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8-K - FORM 8-K - CONCHO RESOURCES INC | h79494e8vk.htm |
Exhibit 99.1
CONCHO RESOURCES INC. ANNOUNCES
2010 ESTIMATED FULL YEAR PRODUCTION, YEAR END PROVED RESERVES AND COSTS INCURRED
MIDLAND, Texas, February 8, 2011 (Business Wire) Concho Resources Inc. (NYSE: CXO) (Concho or
the Company) today reported estimated full year 2010 production and year end proved reserves.
Production and reserves highlights for the year ended December 31, 2010 include:
| Production of 15.6 million barrels of oil equivalents (MMBoe), a 42% increase over 2009 | ||
| Year end proved reserves of 323.5 MMBoe, a 53% increase over year end 2009 | ||
| Reserve replacement ratio1 of 858% |
1 | The Company uses the reserve replacement ratio as an indicator of the Companys 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 imbed 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 858% was calculated by dividing net proved reserve additions of 133.5 MMBoe (the sum of extensions, discoveries, revisions and purchases) by production of 15.6 MMBoe. |
2010 Year End Estimated Proved Reserves, Production and Costs Incurred
(The following information is unaudited and preliminary. Final results will be provided in our
Annual Report on Form 10-K for the year ended December 31, 2010.)
Conchos total proved oil and natural gas reserves at December 31, 2010 were 323.5 MMBoe, a 53%
increase over year end 2009 proved reserves, and consisted of 211.4 million barrels (MMBbls) of
oil and 672.2 billion cubic feet (Bcf) of natural gas utilizing an average 2010 WTI posted oil
price of $75.96 per barrel and an average 2010 Henry Hub spot market natural gas price of $4.38 per
MMBtu. At December 31, 2010, 57% of the Companys proved reserves were proved developed compared
to 49% at year end 2009. The following estimates of our proved oil and natural gas reserves at
December 31, 2010 are based on reports prepared by Cawley, Gillespie & Associates, Inc. and
Netherland, Sewell & Associates, Inc., independent petroleum engineers.
Summary of Changes in Proved Reserves | MMBoe | |||
Reserves at December 31, 2009 |
211.5 | |||
Purchase of minerals-in-place |
74.8 | |||
Sales of minerals-in-place |
(6.0 | ) | ||
Discoveries and extensions |
59.6 | |||
Revisions of previous estimates1 |
(0.8 | ) | ||
Production |
(15.6 | ) | ||
Reserves at December 31, 2010 |
323.5 | |||
1 | Includes 4.5 MMBoe of positive revisions due to price. |
Production for 2010 totaled 15.6 MMBoe (10.3 MMBbls of oil and 31.4 Bcf of natural gas), an
increase of 42% as compared to 10.9 MMBoe (7.4 MMBbls of oil and 21.6 Bcf of natural gas) produced
in 2009. Production in 2010 increased 32% over 2009 production, excluding the properties acquired
from Marbob Energy Corporation and the acquisition of certain properties in connection with the
Marbob preferential purchase right dispute in 2010.
Concho costs incurred are as follows:
Years Ended December 31, | ||||||||
2010 | 2009 | |||||||
(In thousands) | ||||||||
Property acquisition costs: |
||||||||
Proved |
$ | 1,224,378 | $ | 205,817 | ||||
Unproved |
475,688 | 74,692 | ||||||
Exploration |
200,797 | 134,105 | ||||||
Development |
492,622 | 265,731 | ||||||
Total costs incurred for oil and natural gas properties |
$ | 2,393,485 | $ | 680,345 | ||||
In addition, PV-10 at December 31, 2010 was $6.1 billion. Please refer to the attached table for a
reconciliation of PV-10 to the standardized measure of discounted future net cash flows.
During 2010, the Company commenced the drilling of or participated in a total of 662 gross wells
(565 operated), of which 492 had been completed as producers, one of which was unsuccessful and 169
of which were in progress at December 31, 2010.
At December 31, 2010, proved reserves attributable to the Companys New Mexico Shelf assets totaled
approximately 192.9 MMBoe, compared to the December 31, 2009 total of approximately 126.1 MMBoe.
At December 31, 2010, on its New Mexico Shelf assets, the Company had identified 2,897 drilling
locations, with proved undeveloped reserves attributable to 742 of such locations. Of these 2,897
drilling locations, 2,156 target the Yeso formation. For the year ended December 31, 2010, the
Company drilled 270 wells (248 operated) on its New Mexico Shelf assets, with a 100% success rate
on the 221 wells that were completed during 2010.
At December 31, 2010, proved reserves attributable to the Companys Delaware Basin assets totaled
approximately 22.1 MMBoe, compared to the December 31, 2009 total of approximately 5.5 MMBoe. At
December 31, 2010, on its Delaware Basin assets, the Company had identified 1,101 drilling
locations, with proved undeveloped reserves attributable to 83 of such locations. Of these
drilling locations, 968 target the Avalon Shale or the Bone Spring formation. For the year ended
December 31, 2010, the Company drilled 25 wells (16 operated) on its Delaware Basin assets, with a
100% success rate on the eight wells that were completed during 2010.
At December 31, 2010, proved reserves attributable to the Companys Texas Permian assets totaled
approximately 100.5 MMBoe, compared to the December 31, 2009 total of approximately 77.2 MMBoe. At
December 31, 2010, on its Texas Permian assets, the Company had identified 1,800 drilling
locations, with proved undeveloped reserves attributable to 1,094 of such locations. Of these
1,800 drilling locations, 1,742 target the Wolfberry play. For the year ended December 31, 2010,
the Company drilled 313 wells (301 operated) on its Texas Permian assets, with a 99.6% success rate
on the 223 wells that were completed during 2010.
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 facts, 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. Without limiting the generality of the foregoing,
forward-looking statements contained in this press release specifically include statements,
estimates and projections regarding the Companys future financial position, operations,
performance, business strategy, returns, capital expenditure budgets, oil and natural gas reserves,
number of identified drilling locations, levels of production, drilling program, derivative
activities, costs and other guidance included in this press release. These statements are based on
certain assumptions made by the Company based on managements 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.
Actual results may differ materially from those implied or expressed by the forward-looking
statements. 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 Companys most recent Form 10-K and Form 10-Q filings with the SEC and
risks relating to sustained or further declines in the prices we receive for our oil and natural
gas; uncertainties about the estimated quantities of oil and natural gas reserves; risks related to
the integration of the Marbob assets and employees, as well as our other recently acquired assets,
with our operations; drilling and operating risks, including risks related to properties where we
do not serve as the operator; the effects of government regulation, permitting and other legal
requirements, including new legislation or regulation of hydraulic fracturing; drilling and
operating risks; the adequacy of our capital resources and liquidity including, but not limited to,
access to additional borrowing capacity under our credit facility; difficult and adverse conditions
in the domestic and global capital and credit markets; risks related to the concentration of our
operations in the Permian Basin of Southeast New Mexico and West Texas; potential financial losses
or earnings reductions from our commodity price risk management program; shortages of oilfield
equipment, services and qualified personnel and increases in costs for such
equipment, services and personnel; risks and liabilities associated with acquired properties or
businesses; uncertainties about our ability to successfully execute our business and financial
plans and strategies; uncertainties about our ability to replace reserves and economically develop
our current reserves; general economic and business conditions, either internationally or
domestically or in the jurisdictions in which we operate; competition in the oil and natural gas
industry; uncertainty concerning our assumed or possible future results of operations; our existing
indebtedness, as well as the significant increase in our indebtedness as a result of the Marbob
acquisition; 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.
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
focused in the Permian Basin of Southeast New Mexico and West Texas. In addition, the Company is
involved in a number of emerging plays. For more information, visit Conchos website at
www.conchoresources.com.
Concho Resources Inc.
Non-GAAP Financial Measure
Unaudited
Non-GAAP Financial Measure
Unaudited
PV-10 is derived from the standardized measure of discounted future net cash flows, which is
the most directly comparable GAAP financial measure. PV-10 is a computation of the standardized
measure of discounted future net cash flows on a pre-tax basis. PV-10 is equal to the standardized
measure of discounted future net cash flows at the applicable date, before deducting future income
taxes, discounted at 10 percent. The Company believes that the presentation of the PV-10 is
relevant and useful to investors because it presents the discounted future net cash flows
attributable to our estimated net proved reserves prior to taking into account future corporate
income taxes, and it is a useful measure for evaluating the relative monetary significance of our
oil and natural gas properties. Further, investors may utilize the measure as a basis for
comparison of the relative size and value of our reserves to other companies. The Company uses this
measure when assessing the potential return on investment related to our oil and natural gas
properties. PV-10, however, is not a substitute for the standardized measure of discounted future
net cash flows. The Companys PV-10 measure and the standardized measure of discounted future net
cash flows do not purport to present the fair value of our oil and natural gas reserves.
The following table provides a reconciliation of PV-10 to the standardized measure of discounted
future net cash flows at December 31, 2010 and 2009:
December 31, | ||||||||
2010 | 2009 | |||||||
(In millions) | ||||||||
PV-10 |
$ | 6,061.2 | $ | 2,764.8 | ||||
Present value of future income taxes discounted at 10% |
(1,885.1 | ) | (842.8 | ) | ||||
Standardized measure of discounted future net cash flows |
$ | 4,176.1 | $ | 1,922.0 | ||||
Contact:
Concho Resources Inc.
Toffee McAlister (432) 683-7443
Director, Investor Relations and Corporate Communication