Q2 production beat forecast, but the stock is getting hammered today because they are going to push some well completions into next year. Drop in oil prices is also weighing on the sector. This afternoon two Wall Street firms have published updated profiles and forecasts for CXO. RBC Capital rates it a BUY with a $140 price target and Williams Capital rates it a BUY with a $150 price target. Since Concho is lowering their production guidance for 2H 2019, my valuation comes down $31 to $124/share. The primary cause of my drop in valuation is because I lowered the rate of production growth in 2020. - Dan
Concho Resources Inc. Reports Second-Quarter 2019 Results
07/31/2019
MIDLAND, Texas--(BUSINESS WIRE)-- Concho Resources Inc. (NYSE: CXO) (the “Company” or “Concho”) today reported financial and operating results for second-quarter 2019.
Second-Quarter 2019 Highlights
Exceeded second-quarter guidance with production of 329 MBoepd.
Delivered strong execution towards full-year 2019 capital program.
Reported a net loss of $97 million, or $0.48 per share. Adjusted net income (non-GAAP) totaled $139 million, or $0.69 per share. < Compares to my forecast of $1.07 EPS.
Generated $717 million of adjusted EBITDAX (non-GAAP). < Compares to my forecast of $801 million EBITDAX
Tim Leach, Chairman and Chief Executive Officer, commented, “The second quarter continued our track record of strong execution as we delivered production, capital investment and operating costs in-line with or better than our targets, highlighting the fundamental strength of our assets and development approach.”
Second-Quarter 2019 Summary
Production for second-quarter 2019 was approximately 30 million barrels of oil equivalent (MMBoe), or an average of 329 thousand Boe per day (MBoepd). Average daily oil production for second-quarter 2019 totaled 206 thousand barrels per day (MBopd). Natural gas production for second-quarter 2019 totaled 737 million cubic feet per day (MMcfpd).
Concho’s average realized price for oil and natural gas for second-quarter 2019, excluding the effect of commodity derivatives, was $56.02 per Bbl and $1.16 per Mcf, respectively, compared with $60.98 per Bbl and $3.19 per Mcf, respectively, for second-quarter 2018.
Net loss for second-quarter 2019 was $97 million, or $0.48 per share, compared with net income of $137 million, or $0.92 per share, for second-quarter 2018. Excluding certain non-cash and special items, second-quarter 2019 adjusted net income was $139 million, or $0.69 per share, compared with adjusted net income of $185 million, or $1.24 per share, for second-quarter 2018. Special items for the quarter included a non-cash asset impairment charge of $868 million to the carrying value of the Company's New Mexico Shelf assets.
During the quarter, Concho generated adjusted EBITDAX of $717 million, compared with $592 million for second-quarter 2018.
Cash flow from operating activities was $779 million for the quarter, including $111 million in working capital changes. Operating cash flow before working capital changes (non-GAAP) was $668 million.
During second-quarter 2019, Concho received $289 million of cash proceeds from the completion of the previously announced sale by Oryx Southern Delaware Holdings, LLC of its interests in the Oryx I oil gathering and transportation system. The Company used a portion of the proceeds to repay borrowings under its credit facility. At June 30, 2019, Concho had long-term debt of approximately $4.4 billion, including $397 million of outstanding borrowings under its credit facility.
Costs incurred for exploration and development activities for second-quarter 2019 totaled $785 million. During the quarter, Concho averaged 26 rigs, compared with 33 rigs in first-quarter 2019. The Company is currently running 18 rigs, including 11 rigs in the Delaware Basin and seven rigs in the Midland Basin. Additionally, the Company is currently utilizing seven completion crews. See the table under “Operational Activity” below for detailed information about the Company’s drilling and completion activity by operating area for second-quarter 2019.
Large-Scale Projects Accelerating Development Optimization
In the Delaware Basin, Concho completed the 23-well Dominator project, a well-spacing test targeting multiple landings within the Upper Wolfcamp. The average lateral length for the project was approximately 4,400 feet, and all 23 wells were drilled, completed and put on production safely and ahead of schedule. While the Dominator project accelerated the Company’s understanding across the project lifecycle (logistics, lateral placement, well spacing and facilities design), performance from the project indicates the well spacing was too tight. The Company has already incorporated learnings from this project into its second half of 2019 program and future Delaware Basin projects.
In the Midland Basin, Concho put on production the Marion Benge project, consisting of 18 wells targeting the Spraberry and Wolfcamp zones with an average lateral length of 9,900 feet. The Marion Benge project has demonstrated strong initial performance. Additional information on the Company’s operational results is included in the Company’s 2Q 2019 Quarterly Update at www.concho.com.
Outlook
“We have made near-term adjustments to our operational plans that reinforce our commitment to capital discipline and maximizing free cash flow. Moderating activity and building an inventory of drilled but uncompleted wells keeps us on track with our full year capital plan, preserves our balance sheet and positions the company for an inflection in free cash flow and momentum heading into 2020. This momentum combined with our high-quality asset base provide us confidence in our strategy to drive differentiated growth, expand free cash flow and strengthen returns over the long term,” commented Tim Leach.
The Company expects to produce between 316 MBoepd to 322 MBoepd in third-quarter 2019. The Company’s oil mix is expected to be approximately 63% in the second half of 2019 as fewer new wells are planned to come online. Additionally, due to weak natural gas and natural gas liquids pricing, the Company reduced its full-year 2019 natural gas price realization guidance to a range of 60% to 80% of NYMEX Henry Hub and expects to trend towards the low end of the range in the third quarter of 2019.
Concho Resources Q2 Results - Aug 1
Concho Resources Q2 Results - Aug 1
Last edited by dan_s on Thu Aug 01, 2019 4:26 pm, edited 1 time in total.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Concho Resources Q2 Results - Aug 1
MIDLAND, Texas--(BUSINESS WIRE)-- Concho Resources Inc. (NYSE: CXO) (“Concho”) and Solaris Water Midstream, LLC (“Solaris Water”) announced today the formation of a strategic joint venture focused on optimizing produced water logistics at scale in the Northern Delaware Basin. The joint venture includes a long-term produced water management agreement between Concho and Solaris Water.
Concho is contributing water infrastructure assets to Solaris Water in exchange for cash and equity.
Solaris Water will manage Concho's produced water gathering, transportation, disposal and recycling for an approximately 1.6 million-acre area located primarily in Eddy County, New Mexico.
Under the terms of the agreement, Solaris Water will manage Concho’s produced water gathering, transportation, disposal and recycling for an area covering approximately 1.6 million acres located primarily in Eddy County, New Mexico. Concho will contribute 13 salt water disposal wells and approximately 40 miles of large-diameter produced water gathering pipelines in exchange for cash and an equity ownership in Solaris Midstream Holdings, LLC, the parent of Solaris Water.
The assets contributed by Concho will be incorporated into Solaris Water’s growing integrated Pecos Star System, which currently includes more than 300 miles of large-diameter gathering pipelines, more than 500,000 barrels per day of disposal capacity, storage and recycling facilities and water supply pipelines that serve nearly 20 oil and gas operators. This high-capacity water infrastructure network brings significant scale to producers that lowers operating and well completion costs while providing environmental benefits such as reduced truck traffic and less reliance on brackish or fresh water supplies. Solaris Water will deliver to Concho blended reuse source water, enabling a significant increase in the use of recycled water in Concho’s operations.
“Our joint venture with Solaris will provide effective and responsible water management and recycling solutions across our core position in Eddy County, New Mexico,” said Concho President Jack Harper. “Solaris is well positioned to deliver a reliable produced water takeaway solution and an innovative and efficient produced water recycling platform.”
“We are committed to providing dependable, low cost produced water handling and water supply solutions to operators across the Permian Basin,” said Solaris Water Chief Executive Officer Bill Zartler. “This joint venture accelerates the expansion of our Pecos Star System, which is the premier integrated water infrastructure system serving the prolific Northern Delaware Basin. Concho is a leading operator with top-tier assets, an impressive organization, and a stellar reputation, and we could not be more pleased to be Concho’s water infrastructure provider over such a large position in the Northern Delaware Basin.”
About Concho Resources
Concho Resources (NYSE: CXO) is one of the largest unconventional shale producers in the Permian Basin, with operations focused on acquiring, exploring, developing and producing oil and natural gas resources. Concho is at the forefront of applying advanced technology and large-scale development to safely and efficiently maximize resource recovery while delivering attractive, long-term economic returns. We are working today to deliver a better tomorrow for our shareholders, people and communities. For more information about Concho, visit www.concho.com.
About Solaris Water Midstream, LLC
A wholly owned subsidiary of Solaris Midstream Holdings, LLC, Solaris Water is an independent, growth-oriented company based in Houston with offices in Midland, Texas, and Carlsbad, New Mexico. Solaris Water owns, operates and designs crucial water midstream assets across the Permian Basin. Solaris Water currently operates cost-effective, efficient and reliable produced water gathering, transportation, disposal, recycling and storage infrastructure and frac water sourcing and infrastructure in the Midland and Delaware basins. For more information on Solaris Water please visit www.solarismidstream.com.
Concho is contributing water infrastructure assets to Solaris Water in exchange for cash and equity.
Solaris Water will manage Concho's produced water gathering, transportation, disposal and recycling for an approximately 1.6 million-acre area located primarily in Eddy County, New Mexico.
Under the terms of the agreement, Solaris Water will manage Concho’s produced water gathering, transportation, disposal and recycling for an area covering approximately 1.6 million acres located primarily in Eddy County, New Mexico. Concho will contribute 13 salt water disposal wells and approximately 40 miles of large-diameter produced water gathering pipelines in exchange for cash and an equity ownership in Solaris Midstream Holdings, LLC, the parent of Solaris Water.
The assets contributed by Concho will be incorporated into Solaris Water’s growing integrated Pecos Star System, which currently includes more than 300 miles of large-diameter gathering pipelines, more than 500,000 barrels per day of disposal capacity, storage and recycling facilities and water supply pipelines that serve nearly 20 oil and gas operators. This high-capacity water infrastructure network brings significant scale to producers that lowers operating and well completion costs while providing environmental benefits such as reduced truck traffic and less reliance on brackish or fresh water supplies. Solaris Water will deliver to Concho blended reuse source water, enabling a significant increase in the use of recycled water in Concho’s operations.
“Our joint venture with Solaris will provide effective and responsible water management and recycling solutions across our core position in Eddy County, New Mexico,” said Concho President Jack Harper. “Solaris is well positioned to deliver a reliable produced water takeaway solution and an innovative and efficient produced water recycling platform.”
“We are committed to providing dependable, low cost produced water handling and water supply solutions to operators across the Permian Basin,” said Solaris Water Chief Executive Officer Bill Zartler. “This joint venture accelerates the expansion of our Pecos Star System, which is the premier integrated water infrastructure system serving the prolific Northern Delaware Basin. Concho is a leading operator with top-tier assets, an impressive organization, and a stellar reputation, and we could not be more pleased to be Concho’s water infrastructure provider over such a large position in the Northern Delaware Basin.”
About Concho Resources
Concho Resources (NYSE: CXO) is one of the largest unconventional shale producers in the Permian Basin, with operations focused on acquiring, exploring, developing and producing oil and natural gas resources. Concho is at the forefront of applying advanced technology and large-scale development to safely and efficiently maximize resource recovery while delivering attractive, long-term economic returns. We are working today to deliver a better tomorrow for our shareholders, people and communities. For more information about Concho, visit www.concho.com.
About Solaris Water Midstream, LLC
A wholly owned subsidiary of Solaris Midstream Holdings, LLC, Solaris Water is an independent, growth-oriented company based in Houston with offices in Midland, Texas, and Carlsbad, New Mexico. Solaris Water owns, operates and designs crucial water midstream assets across the Permian Basin. Solaris Water currently operates cost-effective, efficient and reliable produced water gathering, transportation, disposal, recycling and storage infrastructure and frac water sourcing and infrastructure in the Midland and Delaware basins. For more information on Solaris Water please visit www.solarismidstream.com.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group