CXO
Posted: Fri Nov 06, 2015 12:50 pm
I am updating my forecast model now and will have it posted to the EPG website later today. - Dan
Concho Resources Inc.: 3Q15: Living Within Its Means
Drew Venker, CFA – Morgan Stanley
November 5, 2015 5:43 AM GMT
Beat and raise. 2016 production guidance is below consensus and may disappoint, but lower costs partially offset the impact. Expect a neutral to slightly negative reception.
Plans to hold 2016 production flat while spending to cash flow. On the 2Q15 call mgmt conveyed the expectation that CXO would grow in 2016 while spending within cash flow at strip pricing, without being specific on capex or volumes. Concho provided explicit preliminary 2016 guidance today for spending and growth that was below consensus expectations. Capex guidance of $1.4 billion is 7% below consensus of $1.5 billion, but above our $1.2 billion estimate. Guidance for flat production YoY is 4% below consensus and 1% below our estimate. Consistent with prior messaging, the company plans to live within cash flow in 2016. This budget assumes $50/Bbl WTI oil and $2.50/MMBtu Henry Hub gas.
Details provided on 3Q acquisitions. YTD CXO spent $255 million on acquisitions, with the bulk in 3Q15. The company acquired 25,000 net acres and 1.5 MBoe/d of production. The properties are primarily in southern Eddy County, New Mexico in the northern Delaware Basin and appear relatively close to Cimarex's Culberson County, Texas operating area. This is a highly attractive asset for Cimarex; while it remains unclear how similar the assets are, if this acreage is generally consistent with Cimarex's position, it would be a meaningfully positive bolt-on to Concho's inventory.
Raising/lowering 2016 estimates primarily for guidance. We are lowering our LOE/G&A estimates and narrowing our oil differential. Our 2016 EBITDA increases 7% to $1.58 billion from 1.47 billion.
CXO trades at 11.3x 2016e EBITDA vs. the Permian peers at 15.2x and 12.0x on our prior estimates.
Net debt to EBITDA at YE-16 remains flat at 1.8x vs. our prior estimates and vs. the Permian peers at 1.8x.
3Q15 results. Production beat was 149 MBoe/d, 1% above MS at 147 MBoe/d and 2% above Consensus of 146 MBoe/d
Concho Resources Inc.: 3Q15: Living Within Its Means
Drew Venker, CFA – Morgan Stanley
November 5, 2015 5:43 AM GMT
Beat and raise. 2016 production guidance is below consensus and may disappoint, but lower costs partially offset the impact. Expect a neutral to slightly negative reception.
Plans to hold 2016 production flat while spending to cash flow. On the 2Q15 call mgmt conveyed the expectation that CXO would grow in 2016 while spending within cash flow at strip pricing, without being specific on capex or volumes. Concho provided explicit preliminary 2016 guidance today for spending and growth that was below consensus expectations. Capex guidance of $1.4 billion is 7% below consensus of $1.5 billion, but above our $1.2 billion estimate. Guidance for flat production YoY is 4% below consensus and 1% below our estimate. Consistent with prior messaging, the company plans to live within cash flow in 2016. This budget assumes $50/Bbl WTI oil and $2.50/MMBtu Henry Hub gas.
Details provided on 3Q acquisitions. YTD CXO spent $255 million on acquisitions, with the bulk in 3Q15. The company acquired 25,000 net acres and 1.5 MBoe/d of production. The properties are primarily in southern Eddy County, New Mexico in the northern Delaware Basin and appear relatively close to Cimarex's Culberson County, Texas operating area. This is a highly attractive asset for Cimarex; while it remains unclear how similar the assets are, if this acreage is generally consistent with Cimarex's position, it would be a meaningfully positive bolt-on to Concho's inventory.
Raising/lowering 2016 estimates primarily for guidance. We are lowering our LOE/G&A estimates and narrowing our oil differential. Our 2016 EBITDA increases 7% to $1.58 billion from 1.47 billion.
CXO trades at 11.3x 2016e EBITDA vs. the Permian peers at 15.2x and 12.0x on our prior estimates.
Net debt to EBITDA at YE-16 remains flat at 1.8x vs. our prior estimates and vs. the Permian peers at 1.8x.
3Q15 results. Production beat was 149 MBoe/d, 1% above MS at 147 MBoe/d and 2% above Consensus of 146 MBoe/d