How Has Concho Resources’ Production Been?



Concho Resources’ production

We have seen in this series that Concho Resources’ (CXO) production has been above the industry average over the past three years. In this article we will look closely at its production pattern.

Concho Resources’ production has shown an upward bias in the past 13 quarters. In 2Q15, CXO’s total production increased 11.5% from 1Q15 to ~147 thousand barrels of oil equivalent per day (or MBoe/d). In comparison, Whiting Petroleum (WLL) saw a 1.9% increase in 2Q15 production over 1Q15. SM Energy (SM), a much smaller energy company compared to Concho Resources, saw 2Q15 production decrease 2.9% from the previous quarter.

Concho Resources is one of the largest independent energy companies in the US. It makes up 1.5% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) and 0.94% of the iShares US Energy ETF (IYE).

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Production may increase in 2015

Concho Resources, being an exclusive Permian producer, has benefited from the impressive Permian shale production growth over the past few years. From 2Q12 to 2Q15, CXO’s total production increased significantly by 110%, from ~70 MBoe/d to ~147 MBoe/d. Year-over-year, 2Q15 production registered a hike of 37%.

CXO plans to increase its 2015 production by 24% to 26% from the 2014 level. Crude oil’s share in its total production is also expected to hold steady for the rest of the year.

Crude oil growing, natural gas slowing

As noted in the chart above, crude oil’s share in Concho Resources’ total production remained strong in the past 13 quarters until 2Q15. It went from 61% in 2Q12 to 67% in 2Q15. At the same time, natural gas’s share in its production fell from 39% to 33%.

Before the slump starting in June 2014, crude oil prices were trading at more profitable levels on a cost equivalent basis. The shale boom had already pressured natural gas prices lower over the last few years. So, many American energy companies switched their focus to crude oil.

In 2Q15, Concho Resources primarily focused on crude oil production. In this period, it drilled 58 wells in the unconventional resources shales of Bone Spring Sands, Wolfcamp Shale, and the Avalon Shale in the Delaware Basin. In also added 21 and 17 horizontal wells in the Midland Basin and the New Mexico Shelf, respectively. All these are crude oil rich shales.

Next, we will discuss Concho Resources’ debt structure.


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