Concho Resources (CXO) Q4 Results - Feb 18

[dan_s]

Concho's Q4 production and Adjusted Net Income beat my forecast. My comments are in blue.
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Highlights

Fourth Quarter

Delivered oil production volumes of 215 MBopd, exceeding the high end of the Company's guidance range. < My Q4 forecast was 208,000 barrels of oil per day.
Completed the New Mexico Shelf divestiture, enabling Concho to achieve its debt-reduction target and repurchase $250 million of shares during the quarter.
Generated cash flow from operating activities of $769 million; operating cash flow before working capital changes (non-GAAP) was $801 million, exceeding exploration and development costs incurred of $614 million. < "Adjusted Cash Flow From Operations" of $801 million compares to my forecast of $717 million.
Reported net loss of $471 million, or $2.38 per share. Adjusted net income (non-GAAP) totaled $206 million, or $1.03 per share. < "Adjusted Net Income" compares to my forecast of $0.69 per share.
Reported $853 million of adjusted EBITDAX (non-GAAP).

Full Year

Increased oil production volumes 25% year over year.
Completed $1.3 billion in non-core asset sales.
Paid $100 million in dividends, initiated a $1.5 billion share repurchase program and repurchased $250 million of shares in 2019.
Generated cash flow from operating activities of $2.8 billion; operating cash flow before working capital changes (non-GAAP) was $2.9 billion.
Reported net loss of $705 million, or $3.55 per share. Adjusted net income (non-GAAP) totaled $611 million, or $3.05 per share.
Reported $3.1 billion of adjusted EBITDAX (non-GAAP).

2020 Outlook

Increasing Concho's quarterly dividend 60% to $0.20 per share.
Planning a $2.6 to $2.8 billion capital program, representing a 10% reduction year over year at the midpoint of the guidance.
Expecting to generate 10% to 12% annual oil volume growth, pro forma for the New Mexico Shelf divestiture. < This will raise my valuation.

Tim Leach, Chairman and Chief Executive Officer, commented, "During the fourth quarter, we delivered strong operational and financial performance, with oil volumes exceeding our guidance range and cash flow from operations totaling $801 million, excluding working capital changes. This exceeded exploration and development costs of $614 million, resulting in free cash flow of $187 million for the quarter. Our cost structure continued to improve as well, with fourth quarter controllable costs coming in below our year-end 2020 target of $9.00 per Boe.

We carry this focus into 2020. Our strategic priorities are to grow margins, grow free cash flow, grow distributions and advance our sustainability progress. We are off to a strong start with a disciplined, returns-focused capital program that is expected to increase oil production 10% to 12% year over year on a pro forma basis for asset sales. The capital program also enables us to strengthen distributions to shareholders, with a 60% increase to our quarterly dividend. With improving capital efficiency and a strong foundation of high-margin drilling opportunities, Concho is well positioned to deliver strong returns for investors."

Over 50% of Concho's 2020 oil production estimate is hedged at a weighted average of $56.96/bbl.

This one is a "keeper" I will post my updated forecast/valuation model to the EPG website on Feb. 19.