Concho Resources (CXO) Misses Q4 EPS by 11c, Offers Outlook

Concho Resources (NYSE: CXO) reported Q4 EPS of ($0.07), $0.11 worse than the analyst estimate of $0.04. Revenue for the quarter came in at $389.15 million versus the consensus estimate of $525.41 million.

Outlook

First Quarter 2016

Production for the first quarter of 2016 is expected to be 130 MBoepd to 134 MBoepd. The outlook for first-quarter 2016 production is a result of reducing drilling and completion activity to align capital spending with cash flow in the second half of 2015 as well as recent operational constraints. These operational constraints, which include a third-party natural gas plant that remains inoperable and a winter storm in the last week of December that affected our operations in southeast New Mexico, are expected to negatively impact production for the first quarter of 2016 by 6 MBoepd. Additionally, weather-related repairs are expected to contribute to an increase in lease operating expense for the first quarter of 2016; as a result, lease operating expense is expected to be $7.75 per Boe to $8.00 per Boe. The crude oil price differential relative to NYMEX is expected to be ($4.50) per Bbl to ($4.70) per Bbl for the first quarter of 2016 and ($3.75) per Bbl to ($4.25) per Bbl for full year 2016.

Full Year 2016

The Company continues to scale capital spending with cash flow due to persistently low commodity prices and currently expects to execute a $1.1 billion to $1.3 billion capital plan in 2016, with approximately 90% for drilling and completion activity. Concho expects full-year 2016 production will be flat-to-down approximately 5% as compared to 2015. The Company’s 2016 production outlook is primarily driven by the reduction in activity year-over-year, shifting to pad drilling and the timing of completion activity.

Commenting on the Company’s updated 2016 capital plan, Mr. Leach said:

“By appropriately scaling our capital program we preserve our high-quality drilling projects for a better environment, keep the balance sheet strong and remain well-positioned to capture unique opportunities in our core operating areas. We plan to manage capital spending around anticipated cash flow and retain significant flexibility to adjust our plan as we progress through 2016. Our improving operational efficiency and high-quality drilling inventory provide increasing confidence that we can do more with less. For 2017, we believe we can continue to balance capital spending and cash flow and deliver double-digit production growth, based on the current commodity price outlook.”

Concho’s 2016 capital plan excludes acquisitions and is subject to change depending upon a number of factors, including commodity prices and industry conditions. Please see the table under “2016 Guidance” below for detailed information about the Company’s outlook for full year 2016.

Financial Position and Liquidity

At December 31, 2015, Concho had long-term debt of $3.3 billion and cash of $0.2 billion. Concho’s net debt-to-EBITDAX ratio was 1.8 times at year end 2015. In addition, Concho has a revolving credit facility with $2.5 billion in commitments from its bank group. At December 31, 2015, Concho had no outstanding borrowings on its credit facility, providing the Company with total liquidity of $2.7 billion.

For earnings history and earnings-related data on Concho Resources (CXO) click here.

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