Concho Resources Inc. (NYSE: CXO) reported financial and operating results for the three and six months ended June 30, 2012.

Production for the second quarter of 2012 totaled 6.8 MMBoe (4.2 million barrels of oil ("MMBbls") and 15.6 billion cubic feet of natural gas ("Bcf")), an increase of 22% as compared to 5.6 MMBoe (3.5 MMBbls and 12.3 Bcf) produced in the second quarter of 2011. During the second quarter of 2012, the Company estimates that production was negatively impacted by 3,000 barrels of oil equivalent per day ("Boepd") due to scheduled and unscheduled maintenance and expansion work at two gas processing plants and a compression station in southeast New Mexico.

Tim Leach, Concho's Chairman, CEO and President commented, "The Permian Basin continues to be one of the most attractive and profitable oil basins in the country. The recent acquisition of assets from Three Rivers was our most strategic acquisition since Marbob and reinforced Concho's significant presence in the Permian Basin. The unprecedented level of activity across the Permian Basin during the first half of 2012 has certainly introduced new challenges; however, I am confident that given our scale and continued success in our core areas, like the Delaware Basin, our capital budget and production guidance for the year remains on track."

For the second quarter of 2012, the Company reported net income of $319.3 million, or $3.07 per diluted share, as compared to net income of $232.2 million, or $2.24 per diluted share, for the second quarter of 2011. The Company's second quarter 2012 results were impacted by several non-cash items including: (1) a $394.8 million unrealized mark-to-market gain on commodity derivatives and (2) $8.4 million of leasehold abandonments. Excluding these items and their tax effects, the second quarter 2012 adjusted net income (non-GAAP) was $80.5 million, or $0.78 per diluted share. Excluding similar non-cash items and their tax impact, adjusted net income (non-GAAP) for the second quarter of 2011 was $113.2 million, or $1.09 per diluted share.

EBITDAX was $327.4 million in the second quarter of 2012, an increase of 5% from $310.7 million reported in the second quarter of 2011. For a description and a reconciliation of net income (GAAP) to EBITDAX (non-GAAP), please see "Supplemental Non-GAAP Financial Measures" below.
Oil and natural gas sales from continuing operations for the second quarter of 2012 decreased 3% when compared to the second quarter of 2011. This decrease was attributable to a 12% decrease in the Company's unhedged realized oil price and a 46% decrease in the Company's unhedged realized natural gas price, which was substantially offset by a 22% increase in production in the second quarter of 2012 compared to the second quarter of 2011. In addition, oil sales were adversely impacted by a temporary widening of the Midland-to-Cushing basis differential, which averaged approximately $5.00 per barrel during the second quarter of 2012. Today, the Midland-to-Cushing basis differential has returned to historical levels of less than $1.00 per barrel. Finally, natural gas price realizations were adversely impacted by the decline in natural gas liquids and residue gas prices.

Oil and natural gas production expense from continuing operations for the second quarter of 2012, including oil and natural gas taxes, totaled $87.7 million, or $12.85 per barrel of oil equivalent ("Boe"), a 3% increase per Boe from the second quarter of 2011. This increase was due primarily to higher lease operating expenses and workover costs, which averaged $7.52 per Boe in the second quarter of 2012 as compared to $5.97 per Boe in the second quarter of 2011, which was partially offset by lower oil and natural gas taxes, which averaged $5.33 per Boe in the second quarter of 2012 as compared to $6.51 per Boe in the second quarter of 2011. The increase in lease operating expenses per Boe over the second quarter 2011 is primarily due to an increase in workover costs and cost of services, including labor related expenses.

Depreciation, depletion and amortization expense ("DD&A") from continuing operations for the second quarter of 2012 totaled $141.5 million, or $20.73 per Boe, a 17% increase per Boe from the second quarter of 2011.

General and administrative expense ("G&A") from continuing operations for the second quarter of 2012 totaled $32.0 million, or $4.69 per Boe, as compared to $22.6 million, or $4.06 per Boe, in the second quarter of 2011. Cash G&A for the second quarter of 2012 totaled $24.6 million and stock-based compensation (non-cash) totaled $7.4 million. The increase in per Boe expense for the second quarter of 2012 over the second quarter of 2011 was primarily due to a 41% increase in absolute G&A expenses reflecting increased staffing across the Company, and was partially offset by a 22% increase in production.