Subsidiary guarantors

3 Months Ended

Mar. 31, 2017

Note 13. Subsidiary guarantors

All of the Company’s 100 percent owned subsidiaries have fully and unconditionally guaranteed the Company’s senior notes. The indentures governing the Company’s senior notes provide that the guarantees of its subsidiary guarantors will be released in certain customary circumstances including (i) in connection with any sale, exchange or other disposition, whether by merger, consolidation or otherwise, of the capital stock of that guarantor to a person that is not the Company or a restricted subsidiary of the Company, such that, after giving effect to such transaction, such guarantor would no longer constitute a subsidiary of the Company, (ii) in connection with any sale, exchange or other disposition (other than a lease) of all or substantially all of the assets of that guarantor to a person that is not the Company or a restricted subsidiary of the Company, (iii) upon the merger of a guarantor into the Company or any other guarantor or the liquidation or dissolution of a guarantor, (iv) if the Company designates any restricted subsidiary that is a guarantor to be an unrestricted subsidiary in accordance with the indenture, (v) upon legal defeasance or satisfaction and discharge of the indenture and (vi) upon written notice of such release or discharge by the Company to the trustee following the release or discharge of all guarantees by such guarantor of any indebtedness that resulted in the creation of such guarantee, except a discharge or release by or as a result of payment under such guarantee.

See Note 8 for a summary of the Company’s senior notes. In accordance with practices accepted by the United States Securities and Exchange Commission, the Company has prepared condensed consolidating financial statements in order to quantify the assets, results of operations and cash flows of such subsidiaries as subsidiary guarantors.

The following condensed consolidating balance sheets at March 31, 2017 and December 31, 2016, condensed consolidating statements of operations for the three months ended March 31, 2017 and 2016 and condensed consolidating statements of cash flows for the three months ended March 31, 2017 and 2016, present financial information for Concho Resources Inc. as the parent on a stand-alone basis (carrying any investments in subsidiaries under the equity method), financial information for the subsidiary guarantors on a stand-alone basis and the consolidation and elimination entries necessary to arrive at the information for the Company on a consolidated basis. All current and deferred income taxes are recorded on Concho Resources Inc., as the subsidiaries are flow-through entities for income tax purposes. The subsidiary guarantors are not restricted from making distributions to the Company.

Condensed Consolidating Balance Sheet
March 31, 2017


			Parent		Subsidiary		Consolidating
(in millions)			Issuer		Guarantors		Entries		Total

ASSETS
Accounts receivable - related parties		$	8,947	$	(593)	$	(8,354)	$	-
Other current assets			74		1,279		-		1,353
Oil and natural gas properties, net			-		11,620		-		11,620
Property and equipment, net			-		209		-		209
Investment in subsidiaries			2,757		-		(2,757)		-
Other long-term assets			52		85		-		137
	Total assets	$	11,830	$	12,600	$	(11,111)	$	13,319

LIABILITIES AND EQUITY
Accounts payable - related parties		$	(593)	$	8,947	$	(8,354)	$	-
Other current liabilities			25		755		-		780
Long-term debt			2,741		-		-		2,741
Other long-term liabilities			1,125		141		-		1,266
Equity			8,532		2,757		(2,757)		8,532
	Total liabilities and equity	$	11,830	$	12,600	$	(11,111)	$	13,319

Condensed Consolidating Balance Sheet
December 31, 2016


			Parent		Subsidiary		Consolidating
(in millions)			Issuer		Guarantors		Entries		Total

ASSETS
Accounts receivable - related parties		$	8,991	$	(336)	$	(8,655)	$	-
Other current assets			12		534		-		546
Oil and natural gas properties, net			-		11,086		-		11,086
Property and equipment, net			-		216		-		216
Investment in subsidiaries			1,989		-		(1,989)		-
Other long-term assets			11		260		-		271
	Total assets	$	11,003	$	11,760	$	(10,644)	$	12,119

LIABILITIES AND EQUITY
Accounts payable - related parties		$	(336)	$	8,991	$	(8,655)	$	-
Other current liabilities			114		639		-		753
Long-term debt			2,741		-		-		2,741
Other long-term liabilities			861		141		-		1,002
Equity			7,623		1,989		(1,989)		7,623
	Total liabilities and equity	$	11,003	$	11,760	$	(10,644)	$	12,119

Condensed Consolidating Statement of Operations
Three Months Ended March 31, 2017


			Parent		Subsidiary		Consolidating
(in millions)			Issuer		Guarantors		Entries		Total

Total operating revenues		$	-	$	612	$	-	$	612
Total operating costs and expenses			285		164		-		449
	Income from operations		285		776		-		1,061
Interest expense			(40)		-		-		(40)
Other, net			776		-		(776)		-
	Income before income taxes		1,021		776		(776)		1,021
Income tax expense			(371)		-		-		(371)
	Net income	$	650	$	776	$	(776)	$	650

Condensed Consolidating Statement of Operations
Three Months Ended March 31, 2016


			Parent		Subsidiary		Consolidating
(in millions)			Issuer		Guarantors		Entries		Total

Total operating revenues		$	-	$	284	$	-	$	284
Total operating costs and expenses			79		(1,916)		-		(1,837)
	Income (loss) from operations		79		(1,632)		-		(1,553)
Interest expense			(53)		(1)		-		(54)
Other, net			(1,640)		(7)		1,640		(7)
	Loss before income taxes		(1,614)		(1,640)		1,640		(1,614)
Income tax benefit			594		-		-		594
	Net loss	$	(1,020)	$	(1,640)	$	1,640	$	(1,020)

Condensed Consolidating Statement of Cash Flows
Three Months Ended March 31, 2017


			Parent		Subsidiary	Consolidating
(in millions)			Issuer		Guarantors		Entries		Total

Net cash flows provided by operating activities		$	19	$	388	$	-	$	407
Net cash flows provided by investing activities			-		330		-		330
Net cash flows used in financing activities			(19)		-		-		(19)
	Net increase in cash and cash equivalents		-		718		-		718
	Cash and cash equivalents at beginning of period		-		53		-		53
	Cash and cash equivalents at end of period	$	-	$	771	$	-	$	771

Condensed Consolidating Statement of Cash Flows
Three Months Ended March 31, 2016


			Parent		Subsidiary		Consolidating
(in millions)			Issuer		Guarantors		Entries		Total

Net cash flows provided by operating activities		$	10	$	360	$	-	$	370
Net cash flows used in investing activities			-		(122)		-		(122)
Net cash flows used in financing activities			(10)		-		-		(10)
	Net increase in cash and cash equivalents		-		238		-		238
	Cash and cash equivalents at beginning of period		-		229		-		229
	Cash and cash equivalents at end of period	$	-	$	467	$	-	$	467