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Concho Resources (CXO) Routs Q1 Earnings Estimates

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Permian-focused energy explorer Concho Resources Inc. reported first-quarter adjusted net earnings per share of 49 cents, comfortably beating the Zacks Consensus Estimate of 31 cents and way above the prior-year quarter adjusted loss of 5 cents.

The outperformance came on the back of higher commodity prices and strong production growth.

Concho Resources’ total operating revenues for the first quarter amounted to $612 million, which increased substantially from $284 million a year ago but was slightly below the Zacks Consensus Estimate of $617.4 million.

 

 

The Permian Advantage

Experts say that it’s cheaper to drill and complete oil wells in the Permian Basin than most other major fields. Moreover, there are certain parts of the shale play whose well-returns are the best in the U.S. With crude prices still down significantly from their 2014 levels, well returns have become a very important metric to gauge profitability.

Permian’s attractive economics means that producers can still make money there at the current, just over-$50-a-barrel price. This is mainly because of the region's extensive pipeline infrastructure, plentiful labor and supplies, and relatively warm winters that makes year-round work possible. Most other domestic shale regions need prices above $60 to support new developments and expansions.

Apart from Concho Resources, other key players in the Permian Basin are Apache Corp. (APA - Free Report) , as well as biggies like ExxonMobil Corp. (XOM - Free Report) and Chevron Corp. (CVX - Free Report) .

Concho Resources Inc. Price, Consensus and EPS Surprise

 

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

Volume Analysis

Concho Resources' average quarterly volume increased 30% year over year to 181.4 thousand barrels of oil equivalent per day, of which 63% was liquids. Daily oil output was up 28% to 113.6 thousand barrels, while natural gas production came in at 406.6 million cubic feet (up 34%).

Realized Prices

The average realized natural gas price doubled from the year-ago quarter to $3.00 per thousand cubic feet, while average oil price realization jumped 64% to $49.08 per barrel. Overall, the company fetched $37.47 per barrel as against $22.34 a year back.

Balance Sheet & Capital Expenditure

As of Mar 31, 2017, Concho Resources had approximately $771 million in cash and cash equivalents. The company had a long-term debt of $2,741 million, representing a debt-to-capitalization ratio of 24.3%.

Guidance

Following first-quarter’s impressive production growth, Concho Resources – a Zacks Rank #3 (Hold) stock – raised its full-year production growth guidance range to 21%–25%, from the prior 20%–24%. The company has provided second quarter net production guidance of 182–186 thousand barrels of oil equivalent per day. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Share Performance

Concho Resources shares have fallen 1.6% over the past 6 months, far lower than the Zacks categorized Oil & Gas - U.S. Exploration & Production industry’s loss 10.1%. Over the last 12 months, Concho Resources stock has risen 10.3%.

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