Form 8-K CONCHO RESOURCES INC For: Nov 05

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section�13 or 15(d) of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): November 5, 2014

Concho Resources Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)

Registrants telephone number, including area code: (432)�683-7443

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

� ���Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

� ���Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

� ���Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

� ���Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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TABLE OF CONTENTS

Item 2.02 Results of Operations and Financial Condition
Item 9.01 Financial Statements and Exhibits
SIGNATURES
EXHIBIT�INDEX
EX-99.1

Item�2.02 Results of Operations and Financial Condition.

On November 5, 2014, Concho Resources Inc. (the Company) announced its results for the three months and nine months ended September 30, 2014. A copy of the Companys press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

Item�9.01 Financial Statements and Exhibits.

(d)�Exhibits.

THE INFORMATION CONTAINED IN THIS CURRENT REPORT, INCLUDING THE EXHIBIT ATTACHED HERETO, SHALL NOT BE DEEMED FILED FOR THE PURPOSES OF SECTION 18 OF THE SECURITIES AND EXCHANGE ACT OF 1934, NOR SHALL IT BE DEEMED INCORPORATED BY REFERENCE INTO ANY REGISTRATION STATEMENT OR OTHER FILING PURSUANT TO THE SECURITIES ACT OF 1933, EXCEPT AS OTHERWISE EXPRESSLY STATED IN SUCH FILING.

SIGNATURES

�����Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

EXHIBIT INDEX

Exhibit 99.1

Concho Resources Inc. Reports Third Quarter 2014 Results and Provides 2015 Outlook

MIDLAND, Texas--(BUSINESS WIRE)--November 5, 2014--Concho Resources Inc. (NYSE: CXO) (the Company or Concho) today reported results for the third quarter of 2014 and provided an outlook for 2015.

Highlights

• Concho delivered record quarterly production, exceeding 10 million BOE, and achieved 23% crude oil production growth over the same quarter a year ago.
• Production for the third quarter of 2014 averaged 113.5 MBoepd and was negatively impacted by approximately 2 MBoepd due to weather-related downtime.
• The Company continued to deliver industry-leading well performance in the northern Delaware Basin.
• Earnings for the third quarter of 2014 totaled $2.69 per diluted share, or $1.09 per diluted share on an adjusted basis¹ (non-GAAP). This compares with earnings of $0.29 per diluted share, or $1.06 per diluted share on an adjusted basis, in the third quarter of 2013.
• EBITDAX² (non-GAAP) increased for the sixth consecutive quarter to $536.4 million.
• Cash flows generated from operating activities in the first nine months of 2014 totaled $1.3 billion. Adjusted cash flows³ (non-GAAP) generated from operating activities in the first nine months of 2014 also totaled $1.3 billion, up 39% over the same period last year.
• Concho is targeting 28% to 32% year-over-year production growth in 2015 with a $3.0 billion capital program. The Company is on track to accomplish its Two-by-Three Growth Plan to double production in 2016 over 2013.

Tim Leach, Chairman, Chief Executive Officer and President, commented, Concho delivered strong results this quarter, even as we faced challenges from flooding in the northern Delaware Basin. Our team did a great job minimizing the production downtime that resulted from the flooding. In addition, through our implementation of enhanced drilling and completion techniques, were making better wells and driving efficiencies throughout our assets in the Permian Basin. Posting another quarter of successively higher production, cash flow and well results underscores our strategy to invest in high-margin, high rate-of-return projects.

Third Quarter Operations Summary

Production for the third quarter of 2014 totaled 10.4 million barrels of oil equivalent (MMBoe), or an average of 113.5 thousand Boe per day (MBoepd), up 20% from the third quarter of 2013 and 6% from the second quarter of 2014. Production for the third quarter of 2014 consisted of 6.7 million barrels (MMBbls) of crude oil and 22.5 billion cubic feet of natural gas. Crude oil production of 6.7 MMBbls represents a 23% and a 7% increase over the third quarter of 2013 and the second quarter of 2014, respectively. The third quarter of 2014 marks the 19^th consecutive quarter of crude oil production growth from continuing operations.

Heavy rainfall and flooding late in the third quarter disrupted the Companys operations, primarily in the northern Delaware Basin, causing production downtime, road closures and drilling and completion delays. The Company estimates weather-related downtime negatively impacted third quarter production by approximately 2 MBoepd. Had such impacted production been included in third quarters production, the Company would have delivered production at the high end of the Companys third quarter guidance range.

During the quarter, the Company started drilling or participated in a total of 153 gross wells, of which 123 were operated by the Company, and completed 120 gross wells. The table below summarizes the Companys drilling activity by core area for the third quarter of 2014.

Delaware Basin

The Companys production in the third quarter of 2014 from horizontal wells in the Delaware Basin totaled 55.2 MBoepd, up 64% over the third quarter of 2013 and 12% over the second quarter of 2014. During the third quarter, Concho drilled 79 wells in the Delaware Basin, including 57 wells targeting the Bone Spring sands, 16 wells targeting the Wolfcamp shale, five wells targeting the Brushy Canyon and one well targeting the Avalon shale.

In addition, Concho continues to deliver industry-leading well results in the Delaware Basin. In the northern Delaware Basin, the Company has 40 new wells with at least 30 days of production as of September 30, 2014. The average peak 30-day and 24-hour rates for these 40 wells were 1,015 Boepd (73% oil) and 1,576 Boepd, respectively, from an average lateral length of 4,749 feet.

In the southern Delaware Basin, the Company has nine new wells with at least 30 days of production as of September 30, 2014, five of which are extended laterals. The average peak 30-day and 24-hour rates for these nine wells were 991 Boepd (79% oil) and 1,427 Boepd, respectively, from an average lateral length of 5,607 feet.

New Mexico Shelf

The Companys operations on the New Mexico Shelf were previously impacted by high line pressure and insufficient gas processing capacity. With these midstream issues substantially resolved, the Company accelerated vertical development during the third quarter with the addition of two rigs. The Company added 12 new horizontal wells with at least 30 days of production as of September 30, 2014, targeting the Yeso. The average peak 30-day and 24-hour rates for these wells were 336 Boepd (85% oil) and 469 Boepd, respectively. The Yeso is a shallow oil target where we have a sizeable inventory of low cost, high return vertical and horizontal projects.

Texas Permian

Concho completed nine horizontal wells in the Midland Basin targeting the Upper Wolfcamp during the third quarter with average peak 30-day and 24-hour rates of 805 Boepd (80% oil) and 1,019 Boepd, respectively, from an average lateral length of 5,853 feet. In the Midland Basin, the Company is testing multi-zone potential targeting the Wolfcamp shale and Spraberry zones while optimizing lateral placement and completion design.

Concho is currently running 37 drilling rigs, including 24 horizontal rigs in the Delaware Basin, four (two horizontal) rigs in the New Mexico Shelf and nine (five horizontal) rigs in the Texas Permian. Concho is currently running the largest horizontal drilling program in the Permian Basin with a total of 31 horizontal rigs.

Third Quarter Financial Summary

Revenues for the third quarter of 2014 were $700.3 million, up 7% compared with the same period a year ago.

Net income for the quarter totaled $305.2 million, or $2.69 per diluted share, compared with net income of $30.4 million, or $0.29 per diluted share, in the third quarter of 2013. Net income for the third quarter of 2014 included several non-cash or non-recurring items, including a $326.2 million gain on derivatives, $14.7 million in cash receipts from commodity derivatives, a $15.5 million impairment of long-lived assets primarily relating to non-core Delaware Basin properties, $4.6 million of leasehold abandonments and a $0.8 million gain on the disposition of assets.

Excluding these items, adjusted net income⁴ (non-GAAP) for the third quarter of 2014 was $123.2 million, or $1.09 per diluted share, compared with adjusted net income (non-GAAP) of $111.1 million, or $1.06 per diluted share, for the third quarter of 2013.

EBITDAX⁵ (non-GAAP) for the third quarter of 2014 totaled $536.4 million, an increase of 18% over the third quarter of 2013.

The Companys total realized price during the third quarter of 2014, excluding the effect of commodity derivatives, was $67.07 per Boe, compared with $75.20 per Boe during the third quarter of 2013. The lower total realized price in the 2014 period reflects lower crude oil prices and an increase in the discount of WTI-Midland to WTI-Cushing, partially offset by slightly higher natural gas prices.

Cash flows generated from operating activities in the first nine months of 2014 totaled $1.3 billion, compared with $944.6 million in the same period last year. Adjusted cash flows⁶ (non-GAAP), which are cash flows from operating activities adjusted for settlements on derivatives not designated as hedges, were $1.3 billion for the first nine months of 2014, as compared to $907.0 million for the same period last year, reflecting an increase of 39%.

Financial Position and Liquidity

As of September 30, 2014, Conchos balance sheet included $98.9 million of cash and cash equivalents and total long-term debt of $3.4 billion. The Companys net debt-to-EBITDAX⁷ (non-GAAP) was 1.7 times at September 30, 2014. Concho had $2.5 billion available for future borrowings under its revolving credit facility and no borrowings outstanding as of September 30, 2014.

Outlook

Due to the lingering effects of the flooding in the northern Delaware Basin at the end of the third quarter, the Company currently estimates that fourth quarter production will be negatively impacted by approximately 1.3 MBoepd. As a result, the Company expects fourth quarter production to be within the range of 122 MBoepd to 127 MBoepd. In addition, the Company expects fourth quarter lease operating expense (LOE) per Boe to be consistent with third quarter LOE per Boe due to repairs to roads and production facilities damaged by the floods.

2015 Capital Program

Concho is targeting year-over-year production growth of 28% to 32% in 2015 and expects to spend approximately $3.0 billion. The Companys capital program includes $2.7 billion for drilling and completions and $300 million for facilities, leasehold acquisitions, midstream, geological and geophysical (G&G) and other capital. As the Company optimizes drilling and completion techniques, the development program requires fewer rigs than originally planned to achieve the Companys Two-by-Three Growth Plan and further extends Conchos inventory. As a result, the Company plans to operate an average of 39 drilling rigs in 2015, with 34 rigs drilling horizontal wells.

Commenting on the Companys 2015 capital program, Mr. Leach said:

The 2015 capital program reflects our continued execution on the Two-by-Three Growth Plan  a plan that balances high growth through the doubling of our production from 2013 to 2016 and improvement of the Companys leverage metric. We are mindful of the significant decline in crude oil prices as we stress-test our capital program against various commodity price scenarios.

Concho is well positioned to navigate the commodity price cycles as a result of our inventory of high rate-of-return projects, ongoing capital efficiency improvements, strong balance sheet and hedges. During times of volatility, preserving our financial strength is a high priority. Therefore, we will recalibrate our capital program and activity level if conditions warrant.

Approximately 90% of the Companys 2015 capital for drilling and completions will be directed to horizontal development in the Permian Basin. The Company plans to allocate approximately $1.7 billion of capital for drilling and completions in the Delaware Basin, approximately $600 million in the Texas Permian and approximately $380 million in the New Mexico Shelf.

The following table summarizes the Companys operational and financial guidance for 2014 and 2015. The Companys capital expenditures guidance for 2014 excludes contributions to the Companys midstream joint venture and other capital.

The Companys guidance is forward-looking information that is subject to a number of risks and uncertainties, many of which are beyond the Companys control. See Forward-Looking Statements and Cautionary Statements below. In addition, our 2015 capital program is subject to change depending upon a number of factors, including economic and industry conditions at the time of drilling and prevailing and anticipated prices for crude oil and natural gas.

Commodity Derivatives Update

The Company enters into commodity derivatives to manage its exposure to commodity price fluctuations. For calendar year 2015, Concho currently has swap contracts covering approximately 41.8 thousand barrels (MBbls) per day of expected crude oil production at a weighted average price of $87.73 per Bbl. Concho also currently has basis swap contracts covering approximately 30.5 MBbls per day of expected crude oil production at a weighted average price of $3.73 per Bbl for calendar year 2015. Please see the table under Derivatives Information below for more detailed information about the Companys current derivatives positions.

Conference Call

Concho will discuss third quarter results on a conference call tomorrow, November 6, 2014, at 8:30 AM CT. To participate in the call, dial (800) 706-7745 (passcode: 68939783). The simultaneous webcast of the conference call will be available at www.concho.com. A related presentation is now posted on the Companys website. To access the presentation, visit www.concho.com and select Investor Relations, then Presentations.

A replay of the conference call will be available on the Companys website or by dialing (888) 286-8010 (passcode: 10103075).

About Concho Resources Inc.

Concho Resources Inc. is an independent oil and natural gas company engaged in the acquisition, development and exploration of oil and natural gas properties. The Companys operations are primarily focused in the Permian Basin of Southeast New Mexico and West Texas. For more information, visit the Companys website at www.concho.com.

Forward-Looking Statements and Cautionary Statements

The foregoing contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical fact, included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. Forward-looking statements contained in this press release specifically include statements, estimates and projections regarding the Company's future financial position, operations, performance, business strategy, drilling program, capital expenditure budget, liquidity and capital resources, the timing and success of specific projects, outcomes and effects of litigation, claims and disputes, derivative activities and potential financing. The words estimate, project, predict, believe, expect, anticipate, potential, could, may, foresee, plan, goal or other similar expressions are intended to identify forward-looking statements, which generally are not historical in nature. However, the absence of these words does not mean that the statements are not forward-looking. These statements are based on certain assumptions and analyses made by the Company based on management's experience, expectations and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Forward-looking statements are not guarantees of performance. Although the Company believes the expectations reflected in its forward-looking statements are reasonable and are based on reasonable assumptions, no assurance can be given that these assumptions are accurate or that any of these expectations will be achieved (in full or at all) or will prove to have been correct. Moreover, such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. These include the factors discussed or referenced in the Risk Factors section of the Company's most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q and risks relating to declines in the prices the Company receives for its oil and natural gas; uncertainties about the estimated quantities of oil and natural gas reserves; drilling and operating risks, including risks related to properties where the Company does not serve as the operator and risks related to hydraulic fracturing activities; the adequacy of the Companys capital resources and liquidity including, but not limited to, access to additional borrowing capacity under its credit facility; the effects of government regulation, permitting and other legal requirements, including new legislation or regulation of hydraulic fracturing; difficult and adverse conditions in the domestic and global capital and credit markets; risks related to the concentration of the Companys operations in the Permian Basin of Southeast New Mexico and West Texas; disruptions to, capacity constraints in or other limitations on the pipeline systems that deliver the Companys oil, natural gas liquids and natural gas and other processing and transportation considerations; shortages of oilfield equipment, services and qualified personnel and increases in costs for such equipment, services and personnel; potential financial losses or earnings reductions from the Companys commodity price management program; risks related to the integration of acquired assets; uncertainties about the Companys ability to successfully execute its business and financial plans and strategies; uncertainties about the Companys ability to replace reserves and economically develop its current reserves; general economic and business conditions; competition in the oil and natural gas industry; uncertainty concerning the Companys assumed or possible future results of operations; and other important factors that could cause actual results to differ materially from those projected.

Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.

¹ Adjusted net income (non-GAAP) is comparable to securities analyst estimates. For an explanation of how we calculate adjusted net income (non-GAAP) and a reconciliation of net income (GAAP) to adjusted net income (non-GAAP), please see Supplemental Non-GAAP Financial Measures below.

² For an explanation of how we calculate and use EBITDAX (non-GAAP) and a reconciliation of net income (GAAP) to EBITDAX (non-GAAP), please see Supplemental Non-GAAP Financial Measures below.

³ For a reconciliation of cash flows from operating activities (GAAP) to adjusted cash flows (non-GAAP), please see Supplemental Non-GAAP Financial Measures below.

⁴ Adjusted net income (non-GAAP) is comparable to securities analyst estimates. For an explanation of how we calculate adjusted net income (non-GAAP) and a reconciliation of net income (GAAP) to adjusted net income (non-GAAP), please see "Supplemental Non-GAAP Financial Measures" below.

⁵ For an explanation of how we calculate and use EBITDAX (non-GAAP) and a reconciliation of net income (GAAP) to EBITDAX (non-GAAP), please see "Supplemental Non-GAAP Financial Measures" below.

⁶ For a reconciliation of cash flows from operating activities (GAAP) to adjusted cash flows (non-GAAP), please see Supplemental Non-GAAP Financial Measures below.

⁷ Trailing twelve month debt-to-EBITDAX. For an explanation of how we calculate and use EBITDAX (non-GAAP) and a reconciliation of net income (GAAP) to EBITDAX (non-GAAP), please see Supplemental Non-GAAP Financial Measures below.

The following tables provide information that the Company believes may be useful to investors who follow the practice of some industry analysts who adjust reported company net income and cash flows from operating activities to exclude certain non-cash and unusual items.

Adjusted Net Income

The following table provides a reconciliation of net income (GAAP) to adjusted net income (non-GAAP) for the periods indicated:

Adjusted Cash Flows

The following table provides a reconciliation of cash flows from operating activities (GAAP) to adjusted cash flows (non-GAAP) for the periods indicated:

EBITDAX

EBITDAX (as defined below) is presented herein and reconciled from the generally accepted accounting principles ("GAAP") measure of net income because of its wide acceptance by the investment community as a financial indicator of a company's ability to internally fund exploration and development activities.

The Company defines EBITDAX as net income, plus (1) exploration and abandonments expense, (2) depreciation, depletion and amortization expense, (3) accretion expense, (4) impairment of long-lived assets, (5) non-cash stock-based compensation expense, (6) (gain) loss on derivatives not designated as hedges, (7) cash receipts from (payments on) derivatives not designated as hedges, (8) (gain) loss on disposition of assets, net, (9) interest expense, (10) loss on extinguishment of debt, (11) federal and state income taxes on continuing operations and (12) similar items listed above that are presented in discontinued operations. EBITDAX is not a measure of net income or cash flows as determined by GAAP.

The Companys EBITDAX measure (which includes continuing and discontinued operations) provides additional information which may be used to better understand the Companys operations. EBITDAX is one of several metrics that the Company uses as a supplemental financial measurement in the evaluation of its business and should not be considered as an alternative to, or more meaningful than, net income, as an indicator of operating performance. Certain items excluded from EBITDAX are significant components in understanding and assessing a company's financial performance, such as a company's cost of capital and tax structure, as well as the historic cost of depreciable assets, none of which are components of EBITDAX. EBITDAX, as used by the Company, may not be comparable to similarly titled measures reported by other companies. The Company believes that EBITDAX is a widely followed measure of operating performance and is one of many metrics used by the Companys management team, and by other users of the Companys consolidated financial statements. For example, EBITDAX can be used to assess the Companys operating performance and return on capital in comparison to other independent exploration and production companies without regard to financial or capital structure, and to assess the financial performance of the Companys assets and the Company without regard to capital structure or historical cost basis.

The following table provides a reconciliation of net income (GAAP) to EBITDAX (non-GAAP) for the periods indicated:

CONTACT:
Concho Resources Inc.
Megan P. Hays, 432-685-2533
Director of Investor Relations
or
Jere Thompson, 432-221-0383
Financial Analyst

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