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Concho Resources Inc. Reports Second Quarter 2012 Financial And Operating Results

Oil and natural gas production expense from continuing operations for the second quarter of 2012, including oil and natural gas taxes, totaled $87.7 million, or $12.85 per barrel of oil equivalent (“Boe”), a 3% increase per Boe from the second quarter of 2011 . This increase was due primarily to higher lease operating expenses and workover costs, which averaged $7.52 per Boe in the second quarter of 2012 as compared to $5.97 per Boe in the second quarter of 2011, which was partially offset by lower oil and natural gas taxes, which averaged $5.33 per Boe in the second quarter of 2012 as compared to $6.51 per Boe in the second quarter of 2011. The increase in lease operating expenses per Boe over the second quarter 2011 is primarily due to an increase in workover costs and cost of services, including labor related expenses.

Depreciation, depletion and amortization expense (“DD&A”) from continuing operations for the second quarter of 2012 totaled $141.5 million, or $20.73 per Boe, a 17% increase per Boe from the second quarter of 2011.

General and administrative expense (“G&A”) from continuing operations for the second quarter of 2012 totaled $32.0 million, or $4.69 per Boe, as compared to $22.6 million, or $4.06 per Boe, in the second quarter of 2011. Cash G&A for the second quarter of 2012 totaled $24.6 million and stock-based compensation (non-cash) totaled $7.4 million. The increase in per Boe expense for the second quarter of 2012 over the second quarter of 2011 was primarily due to a 41% increase in absolute G&A expenses reflecting increased staffing across the Company, and was partially offset by a 22% increase in production.

The Company’s cash flow from operating activities (GAAP) was $611.0 million for the first six months of 2012, as compared to $485.8 million for the first six months of 2011, an increase of 26%. Adjusted cash flows (non-GAAP), which are cash flows from operating activities (GAAP) adjusted for settlements paid on derivatives not designated as hedges, were $587.3 million for the first six months of 2012, as compared to $409.8 million for the first six months of 2011, an increase of 43%. For a description of the use of adjusted cash flows (non-GAAP) and for a reconciliation of cash flows from operating activities (GAAP) to adjusted cash flows (non-GAAP), please see “Supplemental Non-GAAP Financial Measures” below.

In the second quarter of 2012, the Company collected net cash receipts on derivatives not designated as hedges of $8.3 million and the non-cash unrealized mark-to-market gain on derivatives not designated as hedges was $394.8 million. In comparison, the Company made net cash payments of $47.8 million on derivatives not designated as hedges and reported a $192.6 million non-cash unrealized mark-to-market gain on derivatives not designated as hedges in the second quarter of 2011. To better understand the impact of the Company’s derivative positions and their impact on the statements of operations, please see the “Summary Production and Operating Data” and “Derivatives Information” tables at the end of this press release.

Operations

For the quarter ended June 30, 2012, the Company commenced the drilling of or participated in a total of 221 gross wells (186 operated), 84 of which had been completed as producers and 137 of which were in progress at June 30, 2012. In addition, during the second quarter of 2012, the Company completed 139 wells that were drilled prior to the second quarter of 2012.

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