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Concho (CXO) Misses on Q1 Earnings, Lifts Output Guidance

Zacks Equity Research

Concho Resources Inc. CXO reported mixed first-quarter 2019 results on Apr 30, wherein earnings missed the Zacks Consensus Estimate by a whisker, while revenues beat the same.

The Texas-based oil and gas producer posted earnings per share (excluding non-cash and special items) of 72 cents, a penny below the Zacks Consensus Estimate. The underperformance can be attributed to high operating costs incurred in the quarter. The lower-than-expected realized prices (including derivatives impact) also impacted earnings. The metric came in at $37.34 per barrel of oil equivalent (Boe), lagging the consensus estimate of $38.33.

The bottom line also declined from $1.00 per share recorded in the prior-year period due to lower realized prices.

The Permian-focused player generated revenues of $1,104 million, topping the consensus mark of $1,049 million. The better-than expected revenues were driven by higher-than-anticipated production volumes. Precisely, the upstream player’s output of 328,491 barrels of oil equivalent per day (Boe/d) surpassed the Zacks Consensus Estimate of 306,749 Boe/d.

Further, the top line jumped 16.6% from the year-ago level of $947 million.  

Concho Resources Inc. Price, Consensus and EPS Surprise

 

Concho Resources Inc. Price, Consensus and EPS Surprise | Concho Resources Inc. Quote

Volume Analysis

Concho's average quarterly volume increased 44.1% year over year to 328,491 Boe/d. Total output exceeded the high end of the firm’s forecasted range of 300,000-306,000 Boe/d. 

Of the total volume, 64% consisted of liquids. Daily oil output increased 46% to hit a record of 210,400 barrels, while natural gas production totaled 708,544 thousand cubic feet (Mcf), up 40.3% year over year. The 2018 acquisition of RSP Permian led to the expansion of Midland and Delaware Basin positions, thereby attributing to the production rise.

Realized Prices (Excluding Derivatives Effect)

The average realized natural gas price increased from $2.64 per Mcf in the year-ago quarter to $3.39. However, average oil price realization came in at $49.39 per barrel, lower than $61.29 in the year-ago period. Overall, the company fetched $37.33 per Boe compared with $40.71 a year ago.

Operating Expenses & Income

Operating expenses in the quarter skyrocketed to $1,950 million, resulting in operating loss of $846 million against a gain of $1,015 million in the year-ago period. This was primarily because of a surge in derivatives loss, which totaled $1,059 million in first-quarter 2019 versus $35 million in the corresponding period of 2018. Notably, its production, exploration, depreciation, G&A, gathering, processing and transportation expenses marked an increase on a year-over-year basis. 

Dividend & Balance Sheet

Concho declared a quarterly dividend of 12.5 cents a share, payable on Jun 28, 2019 to its shareholders of record as of May 10.

As of Mar 31, Concho had a long-term debt of $4,567 million, representing a debt-to-capitalization ratio of 20.2%. The company’s liquidity ratio stands at 0.62. It has $615 million remaining under its borrowing credit facility.

Guidance Tweaked

While Concho reiterated its full-year capex budget of $2.9 billion, the company raised its production guidance. The firm now expects 2019 oil output to grow 27-31% y/y versus prior forecast of 26-30%. Production for the second quarter is expected within 316,000-322,000 Boe/d. 

Zacks Rank and Key Picks

Concho currently carries a Zacks Rank #3 (Hold). Investors interested in the same industry can consider Anadarko Petroleum Corporation APC, Devon Energy Corporation DVN and Murphy Oil Corporation MUR, each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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