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Concho Resources (CXO)
Q2 2011 Earnings Call
August 04, 2011 10:00 am ET
E. Wright - Chief Operating Officer and Senior Vice President
Toffee McAlister -
Previous Statements by CXO
» Concho Resources, Inc. Q4, 2008 Earnings Call Transcript
» Concho Resources, Inc. Q3 2008 Earnings Call Transcript
» Concho Resource Inc. Q1 2008 Earnings Call Transcript
Jack Harper - Chief of Staff and Senior Vice President
Brian Singer - Goldman Sachs Group Inc.
Daniel Morrison - Global Hunter Securities, LLC
Scott Hanold - RBC Capital Markets, LLC
David Tameron - Wells Fargo Securities, LLC
Eric Hagen - Lazard Capital Markets LLC
Pearce Hammond - Simmons & Company International
Irene Haas - Wunderlich Securities Inc.
Michael Scialla - Stifel, Nicolaus & Co., Inc.
John Freeman - Raymond James & Associates, Inc.
Brian Lively - Tudor, Pickering, Holt & Co. Securities, Inc.
Unknown Analyst -
Good day, ladies and gentlemen, and welcome to the Second Quarter 2011 Concho Resources Inc. Earnings Conference Call. My name is Akia, and I'll be your operator for today. [Operator Instructions] I would now like to turn the presentation over to, Toffee McAlister, Director of Investor Relations. Please proceed.
Good morning. Before we get started, I would like to direct your attention to the forward-looking statement disclaimer contained in the press release. In summary, it says that statements in the press release and on this conference call that state the company's or management's expectations or predictions of the future are forward-looking statements intended to be covered by the Safe Harbor provisions under the federal securities laws. There are many factors that could cause actual results to differ materially from our expectations, including those we've described in the press release, our 10-K and other filings with the SEC. In addition, we will reference certain non-GAAP measures, so be sure to see the reconciliations in our earnings release.
With that, I would like to turn the call over to Tim Leach, Concho's Chairman and CEO.
Thanks, Toffee. I hope everyone has had a chance to see the copy of our second quarter release that came out yesterday afternoon. In addition to Toffee, Joe Wright and Jack Harper are with me on this call and you will hear their comments in a moment.
First, I'd like to give you a bit of an overview and my perspective. It was a good quarter, and I'm pleased with the results of the first half. We're on track to reach our goals for 2011, both for growth and profitability. During the second quarter, we achieved record levels of production, drilling and cash flow. We produced 5.6 million equivalent barrels. We drilled 229 wells, and we recorded $311 million of EBITDAX. The capital budget is going well too, and we're running about 36 rigs today, and we're on track to drill almost 900 wells this year in some of the most economic place in the country. And I'm encouraged by the opportunities set that's in the pipeline, whether it's traditional private opportunities or acreage acquisitions in our core areas that for me seems to be the gift that just keeps on giving. I have no doubt that our prospects for future growth are better than they have ever been.
Before I turn it over to Joe for an operational overview, let me first summarize a few of the recent achievements. Our production is growing as expected, but the Bone Spring production has grown 40% compared to the first quarter. As I've mentioned before, there's a lot of new oil and gas development in the Delaware Basin, and that has to be a big driver for our future growth. Also important is the increase in our inventory of drilling locations. We've added about 2,500 new locations to our inventory within the 5 future drill sites. And our reserves are growing as demonstrated by the mid-year proven growth.
In addition to the operational metrics, Concho continues to increase its financial strength. During the second quarter, we successfully executed the senior notes offering, and after the debt settled, we increased our liquidity to about $1.8 billion on our bank line. This is the most power [ph] quarter that we've had in the history of our company. Lastly, while our operational metrics and our financial condition are strong, I would like to add our success begins with the talent of our people. It's really encouraging to see all the new talent that's coming to Concho. Many of these are top people in the industry, and we're lucky to have. With the staff we have today, we're ready to do much more in the future. So as we begin to think about the possibilities for 2012 and beyond, I'm more confident than ever that we're in the right place, at the right time. Now let me hand the mic over to Joe for an operational update.
Thanks, Tim. As we have seen over the past few quarters, activity levels in the Permian Basin continue to increase. Rig count across the Permian for the second quarter increased about 20% over the previous quarter to approximately 420 rigs. Today, Concho is operating 36 of those rigs and represents one of the most active drilling programs in the market.
For the second quarter, we drilled and participated in 229 wells, which represents a record level of drilling in the company's history. Importantly, our completion groups made good strides during the quarter in reducing our backlog of wells that were waiting on completion. At the end of the quarter, the number of operated wells waiting to start the completion process stood at 59. This represents a 26% improvement over the first quarter. The increase in activity has certainly applied pressure from the service providers and oil takeaway capacity on the front[ph].