Subsidiary guarantors

6 Months Ended

Jun. 30, 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 June 30, 2017 and December 31, 2016, condensed consolidating statements of operations for the three and six months ended June 30, 2017 and 2016 and condensed consolidating statements of cash flows for the six months ended June 30, 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
June 30, 2017


			Parent		Subsidiary		Consolidating
(in millions)			Issuer		Guarantors		Entries		Total

ASSETS
Accounts receivable - related parties		$	8,986	$	(639)	$	(8,347)	$	-
Other current assets			167		1,137		-		1,304
Oil and natural gas properties, net			-		11,806		-		11,806
Property and equipment, net			-		234		-		234
Investment in subsidiaries			2,831		-		(2,831)		-
Other long-term assets			105		142		-		247
	Total assets	$	12,089	$	12,680	$	(11,178)	$	13,591

LIABILITIES AND EQUITY
Accounts payable - related parties		$	(639)	$	8,986	$	(8,347)	$	-
Other current liabilities			46		720		-		766
Long-term debt			2,741		-		-		2,741
Other long-term liabilities			1,212		143		-		1,355
Equity			8,729		2,831		(2,831)		8,729
	Total liabilities and equity	$	12,089	$	12,680	$	(11,178)	$	13,591

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 June 30, 2017


			Parent		Subsidiary		Consolidating
(in millions)			Issuer		Guarantors		Entries		Total

Total operating revenues		$	-	$	567	$	-	$	567
Total operating costs and expenses			210		(508)		-		(298)
	Income from operations		210		59		-		269
Interest expense			(38)		(1)		-		(39)
Loss on extinguishment of debt			(1)		-		-		(1)
Other, net			74		16		(74)		16
	Income before income taxes		245		74		(74)		245
Income tax expense			(93)		-		-		(93)
	Net income	$	152	$	74	$	(74)	$	152

Condensed Consolidating Statement of Operations
Three Months Ended June 30, 2016


			Parent		Subsidiary		Consolidating
(in millions)			Issuer		Guarantors		Entries		Total

Total operating revenues		$	-	$	396	$	-	$	396
Total operating costs and expenses			(297)		(468)		-		(765)
	Loss from operations		(297)		(72)		-		(369)
Interest expense			(54)		(1)		-		(55)
Other, net			(73)		-		73		-
	Loss before income taxes		(424)		(73)		73		(424)
Income tax benefit			158		-		-		158
	Net loss	$	(266)	$	(73)	$	73	$	(266)


Condensed Consolidating Statement of Operations
Six Months Ended June 30, 2017


			Parent		Subsidiary		Consolidating
(in millions)			Issuer		Guarantors		Entries		Total

Total operating revenues		$	-	$	1,179	$	-	$	1,179
Total operating costs and expenses			495		(344)		-		151
	Income from operations		495		835		-		1,330
Interest expense			(78)		(1)		-		(79)
Loss on extinguishment of debt			(1)		-		-		(1)
Other, net			850		16		(850)		16
	Income before income taxes		1,266		850		(850)		1,266
Income tax expense			(464)		-		-		(464)
	Net income	$	802	$	850	$	(850)	$	802

Condensed Consolidating Statement of Operations
Six Months Ended June 30, 2016


			Parent		Subsidiary		Consolidating
(in millions)			Issuer		Guarantors		Entries		Total

Total operating revenues		$	-	$	680	$	-	$	680
Total operating costs and expenses			(218)		(2,384)		-		(2,602)
	Loss from operations		(218)		(1,704)		-		(1,922)
Interest expense			(107)		(2)		-		(109)
Other, net			(1,713)		(7)		1,713		(7)
	Loss before income taxes		(2,038)		(1,713)		1,713		(2,038)
Income tax benefit			752		-		-		752
	Net loss	$	(1,286)	$	(1,713)	$	1,713	$	(1,286)


Condensed Consolidating Statement of Cash Flows
Six Months Ended June 30, 2017


			Parent		Subsidiary	Consolidating
(in millions)			Issuer		Guarantors		Entries		Total

Net cash flows provided by operating activities		$	28	$	777	$	-	$	805
Net cash flows used in investing activities			-		(168)		-		(168)
Net cash flows used in financing activities			(28)		-		-		(28)
	Net increase in cash and cash equivalents		-		609		-		609
	Cash and cash equivalents at beginning of period		-		53		-		53
	Cash and cash equivalents at end of period	$	-	$	662	$	-	$	662

Condensed Consolidating Statement of Cash Flows
Six Months Ended June 30, 2016


			Parent		Subsidiary		Consolidating
(in millions)			Issuer		Guarantors		Entries		Total

Net cash flows provided by operating activities		$	12	$	664	$	-	$	676
Net cash flows used in investing activities			-		(412)		-		(412)
Net cash flows used in financing activities			(12)		-		-		(12)
	Net increase in cash and cash equivalents		-		252		-		252
	Cash and cash equivalents at beginning of period		-		229		-		229
	Cash and cash equivalents at end of period	$	-	$	481	$	-	$	481