Business Wire | Oct 27, 2020 04:07PM EDT

Concho Resources Inc. Reports Third-Quarter 2020 Results

Oct. 27, 2020

MIDLAND, Texas--(BUSINESS WIRE)--Oct. 27, 2020--Concho Resources Inc. (NYSE: CXO) today announced third-quarter 2020 results, reporting a net loss of $61 million, or $0.31 per share. Adjusted net income (non-GAAP), which excludes certain non-cash and special items, for third-quarter 2020 was $282 million, or $1.43 per share.

Tim Leach, Chairman and Chief Executive Officer, commented, "Despite the challenging market environment, Concho delivered excellent results that demonstrate the strength of our business, our high-quality asset base and our ability to execute. On October 19, we announced our intention to merge with ConocoPhillips. We look forward to closing the transaction in the first quarter of next year."

Third-Quarter 2020 Results

Third-quarter 2020 oil production volumes averaged 201 thousand barrels per day (MBopd). Natural gas production for third-quarter 2020 averaged 716 million cubic feet per day (MMcfpd). The Company's total production for third-quarter 2020 was 320 thousand barrels of oil equivalent per day (MBoepd).

Concho's average realized price for oil and natural gas for third-quarter 2020, excluding the effect of commodity derivatives, was $39.23 per Bbl and $1.64 per Mcf, respectively.

For third-quarter 2020, controllable costs totaled $7.06 per Boe, representing a 27% decrease year over year. Controllable costs include production expenses (consisting of lease operating and workover expenses), cash general and administrative (G&A) expenses (which excludes non-cash stock-based compensation) and interest expense.

Cash flow from operating activities was $608 million, including $60 million in working capital changes. Operating cash flow before working capital changes (non-GAAP) was $668 million, exceeding third-quarter capital expenditures of $284 million, and resulting in free cash flow (non-GAAP) of $384 million. Capital expenditures refers to the Company's additions to oil and natural gas properties on the Company's condensed consolidated statements of cash flows.

At September 30, 2020, Concho had long-term debt of $3.9 billion with no outstanding debt maturities until January 2027, no debt outstanding under its credit facility and approximately $400 million in cash and cash equivalents.

Investor Conference Call

Due to the pending transaction with ConocoPhillips, which was announced on Monday, October 19, 2020, the Company will not host a conference call/webcast to review its third-quarter 2020 results.

About Concho Resources

Concho Resources (NYSE: CXO) is one of the largest unconventional shale producers in the Permian Basin, with operations focused on safely and efficiently developing and producing oil and natural gas resources. We are working today to deliver a better tomorrow for our shareholders, people and communities. For more information about Concho, visit 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, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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. The words "estimate," "project," "predict," "believe," "expect," "anticipate," "potential," "could," "may," "enable," "strategy," "intend," "positioned," "foresee," "plan," "will," "guidance," "outlook," "goal," "target" or other similar expressions that convey the uncertainty of future events or outcomes 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, current plans, anticipated future developments, access to capital, market conditions, impacts of hedges, the impact of the COVID-19 pandemic and the actions taken by regulators and third parties in response to such pandemic 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 risk factors and other information discussed or referenced in the Company's most recent Annual Report on Form 10-K and other filings with the Securities and Exchange Commission. In particular, the unprecedented nature of the current economic downturn, pandemic and industry decline may make it particularly difficult to identify risks or predict the degree to which identified risks will impact the Company's business and financial condition. 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. Information on Concho's website is not part of this press release.

Use of Non-GAAP Financial Measures

To supplement the presentation of the Company's financial results prepared in accordance with U.S. generally accepted accounting principles ("GAAP"), this press release contains certain financial measures that are not prepared in accordance with GAAP, including adjusted net income, adjusted earnings per share, operating cash flow before working capital changes and free cash flow.

See "Supplemental Non-GAAP Financial Measures" below for a description and reconciliation of each of these non-GAAP measures to the most directly comparable financial measure calculated in accordance with GAAP.

For future periods, the Company is unable to provide a reconciliation of free cash flow to the most comparable GAAP financial measures because the information needed to reconcile this measure is dependent on future events, many of which are outside management's control. Additionally, estimating free cash flow to provide a meaningful reconciliation consistent with the Company's policies for future periods is extremely difficult and requires a level of precision that is unavailable for these future periods and cannot be accomplished without unreasonable effort. Forward-looking estimates of free cash flow are estimated in a manner consistent with the relevant definitions and assumptions noted herein.

Concho Resources Inc.

Condensed Consolidated Balance Sheets

Unaudited

September December(in millions, except share and per share amounts) 30, 31, 2020 2019

Assets

Current assets:

Cash and cash equivalents $ 402 $ 70

Accounts receivable, net:

Oil and natural gas 392 584

Joint operations and other 130 304

Inventory 26 30

Derivative instruments 212 6

Prepaid costs and other 44 61

Total current assets 1,206 1,055

Property and equipment:

Oil and natural gas properties, successful efforts 27,143 28,785 method

Accumulated depletion and depreciation (16,643 ) (7,895 )

Total oil and natural gas properties, net 10,500 20,890

Other property and equipment, net 456 437

Total property and equipment, net 10,956 21,327

Deferred income taxes 19 -

Deferred loan costs, net 5 7

Goodwill - 1,917

Intangible assets, net 16 17

Noncurrent derivative instruments 5 11

Other assets 330 398

Total assets $ 12,537 $ 24,732

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable - trade $ 45 $ 53

Revenue payable 140 268

Accrued drilling costs 181 386

Derivative instruments 5 112

Other current liabilities 326 363

Total current liabilities 697 1,182

Long-term debt 3,856 3,955

Deferred income taxes - 1,654

Noncurrent derivative instruments 47 7

Asset retirement obligations and other long-term 150 152 liabilities

Stockholders' equity:

Common stock, $0.001 par value; 300,000,000 authorized;197,551,182 and 198,863,681 issued at September 30, - - 2020 and December 31, 2019, respectively

Additional paid-in capital 14,511 14,608

Retained earnings (accumulated deficit) (6,573 ) 3,320

Treasury stock, at cost; 1,244,629 and 1,175,026 at (151 ) (146 )September 30, 2020 and December 31, 2019, respectively

Total stockholders' equity 7,787 17,782

Total liabilities and stockholders' equity $ 12,537 $ 24,732

Concho Resources Inc.

Condensed Consolidated Statements of Operations

Unaudited

Three Months Ended Nine Months Ended September 30, September 30,

(in millions, except per share 2020 2019 2020 2019amounts)

Operating revenues:

Oil sales $ 725 $ 1,023 $ 2,027 $ 3,007

Natural gas sales 109 92 203 339

Total operating revenues 834 1,115 2,230 3,346

Operating costs and expenses:

Oil and natural gas production 115 190 406 552

Production and ad valorem taxes 71 85 196 255

Gathering, processing and 46 25 139 73 transportation

Exploration and abandonments 14 26 2,749 90

Depreciation, depletion and 288 488 1,083 1,431 amortization

Accretion of discount on asset 2 3 6 8 retirement obligations

Impairments of long-lived assets - 20 7,772 888

Impairments of goodwill - 81 1,917 81

General and administrative(including non-cash stock-basedcompensation of $18 and $20 forthe three months ended September 70 75 204 254 30, 2020 and 2019, respectively,and $53 and $67 for the ninemonths ended September 30, 2020and 2019, respectively)

(Gain) loss on derivatives, net 199 (397 ) (1,056 ) 445

Net (gain) loss on disposition 1 (303 ) (99 ) (302 )of assets and other

Total operating costs and 806 293 13,317 3,775 expenses

Income (loss) from operations 28 822 (11,087 ) (429 )

Other income (expense):

Interest expense (44 ) (46 ) (127 ) (141 )

Loss on extinguishment of debt (24 ) - (24 ) -

Other, net 5 4 (208 ) 311

Total other income (expense) (63 ) (42 ) (359 ) 170

Income (loss) before income (35 ) 780 (11,446 ) (259 )taxes

Income tax (expense) benefit (26 ) (222 ) 1,673 25

Net income (loss) $ (61 ) $ 558 $ (9,773 ) $ (234 )

Earnings per share:

Basic net income (loss) $ (0.31 ) $ 2.78 $ (50.04 ) $ (1.18 )

Diluted net income (loss) $ (0.31 ) $ 2.78 $ (50.04 ) $ (1.18 )



Concho Resources Inc.

Earnings per Share

Unaudited

The Company uses the two-class method of calculating earnings per share because certain of the Company's unvested share-based awards qualify as participating securities.

The Company's basic earnings (loss) per share attributable to common stockholders is computed as (i) net income (loss) as reported, (ii) less participating basic earnings (iii) divided by weighted average basic common shares outstanding. The Company's diluted earnings (loss) per share attributable to common stockholders is computed as (i) basic earnings (loss) attributable to common stockholders, (ii) plus reallocation of participating earnings (iii) divided by weighted average diluted common shares outstanding.

The following table reconciles the Company's income (loss) from operations and earnings (loss) attributable to common stockholders to the basic and diluted earnings (loss) used to determine the Company's earnings (loss) per share amounts for the periods indicated under the two-class method:

Three Months EndedSeptember 30,

Nine Months EndedSeptember 30,

(in millions)

2020

2019

2020

2019

Net income (loss) as reported

$

(61

)

$

558

$

(9,773

)

$

(234

)

Participating basic earnings (a)

-

(4

)

(1

)

(1

)

Basic earnings (loss) attributable to common stockholders

(61

)

554

(9,774

)

(235

)

Reallocation of participating earnings

-

-

-

-

Diluted earnings (loss) attributable to common stockholders

$

(61

)

$

554

$

(9,774

)

$

(235

)

(a)

Unvested restricted stock awards represent participating securities because they participate in nonforfeitable dividends or distributions with the common equity holders of the Company. Participating earnings represent the distributed and undistributed earnings of the Company attributable to the participating securities. Unvested restricted stock awards do not participate in undistributed net losses as they are not contractually obligated to do so.

Concho Resources Inc.

Earnings per Share

Unaudited



The Company uses the two-class method of calculating earnings per share because certain of the Company's unvested share-based awards qualify as participating securities.



The Company's basic earnings (loss) per share attributable to common stockholders is computed as (i) net income (loss) as reported, (ii) less participating basic earnings (iii) divided by weighted average basic common shares outstanding. The Company's diluted earnings (loss) per share attributable to common stockholders is computed as (i) basic earnings (loss) attributable to common stockholders, (ii) plus reallocation of participating earnings (iii) divided by weighted average diluted common shares outstanding.



The following table reconciles the Company's income (loss) from operations and earnings (loss) attributable to common stockholders to the basic and diluted earnings (loss) used to determine the Company's earnings (loss) per share amounts for the periods indicated under the two-class method:

Three Months Nine Months Ended Ended September 30, September 30,

(in millions) 2020 2019 2020 2019

Net income (loss) as reported $ (61 ) $ 558 $ (9,773 ) $ (234 )

Participating basic earnings (a) - (4 ) (1 ) (1 )

Basic earnings (loss) attributable to common (61 ) 554 (9,774 ) (235 ) stockholders

Reallocation of participating - - - - earnings

Diluted earnings (loss) attributable to common $ (61 ) $ 554 $ (9,774 ) $ (235 ) stockholders



Unvested restricted stock awards represent participating securities because they participate in nonforfeitable dividends or distributions with the common equity holders of the Company. Participating earnings represent the(a) distributed and undistributed earnings of the Company attributable to the participating securities. Unvested restricted stock awards do not participate in undistributed net losses as they are not contractually obligated to do so.

The following table is a reconciliation of the basic weighted average common shares outstanding to diluted weighted average common shares outstanding for the periods indicated:

Three Months EndedSeptember 30,

Nine Months EndedSeptember 30,

(in thousands)

2020

2019

2020

2019

Weighted average common shares outstanding:

Basic

195,323

199,448

195,311

199,272

Dilutive performance units

-

6

-

-

Diluted

195,323

199,454

195,311

199,272

The following table is a reconciliation of the basic weighted average commonshares outstanding to diluted weighted average common shares outstanding forthe periods indicated:

Three Months Ended Nine Months Ended September 30, September 30,

(in thousands) 2020 2019 2020 2019

Weighted average common shares outstanding:

Basic 195,323 199,448 195,311 199,272

Dilutive performance units - 6 - -

Diluted 195,323 199,454 195,311 199,272



Concho Resources Inc.

Condensed Consolidated Statements of Cash Flows

Unaudited

Nine Months EndedSeptember 30,

(in millions)

2020

2019

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$

(9,773

)

$

(234

)

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation, depletion and amortization

1,083

1,431

Accretion of discount on asset retirement obligations

6

8

Impairments of long-lived assets

7,772

888

Impairments of goodwill

1,917

81

Exploration and abandonments

2,726

68

Non-cash stock-based compensation expense

53

67

Deferred income taxes

(1,673

)

(25

)

Net gain on disposition of assets and other non-operating items

(104

)

(591

)

(Gain) loss on derivatives, net

(1,056

)

445

Net settlements received from (paid on) derivatives

789

(57

)

Loss on extinguishment of debt

24

-

Other

198

(6

)

Changes in operating assets and liabilities, net of acquisitions and dispositions:

Accounts receivable

326

(19

)

Prepaid costs and other

18

(1

)

Inventory

4

2

Accounts payable

(7

)

16

Revenue payable

(129

)

(20

)

Other current liabilities

(41

)

14

Net cash provided by operating activities

2,133

2,067

CASH FLOWS FROM INVESTING ACTIVITIES:

Additions to oil and natural gas properties

(1,152

)

(2,344

)

Changes in working capital associated with oil and natural gas property additions

(156

)

(41

)

Acquisitions of oil and natural gas properties

(45

)

(34

)

Additions to property, equipment and other assets

(49

)

(82

)

Proceeds from the disposition of assets

6

393

Deposit for pending divestiture of oil and natural gas properties

-

93

Direct transaction costs for asset acquisitions and dispositions

(1

)

(5

)

Net cash used in investing activities

(1,397

)

(2,020

)

CASH FLOWS FROM FINANCING ACTIVITIES:

Borrowings under credit facility

345

2,680

Payments on credit facility

(345

)

(2,527

)

Issuance of senior notes, net

499

-

Repayments of senior notes

(600

)

-

Debt extinguishment costs

(20

)

-

Payments for loan costs

(4

)

-

Payment of common stock dividends

(119

)

(75

)

Purchases of treasury stock

(5

)

(15

)

Purchases of common stock under share repurchase program

(150

)

-

Decrease in book overdrafts

-

(104

)

Other

(5

)

(6

)

Net cash used in financing activities

(404

)

(47

)

Net increase in cash and cash equivalents

332

-

Cash and cash equivalents at beginning of period

70

-

Cash and cash equivalents at end of period

$

402

$

-

Concho Resources Inc.

Condensed Consolidated Statements of Cash Flows

Unaudited

Nine Months Ended September 30,

(in millions) 2020 2019

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss $ (9,773 ) $ (234 )

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation, depletion and amortization 1,083 1,431

Accretion of discount on asset retirement obligations 6 8

Impairments of long-lived assets 7,772 888

Impairments of goodwill 1,917 81

Exploration and abandonments 2,726 68

Non-cash stock-based compensation expense 53 67

Deferred income taxes (1,673 ) (25 )

Net gain on disposition of assets and other non-operating (104 ) (591 )items

(Gain) loss on derivatives, net (1,056 ) 445

Net settlements received from (paid on) derivatives 789 (57 )

Loss on extinguishment of debt 24 -

Other 198 (6 )

Changes in operating assets and liabilities, net of acquisitions and dispositions:

Accounts receivable 326 (19 )

Prepaid costs and other 18 (1 )

Inventory 4 2

Accounts payable (7 ) 16

Revenue payable (129 ) (20 )

Other current liabilities (41 ) 14

Net cash provided by operating activities 2,133 2,067

CASH FLOWS FROM INVESTING ACTIVITIES:

Additions to oil and natural gas properties (1,152 ) (2,344 )

Changes in working capital associated with oil and natural (156 ) (41 )gas property additions

Acquisitions of oil and natural gas properties (45 ) (34 )

Additions to property, equipment and other assets (49 ) (82 )

Proceeds from the disposition of assets 6 393

Deposit for pending divestiture of oil and natural gas - 93 properties

Direct transaction costs for asset acquisitions and (1 ) (5 )dispositions

Net cash used in investing activities (1,397 ) (2,020 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Borrowings under credit facility 345 2,680

Payments on credit facility (345 ) (2,527 )

Issuance of senior notes, net 499 -

Repayments of senior notes (600 ) -

Debt extinguishment costs (20 ) -

Payments for loan costs (4 ) -

Payment of common stock dividends (119 ) (75 )

Purchases of treasury stock (5 ) (15 )

Purchases of common stock under share repurchase program (150 ) -

Decrease in book overdrafts - (104 )

Other (5 ) (6 )

Net cash used in financing activities (404 ) (47 )

Net increase in cash and cash equivalents 332 -

Cash and cash equivalents at beginning of period 70 -

Cash and cash equivalents at end of period $ 402 $ -



Concho Resources Inc.

Summary Production and Price Data

Unaudited



The following table sets forth summary information concerning production andoperating data for the periods indicated:

Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

Production and operating data:

Net production volumes:

Oil (MBbl) 18,472 18,940 55,667 56,602

Natural gas (MMcf) 65,867 68,411 194,914 199,284

Total (MBoe) 29,450 30,342 88,153 89,816



Average daily production volumes:

Oil (MBbl) 201 206 203 207

Natural gas (MMcf) 716 744 711 730

Total (MBoe) 320 330 322 329



Average prices per unit: (a)

Oil, without derivatives (Bbl) $ 39.23 $ 54.01 $ 36.41 $ 53.13

Oil, with derivatives (Bbl) (b) $ 48.43 $ 52.84 $ 49.76 $ 51.85

Natural gas, without derivatives $ 1.64 $ 1.34 $ 1.04 $ 1.70 (Mcf)

Natural gas, with derivatives (Mcf) $ 1.68 $ 1.54 $ 1.27 $ 1.77 (b)

Total, without derivatives (Boe) $ 28.27 $ 36.74 $ 25.29 $ 37.25

Total, with derivatives (Boe) (b) $ 34.13 $ 36.46 $ 34.23 $ 36.60



Operating costs and expenses per Boe: (a)

Oil and natural gas production $ 3.90 $ 6.26 $ 4.60 $ 6.14

Production and ad valorem taxes $ 2.41 $ 2.79 $ 2.22 $ 2.84

Gathering, processing and $ 1.55 $ 0.82 $ 1.57 $ 0.81 transportation

Depreciation, depletion and $ 9.77 $ 16.07 $ 12.28 $ 15.93 amortization

General and administrative $ 2.30 $ 2.50 $ 2.30 $ 2.82

(a)

Per unit and per Boe amounts calculated using dollars and volumes rounded to thousands.

(b)

Includes the effect of net cash receipts from (payments on) derivatives:

Three Months EndedSeptember 30,

Nine Months EndedSeptember 30,

(in millions)

2020

2019

2020

2019

Net cash receipts from (payments on) derivatives:

Oil derivatives

$

171

$

(21

)

$

744

$

(72

)

Natural gas derivatives (c)

2

14

45

15

Total

$

173

$

(7

)

$

789

$

(57

)

The presentation of average prices with derivatives is a result of including the net cash receipts from (payments on) commodity derivatives that are presented in the Company's condensed consolidated statements of cash flows. This presentation of average prices with derivatives is a means by which to reflect the actual cash performance of the Company's commodity derivatives for the respective periods and presents oil and natural gas prices with derivatives in a manner consistent with the presentation generally used by the investment community.

(c)

Includes propane and natural gasoline price swaps.

(a) Per unit and per Boe amounts calculated using dollars and volumes rounded to thousands.



(b) Includes the effect of net cash receipts from (payments on) derivatives:



Three Months Ended Nine Months Ended September 30, September 30,

(in millions) 2020 2019 2020 2019

Net cash receipts from (payments on) derivatives:

Oil derivatives $ 171 $ (21 ) $ 744 $ (72 )

Natural gas derivatives (c) 2 14 45 15

Total $ 173 $ (7 ) $ 789 $ (57 )





The presentation of average prices with derivatives is a result of including the net cash receipts from (payments on) commodity derivatives that are presented in the Company's condensed consolidated statements of cash flows. This presentation of average prices with derivatives is a means by which to reflect the actual cash performance of the Company's commodity derivatives for the respective periods and presents oil and natural gas prices with derivatives in a manner consistent with the presentation generally used by the investment community.

Includes propane and natural gasoline price swaps.(c)

Concho Resources Inc.

Operational Activity

Unaudited

The tables below provide a summary of operational activity for third-quarter 2020:

Total Activity (Gross):

Number of Wells Drilled

Number of Wells Completed

Number of Wells Put on Production

Delaware Basin

43

49

24

Midland Basin

20

14

33

Total

63

63

57

Concho Resources Inc.

Operational Activity

Unaudited



The tables below provide a summary of operational activity for third-quarter2020:



Total Activity (Gross):

Number of Wells Number of Wells Number of Wells Drilled Completed Put on Production

Delaware Basin 43 49 24

Midland Basin 20 14 33

Total 63 63 57



Total Activity (Gross Operated):

Number of WellsDrilled

Number of WellsCompleted

Number of WellsPut on Production

Delaware Basin

15

29

18

Midland Basin

20

14

33

Total

35

43

51

Total Activity (Gross Operated):

Number of Wells Number of Wells Number of Wells Drilled Completed Put on Production

Delaware Basin 15 29 18

Midland Basin 20 14 33

Total 35 43 51



Total Activity (Net Operated):

Number of WellsDrilled

Number of WellsCompleted

Number of WellsPut on Production

Delaware Basin

15

24

14

Midland Basin

20

12

29

Total

35

36

43

Total Activity (Net Operated):

Number of Wells Number of Wells Number of Wells Drilled Completed Put on Production

Delaware Basin 15 24 14

Midland Basin 20 12 29

Total 35 36 43



Concho Resources Inc.

Derivatives Information

Unaudited

The table below provides data associated with the Company's derivatives at October 27, 2020, for the periods indicated:

2020

2021

2022

FourthQuarter

FirstQuarter

SecondQuarter

ThirdQuarter

FourthQuarter

Total

Total

Oil Price Swaps - WTI: (a)

Volume (MBbl)

13,778

9,720

9,555

8,096

8,096

35,467

9,159

Price per Bbl

$

52.11

$

46.46

$

46.61

$

46.80

$

46.80

$

46.66

$

42.21

Oil Price Swaps - Brent: (b)

Volume (MBbl)

2,727

1,890

1,684

1,518

1,518

6,610

1,825

Price per Bbl

$

48.66

$

41.43

$

41.21

$

40.82

$

40.82

$

41.09

$

45.98

Oil Basis Swaps: (c)

Volume (MBbl)

11,192

7,650

7,735

7,636

7,636

30,657

6,570

Price per Bbl

$

(0.69

)

$

0.50

$

0.50

$

0.50

$

0.50

$

0.50

$

0.25

WTI Oil Roll Swaps: (d)

Volume (MBbl)

10,381

180

182

184

184

730

-

Price per Bbl

$

(0.31

)

$

(0.18

)

$

(0.18

)

$

(0.18

)

$

(0.18

)

$

(0.18

)

$

-

Natural Gas Price Swaps: (e)

Volume (BBtu)

34,938

32,930

31,240

28,520

27,290

119,980

36,500

Price per MMBtu

$

2.44

$

2.64

$

2.60

$

2.57

$

2.57

$

2.60

$

2.38

Natural Gas Basis Swaps - HH/EPP: (f)

Volume (BBtu)

26,370

27,250

25,780

23,920

22,690

99,640

45,610

Price per MMBtu

$

(0.95

)

$

(0.62

)

$

(0.64

)

$

(0.61

)

$

(0.62

)

$

(0.62

)

$

(0.64

)

Natural Gas Basis Swaps - HH/WAHA: (g)

Volume (BBtu)

8,280

9,000

8,490

8,280

8,280

34,050

16,410

Price per MMBtu

$

(1.03

)

$

(0.73

)

$

(0.76

)

$

(0.63

)

$

(0.63

)

$

(0.69

)

$

(0.55

)

Propane Price Swaps: (h)

Volume (gal)

81,144

-

-

-

-

-

-

Price per gal

$

0.51

$

-

$

-

$

-

$

-

$

-

$

-

Natural Gasoline Price Swaps: (i)

Volume (gal)

36,708

-

-

-

-

-

-

Price per gal

$

0.86

$

-

$

-

$

-

$

-

$

-

$

-

(a)

These oil derivative contracts are settled based on the New York Mercantile Exchange ("NYMEX") - West Texas Intermediate ("WTI") calendar-month average futures price.

(b)

These oil derivative contracts are settled based on the Brent calendar-month average futures price.

(c)

The basis differential price is between Midland - WTI and Cushing - WTI. These contracts are settled on a calendar-month basis.

(d)

These oil derivative contracts are settled based on differentials between the NYMEX - WTI prices for certain futures contracts.

(e)

These natural gas derivative contracts are settled based on the NYMEX - Henry Hub last trading day futures price.

(f)

The basis differential price is between NYMEX - Henry Hub and El Paso Permian.

(g)

The basis differential price is between NYMEX - Henry Hub and WAHA.

(h)

These contracts are settled based on the OPIS Mont Belvieu Propane (non-TET) calendar-month average futures price.

(i)

These contracts are settled based on the OPIS Mont Belvieu Natural Gasoline (non-TET) calendar-month average futures price.

Concho Resources Inc.

Derivatives Information

Unaudited

The table below provides data associated with the Company's derivatives at October 27, 2020, for the periods indicated:



2020 2021 2022

Fourth First Second Third Fourth Total Total Quarter Quarter Quarter Quarter Quarter

Oil Price Swaps - WTI: (a)

Volume 13,778 9,720 9,555 8,096 8,096 35,467 9,159 (MBbl)

Price $ 52.11 $ 46.46 $ 46.61 $ 46.80 $ 46.80 $ 46.66 $ 42.21 per Bbl

Oil Price Swaps - Brent: (b)

Volume 2,727 1,890 1,684 1,518 1,518 6,610 1,825 (MBbl)

Price $ 48.66 $ 41.43 $ 41.21 $ 40.82 $ 40.82 $ 41.09 $ 45.98 per Bbl

Oil Basis Swaps: (c)

Volume 11,192 7,650 7,735 7,636 7,636 30,657 6,570 (MBbl)

Price $ (0.69 ) $ 0.50 $ 0.50 $ 0.50 $ 0.50 $ 0.50 $ 0.25 per Bbl

WTI Oil Roll Swaps: (d)

Volume 10,381 180 182 184 184 730 - (MBbl)

Price $ (0.31 ) $ (0.18 ) $ (0.18 ) $ (0.18 ) $ (0.18 ) $ (0.18 ) $ - per Bbl

Natural Gas Price Swaps: (e)

Volume 34,938 32,930 31,240 28,520 27,290 119,980 36,500 (BBtu)

Price per $ 2.44 $ 2.64 $ 2.60 $ 2.57 $ 2.57 $ 2.60 $ 2.38 MMBtu

Natural Gas Basis Swaps - HH/EPP: (f)

Volume 26,370 27,250 25,780 23,920 22,690 99,640 45,610 (BBtu)

Price per $ (0.95 ) $ (0.62 ) $ (0.64 ) $ (0.61 ) $ (0.62 ) $ (0.62 ) $ (0.64 ) MMBtu

Natural Gas Basis Swaps - HH/WAHA: (g)

Volume 8,280 9,000 8,490 8,280 8,280 34,050 16,410 (BBtu)

Price per $ (1.03 ) $ (0.73 ) $ (0.76 ) $ (0.63 ) $ (0.63 ) $ (0.69 ) $ (0.55 ) MMBtu

Propane Price Swaps: (h)

Volume 81,144 - - - - - - (gal)

Price $ 0.51 $ - $ - $ - $ - $ - $ - per gal

Natural Gasoline Price Swaps: (i)

Volume 36,708 - - - - - - (gal)

Price $ 0.86 $ - $ - $ - $ - $ - $ - per gal





These oil derivative contracts are settled based on the New York Mercantile(a) Exchange ("NYMEX") - West Texas Intermediate ("WTI") calendar-month average futures price.

(b) These oil derivative contracts are settled based on the Brent calendar-month average futures price.

(c) The basis differential price is between Midland - WTI and Cushing - WTI. These contracts are settled on a calendar-month basis.

(d) These oil derivative contracts are settled based on differentials between the NYMEX - WTI prices for certain futures contracts.

(e) These natural gas derivative contracts are settled based on the NYMEX - Henry Hub last trading day futures price.

(f) The basis differential price is between NYMEX - Henry Hub and El Paso Permian.

(g) The basis differential price is between NYMEX - Henry Hub and WAHA.

(h) These contracts are settled based on the OPIS Mont Belvieu Propane (non-TET) calendar-month average futures price.

(i) These contracts are settled based on the OPIS Mont Belvieu Natural Gasoline (non-TET) calendar-month average futures price.



Concho Resources Inc.

Supplemental Non-GAAP Financial Measures

Unaudited

The Company reports its financial results in accordance with the United States generally accepted accounting principles (GAAP). However, the Company believes certain non-GAAP performance measures may provide financial statement users with additional meaningful comparisons between current results, the results of its peers and the results of prior periods. In addition, the Company believes these measures are used by analysts and others in the valuation, rating and investment recommendations of companies within the oil and natural gas exploration and production industry. See the reconciliations throughout this release of GAAP financial measures to non-GAAP financial measures for the periods indicated.

Reconciliation of Net Income (Loss) to Adjusted Net Income and Adjusted Earnings per Share

The Company's presentation of adjusted net income and adjusted earnings per share that exclude the effect of certain items are non-GAAP financial measures. Adjusted net income and adjusted earnings per share represent earnings (loss) and diluted earnings (loss) per share determined under GAAP without regard to certain non-cash and special items. The Company believes these measures provide useful information to analysts and investors for analysis of its operating results on a consistent, comparable basis from period to period. Adjusted net income and adjusted earnings per share should not be considered in isolation or as a substitute for earnings (loss) or diluted earnings (loss) per share as determined in accordance with GAAP and may not be comparable to other similarly titled measures of other companies.

The following table provides a reconciliation from the GAAP measure of net income (loss) to adjusted net income, both in total and on a per diluted share basis, for the periods indicated:

Three Months EndedSeptember 30,

Nine Months EndedSeptember 30,

(in millions, except per share amounts)

2020

2019

2020

2019

Net income (loss) - as reported

$

(61

)

$

558

$

(9,773

)

$

(234

)

Adjustments for certain non-cash and special items:

(Gain) loss on derivatives, net

199

(397

)

(1,056

)

445

Net cash received from (paid on) derivatives

173

(7

)

789

(57

)

Impairments of long-lived assets

-

20

7,772

888

Impairments of goodwill

-

81

1,917

81

Unproved impairments and leasehold abandonments

3

17

2,724

59

Loss on extinguishment of debt

24

-

24

-

Net (gain) loss on disposition of assets and other

2

(303

)

(98

)

(589

)

(Gain) loss on equity method investments

(9

)

-

186

(17

)

Voluntary separation program costs (a)

6

-

33

-

Tax impact (b)

(89

)

152

(2,334

)

(165

)

Changes in deferred taxes and other estimates

34

1

463

(6

)

Adjusted net income

$

282

$

122

$

647

$

405

Earnings (loss) per diluted share - as reported

$

(0.31

)

$

2.78

$

(50.04

)

$

(1.18

)

Adjustments for certain non-cash and special items per diluted share:

(Gain) loss on derivatives, net

1.01

(1.98

)

(5.40

)

2.24

Net cash received from (paid on) derivatives

0.88

(0.03

)

4.04

(0.29

)

Impairments of long-lived assets

-

0.10

39.78

4.44

Impairments of goodwill

-

0.40

9.81

0.41

Unproved impairments and leasehold abandonments

0.02

0.08

13.94

0.30

Loss on extinguishment of debt

0.12

-

0.12

-

Net (gain) loss on disposition of assets and other

0.01

(1.51

)

(0.50

)

(2.95

)

(Gain) loss on equity method investments

(0.05

)

-

0.95

(0.09

)

Voluntary separation program costs

0.03

-

0.17

-

Tax impact

(0.45

)

0.77

(11.95

)

(0.83

)

Changes in deferred taxes and other estimates

0.17

-

2.37

(0.03

)

Adjusted earnings per diluted share

$

1.43

$

0.61

$

3.29

$

2.02

Adjusted earnings per share:

Basic earnings

$

1.43

$

0.61

$

3.29

$

2.02

Diluted earnings

$

1.43

$

0.61

$

3.29

$

2.02

(a)

In May 2020, the Company offered employees who met certain eligibility criteria the option to participate in a voluntary separation program.

(b)

Estimated using statutory tax rate in effect for the period.

Concho Resources Inc.

Supplemental Non-GAAP Financial Measures

Unaudited



The Company reports its financial results in accordance with the United States generally accepted accounting principles (GAAP). However, the Company believes certain non-GAAP performance measures may provide financial statement users with additional meaningful comparisons between current results, the results of its peers and the results of prior periods. In addition, the Company believes these measures are used by analysts and others in the valuation, rating and investment recommendations of companies within the oil and natural gas exploration and production industry. See the reconciliations throughout this release of GAAP financial measures to non-GAAP financial measures for the periods indicated.



Reconciliation of Net Income (Loss) to Adjusted Net Income and Adjusted Earnings per Share



The Company's presentation of adjusted net income and adjusted earnings per share that exclude the effect of certain items are non-GAAP financial measures. Adjusted net income and adjusted earnings per share represent earnings (loss) and diluted earnings (loss) per share determined under GAAP without regard to certain non-cash and special items. The Company believes these measures provide useful information to analysts and investors for analysis of its operating results on a consistent, comparable basis from period to period. Adjusted net income and adjusted earnings per share should not be considered in isolation or as a substitute for earnings (loss) or diluted earnings (loss) per share as determined in accordance with GAAP and may not be comparable to other similarly titled measures of other companies.



The following table provides a reconciliation from the GAAP measure of net income (loss) to adjusted net income, both in total and on a per diluted share basis, for the periods indicated:

Three Months Ended Nine Months Ended September 30, September 30,

(in millions, except per 2020 2019 2020 2019 share amounts)

Net income (loss) - as $ (61 ) $ 558 $ (9,773 ) $ (234 ) reported

Adjustments for certain non-cash and special items:

(Gain) loss on derivatives, 199 (397 ) (1,056 ) 445 net

Net cash received from (paid 173 (7 ) 789 (57 ) on) derivatives

Impairments of long-lived - 20 7,772 888 assets

Impairments of goodwill - 81 1,917 81

Unproved impairments and 3 17 2,724 59 leasehold abandonments

Loss on extinguishment of 24 - 24 - debt

Net (gain) loss on disposition of assets and 2 (303 ) (98 ) (589 ) other

(Gain) loss on equity method (9 ) - 186 (17 ) investments

Voluntary separation program 6 - 33 - costs (a)

Tax impact (b) (89 ) 152 (2,334 ) (165 )

Changes in deferred taxes and 34 1 463 (6 ) other estimates

Adjusted net income $ 282 $ 122 $ 647 $ 405

Earnings (loss) per diluted $ (0.31 ) $ 2.78 $ (50.04 ) $ (1.18 ) share - as reported

Adjustments for certain non-cash and special items per diluted share:

(Gain) loss on derivatives, 1.01 (1.98 ) (5.40 ) 2.24 net

Net cash received from (paid 0.88 (0.03 ) 4.04 (0.29 ) on) derivatives

Impairments of long-lived - 0.10 39.78 4.44 assets

Impairments of goodwill - 0.40 9.81 0.41

Unproved impairments and 0.02 0.08 13.94 0.30 leasehold abandonments

Loss on extinguishment of 0.12 - 0.12 - debt

Net (gain) loss on disposition of assets and 0.01 (1.51 ) (0.50 ) (2.95 ) other

(Gain) loss on equity method (0.05 ) - 0.95 (0.09 ) investments

Voluntary separation program 0.03 - 0.17 - costs

Tax impact (0.45 ) 0.77 (11.95 ) (0.83 )

Changes in deferred taxes and 0.17 - 2.37 (0.03 ) other estimates

Adjusted earnings per diluted $ 1.43 $ 0.61 $ 3.29 $ 2.02 share

Adjusted earnings per share:

Basic earnings $ 1.43 $ 0.61 $ 3.29 $ 2.02

Diluted earnings $ 1.43 $ 0.61 $ 3.29 $ 2.02



(a) In May 2020, the Company offered employees who met certain eligibility criteria the option to participate in a voluntary separation program.

(b) Estimated using statutory tax rate in effect for the period.



Reconciliation of Net Cash Provided by Operating Activities to Operating Cash Flow ("OCF") Before Working Capital Changes and to Free Cash Flow

The Company provides OCF before working capital changes, which is a non-GAAP financial measure. OCF before working capital changes represents net cash provided by operating activities as determined under GAAP without regard to changes in operating assets and liabilities, net of acquisitions and dispositions as determined in accordance with GAAP. The Company believes OCF before working capital changes is an accepted measure of an oil and natural gas company's ability to generate cash used to fund development and acquisition activities and service debt or pay dividends. Additionally, the Company provides free cash flow, which is a non-GAAP financial measure. Free cash flow is cash flow from operating activities before changes in working capital in excess of additions to oil and natural gas properties. The Company believes that free cash flow is useful to investors as it provides a measure to compare both cash flow from operating activities and additions to oil and natural gas properties across periods on a consistent basis.

The Company previously defined free cash flow for periods prior to 2020 as cash flow from operating activities before changes in working capital in excess of exploration and development costs incurred. Exploration and development costs incurred include those costs that are capitalized or charged to expense such as geological and geophysical costs and capitalized asset retirement costs. The Company's new calculation better aligns with the way its industry peers compute free cash flow and can be derived directly from line items appearing on the Company's statement of cash flows.

These non-GAAP measures should not be considered as alternatives to, or more meaningful than, net cash provided by operating activities as an indicator of operating performance.

The following tables provide a reconciliation from the GAAP measure of net cash provided by operating activities to OCF before working capital changes and to free cash flow:

Three Months EndedSeptember 30,

Nine Months EndedSeptember 30,

(in millions)

2020

2019

2020

2019

Net cash provided by operating activities

$

608

$

665

$

2,133

$

2,067

Changes in cash due to changes in operating assets and liabilities:

Accounts receivable

19

52

(326

)

19

Prepaid costs and other

(2

)

5

(18

)

1

Inventory

(2

)

(1

)

(4

)

(2

)

Accounts payable

6

(11

)

7

(16

)

Revenue payable

33

25

129

20

Other current liabilities

6

(29

)

41

(14

)

Total working capital changes

60

41

(171

)

8

Operating cash flow before working capital changes

$

668

$

706

$

1,962

$

2,075

Reconciliation of Net Cash Provided by Operating Activities to Operating CashFlow ("OCF") Before Working Capital Changes and to Free Cash Flow



The Company provides OCF before working capital changes, which is a non-GAAPfinancial measure. OCF before working capital changes represents net cashprovided by operating activities as determined under GAAP without regard tochanges in operating assets and liabilities, net of acquisitions anddispositions as determined in accordance with GAAP. The Company believes OCFbefore working capital changes is an accepted measure of an oil and naturalgas company's ability to generate cash used to fund development andacquisition activities and service debt or pay dividends. Additionally, theCompany provides free cash flow, which is a non-GAAP financial measure. Freecash flow is cash flow from operating activities before changes in workingcapital in excess of additions to oil and natural gas properties. The Companybelieves that free cash flow is useful to investors as it provides a measureto compare both cash flow from operating activities and additions to oil andnatural gas properties across periods on a consistent basis.



The Company previously defined free cash flow for periods prior to 2020 ascash flow from operating activities before changes in working capital inexcess of exploration and development costs incurred. Exploration anddevelopment costs incurred include those costs that are capitalized or chargedto expense such as geological and geophysical costs and capitalized assetretirement costs. The Company's new calculation better aligns with the way itsindustry peers compute free cash flow and can be derived directly from lineitems appearing on the Company's statement of cash flows.



These non-GAAP measures should not be considered as alternatives to, or moremeaningful than, net cash provided by operating activities as an indicator ofoperating performance.



The following tables provide a reconciliation from the GAAP measure of netcash provided by operating activities to OCF before working capital changesand to free cash flow:

Three Months Ended Nine Months Ended September 30, September 30,

(in millions) 2020 2019 2020 2019

Net cash provided by operating $ 608 $ 665 $ 2,133 $ 2,067 activities

Changes in cash due to changes in operating assets and liabilities:

Accounts receivable 19 52 (326 ) 19

Prepaid costs and other (2 ) 5 (18 ) 1

Inventory (2 ) (1 ) (4 ) (2 )

Accounts payable 6 (11 ) 7 (16 )

Revenue payable 33 25 129 20

Other current liabilities 6 (29 ) 41 (14 )

Total working capital changes 60 41 (171 ) 8

Operating cash flow before working $ 668 $ 706 $ 1,962 $ 2,075 capital changes



Three Months EndedSeptember 30,

Nine Months EndedSeptember 30,

(in millions)

2020

2019

2020

2019

Operating cash flow before working capital changes

$

668

$

706

$

1,962

$

2,075

Additions to oil and natural gas properties

(284

)

(645

)

(1,152

)

(2,344

)

Free cash flow

$

384

$

61

$

810

$

(269

)

View source version on businesswire.com: https://www.businesswire.com/news/home/20201027006179/en/

CONTACT: INVESTOR RELATIONS Megan P. Hays Vice President of Investor Relations & Public Affairs 432.685.2533

CONTACT: Michael Healey Manager of Investor Relations 432.818.1387

CONTACT: MEDIA Mary T. Starnes Manager of Public Affairs & Corporate Responsibility Strategy 432.221.0477