Concho Resources Trimming Debt


Concho Resources Inc. (CXO) is moving ahead with its plan of trimming dearer debt with cheaper ones. Focusing on this aspect, the company received consent from its note holders with approximately $225.6 million in aggregate principal amount for repurchase. The aforementioned batch of senior notes from the total $300 million is slated to mature in 2017 and carry a dearer coupon rate of 8.625%, which is adding to the interest burden of the company.

Concho Resources is also moving ahead with the issuance of cheaper senior unsecured notes worth $850 million. The notes, which carry a coupon rate of 5.5%, are due in 2023.

Concho Resources Inc. is an independent oil and natural gas company engaged in the acquisition, development, exploitation and exploration of oil and natural gas properties. The company's conventional operations are primarily focused in the Permian Basin of Southeast New Mexico and West Texas. In addition, the company is involved in a number of unconventional emerging resource plays.

As of Dec 31, 2012, the company owned interests in approximately 1.3 million gross (745,000 net) acres in the New Mexico and Texas Permian, alongside proved reserves of 458 million barrels of oil equivalent.

However, recent times have not been particularly good for the company. Earlier in May, the company reported weak first quarter numbers. The bottom line fell 3.3% year over year owing to lower prices dragging down revenues. Higher production at the same time could salvage the performance only partially.

The company currently holds a Zacks Rank #3, which is equivalent to a short-term Hold rating. However, there are other stocks in the oil and gas sector – Abraxas Petroleum Corp. (AXAS), Enerplus Corporation (ERF) and EPL Oil & Gas, Inc. (EPL) – which hold a Zacks Rank #1 (Strong Buy) and are expected to perform better.

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