Concho Resources Inc. (NYSE: CXO) (“Concho” or the “Company”) today provided a 2013 operational update, including full-year production, year-end estimated proved reserves and costs incurred. Highlights include:
- Full-year production of 33.6 million barrels of oil equivalent (“MMBoe”), a 20% increase over 2012 production from continuing operations
- Year-end estimated proved reserves of 503 MMBoe, a 13% increase over year-end 2012
- Reserve replacement ratio 1 of 266%
- Drill-bit finding and development (“F&D”) costs of $16.79 per Boe
The Company uses the reserve replacement ratio as an indicator of the Company's ability to replenish annual production volumes and grow its reserves, thereby providing some information on the sources of future production. It should be noted that the reserve replacement ratio is a statistical indicator that has limitations. The ratio is limited because it typically varies widely based on the extent and timing of discoveries and property acquisitions. Its predictive and comparative value is also limited for the same reasons. In addition, since the ratio does not embed the cost or timing of future production of new reserves, it cannot be used as a measure of value creation. The reserve replacement ratio of 266% was calculated by dividing net proved reserve additions of 89.4 MMBoe (the sum of extensions, discoveries, revisions and purchases) by production of 33.6 MMBoe.
During 2013, Concho delivered another strong year of organic reserve additions. Through extensions and discoveries, the Company added over 105 MMBoe of proved reserves and replaced 266% of full-year 2013 production after adjusting for revisions. Proved reserves growth in 2013 reflected the Company’s robust development and exploration activities in the Permian Basin, where Concho is one of the largest and most active producers.
“We continue to focus our concentration on high-growth, high-return, crude oil assets across the Permian Basin,” commented Tim Leach, Chairman, Chief Executive Officer and President. “The success of our drilling program has unlocked vast resource development opportunities in both the Delaware and Midland Basins. Going forward, I expect the robust returns from our engineered drilling inventory, plus the incremental resource potential throughout our portfolio will continue to drive organic proved reserves growth for years to come.”