Concho Resources Inc.NYSE
Concho Resources: Drilling Gushers On Wall Street
Wed, Nov. 30, 7:30 PM
- Analysts say today's agreement to curb oil production will elevate prices through at least H1 2017, and the first to pounce on higher prices by expanding drilling will be U.S. shale explorers.
- In shale fields across the U.S., production costs have been cut roughly in half since 2014, when Saudi Arabia raised output in an attempt to drive higher-cost shale producers out of the market, but instead of killing the U.S. shale industry, the ensuing price war made shale a leaner and meaner rival.
- As an example, Concho Resources (NYSE:CXO) CEO Tim Leach says his company is on track to raise production 5% by year’s end, even though it is spending 7% less than originally budgeted for 2016.
- Continental Resources' (NYSE:CLR) Harold Hamm says U.S. oil production will rise in the wake of OPEC’s cut, and rising prices could unlock some of the thousands of drilled but uncompleted wells in the U.S.; some of CLR's ~175 uncompleted wells now will be completed in light of OPEC’s decision and the improved price outlook but the company will not add rigs.
- “As you move up the price curve and you get more confident of the outlook for future pricing, we’ll be able to add activity as cash flows grow," says Newfield Exploration (NYSE:NFX) CEO Lee Boothby.
- Among other shale-focused companies that enjoyed huge gains today: WLL, PE, OAS, SN, CRC, FANG, RSPP, PXD, XEC, EPE, WPX.
Wed, Nov. 30, 2:30 PM
- Oil and gas names continue to surge following the news that OPEC will cut production.
- Among the 36 energy stocks in the benchmark SPDR Energy ETF, 13 are up by at least 10%: MRO +21.6%, RIG +19.6%, MUR +15.7%, DVN +15.2%, NFX +15.2%, HES +14.8%, APC +13.6%, HAL +13.6%, CXO +11.3%, XEC +10.9%, EOG +10.5%, COP +10.4%, CHK +10%.
- Continental Resources (CLR +23.6%) soars to a 52-week high, making founder and CEO Harold Hamm, already the wealthiest U.S. energy billionaire, another $3B richer.
- Offshore drillers are broadly sporting double-digit gains: ESV +24.8%, ATW +20.6%, RIGP +18.7%, SDRL +16.5%, DO +15.7%, RDC +15%.
- "For all E&P stocks, this is a bullish call for sure, because price is directly correlated with cash flow," says Luana Siegfried, energy equity research associate at Raymond James, which sees U.S. crude reaching $60/bbl by year-end.
- MarketWatch's Philip van Doorn writes that pending earnings estimate increases from analysts ought to set a floor under the energy sector and support even higher prices for oil stocks.
Mon, Nov. 21, 8:46 AM
- Concho Resources (NYSE:CXO) +2.6% premarket after agreeing to acquire ~16.4K net acres in the northern Delaware Basin in New Mexico for ~$430M in cash and stock, and raising its FY 2017 production guidance.
- CXO says it will issue 2.18M shares and pay $150M in cash, funded with cash on hand and borrowing from its credit facility as well as potential asset sales.
- The deal includes ~2.5K boe/day (69% oil) of current production, and expands its position in the Red Hills area by more than 25% to ~47K net acres.
- As a result of the acquisition, CXO says it plans to increase its operated rig count to an average of eight rigs in the northern Delaware Basin during 2017, and now expects to grow oil production volumes by more than 20% Y/Y in 2017 and total production by 18%-21%, up from prior guidance of 17%-20%.
- CXO also maintains its 2017 capex guidance of $1.4B-$1.6B.
Tue, Nov. 15, 10:49 AM
- West Texas' Permian Basin now holds nearly as many active oil rigs as the rest of the U.S. combined, including those offshore, the U.S. Energy Information Administration reports.
- The rig count has been rising since this summer, but the Permian began seeing rigs increase earlier than the U.S. as a whole, and is adding rigs more quickly; of the ~450 total U.S. rigs, the Permian now accounts for ~220.
- Permian production has reached 2M bbl/day of oil, while south Texas’ Eagle Ford and North Dakota’s Bakken have fallen to below 1M bbl/day.
- Top Permain producers include CVX, OXY, APA, PXD, CXO, DVN, EOG, MRO, FANG, XOM, ECA, RSPP, SM, EGN, PE, AREX, GPOR, XEC, LPI, CPE, ESTE, WPX, PDCE
Tue, Nov. 8, 4:44 PM
Mon, Nov. 7, 5:35 PM
Mon, Oct. 24, 4:57 PM
- Concho Resources (NYSE:CXO) and P-E firm Energy Spectrum Capital have hired bankers to seek a buyer for their Alpha Crude Connector pipeline system in the Permian Basin, WSJ reports.
- The Alpha Crude Connector, which consists of ~400 miles of pipelines running through parts of Texas and New Mexico, could fetch as much as $1B, according to the report.
- Alpha Crude, which was completed in April, is capable of transporting more than 100K bbl/day and has capacity to store 3x that much oil.
Thu, Oct. 13, 7:15 PM
- The biggest threat to the rally in oil stocks might be more production from E&P companies drilling in the U.S. shale, Credit Suisse analysts say.
- A clear benefit of the price cycle has been the vastly improved efficiency and productivity of shale, but shale "may ultimately be too productive as WTI approaches $70/bbl," the firm says as it lowers its long-term WTI forecast to $62.50/bbl from $67.50.
- Credit Suisse says names that continue to demonstrate resource improvement at the low-end of the cost curve, namely in the Permian and STACK plays, remain attractive, such as Concho Resources (NYSE:CXO), Devon Energy (NYSE:DVN), Newfield Exploration (NYSE:NFX) and Pioneer Natural Resources (NYSE:PXD).
- The firm downgrades Carrizo Oil & Gas (NASDAQ:CRZO) and Sanchez Energy (NYSE:SN) to Neutral from Outperform, and Laredo Petroleum (NYSE:LPI) to Underperform from Neutral, following relative outperformance vs. peers.
Mon, Aug. 15, 4:38 PM
- Concho Resources (NYSE:CXO) -1.4% AH after agreeing to acquire ~40K net acres in the Midland Basin from privately-held Reliance Energy for $1.625B in cash and stock.
- CXO says the deal includes 10K boe/day of production from 326 vertical wells and 44 horizontal wells, only one of which was completed in 2016, and expands its core Midland Basin position to more than 150K net acres and production of 30K boe/day.
- To help fund the deal, CXO announces a 9M-share public offering, with an underwriters option to purchase up to an additional 1.35M common shares.
Mon, Aug. 8, 11:57 AM
- SM Energy’s (SM +7.2%) $980M purchase of drilling rights in the Permian Basin shows that producers are willing to pay a premium for access to one of the few spots where oil exploration still turns a profit, Bloomberg reports.
- SM will pay the equivalent of $39.5K/acre for drilling rights across 24,783 acres in the Permian Basin, will ahead of the $25K-$35K that acreage in the Permian’s Midland Basin section had been fetching as recently as May and almost doubling SM's holdings in the region.
- Other Permian producers also are trading higher, including: PXD +2.2%, CXO +1.8%, XEC +2.1%, CWEI +6.1%, APA +3.8%, FANG +2.1%, PE +1.2%, QEP +3.6%, RSPP +2.4%, APC +2.6%, DVN +3.7%, MTDR +2.3%.
Wed, Aug. 3, 3:28 PM
- The Permian energy producers remain "the envy" of their non-Permian peers following Q2 earnings beats (I, II) from Concho Resources (CXO +3.4%) and Diamondback Energy (FANG +1.8%), Deutsche Bank analysts say.
- Advantaged with solid balance sheets, strong margins, capital market access, improving well productivity and persistent pressure on costs, the Permian players are "visibly turning operating leverage into momentum," the firm writes.
- Q2 marked the second straight quarter that XCO reported a "beat-and-raise" set of results, with volumes, cash costs and cash flow all beating expectations while guiding full-year volumes higher and costs lower; CXO has now raised the midpoint of volume guidance from -2.5% Y/Y to +1% Y/Y in the last six months from an unchanged ~$1.2B budget, which Deutsche Bank says shows the strength of CXO’s asset base that continues to churn out strong results.
- FANG’s Q2 offered few financial surprises but finally delivered the first set of strong results from Howard county, with two wells registering average IP30s of ~1,300 boe/day; as the northern Midland basin has received increased industry attention, the firm says the results and FANG’s next set of Howard wells and northwest Martin county should be closely watched.
Tue, Aug. 2, 5:06 PM
Mon, Aug. 1, 5:35 PM
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Wed, Jul. 13, 3:19 PM
- Whiting Petroleum (WLL -2.3%) is upgraded to Outperform from Neutral with a $14 price target, up from $13, at Credit Suisse, which says the stock's pullback following the recent debt swap has provided a compelling entry point.
- The firm says WLL's extensive inventory in the core of the Williston coupled with improving type curves from larger completions provide compelling near-term catalysts, as drilling activity should accelerate in 2017 at the latest; asset sales remain another key catalyst, with remaining assets on the block including North Ward Estes and the monetization of WLL’s Williston Basin gas plants.
- Credit Suisse also sees strong upside potential for Concho Resources (CXO -1%), Pioneer Natural Resources (PXD -1.7%) and Newfield Exploration (NFX -1.1%) as well performance improves in the Permian and STACK.
- WLL and other oil companies are broadly lower after WTI crude fell below $45/bbl as EIA weekly storage data showed a surprise rise in stockpiles.
Mon, Jun. 13, 2:45 PM
- Plenty of upside remains in E&P names even after sharp YTD gains, Morgan Stanley analysts say amid confidence that the oil market recovery is occurring and oil prices will need to hit $80/bbl or so to deliver the production growth the world will need.
- Given recent production outages, the firm sees a risk of an H2 pullback yet also a long-term recovery that is "the bigger and a higher conviction event in a low conviction world and we add risk, yet not go 'all-in' here."
- Stanley upgrades Concho Resources (CXO +0.1%) and Cenovus Energy (CVE +0.9%) to Overweight from Equal Weight, and says it also remains positive on Pioneer Natural Resources (PXD +0.6%), Devon Energy (DVN +2.4%), Continental Resources (CLR +1.7%) and Cimarex Energy (C -0.8%); the firm cuts Occidental Petroleum (OXY -0.3%) to Equal Weight from Overweight on relative value.
Tue, Jun. 7, 3:44 PM
- Seaport Global Securities upgrades a half-dozen energy E&P stocks - and downgrades two others - even after the group has rallied YTD, saying it is "willing to overlook higher leverage as long as the operational trajectory is notably improving."
- Noble Energy (NBL +4.2%) and Eclipse Resources (ECR +5.5%) are upgraded to Buy from Neutral, as NBL boasts "strong growth and cheap valuation relative to peers" and ERC is "among the cheapest NE gas names while offering good compression in out-year multiples."
- Seaport hikes Synergy Resources (SYRG +2.4%) to Buy from Accumulate thanks to "top-tier growth potential at >$50 oil."
- Upgraded to Accumulate from Neutral are Carrizo Oil & Gas (CRZO +4.3%), as “strong Eagle Ford returns justify return to growth,” and Concho Resources (CXO +4.6%), with “high-quality exposure to the Delaware Basin poised to garner further credit."
- The firm raises WPX Energy (WPX +0.2%) to Neutral from Sell, citing “leverage burden eased with equity, higher commodity price deck assumptions, recent operational progress."
- However, Oasis Petroleum (OAS +0.7%) is downgraded to Neutral from Buy as “NAV valuation gap has closed after a 54% move since our March 30 report," and Petroquest Energy (PQ +1.3%) is cut to Accumulate from Buy as “risk/reward upside has tempered" following a 67% move since March 30.