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What Are Concho Resources’ Free Cash Flow Trends?

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CXO’s cash flows

In this part of the series, we’ll be looking at Concho Resources’ (CXO) cash flows. In 1Q16, Concho reported cash flow from operations (or CFO) of $112.3 million. This was ~11% lower than its CFO in 1Q15.

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CXO’s free cash flow trends

Concho Resources free cash flow (or FCF), which is its CFO minus its capital expenditure (capex), has remained negative over the past nine quarters, as the graph above shows. CXO’s FCF was -$277 million in 1Q16.

CXO anticipates double-digit production growth in 2017. Tim Leach, Concho’s CEO, said at the company’s 1Q16 earnings conference, “We’re uniquely positioned with four core areas to compete for capital within the Permian, which is the most robust and cost-efficient basin in North America. We’re focused on making smart capital allocation decisions and keeping a strong financial position.”

CXO’s capex in 2016

CXO’s exploration and development capex is expected to be $0.9 billion–$1.1 billion, a fall of 44% at the midpoint compared to its 2015 exploration and development capex.

Many upstream companies have been reducing their 2016 capex due to low energy prices (USO) (UNG). Hess (HES) and Anadarko Petroleum (APC) have lowered their capex by 40% and 50%, respectively, compared to 2015. Newfield Exploration’s (NFX) 2016 capex is expected to be ~50% less than its 2015 capex.

Combined, these companies make up ~0.25% of the iShares Core S&P 500 ETF (IVV).

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