Concho Resources Q1 Results Beat View; Announces Midstream JV, Share Sale

(RTTNews) - Independent oil and natural gas company Concho Resources Inc. (CXO) on Monday reported a profit for the first quarter that tripled from last year, reflecting higher production and realized prices. Both revenue and adjusted earnings per share for the quarter beat analysts' estimates.

Concho Resources also said it has formed a midstream joint venture with a private entity to construct a crude oil transportation system in the northern Delaware Basin. Further, the company intends to sell 6 million shares of its common stock.

The Midland, Texas-based company's net income for the first quarter was $91.31 million or $0.87 per share, up from $30.09 million or $0.29 per share in the year-ago period.

The latest quarter's results were impacted by several non-cash and unusual items. These include a $35.6 million loss on derivatives not designated as hedges, $14.8 million in cash payments on commodity derivatives, $3.9 million of leasehold abandonments and a $0.1 million net gain on disposition of assets.

Adjusted net income for the quarter was $106.62 million or $1.01 per shares, compared to $60.27 million or $0.58 per share in the prior-year quarter. On average, twenty eight analysts polled by Thomson Reuters expected the company to report earnings of $0.97 per share for the quarter. Analysts' estimates typically exclude special items.

Total operating revenues for the quarter grew 40 percent to $660.96 million from $472.13 million in the year ago quarter. Analysts had a consensus revenue estimate of $629.78 million.

Oil and natural gas sales for the quarter also surged 40 percent from the the prior-year period. This increase was attributable to an 18 percent increase in production, a 12 percent increase in the company's unhedged realized oil price and a 38 percent increase in the company's unhedged realized gas price.

Average daily production for the quarter was 101.62 thousand barrels of oil equivalent per day or Mboepd, up 5 percent from the preceding fourth quarter.

Concho Resources said it has formed a midstream joint venture with a private entity to construct a crude oil transportation system in the northern Delaware Basin. The company noted that it aligns with its midstream strategic objectives of improving price realizations and securing transportation for its crude oil volume.

The joint venture will connect a substantial portion of the company's crude oil production in the northern Delaware Basin and increase optionality by providing multiple delivery points. The system is expected to be operational in the second half of 2015.

Concho increased its upstream capital budget to $2.6 billion, excluding acquisitions, citing operational efficiencies. The company expects to drill about 40 additional net wells with the incremental capital before the end of 2014.

Additionally, the company expects its midstream joint venture and previously announced acreage acquisitions in the southern Delaware Basin to add about $100 million to the overall 2014 capital budget.

Looking ahead to the second quarter, Concho Resources expects production to average between 104 MBoepd to 108 MBoepd.

For 2014, Concho Resources raised its production guidance range to a range of 20 to 24 percent growth over 2013, compared to the prior range of 18 to 22 percent growth.

In a separate statement, Concho Resources said it intends to commence a registered public offering of 6 million shares of common stock. The company also expects to grant the underwriters an option to purchase up to 900,000 additional shares of stock.

The company intends to use net proceeds from the offering to repay all outstanding borrowings under its credit facility and for general corporate purposes. This includes funding its three-year accelerated growth plan, capital commitments associated with the recently announced midstream joint venture, and future acquisitions.

CXO closed Friday's trading at $134.48, up $0.87 or 0.65 percent on a volume of 1.21 million shares.