Exhibit 99.1
Concho Resources Inc. Reports Fourth Quarter and Full Year 2008 Financial and Operating Results
MIDLAND, Texas--(BUSINESS WIRE)--February 24, 2009--Concho Resources Inc. (NYSE: CXO) (“Concho” or the “Company”) today reported financial and operating results for the three and twelve months ended December 31, 2008. Highlights for the year ended December 31, 2008 include:
- Net income of $278.7 million, a 999% increase over 2007
- Net cash provided by operating activities of $391.4 million, a 131% increase over 2007
- EBITDAX1 of $400.6 million, an 85% increase over 2007
1For an explanation of how we calculate and use EBITDAX and a reconciliation of net income to EBITDAX, please see "Supplemental non-GAAP financial measures" below.
Year End 2008 Financial Results
For the year ended December 31, 2008, the Company reported net income of $278.7 million, or $3.46 per diluted share, on revenues of $533.8 million, as compared to net income of $25.4 million, or $0.38 per diluted share, on revenues of $294.3 million for the year ended December 31, 2007. Net income for 2008 included a pre-tax gain on derivatives not designated as hedges of $249.9 million and 2007 net income included a pre-tax loss on derivatives not designated as hedges of $20.3 million. EBITDAX (defined 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) ineffective portion of cash flow hedges and unrealized (gain) loss on derivatives not designated as hedges, (7) interest expense, (8) bad debt expense and (9) federal and state income taxes, less other ancillary income including interest income, gathering income and rental income) increased to $400.6 million in 2008, as compared to $216.3 million in 2007.
Production for 2008 totaled 7.1 million barrels of oil equivalents (“MMBoe”) (4.6 million barrels of oil (“MMBbls”) and 15.0 billion cubic feet of natural gas (“Bcf”), an increase of 41% as compared to 5.0 MMBoe (3.0 MMBbls and 12.1 Bcf) produced in 2007. Excluding production from properties acquired in the acquisition of Henry Petroleum LP and certain of its affiliated entities (“Henry”), 2008 production increased 24% over 2007.
Timothy A. Leach, Concho's Chairman and CEO, commented, “Despite difficult market conditions at year end, 2008 was an outstanding year for Concho. During the year, we made significant operational advances on our core New Mexico Permian assets, added a new core area in the Wolfberry, and grew proved reserves significantly despite a more than $50 per barrel drop in oil prices from year end 2007 to year end 2008.”
Oil and gas production expense for 2008, including taxes, totaled $91.2 million, or $12.88 per barrel of oil equivalent (“Boe”), a 19% increase per Boe over 2007. This increase was due primarily to higher commodity prices, resulting in significantly greater production taxes, (which averaged $6.18 per Boe in 2008 as compared to $4.84 per Boe in 2007) and the addition of the Henry properties, which have higher per unit operating expenses than the Company’s legacy properties.
Depletion, depreciation and amortization expense (“DD&A”) for 2008 totaled $123.9 million, or $17.50 per Boe, compared to $76.8 million, or $15.28 per Boe, in 2007. The increase in depletion expense was primarily due to the Henry acquisition for which the depletion rate was higher than the Company’s legacy assets, the capitalized costs associated with new wells that were successfully drilled and completed and the downward revision in proved reserves at year end 2008 as a result of the decrease in year end oil and natural gas prices used to determine proved reserves.
Exploration and abandonment costs for 2008 totaled $38.5 million, an increase of 32% over 2007. The increase was primarily due to $31.6 million of leasehold abandonments, principally related to exploration acreage outside of the Company’s core operating areas. The largest components of this charge were related to the Company’s leasehold positions in the West Texas Barnett / Woodford Shale play in Culberson County, Texas ($9.7 million), and the Fayetteville Shale play in Arkansas ($9.0 million).
Impairments of long-lived assets increased to $18.4 million in 2008 as compared to $7.3 million in 2007. This increase was primarily the result of lower commodity prices at year end 2008 as compared to 2007.
General and administrative expense (“G&A”) for 2008 totaled $40.8 million. Recurring cash G&A for 2008 totaled $31.3 million, stock-based compensation (non-cash) totaled $5.2 million, and $4.3 million was attributable to certain employee bonuses to be paid over a two year period commencing July 31, 2008 under the terms of the Henry purchase agreement.
Net income for the twelve months ended December 31, 2008 included the effect of a $249.9 million pre-tax gain on derivatives not designated as hedges, $6.3 million of which was cash payments attributable to settlements of derivative contracts and $256.2 million of which was a non-cash mark-to-market unrealized gain. Additionally, for the twelve months ended December 31, 2008, the Company paid cash settlements totaling approximately $30.6 million associated with its derivatives contracts designated as cash flow hedges (accounted for as a reduction in oil revenues).
Total costs incurred for oil and natural gas properties was $1.2 billion for the year ended December 31, 2008, including $339.0 million for exploration and development drilling activities and $838.0 million for property acquisitions (including $206.5 million of deferred tax liability recorded with the Henry acquisition).
Fourth Quarter 2008 Financial Results
For the three months ended December 31, 2008, Concho reported net income of $128.8 million, or $1.51 per diluted share, on revenues of $119.2 million, as compared to net income of $6.9 million, or $0.09 per diluted share, on revenues of $98.8 million for the three months ended December 31, 2007. EBITDAX increased to $103.3 million in the fourth quarter of 2008, as compared to $75.5 million in the same period of 2007.
Production for the quarter ended December 31, 2008 totaled 2.3 MMBoe (1.6 MMBbls and 4.6 Bcf), an increase of 65% as compared to 1.4 MMBoe (0.9 MMBbls and 3.2 Bcf) produced in the quarter ended December 31, 2007. Excluding production from properties acquired in the Henry acquisition, fourth quarter 2008 production increased 28% over fourth quarter 2007 production.
Oil and gas production expense, including taxes, for the fourth quarter of 2008 totaled $25.3 million, or $10.94 per Boe, a 6% per Boe decrease over the $11.67 per Boe in the fourth quarter 2007. This decrease in per unit oil and gas production expense was due primarily to lower production taxes per BOE ($3.86 per BOE in the fourth quarter of 2008 compared to $6.20 per BOE in the fourth quarter of 2007) as a result of lower commodity prices in the fourth quarter of 2008 as compared to the fourth quarter of 2007, which was partially offset by the higher per unit operating costs of the Henry properties as compared to the Company’s legacy properties.
DD&A for the fourth quarter 2008 was $20.77 per Boe, compared to $15.53 per Boe in the same period of 2007. The increase in fourth quarter DD&A expense was primarily due to the acquisition of the Henry properties for which the depletion rate was higher than the Company’s legacy assets, capitalized costs associated with new wells that were successfully drilled and completed, and the decrease in the oil and natural gas prices between the periods which were utilized to determine the proved reserves.
Exploration and abandonment costs for the fourth quarter of 2008 totaled $18.2 million. Approximately $16.6 million resulted from acreage impairment costs associated with the Company’s undeveloped leasehold in various non-core assets, including the previously mentioned West Texas Barnett/Woodford Shale and the Fayetteville Shale in Arkansas.
G&A for the quarter ended December 31, 2008 totaled $13.7 million. Recurring cash G&A for the quarter totaled $11.4 million, stock-based compensation (non-cash) totaled $0.3 million, and the remaining $2.0 million was attributable to certain employee bonuses to be paid over a two year period commencing July 31, 2008 under the terms of the Henry purchase agreement.
Fourth quarter 2008 net income included the effect of a $206.2 million pre-tax gain on derivatives not designated as hedges; $22.8 million of which were cash receipts attributable to settlements of derivative contracts and $183.4 million of which was a non-cash mark-to-market unrealized gain. For the quarter, the Company received cash settlements totaling approximately $2.1 million associated with its derivatives contracts designated as cash flow hedges (accounted for as an increase in oil revenues).
Operations
For the twelve months ended December 31, 2008, the Company commenced the drilling of or participated in a total of 243 wells (199 operated), 211 of which had been completed as producers and 31 of which were in progress and one of which was unsuccessful as of December 31, 2008. In addition, the Company participated in 242 gross recompletions (226 operated), 220 of which had been completed as producers, 17 of which were in progress and five of which were unsuccessful as of December 31, 2008. Currently, the Company is operating eleven drilling rigs, all in the Permian Basin; six of these rigs are drilling on the New Mexico Shelf in the Yeso formation and five of these rigs are drilling in the Texas Permian on the Company’s Wolfberry assets.
New Mexico Permian
For the three months ended December 31, 2008, the Company commenced the drilling of 35 wells (34 operated) and participated in 59 recompletions (56 operated) on its New Mexico Permian assets, with a 100% success rate on the 20 wells and 42 recompletions that had been completed by December 31, 2008. As of December 31, 2008, there were 10 wells with completion in progress and 5 wells drilling.
For the year ended December 31, 2008, the Company drilled or participated in 142 wells (129 operated) and 212 recompletions (201 operated) on its New Mexico Permian assets, with a 100% success rate on the 132 wells and a 98% success rate on the 195 recompletions that had been completed by December 31, 2008.
Texas Permian
For the three months ended December 31, 2008, the Company commenced the drilling of 43 wells (41 operated) and participated in six recompletions (five operated) on its Texas Permian assets, with a 100% success rate on the 25 wells and the six recompletions that had been completed by December 31, 2008. As of December 31, 2008, there were 15 wells with completion in progress and 3 wells drilling.
For the year ended December 31, 2008, the Company drilled 69 wells (65 operated) and performed 26 recompletions (22 operated) on its Texas Permian assets, with a 100% success rate on the 54 wells and 96% success rate on the 26 recompletions that had been completed by December 31, 2008.
2009 Guidance Update
The Company’s 2009 guidance remains unchanged except for the DD&A rate and the current estimate of cash income taxes. Based on year end 2008 results and current market conditions, the Company now estimates that its DD&A rate will be in the range of $20.00 to $22.00 per Boe as compared to previous guidance of $17.00 to $17.80 per Boe. In addition, based on current commodity prices and assumed activity levels, the Company estimates that its cash taxes will range between 40% and 50% of its total income tax liability as compared to previous guidance of 20% to 30% of its total income tax liability.
Conference Call Information
The Company will host a conference call on Wednesday, February 25, 2009 at 9:00 a.m. Central Time to discuss fourth quarter and full year 2008 financial and operating results. Interested parties may listen to the conference call via the Company’s website at http://www.conchoresources.com or by dialing 800-259-0251 (passcode: 43250626). A replay of the conference call will be available on the Company’s website or by dialing 888-286-8010 (passcode: 84905346).
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 the expectations of plans, strategies, objectives and anticipated financial and operating results of the Company, including the Company’s drilling program, production, derivatives activities, capital expenditure levels and other guidance included in this press release. These statements are based on certain assumptions made by the Company based on management’s experience and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. 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 risks relating to financial performance and results, prices and demand for oil and natural gas, availability of drilling equipment and personnel, availability of sufficient capital to execute our business plan, difficulties integrating Henry’s properties and employees into our Company, our ability to replace reserves and efficiently develop and exploit our current reserves and other important factors that could cause actual results to differ materially from those projected as described in the Company’s reports filed with the Securities and Exchange Commission(“SEC”).
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.
About Concho Resources Inc.
Concho Resources Inc. is an independent oil and natural gas company engaged in the acquisition, development, exploitation and exploration of oil and natural gas properties. The Company’s core operating areas are primarily focused in the Permian Basin of Southeast New Mexico and West Texas. In addition, the Company is involved in a number of emerging plays. For more information, visit Concho’s website at www.conchoresources.com.
Concho Resources Inc. Consolidated Balance Sheets |
| | | | |
| | December 31, |
| (in thousands, except share and per share data) | | 2008 | | 2007 |
| Assets | | | | |
| Current assets: | | | | |
| Cash and cash equivalents | | $ | 17,752 | | | $ | 30,424 | |
| Accounts receivable, net of allowance for doubtful accounts: | | | | |
| Oil and gas | | | 48,793 | | | | 36,735 | |
| Joint operations and other | | | 92,833 | | | | 21,183 | |
| Related parties | | | 314 | | | | - | |
| Derivative instruments | | | 113,149 | | | | 1,866 | |
| Deferred income taxes | | | - | | | | 13,502 | |
| Prepaid costs and other | | | 5,942 | | | | 4,273 | |
| Total current assets | | | 278,783 | | | | 107,983 | |
| Property and equipment, at cost: | | | | |
| Oil and gas properties, successful efforts method | | | 2,693,574 | | | | 1,555,018 | |
| Accumulated depletion and depreciation | | | (306,990 | ) | | | (167,109 | ) |
| Total oil and gas properties, net | | | 2,386,584 | | | | 1,387,909 | |
| Other property and equipment, net | | | 14,820 | | | | 7,085 | |
| Total property and equipment, net | | | 2,401,404 | | | | 1,394,994 | |
| Deferred loan costs, net | | | 15,701 | | | | 3,426 | |
| Inventory | | | 19,956 | | | | 1,459 | |
| Intangible asset, net - operating rights | | | 37,768 | | | | - | |
| Noncurrent derivative instruments | | | 61,157 | | | | - | |
| Other assets | | | 434 | | | | 367 | |
| Total assets | | $ | 2,815,203 | | | $ | 1,508,229 | |
| Liabilities and Stockholders’ Equity | | | | |
| Current liabilities: | | | | |
| Accounts payable: | | | | |
| Trade | | $ | 7,462 | | | $ | 14,222 | |
| Related parties | | | 312 | | | | 2,119 | |
| Other current liabilities: | | | | |
| Bank overdrafts | | | 9,434 | | | | 5,651 | |
| Revenue payable | | | 22,286 | | | | 14,494 | |
| Accrued and prepaid drilling costs | | | 154,196 | | | | 39,276 | |
| Derivative instruments | | | 1,866 | | | | 36,414 | |
| Deferred income taxes | | | 37,205 | | | | - | |
| Current portion of long-term debt | | | - | | | | 2,000 | |
| Other current liabilities | | | 38,057 | | | | 14,466 | |
| Total current liabilities | | | 270,818 | | | | 128,642 | |
| Long-term debt | | | 630,000 | | | | 325,404 | |
| Noncurrent derivative instruments | | | - | | | | 10,517 | |
| Deferred income taxes | | | 573,763 | | | | 259,070 | |
| Asset retirement obligations and other long-term liabilities | | | 15,468 | | | | 9,198 | |
| Commitments and contingencies | | | | |
| Stockholders’ equity: | | | | |
Preferred stock, $0.001 par value; 10,000,000 shares authorized; none issued and outstanding at December 31, 2008 and 2007 | | | - | | | | - | |
Common stock, $0.001 par value; 300,000,000 authorized; 84,828,824 and 75,832,310 shares issued at December 31, 2008 and 2007, respectively | | | 85 | | | | 76 | |
| Additional paid-in capital | | | 1,009,025 | | | | 752,380 | |
| Notes receivable from employees | | | - | | | | (330 | ) |
| Retained earnings | | | 316,169 | | | | 37,467 | |
| Accumulated other comprehensive loss | | | - | | | | (14,195 | ) |
Treasury stock, at cost; 3,142 and no shares at December 31, 2008 and 2007, respectively | | | (125 | ) | | | - | |
| Total stockholders’ equity | | | 1,325,154 | | | | 775,398 | |
| Total liabilities and stockholders’ equity | | $ | 2,815,203 | | | $ | 1,508,229 | |
Concho Resources Inc. Consolidated Statements of Operations |
| | Three Months Ended | | Years Ended |
| | December 31, | | December 31, |
| (in thousands, except per share amounts) | | 2008 | | 2007 | | 2008 | | 2007 |
| Operating revenues: | | | | | | | | |
| Oil sales | | $ | 89,119 | | | $ | 67,444 | | | $ | 390,945 | | | $ | 195,596 | |
| Natural gas sales | | | 30,119 | | | | 31,342 | | | | 142,844 | | | | 98,737 | |
| Total operating revenues | | | 119,238 | | | | 98,786 | | | | 533,789 | | | | 294,333 | |
| Operating costs and expenses: | | | | | | | | |
| Oil and gas production | | | 25,319 | | | | 16,342 | | | | 91,234 | | | | 54,267 | |
| Exploration and abandonments | | | 18,180 | | | | 10,988 | | | | 38,468 | | | | 29,098 | |
| Depreciation, depletion and amortization | | | 48,090 | | | | 21,743 | | | | 123,912 | | | | 76,779 | |
| Accretion of discount on asset retirement obligations | | | 318 | | | | 110 | | | | 889 | | | | 444 | |
| Impairments of long-lived assets | | | 15,590 | | | | 2,690 | | | | 18,417 | | | | 7,267 | |
General and administrative (including non-cash stock-based compensation of $269 and $1,185 for the three months ended and $5,223 and $3,841 for the years ended December 31, 2008 and 2007, respectively) | | | 13,732 | | | | 8,610 | | | | 40,776 | | | | 25,177 | |
| Bad debt expense | | | - | | | | - | | | | 2,905 | | | | - | |
| Contract drilling fees - stacked rigs | | | - | | | | - | | | | - | | | | 4,269 | |
| Ineffective portion of cash flow hedges | | | - | | | | (313 | ) | | | (1,336 | ) | | | 821 | |
| (Gain) loss on derivatives not designated as hedges | | | (206,192 | ) | | | 23,362 | | | | (249,870 | ) | | | 20,274 | |
| Total operating costs and expenses | | | (84,963 | ) | | | 83,532 | | | | 65,395 | | | | 218,396 | |
| Income from operations | | | 204,201 | | | | 15,254 | | | | 468,394 | | | | 75,937 | |
| Other income (expense): | | | | | | | | |
| Interest expense | | | (9,284 | ) | | | (6,239 | ) | | | (29,039 | ) | | | (36,042 | ) |
| Other, net | | | (233 | ) | | | 527 | | | | 1,432 | | | | 1,484 | |
| Total other expense | | | (9,517 | ) | | | (5,712 | ) | | | (27,607 | ) | | | (34,558 | ) |
| Income before income taxes | | | 194,684 | | | | 9,542 | | | | 440,787 | | | | 41,379 | |
| Income tax expense | | | (65,855 | ) | | | (2,684 | ) | | | (162,085 | ) | | | (16,019 | ) |
| Net income | | | 128,829 | | | | 6,858 | | | | 278,702 | | | | 25,360 | |
| Preferred stock dividends | | | - | | | | - | | | | - | | | | (45 | ) |
| Net income applicable to common shareholders | | $ | 128,829 | | | $ | 6,858 | | | $ | 278,702 | | | $ | 25,315 | |
| Basic earnings per share: | | | | | | | | |
| Net income per share | | $ | 1.53 | | | $ | 0.09 | | | $ | 3.52 | | | $ | 0.39 | |
| Weighted average shares used in basic earnings per share | | | 84,318 | | | | 75,199 | | | | 79,206 | | | | 64,316 | |
| Diluted earnings per share: | | | | | | | | |
| Net income per share | | $ | 1.51 | | | $ | 0.09 | | | $ | 3.46 | | | $ | 0.38 | |
| Weighted average shares used in diluted earnings per share | | | 85,478 | | | | 76,542 | | | | 80,587 | | | | 66,309 | |
Concho Resources Inc. Consolidated Statements of Cash Flows |
| |
| | Years Ended December 31, |
| (in thousands) | | 2008 | | 2007 |
| CASH FLOWS FROM OPERATING ACTIVITIES: | | | | |
| Net income | | $ | 278,702 | | | $ | 25,360 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | |
| Depreciation, depletion and amortization | | | 123,912 | | | | 76,779 | |
| Impairments of long-lived assets | | | 18,417 | | | | 7,267 | |
| Accretion of discount on asset retirement obligations | | | 889 | | | | 444 | |
| Exploration expense, including dry holes | | | 35,328 | | | | 25,009 | |
| Non-cash compensation expense | | | 5,223 | | | | 3,841 | |
| Deferred income taxes | | | 153,484 | | | | 13,716 | |
| Gain on sale of assets | | | (777 | ) | | | (368 | ) |
| Ineffective portion of cash flow hedges | | | (1,336 | ) | | | 821 | |
| (Gain) loss on derivatives not designated as hedges | | | (249,870 | ) | | | 20,274 | |
| Dedesignated cash flow hedges reclassified from accumulated other comprehensive income (loss) | | | 696 | | | | (1,103 | ) |
| Other non-cash items | | | 6,517 | | | | 3,376 | |
| Changes in operating assets and liabilities, net of acquisitions: | | | | |
| Accounts receivable | | | 42,514 | | | | (5,759 | ) |
| Prepaid costs and other | | | (5,542 | ) | | | (169 | ) |
| Inventory | | | (16,819 | ) | | | (150 | ) |
| Accounts payable | | | (25,234 | ) | | | (3,493 | ) |
| Revenue payable | | | 7,074 | | | | 4,593 | |
| Other current liabilities | | | 18,219 | | | | (669 | ) |
| Net cash provided by operating activities | | | 391,397 | | | | 169,769 | |
| CASH FLOWS FROM INVESTING ACTIVITIES: | | | | |
| Capital expenditures on oil and gas properties | | | (347,702 | ) | | | (162,378 | ) |
| Acquisition of oil and gas properties, businesses and other assets | | | (584,220 | ) | | | (255 | ) |
| Additions to other property and equipment | | | (8,808 | ) | | | (2,813 | ) |
| Proceeds from the sale of oil and gas properties and other assets | | | 1,034 | | | | 3,278 | |
| Settlements received (paid) on derivatives not designated as hedges | | | (6,354 | ) | | | 1,815 | |
| Net cash used in investing activities | | | (946,050 | ) | | | (160,353 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES: | | | | |
| Proceeds from issuance of long-term debt | | | 767,800 | | | | 300,200 | |
| Payments of long-term debt | | | (465,700 | ) | | | (468,800 | ) |
| Exercise of stock options | | | 5,391 | | | | - | |
| Excess tax benefit from stock-based compensation | | | 3,614 | | | | - | |
| Net proceeds from issuance of common stock | | | 242,426 | | | | 172,709 | |
| Payments of preferred stock dividends | | | - | | | | (132 | ) |
| Proceeds from repayment of officer and employee notes | | | 333 | | | | 12,830 | |
| Payments for loan origination costs | | | (15,541 | ) | | | (2,572 | ) |
| Purchase of treasury stock | | | (125 | ) | | | - | |
| Bank overdrafts | | | 3,783 | | | | 5,651 | |
| Net cash provided by financing activities | | | 541,981 | | | | 19,886 | |
| Net increase (decrease) in cash and cash equivalents | | | (12,672 | ) | | | 29,302 | |
| Cash and cash equivalents at beginning of period | | | 30,424 | | | | 1,122 | |
| Cash and cash equivalents at end of period | | $ | 17,752 | | | $ | 30,424 | |
| SUPPLEMENTAL CASH FLOWS: | | | | |
| Cash paid for interest and fees, net of $1,233 and $2,647 capitalized interest | | $ | 27,747 | | | $ | 41,036 | |
| Cash paid for income taxes | | $ | 11,304 | | | $ | 2,050 | |
| NON-CASH INVESTING AND FINANCING ACTIVITIES: | | | | |
Issuance of common stock in acquisition of oil and gas properties and other assets | | $ | - | | | $ | 650 | |
| Deferred tax effect of acquired oil and gas properties | | $ | 206,497 | | | $ | (444 | ) |
Concho Resources Inc. Summary Production and Price Data |
The following table presents selected financial and operating information of Concho Resources Inc. for the periods indicated: |
| | | | | | | | |
| | Three Months Ended | | Years Ended |
| | December 31, | | December 31, |
| (in thousands, except price and daily volume data) | | 2008 | | 2007 | | 2008 | | 2007 |
| | | | | | | | |
| Statement of operations data: | | | | | | | | |
| Oil sales | | $ | 89,119 | | | $ | 67,444 | | | $ | 390,945 | | | $ | 195,596 | |
| Natural gas sales | | | 30,119 | | | | 31,342 | | | | 142,844 | | | | 98,737 | |
| Total operating revenues | | | 119,238 | | | | 98,786 | | | | 533,789 | | | | 294,333 | |
| Operating costs and expenses (excluding gains (losses) on derivatives | | | | | | | | |
| not designated as hedges) | | | (121,229 | ) | | | (60,170 | ) | | | (315,265 | ) | | | (198,122 | ) |
| Gains (losses) on derivatives not designated as hedges | | | 206,192 | | | | (23,362 | ) | | | 249,870 | | | | (20,274 | ) |
| Interest, net and other revenue | | | (9,517 | ) | | | (5,712 | ) | | | (27,607 | ) | | | (34,558 | ) |
| Income before income taxes | | | 194,684 | | | | 9,542 | | | | 440,787 | | | | 41,379 | |
| Income tax expense | | | (65,855 | ) | | | (2,684 | ) | | | (162,085 | ) | | | (16,019 | ) |
| Net income | | $ | 128,829 | | | $ | 6,858 | | | $ | 278,702 | | | $ | 25,360 | |
| | | | | | | | |
| Net production volumes: | | | | | | | | |
| Oil (MBbl) | | | 1,553 | | | | 871 | | | | 4,586 | | | | 3,014 | |
| Natural gas (MMcf) | | | 4,573 | | | | 3,177 | | | | 14,968 | | | | 12,064 | |
| Total (MBoe) | | | 2,315 | | | | 1,400 | | | | 7,081 | | | | 5,025 | |
| | | | | | | | |
| Average daily production volumes: | | | | | | | | |
| Oil (Bbl) | | | 16,880 | | | | 9,467 | | | | 12,530 | | | | 8,258 | |
| Natural gas (Mcf) | | | 49,707 | | | | 34,533 | | | | 40,896 | | | | 33,052 | |
| Total (Boe) | | | 25,165 | | | | 15,223 | | | | 19,347 | | | | 13,767 | |
| | | | | | | | |
| Average prices: | | | | | | | | |
| Oil, without hedges (Bbl) | | $ | 56.04 | | | $ | 86.32 | | | $ | 91.92 | | | $ | 68.58 | |
| Oil, with hedges (Bbl) | | $ | 57.39 | | | $ | 77.43 | | | $ | 85.25 | | | $ | 64.90 | |
| Natural gas, without hedges (Mcf) | | $ | 6.68 | | | $ | 9.75 | | | $ | 9.59 | | | $ | 8.08 | |
| Natural gas, with hedges (Mcf) | | $ | 6.59 | | | $ | 9.87 | | | $ | 9.54 | | | $ | 8.18 | |
| Total, without hedges (Boe) | | $ | 50.79 | | | $ | 75.82 | | | $ | 79.80 | | | $ | 60.54 | |
| Total, with hedges (Boe) | | $ | 51.51 | | | $ | 70.56 | | | $ | 75.38 | | | $ | 58.56 | |
| | | | | | | | | |
| |
| Bbl – Barrel |
| MBbl – Thousand Barrels |
| Mcf – Thousand cubic feet |
| MMcf – Million cubic feet |
| Boe – One barrel of crude oil equivalent |
| MBoe – One thousand Boe |
Concho Resources, Inc.
Supplemental Non-GAAP Financial Measures
EBITDAX (as defined below) is presented herein, and reconciled from the generally accepted accounting principle (“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.
We define 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) ineffective portion of cash flow hedges and unrealized (gain) loss on derivatives not designated as hedges, (7) interest expense, (8) bad debt expense and (9) federal and state income taxes, less other ancillary income including interest income, gathering income and rental income. EBITDAX is not a measure of net income or cash flow as determined by GAAP.
Our EBITDAX measure provides additional information which may be used to better understand our operations. EBITDAX is one of several metrics that we use as a supplemental financial measurement in the evaluation of our business and should not be considered as an alternative to, or more meaningful than, net income, as an indicator of our 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 us may not be comparable to similarly titled measures reported by other companies. We believe that EBITDAX is a widely followed measure of operating performance and is one of many metrics used by our management team and by other users of our consolidated financial statements. For example, EBITDAX can be used to assess our 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 our assets and our company without regard to capital structure or historical cost basis.
The following table provides a reconciliation of net income to EBITDAX:
| | | | | | | | | |
| | Three Months Ended | | Year Ended |
| | December 31, | | December 31, |
| | 2008 | | 2007 | | 2008 | | 2007 |
| | | | | | | | |
| Net income | | $ | 128,829 | | | $ | 6,858 | | | $ | 278,702 | | | $ | 25,360 | |
| Exploration and abandonments | | | 18,180 | | | | 10,988 | | | | 38,468 | | | | 29,098 | |
| Depreciation, depletion and amortization | | | 48,090 | | | | 21,743 | | | | 123,912 | | | | 76,779 | |
| Accretion of discount on asset retirement obligations | | | 318 | | | | 110 | | | | 889 | | | | 444 | |
| Impairments of long-lived assets | | | 15,590 | | | | 2,690 | | | | 18,417 | | | | 7,267 | |
| Non-cash stock-based compensation | | | 269 | | | | 1,185 | | | | 5,223 | | | | 3,841 | |
| Ineffective portion of cash flow hedges | | | - | | | | (313 | ) | | | (1,336 | ) | | | 821 | |
| Unrealized (gain) loss on derivatives not designated as hedges | | | (183,376 | ) | | | 23,891 | | | | (256,224 | ) | | | 22,089 | |
| Interest expense | | | 9,284 | | | | 6,239 | | | | 29,039 | | | | 36,042 | |
| Bad debt expense | | | - | | | | - | | | | 2,905 | | | | - | |
| Other, net | | | 233 | | | | (527 | ) | | | (1,432 | ) | | | (1,484 | ) |
| Income tax expense | | | 65,855 | | | | 2,684 | | | | 162,085 | | | | 16,019 | |
| | | | | | | | |
| EBITDAX | | $ | 103,272 | | | $ | 75,548 | | | $ | 400,648 | | | $ | 216,276 | |
Concho Resources Inc.
Derivatives information at February 24, 2009
The table below provides the volumes and related data associated with our oil and natural gas derivatives at February 24, 2009. The counterparties in our derivative instruments are Bank of America, N.A., BNP Paribas, Calyon, Citibank, N.A., JPMorgan Chase Bank, N.A, KeyBank and Wells Fargo.
| | | | | | | | | | |
| | | | Aggregate | | | | | | |
| | | Remaining | | | | | | |
| | | Volume / | | | | Index | | Remaining |
| | | Notional | | Daily | | Price / | | Contract |
| | | | Amount | | Volume | | Rate | | Period |
| | | | | | | | | |
| | | | | | | | | |
| Crude oil (volumes in Bbls): | | | | | | | | |
| Price collar | | 768,000 | | 2,104 | | $120.00 - $134.60 (a) | | 1/1/09 - 12/31/09 |
| Price collar | | 600,000 | | 6,522 | | $45.00 - $49.00 (a) | | 3/1/09 - 5/31/09 |
| Price swap | | 1,813,491 | | 4,968 | | $87.16 (a) (c) | | 1/1/09 - 12/31/09 |
| Price swap | | 1,241,746 | | 3,402 | | $76.00 (a) (c) | | 1/1/10 - 12/31/10 |
| Price swap | | 557,746 | | 1,528 | | $104.91 (a) (c) | | 1/1/11 - 12/31/11 |
| Price swap | | 504,000 | | 1,377 | | $127.80 (a) | | 1/1/12 - 12/31/12 |
| | | | | | | | | |
| Natural gas (volumes in MMBtus): | | | | | | | | |
| Price swap | | 1,825,000 | | 5,000 | | $8.44 (b) | | 1/1/09 - 12/31/09 |
| Basis swap | | 6,022,500 | | 16,500 | | $1.08 (d) | | 1/1/09 - 12/31/09 |
| | | | | | | | | |
| Interest rate (notional amount in dollars): | | | | | | | | |
| Rate swap | | $ 300,000,000 | | | | 1.90% (e) | | 5/1/09 - 4/30/12 |
| | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | |
(a) The index prices for the oil price swaps are based on the NYMEX-West Texas Intermediate monthly average futures price. |
(b) The index price for the natural gas price collar is based on the Inside FERC-El Paso Permian Basin first-of-the-month spot price. |
(c) Prices represent weighted average prices. |
(d) The basis differential between the El Paso Permian delivery point and NYMEX Henry Hub delivery point. |
(e) The weighted average index rate is based on the one-month LIBOR. |
CONTACT:
Concho Resources Inc.
Jack Harper, 432-683-7443
Vice President – Capital Markets and Business Development
