Concho Resources: Note from Stifel on Feb 20
Posted: Wed Feb 20, 2019 10:56 am
From Derrick Whitfield at Stifel on 2/20/2019:
Concho Resources Inc. (CXO, $121.00, Buy; Target $262.00) - Demonstrates strong capital efficiency in 2019/2020 outlooks and 2018 resource update
We view the quarter and year-end release as slightly positive. The positives include: i) in-line Q418 production on lower than expected capex, ii) solid reserves (growth, mix) and resource (33% increase in premium resource) update, iii) strong capital efficiency implied in 2019 (bopd down ~6%, capex down ~11%) and 2020 (bopd down ~8%, capex down ~22%) guidance, iv) impressive IP30/k-ft rates in the Midland Basin (company record). The negatives include: i) slight miss on Q418 oil volumes (0.6% below consensus) and EBITDA (7.2% below consensus), and ii) weaker than expected Q119 production guide (implied oil is 6.6% below consensus). We caution investors to note the EBITDA miss was likely due to oil and gas realizations. Net-net, we believe the strength of the 2019/2020 outlook and reserve/resource outlook should outweigh Q418/Q119 concerns. Also, we believe the $2.8-3.0B capital plan is far better (lower) than buy-side consensus expectations.
Concho Resources Inc. (CXO, $121.00, Buy; Target $262.00) - Demonstrates strong capital efficiency in 2019/2020 outlooks and 2018 resource update
We view the quarter and year-end release as slightly positive. The positives include: i) in-line Q418 production on lower than expected capex, ii) solid reserves (growth, mix) and resource (33% increase in premium resource) update, iii) strong capital efficiency implied in 2019 (bopd down ~6%, capex down ~11%) and 2020 (bopd down ~8%, capex down ~22%) guidance, iv) impressive IP30/k-ft rates in the Midland Basin (company record). The negatives include: i) slight miss on Q418 oil volumes (0.6% below consensus) and EBITDA (7.2% below consensus), and ii) weaker than expected Q119 production guide (implied oil is 6.6% below consensus). We caution investors to note the EBITDA miss was likely due to oil and gas realizations. Net-net, we believe the strength of the 2019/2020 outlook and reserve/resource outlook should outweigh Q418/Q119 concerns. Also, we believe the $2.8-3.0B capital plan is far better (lower) than buy-side consensus expectations.