Concho Resources (CXO)
Q3 2012 Earnings Call
November 08, 2012 10:00 am ET
L. Price Moncrief - Vice President of Capital Markets and Strategy
Previous Statements by CXO
» Concho Resources' CEO Discusses Q2 2012 Results - Earnings Call Transcript
» Concho Resources' CEO Discusses Acquisition of Three Rivers Operating Company Conference (Transcript)
» Concho Resources' CEO Discusses Q1 2012 Results - Earnings Call Transcript
E. Joseph Wright - Chief Operating Officer and Senior Vice President
Matthew G. Hyde - Senior Vice President of Exploration and Land
Darin G. Holderness - Chief Financial Officer, Principal Accounting Officer and Senior Vice President
Jack F. Harper - Chief of Staff and Senior Vice President
John Freeman - Raymond James & Associates, Inc., Research Division
Brian Lively - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division
William B. D. Butler - Stephens Inc., Research Division
Brian Singer - Goldman Sachs Group Inc., Research Division
Irene O. Haas - Wunderlich Securities Inc., Research Division
Mario Barraza - Tuohy Brothers Investment Research, Inc.
Joseph Bachmann - Howard Weil Incorporated, Research Division
Michael S. Scialla - Stifel, Nicolaus & Co., Inc., Research Division
Pearce W. Hammond - Simmons & Company International, Research Division
Joseph Patrick Magner - Macquarie Research
Sven Del Pozzo - IHS Herold, Inc.
Scott Hanold - RBC Capital Markets, LLC, Research Division
David R. Tameron - Wells Fargo Securities, LLC, Research Division
Good day, ladies and gentlemen, and welcome to the Third Quarter 2012 Concho Resources Earnings Conference Call. My name is Lisa, and I'll be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes.
I would now like to turn the conference over to your host for today, Mr. Price Moncrief, Vice President of Capital Markets and Strategies. Please proceed.
L. Price Moncrief
Good morning, everyone. We're glad you could join us today for Concho's Third Quarter 2012 Conference Call. Before we get started, I would like direct your attention to the forward-looking statement disclaimer contained in the press release.
In summary, it says that statements in last night’s 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 our 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 or our most recent investor presentation, which includes details on our 2013 capital budget and guidance. Both the earnings release and the investor presentation can be found on our website.
On today's call, I am joined by Tim Leach, our Chairman and CEO; and Joe Wright, our Chief Operating Officer, who will discuss, among other things, our third quarter results and 2013 budget and annual guidance. We're also joined by other members of our management team who will be available to answer questions later in the call.
With that, I'd like to turn the call over to Tim.
Timothy A. Leach
Good morning. I'm pleased that you could join us this morning as we review our third quarter results, provide an update on our recent drilling activity and detail our capital budget and production outlook for 2013.
As I'm sure you saw on last night's press release, the third quarter was a good quarter for Concho. We produced nearly 85,000 barrels per day and generated $387 million in EBITDAX, both all-time records for the company.
I'm especially pleased with the progress of our development strategy in the Delaware Basin, which now represents over 25% of our net production and continues to deliver sequential double-digit growth rates. It's a real driver of our growth and noteworthy considering this horizontal effort in the Delaware is barely 2 years old.
There's lots of exciting things happening in the Permian, and the Delaware is just an excellent example. I spoke to you last quarter about the advantages of being positioned in the Permian. I continue to believe that this is the place to be in terms of profitability and growth. At the same time, the Permian is going through a transformation and the playing field is rapidly evolving.
Against this backdrop of rapid changes, it's important to step back and reflect on our strategy, our results and then consider how we're positioned for the future.
Since inception, Concho has always focused on a rate of return growth. Our belief has been simple. We invest in high rate return projects that really work. The results should be strong profitable growth. This approach enables us to preserve our balance sheet, while remaining flexible enough to capture Permian opportunities when they develop. Historically, the strategy has delivered annual production growth in excess of 40%, about half of which has been organic and the other half from acquisitions.
Looking forward, I see no reason why that strategy in resulting organic production growth should change, given the increase in opportunities in the Permian. The efficiencies realized through horizontal development are real, and in the not-too-distant future, horizontal rig count will exceed vertical rig count in the Permian. That's truly a revolutionary change.
Today, half our operated rigs are drilling horizontal wells, thanks in large part, to many of the strategic moves we made over the last 12 months. Most notably, we have nearly doubled our footprint in the Delaware Basin through the acquisition of OGX, Three Rivers and other lease hold.
We've entered areas like the Southern Delaware Basin, the Southern Midland Basin and the Northern Midland Basin. We are a better company today because we've expanded the opportunities to reinvest capital across the Permian, without having to sacrifice returns. As a company that remains committed to returns, I cannot be more optimistic about Concho's ability to deliver consistently strong organic growth, while creating value for the shareholders.