Concho Resources (CXO) Q2 results

[dan_s]

Concho Resources Inc. (CXO) (the “Company” or “Concho”) today reported financial and operating results for the second quarter of 2017.

Second-Quarter 2017 Highlights

Increased production 27% year-over-year to 184.7 MBoepd. < Compares to my forecast of 185.0 MBoepd
Delivered 8th consecutive quarter in which cash flows from operations exceeded capital expenditures.
Continued delineation of the stacked oil resource in the Northern Delaware Basin.
Achieved record well performance in the Southern Delaware Basin.
Acquired 12,400 net acres, enhancing the Company’s Midland Basin assets in Andrews and Martin counties, Texas.
Raised annual production growth outlook to a midpoint of 25% and expect oil production to increase by more than 25%. < This will increase my valuation
Full-year 2017 capital expenditures, excluding acquisitions, tracking the midpoint of the guidance range of $1.6 billion to $1.8 billion.
Reported quarterly net income of $152 million, or $1.02 per diluted share. Adjusted net income totaled $77 million, or $0.52 per diluted share (non-GAAP). < This compares to my forecast of $0.35 EPS
Generated $461 million of EBITDAX (non-GAAP).

Tim Leach, Chairman and Chief Executive Officer, commented, “Strong companies that are able to navigate and capitalize on commodity price volatility will win in this environment. Our ability to deliver excellent performance while balancing capital investment and cash flow over the last two years demonstrates our execution strength and high-quality assets. This quarter’s solid operating results are supported by the capital efficiency of our program, which we see improving further as we move to large-scale development. Going forward, we will continue to focus on executing a disciplined capital program funded within cash flow. I am confident that this discipline will continue to distinguish Concho as an industry leader.”

[dan_s]

This is one tough market!

Concho is funding an aggressive drilling program that is on-track to deliver more than 24% year-over-year production growth totally with cash flow from operations and the share price is getting hammered.

I have adjusted my forecast model for Concho and it will be posted to the EPG website this afternoon.

My valuation has been adjusted to $160/share, which compares to First Call's price target of $149.89.

Concho has 20% annual production growth locked in for many years and the growth will be funded by cash flow from operations if commodity prices stay exactly where they are today.