Concho Resources (CXO)

[dan_s]

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

Concho will be dropping half of their rigs in Q1 and going back to a 12 rig program in the Permian Basin. They can easily "live within cash flow" this year since approximately 67% of their 2016 oil production is hedged at $70.13/bbl. Their cash flow should be $1.4 to $1.5 Billion in 2016.

Concho is well positioned to be a Buyer in what should be a very attractive acquisitions market this year.

My valuation is $121.50/share, compared to First Call's price target of $112.56.

35 analysts have submitted 2016 forecasts to First Call. There is a very wide gap between the high and low estimates. Once Concho and the other companies provide 2016 guidance, the gaps should narrow.

My EPS forecast is right in the middle, but my operating cash flow per share is higher. Concho does not account for their derivatives as hedges, so cash settlements are included as "Cash Flows from Investing Activities" on the Statement of Cash Flows. Cash is cash, so I include the cash settlements in cash flows from operating activities, like I do on all of the other Sweet 16.