Concho Acquires Marbob Assets, Posts Preliminary 2011 Capex Budget

Concho Resources has closed its previously-announced acquisition of the oil and natural gas assets of Marbob and certain affiliated entities (collectively "Marbob").

In addition, the Company purchased additional non-operated rights and interests in certain Marbob properties owned by persons affiliated with Marbob for approximately $32 million. As of June 30, 2010, estimated proved reserves associated with these additional interests totaled approximately 1.3 million barrels of oil equivalents (MMBoe).

Aggregate consideration paid to Marbob at closing consisted of approximately $1.1 billion of cash, the issuance of approximately 1.1 million shares of Concho common stock and a $150 million senior unsecured note issued to Marbob due in 2018. The cash consideration was funded with borrowings under the Company's amended credit facility and with proceeds from a previously-announced $300 million private placement of Concho common stock.

The previously-announced purchase price was reduced by approximately $400 million due to the exercise of preferential purchase rights by third parties. As of October 1, 2010, current net daily production and proved reserves on the assets acquired from Marbob, reduced by the effects of the exercised preferential purchase rights, is approximately 12,000 barrels of oil equivalents per day (Boepd) and 63 MMBoe, respectively.

2011 Preliminary Capital Expenditures Budget and Production Guidance

The Company's preliminary capital expenditure budget for 2011, based on current capital costs, is estimated to be approximately $1 billion. At this level of capital spending, the Company currently estimates that its production for 2011 would total approximately 22 MMBoe. The Company expects that this capital budget can be substantially funded with internally generated after tax cash flow assuming (i) a NYMEX crude oil price of $85 per barrel and a NYMEX natural gas price of $4.50 per Mcf for the Company's unhedged production and (ii) that the Company produces approximately 22 MMBoe. The Company intends to monitor both the direction of commodity prices and the costs of goods and services, and plans to provide more detailed 2011 guidance in November 2010, after its Board of Directors has reviewed and approved its 2011 capital budget.

Liquidity Update

After giving effect to the closing of the Marbob transaction and related financings discussed above, the Company would have, on a pro forma basis, approximately $1.7 billion of total debt as of September 30, 2010, consisting of $1.25 billion of debt outstanding under its credit facility, a $150 million senior unsecured note issued to Marbob and $300 million of senior unsecured notes due 2017. At September 30, 2010, the Company would have over $750 million of availability under its credit facility on a pro forma basis.

Divestiture Plan

Concho plans to offer for sale certain Permian Basin properties, which are generally not in the Company's core areas of operations and which have higher per unit costs than the Company's existing portfolio of assets. These properties currently produce approximately 1,500 Boepd, consisting of 48% oil and 52% natural gas. As of June 30, 2010, estimated proved reserves associated with these properties totaled approximately 6.5 MMBoe. Assuming a suitable bid is received, Concho anticipates closing the sale prior to year-end 2010.

Management Comment

Tim Leach, Chairman, CEO and President of the Company, commented, "The properties we acquired from Marbob expand our Yeso drilling inventory and significantly enhance our position in the emerging Bone Spring play, where our Company now has approximately 150,000 net acres. Our $1 billion preliminary capital budget for 2011 anticipates maintaining a very active drilling program and achieving significant production growth while continuing to spend within cash flow."


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