UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For the fiscal year ended December 31, 20172018

or

For the transition period from                                           to                                          

Commission file number: 1-33615

Concho Resources Inc.

(Exact name of registrant as specified in its charter)

Securities Registered Pursuant to Section 12(g) of the Act:  None 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   Yes ☑No o ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.   Yes o☐ No ☑

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes ☑No o ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes ☑No o☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   ☑

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   o ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes o☐ No ☑

TABLE OF CONTENTS

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Various statements and information contained in or incorporated by reference into this report that express a belief, expectation, or intention, or that are not statements of historical fact, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements include statements, projections and estimates concerning our future financial position, operations, performance, business strategy, oil and natural gas reserves, drilling program, capital expenditures, liquidity and capital resources, the timing and success of specific projects, outcomes and effects of litigation, claims, disputes and disputes, derivative activities and potential financing.activities. Forward-looking statements are generally accompanied by words such as “estimate,” “project,” “predict,” “believe,” “expect,” “anticipate,” “potential,” “could,” “may,” “foresee,” “plan,” “will,” “goal” or other words that convey the uncertainty of future events, expectations or possible outcomes. Forward-looking statements are not guarantees of performance. We have based these forward-looking statements on our current expectations and assumptions about future events and their potential effect on us. These statements are based on certain assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments as well as other factors we believe are appropriate under the circumstances. Actual results may differ materially from those implied or expressed by any forward-looking statements. These forward-looking statements speak only as of the date of this report, or if earlier, as of the date they were made. We disclaim any obligation to update or revise these statements unless required by law, whether as a result of new information, future events or otherwise, and we caution you not to rely on them unduly. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties relating to, among other matters, the risks discussed in “Item 1A. Risk Factors” in this report, as well as those factors summarized below:

·           declines in, or the sustained depression of, or increased volatility in the prices we receive for our oil and natural gas;gas, or increases in the differential between index oil or natural gas prices and prices received;

·           uncertainties about drilling, completion and operating risks, including our ability to efficiently execute large-scale project development as we could experience delays, curtailments and other adverse impacts associated with a high concentration of activity;

·the estimated quantitieseffects of government regulation, permitting and other legal requirements, including new legislation or regulation related to hydraulic fracturing, climate change or derivatives reform;

·disruptions to, capacity constraints in or other limitations on the pipeline systems that deliver our oil and natural gas reserves;and other processing and transportation considerations;

·           risks related to ongoing expansion of our business, including the recruitment and retention of qualified personnel in the Permian Basin;

·competition in the oil and natural gas industry;

·risks related to the concentration of our operations in the Permian Basin of Southeast New Mexico and West Texas;

·the costs and availability of equipment, resources, services and qualified personnel required to perform our drilling, completion and operating activities;

·disruptions to, capacity constraints in or other limitations on the pipeline systems that deliver our oil, natural gas liquids and natural gas and other processing and transportation considerations;

·           drilling, completion and operating risks;

·environmental hazards, such as uncontrollable flows of oil, natural gas, brine,saltwater, well fluids, toxic gas or other pollution into the environment, including groundwater contamination;

·           risks related touncertainties about the concentrationestimated quantities of our operations in the Permian Basin of southeast New Mexicooil and west Texas;natural gas reserves;

·           risks associated with acquisitions includingsuch as increased expenses and integration efforts, failure to realize the expected benefits of the transaction and liabilities associated with acquired properties or businesses and the ability to realize expected benefits;businesses;

·the effects of government regulation, permitting and other legal requirements, including new legislation or regulation related to hydraulic fracturing, climate change, derivatives reform or the export of oil and natural gas;

·           the impact of current and potential changes to federal or state tax rules and regulations, including the Tax Cuts and Jobs Act;

·potential financial losses or earnings reductions from our commodity price risk-management program;

·difficult and adverse conditions in the domestic and global capital and credit markets;

·the adequacy of our capital resources and liquidity including, but not limited to, access to additional borrowing capacity under our credit facility;

·the impact of potential changes in our credit ratings;

·uncertainties about our ability to successfully execute our business and financial plans and strategies;

·evolving cybersecurity risks, such as those involving unauthorized access, denial-of-service attacks, malicious software, data privacy breaches by employees, insiders or others with authorized access, cyber or phishing-attacks, ransomware, malware, social engineering, physical breaches or other actions;

·           the impact of current and potential changes to federal or state tax rules and regulations;

·potential financial losses or earnings reductions from our commodity price risk-management program;

·difficult and adverse conditions in the domestic and global capital and credit markets;

·the adequacy of our capital resources and liquidity including, but not limited to, access to additional borrowing capacity under our Credit Facility, as defined herein;

·the impact of potential changes in our credit ratings;

·uncertainties about our ability to successfully execute our business and financial plans and strategies;

·uncertainties about our ability to replace reserves and economically develop our current reserves;

·           general economic and business conditions, either internationally or domestically;

·competition in the oil and natural gas industry; and

·           uncertainty concerning our assumed or possible future results of operations.

Reserve engineering is a process of estimating underground accumulations of oil and natural gas that cannot be measured in an exact way. The accuracy of any reserve estimate depends on the quality of available data, the interpretation of such data and the price and cost assumptions made by our reserve engineers. In addition, the results of drilling, testing and production activities may justify revisions of estimates that were made previously. If significant, such revisions would change the schedule of any further production and development drilling. Accordingly, reserve estimates may differ from the quantities of oil and natural gas that are ultimately recovered.

PART I

Item 1. Business

General

Concho Resources Inc., a Delaware corporation (“Concho,” the “Company,” “we,” “us” and “our”) formed in February 2006, is an independent oil and natural gas company engaged in the acquisition, development, exploration and production of oil and natural gas properties. Our core operations are primarily focused in the Permian Basin of southeastSoutheast New Mexico and westWest Texas. The Permian Basin is one of the most prolific oil and natural gas producing regions in the United States and is characterized by an extensive production history, long reserve life, multiple producing horizons and enhanced recovery potential. Currently, the majority of the rigs running in the Permian Basin are drilling horizontal wells. Concho’s legacy in the Permian Basin provides us a deep understanding of operating and geological trends. Wetrends, and we are actively developing our resource base by utilizing extended length lateral drilling, enhanced completion techniques,large-scale development projects, which include long-lateral wells and multi-well pad locations, and large-scale development projects throughout our four core operating areas: the Northern Delaware Basin, the Southern Delaware Basin, the Midland Basin and the New Mexico Shelf.areas. Our strategy remains focused on development and exploration activities on our multi-year project inventory, and pursuing acquisitions that meet our strategic and financial objectives.

Business and Properties

Our core operations are focused in the Permian Basin, which underlies an area of southeastSoutheast New Mexico and westWest Texas approximately 250 miles wide and 300 miles long. Commercial accumulations of hydrocarbons occur in multiple stratigraphic horizons, at depths ranging from less than 1,000 feet to over 25,000 feet. At December 31, 2017, substantially all of2018, our 8401,187 MMBoe total estimated proved reserves were located in our core operating areas and consisted of approximately 6063 percent oil and 4037 percent natural gas. We have assembled a multi-year inventory of horizontal development and exploration projects across our four core operating areas.

We have one operating segment and one reporting unit, which is oil and natural gas development, exploration and production. All of our operations are conducted in one geographic area of the United States.

On July 19, 2018, we completed the acquisition of RSP Permian, Inc. (“RSP”) through an all-stock transaction (the “RSP Acquisition”). RSP was an independent oil and natural gas company engaged in the acquisition, exploration, development and production of oil and natural gas reserves in the Permian Basin. The vast majority of RSP’s acreage was located on large, contiguous acreage blocks in the core of the Midland Basin and the Delaware Basin. The acquisition added approximately 92,000 net acres to our asset portfolio.

Following the RSP Acquisition, we simplified our asset structure, changing from four operating areas to two – comprising the Midland Basin and the Delaware Basin, which includes our assets in the Northern Delaware Basin, Southern Delaware Basin and New Mexico Shelf.

The following table summarizes our drilling activity during the periods indicated:

The following table sets forth information with respect to drilling of wells commenced during the periods indicated:

Summary of Core Operating Areas

The following is a summary of information regarding our core operating areas:

Core operating areas

Northern Operating areas

Our operations are focused in the Delaware Basin and the Midland Basin, within the greater Permian Basin. In both areas, we are transitioning our development to large-scale manufacturing mode, which includes leveraging our experience and expertise to maximize resource recovery and program economics while optimizing well spacing, landing intervals, lateral length and completion techniques.

Delaware Basin. At December 31, 20172018, we had estimated proved reserves in this area of 295674 MMBoe, representing 3557 percent of our total proved reserves. During the year ended December 31, 2018, we commenced drilling or participated in the drilling of 281 (171 net) wells in this area, and we completed 239 (136 net) wells that are producing.

The Northern Delaware Basin is characterized by a thick, resource-rich hydrocarbon column that lends itself to multi-zone development. We leverage leading-edge horizontal drilling and completion technologies, utilizing multi-well pad sites and extended lateral lengths to develop multiple producing formations. Our current activity has targetedis focused primarily on the Avalon, shale and Bone Spring and Wolfcamp formations at depths from 6,500 to 13,500 feet.  We continue to test and develop additional landing intervals within these formations.

During the year ended December 31, 2017, we commenced drilling or participated in the drilling of 149 (78 net) wells in this area. Throughout 2017, we completed 126 (66 net) wells that are producing. Additionally in 2017, we abandoned 1 (1 net) well that was spud in 2014 and used to monitor offsetting well stimulations. During 2017, we continued (i) development and step-out activity targeting the Avalon shale, Bone Spring sands and Wolfcamp formation and (ii) to refine our completion techniques. During 2017, all of the wells we commenced or participated in drilling were drilled horizontally.

Southern Delaware Basin.At December 31, 2017, we had estimated proved reserves in this area of 128 MMBoe, representing 15 percent of our total proved reserves.

Across our Southern Delaware Basin acreage position, we primarily target the Bone Spring and Wolfcamp formations, which generally range from 8,0006,500 feet to 12,500 feet in depth.  We leverage leading-edge horizontal drilling and completion technologies, utilizing multi-well pad sites and extended lateral lengths, to develop these producing formations.

During the year ended December 31, 2017, we commenced drilling or participated in the drilling of 61 (38 net) wells in this area. Throughout 2017, we completed 53 (33 net) wells that are producing. Additionally in 2017, we spud 2 (2 net) wells that were subsequently abandoned due to mechanical issues. During 2017, we continued (i) development and step-out activity

Drilling Activities

The following table sets forth information with respect to (i) wells drilled and completed during the periods indicated and (ii) wells drilled in a prior period but completed in the periods indicated. The information should not be considered indicative of future performance, nor should a correlation be assumed between the number of productive wells drilled, quantities of reserves found or economic value.

Our Production, Prices and Expenses

The following table sets forth a summary information concerningof our production and operating data for the years ended December 31, 2018, 2017 2016 and 2015.2016. The actual historical data in this table excludes results from the RSP Acquisition for periods prior to July 19, 2018 and our acquisition of certain assets of Reliance Energy, Inc. (the “Reliance Acquisition”) for periods prior to October 2016. Because of normal production declines, increased or decreased drilling activities, fluctuations in commodity prices and the effects of acquisitions or divestitures, the historical information presented below should not be interpreted as being indicative of future results.

Productive Wells

The following table sets forth the number of productive oil and natural gas wells on our properties at December 31, 2018, 2017 2016 and 2015.2016. As of December 31, 2018, we did not have any wells with multiple completions. This table does not include wells in which we own a royalty interest only.