Independent exploration and production company, Concho Resources Inc. (CXO) cut its 2015 capital expenditure outlook to $2.0 billion from its prior outlook of $3.0 billion. The company attributed the cut to a sharp decline in commodity prices.
The company's updated 2015 capital outlay includes about $1.8 billion for drilling and completion activities and about $200 million for facilities, midstream and other requirements.
The company also expects to generate 16% to 20% year-over-year production growth in 2015, compared to its prior forecast of 28% to 32% growth.
Management reduced the capital program to maintain a strong balance sheet and quality of assets in the Permian Basin. In the current bearish environment, the company intends to manage its 2015 capital program around anticipated cash flows and retain significant flexibility to scale activity level up or down depending on service costs and commodity prices.
Concho Resources Inc. is an independent oil and natural gas company engaged in the acquisition, development, exploitation and exploration of oil and natural gas properties. The company's conventional operations are primarily focused on the Permian Basin of Southeast New Mexico and West Texas. In addition, the company is involved in a number of unconventional emerging resource plays. With holdings of around 605,000 net acres across the Permian Basin, 22,000 drilling locations and approximately 3 billion oil-equivalent barrels of resource potential, Concho Resources’ asset portfolio is primed for high production growth and peer-leading returns.
However, the company has lately been hassled by a number of reasons. In November, the company reported lukewarm third-quarter numbers. Performance was affected by heavy rainfall and flooding, primarily in the northern Delaware Basin, causing production downtime, road closures and drilling and completion delays.
Looking forward, due to the lingering effects of the flooding in the northern Delaware Basin at the end of the third quarter, the company estimates that fourth quarter production will also be negatively impacted. As a result, the company expects fourth-quarter production within the range of 122 thousand barrels of oil equivalent per day (MBoepd) to 127 MBoepd.
The company currently holds a Zacks Rank #5 (Strong Sell). However, there are better-ranked stocks in the oil and gas sector like Spectra Energy Partners LP (SEP), Exterran Holdings, Inc. (EXH) and Seadrill Partners LLC (SDLP). All these hold a Zacks Rank #1 (Strong Buy).
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