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

We define EBITDAX as net income, plus (1) exploration and abandonments expense, (2) depreciation, depletion and amortization expense, (3) accretion expense, (4) impairments of long-lived assets, (5) non-cash stock-based compensation expense, (6) bad debt expense, (7) unrealized (gain) loss on derivatives not designated as hedges, (8) (gain) loss on sale of assets, net, (9) interest expense, (10) federal and state income taxes on continuing operations and (11) 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.

Our EBITDAX measure (which includes continuing and discontinued operations) provides additional information which may be used to better understand our operations. EBITDAX is one of several metrics that we use as a supplemental financial measurement in the evaluation of our business and should not be considered as an alternative to, or more meaningful than, net income, as an indicator of our 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 us, may not be comparable to similarly titled measures reported by other companies. We believe that EBITDAX is a widely followed measure of operating performance and is one of many metrics used by our management team, and by other users, of our consolidated financial statements. For example, EBITDAX can be used to assess our 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 our assets and our company without regard to capital structure or historical cost basis.

The following table provides a reconciliation of net income to EBITDAX for the three and six months ended June 30, 2012 and 2011:

                   
         
Three Months Ended Six Months Ended
June 30, June 30,
(in thousands)     2012   2011   2012   2011
 
Net income $ 319,297 $ 232,182 $ 350,414 $ 274,757
Exploration and abandonments 14,398 400 20,377 1,126
Depreciation, depletion and amortization 141,450 98,881 277,319 189,169
Accretion of discount on asset retirement obligations 1,047 715 2,035 1,419
Impairments of long-lived assets - 76 - 76
Non-cash stock-based compensation 7,347 4,725 13,475 9,193
Unrealized (gain) loss on derivatives not designated as hedges (394,763 ) (192,633 ) (268,581 ) 12,213
(Gain) loss on sale of assets, net (827 ) 1,431 68 1,455
Interest expense 41,899 21,660 77,736 51,320

Income tax expense on continuing operations

197,563 143,270 216,680 112,801
Discontinued operations   -     -     -     (83,306 )
EBITDAX $ 327,411   $ 310,707   $ 689,523   $ 570,223  
                   
     

Concho Resources Inc.

Costs Incurred

Unaudited

 

 

The table below provides the costs incurred for the three and six months ended June 30, 2012 and 2011.

 
Costs incurred for oil and natural gas producing activities (a)
 
 
Three Months Ended Six Months Ended
June 30, June 30,
(in thousands)   2012   2011   2012   2011
 
Property acquisition costs:
Proved $ 5,568 $ 3,230 $ 165,615 $ 69,148
Unproved 21,851 18,132 61,207 75,340
Exploration 159,013 181,353 343,496 271,919
Development   192,051   140,768   386,782   334,485
Total costs incurred for oil and natural gas properties $ 378,483 $ 343,483 $ 957,100 $ 750,892
                   
 
 
(a) The costs incurred for oil and natural gas producing activities includes the following amounts of asset retirement obligations:
                 
 
Three Months Ended Six Months Ended
June 30, June 30,
(in thousands)   2012   2011   2012   2011
 
Proved property acquisition costs $ 77 $ - $ 2,127 $ 148
Exploration costs 469 320 1,267 640
Development costs   3,239   757   3,283   752
Total $ 3,785 $ 1,077 $ 6,677 $ 1,540
                         
               

Concho Resources Inc.

Derivatives Information

Unaudited

 

The table below provides data associated with the Company’s derivatives at August 6, 2012.

                                   
 
2012

Third Quarter

Fourth Quarter

Total 2013 2014 2015 2016 2017
 
Oil Swaps:
Volume (Bbl) 4,044,500 3,676,500 7,721,000 12,215,000 6,043,000 1,076,000 429,000 168,000
NYMEX price (Bbl) (a) $ 96.15 $ 96.01 $ 96.08 $ 96.01 $ 91.99 $ 86.69 $ 88.31 $ 87.00
 
Natural Gas Swaps:
Volume (MMBtu) 75,000 75,000 150,000 - - - - -
NYMEX price (MMBtu) (b) $ 6.54 $ 6.54 $ 6.54 - - - - -
                                   
 
(a) The index prices for the oil contracts are based on the NYMEX – West Texas Intermediate monthly average futures price.
(b) The index prices for the natural gas contracts are based on the NYMEX – Henry Hub last trading day of the month futures price.
   




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