Concho Resources’ fourth-quarter earnings

Concho Resources (CXO) is expected to report its fourth-quarter earnings results on February 19. The company is expected to report an adjusted net income of $1.11 per diluted share in the quarter based on analysts’ consensus estimate, which could drag its earnings down 21.8% on a sequential basis.

The earnings of CXO’s peers ConocoPhillips (COP), Occidental Petroleum (OXY), and Pioneer Natural Resources (PXD) fell 16.9%, 29.8%, and 42.9%, respectively, in the quarter.

Concho Resources’ Q4 Results Are Around the Corner—What to Expect

Based on the midpoint of the company’s guidance, its total production could rise 6.1% in the quarter. However, analysts expect its total revenue to rise only 2.2% on a sequential basis despite a 13.9% fall in WTI crude oil prices in the period.

In the quarter, CXO’s production mix in oil is expected to be 65%, one percentage point higher than in the previous quarter. The rise in its revenue could be the result of a 29.6% sequential jump in natural gas prices in the quarter. Based on CXO’s management’s guidance, its realized natural gas prices should be between 110% and 120% of Henry Hub natural gas prices traded on the New York Mercantile Exchange.

WTI Cushing-Midland spread could support its earnings

The WTI Cushing-Midland spread is vital for oil producers in the Permian Basin. CXO’s upstream assets are located in this region. The WTI Cushing-Midland spread more than halved in the fourth quarter compared to the previous quarter. Earlier, we discussed CXO’s production mix in oil. CXO hedged 37.6% of its expected fourth-quarter production at a discount of $0.77 per barrel to WTI at Cushing.

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