Concho Resources (CXO) Q3 Results - Oct 31

[dan_s]

Concho Resources Inc. (CXO) reported financial and operating results for third-quarter 2019.

Third-Quarter 2019 Highlights

Delivered total production of 330 MBoepd, exceeding the high end of the Company's guidance range. < Compares to my forecast of 321.5 MBoepd.
Achieved oil production volumes of 206 MBopd. < Compares to my forecast of 202 MBopd.
Reduced controllable cash costs per unit 3% year over year.
Surpassed year-end 2019 well cost reduction target with 20% lower well costs versus first-half 2019, led by a significant reduction in Delaware Basin well costs.
Announced strategic New Mexico Shelf divestiture for total cash consideration of $925 million, subject to customary closing and post-closing adjustments.
Authorized initiation of a $1.5 billion share repurchase program.
Generated cash flow from operating activities of $665 million; operating cash flow before working capital changes (non-GAAP) was $706 million, exceeding exploration and development costs incurred of $670 million. < Compares to my forecast of $667 million cash flow from operations before working capital changes.
Reported net income of $558 million, or $2.78 per share. Adjusted net income (non-GAAP) totaled $122 million, or $0.61 per share. < Compares to my forecast of $131 million net income or $0.65 per share.
Generated $757 million of adjusted EBITDAX (non-GAAP).

Tim Leach, Chairman and Chief Executive Officer, commented, “The fundamentals of our business are solid, as demonstrated by our strong operational and financial performance in the third quarter. We achieved our production targets and materially reduced well costs, enabling us to surpass our well cost targets for the year and generate operating cash flow that exceeded capital spending. We also made significant progress on other important initiatives, including the sale of our New Mexico Shelf assets. The transaction was an important step in high-grading our portfolio, and we will use the proceeds to achieve our debt reduction target and accelerate the return of capital to shareholders. Through our focus on enhancing capital efficiency, improving costs and actively managing our portfolio, Concho is positioned to deliver sustainable, competitive growth and superior returns for investors.”

[dan_s]

Concho Resources Inc. (CXO) (the “Company” or “Concho”) announced that its Board of Directors declared a quarterly dividend of $0.125 per share on the Company’s outstanding common stock. The quarterly dividend is payable December 20, 2019, to stockholders of record at the close of business on November 8, 2019.

[dan_s]

Strategic Asset Sale Accelerates Value

In September, the Company announced the sale of its New Mexico Shelf assets to an affiliate of Spur Energy Partners LLC for $925 million. The transaction is expected to close in early November and is subject to customary terms, conditions and closing and post-closing adjustments. The Company intends to use the proceeds from the transaction to pay down borrowings on its revolving credit facility and initiate a $1.5 billion share repurchase program. As of September 30, 2019, Concho had long-term debt of approximately $4.3 billion, including $395 million of outstanding borrowings under its credit facility.

[dan_s]

I have updated my forecast/valuation model for CXO. It will be posted to the EPG website this afternoon.

Q3 results came in very close to my forecast and Q4 results should be solid. ~60% of Q4 oil is hedged at more than $56/bbl.

New Mexico asset sale will shore up an already strong balance sheet and stock repurchase program will improve per share results in 2020.

First Call's price target of $102.91 looks good to me.

[dan_s]

Note received November 4 from Stifel

"CXO (Buy, $69.30) – CXO announced a beat and raise on in-line capex for the quarter. Concho also outlined impressive gains in capital
efficiency (with Q319 actuals at $955/ft materially outperforming management’s year-end target of $1,065/ft) and provided a free cash flow
outlook for 2020 (~$350 million at $50/bbl and ~$750 million at $60/bbl). Net-net, we believe the strong print demonstrates management's
commitment to capital discipline and its ability to execute."