After reporting more than 28% growth in total production in the fourth quarter, Permian Basin pure-play explorer Concho Resources Inc. said it expects to grow 2018 output by 16-20%, with crude oil rising by about 20%, using a $2 billion capital expenditures (capex) program.
The Midland, TX-based independent reported net production of 19.4 million boe (211,083 boe/d) in 4Q2017, a 28.4% increase from the year-ago quarter (15.1 million boe, 164,337 boe/d). Full-year production totaled 70.3 million boe (192,658 boe/d) in 2017, up 27.7% from 2016 (55.1 million boe, 150,511 boe/d).
During an earnings conference call Wednesday, CEO Tim Leach said "the operating environment was dynamic" in 2017. "We had to keep both our hands firmly on the steering wheel but our focus paid off and the team delivered exceptional performance."
In the fourth quarter, Concho averaged 16 rigs, which was down three sequentially. However, it currently has 19 rigs deployed, eight of which are running in the northern part of the Permian's Delaware sub-basin. Another six rigs are deployed in the southern Delaware, while the remaining five rigs are running in the Permian's Midland sub-basin.
The company drilled 71 wells (49 operated) and completed 91 wells (58 operated) in 4Q2017. During the quarter, Concho added 24 wells with at least 60 days of production in the northern part of the Delaware; three wells with at least 60 days of production targeting the Wolfcamp A formation in the southern Delaware; and six wells targeting the Wolfcamp A and B formations in the Midland.
For the full year, Concho drilled 311 wells (217 operated) and completed 305 wells (211 operated). The company spent $1.7 billion on capex in 2017.
So far during 1Q2018, Concho has completed the sale of noncore leasehold in the West Texas counties of Reeves and Ward to an unidentified seller for about $280 million.
Concho also this year executed a trade "with a large integrated oil company,” to help fill in a strategic part of the Mabee Ranch project in Culberson County, TX, within the Midland sub-basin. Concho traded "checkerboard acreage,” Leach said.
“The trade is a win-win and allows both companies to operate more effectively and maximize the value of their respective assets,” said the CEO.
In addition, the operator has increased working interests in operated properties in Upton County, TX, and in the New Mexico Shelf region.
"We're focusing on all parts of this equation," Leach said. The company has received $1.4 billion in proceeds from its divestitures since 2016.
During the question and answer portion of the call with analysts, Leach said portfolio management "is a major part of our strategy. As the company grows...our drilling program is getting more sophisticated, and the asset quality just continues to get better.
“Trading into longer development, longer lateral development, bigger blocks, higher ownership -- those types of trades are ongoing. I can't remember the number we did in the last quarter, but it was a shockingly high number of trades. It's just kind of the blocking and tackling of our business. Selling out of areas, I still think that that will continue."
Concho reported net earnings of $267 million ($1.80/share) in 4Q2017, compared with a net loss of $125 million (minus 86 cents) in the year-ago quarter. For the full year, the company posted net earnings of $956 million ($6.44/share), versus a net loss of $1.46 billion (minus $10.85) in 2016.