,440 | 1,186,621 | ||||||
| Noncurrent derivative instruments | 16,035 | 12,049 | ||||||
| Asset retirement obligations and other long-term liabilities | 87,026 | 83,382 | ||||||
| Stockholders’ equity: | ||||||||
|
Common stock, $0.001 par value; 300,000,000 authorized; 104,848,854 and 104,668,427 shares issued at March 31, 2013 and December 31, 2012, respectively |
105 | 105 | ||||||
| Additional paid-in capital | 1,994,817 | 1,982,714 | ||||||
| Retained earnings | 1,520,656 | 1,490,563 | ||||||
|
Treasury stock, at cost; 118,591 and 86,861 shares at March 31, 2013 and December 31, 2012, respectively |
(10,095 | ) | (7,186 | ) | ||||
| Total stockholders’ equity | 3,505,483 | 3,466,196 | ||||||
| Total liabilities and stockholders’ equity | $ | 8,863,398 | $ | 8,589,437 | ||||
| Concho Resources Inc. | ||||||||
| Consolidated Statements of Operations | ||||||||
| Unaudited | ||||||||
| Three Months Ended | ||||||||
| March 31, | ||||||||
| (in thousands, except per share amounts) | 2013 | 2012 | ||||||
| Operating revenues: | ||||||||
| Oil sales | $ | 393,208 | $ | 383,963 | ||||
| Natural gas sales | 78,919 | 89,821 | ||||||
| Total operating revenues | 472,127 | 473,784 | ||||||
| Operating costs and expenses: | ||||||||
| Oil and natural gas production | 100,845 | 81,577 | ||||||
| Exploration and abandonments | 18,407 | 5,979 | ||||||
| Depreciation, depletion and amortization | 168,420 | 127,263 | ||||||
| Accretion of discount on asset retirement obligations | 1,394 | 841 | ||||||
|
General and administrative (including non-cash stock-based compensation of $6,767 and $6,128 for the three months ended March 31, 2013 and 2012, respectively) |
43,293 | 27,979 | ||||||
| Loss on derivatives not designated as hedges | 59,017 | 158,093 | ||||||
| Total operating costs and expenses | 391,376 | 401,732 | ||||||
| Income from operations | 80,751 | 72,052 | ||||||
| Other income (expense): | ||||||||
| Interest expense | (52,106 | ) | (35,837 | ) | ||||
| Other, net | (109 | ) | (1,268 | ) | ||||
| Total other expense | (52,215 | ) | (37,105 | ) | ||||
| Income from continuing operations before income taxes | 28,536 | 34,947 | ||||||
| Income tax expense | (10,977 | ) | (13,615 | ) | ||||
| Income from continuing operations | 17,559 | 21,332 | ||||||
| Income from discontinued operations, net of tax | 12,534 | 9,785 | ||||||
| Net income | $ | 30,093 | $ | 31,117 | ||||
| Basic earnings per share: | ||||||||
| Income from continuing operations | $ | 0.17 | $ | 0.21 | ||||
| Income from discontinued operations, net of tax | 0.12 | 0.09 | ||||||
| Net income | $ | 0.29 | $ | 0.30 | ||||
| Weighted average shares used in basic earnings per share | 103,631 | 102,854 | ||||||
| Diluted earnings per share: | ||||||||
| Income from continuing operations | $ | 0.17 | $ | 0.21 | ||||
| Income from discontinued operations, net of tax | 0.12 | 0.09 | ||||||
| Net income | $ | 0.29 | $ | 0.30 | ||||
| Weighted average shares used in diluted earnings per share | 104,345 | 103,770 | ||||||
| Concho Resources Inc. | ||||||||
| Consolidated Statements of Cash Flows | ||||||||
| Unaudited | ||||||||
| Three Months Ended | ||||||||
| March 31, | ||||||||
| (in thousands) | 2013 | 2012 | ||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income | $ | 30,093 | $ | 31,117 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation, depletion and amortization | 168,420 | 127,263 | ||||||
| Accretion of discount on asset retirement obligations | 1,394 | 841 | ||||||
| Exploration and abandonments, including dry holes | 4,478 | 3,102 | ||||||
| Non-cash compensation expense | 6,767 | 6,128 | ||||||
| Deferred income taxes | 11,500 | 12,007 | ||||||
| Loss on sale of assets, net | 5 | 895 | ||||||
| Loss on derivatives not designated as hedges | 59,017 | 158,093 | ||||||
| Discontinued operations | (19,754 | ) | 9,315 | |||||
| Other non-cash items | 3,376 | 2,818 | ||||||
| Changes in operating assets and liabilities, net of acquisitions and dispositions: | ||||||||
| Accounts receivable | 12,608 | (19,102 | ) | |||||
| Prepaid costs and other | 726 | (1,494 | ) | |||||
| Inventory | (21 | ) | 6,328 | |||||
| Accounts payable | (27,679 | ) | (11,727 | ) | ||||
| Revenue payable | (15,636 | ) | 31,722 | |||||
| Other current liabilities | (15,623 | ) | (11,401 | ) | ||||
| Net cash provided by operating activities | 219,671 | 345,905 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Capital expenditures on oil and natural gas properties | (419,766 | ) | (541,665 | ) | ||||
| Additions to other property and equipment | (4,244 | ) | (20,234 | ) | ||||
| Proceeds from the sale of assets | 15,865 | 669 | ||||||
| Funds held in escrow | - | 17,394 | ||||||
| Settlements received from (paid on) derivatives not designated as hedges | 6,016 | (31,911 | ) | |||||
| Net cash used in investing activities | (402,129 | ) | (575,747 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from issuance of debt | 626,700 | 1,180,000 | ||||||
| Payments of debt | (463,300 | ) | (978,500 | ) | ||||
| Exercise of stock options | 2,059 | 2,996 | ||||||
| Excess tax benefit from stock-based compensation | 3,277 | 6,781 | ||||||
| Payments for loan costs | - | (10,050 | ) | |||||
| Purchase of treasury stock | (2,909 | ) | (2,038 | ) | ||||
| Bank overdrafts | 14,725 | 30,917 | ||||||
| Net cash provided by financing activities | 180,552 | 230,106 | ||||||
| Net increase (decrease) in cash and cash equivalents | (1,906 | ) | 264 | |||||
| Cash and cash equivalents at beginning of period | 2,880 | 342 | ||||||
| Cash and cash equivalents at end of period | $ | 974 | $ | 606 | ||||
| SUPPLEMENTAL CASH FLOWS: | ||||||||
| Cash paid for interest and fees | $ | 43,988 | $ | 51,647 | ||||
| Cash paid for income taxes | $ | 3,145 | $ | 5,455 | ||||
Concho Resources Inc.
Summary Production and Price Data
Unaudited
The following table sets forth summary information from the Company’s continuing and discontinued operations concerning production and operating data for the periods indicated:
| Three Months Ended | |||||||||
| March 31, | |||||||||
| 2013 | 2012 | ||||||||
| Production and operating data from continuing and discontinued operations: | |||||||||
|
Net production volumes: |
|||||||||
| Oil (MBbl) | 4,767 | 4,214 | |||||||
| Natural gas (MMcf) | 17,798 | 16,229 | |||||||
| Total (MBoe) | 7,733 | 6,919 | |||||||
| Average daily production volumes: | |||||||||
| Oil (Bbl) | 52,967 | 46,308 | |||||||
| Natural gas (Mcf) | 197,756 | 178,341 | |||||||
| Total (Boe) | 85,926 | 76,032 | |||||||
| Average prices: | |||||||||
| Oil, without derivatives (Bbl) | $ | 82.49 | $ | 98.16 | |||||
| Oil, with derivatives (Bbl) (a) | $ | 83.75 | $ | 90.52 | |||||
| Natural gas, without derivatives (Mcf) | $ | 4.43 | $ | 5.80 | |||||
| Natural gas, with derivatives (Mcf) (a) | $ | 4.43 | $ | 5.82 | |||||
| Total, without derivatives (Boe) | $ | 61.05 | $ | 73.39 | |||||
| Total, with derivatives (Boe) (a) | $ | 61.83 | $ | 68.78 | |||||
| Operating costs and expenses per Boe: | |||||||||
| Lease operating expenses and workover costs | $ | 7.74 | $ | 7.28 | |||||
| Oil and natural gas taxes | $ | 5.31 | $ | 6.04 | |||||
| Depreciation, depletion and amortization | $ | 21.79 | $ | 19.64 | |||||
| General and administrative | $ | 5.60 | $ | 3.96 | |||||
| (a) | Includes the effect of cash settlements received from (paid on) commodity derivatives not designated as hedges and reported in operating costs and expenses. The following table reflects the amounts of cash settlements received from (paid on) commodity derivatives not designated as hedges that were included in computing average prices with derivatives and reconciles to the amount in loss on derivatives not designated as hedges as reported in the statements of operations: | ||||||||
| Three Months Ended | |||||||||
| March 31, | |||||||||
| (in thousands) | 2013 | 2012 | |||||||
| Loss on derivatives not designated as hedges: | |||||||||
| Cash receipts from (payments on) oil derivatives | $ | 6,016 | $ | (32,196 | ) | ||||
| Cash receipts from natural gas derivatives | - | 285 | |||||||
| Unrealized mark-to-market loss on commodity derivatives | (65,033 | ) | (126,182 | ) | |||||
| Loss on derivatives not designated as hedges | $ | (59,017 | ) | $ | (158,093 | ) | |||
| 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 loss on derivatives not designated as hedges in the statements of operations. 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. | |||||||||
The following table sets forth summary information from the Company’s continuing operations concerning production and operating data for the periods indicated:
| Three Months Ended | ||||||||||||
| March 31, | ||||||||||||
| 2013 | 2012 | |||||||||||
| Production and operating data from continuing operations: | ||||||||||||
| Net production volumes: | ||||||||||||
| Oil (MBbl) | 4,767 | 3,914 | ||||||||||
| Natural gas (MMcf) | 17,798 | 15,539 | ||||||||||
| Total (MBoe) | 7,733 | 6,504 | ||||||||||
| Average daily production volumes: | ||||||||||||
| Oil (Bbl) | 52,967 | 43,011 | ||||||||||
| Natural gas (Mcf) | 197,756 | 170,758 | ||||||||||
| Total (Boe) | 85,926 | 71,471 | ||||||||||
| Average prices: | ||||||||||||
| Oil, without derivatives (Bbl) | $ | 82.49 | $ | 98.10 | ||||||||
| Oil, with derivatives (Bbl) (a) | $ | 83.75 | $ | 89.87 | ||||||||
| Natural gas, without derivatives (Mcf) | $ | 4.43 | $ | 5.78 | ||||||||
| Natural gas, with derivatives (Mcf) (a) | $ | 4.43 | $ | 5.80 | ||||||||
| Total, without derivatives (Boe) | $ | 61.05 | $ | 72.85 | ||||||||
| Total, with derivatives (Boe) (a) | $ | 61.83 | $ | 67.94 | ||||||||
| Operating costs and expenses per Boe: | ||||||||||||
| Lease operating expenses and workover costs | $ | 7.74 | $ | 6.58 | ||||||||
| Oil and natural gas taxes | $ | 5.31 | $ | 5.96 | ||||||||
| Depreciation, depletion and amortization | $ | 21.79 | $ | 19.57 | ||||||||
| General and administrative | $ | 5.60 | $ | 4.30 | ||||||||
| (a) | Includes the effect of cash settlements received from (paid on) commodity derivatives not designated as hedges and reported in operating costs and expenses. The following table reflects the amounts of cash settlements received from (paid on) commodity derivatives not designated as hedges that were included in computing average prices with derivatives and reconciles to the amount in loss on derivatives not designated as hedges as reported in the statements of operations: | |||||||||||
| Three Months Ended | ||||||||||||
| March 31, | ||||||||||||
| (in thousands) | 2013 | 2012 | ||||||||||
| Loss on derivatives not designated as hedges: | ||||||||||||
| Cash receipts from (payments on) oil derivatives | $ | 6,016 | $ | (32,196 | ) | |||||||
| Cash receipts from natural gas derivatives | - | 285 | ||||||||||
| Unrealized mark-to-market loss on commodity derivatives | (65,033 | ) | (126,182 | ) | ||||||||
| Loss on derivatives not designated as hedges | $ | (59,017 | ) | $ | (158,093 | ) | ||||||
| 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 loss on derivatives not designated as hedges in the statements of operations. 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.
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 items.
Adjusted Net Income
The following table provides a reconciliation of net income (GAAP) to adjusted net income (non-GAAP) for the three months March 31, 2013 and 2012.
| Three Months Ended | ||||||||||
| March 31, | ||||||||||
| (in thousands, except per share amounts) | 2013 | 2012 | ||||||||
| Net income - as reported | $ | 30,093 | $ | 31,117 | ||||||
| Adjustments for certain non-cash items: | ||||||||||
| Unrealized loss on commodity derivatives | 65,033 | 126,182 | ||||||||
| Leasehold abandonments | 4,387 | 120 | ||||||||
| Discontinued operations: | ||||||||||
| Gain on sale of assets | (20,363 | ) | - | |||||||
| Tax impact (a) | (18,887 | ) | (49,258 | ) | ||||||
| Adjusted net income | $ | 60,263 | $ | 108,161 | ||||||
| Adjusted basic earnings per share: | ||||||||||
| Adjusted net income per share | $ | 0.58 | $ | 1.05 | ||||||
| Weighted average shares used in adjusted basic earnings per share | 103,631 | 102,854 | ||||||||
| Adjusted diluted earnings per share: | ||||||||||
| Adjusted net income per share | $ | 0.58 | $ | 1.04 | ||||||
| Weighted average shares used in adjusted diluted earnings per share | 104,345 | 103,770 | ||||||||
| (a) | The tax impact is computed utilizing the Company's adjusted statutory effective federal and state income tax rates. The income tax rates for the three months ended March 31, 2013 and 2012 were 38.5% and 39.0%, respectively. | |||||||||
Adjusted Cash Flows
The following table provides a reconciliation of cash flows from operating activities (GAAP) to adjusted cash flows (non-GAAP) for the three months ended March 31, 2013 and 2012.
| Three Months Ended | |||||||||||||
| March 31, | |||||||||||||
| (in thousands) | 2013 | 2012 | |||||||||||
| Cash flows from operating activities | $ | 219,671 | $ | 345,905 | |||||||||
| Settlements received from (paid on) derivatives not designated as hedges (a) | 6,016 | (31,911 | ) | ||||||||||
| Adjusted cash flows | $ | 225,687 | $ | 313,994 | |||||||||
| (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 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) non-cash stock-based compensation expense, (5) unrealized (gain) loss on derivatives not designated as hedges, (6) loss on sale of assets, (7) interest expense, (8) federal and state income taxes on continuing operations and (9) 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 three months ended March 31, 2013 and 2012:
| Three Months Ended | |||||||||
| March 31, | |||||||||
| (in thousands) | 2013 | 2012 | |||||||
| Net income | $ | 30,093 | $ | 31,117 | |||||
| Exploration and abandonments | 18,407 | 5,979 | |||||||
| Depreciation, depletion and amortization | 168,420 | 127,263 | |||||||
| Accretion of discount on asset retirement obligations | 1,394 | 841 | |||||||
| Non-cash stock-based compensation | 6,767 | 6,128 | |||||||
| Unrealized loss on derivatives not designated as hedges | 65,033 | 126,182 | |||||||
| Loss of sale of assets, net | 5 | 895 | |||||||
| Interest expense | 52,106 | 35,837 | |||||||
| Income tax expense from continuing operations | 10,977 | 13,615 | |||||||
| Discontinued operations | (12,534 | ) | 14,255 | ||||||
| EBITDAX | $ | 340,668 | $ | 362,112 | |||||
| Concho Resources Inc. | ||||||||
| Costs Incurred | ||||||||
| Unaudited | ||||||||
|
The table below provides the costs incurred for the three months ended March 31, 2013 and 2012. |
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Costs incurred for oil and natural gas producing activities (a) |
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| Three Months Ended | ||||||||
| March 31, | ||||||||
| (in thousands) | 2013 | 2012 | ||||||
| Property acquisition costs: | ||||||||
| Proved | $ | 1,885 | $ | 160,047 | ||||
| Unproved | 27,896 | 39,356 | ||||||
| Exploration | 266,690 | 184,483 | ||||||
| Development | 174,722 | 194,731 | ||||||
| Total costs incurred for oil and natural gas properties | $ | 471,193 | $ | 578,617 | ||||
| (a) | The costs incurred for oil and natural gas producing activities includes the following amounts of asset retirement obligations: | |||||||
| Three Months Ended | ||||||||
| March 31, | ||||||||
| (in thousands) | 2013 | 2012 | ||||||
| Proved property acquisition costs | $ | 161 | $ | - | ||||
| Exploration costs | 734 | 2,050 | ||||||
| Development costs | 1,530 | 798 | ||||||
| Total asset retirement obligations | $ | 2,425 | $ | 2,848 | ||||
| Concho Resources Inc. | |||||||||||||||||||||||||||||||
| Derivatives Information | |||||||||||||||||||||||||||||||
| Unaudited | |||||||||||||||||||||||||||||||
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The table below provides data associated with the Company’s derivatives at May 1, 2013. |
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| 2013 | |||||||||||||||||||||||||||||||
| Second Quarter | Third Quarter | Fourth Quarter | Total | 2014 | 2015 | 2016 | 2017 | ||||||||||||||||||||||||
| Oil Swaps: (a) | |||||||||||||||||||||||||||||||
| Volume (Bbl) | 4,191,000 | 3,963,000 | 3,608,000 | 11,762,000 | 12,262,000 | 3,316,000 | 429,000 | 168,000 | |||||||||||||||||||||||
| Price (Bbl) | $ | 95.53 | $ | 95.17 | $ | 95.01 | $ | 95.25 | $ | 91.33 | $ | 87.19 | $ | 88.31 | $ | 87.00 | |||||||||||||||
| Oil Basis Swaps: (b) | |||||||||||||||||||||||||||||||
| Volume (Bbl) | 3,608,000 | 3,680,000 | 3,404,000 | 10,692,000 | 1,810,000 | - | - | - | |||||||||||||||||||||||
| Price (Bbl) | $ | (1.16 | ) | $ | (1.11 | ) | $ | (1.12 | ) | $ | (1.13 | ) | $ | (0.50 | ) | $ | - | $ | - | $ | - | ||||||||||
| Natural Gas Swaps: (c) | |||||||||||||||||||||||||||||||
| Volume (MMBtu) | 2,280,000 | 6,992,000 | 6,992,000 | 16,264,000 | - | - | - | - | |||||||||||||||||||||||
| Price (MMBtu) | $ | 4.25 | $ | 4.25 | $ | 4.25 | $ | 4.25 | $ | - | $ | - | $ | - | $ | - | |||||||||||||||
| Natural Gas Collars: (d) | |||||||||||||||||||||||||||||||
| Volume (MMBtu) | - | - | - | - | 21,900,000 | - | - | - | |||||||||||||||||||||||
| Price (MMBtu) | $ | - | $ | - | $ | - | $ | - | $ | 3.85 – 4.40 | $ | - | $ | - | $ | - | |||||||||||||||
| (a) | The index prices for the oil contracts are based on the NYMEX – West Texas Intermediate 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 index prices for the natural gas collars are based on the El Paso Permian delivery point. | ||||||||||||||||||||||||||||||