e424b5
Filed Pursuant to Rule 424(b)5
Registration No. 333-161809
CALCULATION
OF REGISTRATION FEE
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Maximum
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Maximum
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Amount of
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Title of Each Class of
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Amount to be
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Offering Price per
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Aggregate Offering
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Registration
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Securities to be Registered
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Registered
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Unit
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Price
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Fee(1)
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Common Stock
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5,347,500
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$42.75
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$228,605,625
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$16,299.58
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(1) |
Calculated in accordance with Rule 457(r) under the
Securities Act of 1933.
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PROSPECTUS
SUPPLEMENT
(To prospectus, dated September 9, 2009)
4,650,000 Shares
Concho Resources Inc.
Common Stock
We are offering 4,650,000 shares of our common stock.
Our common stock is quoted on the New York Stock Exchange under
the symbol CXO. On January 26, 2010, the last
sale price of the shares as reported on the New York Stock
Exchange was $42.86 per share.
Investing in the common stock involves risks that are
described in the Risk Factors section beginning on
page S-6
of this prospectus supplement.
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Per Share
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Total
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Public offering price
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$42.75
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$198,787,500
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Underwriting discount
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$1.71
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$7,951,500
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Proceeds, before expenses, to us
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$41.04
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$190,836,000
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The underwriters may also purchase up to an additional 697,500
shares from us, at the public offering price, less the
underwriting discount, within 30 days from the date of this
prospectus supplement to cover over-allotments, if any.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus supplement and the
accompanying prospectus are truthful or complete. Any
representation to the contrary is a criminal offense.
The shares will be ready for delivery on or about
February 1, 2010.
Joint
Book-Running Managers
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BofA
Merrill Lynch |
J.P. Morgan |
UBS Investment Bank |
Co-Managers
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Barclays
Capital |
Raymond
James |
SunTrust Robinson Humphrey |
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Tudor,
Pickering, Holt & Co. |
Wells Fargo Securities |
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Boenning
& Scattergood, Inc. |
Canaccord Adams |
Dahlman Rose & Company, LLC |
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Howard
Weil Incorporated |
KeyBanc Capital Markets |
Lazard Capital Markets |
The date of this prospectus supplement is January 26, 2010.
TABLE OF
CONTENTS
Prospectus
Supplement
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Page
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S-ii
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S-ii
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S-iii
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S-1
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S-6
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S-23
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S-24
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S-25
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S-25
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S-26
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S-30
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S-34
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S-35
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S-35
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Prospectus
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Page
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About This Prospectus
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1
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The Company
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1
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Where You Can Find More Information
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2
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Cautionary Statement Regarding Forward-Looking Statements
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3
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Risk Factors
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4
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Ratios of Earnings to Fixed Charges and Earnings to Fixed
Charges and Preferred Stock Dividends
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4
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Use of Proceeds
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5
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Description of Debt Securities
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6
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Description of Capital Stock
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18
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Description of Warrants
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22
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Plan of Distribution
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23
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Legal Matters
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24
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Experts
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24
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S-i
ABOUT
THIS PROSPECTUS SUPPLEMENT
This document is in two parts. The first part is the prospectus
supplement and the documents incorporated by reference herein,
which describes the specific terms of this offering of our
common stock. The second part is the accompanying prospectus,
which gives more general information, some of which may not
apply to our common stock or this offering. If the information
relating to the offering varies between the prospectus
supplement and the accompanying prospectus, you should rely on
the information in this prospectus supplement.
You should rely only on the information contained in or
incorporated by reference into this prospectus supplement, the
accompanying prospectus and any related free writing prospectus.
We have not authorized any dealer, salesman or other person to
provide you with additional or different information. If anyone
provides you with different or inconsistent information, you
should not rely on it. This prospectus supplement and the
accompanying prospectus are not an offer to sell or the
solicitation of an offer to buy any securities other than the
securities to which they relate and are not an offer to sell or
the solicitation of an offer to buy securities in any
jurisdiction to any person to whom it is unlawful to make an
offer or solicitation in that jurisdiction. You should not
assume that the information contained in this prospectus
supplement is accurate as of any date other than the date on the
front cover of this prospectus supplement, or that the
information contained in any document incorporated by reference
is accurate as of any date other than the date of the document
incorporated by reference, regardless of the time of delivery of
this prospectus supplement or any sale of a security.
Unless otherwise indicated or the context otherwise requires,
all references in this prospectus supplement to we,
our, us, the Company or
Concho are to Concho Resources Inc., a Delaware
corporation, and its subsidiaries.
WHERE YOU
CAN FIND MORE INFORMATION
We file annual, quarterly and current reports and other
information with the SEC (File
No. 001-33615)
pursuant to the Securities Exchange Act of 1934 (the
Exchange Act). You may read and copy any documents
that are filed at the SECs public reference room at
100 F Street, N.E., Washington, D.C. 20549. You
may also obtain copies of these documents at prescribed rates
from the public reference section of the SEC at its Washington
address. Please call the SEC at
1-800-SEC-0330
for further information.
Our filings are also available to the public through the
SECs website at
http://www.sec.gov.
The SEC allows us to incorporate by reference
information that we file with them, which means that we can
disclose important information to you by referring you to
documents previously filed with the SEC. The information
incorporated by reference is an important part of this
prospectus supplement, and the information that we later file
with the SEC will automatically update and supersede this
information. The following documents we filed with the SEC
pursuant to the Exchange Act are incorporated herein by
reference:
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our Annual Report on
Form 10-K
for the year ended December 31, 2008;
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our Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2009;
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our Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2009;
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our Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2009; and
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our Current Reports on
Form 8-K
and 8-K/A
filed on each of August 6, 2008, October 7, 2008,
January 28, 2009, March 4, 2009, April 9, 2009,
June 12, 2009, August 12, 2009, September 9,
2009, September 17, 2009, September 22, 2009,
November 12, 2009, November 25, 2009 and
January 25, 2010 (excluding any information furnished
pursuant to Item 2.02 or Item 7.01 of any such Current
Report on
Form 8-K).
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S-ii
These reports contain important information about us, our
financial condition and our results of operations.
All future documents filed pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act (excluding any
information furnished pursuant to Item 2.02 or
Item 7.01 of any such Current Report on
Form 8-K)
before the termination of the offering of securities under this
prospectus supplement shall be deemed to be incorporated in this
prospectus supplement by reference and to be a part hereof from
the date of filing of such documents. Any statement contained
herein, or in a document incorporated or deemed to be
incorporated by reference herein, shall be deemed to be modified
or superseded for purposes of this prospectus supplement to the
extent that a statement contained herein or in any subsequently
filed document that also is or is deemed to be incorporated by
reference herein, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of
this prospectus supplement.
You may request a copy of these filings at no cost by writing or
telephoning us at the following address and telephone number:
Concho Resources Inc.
550 West Texas Avenue, Suite 100
Midland, Texas 79701
Attention: General Counsel
(432) 683-7443
We also maintain a website at
http://www.conchoresources.com.
However, the information on our website is not part of this
prospectus supplement, and you should rely only on the
information contained in this prospectus supplement, the
accompanying prospectus and the documents incorporated herein by
reference when making a decision as to whether to buy our common
stock in this offering.
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Various statements contained in or incorporated by reference
into this prospectus supplement that express a belief,
expectation, or intention, or that are not statements of
historical fact, are forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 (the
Securities Act) and Section 21E of the Exchange
Act. These forward-looking statements may include projections
and estimates concerning capital expenditures, our liquidity and
capital resources, the timing and success of specific projects,
outcomes and effects of litigation, claims and disputes,
elements of our business strategy and other statements
concerning our operations, economic performance and financial
condition. Forward-looking statements are generally accompanied
by words such as estimate, project,
predict, believe, expect,
anticipate, potential,
could, may, foresee,
plan, goal or other words that convey
the uncertainty of future events or outcomes. We have based
these forward-looking statements on our current expectations and
assumptions about future events. These statements are based on
certain assumptions and analyses made by us in light of our
experience and our perception of historical trends, current
conditions and expected future developments as well as other
factors we believe are appropriate under the circumstances.
These forward-looking statements speak only as of the date of
this prospectus supplement, or if earlier, as of the date they
were made; we disclaim any obligation to update or revise these
statements unless required by securities law, and we caution you
not to rely on them unduly. While our management considers these
expectations and assumptions to be reasonable, they are
inherently subject to significant business, economic,
competitive, regulatory and other risks, contingencies and
uncertainties relating to, among other matters, the risks
discussed in Risk Factors, as well as those factors
summarized below:
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sustained or further declines in the prices we receive for our
oil and natural gas;
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uncertainties about the estimated quantities of oil and natural
gas reserves, including uncertainties about the effects of the
SECs new rules governing reserve reporting;
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drilling and operating risks;
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S-iii
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the adequacy of our capital resources and liquidity including,
but not limited to, access to additional borrowing capacity
under our credit facility;
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the effects of government regulation, permitting and other legal
requirements;
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difficult and adverse conditions in the domestic and global
capital and credit markets;
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risks related to the concentration of our operations in the
Permian Basin of Southeast New Mexico and West Texas;
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potential financial losses or earnings reductions from our
commodity price risk management program;
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shortages of oilfield equipment, services and qualified
personnel and increased costs for such equipment, services and
personnel;
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risks and liabilities associated with acquired properties or
businesses;
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uncertainties about our ability to successfully execute our
business and financial plans and strategies;
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uncertainties about our ability to replace reserves and
economically develop our current reserves;
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general economic and business conditions, either internationally
or domestically or in the jurisdictions in which we operate;
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competition in the oil and gas industry;
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uncertainty concerning our assumed or possible future results of
operations; and
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our existing indebtedness.
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Reserve engineering is a process of estimating underground
accumulations of oil and natural gas that cannot be measured in
an exact way. The accuracy of any reserve estimate depends on
the quality of available data, the interpretation of such data
and price and cost assumptions made by our reserve engineers. In
addition, the results of drilling, testing and production
activities may justify revisions of estimates that were made
previously. If significant, such revisions would change the
schedule of any further production and development drilling.
Accordingly, reserve estimates may differ from the quantities of
oil and natural gas that are ultimately recovered.
S-iv
SUMMARY
This summary highlights selected information contained
elsewhere in this prospectus supplement, the accompanying
prospectus and the documents we incorporate by reference. It
does not contain all of the information you should consider
before making an investment decision. You should read the entire
prospectus supplement, the accompanying prospectus, the
documents incorporated by reference and the other documents to
which we refer for a more complete understanding of our business
and this offering. Please read the section entitled Risk
Factors commencing on
page S-6
of this prospectus supplement and additional information
contained in our Annual Report on
Form 10-K
for the year ended December 31, 2008 and our Quarterly
Reports on
Form 10-Q
for the quarters ended March 31, 2009, June 30, 2009
and September 30, 2009 incorporated by reference in this
prospectus supplement for more information about important
factors you should consider before investing in our common stock
in this offering.
Our
Business
We are an independent oil and natural gas company engaged in the
acquisition, development and exploration of oil and natural gas
properties. Our core operating areas are located in the Permian
Basin region of Southeast New Mexico and West Texas, a large
onshore oil and natural gas basin in the United States. The
Permian Basin is one of the most prolific oil and natural gas
producing regions in the United States and is characterized by
an extensive production history, mature infrastructure, long
reserve life, multiple producing horizons and enhanced recovery
potential. We refer to our two core operating areas as the
(1) New Mexico Permian, where we primarily target the Yeso
formation, and (2) Texas Permian, where we primarily target
the Wolfberry, a term applied to the combined Wolfcamp and
Spraberry horizons. These core operating areas are complemented
by activities in our emerging plays, which include the Lower Abo
horizontal play in Southeast New Mexico and the Bakken/Three
Forks play in North Dakota. We intend to grow our reserves and
production through development drilling and exploration
activities on our multi-year project inventory and through
acquisitions that meet our strategic and financial objectives.
Recent
Developments
Operational
Update
Our estimated total proved oil and natural gas reserves at
December 31, 2009 were 211.5 MMBoe, an increase of
54 percent over year-end 2008 proved reserves, and
consisted of 142.0 MMBbls of oil and 416.9 Bcf of
natural gas. Production for the year ended December 31,
2009 totaled 10.9 MMBoe, an increase of 54 percent
over production in 2008, and consisted of 7.3 MMBbls of oil
and 21.7 Bcf of natural gas. The following estimates of our
proved oil and natural gas reserves as of December 31, 2009
are based, in part, on reports prepared by Cawley,
Gillespie & Associates, Inc. and Netherland,
Sewell & Associates, Inc., independent petroleum
engineers. In preparing their reports, Cawley,
Gillespie & Associates, Inc. and Netherland,
Sewell & Associates, Inc. evaluated properties
representing 93 percent of our total proved reserves for
2009 and 100 percent for 2008. The estimates for the
remaining portion of our total proved reserves for 2009 were
prepared by our internal reserve engineers and technical staff.
S-1
The following table provides a summary of selected operating and
reserve information in our core operating areas, our emerging
plays and our other oil and natural gas assets.
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Quarter Ended
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December 31, 2009
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December 31, 2009
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Gross
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Natural
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Identified
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Average Net Daily
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Oil
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Gas
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Total
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% Proved
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Drilling
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Production
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(MMBbl)
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(Bcf)
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(MMBoe)
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Developed
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Locations
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(Boe per day)
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Core Operating Areas:
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New Mexico Permian
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83.9
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268.6
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128.6
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52.1
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%
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1,592
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20,670
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Texas Permian
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54.4
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136.5
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77.2
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44.0
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%
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1,795
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7,549
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Emerging Plays:
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Lower Abo
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1.7
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6.0
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2.7
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54.6
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%
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152
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1,660
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Bakken/Three Forks
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2.0
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3.6
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2.6
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35.2
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%
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146
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524
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Other
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2.2
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0.4
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83.7
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%
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10
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174
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Total
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142.0
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416.9
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211.5
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49.0
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%
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3,695
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(a)
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30,577
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(a)
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Of the 3,695 identified drilling
locations, 1,726 locations were associated with proved reserves.
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The following is a summary of our changes in quantities of
proved oil and natural gas reserves for the year ended
December 31, 2009.
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Oil
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Natural Gas
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Total
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(MMBbl)
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(Bcf)
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(MMBoe)
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Balance December 31, 2008
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86.3
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305.9
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137.3
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Extensions, discoveries and revisions of previous estimates(a)
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49.1
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94.8
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64.9
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Sales of
minerals-in-place
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(0.3
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(0.1
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Purchases of
minerals-in-place
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13.9
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38.1
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20.3
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Production
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(7.3
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(21.6
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(10.9
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Balance December 31, 2009
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142.0
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416.9
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211.5
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(a)
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Includes 13.9 MMBoe resulting
from the adoption of the new SEC rules related to disclosures of
oil and natural gas reserves that are effective for fiscal years
ending on or after December 31, 2009. For more information
on the comparability of our reserves as a result of the new SEC
rules, see Risk Factors Risks Related to Our
Business Our estimates of proved reserves have been
prepared under new SEC rules which went into effect for fiscal
years ending on or after December 31, 2009, which may make
comparisons to prior periods difficult and could limit our
ability to book additional proved undeveloped reserves in the
future.
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During 2009, we commenced the drilling of or participated in a
total of 361 gross wells (314 operated), of which 295 had
been completed as producers and 64 of which were in progress,
and two of which were unsuccessful during 2009. We estimate that
we incurred approximately $685 million in acquisition,
development and exploration activities during 2009, including
approximately $260 million related to the acquisitions of
oil and natural gas properties described below.
Recent
Acquisitions
In December 2009, we made two acquisitions of interests in
producing and non-producing assets in the Wolfberry play in the
Texas Permian for approximately $260 million in cash, which
added an additional 290 net identified drilling locations
to our inventory.
In the first transaction, we acquired interests in producing and
non-producing assets in the Wolfberry play from multiple private
sellers for approximately $213 million in cash, subject to
usual and customary post-
S-2
closing adjustments. As of December 31, 2009, these
properties included estimated total proved reserves of
16.3 MMBoe, of which 69 percent were crude oil and
22 percent were proved developed.
In a separate transaction, we purchased additional rights and
interests in the Wolfberry play from multiple private sellers
for approximately $47 million in cash, subject to usual and
customary post-closing adjustments. These acquired interests
included additional interests in 522 producing wells and 848
identified locations that we operated before the acquisition. As
of December 31, 2009, these properties included estimated
total proved reserves of 3.6 MMBoe, of which
67 percent were crude oil and 40 percent were proved
developed.
2010
Capital Budget
In December 2009, we announced an updated capital budget for
2010 of approximately $625 million. Approximately
$565 million of our 2010 capital budget will be dedicated
to our two core areas, of which approximately $290 million
will be dedicated to drilling and recompletion projects on our
New Mexico Permian assets and approximately $220 million
will be dedicated to drilling and recompletion projects on our
Texas Permian assets, primarily in the Wolfberry play. Of the
remaining $55 million of capital dedicated to our core
areas, $20 million will be allocated to leasehold and
geological and geophysical expenses and $35 million will be
allocated to facilities. On our New Mexico Permian assets, we
plan to drill approximately 200 Yeso combination wells and
deepen 17 existing Paddock wells to the Blinebry interval. On
our Texas Permian assets, we plan to drill approximately 300
Wolfberry wells. Outside of our core areas, we have allocated
approximately $30 million to each of the Bakken and Lower
Abo oil plays.
Corporate
Information
We were formed in February 2006 as a result of the combination
of Concho Equity Holdings Corp. and a portion of the oil and
natural gas properties and related assets owned by Chase Oil
Corporation and certain of its affiliates. Concho Equity
Holdings Corp., which was subsequently merged into one of our
wholly-owned subsidiaries, was formed in April 2004 and
represented the third of three Permian Basin-focused companies
that have been formed since 1997 by certain members of our
current management team (the prior two companies were sold to
large domestic independent oil and natural gas companies).
We are a Delaware corporation. Our principal executive offices
are located at 550 West Texas Avenue, Suite 100,
Midland, Texas 79701. Our common stock is listed on the New York
Stock Exchange under the symbol CXO. We maintain a
web site at
http://www.conchoresources.com.
However, the information on our website is not part of this
prospectus supplement, and you should rely only on the
information contained in this prospectus supplement and in the
documents incorporated herein by reference when making a
decision as to whether to buy our common stock in this offering.
S-3
THE
OFFERING
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Issuer |
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Concho Resources Inc. |
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Shares of common stock offered |
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4,650,000 shares. |
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Option to purchase additional shares |
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The underwriters may also purchase up to an additional
697,500 shares from us, at the public offering price, less
the underwriting discount, within 30 days from the date of this
prospectus supplement to cover over-allotments, if any. |
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Shares of common stock outstanding following this
offering(a)
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90,453,546 shares (91,151,046 shares if the
underwriters exercise their over-allotment option in full). |
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Use of proceeds |
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We will use the estimated net proceeds from this offering of
approximately $190.5 million (or $219.2 million if the
underwriters exercise their over-allotment option in full) to
repay a portion of the outstanding borrowings under our credit
facility. See Use of Proceeds. |
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Conflicts of interest |
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Certain of the underwriters and their affiliates have in the
past provided, and may in the future provide, investment
banking, commercial banking, derivative transactions and
financial advisory services to us and our affiliates in the
ordinary course of business. Specifically, affiliates of the
underwriters serve various roles in our credit facility; Bank of
America, N.A., an affiliate of Merrill Lynch, Pierce,
Fenner & Smith Incorporated, serves as syndication
agent and a lender; JPMorgan Chase Bank, N.A., an affiliate of
J.P. Morgan Securities Inc., serves as administrative
agent, a lender, L/C issuer and swing line lender; SunTrust
Bank, an affiliate of SunTrust Robinson Humphrey, Inc., serves
as a lender; Wachovia Bank, National Association, and Wells
Fargo Bank, National Association, affiliates of Wells Fargo
Securities, LLC, serve as lenders; and KeyBank National
Association, an affiliate of KeyBanc Capital Markets Inc.,
serves as a lender. |
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Wells Fargo Bank, National Association, an affiliate of Wells
Fargo Securities, LLC, serves as the trustee for the indenture
governing our 8.625% senior notes due 2017. |
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We intend to use at least 5% of the net proceeds of this
offering to repay indebtedness owed by us to certain affiliates
of the underwriters who are lenders under our credit facility.
Accordingly, this offering is being made in compliance with the
requirements of NASD Conduct Rule 2720 of the Financial
Industry Regulatory |
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Authority. In accordance with that rule, no qualified
independent underwriter is required, because a bona fide
public market exists in the shares, as that term is defined in
the rule. |
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See Use of Proceeds and
Underwriting Conflicts of Interest. |
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New York Stock Exchange symbol |
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CXO. |
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(a) |
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Based on 85,803,546 shares outstanding as of
December 31, 2009. |
S-4
Unless we indicate otherwise or the context otherwise requires,
all of the information in this prospectus supplement:
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assumes no exercise of the underwriters over-allotment
option; and
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does not reflect as of December 31, 2009 (i)
2,156,503 shares of our common stock potentially issuable
pursuant to the exercise of outstanding stock options held by
our directors, officers and employees or (ii)
1,581,226 shares available for issuance under our 2006
Stock Incentive Plan.
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RISK
FACTORS
Investing in our common stock involves substantial risk. You
should carefully consider the risk factors set forth in the
section entitled Risk Factors and the other
information contained in this prospectus supplement and the
accompanying prospectus and the documents incorporated by
reference herein, prior to making an investment in our common
stock. See Risk Factors beginning on
page S-6
of this prospectus supplement.
S-5
RISK
FACTORS
An investment in our common stock involves risk. In addition
to the risks described below, you should also carefully read all
of the other information included in this prospectus supplement,
the accompanying prospectus and the documents we have
incorporated by reference into this prospectus supplement in
evaluating an investment in our common stock. If any of the
described risks actually were to occur, our business, financial
condition or results of operations could be affected materially
and adversely. In that case, the trading price of our common
stock could decline and you could lose all or part of your
investment.
The risks described below are not the only ones facing our
company. Additional risks not presently known to us or that we
currently deem immaterial individually or in the aggregate may
also impair our business operations.
This prospectus supplement and documents incorporated by
reference also contain forward-looking statements that involve
risks and uncertainties, some of which are described in the
documents incorporated by reference in this prospectus
supplement and the accompanying prospectus. Our actual results
could differ materially from those anticipated in these
forward-looking statements as a result of various factors,
including the risks and uncertainties faced by us described
below or incorporated by reference in this prospectus supplement
and the accompanying prospectus.
Risks
Related to Our Business
Oil
and natural gas prices are volatile. A decline in oil and
natural gas prices could adversely affect our financial
position, financial results, cash flow, access to capital and
ability to grow.
Our future financial condition, revenues, results of operations,
rate of growth and the carrying value of our oil and natural gas
properties depend primarily upon the prices we receive for our
oil and natural gas production and the prices prevailing from
time to time for oil and natural gas. Oil and natural gas prices
historically have been volatile, and are likely to continue to
be volatile in the future, especially given current geopolitical
conditions. This price volatility also affects the amount of our
cash flow we have available for capital expenditures and our
ability to borrow money or raise additional capital. The prices
for oil and natural gas are subject to a variety of factors
beyond our control, including:
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the level of consumer demand for oil and natural gas;
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the domestic and foreign supply of oil and natural gas;
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commodity processing, gathering and transportation availability,
and the availability of refining capacity;
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the price and level of imports of foreign oil and natural gas;
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the ability of the members of the Organization of Petroleum
Exporting Countries to agree to and maintain oil price and
production controls;
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domestic and foreign governmental regulations and taxes;
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the price and availability of alternative fuel sources;
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weather conditions;
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political conditions or hostilities in oil and natural gas
producing regions, including the Middle East, Africa and South
America;
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technological advances affecting energy consumption;
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variations between product prices at sales points and applicable
index prices; and
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worldwide economic conditions.
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Furthermore, oil and natural gas prices were particularly
volatile during 2009. For example, the NYMEX oil prices during
the year ended December 31, 2009 ranged from a high of
$81.37 to a low of $33.98
S-6
per Bbl, and the NYMEX natural gas prices during that time
ranged from a high of $6.07 to a low of $2.51 per MMBtu.
Declines in oil and natural gas prices would not only reduce our
revenue, but could also reduce the amount of oil and natural gas
that we can produce economically and, as a result, could have a
material adverse effect on our financial condition, results of
operations and reserves. If the oil and natural gas industry
experiences significant price declines, we may, among other
things, be unable to maintain or increase our borrowing
capacity, repay current or future indebtedness or obtain
additional capital on attractive terms, all of which can
adversely affect the value of our common stock.
Our
estimates of proved reserves have been prepared under new SEC
rules which went into effect for fiscal years ending on or after
December 31, 2009, which may make comparisons to prior
periods difficult and could limit our ability to book additional
proved undeveloped reserves in the future.
This prospectus supplement presents estimates of our proved
reserves as of December 31, 2009, which have been prepared
and presented under new SEC rules. These new rules are effective
for fiscal years ending on or after December 31, 2009, and
require SEC reporting companies to prepare their reserves
estimates using revised reserve definitions and revised pricing
based on
twelve-month
unweighted
first-day-of-the-month
average pricing. The previous rules required that reserve
estimates be calculated using
last-day-of-the-year
pricing. The pricing that was used for estimates of our reserves
as of December 31, 2009 was based on an unweighted average
twelve month West Texas Intermediate posted price of $57.65 per
Bbl for oil and a NYMEX price of $3.87 per MMBtu for natural
gas, as compared to $41.00 per Bbl for oil and $5.71 per MMBtu
for natural gas as of December 31, 2008. As a result of
these changes, direct comparisons to our previously-reported
reserves amounts may be more difficult.
Another impact of the new SEC rules is a general requirement
that, subject to limited exceptions, proved undeveloped reserves
may only be booked if they relate to wells scheduled to be
drilled within five years of the date of booking. This new rule
has limited and may continue to limit our potential to book
additional proved undeveloped reserves as we pursue our drilling
program, particularly as we develop our significant acreage in
Southeast New Mexico and West Texas. Moreover, we may be
required to write down our proved undeveloped reserves if we do
not drill on those reserves within the required five-year
timeframe.
The SEC has not reviewed our or any reporting companys
reserve estimates under the new rules and has released only
limited interpretive guidance regarding reporting of reserve
estimates under the new rules and may not issue further
interpretive guidance on the new rules. Accordingly, while the
estimates of our proved reserves at December 31, 2009
included in this prospectus supplement have been prepared based
on what we and our independent reserve engineers believe to be
reasonable interpretations of the new SEC rules, those estimates
could differ materially from any estimates we might prepare
applying more specific SEC interpretive guidance.
Drilling
for and producing oil and natural gas are high-risk activities
with many uncertainties that could cause our expenses to
increase or our cash flows and production volumes to
decrease.
Our future financial condition and results of operations will
depend on the success of our exploration, development and
production activities. Our oil and natural gas exploration,
development and production activities are subject to numerous
risks, including the risk that drilling will not result in
commercially viable oil or natural gas production. Our decisions
to purchase, explore or develop prospects or properties will
depend in part on the evaluation of data obtained through
geophysical and geological analyses, production data and
engineering studies, the results of which are often inconclusive
or subject to varying interpretations. Our cost of drilling,
completing, equipping and operating wells is often uncertain
before drilling commences. Overruns in budgeted expenditures are
common risks that can make a particular project uneconomical or
less economic than forecasted. Further, many factors may
curtail, delay or cancel drilling, including the following:
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delays imposed by or resulting from compliance with regulatory
and contractual requirements;
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pressure or irregularities in geological formations;
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S-7
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shortages of or delays in obtaining equipment and qualified
personnel;
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equipment failures or accidents;
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adverse weather conditions;
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reductions in oil and natural gas prices;
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surface access restrictions;
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loss of title or other title related issues;
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oil, natural gas liquids or natural gas gathering,
transportation and processing availability restrictions or
limitations; and
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limitations in the market for oil and natural gas.
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Estimates
of proved reserves and future net cash flows are not precise.
The actual quantities of our proved reserves and our future net
cash flows may prove to be lower than estimated.
Numerous uncertainties exist in estimating quantities of proved
reserves and future net cash flows therefrom. Our estimates of
proved reserves and related future net cash flows are based on
various assumptions, which may ultimately prove to be inaccurate.
Petroleum engineering is a subjective process of estimating
accumulations of oil
and/or
natural gas that cannot be measured in an exact manner.
Estimates of economically recoverable oil and natural gas
reserves and of future net cash flows depend upon a number of
variable factors and assumptions, including the following:
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historical production from the area compared with production
from other producing areas;
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the quality, quantity and interpretation of available relevant
data;
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the assumed effects of regulations by governmental agencies;
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assumptions concerning future commodity prices; and
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assumptions concerning future operating costs; severance, ad
valorem and excise taxes; development costs; and workover and
remedial costs.
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Because all reserve estimates are to some degree subjective,
each of the following items, or other items not identified
below, may differ materially from those assumed in estimating
reserves:
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the quantities of oil and natural gas that are ultimately
recovered;
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the production and operating costs incurred;
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the amount and timing of future development
expenditures; and
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future commodity prices.
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Furthermore, different reserve engineers may make different
estimates of reserves and cash flows based on the same data. Our
actual production, revenues and expenditures with respect to
reserves will likely be different from estimates and the
differences may be material.
Standardized Measure is a reporting convention that provides a
common basis for comparing oil and gas companies subject to the
rules and regulations of the SEC. It requires the use of
operating and development costs prevailing as of the date of
computation. Consequently, it may not reflect the prices
ordinarily received or that will be received for oil and natural
gas production because of seasonal price fluctuations or other
varying market conditions, nor may it reflect the actual costs
that will be required to produce or develop the oil and gas
properties. Accordingly, estimates included herein of future net
cash flows may be materially different from the future net cash
flows that are ultimately received. In addition, the ten percent
discount factor, which is required by the rules and regulations
of the SEC to be used in calculating
S-8
discounted future net cash flows for reporting purposes, may not
be the most appropriate discount factor based on interest rates
in effect from time to time and risks associated with our
company or the oil and gas industry in general. Therefore, the
estimates of discounted future net cash flows or Standardized
Measure included or incorporated by reference in this prospectus
supplement should not be construed as accurate estimates of the
current market value of our proved reserves. Any adjustments to
the estimates of proved reserves or decreases in the price of
oil or natural gas may decrease the value of our common stock.
Our
business requires substantial capital expenditures. We may be
unable to obtain needed capital or financing on satisfactory
terms or at all, which could lead to a decline in our oil and
natural gas reserves.
The oil and natural gas industry is capital intensive. We make
and expect to continue to make substantial capital expenditures
for the acquisition, exploration and development of oil and
natural gas reserves. At December 31, 2009, debt
outstanding under our credit facility was $550.0 million,
and $405.9 million was available to be borrowed. Following
the application of the proceeds of this offering in the manner
described in Use of Proceeds, we expect to have
approximately $359.5 million of outstanding indebtedness
and $596.4 million of availability under our credit
facility. Expenditures for exploration and development of oil
and natural gas properties are the primary use of our capital
resources. We incurred approximately $685 million in
acquisition, exploration and development activities during the
year ended December 31, 2009 on our properties, and under
our 2010 capital budget, we intend to invest approximately
$625 million for exploration and development activities,
dependent on our cash flow.
We intend to finance our future capital expenditures, other than
significant acquisitions, primarily through cash flow from
operations and through borrowings under our credit facility;
however, our financing needs may require us to alter or increase
our capitalization substantially through the issuance of debt or
equity securities. The issuance of additional equity securities
could have a dilutive effect on the value of our common stock.
Additional borrowings under our credit facility or the issuance
of additional debt securities will require that a greater
portion of our cash flow from operations be used for the payment
of interest and principal on our debt, thereby reducing our
ability to use cash flow to fund working capital, capital
expenditures and acquisitions. In addition, our credit facility
imposes certain limitations on our ability to incur additional
indebtedness other than indebtedness under our credit facility.
If we desire to issue additional debt securities other than as
expressly permitted under our credit facility, we will be
required to seek the consent of the lenders in accordance with
the requirements of the facility, which consent may be withheld
by the lenders under our credit facility in their discretion. If
we incur certain additional indebtedness, our borrowing base
under our credit facility will be reduced. Additional financing
also may not be available on acceptable terms or at all. In the
event additional capital resources are unavailable, we may
curtail drilling, development and other activities or be forced
to sell some of our assets on an untimely or unfavorable basis.
Our cash flow from operations and access to capital are subject
to a number of variables, including:
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our proved reserves;
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the level of oil and natural gas we are able to produce from
existing wells;
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the prices at which our oil and natural gas are sold;
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global credit and securities markets;
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the ability and willingness of lenders and investors to provide
capital and the cost of that capital; and
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our ability to acquire, locate and produce new reserves.
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If our revenues or the borrowing base under our credit facility
decrease as a result of lower oil or natural gas prices,
operating difficulties, declines in reserves, lending
requirements or regulations, or for any other reason, we may
have limited ability to obtain the capital necessary to sustain
our operations at current levels. As a result, we may require
additional capital to fund our operations, and we may not be
able to obtain debt or equity financing to satisfy our capital
requirements. If cash generated from operations or cash
available
S-9
under our credit facility is not sufficient to meet our capital
requirements, the failure to obtain additional financing could
result in a curtailment of our operations relating to the
development of our prospects, which in turn could lead to a
decline in our oil and natural gas reserves, and could adversely
affect our production, revenues and results of operations.
We are
subject to complex federal, state, local and other laws and
regulations that could adversely affect the cost, timing, manner
or feasibility of conducting our operations.
Our oil and natural gas exploration, development and production,
and related saltwater disposal operations are subject to complex
and stringent laws and regulations. In order to conduct our
operations in compliance with these laws and regulations, we
must obtain and maintain numerous permits, approvals and
certificates from various federal, state, local and governmental
authorities. We may incur substantial costs and experience
delays in order to maintain compliance with these existing laws
and regulations. In addition, our costs of compliance may
increase or our operations may be otherwise adversely affected
if existing laws and regulations are revised or reinterpreted,
or if new laws and regulations become applicable to our
operations. These and other costs could have a material adverse
effect on our production, revenues and results of operations.
Our business is subject to federal, state and local laws and
regulations as interpreted and enforced by governmental
authorities possessing jurisdiction over various aspects of the
exploration for, and the production of, oil and natural gas.
Failure to comply with such laws and regulations, as interpreted
and enforced, could have a material adverse effect on our
production, revenues and results of operations.
Our
operations expose us to significant costs and liabilities with
respect to environmental and operational safety
matters.
We may incur significant delays, costs and liabilities as a
result of environmental, health and safety requirements
applicable to our oil and natural gas exploration, development
and production, and related saltwater disposal activities. These
delays, costs and liabilities could arise under a wide range of
federal, state and local laws and regulations relating to
protection of the environment, health and safety, including
regulations and enforcement policies that have tended to become
increasingly strict over time. Failure to comply with these laws
and regulations may result in the assessment of administrative,
civil and criminal penalties, imposition of cleanup and site
restoration costs and liens, and, in some instances, issuance of
orders or injunctions limiting or requiring discontinuation of
certain operations. In addition, claims for damages to persons
or property, including natural resources, may result from the
environmental, health and safety impacts of our operations.
Strict as well as joint and several liability may be imposed
under certain environmental laws, which could cause us to become
liable for the conduct of others or for consequences of our own
actions that were in compliance with all applicable laws at the
time those actions were taken. New laws, regulations or
enforcement policies could be more stringent and impose
unforeseen liabilities or significantly increase compliance
costs. If we were not able to recover the resulting costs
through insurance or increased revenues, our production,
revenues and results of operations could be adversely affected.
We may
not be able to obtain funding at all, or obtain funding on
acceptable terms, to meet our future capital needs because of
the uncertainty in the credit and capital markets.
Global financial markets and economic conditions have been, and
will likely continue to be, uncertain and volatile. These
issues, along with significant write-offs in the financial
services sector, the re-pricing of credit risk and the ongoing
weak economic conditions have made, and will likely continue to
make, it difficult to obtain funding.
In particular, the cost of raising money in the debt and equity
capital markets has increased while the availability of funds
from those markets has diminished. Also, as a result of concern
about the stability of financial markets generally and the
solvency of counterparties specifically, the cost of obtaining
money from
S-10
the credit markets has increased as many lenders and
institutional investors have increased interest rates, enacted
tighter lending standards and reduced and, in some cases, ceased
to provide funding to borrowers.
In addition, our ability to obtain capital under our credit
facility may be impaired because of the downturn in the
financial market, including the issues surrounding the solvency
of certain institutional lenders and the failure of several
banks. Specifically, we may be unable to obtain adequate funding
under our credit facility because:
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our lending counterparties may be unwilling or unable to meet
their funding obligations;
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the borrowing base under our credit facility is redetermined at
least twice a year and may decrease due to a decrease in oil or
natural gas prices, operating difficulties, declines in
reserves, lending requirements or regulations, or for other
reasons; or
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if any lender is unable or unwilling to fund their respective
portion of any advance under our credit facility, then the other
lenders thereunder are not required to provide additional
funding to make up the portion of the advance that the
defaulting lender refused to fund.
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Due to these factors, we cannot be certain that funding will be
available if needed and to the extent required, on acceptable
terms. If funding is not available when needed, or is available
only on unfavorable terms, we may be unable to implement our
development plan, enhance our existing business, complete
acquisitions or otherwise take advantage of business
opportunities or respond to competitive pressures, any of which
could have a material adverse effect on our production, revenues
and results of operations.
Our
lenders can limit our borrowing capabilities, which may
materially impact our operations.
At December 31, 2009, we had approximately
$550.0 million of outstanding debt under our credit
facility, and our borrowing base was $955.9 million.
Following the application of the proceeds of this offering in
the manner described in Use of Proceeds, we expect
to have approximately $596.4 million of availability under
our credit facility. The borrowing base limitation under our
credit facility is semi-annually redetermined based upon a
number of factors, including commodity prices and reserve
levels. In addition to such semi-annual redeterminations, our
lenders may request one additional redetermination during any
twelve-month period. Upon a redetermination, our borrowing base
could be substantially reduced, and in the event the amount
outstanding under our credit facility at any time exceeds the
borrowing base at such time, we may be required to repay a
portion of our outstanding borrowings. If we incur certain
additional indebtedness, our borrowing base under our credit
facility will be reduced. We expect to utilize cash flow from
operations, bank borrowings, equity financings and asset sales
to fund our acquisition, exploration and development activities.
A reduction in our borrowing base could limit our activities. In
addition, we may significantly alter our capitalization in order
to make future acquisitions or develop our properties. These
changes in capitalization may significantly increase our level
of debt. If we incur additional debt for these or other
purposes, the related risks that we now face could intensify. A
higher level of debt also increases the risk that we may default
on our debt obligations. Our ability to meet our debt
obligations and to reduce our level of debt depends on our
future performance which is affected by general economic
conditions and financial, business and other factors, many of
which are beyond our control.
Our
producing properties are located primarily in the Permian Basin
of Southeast New Mexico and West Texas, making us vulnerable to
risks associated with operating in one major geographic area. In
addition, we have a large amount of proved reserves attributable
to a small number of producing horizons within this
area.
Our producing properties in our core operating areas are
geographically concentrated in the Permian Basin of Southeast
New Mexico and West Texas. At December 31, 2009,
approximately 97 percent of our proved reserves were
attributable to properties located in our core operating areas.
As a result of this concentration, we may be disproportionately
exposed to the impact of regional supply and demand factors,
delays or interruptions of production from wells in this area
caused by governmental regulation, processing or
S-11
transportation capacity constraints, market limitations, or
interruption of the processing or transportation of oil, natural
gas or natural gas liquids.
In addition to the geographic concentration of our producing
properties described above, at December 31, 2009,
approximately (i) 49.6 percent of our proved reserves
were attributable to the Yeso formation, which includes both the
Paddock and Blinebry intervals, underlying our oil and natural
gas properties located in Southeast New Mexico; and
(ii) 29.4 percent of our proved reserves were
attributable to the Wolfberry play in West Texas. This
concentration of assets within a small number of producing
horizons exposes us to additional risks, such as changes in
field-wide rules and regulations that could cause us to
permanently or temporarily shut-in all of our wells within a
field.
Future
price declines could result in a reduction in the carrying value
of our proved oil and natural gas properties, which could
adversely affect our results of operations.
Declines in commodity prices may result in having to make
substantial downward adjustments to our estimated proved
reserves. If this occurs, or if our estimates of production or
economic factors change, accounting rules may require us to
write-down, as a noncash charge to earnings, the carrying value
of our proved oil and natural gas properties for impairments. We
are required to perform impairment tests on proved assets
whenever events or changes in circumstances warrant a review of
our proved oil and natural gas properties. To the extent such
tests indicate a reduction of the estimated useful life or
estimated future cash flows of our oil and natural gas
properties, the carrying value may not be recoverable and
therefore require a write-down. We may incur impairment charges
in the future, which could materially adversely affect our
results of operations in the period incurred.
We
periodically evaluate our unproved oil and natural gas
properties for impairment, and could be required to recognize
noncash charges to earnings of future periods.
At September 30, 2009, we carried unproved property costs
of $273.3 million. GAAP requires periodic evaluation of
these costs on a
project-by-project
basis in comparison to their estimated fair value. These
evaluations will be affected by the results of exploration
activities, commodity price circumstances, planned future sales
or expiration of all or a portion of the leases, contracts and
permits appurtenant to such projects. If the quantity of
potential reserves determined by such evaluations is not
sufficient to fully recover the cost invested in each project,
we will recognize noncash charges to earnings of future periods.
Part
of our strategy involves exploratory drilling, including
drilling in new or emerging plays. As a result, our drilling
results in these areas are uncertain, and the value of our
undeveloped acreage will decline if drilling results are
unsuccessful.
The results of our exploratory drilling in new or emerging plays
are more uncertain than drilling results in areas that are
developed and have established production. Since new or emerging
plays and new formations have limited or no production history,
we are unable to use past drilling results in those areas to
help predict our future drilling results. As a result, our cost
of drilling, completing and operating wells in these areas may
be higher than initially expected, and the value of our
undeveloped acreage will decline if drilling results are
unsuccessful.
Our
commodity price risk management program may cause us to forego
additional future profits or result in our making cash payments
to our counterparties.
To reduce our exposure to changes in the prices of oil and
natural gas, we have entered into and may in the future enter
into additional commodity price risk management arrangements for
a portion of our oil and natural gas production. The agreements
that we have entered into generally have the effect of providing
us with a fixed price for a portion of our expected future oil
and natural gas production over a fixed period of time.
Commodity price risk management arrangements expose us to the
risk of financial loss and may limit
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our ability to benefit from increases in oil and natural gas
prices in some circumstances, including the following:
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the counterparty to a commodity price risk management contract
may default on its contractual obligations to us;
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there may be a change in the expected differential between the
underlying price in a commodity price risk management agreement
and actual prices received; or
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market prices may exceed the prices which we are contracted to
receive, resulting in our need to make significant cash payments
to our counterparties.
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Our commodity price risk management activities could have the
effect of reducing our revenues, net income and the value of our
common stock. At September 30, 2009, the net unrealized
asset on our commodity price risk management contracts was
$3.1 million. An average increase in the commodity price of
$10.00 per barrel of oil and $1.00 per Mcf for natural gas from
the commodity prices at September 30, 2009 would have
decreased the net unrealized value of our commodity price risk
management contracts by approximately $91 million. We may
continue to incur significant unrealized gains or losses in the
future from our commodity price risk management activities to
the extent market prices increase or decrease and our
derivatives contracts remain in place.
We
have entered into interest rate derivative instruments that may
subject us to loss of income.
We have entered into derivative instruments designed to limit
the interest rate risk under our current credit facility or any
credit facilities we may enter into in the future. These
derivative instruments can involve the exchange of a portion of
our floating rate interest obligations for fixed rate interest
obligations or a cap on our exposure to floating interest rates
to reduce our exposure to the volatility of interest rates.
While we may enter into instruments limiting our exposure to
higher market interest rates, we cannot assure you that any
interest rate derivative instruments we implement will be
effective. Furthermore, even if effective these instruments may
not offer complete protection from the risk of higher interest
rates.
All interest rate derivative instruments involve certain
additional risks, such as:
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the counterparty may default on its contractual obligations to
us;
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there may be issues with regard to the legal enforceability of
such instruments;
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the early repayment of our interest rate derivative instruments
could lead to prepayment penalties; or
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unanticipated and significant changes in interest rates may
cause a significant loss of basis in the instrument and a change
in current period expense.
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If we
enter into derivative instruments that require us to post cash
collateral, our cash otherwise available for use in our
operations would be reduced, which could limit our ability to
make future capital expenditures.
The use of derivatives may, in some cases, require the posting
of cash collateral with counterparties. If we enter into
derivative instruments that require cash collateral and
commodity prices or interest rates change in a manner adverse to
us, our cash otherwise available for use in our operations would
be reduced, which could limit our ability to make future capital
expenditures and make payments on our indebtedness. Future
collateral requirements will depend on arrangements with our
counterparties and highly volatile oil and natural gas prices
and interest rates.
Nonperformance
by the counterparties to our derivative instruments and
commodity purchase agreements could adversely affect our
financial condition and results of operations.
We routinely enter into derivative instruments with a number of
counterparties to reduce our exposure to changes in oil and
natural gas prices and interest rates. A number of financial
institutions similar to those
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that serve as counterparties to our derivative instruments have
been adversely affected by the global credit crisis. If a
counterparty to one of these derivative instruments cannot or
will not perform under the contract, we will not realize the
benefit of the derivative, which could adversely affect our
financial condition and results of operations.
Additionally, substantially all of our accounts receivable
result from oil and natural gas sales to third parties in the
energy industry. Recent market conditions have resulted in
downgrades to credit ratings of energy industry merchants and
financial institutions, affecting the liquidity of several of
our purchasers and counterparties. We extend credit to our
purchasers based on each partys creditworthiness, but we
generally have not required our purchasers to provide collateral
support for their obligations to us and therefore have no
assurances that our counterparties will have the ability to pay
us. If a purchaser of our oil and natural gas production fails
to meet its obligations under our commodity purchase agreement,
our financial condition and results of operations could be
adversely affected.
Our
identified inventory of drilling locations are scheduled out
over several years, making them susceptible to uncertainties
that could materially alter the occurrence or timing of their
drilling.
We have identified and scheduled the drilling of certain of our
drilling locations as an estimation of our future multi-year
development activities on our existing acreage. At
December 31, 2009, we had identified 3,695 drilling
locations with proved undeveloped reserves attributable to 1,726
of such locations. These identified locations represent a
significant part of our growth strategy. Our ability to drill
and develop these locations depends on a number of
uncertainties, including (i) our ability to timely drill
wells on lands subject to complex development terms and
circumstances; (ii) the availability of capital, equipment,
services and personnel; (iii) seasonal conditions;
(iv) regulatory and third party approvals; (v) oil and
natural gas prices, and (vi) drilling and recompletion
costs and results. Because of these uncertainties, we may never
drill the numerous potential locations we have identified or
produce oil or natural gas from these or any other potential
locations. As such, our actual development activities may
materially differ from those presently identified, which could
adversely affect our production, revenues and results of
operations.
Approximately
51 percent of our total estimated net proved reserves at
December 31, 2009 were undeveloped, and those reserves may
not ultimately be developed.
At December 31, 2009, approximately 51 percent of our
total estimated net proved reserves were undeveloped. Recovery
of undeveloped reserves requires significant capital
expenditures and successful drilling. Our reserve data assumes
that we can and will make these expenditures and conduct these
operations successfully. These assumptions, however, may not
prove correct. If we choose not to spend the capital to develop
these reserves, or if we are not otherwise able to successfully
develop these reserves, we will be required to write-off these
reserves. In addition, under the SECs recently updated
reserve rules, because proved undeveloped reserves may be booked
only if they relate to wells scheduled to be drilled within five
years of the date of booking, we may be required to write off
any proved undeveloped reserves that are not developed within
this five year timeframe. Any such write-offs of our reserves
could reduce our ability to borrow money and could reduce the
value of our securities.
Unless
we replace our oil and natural gas reserves, our reserves and
production will decline, which would adversely affect our cash
flow and ability to pay interest and principal on our
indebtedness, our ability to raise capital and the value of our
securities.
Unless we conduct successful development and exploration
activities or acquire properties containing proved reserves, our
proved reserves will decline as those reserves are produced.
Producing oil and natural gas reservoirs generally are
characterized by declining production rates that vary depending
upon reservoir characteristics and other factors. Our future oil
and natural gas reserves and production, and therefore our cash
flow and results of operations, are highly dependent on our
success in efficiently developing our current reserves and
economically finding or acquiring additional recoverable
reserves. The value of our securities and our ability to raise
capital and ability to pay interest and principal on our
indebtedness will be adversely impacted if we are not able to
replace our reserves that are depleted by production or
otherwise lost. We may
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not be able to develop, find or acquire sufficient additional
reserves to replace our current and future production.
We may
be unable to make attractive acquisitions or successfully
integrate acquired companies, and any inability to do so may
disrupt our business and hinder our ability to
grow.
One aspect of our business strategy calls for acquisitions of
businesses or assets that complement or expand our current
business. We may not be able to identify attractive acquisition
opportunities. Even if we do identify attractive candidates, we
may not be able to complete the acquisition of them or do so on
commercially acceptable terms.
In addition, our credit facility and the indenture governing our
8.625% senior notes due 2017 impose certain direct
limitations on our ability to enter into mergers or combination
transactions involving our company. Our credit facility and the
indenture governing our 8.625% senior notes due 2017 also
limit our ability to incur certain indebtedness, which could
indirectly limit our ability to engage in acquisitions of
businesses or assets. If we desire to engage in an acquisition
that is otherwise prohibited by our credit facility or the
indenture governing our 8.625% senior notes due 2017, we
will be required to seek the consent of our lenders or the
holders of the senior notes in accordance with the requirements
of the facility or the indenture, which consent may be withheld
by the lenders under our credit facility or such holders of
senior notes in their sole discretion. Furthermore, given the
current situation in the credit markets, many lenders are
reluctant to provide consents in any circumstances, including to
allow accretive transactions.
If we acquire another business or assets, we could have
difficulty integrating its operations, systems, management and
other personnel and technology with our own. These difficulties
could disrupt our ongoing business, distract our management and
employees, increase our expenses and adversely affect our
results of operations. In addition, we may incur additional debt
or issue additional equity to pay for any future acquisitions,
subject to the limitations described above.
Our
acquisitions may prove to be worth less than what we paid
because of uncertainties in evaluating recoverable reserves and
could expose us to potentially significant
liabilities.
We obtained the majority of our current reserve base through
acquisitions of producing properties and undeveloped acreage. We
expect that acquisitions will continue to contribute to our
future growth. In connection these and potential future
acquisitions, we are often only able to perform limited due
diligence.
Successful acquisitions of oil and natural gas properties
require an assessment of a number of factors, including
estimates of recoverable reserves, the timing of recovering
reserves, exploration potential, future oil and natural gas
prices, operating costs and potential environmental, regulatory
and other liabilities. Such assessments are inexact and we
cannot make these assessments with a high degree of accuracy. In
connection with our assessments, we perform a review of the
acquired properties. However, such a review will not reveal all
existing or potential problems. In addition, our review may not
permit us to become sufficiently familiar with the properties to
fully assess their deficiencies and capabilities. We do not
inspect every well. Even when we inspect a well, we do not
always discover structural, subsurface and environmental
problems that may exist or arise.
There may be threatened, contemplated, asserted or other claims
against the acquired assets related to environmental, title,
regulatory, tax, contract, litigation or other matters of which
we are unaware, which could materially and adversely affect our
production, revenues and results of operations. We are sometimes
able to obtain contractual indemnification for preclosing
liabilities, including environmental liabilities, but we
generally acquire interests in properties on an as
is basis with limited remedies for breaches of
representations and warranties. In addition, even when we are
able to obtain such indemnification from the sellers, these
indemnification obligations usually expire over time and expose
us to potential unindemnified liabilities, which could
materially adversely affect our production, revenues and results
of operations.
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Competition
in the oil and natural gas industry is intense, making it more
difficult for us to acquire properties, market oil and natural
gas and secure trained personnel.
We operate in a highly competitive environment for acquiring
properties, marketing oil and natural gas and securing trained
personnel. Many of our competitors possess and employ financial,
technical and personnel resources substantially greater than
ours, which can be particularly important in the areas in which
we operate. Those companies may be able to pay more for
productive oil and natural gas properties and exploratory
prospects and to evaluate, bid for and purchase a greater number
of properties and prospects than our financial or personnel
resources permit. In addition, those companies may be able to
offer better compensation packages to attract and retain
qualified personnel than we are able to offer. The cost to
attract and retain qualified personnel has increased over the
past few years due to competition and may increase substantially
in the future. Our ability to acquire additional prospects and
to find and develop reserves in the future will depend on our
ability to evaluate and select suitable properties and to
consummate transactions in a highly competitive environment.
Also, there is substantial competition for capital available for
investment in the oil and natural gas industry. We may not be
able to compete successfully in the future in acquiring
prospective reserves, developing reserves, marketing
hydrocarbons, attracting and retaining quality personnel and
raising additional capital. Our failure to acquire properties,
market oil and natural gas and secure trained personnel and
adequately compensate personnel could have a material adverse
effect on our production, revenues and results of operations.
Shortages
of oilfield equipment, services and qualified personnel could
delay our drilling program and increase the prices we pay to
obtain such equipment, services and personnel.
The demand for qualified and experienced field personnel to
drill wells and conduct field operations, geologists,
geophysicists, engineers and other professionals in the oil and
natural gas industry can fluctuate significantly, often in
correlation with oil and natural gas prices, causing periodic
shortages. Historically, there have been shortages of drilling
and workover rigs, pipe and other oilfield equipment as demand
for rigs and equipment has increased along with the number of
wells being drilled. These factors also cause significant
increases in costs for equipment, services and personnel. Higher
oil and natural gas prices generally stimulate demand and result
in increased prices for drilling and workover rigs, crews and
associated supplies, equipment and services. It is beyond our
control and ability to predict whether these conditions will
exist in the future and, if so, what their timing and duration
will be. These types of shortages or price increases could
significantly decrease our profit margin, cash flow and
operating results, or restrict our ability to drill the wells
and conduct the operations which we currently have planned and
budgeted or which we may plan in the future.
Our
exploration and development drilling may not result in
commercially productive reserves.
Drilling activities are subject to many risks, including the
risk that commercially productive reservoirs will not be
encountered. New wells that we drill may not be productive, or
we may not recover all or any portion of our investment in such
wells. The seismic data and other technologies we use do not
allow us to know conclusively prior to drilling a well that oil
or natural gas is present or may be produced economically.
Drilling for oil and natural gas often involves unprofitable
results, not only from dry holes but also from wells that are
productive but do not produce sufficient net reserves to return
a profit at then realized prices after deducting drilling,
operating and other costs. The cost of drilling, completing and
operating a well is often uncertain, and cost factors can
adversely affect the economics of a project. Further, our
drilling operations may be curtailed, delayed or canceled as a
result of numerous factors, including:
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unexpected drilling conditions;
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title problems;
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pressure or lost circulation in formations;
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equipment failures or accidents;
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adverse weather conditions;
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compliance with environmental and other governmental or
contractual requirements; and
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increases in the cost of, or shortages or delays in the
availability of, electricity, supplies, materials, drilling or
workover rigs, equipment and services.
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We may
incur substantial losses and be subject to substantial liability
claims as a result of our oil and natural gas operations. In
addition, we may not be insured for, or our insurance may be
inadequate to protect us against, these risks.
We are not insured against all risks. Losses and liabilities
arising from uninsured and underinsured events could materially
and adversely affect our business, financial condition or
results of operations. Our oil and natural gas exploration and
production activities are subject to all of the operating risks
associated with drilling for and producing oil and natural gas,
including the possibility of:
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environmental hazards, such as uncontrollable flows of oil,
natural gas, brine, well fluids, toxic gas or other pollution
into the environment, including groundwater contamination;
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abnormally pressured or structured formations;
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mechanical difficulties, such as stuck oilfield drilling and
service tools and casing collapse;
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fires, explosions and ruptures of pipelines;
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personal injuries and death; and
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natural disasters.
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Any of these risks could adversely affect our ability to conduct
operations or result in substantial losses to us as a result of:
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injury or loss of life;
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damage to and destruction of property, natural resources and
equipment;
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pollution and other environmental damage;
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regulatory investigations and penalties;
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suspension of our operations; and
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repair and remediation costs.
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We may elect not to obtain insurance if we believe that the cost
of available insurance is excessive relative to the risks
presented. In addition, pollution and environmental risks
generally are not fully insurable. The occurrence of an event
that is not covered or not fully covered by insurance could have
a material adverse effect on our production, revenues and
results of operations.
Market
conditions or operational impediments may hinder our access to
oil and natural gas markets or delay our
production.
Market conditions or the unavailability of satisfactory oil and
natural gas processing or transportation arrangements may hinder
our access to oil and natural gas markets or delay our
production. The availability of a ready market for our oil and
natural gas production depends on a number of factors, including
the demand for and supply of oil and natural gas, the proximity
of reserves to pipelines and terminal facilities, competition
for such facilities and the inability of such facilities to
gather, transport or process our production due to shutdowns or
curtailments arising from mechanical, operational or weather
related matters, including hurricanes and other severe weather
conditions. Our ability to market our production depends in
substantial part on the availability and capacity of gathering
and transportation systems, pipelines and processing facilities
owned and operated by third parties. Our failure to obtain such
services on acceptable terms could have a material adverse
effect on our business, financial condition and results of
operations. We may be required to shut in or otherwise curtail
production from wells due to lack of a market or inadequacy or
unavailability of
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oil, natural gas liquids or natural gas pipeline or gathering,
transportation or processing capacity. If that were to occur,
then we would be unable to realize revenue from those wells
until suitable arrangements were made to market our production.
Certain
federal income tax deductions currently available with respect
to oil and natural gas exploration and development may be
eliminated as a result of future legislation.
President Obamas Proposed Fiscal Year 2010 Budget includes
proposed legislation that would, if enacted into law, make
significant changes to U.S. tax laws, including the
elimination of certain key United States federal income tax
incentives currently available to oil and natural gas
exploration and production companies. These changes include, but
are not limited to, (i) the repeal of the percentage
depletion allowance for oil and natural gas properties,
(ii) the elimination of current deductions for intangible
drilling costs, (iii) the elimination of the deduction for
certain domestic production activities, and (iv) an
extension of the amortization period for certain geological and
geophysical expenditures. It is unclear whether any such changes
will be enacted or how soon any such changes could become
effective. The passage of any legislation as a result of these
proposals or any other similar changes in U.S. federal
income tax laws could eliminate or otherwise limit certain tax
deductions that are currently available with respect to oil and
natural gas exploration and development, and any such change
could negatively impact our financial condition and results of
operations.
The
adoption of climate change legislation by Congress could result
in increased operating costs and reduced demand for the oil and
natural gas we produce.
On June 26, 2009, the United States House of
Representatives approved adoption of the American Clean
Energy and Security Act of 2009, also known as the
Waxman-Markey
cap-and-trade
legislation or ACESA. The purpose of ACESA is to control
and reduce emissions of greenhouse gases, or
GHGs, in the United States. GHGs are certain gases,
including carbon dioxide and methane, that may be contributing
to warming of the Earths atmosphere and other climatic
changes. ACESA would establish an economy-wide cap on emissions
of GHGs in the United States and would require an overall
reduction in GHG emissions of 17% (from 2005 levels) by 2020,
and by over 80% by 2050. Under ACESA, most sources of GHG
emissions would be required to obtain GHG emission
allowances corresponding to their annual emissions
of GHGs. The number of emission allowances issued each year
would decline as necessary to meet ACESAs overall emission
reduction goals. As the number of GHG emission allowances
declines each year, the cost or value of allowances is expected
to escalate significantly. The net effect of ACESA would be to
impose increasing costs on the combustion of carbon-based fuels
such as oil, refined petroleum products, and natural gas.
On November 5, 2009, the United States Senate Committee on
Environment and Public Works approved the Clean Energy
Jobs and American Power Act of 2009 for controlling and
reducing emissions of GHGs in the United States. This bill
differs in certain areas from ACESA. If the Senate adopts GHG
legislation that is different from ACESA, the Senate legislation
would need to be reconciled with ACESA and both chambers would
be required to approve identical legislation before it could
become law. President Obama has indicated that he is in support
of the adoption of legislation to control and reduce emissions
of GHGs through an emission allowance permitting system that
results in fewer allowances being issued each year but that
allows parties to buy, sell and trade allowances as needed to
fulfill their GHG emission obligations. Although it is not
possible at this time to predict whether or when the Senate may
approve any climate change legislation or how any bill approved
by the Senate would be reconciled with ACESA, any laws or
regulations that may be adopted to restrict or reduce emissions
of GHGs could require us to incur increased operating costs, and
could have an adverse effect on demand for the oil and natural
gas we produce.
The
adoption of derivatives legislation by Congress could have an
adverse impact on our ability to hedge risks associated with our
business.
Congress is currently considering legislation to impose
restrictions on certain transactions involving derivatives,
which could affect the use of derivatives in hedging
transactions. ACESA contains provisions that would prohibit
private energy commodity derivative and hedging transactions.
ACESA would expand the
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power of the Commodity Futures Trading Commission, or CFTC, to
regulate derivative transactions related to energy commodities,
including oil and natural gas, and to mandate clearance of such
derivative contracts through registered derivative clearing
organizations. Under ACESA, the CFTCs expanded authority
over energy derivatives would terminate upon the adoption of
general legislation covering derivative regulatory reform. The
CFTC is considering whether to set limits on trading and
positions in commodities with finite supply, particularly energy
commodities, such as crude oil, natural gas and other energy
products. The CFTC also is evaluating whether position limits
should be applied consistently across all markets and
participants. Separately, the House of Representatives adopted
financial regulatory reform legislation on December 11,
2009, that among other things would impose comprehensive
regulation on the
over-the-counter
(OTC) derivatives marketplace. This legislation would subject
swap dealers and major swap participants to
substantial supervision and regulation, including capital
standards, margin requirements, business conduct standards, and
recordkeeping and reporting requirements. It also would require
central clearing for transactions entered into between swap
dealers or major swap participants, and would provide the CFTC
with authority to impose position limits in the OTC derivatives
markets. A major swap participant generally would be someone
other than a dealer who maintains a substantial net
position in outstanding swaps, excluding swaps used for
commercial hedging or for reducing or mitigating commercial
risk, or whose positions create substantial net counterparty
exposure that could have serious adverse effects on the
financial stability of the US banking system or financial
markets. Although it is not possible at this time to predict
whether or when Congress may act on derivatives legislation or
how any climate change bill approved by the Senate would be
reconciled with ACESA, any laws or regulations that may be
adopted that subject us to additional capital or margin
requirements relating to, or to additional restrictions on, our
trading and commodity positions could have an adverse effect on
our ability to hedge risks associated with our business or on
the cost of our hedging activity.
Federal
and state legislation and regulatory initiatives relating to
hydraulic fracturing could result in increased costs and
additional operating restrictions or delays.
Congress is currently considering legislation to amend the
federal Safe Drinking Water Act to require the disclosure of
chemicals used by the oil and natural gas industry in the
hydraulic fracturing process. Hydraulic fracturing is an
important and commonly used process in the completion of
unconventional natural gas wells in shale formations. This
process involves the injection of water, sand and chemicals
under pressure into rock formations to stimulate natural gas
production. Sponsors of two companion bills, which are currently
pending in the Energy and Commerce Committee and the
Environmental and Public Works Committee of the House of
Representatives and Senate, respectively, have asserted
that chemicals used in the fracturing process could adversely
affect drinking water supplies. The proposed legislation would
require the reporting and public disclosure of chemicals used in
the fracturing process, which could make it easier for third
parties opposing the hydraulic fracturing process to initiate
legal proceedings based on allegations that specific chemicals
used in the fracturing process could adversely affect
groundwater. In addition, this legislation, if adopted, could
establish an additional level of regulation at the federal level
that could lead to operational delays or increased operating
costs and could result in additional regulatory burdens. The
adoption of any future federal or state laws or implementing
regulations imposing reporting obligations on, or otherwise
limiting, the hydraulic fracturing process could make it more
difficult to complete natural gas wells in shale formations and
increase our costs of compliance and doing business.
The
loss of our chief executive officer or other key personnel could
negatively impact our ability to execute our business
strategy.
We depend, and will continue to depend in the foreseeable
future, on the services of our chief executive officer, Timothy
A. Leach, and other officers and key employees who have
extensive experience and expertise in evaluating and analyzing
producing oil and natural gas properties and drilling prospects,
maximizing production from oil and natural gas properties,
marketing oil and natural gas production, and developing and
executing acquisition, financing and hedging strategies. Our
ability to hire and retain our officers and key employees is
important to our continued success and growth. The unexpected
loss of the services of one or more of these individuals could
negatively impact our ability to execute our business strategy.
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Because
we do not control the development of certain of the properties
in which we own interests, but do not operate, we may not be
able to achieve any production from these properties in a timely
manner.
At December 31, 2009, approximately 3.5 percent of our
proved reserves were attributable to properties for which we
were not the operator. As a result, the success and timing of
drilling and development activities on such nonoperated
properties depend upon a number of factors, including:
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the nature and timing of drilling and operational activities;
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the timing and amount of capital expenditures;
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the operators expertise and financial resources;
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the approval of other participants in such properties; and
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the selection and application of suitable technology.
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If drilling and development activities are not conducted on
these properties or are not conducted on a timely basis, we may
be unable to increase our production or offset normal production
declines or we will be required to write-off the reserves
attributable thereto, which may adversely affect our production,
revenues and results of operations. Any such write-offs of our
reserves could reduce our ability to borrow money and could
reduce the value of our securities.
Uncertainties
associated with enhanced recovery methods may result in us not
realizing an acceptable return on our investments in such
projects.
We inject water into formations on some of our properties to
increase the production of oil and natural gas. We may in the
future expand these efforts to more of our properties or employ
other enhanced recovery methods in our operations. The
additional production and reserves, if any, attributable to the
use of enhanced recovery methods are inherently difficult to
predict. If our enhanced recovery methods do not allow for the
extraction of oil and natural gas in a manner or to the extent
that we anticipate, we may not realize an acceptable return on
our investments in such projects. In addition, if proposed
legislation and regulatory initiatives relating to hydraulic
fracturing become law, the cost of some of these enhanced
recovery methods could increase substantially.
Our
indebtedness could restrict our operations and make us more
vulnerable to adverse economic conditions.
We now have, and will continue to have, a significant amount of
indebtedness, and the terms of our credit facility require us to
pay higher interest rate margins as we utilize a larger
percentage of our available borrowing base. At December 31,
2009, we had total consolidated indebtedness of $845.8 million,
comprised of amounts outstanding under our credit facility and
our 8.625% senior notes due 2017. At December 31, 2009,
after giving effect to the issuance and sale of our common stock
in this offering and the application of the net proceeds
therefrom as set forth under Use of Proceeds to
repay a portion of the borrowings under our credit facility, we
would have had total consolidated indebtedness of
$655.3 million (net of discount). Assuming our total debt
outstanding at September 30, 2009 was held constant, if
interest rates had been higher or lower by one percent per
annum, on our variable interest rate indebtedness, our interest
expense for the year ended December 31, 2009 would have
increased or decreased by approximately $3.5 million.
Following the application of the proceeds of this offering in
the manner described in Use of Proceeds, we expect
to have approximately $596.4 million of availability under
our credit facility.
Our current and future indebtedness could have important
consequences to you. For example, it could:
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impair our ability to make investments and obtain additional
financing for working capital, capital expenditures,
acquisitions or other general corporate purposes;
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limit our ability to fund future capital expenditures and
working capital, to engage in future acquisitions or development
activities, or to otherwise fully realize the value of our
assets and
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S-20
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opportunities, because we must dedicate a substantial portion of
these funds to make principal and interest payments on our
indebtedness;
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limit our ability to borrow funds that may be necessary to
operate or expand our business;
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put us at a competitive disadvantage to competitors that have
less debt;
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increase our vulnerability to interest rate increases; and
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hinder our ability to adjust to rapidly changing economic and
industry conditions.
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Our ability to meet our debt service and other obligations may
depend in significant part on the extent to which we can
successfully implement our business strategy. We may not be able
to implement or realize the benefits of our business strategy.
In addition, if we fail to comply with the covenants or other
terms of any agreements governing our debt, our lenders may have
the right to accelerate the maturity of that debt and foreclose
upon any collateral securing that debt.
A
terrorist attack or armed conflict could harm our business by
decreasing our revenues and increasing our costs.
Terrorist activities, anti-terrorist efforts and other armed
conflict involving the United States may adversely affect the
United States and global economies and could prevent us from
meeting our financial and other obligations. If any of these
events occur or escalate, the resulting political instability
and societal disruption could reduce overall demand for oil and
natural gas, potentially putting downward pressure on demand for
our services and causing a reduction in our revenue. Oil and
natural gas related facilities could be direct targets of
terrorist attacks, and our operations could be adversely
impacted if significant infrastructure or facilities used for
the production, transportation, processing or marketing of oil
and natural gas production are destroyed or damaged. Costs for
insurance and other security may increase as a result of these
threats, and some insurance coverage may become more difficult
to obtain, if available at all.
Risks
Related to Our Common Stock
Our
restated certificate of incorporation, bylaws and Delaware law
contain provisions that could discourage acquisition bids or
merger proposals, which may adversely affect the market price of
our common stock.
Our restated certificate of incorporation authorizes our board
of directors to issue preferred stock without stockholder
approval. If our board of directors elects to issue preferred
stock, it could be more difficult for a third party to acquire
us. In addition, some provisions of our certificate of
incorporation, bylaws and Delaware law could make it more
difficult for a third party to acquire control of us, even if
the change of control would be beneficial to our stockholders,
including:
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the organization of our board of directors as a classified
board, which allows no more than approximately one-third of our
directors to be elected each year;
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stockholders cannot remove directors from our board of directors
except for cause and then only by the holders of not less than
662/3%
of the voting power of all outstanding voting stock;
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the prohibition of stockholder action by written
consent; and
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limitations on the ability of our stockholders to call special
meetings and establish advance notice provisions for stockholder
proposals and nominations for elections to the board of
directors to be acted upon at meetings of stockholders.
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Please read Description of Capital Stock
Anti-Takeover Provisions of our Certificate of Incorporation and
Bylaws in the accompanying prospectus for more information
about these provisions.
S-21
Because
we have no plans to pay dividends on our common stock, investors
must look solely to stock appreciation for a return on their
investment in us.
We do not anticipate paying any cash dividends on our common
stock in the foreseeable future. We currently intend to retain
all future earnings to fund the development and growth of our
business. Any payment of future dividends will be at the
discretion of our board of directors and will depend on, among
other things, our earnings, financial condition, capital
requirements, level of indebtedness, statutory and contractual
restrictions applying to the payment of dividends and other
considerations that our board of directors deems relevant.
Covenants contained in our credit facility and the indenture
governing our 8.625% senior notes due 2017 restrict the
payment of dividends. Investors must rely on sales of their
common stock after price appreciation, which may never occur, as
the only way to realize a return on their investment. Investors
seeking cash dividends should not purchase our common stock.
The
availability of shares for sale in the future could reduce the
market price of our common stock.
In the future, we may issue securities to raise cash for
acquisitions. We may also acquire interests in other companies
by using a combination of cash and our common stock or just our
common stock. We may also issue securities convertible into, or
exchangeable for, or that represent the right to receive, our
common stock. Any of these events may dilute your ownership
interest in our company, reduce our earnings per share and have
an adverse impact on the price of our common stock.
In addition, sales of a substantial amount of our common stock
in the public market, or the perception that these sales may
occur, could reduce the market price of our common stock. This
could also impair our ability to raise additional capital
through the sale of our securities.
S-22
USE OF
PROCEEDS
Our net proceeds from this offering will be approximately
$190.5 million (or approximately $219.2 million if the
underwriters exercise their over-allotment option in
full), after deducting fees and expenses (including underwriting
discounts and commissions). We intend to use all of the net
proceeds from this offering to repay a portion of the
outstanding borrowings under our credit facility.
Our credit facility matures on July 31, 2013. At
December 31, 2009, we had outstanding borrowings of
approximately $550.0 million under our credit facility,
which bore interest at a rate of approximately 2.8 percent.
Borrowings under the credit facility were incurred for general
corporate purposes, including our two recent acquisitions. See
Summary Recent Developments Recent
Acquisitions. Any amounts repaid with the proceeds from
this offering may be reborrowed in the future. Affiliates of
certain underwriters are lenders under our credit facility and
will receive a portion of the net proceeds of this offering,
which is being applied to repay a portion of such indebtedness.
See Underwriting Conflicts of Interest.
S-23
CAPITALIZATION
The following table sets forth our capitalization at
September 30, 2009:
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on an actual basis; and
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on an as adjusted basis to give effect to (i) the
completion of this offering and (ii) our application of the
estimated net proceeds from this offering in the manner
described in Use of Proceeds.
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You should read the information in this table together with our
consolidated financial statements and the related notes and the
information contained in the documents incorporated by reference
in the accompanying prospectus.
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September 30, 2009
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Actual
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As Adjusted
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(Unaudited)
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(In thousands)
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Cash and cash equivalents
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$
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15,695
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$
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15,695
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Long-term debt:
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Credit facility(a)
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$
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350,000
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$
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159,464
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8.625% Senior Notes due 2017(b)
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295,747
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295,747
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Total long-term debt
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645,747
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455,211
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Stockholders equity:
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Common stock, $0.001 par value; 300,000,000 authorized;
85,605,502 shares issued at September 30, 2009 actual;
90,255,502 shares issued at September 30, 2009 as
adjusted(c)
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86
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90
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Additional paid-in capital
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1,023,543
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1,214,075
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Retained earnings
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289,488
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289,488
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Treasury stock, at cost; 12,380 shares at
September 30, 2009 actual and as adjusted
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(417
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)
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(417
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)
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Total stockholders equity
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1,312,700
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1,503,236
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Total capitalization
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$
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1,958,447
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$
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1,958,447
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(a) |
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As of December 31, 2009, outstanding borrowings under our
credit facility totaled $550.0 million. |
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(b) |
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The $300 million aggregate principal amount of notes are
recorded at their discounted amount, with the discount to be
amortized over the life of the notes. |
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(c) |
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As of December 31, 2009, we had 85,803,546 shares of common
stock outstanding and, as adjusted for this offering, would have
had 90,543,546 shares outstanding (or
91,151,046 shares if the underwriters exercise their
over-allotment option in full). |
S-24
PRICE
RANGE OF COMMON STOCK
Our common stock is quoted on the New York Stock Exchange under
the symbol CXO. The following table shows, for the
periods indicated, the high and low reported sale prices for our
common stock, as reported on the New York Stock Exchange.
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Sales Price
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High
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Low
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2008:
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First quarter
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$
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26.44
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$
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17.33
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Second quarter
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$
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40.97
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$
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25.12
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Third quarter
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$
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39.07
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$
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22.31
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Fourth quarter
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$
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27.79
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$
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14.71
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2009:
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First quarter
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$
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28.10
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$
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17.29
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Second quarter
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$
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33.57
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$
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23.50
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Third quarter
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$
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38.70
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$
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25.17
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Fourth quarter
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$
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47.00
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$
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33.71
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2010:
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First quarter (through January 26, 2010)
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$
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47.64
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$
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42.60
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On January 26, 2010, the last sales price of our common
stock as reported on the New York Stock Exchange was
$42.86 per share.
As of January 19, 2010, there were approximately 318
holders of record of our common stock.
DIVIDEND
POLICY
We have not paid, and do not intend to pay in the foreseeable
future, cash dividends on our common stock. Covenants contained
in our credit facility and the indenture governing our
8.625% senior notes due 2017 restrict the payment of
dividends on our common stock. We currently intend to retain all
future earnings to fund the development and growth of our
business. Any payment of future dividends will be at the
discretion of our board of directors and will depend on, among
other things, our earnings, financial condition, capital
requirements, level of indebtedness, statutory and contractual
restrictions applying to the payment of dividends and other
considerations that our board of directors deems relevant.
S-25
CERTAIN
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES FOR
NON-U.S.
HOLDERS OF OUR COMMON STOCK
The following is a summary of certain United States federal
income tax, and, to a limited extent, estate tax consequences to
Non-U.S. holders
with respect to the acquisition, ownership and disposition of
our common stock. A
Non-U.S. holder
for purposes of this discussion is any beneficial owner of our
common stock who acquires such stock for cash pursuant to the
terms of this prospectus supplement and who is not:
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an individual citizen or resident of the United States,
including an alien individual who is a lawful permanent resident
of the United States or meets the substantial
presence test under section 7701(b)(3) of the
Internal Revenue Code of 1986, as amended (the Code);
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a corporation (including an entity treated as a corporation for
United States federal income tax purposes) created or organized
in the United States or under the laws of the United States, any
state thereof, or the District of Columbia;
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a partnership (or an entity treated as a partnership for United
States federal income tax purposes);
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an estate, the income of which is subject to United States
federal income tax regardless of its source; or
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a trust (i) if a United States court can exercise primary
supervision over the administration of the trust and one or more
United States persons can control all substantial decisions of
the trust, or (ii) that has a valid election in effect
under applicable Treasury Regulations to be treated as a United
States person.
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This discussion is based on current provisions of the Code,
final, temporary and proposed Treasury Regulations, judicial
opinions, published positions of the Internal Revenue Service
(the IRS) and administrative and judicial
authorities, all of which are subject to change, possibly with
retroactive effect, or are subject to different interpretations.
This discussion assumes that a
Non-U.S. holder
holds our common stock as a capital asset (generally, property
held for investment). This discussion does not address all
aspects of United States federal income and estate taxation
or any aspects of state, local, or
non-U.S. taxation,
nor does it consider any specific facts or circumstances that
may apply to particular
Non-U.S. holders
that may be subject to special treatment under the United States
federal income tax laws, such as (without limitation):
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certain United States expatriates;
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shareholders that hold our common stock as part of a straddle,
constructive sale transaction, synthetic security, hedge,
conversion transaction or other integrated investment or risk
reduction transaction;
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shareholders that acquired our common stock through the exercise
of employee stock options or otherwise as compensation or
through a tax-qualified retirement plan;
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shareholders that are partnerships or other pass-through
entities or holders of interests therein;
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financial institutions;
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insurance companies;
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tax-exempt entities;
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dealers in securities or foreign currency; and
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traders in securities that use a
mark-to-market
method of accounting for United States federal income tax
purposes.
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If a partnership (including an entity treated as a partnership
for United States federal income tax purposes) holds our common
stock, the tax treatment of a partner of the partnership
generally will depend upon the status of the partner and the
activities of the partnership. If you are a partner of a
partnership
S-26
(including an entity treated as a partnership for United States
federal income tax purposes) holding our common stock, you
should consult your tax advisor.
INVESTORS CONSIDERING THE PURCHASE OF OUR COMMON STOCK SHOULD
CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE APPLICATION OF
UNITED STATES FEDERAL INCOME AND ESTATE TAX LAWS TO THEIR
PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES ARISING
UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING
JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY.
Dividends
We do not expect to pay any cash distributions on our common
stock in the foreseeable future. However, in the event we do
make cash distributions, such distributions will be treated as
dividends to the extent of our current and accumulated earnings
and profits as determined under the Code and will be subject to
withholding as discussed below. Any portion of a distribution
that exceeds our current and accumulated earnings and profits
will first be applied to reduce the
Non-U.S. holders
basis in the common stock and, to the extent such portion
exceeds the
Non-U.S. holders
basis, the excess will be treated as gain from the disposition
of the common stock, the tax treatment of which is discussed
below under Gain on Sale or Other Disposition
of Common Stock
Dividends paid to a
Non-U.S. holder
on our common stock will generally be subject to United States
withholding tax at a rate of 30% or such lower rate as may be
specified by an applicable income tax treaty A
Non-U.S. holder
of our common stock that wishes to claim the benefit of an
applicable treaty rate for dividends will be required to
(i) complete IRS
Form W-8BEN
(or other applicable form) and certify under penalties of
perjury that such holder is not a United States person as
defined under the Code and is eligible for treaty benefits, or
(ii) if our common stock is held through certain foreign
intermediaries, satisfy the relevant certification requirements
of applicable Treasury Regulations. A
Non-U.S. holder
of our common stock that is eligible for a reduced rate of
United States withholding tax pursuant to an income tax treaty
may obtain a refund of any excess amounts withheld by timely
filing an appropriate claim for refund with the IRS.
Dividends that are effectively connected with the conduct of a
trade or business by the
Non-U.S. holder
within the United States (and, where a tax treaty applies, are
attributable to a permanent establishment maintained by the
Non-U.S. holder
in the United States) are not subject to United States
withholding tax, provided certain certification and disclosure
requirements are satisfied. Instead, such dividends are subject
to United States federal income tax on a net income basis in the
same manner as if the
Non-U.S. holder
were a United States person as defined under the Code, unless an
applicable income tax treaty provides otherwise. Any such
effectively connected dividends received by a foreign
corporation may be subject to an additional branch profits
tax at a 30% rate or such lower rate as may be specified
by an applicable income tax treaty.
Gain on
Sale or Other Disposition of Common Stock
In general, a
Non-U.S. holder
will not be subject to United States federal income tax on any
gain realized upon the sale or other taxable disposition of the
Non-U.S. holders
shares of common stock unless:
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the gain is effectively connected with a trade or business
carried on by the
Non-U.S. holder
within the United States (and, where an income tax treaty so
requires, is attributable to a United States permanent
establishment maintained by the
Non-U.S. holder);
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the
Non-U.S. holder
is an individual who is present in the United States for
183 days or more in the taxable year of disposition and
certain other conditions are met; or
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we are or have been a United States real property holding
corporation or USRPHC for United States federal
income tax purposes at any time during the shorter of the period
during which such
Non-U.S. holder
holds our stock or the five-year period ending on the date such
Non-U.S. holder
disposes of our stock.
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S-27
A non-corporate
Non-U.S. holder
described in the first bullet point above will be subject to tax
on the net gain realized from the sale or other disposition
under regular graduated U.S. federal income tax rates in
the same manner as if it were a United States person. If a
Non-U.S. holder
that is a foreign corporation is described in the first bullet
point above, it will be subject to tax on its net gain in the
same manner as if it were a United States person and may also be
subject to the branch profits tax at a rate of 30% of its
effectively connected earnings and profits or at such lower rate
as may be specified by an applicable income tax treaty.
An individual
Non-U.S. holder
described in the second bullet point above will be subject to a
flat 30% tax on the gain derived from the sale or other
disposition, which may be offset by U.S. source capital
losses, even though the individual is not considered a resident
of the United States.
Because of the oil and natural gas properties and other real
property assets we own, we believe that we are and will remain a
USRPHC. However, so long as our common stock continues to be
regularly traded on an established securities market, only a
Non-U.S. holder
who owns or has owned (actually or by applying certain
constructive ownership rules) at any time during the shorter of
the five-year period preceding the date of disposition or the
holders holding period more than 5% of our common stock
will be subject to United States federal income tax on the
disposition of such common stock by reason of our status as a
USRPHC.
Information
Reporting and Backup Withholding
We must report annually to the IRS and to a
Non-U.S. holder
the amount of dividends paid to such holder and any tax withheld
with respect to those dividends, regardless of whether
withholding is required. Copies of the information returns may
also be made available to the tax authorities in the country in
which the
Non-U.S.
holder resides under the provisions of an applicable income tax
treaty. United States backup withholding tax will be imposed
(currently at a rate of 28%, but that rate is scheduled to
increase to 31% effective January 1, 2011) on certain
payments to persons that fail to furnish the information
required under the United States information reporting
requirements. A
Non-U.S. holder
will be exempt from this backup withholding if such holder
properly provides a
Form W-8BEN
certifying that it is not a United States person or otherwise
meets documentary evidence requirements for establishing that it
is not a United States person or otherwise establishes an
exemption.
The gross proceeds from the disposition of our common stock may
be subject to information reporting and backup withholding. If a
Non-U.S. holder
sells our common stock outside the United States through a
non-U.S. office
of a
non-U.S. broker
and the sales proceeds are paid to the
Non-U.S. holder
outside the United States, then the United States backup
withholding and information reporting requirements generally
will not apply to that payment. However, unless such a broker
has documentary evidence in its records that the
Non-U.S. holder
is not a United States person and certain other conditions are
met, or the
Non-U.S.
holder otherwise establishes an exemption, information reporting
will apply to a payment of the proceeds of the disposition of a
note effected outside the United States by such a broker if it
is:
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a United States person;
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a foreign person that derives 50% or more of its gross income
for certain periods from the conduct of a trade or business in
the United States;
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a controlled foreign corporation for U.S. federal income
tax purposes; or
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a foreign partnership that, at any time during its taxable year,
has more than 50% of its income or capital interests owned by
United States persons or is engaged in the conduct of a
U.S. trade or business.
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Backup withholding is not an additional tax. Any amount withheld
under the backup withholding rules is allowable as a credit
against the
Non-U.S. holders
U.S. federal income tax liability, if any, and a refund may
be obtained if the amounts withheld exceed such holders
actual U.S. federal income tax liability and the required
information or appropriate claim form is timely provided to the
IRS.
S-28
Federal
Estate Tax
Our common stock owned or treated as owned by an individual who
is not a citizen or resident of the United States (as
specifically defined for United States federal estate tax
purposes) at the time of death will be includible in the
individuals gross estate for United States federal estate
tax purposes, unless an applicable estate tax treaty provides
otherwise.
Certain
Legislative Developments
Recently proposed legislation (which was passed by the House of
Representatives) would generally impose, effective for payments
made after December 31, 2012, a withholding tax of 30% on
dividends from, and the gross proceeds of a disposition of,
stock paid to certain foreign entities unless various
information reporting and due diligence requirements are
satisfied. There can be no assurance as to whether or not this
proposed legislation will be enacted, and, if it is enacted,
what form it will take or when it will be effective.
Non-U.S. holders
are encouraged to consult their own tax advisors regarding the
possible implications of this proposed legislation on their
investment in our common stock.
THE PRECEDING DISCUSSION OF CERTAIN UNITED STATES FEDERAL INCOME
AND ESTATE TAX CONSEQUENCES FOR
NON-U.S. HOLDERS
OF OUR COMMON STOCK IS FOR GENERAL INFORMATION ONLY AND SHOULD
NOT BE CONSIDERED TAX ADVICE. EACH PROSPECTIVE INVESTOR SHOULD
CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR UNITED
STATES FEDERAL, STATE, LOCAL AND
NON-U.S. TAX
CONSEQUENCES OF ACQUISITION, OWNERSHIP AND DISPOSITION OF OUR
COMMON STOCK, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE
IN APPLICABLE LAWS.
S-29
UNDERWRITING
Merrill Lynch, Pierce, Fenner & Smith Incorporated,
J.P. Morgan Securities Inc. and UBS Securities LLC are acting as
representatives of each of the underwriters named below. Subject
to the terms and conditions set forth in an underwriting
agreement between us and the underwriters, we have agreed to
sell to the underwriters, and each of the underwriters has
agreed, severally and not jointly, to purchase from us, the
number of shares of common stock set forth opposite its name
below.
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Number
|
Underwriter
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of Shares
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Merrill Lynch, Pierce, Fenner & Smith
Incorporated
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1,627,500
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J.P. Morgan Securities Inc.
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697,500
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UBS Securities LLC
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697,500
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Barclays Capital Inc.
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209,250
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Raymond James & Associates, Inc.
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209,250
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SunTrust Robinson Humphrey, Inc.
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209,250
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Tudor, Pickering, Holt & Co. Securities, Inc.
|
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209,250
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Wells Fargo Securities, LLC
|
|
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209,250
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Boenning & Scattergood, Inc.
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96,875
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Canaccord Adams Inc.
|
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|
96,875
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|
Dahlman Rose & Company, LLC
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|
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96,875
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Howard Weil Incorporated
|
|
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96,875
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KeyBanc Capital Markets Inc.
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|
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96,875
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Lazard Capital Markets LLC
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96,875
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Total
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4,650,000
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Subject to the terms and conditions set forth in the
underwriting agreement, the underwriters have agreed, severally
and not jointly, to purchase all of the shares sold under the
underwriting agreement if any of these shares are purchased. If
an underwriter defaults, the underwriting agreement provides
that the purchase commitments of the nondefaulting underwriters
may be increased or the underwriting agreement may be terminated.
We have agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act, or
to contribute to payments the underwriters may be required to
make in respect of those liabilities.
The underwriters are offering the shares, subject to prior sale,
when, as and if issued to and accepted by them, subject to
approval of legal matters by their counsel, including the
validity of the shares, and other conditions contained in the
underwriting agreement, such as the receipt by the underwriters
of officers certificates and legal opinions. The
underwriters reserve the right to withdraw, cancel or modify
offers to the public and to reject orders in whole or in part.
Commissions
and Discounts
The underwriters propose initially to offer the shares to the
public at the public offering price set forth on the cover page
of this prospectus supplement and to dealers at that price less
a concession not in excess of $1.02 per share. After the initial
offering, the public offering price, concession, or any other
term of the offering may be changed.
S-30
The following table shows the public offering price,
underwriting discount and proceeds before expenses to us. The
information assumes either no exercise or full exercise by the
underwriters of their over-allotment option.
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Per Share
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Without Option
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With Option
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Public offering price
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$42.75
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$198,787,500
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$228,605,625
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Underwriting discount
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$1.71
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$7,951,500
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$9,144,225
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Proceeds, before expenses, to us
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$41.04
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$190,836,000
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$219,461,400
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The expenses of the offering, not including the underwriting
discount, are estimated at $300,000 and are payable by us.
Over-allotment
Option
We have granted an option to the underwriters to purchase up to
697,500 additional shares at the public offering price,
less the underwriting discount. The underwriters may exercise
this option for 30 days from the date of this prospectus
supplement solely to cover any over-allotments. If the
underwriters exercise this option, each will be obligated,
subject to conditions contained in the underwriting agreement,
to purchase a number of additional shares proportionate to that
underwriters initial amount reflected in the above table.
No Sales
of Similar Securities
We have agreed that we will not offer, sell, contract to sell,
pledge or otherwise dispose of, directly or indirectly, or file
with the SEC a registration statement under the Securities Act
of 1933 relating to, any shares of our common stock or
securities convertible into or exchangeable or exercisable for
any shares of our common stock, or publicly disclose the
intention to make any offer, sale, pledge, disposition or
filing, without the prior written consent of Merrill Lynch,
Pierce, Fenner & Smith Incorporated for a period of
60 days after the date of this prospectus supplement.
Our directors and executive officers have entered into lock up
agreements with the underwriters prior to the commencement of
this offering pursuant to which we and each of these persons or
entities, with limited exceptions, for a period of 60 days
after the date of this prospectus supplement, may not, without
the prior written consent of Merrill Lynch, Pierce,
Fenner & Smith Incorporated, (1) offer, pledge,
announce the intention to sell, grant any option, right or
warrant to purchase, or otherwise transfer or dispose of,
directly or indirectly, any shares of our common stock
(including, without limitation, common stock which may be deemed
to be beneficially owned by such directors, executive officers,
managers and members in accordance with the rules and
regulations of the SEC and securities which may be issued upon
exercise of a stock option or warrant) or (2) enter into
any swap or other agreement that transfers, in whole or in part,
any of the economic consequences of ownership of the common
stock, whether any such transaction described in clause (1)
or (2) above is to be settled by delivery of common stock
or such other securities, in cash or otherwise. Notwithstanding
the foregoing, such persons may (i) transfer any securities
during the lock up period in accordance with the directors
or officers existing
Rule 10b5-1
trading plans and (ii) enter into any new, or renew or
amend any existing,
Rule 10b5-1
trading plan, provided that in connection with the entry,
renewal or amendment of such plan no shares of common stock
shall be scheduled for sale thereunder during the lock up
period. Under these
Rule 10b5-1
trading plans, these individuals have contracted or will
contract with brokers to buy or sell our securities on a
periodic basis. Under these plans, a broker executes trades
pursuant to the parameters established by the executive officer
or director at the time of the creation of the plan, without
further direction from them. One of our directors has an
existing
Rule 10b5-1
trading plan pursuant to which he will dispose of
56,125 shares during the
60-day lock
up period.
New York
Stock Exchange
The shares are listed on the New York Stock Exchange under the
symbol CXO.
S-31
Price
Stabilization, Short Positions
Until the distribution of the shares is completed, SEC rules may
limit underwriters and selling group members from bidding for
and purchasing our common stock. However, the representatives
may engage in transactions that stabilize the price of the
common stock, such as bids or purchases to peg, fix or maintain
that price.
In connection with the offering, the underwriters may purchase
and sell our common stock in the open market. These transactions
may include short sales, purchases on the open market to cover
positions created by short sales and stabilizing transactions.
Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the
offering. Covered short sales are sales made in an
amount not greater than the underwriters over-allotment
option described above. The underwriters may close out any
covered short position by either exercising their over-allotment
option or purchasing shares in the open market. In determining
the source of shares to close out the covered short position,
the underwriters will consider, among other things, the price of
shares available for purchase in the open market as compared to
the price at which they may purchase shares through the
over-allotment option. Naked short sales are sales
in excess of the over-allotment option. The underwriters must
close out any naked short position by purchasing shares in the
open market. A naked short position is more likely to be created
if the underwriters are concerned that there may be downward
pressure on the price of our common stock in the open market
after pricing that could adversely affect investors who purchase
in the offering. Stabilizing transactions consist of various
bids for or purchases of shares of common stock made by the
underwriters in the open market prior to the completion of the
offering.
Similar to other purchase transactions, the underwriters
purchases to cover the syndicate short sales may have the effect
of raising or maintaining the market price of our common stock
or preventing or retarding a decline in the market price of our
common stock. As a result, the price of our common stock may be
higher than the price that might otherwise exist in the open
market. The underwriters may conduct these transactions on the
New York Stock Exchange, in the
over-the-counter
market or otherwise.
Neither we nor any of the underwriters make any representation
or prediction as to the direction or magnitude of any effect
that the transactions described above may have on the price of
our common stock. In addition, neither we nor any of the
underwriters make any representation that the representatives
will engage in these transactions or that these transactions,
once commenced, will not be discontinued without notice.
Electronic
Offer, Sale and Distribution of Shares
In connection with the offering, certain of the underwriters or
securities dealers may distribute prospectuses by electronic
means, such as
e-mail. In
addition, one or more of the underwriters may facilitate
internet distribution for this offering to certain of its
internet subscription customers. Such underwriters may allocate
a limited number of shares for sale to its online brokerage
customers. Other than the prospectus in electronic format, the
information on the underwriters web sites is not part of
this prospectus.
Notice to
Prospective Investors in the EEA
In relation to each Member State of the European Economic Area
which has implemented the Prospectus Directive (each, a
Relevant Member State) an offer to the public of any
shares which are the subject of the offering contemplated by
this prospectus may not be made in that Relevant Member State,
except that an offer to the public in that Relevant Member State
of any shares may be made at any time under the following
exemptions under the Prospectus Directive, if they have been
implemented in that Relevant Member State:
(a) to legal entities which are authorized or regulated to
operate in the financial markets or, if not so authorized or
regulated, whose corporate purpose is solely to invest in
securities;
(b) to any legal entity which has two or more of
(1) an average of at least 250 employees during the
last financial year; (2) a total balance sheet of more than
43,000,000 and (3) an annual net turnover of more
than 50,000,000, as shown in its last annual or
consolidated accounts;
S-32
(c) by the underwriters to fewer than 100 natural or legal
persons (other than qualified investors as defined
in the Prospectus Directive) subject to obtaining the prior
consent of the representatives for any such offer; or
(d) in any other circumstances falling within
Article 3(2) of the Prospectus Directive;
provided that no such offer of shares shall result in a
requirement for the publication by us or any representative of a
prospectus pursuant to Article 3 of the Prospectus
Directive.
Any person making or intending to make any offer of shares
within the EEA should only do so in circumstances in which no
obligation arises for us or any of the underwriters to produce a
prospectus for such offer. Neither we nor the underwriters have
authorized, nor do they authorize, the making of any offer of
shares through any financial intermediary, other than offers
made by the underwriters which constitute the final offering of
shares contemplated in this prospectus.
For the purposes of this provision, and your representation
below, the expression an offer to the public in
relation to any shares in any Relevant Member State means the
communication in any form and by any means of sufficient
information on the terms of the offer and any shares to be
offered so as to enable an investor to decide to purchase any
shares, as the same may be varied in that Relevant Member State
by any measure implementing the Prospectus Directive in that
Relevant Member State and the expression Prospectus
Directive means Directive 2003/71/EC and includes any
relevant implementing measure in each Relevant Member State.
Each person in a Relevant Member State who receives any
communication in respect of, or who acquires any shares under,
the offer of shares contemplated by this prospectus will be
deemed to have represented, warranted and agreed to and with us
and each underwriter that:
(A) it is a qualified investor within the
meaning of the law in that Relevant Member State implementing
Article 2(1)(e) of the Prospectus Directive; and
(B) in the case of any shares acquired by it as a financial
intermediary, as that term is used in Article 3(2) of the
Prospectus Directive, (i) the shares acquired by it in the
offering have not been acquired on behalf of, nor have they been
acquired with a view to their offer or resale to, persons in any
Relevant Member State other than qualified investors
(as defined in the Prospectus Directive), or in circumstances in
which the prior consent of the representatives has been given to
the offer or resale; or (ii) where shares have been
acquired by it on behalf of persons in any Relevant Member State
other than qualified investors, the offer of those shares to it
is not treated under the Prospectus Directive as having been
made to such persons.
In addition, in the United Kingdom, this document is being
distributed only to, and is directed only at, and any offer
subsequently made may only be directed at persons who are
qualified investors (as defined in the Prospectus
Directive) (i) who have professional experience in matters
relating to investments falling within Article 19
(5) of the Financial Services and Markets Act 2000
(Financial Promotion) Order 2005, as amended (the
Order)
and/or
(ii) who are high net worth companies (or persons to whom
it may otherwise be lawfully communicated) falling within
Article 49(2)(a) to (d) of the Order (all such persons
together being referred to as relevant persons).
This document must not be acted on or relied on in the United
Kingdom by persons who are not relevant persons. In the United
Kingdom, any investment or investment activity to which this
document relates is only available to, and will be engaged in
with, relevant persons.
Notice to
Prospective Investors in Switzerland
This document, as well as any other material relating to the
shares which are the subject of the offering contemplated by
this prospectus, do not constitute an issue prospectus pursuant
to Article 652a
and/or 1156
of the Swiss Code of Obligations. The shares will not be listed
on the SIX Swiss Exchange and, therefore, the documents relating
to the shares, including, but not limited to, this document, do
not claim to comply with the disclosure standards of the listing
rules of SIX Swiss Exchange and corresponding prospectus schemes
annexed to the listing rules of the SIX Swiss Exchange. The
shares are being offered in Switzerland
S-33
by way of a private placement, i.e., to a small number of
selected investors only, without any public offer and only to
investors who do not purchase the shares with the intention to
distribute them to the public. The investors will be
individually approached by the issuer from time to time. This
document, as well as any other material relating to the shares,
is personal and confidential and do not constitute an offer to
any other person. This document may only be used by those
investors to whom it has been handed out in connection with the
offering described herein and may neither directly nor
indirectly be distributed or made available to other persons
without express consent of the issuer. It may not be used in
connection with any other offer and shall in particular not be
copied
and/or
distributed to the public in (or from) Switzerland.
Notice to
Prospective Investors in the Dubai International Financial
Centre
This document relates to an exempt offer in accordance with the
Offered Securities Rules of the Dubai Financial Services
Authority. This document is intended for distribution only to
persons of a type specified in those rules. It must not be
delivered to, or relied on by, any other person. The Dubai
Financial Services Authority has no responsibility for reviewing
or verifying any documents in connection with exempt offers. The
Dubai Financial Services Authority has not approved this
document nor taken steps to verify the information set out in
it, and has no responsibility for it. The shares which are the
subject of the offering contemplated by this prospectus may be
illiquid
and/or
subject to restrictions on their resale. Prospective purchasers
of the shares offered should conduct their own due diligence on
the shares. If you do not understand the contents of this
document you should consult an authorised financial adviser.
Conflicts
of Interest
Certain of the underwriters and their affiliates have in the
past provided, and may in the future provide, investment
banking, commercial banking, derivative transactions and
financial advisory services to us and our affiliates in the
ordinary course of business. Specifically, affiliates of the
underwriters serve various roles in our credit facility; Bank of
America, N.A., an affiliate of Merrill Lynch, Pierce,
Fenner & Smith Incorporated, serves as syndication
agent and a lender; JPMorgan Chase Bank, N.A., an affiliate of
J.P. Morgan Securities Inc., serves as administrative
agent, a lender, L/C issuer and swing line lender; SunTrust
Bank, an affiliate of SunTrust Robinson Humphrey, Inc., serves
as a lender; Wachovia Bank, National Association, and Wells
Fargo Bank, National Association, affiliates of Wells Fargo
Securities, LLC, serve as lenders; and KeyBank National
Association, an affiliate of KeyBanc Capital Markets Inc.,
serves as a lender.
Wells Fargo Bank, National Association, an affiliate of Wells
Fargo Securities, LLC, serves as the trustee for the indenture
governing our 8.625% senior notes due 2017.
Until he joined Keeneland Capital in 2009, A. Wellford Tabor,
one of our directors, was a member of Wachovia Capital Partners,
which is a merchant banking arm of Wells Fargo &
Company and an affiliate of Wells Fargo Securities, LLC. An
affiliate of Wachovia Capital Partners and Wells Fargo
Securities, LLC has been, and may continue to be, one of our
stockholders.
Merrill Lynch, Pierce, Fenner & Smith Incorporated,
J.P. Morgan Securities Inc., SunTrust Robinson Humphrey,
Inc., Wells Fargo Securities, LLC and KeyBanc Capital Markets
Inc. will not confirm any sales to any accounts over which they
exercise discretionary authority without first receiving a
written consent from those accounts.
Amounts repaid under our senior secured revolving credit
facility may be reborrowed by us. In addition, from time to
time, the underwriters and their affiliates may effect
transactions for their own account or the account of customers,
and hold on behalf of themselves or their customers, long or
short positions in our debt or equity securities or loans, and
may do so in the future. In the ordinary course of their various
business activities, the underwriters and their respective
affiliates may make or hold a broad array of investments and
actively trade debt and equity securities (or related derivative
securities) and financial instruments (including bank loans) for
their own account and for the accounts of their customers and
may at any time hold long and short positions in such securities
and instruments. Such investment and securities activities may
involve securities and instruments by us.
S-34
We intend to use at least 5% of the net proceeds of this
offering to repay indebtedness owed by us to certain affiliates
of the underwriters who are lenders under our credit facility.
See Use of Proceeds. Accordingly, this offering is
being made in compliance with the requirements of NASD Conduct
Rule 2720 of the Financial Industry Regulatory Authority.
In accordance with that rule, no qualified independent
underwriter is required, because a bona fide public market
exists in the shares, as that term is defined in the rule.
LEGAL
MATTERS
Certain legal matters in connection with the common stock will
be passed upon by Vinson & Elkins L.L.P., Houston,
Texas, as our counsel. Certain legal matters will be passed upon
for the underwriters by Simpson Thacher & Bartlett
LLP, New York, New York.
EXPERTS
The consolidated financial statements and managements
assessment of the effectiveness of internal control over
financial reporting incorporated in this prospectus supplement
by reference to the Annual Report on
Form 10-K
for the year ended December 31, 2008 have been so
incorporated by reference in reliance upon the reports of Grant
Thornton LLP, independent registered public accountants, upon
the authority of said firm as experts in auditing and accounting
in giving said reports.
The special-purpose combined financial statements of the Henry
Group Properties as of December 31, 2007 and 2006, and for
each of the years in the three-year period ended
December 31, 2007 incorporated in this prospectus
supplement by reference to the Current Reports on
Form 8-K
filed on August 6, 2008 and October 7, 2008 have been
so incorporated by reference in reliance upon the report of
Davis, Kinard & Co., P.C., independent registered
public accounting firm, upon the authority of said firm as
experts in accounting and auditing.
Certain estimates of our net oil and natural gas reserves and
related information included or incorporated by reference in
this prospectus supplement have been derived from reports
prepared by Cawley, Gillespie & Associates, Inc. and
Netherland, Sewell & Associates, Inc. All such
information has been so included or incorporated by reference on
the authority of such firms as experts regarding the matters
contained in their reports.
S-35
PROSPECTUS
Concho
Resources Inc.
Debt Securities
Preferred Stock
Common Stock
Depositary Shares
Warrants
Guarantee
of Debt Securities of Concho Resources Inc. by:
COG Operating LLC
COG Realty LLC
Concho Energy Services LLC
Quail Ranch LLC
We may offer and sell the securities listed above from time to
time in one or more offerings in one or more classes or series.
Any debt securities we offer pursuant to this prospectus may be
fully and unconditionally guaranteed by certain of our
subsidiaries, including COG Operating LLC, COG Realty LLC,
Concho Energy Services LLC, and Quail Ranch LLC.
This prospectus provides you with a general description of the
securities that may be offered. Each time securities are
offered, we will provide a prospectus supplement and attach it
to this prospectus. The prospectus supplement will contain more
specific information about the offering and the terms of the
securities being offered, including any guarantees by our
subsidiaries. A prospectus supplement may also add, update or
change information contained in this prospectus. This prospectus
may not be used to offer or sell securities without a prospectus
supplement describing the method and terms of the offering.
We may sell these securities directly or through agents,
underwriters or dealers, or through a combination of these
methods. See Plan of Distribution. The prospectus
supplement will list any agents, underwriters or dealers that
may be involved and the compensation they will receive. The
prospectus supplement will also show you the total amount of
money that we will receive from selling the securities being
offered, after the expenses of the offering. You should
carefully read this prospectus and any accompanying prospectus
supplement, together with the documents we incorporate by
reference, before you invest in any of our securities.
Investing in any of our securities involves
risk. Please read carefully the information included
and incorporated by reference in this prospectus and in any
applicable prospectus supplement for a discussion of the factors
you should consider before deciding to purchase our securities.
See Risk Factors beginning on page 4 of this
prospectus.
Our common stock is listed on the New York Stock Exchange under
the symbol CXO.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
This
prospectus is dated September 9, 2009.
TABLE OF
CONTENTS
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You should rely only on the information contained in or
incorporated by reference into this prospectus and any
prospectus supplement. We have not authorized any dealer,
salesman or other person to provide you with additional or
different information. If anyone provides you with different or
inconsistent information, you should not rely on it. This
prospectus and any prospectus supplement are not an offer to
sell or the solicitation of an offer to buy any securities other
than the securities to which they relate and are not an offer to
sell or the solicitation of an offer to buy securities in any
jurisdiction to any person to whom it is unlawful to make an
offer or solicitation in that jurisdiction. You should not
assume that the information contained in this prospectus is
accurate as of any date other than the date on the front cover
of this prospectus, or that the information contained in any
document incorporated by reference is accurate as of any date
other than the date of the document incorporated by reference,
regardless of the time of delivery of this prospectus or any
sale of a security.
i
ABOUT
THIS PROSPECTUS
This prospectus is part of a registration statement that we
filed with the Securities and Exchange Commission, which we
refer to as the SEC, using a shelf registration
process. Under this shelf registration process, we may offer and
sell any combination of the securities described in this
prospectus in one or more offerings. This prospectus provides
you with a general description of the securities we may offer.
Each time we sell securities, we will provide a prospectus
supplement that will contain specific information about the
terms of the offering and the offered securities. The prospectus
supplement may also add, update or change information contained
in this prospectus. Any statement that we make in this
prospectus will be modified or superseded by any inconsistent
statement made by us in a prospectus supplement. You should read
both this prospectus and any prospectus supplement together with
additional information described under the heading Where
You Can Find More Information.
Unless the context requires otherwise or unless otherwise noted,
all references in this prospectus or any accompanying prospectus
supplement to Concho, we or
our are to Concho Resources Inc. and its
subsidiaries.
THE
COMPANY
We are an independent oil and natural gas company engaged in the
acquisition, development, exploitation and exploration of oil
and natural gas properties. Our core operations are focused in
the Permian Basin of Southeast New Mexico and West Texas. These
core operating areas are complemented by activities in our
emerging plays. We intend to grow our reserves and production
through development drilling, exploitation and exploration
activities on our multi-year project inventory and through
acquisitions that meet our strategic and financial objectives.
We were formed in February 2006 as a result of the combination
of Concho Equity Holdings Corp. and a portion of the oil and
natural gas properties and related assets owned by Chase Oil
Corporation and certain of its affiliates. Concho Equity
Holdings Corp., which was subsequently merged into one of our
wholly-owned subsidiaries, was formed in April 2004 and
represented the third of three Permian Basin-focused companies
that have been formed since 1997 by certain members of our
current management team (the prior two companies were sold to
large domestic independent oil and gas companies).
Our principal executive offices are located at 550 West
Texas Avenue, Suite 100, Midland, Texas 79701. Our common
stock is listed on the New York Stock Exchange under the symbol
CXO.
1
WHERE YOU
CAN FIND MORE INFORMATION
We file annual, quarterly and current reports and other
information with the SEC (File
No. 001-33615)
pursuant to the Securities Exchange Act of 1934 (the
Exchange Act). You may read and copy any documents
that are filed at the SECs public reference room at
100 F Street, N.E., Washington, D.C. 20549. You
may also obtain copies of these documents at prescribed rates
from the public reference section of the SEC at its Washington
address. Please call the SEC at
1-800-SEC-0330
for further information.
Our filings are also available to the public through the
SECs website at
http://www.sec.gov.
The SEC allows us to incorporate by reference
information that we file with it, which means that we can
disclose important information to you by referring you to
documents previously filed with the SEC. The information
incorporated by reference is an important part of this
prospectus, and the information that we later file with the SEC
will automatically update and supersede this information. The
following documents we filed with the SEC pursuant to the
Exchange Act are incorporated herein by reference:
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our Annual Report on
Form 10-K
for the year ended December 31, 2008;
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our Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2009;
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our Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2009;
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our Current Reports on
Form 8-K
and 8-K/A
filed on each of August 6, 2008, October 7, 2008,
January 28, 2009, March 4, 2009, April 9, 2009,
June 12, 2009, August 12, 2009 and September 9,
2009 (excluding any information furnished pursuant to
Item 2.02 or Item 7.01 of any such Current Report on
Form 8-K); and
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the description of our common stock contained in our
registration statement on
Form 8-A12B
filed on July 23, 2007, including any amendment to that
form that we may file in the future for the purpose of updating
the description of our common stock.
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These reports contain important information about us, our
financial condition and our results of operations.
All future documents filed pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act (excluding any
information furnished pursuant to Item 2.02 or
Item 7.01 on any Current Report on
Form 8-K)
before the termination of each offering under this prospectus
shall be deemed to be incorporated in this prospectus by
reference and to be a part hereof from the date of filing of
such documents. Any statement contained herein, or in a document
incorporated or deemed to be incorporated by reference herein,
shall be deemed to be modified or superseded for purposes of
this prospectus to the extent that a statement contained herein
or in any subsequently filed document that also is or is deemed
to be incorporated by reference herein, modifies or supersedes
such statement. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to
constitute a part of this prospectus.
You may request a copy of these filings at no cost by writing or
telephoning us at the following address and telephone number:
Concho Resources Inc.
550 West Texas Avenue, Suite 100
Midland, Texas 79701
Attention: General Counsel
(432) 683-7443
We also maintain a website at
http://www.conchoresources.com.
However, the information on our website is not part of this
prospectus.
2
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Various statements contained in or incorporated by reference
into this prospectus, our filings with the SEC and our public
releases, including those that express a belief, expectation, or
intention, as well as those that are not statements of
historical fact, are forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 (the
Securities Act) and Section 21E of the Exchange
Act. These forward-looking statements may include projections
and estimates concerning capital expenditures, our liquidity and
capital resources, the timing and success of specific projects,
outcomes and effects of litigation, claims and disputes,
elements of our business strategy and other statements
concerning our operations, economic performance and financial
condition. Forward-looking statements are generally accompanied
by words such as estimate, project,
predict, believe, expect,
anticipate, potential,
could, may, foresee,
plan, goal or other words that convey
the uncertainty of future events or outcomes. We have based
these forward-looking statements on our current expectations and
assumptions about future events. These statements are based on
certain assumptions and analyses made by us in light of our
experience and our perception of historical trends, current
conditions and expected future developments as well as other
factors we believe are appropriate under the circumstances.
These forward-looking statements speak only as of the date of
this prospectus; we disclaim any obligation to update or revise
these statements unless required by securities law, and we
caution you not to rely on them unduly. While our management
considers these expectations and assumptions to be reasonable,
they are inherently subject to significant business, economic,
competitive, regulatory and other risks, contingencies and
uncertainties relating to, among other matters, the risks
discussed in our Annual Report on
Form 10-K
for the year ended December 31, 2008, our Quarterly Reports
on
Form 10-Q
for the quarters ended March 31, 2009 and June 30,
2009 and our subsequent SEC filings, as well as those factors
summarized below:
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our business and financial strategy;
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the estimated quantities of crude oil and natural gas reserves;
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our use of industry technology;
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our realized oil and natural gas prices;
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the timing and amount of the future production of our oil and
natural gas;
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the amount, nature and timing of our capital expenditures;
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the drilling of our wells;
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our competition and government regulations;
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the marketing of our oil and natural gas;
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our exploitation activities or property acquisitions;
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the costs of exploiting and developing our properties and
conducting other operations;
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general economic and business conditions;
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our cash flow and anticipated liquidity;
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hedging results;
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uncertainty regarding our future operating results;
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our plans, objectives, expectations and intentions contained in
this prospectus that are not historical; and
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our ability to integrate acquisitions.
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Reserve engineering is a process of estimating underground
accumulations of oil and natural gas that cannot be measured in
an exact way. The accuracy of any reserve estimate depends on
the quality of available data, the interpretation of such data
and price and cost assumptions made by our reserve engineers. In
addition, the results of drilling, testing and production
activities may justify revisions of estimates that were made
previously. If significant, such revisions would change the
schedule of any further production and development drilling.
Accordingly, reserve estimates may differ from the quantities of
oil and natural gas that are ultimately recovered.
3
RISK
FACTORS
An investment in our securities involves a significant degree of
risk. Before you invest in our securities you should carefully
consider those risk factors included in our most recent Annual
Report on
Form 10-K,
any Quarterly Reports on
Form 10-Q
and any Current Reports on
Form 8-K,
which are incorporated herein by reference, and those risk
factors that may be included in any applicable prospectus
supplement, together with all of the other information included
in this prospectus, any prospectus supplement and the documents
we incorporate by reference, in evaluating an investment in our
securities. If any of the risks discussed in the foregoing
documents were to occur, our business, financial condition,
results of operations and cash flows could be materially
adversely affected. Please read Cautionary Statement
Regarding Forward-Looking Statements.
RATIOS OF
EARNINGS TO FIXED CHARGES AND EARNINGS TO FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
The following table contains our consolidated ratios of earnings
to fixed charges and earnings to fixed charges and preferred
stock dividends for the periods indicated.
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Concho Resources Inc.
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Inception
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Chase Group
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(April 21,
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Properties
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Six Months
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Years Ended
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2004) through
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Years Ended
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Ended June 30,
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December 31,
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December 31,
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December 31,
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2009
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2008
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2007
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2006
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2005
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2004
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2005
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2004
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Ratios of earnings to fixed charges(a)
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(c
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15.36
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2.00
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1.97
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2.01
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(c
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NM(d
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NM(d
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Ratios of earnings to fixed charges and preferred stock
dividends(b)
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(e
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15.36
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2.00
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1.90
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(f
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(e
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NM(d
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The ratio has been computed by dividing earnings by fixed
charges. For purposes of computing the ratio: |
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earnings include income (loss) before income taxes, adjusted for
interest expense and the portion of rental expense deemed to be
representative of the interest component of rental expense; and |
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fixed charges consist of interest expense, capitalized interest
and the portion of rental expense deemed to be representative of
the interest component of rental expense. |
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The ratio has been computed by dividing earnings by fixed
charges and preferred stock dividends. For purposes of computing
the ratio: |
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earnings include income (loss) before income taxes, adjusted for
interest expense and the portion of rental expense deemed to be
representative of the interest component of rental expense; and |
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fixed charges and preferred stock dividends consist of interest
expense, capitalized interest, the portion of rental expense
deemed to be representative of the interest component of rental
expense and preferred stock dividends. |
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Due to our net loss for the six months ended June 30, 2009
and from inception (April 21, 2004) through
December 31, 2004, the ratio coverage was less than 1:1. To
achieve ratio coverage of 1:1, we would have needed additional
earnings of approximately $80.3 million and
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Not meaningful, as there were no fixed charges or preferred
stock dividends for these periods. |
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Due to our net loss for the six months ended June 30, 2009
and from inception (April 21, 2004) through
December 31, 2004, the ratio coverage was less than 1:1. To
achieve a ratio coverage of 1:1, we would have needed additional
earnings of approximately $80.3 million and
$4.4 million, respectively. |
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Due to the fixed charges and preferred stock dividends exceeding
earnings for the period, we would have needed additional
earnings of approximately $1.1 million to achieve a ratio
coverage of 1:1. |
4
USE OF
PROCEEDS
Except as may be stated in the applicable prospectus supplement,
we intend to use the net proceeds from any sales of securities
by us under this prospectus for general corporate purposes,
which may include repayment or refinancing of borrowings,
working capital, capital expenditures, investments and
acquisitions. Pending any specific application, we may initially
invest funds in short-term marketable securities or apply them
to repayments of indebtedness.
5
DESCRIPTION
OF DEBT SECURITIES
The Debt Securities will be either our senior debt securities
(Senior Debt Securities) or our subordinated debt
securities (Subordinated Debt Securities). The
Senior Debt Securities and the Subordinated Debt Securities will
be issued under separate indentures among us, the Subsidiary
Guarantors of such Debt Securities, if any, and a trustee to be
determined (the Trustee). Senior Debt Securities
will be issued under a Senior Indenture and
Subordinated Debt Securities will be issued under a
Subordinated Indenture. Together, the Senior
Indenture and the Subordinated Indenture are called
Indentures.
The Debt Securities may be issued from time to time in one or
more series. The particular terms of each series that are
offered by a prospectus supplement will be described in the
prospectus supplement.
Unless the Debt Securities are guaranteed by our subsidiaries as
described below, the rights of Concho and our creditors,
including holders of the Debt Securities, to participate in the
assets of any subsidiary upon the latters liquidation or
reorganization, will be subject to the prior claims of the
subsidiarys creditors, except to the extent that we may
ourself be a creditor with recognized claims against such
subsidiary.
We have summarized selected provisions of the Indentures below.
The summary is not complete. The form of each Indenture has been
filed with the SEC as an exhibit to the registration statement
of which this prospectus is a part, and you should read the
Indentures for provisions that may be important to you.
Capitalized terms used in the summary have the meanings
specified in the Indentures.
General
The Indentures provide that Debt Securities in separate series
may be issued thereunder from time to time without limitation as
to aggregate principal amount. We may specify a maximum
aggregate principal amount for the Debt Securities of any
series. We will determine the terms and conditions of the Debt
Securities, including the maturity, principal and interest, but
those terms must be consistent with the Indenture. The Debt
Securities will be our unsecured obligations.
The Subordinated Debt Securities will be subordinated in right
of payment to the prior payment in full of all of our Senior
Debt as described under Subordination of
Subordinated Debt Securities and in the prospectus
supplement applicable to any Subordinated Debt Securities. If
the prospectus supplement so indicates, the Debt Securities will
be convertible into our common stock.
If specified in the prospectus supplement respecting a
particular series of Debt Securities, certain subsidiaries of
Concho (each a Subsidiary Guarantor) will fully and
unconditionally guarantee (the Subsidiary Guarantee)
that series as described under Subsidiary
Guarantee and in the prospectus supplement. Each
Subsidiary Guarantee will be an unsecured obligation of the
Subsidiary Guarantor. A Subsidiary Guarantee of Subordinated
Debt Securities will be subordinated to the Senior Debt of the
Subsidiary Guarantor on the same basis as the Subordinated Debt
Securities are subordinated to our Senior Debt.
The applicable prospectus supplement will set forth the price or
prices at which the Debt Securities to be issued will be offered
for sale and will describe the following terms of such Debt
Securities:
(1) the title of the Debt Securities;
(2) whether the Debt Securities are Senior Debt Securities
or Subordinated Debt Securities and, if Subordinated Debt
Securities, the related subordination terms;
(3) whether any Subsidiary Guarantor will provide a
Subsidiary Guarantee of the Debt Securities;
(4) any limit on the aggregate principal amount of the Debt
Securities;
(5) each date on which the principal of the Debt Securities
will be payable;
(6) the interest rate that the Debt Securities will bear
and the interest payment dates for the Debt Securities;
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(7) each place where payments on the Debt Securities will
be payable;
(8) any terms upon which the Debt Securities may be
redeemed, in whole or in part, at our option;
(9) any sinking fund or other provisions that would
obligate us to redeem or otherwise repurchase the Debt
Securities;
(10) the portion of the principal amount, if less than all,
of the Debt Securities that will be payable upon declaration of
acceleration of the Maturity of the Debt Securities;
(11) whether the Debt Securities are defeasible;
(12) any addition to or change in the Events of Default;
(13) whether the Debt Securities are convertible into our
common stock and, if so, the terms and conditions upon which
conversion will be effected, including the initial conversion
price or conversion rate and any adjustments thereto and the
conversion period;
(14) any addition to or change in the covenants in the
Indenture applicable to the Debt Securities; and
(15) any other terms of the Debt Securities not
inconsistent with the provisions of the Indenture.
Debt Securities, including any Debt Securities that provide for
an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration of the Maturity
thereof (Original Issue Discount Securities), may be
sold at a substantial discount below their principal amount.
Special United States federal income tax considerations
applicable to Debt Securities sold at an original issue discount
may be described in the applicable prospectus supplement. In
addition, special United States federal income tax or other
considerations applicable to any Debt Securities that are
denominated in a currency or currency unit other than United
States dollars may be described in the applicable prospectus
supplement.
Subordination
of Subordinated Debt Securities
The indebtedness evidenced by the Subordinated Debt Securities
will, to the extent set forth in the Subordinated Indenture with
respect to each series of Subordinated Debt Securities, be
subordinated in right of payment to the prior payment in full of
all of our Senior Debt, including the Senior Debt Securities,
and it may also be senior in right of payment to all of our
Subordinated Debt. The prospectus supplement relating to any
Subordinated Debt Securities will summarize the subordination
provisions of the Subordinated Indenture applicable to that
series including:
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the applicability and effect of such provisions upon any payment
or distribution respecting that series following any
liquidation, dissolution or other
winding-up,
or any assignment for the benefit of creditors or other
marshalling of assets or any bankruptcy, insolvency or similar
proceedings;
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the applicability and effect of such provisions in the event of
specified defaults with respect to any Senior Debt, including
the circumstances under which and the periods during which we
will be prohibited from making payments on the Subordinated Debt
Securities; and
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the definition of Senior Debt applicable to the Subordinated
Debt Securities of that series and, if the series is issued on a
senior subordinated basis, the definition of Subordinated Debt
applicable to that series.
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The prospectus supplement will also describe as of a recent date
the approximate amount of Senior Debt to which the Subordinated
Debt Securities of that series will be subordinated.
The failure to make any payment on any of the Subordinated Debt
Securities by reason of the subordination provisions of the
Subordinated Indenture described in the prospectus supplement
will not be construed as preventing the occurrence of an Event
of Default with respect to the Subordinated Debt Securities
arising from any such failure to make payment.
The subordination provisions described above will not be
applicable to payments in respect of the Subordinated Debt
Securities from a defeasance trust established in connection
with any legal defeasance or
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covenant defeasance of the Subordinated Debt Securities as
described under Legal Defeasance and Covenant
Defeasance.
Subsidiary
Guarantee
If specified in the prospectus supplement, one or more of the
Subsidiary Guarantors will guarantee the Debt Securities of a
series. Unless otherwise indicated in the prospectus supplement,
the following provisions will apply to the Subsidiary Guarantee
of the Subsidiary Guarantor.
Subject to the limitations described below and in the prospectus
supplement, one or more of the Subsidiary Guarantors will
jointly and severally, fully and unconditionally guarantee the
punctual payment when due, whether at Stated Maturity, by
acceleration or otherwise, of all our payment obligations under
the Indentures and the Debt Securities of a series, whether for
principal of, premium, if any, or interest on the Debt
Securities or otherwise (all such obligations guaranteed by a
Subsidiary Guarantor being herein called the Guaranteed
Obligations). The Subsidiary Guarantors will also pay all
expenses (including reasonable counsel fees and expenses)
incurred by the applicable Trustee in enforcing any rights under
a Subsidiary Guarantee with respect to a Subsidiary Guarantor.
In the case of Subordinated Debt Securities, a Subsidiary
Guarantors Subsidiary Guarantee will be subordinated in
right of payment to the Senior Debt of such Subsidiary Guarantor
on the same basis as the Subordinated Debt Securities are
subordinated to our Senior Debt. No payment will be made by any
Subsidiary Guarantor under its Subsidiary Guarantee during any
period in which payments by us on the Subordinated Debt
Securities are suspended by the subordination provisions of the
Subordinated Indenture.
Each Subsidiary Guarantee will be limited in amount to an amount
not to exceed the maximum amount that can be guaranteed by the
relevant Subsidiary Guarantor without rendering such Subsidiary
Guarantee voidable under applicable law relating to fraudulent
conveyance or fraudulent transfer or similar laws affecting the
rights of creditors generally.
Each Subsidiary Guarantee will be a continuing guarantee and
will:
(1) remain in full force and effect until either
(a) payment in full of all the applicable Debt Securities
(or such Debt Securities are otherwise satisfied and discharged
in accordance with the provisions of the applicable Indenture)
or (b) released as described in the following paragraph;
(2) be binding upon each Subsidiary Guarantor; and
(3) inure to the benefit of and be enforceable by the
applicable Trustee, the Holders and their successors,
transferees and assigns.
In the event that (a) a Subsidiary Guarantor ceases to be a
Subsidiary, (b) either legal defeasance or covenant
defeasance occurs with respect to the series or (c) all or
substantially all of the assets or all of the Capital Stock of
such Subsidiary Guarantor is sold, including by way of sale,
merger, consolidation or otherwise, such Subsidiary Guarantor
will be released and discharged of its obligations under its
Subsidiary Guarantee without any further action required on the
part of the Trustee or any Holder, and no other person acquiring
or owning the assets or Capital Stock of such Subsidiary
Guarantor will be required to enter into a Subsidiary Guarantee.
In addition, the prospectus supplement may specify additional
circumstances under which a Subsidiary Guarantor can be released
from its Subsidiary Guarantee.
Form,
Exchange and Transfer
The Debt Securities of each series will be issuable only in
fully registered form, without coupons, and, unless otherwise
specified in the applicable prospectus supplement, only in
denominations of $1,000 and integral multiples thereof.
At the option of the Holder, subject to the terms of the
applicable Indenture and the limitations applicable to Global
Securities, Debt Securities of each series will be exchangeable
for other Debt Securities of the same series of any authorized
denomination and of a like tenor and aggregate principal amount.
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Subject to the terms of the applicable Indenture and the
limitations applicable to Global Securities, Debt Securities may
be presented for exchange as provided above or for registration
of transfer (duly endorsed or with the form of transfer endorsed
thereon duly executed) at the office of the Security Registrar
or at the office of any transfer agent designated by us for such
purpose. No service charge will be made for any registration of
transfer or exchange of Debt Securities, but we may require
payment of a sum sufficient to cover any tax or other
governmental charge payable in that connection. Such transfer or
exchange will be effected upon the Security Registrar or such
transfer agent, as the case may be, being satisfied with the
documents of title and identity of the person making the
request. The Security Registrar and any other transfer agent
initially designated by us for any Debt Securities will be named
in the applicable prospectus supplement. We may at any time
designate additional transfer agents or rescind the designation
of any transfer agent or approve a change in the office through
which any transfer agent acts, except that we will be required
to maintain a transfer agent in each Place of Payment for the
Debt Securities of each series.
If the Debt Securities of any series (or of any series and
specified tenor) are to be redeemed in part, we will not be
required to (1) issue, register the transfer of or exchange
any Debt Security of that series (or of that series and
specified tenor, as the case may be) during a period beginning
at the opening of business 15 days before the day of
mailing of a notice of redemption of any such Debt Security that
may be selected for redemption and ending at the close of
business on the day of such mailing or (2) register the
transfer of or exchange any Debt Security so selected for
redemption, in whole or in part, except the unredeemed portion
of any such Debt Security being redeemed in part.
Global
Securities
Some or all of the Debt Securities of any series may be
represented, in whole or in part, by one or more Global
Securities that will have an aggregate principal amount equal to
that of the Debt Securities they represent. Each Global Security
will be registered in the name of a Depositary or its nominee
identified in the applicable prospectus supplement, will be
deposited with such Depositary or nominee or its custodian and
will bear a legend regarding the restrictions on exchanges and
registration of transfer thereof referred to below and any such
other matters as may be provided for pursuant to the applicable
Indenture.
Notwithstanding any provision of the Indentures or any Debt
Security described in this prospectus, no Global Security may be
exchanged in whole or in part for Debt Securities registered,
and no transfer of a Global Security in whole or in part may be
registered, in the name of any Person other than the Depositary
for such Global Security or any nominee of such Depositary
unless:
(1) the Depositary has notified us that it is unwilling or
unable to continue as Depositary for such Global Security or has
ceased to be qualified to act as such as required by the
applicable Indenture, and in either case we fail to appoint a
successor Depositary within 90 days;
(2) an Event of Default with respect to the Debt Securities
represented by such Global Security has occurred and is
continuing and the Trustee has received a written request from
the Depositary to issue certificated Debt Securities;
(3) subject to the rules of the Depositary, we shall have
elected to terminate the book-entry system through the
Depositary; or
(4) other circumstances exist, in addition to or in lieu of
those described above, as may be described in the applicable
prospectus supplement.
All certificated Debt Securities issued in exchange for a Global
Security or any portion thereof will be registered in such names
as the Depositary may direct.
As long as the Depositary, or its nominee, is the registered
holder of a Global Security, the Depositary or such nominee, as
the case may be, will be considered the sole owner and Holder of
such Global Security and the Debt Securities that it represents
for all purposes under the Debt Securities and the applicable
Indenture. Except in the limited circumstances referred to
above, owners of beneficial interests in a Global Security will
not be entitled to have such Global Security or any Debt
Securities that it represents registered in their names,
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will not receive or be entitled to receive physical delivery of
certificated Debt Securities in exchange for those interests and
will not be considered to be the owners or Holders of such
Global Security or any Debt Securities that it represents for
any purpose under the Debt Securities or the applicable
Indenture. All payments on a Global Security will be made to the
Depositary or its nominee, as the case may be, as the Holder of
the security. The laws of some jurisdictions may require that
some purchasers of Debt Securities take physical delivery of
such Debt Securities in certificated form. These laws may impair
the ability to transfer beneficial interests in a Global
Security.
Ownership of beneficial interests in a Global Security will be
limited to institutions that have accounts with the Depositary
or its nominee (participants) and to persons that
may hold beneficial interests through participants. In
connection with the issuance of any Global Security, the
Depositary will credit, on its book-entry registration and
transfer system, the respective principal amounts of Debt
Securities represented by the Global Security to the accounts of
its participants. Ownership of beneficial interests in a Global
Security will be shown only on, and the transfer of those
ownership interests will be effected only through, records
maintained by the Depositary (with respect to participants
interests) or any such participant (with respect to interests of
Persons held by such participants on their behalf). Payments,
transfers, exchanges and other matters relating to beneficial
interests in a Global Security may be subject to various
policies and procedures adopted by the Depositary from time to
time. None of us, the Subsidiary Guarantors, the Trustees or the
agents of us, the Subsidiary Guarantors or the Trustees will
have any responsibility or liability for any aspect of the
Depositarys or any participants records relating to,
or for payments made on account of, beneficial interests in a
Global Security, or for maintaining, supervising or reviewing
any records relating to such beneficial interests.
Payment
and Paying Agents
Unless otherwise indicated in the applicable prospectus
supplement, payment of interest on a Debt Security on any
Interest Payment Date will be made to the Person in whose name
such Debt Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date
for such interest.
Unless otherwise indicated in the applicable prospectus
supplement, principal of and any premium and interest on the
Debt Securities of a particular series will be payable at the
office of such Paying Agent or Paying Agents as we may designate
for such purpose from time to time, except that at our option
payment of any interest on Debt Securities in certificated form
may be made by check mailed to the address of the Person
entitled thereto as such address appears in the Security
Register. Unless otherwise indicated in the applicable
prospectus supplement, the corporate trust office of the Trustee
under the Senior Indenture in The City of New York will be
designated as sole Paying Agent for payments with respect to
Senior Debt Securities of each series, and the corporate trust
office of the Trustee under the Subordinated Indenture in The
City of New York will be designated as the sole Paying Agent for
payment with respect to Subordinated Debt Securities of each
series. Any other Paying Agents initially designated by us for
the Debt Securities of a particular series will be named in the
applicable prospectus supplement. We may at any time designate
additional Paying Agents or rescind the designation of any
Paying Agent or approve a change in the office through which any
Paying Agent acts, except that we will be required to maintain a
Paying Agent in each Place of Payment for the Debt Securities of
a particular series.
All money paid by us to a Paying Agent for the payment of the
principal of or any premium or interest on any Debt Security
which remains unclaimed at the end of two years after such
principal, premium or interest has become due and payable will
be repaid to us, and the Holder of such Debt Security thereafter
may look only to us for payment.
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Consolidation,
Merger and Sale of Assets
Unless otherwise specified in the prospectus supplement, we may
not consolidate with or merge into, or transfer, lease or
otherwise dispose of all or substantially all of our assets to,
any Person (a successor Person), and may not permit
any Person to consolidate with or merge into us, unless:
(1) the successor Person (if not us) is a corporation,
partnership, trust or other entity organized and validly
existing under the laws of any domestic jurisdiction and assumes
our obligations on the Debt Securities and under the Indentures;
(2) immediately before and after giving pro forma effect to
the transaction, no Event of Default, and no event which, after
notice or lapse of time or both, would become an Event of
Default, has occurred and is continuing; and
(3) several other conditions, including any additional
conditions with respect to any particular Debt Securities
specified in the applicable prospectus supplement, are met.
The successor Person (if not us) will be substituted for us
under the applicable Indenture with the same effect as if it had
been an original party to such Indenture, and, except in the
case of a lease, we will be relieved from any further
obligations under such Indenture and the Debt Securities.
Events of
Default
Unless otherwise specified in the prospectus supplement, each of
the following will constitute an Event of Default under the
applicable Indenture with respect to Debt Securities of any
series:
(1) failure to pay principal of or any premium on any Debt
Security of that series when due, whether or not, in the case of
Subordinated Debt Securities, such payment is prohibited by the
subordination provisions of the Subordinated Indenture;
(2) failure to pay any interest on any Debt Securities of
that series when due, continued for 30 days, whether or
not, in the case of Subordinated Debt Securities, such payment
is prohibited by the subordination provisions of the
Subordinated Indenture;
(3) failure to deposit any sinking fund payment, when due,
in respect of any Debt Security of that series, whether or not,
in the case of Subordinated Debt Securities, such deposit is
prohibited by the subordination provisions of the Subordinated
Indenture;
(4) failure to perform or comply with the provisions
described under Consolidation, Merger and Sale
of Assets;
(5) failure to perform any of our other covenants in such
Indenture (other than a covenant included in such Indenture
solely for the benefit of a series other than that series),
continued for 60 days after written notice has been given
by the applicable Trustee, or the Holders of at least 25% in
principal amount of the Outstanding Debt Securities of that
series, as provided in such Indenture;
(6) any Debt of ourself, any Significant Subsidiary or, if
a Subsidiary Guarantor has guaranteed the series, such
Subsidiary Guarantor, is not paid within any applicable grace
period after final maturity or is accelerated by its holders
because of a default and the total amount of such Debt unpaid or
accelerated exceeds $20.0 million;
(7) any judgment or decree for the payment of money in
excess of $20.0 million is entered against us, any
Significant Subsidiary or, if a Subsidiary Guarantor has
guaranteed the series, such Subsidiary Guarantor, remains
outstanding for a period of 60 consecutive days following entry
of such judgment and is not discharged, waived or stayed;
(8) certain events of bankruptcy, insolvency or
reorganization affecting us, any Significant Subsidiary or, if a
Subsidiary Guarantor has guaranteed the series, such Subsidiary
Guarantor; and
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(9) if any Subsidiary Guarantor has guaranteed such series,
the Subsidiary Guarantee of any such Subsidiary Guarantor is
held by a final non-appealable order or judgment of a court of
competent jurisdiction to be unenforceable or invalid or ceases
for any reason to be in full force and effect (other than in
accordance with the terms of the applicable Indenture) or any
Subsidiary Guarantor or any Person acting on behalf of any
Subsidiary Guarantor denies or disaffirms such Subsidiary
Guarantors obligations under its Subsidiary Guarantee
(other than by reason of a release of such Subsidiary Guarantor
from its Subsidiary Guarantee in accordance with the terms of
the applicable Indenture).
If an Event of Default (other than an Event of Default with
respect to Concho Resources Inc. described in clause (8)
above) with respect to the Debt Securities of any series at the
time Outstanding occurs and is continuing, either the applicable
Trustee or the Holders of at least 25% in principal amount of
the Outstanding Debt Securities of that series by notice as
provided in the Indenture may declare the principal amount of
the Debt Securities of that series (or, in the case of any Debt
Security that is an Original Issue Discount Debt Security, such
portion of the principal amount of such Debt Security as may be
specified in the terms of such Debt Security) to be due and
payable immediately, together with any accrued and unpaid
interest thereon. If an Event of Default with respect to Concho
Resources Inc. described in clause (8) above with respect
to the Debt Securities of any series at the time Outstanding
occurs, the principal amount of all the Debt Securities of that
series (or, in the case of any such Original Issue Discount
Security, such specified amount) will automatically, and without
any action by the applicable Trustee or any Holder, become
immediately due and payable, together with any accrued and
unpaid interest thereon. After any such acceleration and its
consequences, but before a judgment or decree based on
acceleration, the Holders of a majority in principal amount of
the Outstanding Debt Securities of that series may, under
certain circumstances, rescind and annul such acceleration if
all Events of Default with respect to that series, other than
the non-payment of accelerated principal (or other specified
amount), have been cured or waived as provided in the applicable
Indenture. For information as to waiver of defaults, see
Modification and Waiver below.
Subject to the provisions of the Indentures relating to the
duties of the Trustees in case an Event of Default has occurred
and is continuing, no Trustee will be under any obligation to
exercise any of its rights or powers under the applicable
Indenture at the request or direction of any of the Holders,
unless such Holders have offered to such Trustee reasonable
security or indemnity. Subject to such provisions for the
indemnification of the Trustees, the Holders of a majority in
principal amount of the Outstanding Debt Securities of any
series will have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the
Trustee or exercising any trust or power conferred on the
Trustee with respect to the Debt Securities of that series.
No Holder of a Debt Security of any series will have any right
to institute any proceeding with respect to the applicable
Indenture, or for the appointment of a receiver or a trustee, or
for any other remedy thereunder, unless:
(1) such Holder has previously given to the Trustee under
the applicable Indenture written notice of a continuing Event of
Default with respect to the Debt Securities of that series;
(2) the Holders of at least 25% in principal amount of the
Outstanding Debt Securities of that series have made written
request, and such Holder or Holders have offered reasonable
security or indemnity, to the Trustee to institute such
proceeding as trustee; and
(3) the Trustee has failed to institute such proceeding,
and has not received from the Holders of a majority in principal
amount of the Outstanding Debt Securities of that series a
direction inconsistent with such request, within 60 days
after such notice, request and offer.
However, such limitations do not apply to a suit instituted by a
Holder of a Debt Security for the enforcement of payment of the
principal of or any premium or interest on such Debt Security on
or after the applicable due date specified in such Debt Security
or, if applicable, to convert such Debt Security.
We will be required to furnish to each Trustee annually a
statement by certain of our officers as to whether or not we, to
their knowledge, are in default in the performance or observance
of any of the terms, provisions and conditions of the applicable
Indenture and, if so, specifying all such known defaults.
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Modification
and Waiver
We may modify or amend an Indenture without the consent of any
holders of the Debt Securities in certain circumstances,
including:
(1) to evidence the succession under the Indenture of
another Person to us or any Subsidiary Guarantor and to provide
for its assumption of our or such Subsidiary Guarantors
obligations to holders of Debt Securities;
(2) to make any changes that would add any additional
covenants of us or the Subsidiary Guarantors for the benefit of
the holders of Debt Securities or that do not adversely affect
the rights under the Indenture of the Holders of Debt Securities
in any material respect;
(3) to add any additional Events of Default;
(4) to provide for uncertificated notes in addition to or
in place of certificated notes;
(5) to secure the Debt Securities;
(6) to establish the form or terms of any series of Debt
Securities;
(7) to evidence and provide for the acceptance of
appointment under the Indenture of a successor Trustee;
(8) to cure any ambiguity, defect or inconsistency;
(9) to add Subsidiary Guarantors; or
(10) in the case of any Subordinated Debt Security, to make
any change in the subordination provisions that limits or
terminates the benefits applicable to any Holder of Senior Debt.
Other modifications and amendments of an Indenture may be made
by us, the Subsidiary Guarantors, if applicable, and the
applicable Trustee with the consent of the Holders of not less
than a majority in principal amount of the Outstanding Debt
Securities of each series affected by such modification or
amendment; provided, however, that no such modification or
amendment may, without the consent of the Holder of each
Outstanding Debt Security affected thereby:
(1) change the Stated Maturity of the principal of, or any
installment of principal of or interest on, any Debt Security;
(2) reduce the principal amount of, or any premium or
interest on, any Debt Security;
(3) reduce the amount of principal of an Original Issue
Discount Security or any other Debt Security payable upon
acceleration of the Maturity thereof;
(4) change the place or currency of payment of principal
of, or any premium or interest on, any Debt Security;
(5) impair the right to institute suit for the enforcement
of any payment due on or any conversion right with respect to
any Debt Security;
(6) modify the subordination provisions in the case of
Subordinated Debt Securities, or modify any conversion
provisions, in either case in a manner adverse to the Holders of
the Subordinated Debt Securities;
(7) except as provided in the applicable Indenture, release
the Subsidiary Guarantee of a Subsidiary Guarantor;
(8) reduce the percentage in principal amount of
Outstanding Debt Securities of any series, the consent of whose
Holders is required for modification or amendment of the
Indenture;
(9) reduce the percentage in principal amount of
Outstanding Debt Securities of any series necessary for waiver
of compliance with certain provisions of the Indenture or for
waiver of certain defaults;
(10) modify such provisions with respect to modification,
amendment or waiver; or
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(11) following the making of an offer to purchase Debt
Securities from any Holder that has been made pursuant to a
covenant in such Indenture, modify such covenant in a manner
adverse to such Holder.
The Holders of not less than a majority in principal amount of
the Outstanding Debt Securities of any series may waive
compliance by us with certain restrictive provisions of the
applicable Indenture. The Holders of not less than a majority in
principal amount of the Outstanding Debt Securities of any
series may waive any past default under the applicable
Indenture, except a default in the payment of principal, premium
or interest and certain covenants and provisions of the
Indenture which cannot be amended without the consent of the
Holder of each Outstanding Debt Security of such series.
Each of the Indentures provides that in determining whether the
Holders of the requisite principal amount of the Outstanding
Debt Securities have given or taken any direction, notice,
consent, waiver or other action under such Indenture as of any
date:
(1) the principal amount of an Original Issue Discount
Security that will be deemed to be Outstanding will be the
amount of the principal that would be due and payable as of such
date upon acceleration of maturity to such date;
(2) if, as of such date, the principal amount payable at
the Stated Maturity of a Debt Security is not determinable (for
example, because it is based on an index), the principal amount
of such Debt Security deemed to be Outstanding as of such date
will be an amount determined in the manner prescribed for such
Debt Security;
(3) the principal amount of a Debt Security denominated in
one or more foreign currencies or currency units that will be
deemed to be Outstanding will be the United States-dollar
equivalent, determined as of such date in the manner prescribed
for such Debt Security, of the principal amount of such Debt
Security (or, in the case of a Debt Security described in
clause (1) or (2) above, of the amount described in
such clause); and
(4) certain Debt Securities, including those owned by us,
any Subsidiary Guarantor or any of our other Affiliates, will
not be deemed to be Outstanding.
Except in certain limited circumstances, we will be entitled to
set any day as a record date for the purpose of determining the
Holders of Outstanding Debt Securities of any series entitled to
give or take any direction, notice, consent, waiver or other
action under the applicable Indenture, in the manner and subject
to the limitations provided in the Indenture. In certain limited
circumstances, the Trustee will be entitled to set a record date
for action by Holders. If a record date is set for any action to
be taken by Holders of a particular series, only persons who are
Holders of Outstanding Debt Securities of that series on the
record date may take such action. To be effective, such action
must be taken by Holders of the requisite principal amount of
such Debt Securities within a specified period following the
record date. For any particular record date, this period will be
180 days or such other period as may be specified by us (or
the Trustee, if it set the record date), and may be shortened or
lengthened (but not beyond 180 days) from time to time.
Satisfaction
and Discharge
Each Indenture will be discharged and will cease to be of
further effect as to all outstanding Debt Securities of any
series issued thereunder, when:
(1) either:
(a) all outstanding Debt Securities of that series that
have been authenticated (except lost, stolen or destroyed Debt
Securities that have been replaced or paid and Debt Securities
for whose payment money has theretofore been deposited in trust
and thereafter repaid to us) have been delivered to the Trustee
for cancellation; or
(b) all outstanding Debt Securities of that series that
have been not delivered to the Trustee for cancellation have
become due and payable or will become due and payable at their
Stated Maturity within one year or are to be called for
redemption within one year under arrangements satisfactory to
the Trustee and in any case we have irrevocably deposited with
the Trustee as trust funds money in an
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amount sufficient, without consideration of any reinvestment of
interest, to pay the entire indebtedness of such Debt Securities
not delivered to the Trustee for cancellation, for principal,
premium, if any, and accrued interest to the Stated Maturity or
redemption date;
(2) we have paid or caused to be paid all other sums
payable by us under the Indenture with respect to the Debt
Securities of that series; and
(3) we have delivered an Officers Certificate and an
Opinion of Counsel to the Trustee stating that all conditions
precedent to satisfaction and discharge of the Indenture with
respect to the Debt Securities of that series have been
satisfied.
Legal
Defeasance and Covenant Defeasance
To the extent indicated in the applicable prospectus supplement,
we may elect, at our option at any time, to have our obligations
discharged under provisions relating to defeasance and discharge
of indebtedness, which we call legal defeasance, or
relating to defeasance of certain restrictive covenants applied
to the Debt Securities of any series, or to any specified part
of a series, which we call covenant defeasance.
Legal Defeasance. The Indentures provide that,
upon our exercise of our option (if any) to have the legal
defeasance provisions applied to any series of Debt Securities,
we and, if applicable, each Subsidiary Guarantor will be
discharged from all our obligations, and, if such Debt
Securities are Subordinated Debt Securities, the provisions of
the Subordinated Indenture relating to subordination will cease
to be effective, with respect to such Debt Securities (except
for certain obligations to convert, exchange or register the
transfer of Debt Securities, to replace stolen, lost or
mutilated Debt Securities, to maintain paying agencies and to
hold moneys for payment in trust) upon the deposit in trust for
the benefit of the Holders of such Debt Securities of money or
U.S. Government Obligations, or both, which, through the
payment of principal and interest in respect thereof in
accordance with their terms, will provide money in an amount
sufficient (in the opinion of a nationally recognized firm of
independent public accountants) to pay the principal of and any
premium and interest on such Debt Securities on the respective
Stated Maturities in accordance with the terms of the applicable
Indenture and such Debt Securities. Such defeasance or discharge
may occur only if, among other things:
(1) we have delivered to the applicable Trustee an Opinion
of Counsel to the effect that we have received from, or there
has been published by, the United States Internal Revenue
Service a ruling, or there has been a change in tax law, in
either case to the effect that Holders of such Debt Securities
will not recognize gain or loss for federal income tax purposes
as a result of such deposit and legal defeasance and will be
subject to federal income tax on the same amount, in the same
manner and at the same times as would have been the case if such
deposit and legal defeasance were not to occur;
(2) no Event of Default or event that with the passing of
time or the giving of notice, or both, shall constitute an Event
of Default shall have occurred and be continuing at the time of
such deposit or, with respect to any Event of Default described
in clause (8) under Events of
Default, at any time until 121 days after such
deposit;
(3) such deposit and legal defeasance will not result in a
breach or violation of, or constitute a default under, any
agreement or instrument (other than the applicable Indenture) to
which we are a party or by which we are bound;
(4) in the case of Subordinated Debt Securities, at the
time of such deposit, no default in the payment of all or a
portion of principal of (or premium, if any) or interest on any
Senior Debt shall have occurred and be continuing, no event of
default shall have resulted in the acceleration of any Senior
Debt and no other event of default with respect to any Senior
Debt shall have occurred and be continuing permitting after
notice or the lapse of time, or both, the acceleration
thereof; and
(5) we have delivered to the Trustee an Opinion of Counsel
to the effect that such deposit shall not cause the Trustee or
the trust so created to be subject to the Investment Company Act
of 1940.
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Covenant Defeasance. The Indentures provide
that, upon our exercise of our option (if any) to have the
covenant defeasance provisions applied to any Debt Securities,
we may fail to comply with certain restrictive covenants (but
not with respect to conversion, if applicable), including those
that may be described in the applicable prospectus supplement,
and the occurrence of certain Events of Default, which are
described above in clause (5) (with respect to such restrictive
covenants) and clauses (6), (7) and (9) under
Events of Default and any that may be described in
the applicable prospectus supplement, will not be deemed to
either be or result in an Event of Default and, if such Debt
Securities are Subordinated Debt Securities, the provisions of
the Subordinated Indenture relating to subordination will cease
to be effective, in each case with respect to such Debt
Securities. In order to exercise such option, we must deposit,
in trust for the benefit of the Holders of such Debt Securities,
money or U.S. Government Obligations, or both, which,
through the payment of principal and interest in respect thereof
in accordance with their terms, will provide money in an amount
sufficient (in the opinion of a nationally recognized firm of
independent public accountants) to pay the principal of and any
premium and interest on such Debt Securities on the respective
Stated Maturities in accordance with the terms of the applicable
Indenture and such Debt Securities. Such covenant defeasance may
occur only if we have delivered to the applicable Trustee an
Opinion of Counsel to the effect that Holders of such Debt
Securities will not recognize gain or loss for federal income
tax purposes as a result of such deposit and covenant defeasance
and will be subject to federal income tax on the same amount, in
the same manner and at the same times as would have been the
case if such deposit and covenant defeasance were not to occur,
and the requirements set forth in clauses (2), (3), (4) and
(5) above are satisfied. If we exercise this option with
respect to any series of Debt Securities and such Debt
Securities were declared due and payable because of the
occurrence of any Event of Default, the amount of money and
U.S. Government Obligations so deposited in trust would be
sufficient to pay amounts due on such Debt Securities at the
time of their respective Stated Maturities but may not be
sufficient to pay amounts due on such Debt Securities upon any
acceleration resulting from such Event of Default. In such case,
we would remain liable for such payments.
If we exercise either our legal defeasance or covenant
defeasance option, any Subsidiary Guarantee will terminate.
No
Personal Liability of Directors, Officers, Employees and
Stockholders
No director, officer, employee, incorporator, stockholder,
member, partner or trustee of the Company or any Subsidiary
Guarantor, as such, shall have any liability for any obligations
of the Company or any Subsidiary Guarantor under the Debt
Securities, the Indentures or any Subsidiary Guarantees or for
any claim based on, in respect of, or by reason of, such
obligations or their creation. By accepting a Debt Security,
each Holder shall be deemed to have waived and released all such
liability. The waiver and release shall be a part of the
consideration for the issue of the Debt Securities. The waiver
may not be effective to waive liabilities under the federal
securities laws, and it is the view of the SEC that such a
waiver is against public policy.
Notices
Notices to Holders of Debt Securities will be given by mail to
the addresses of such Holders as they may appear in the Security
Register.
Title
We, the Subsidiary Guarantors, the Trustees and any agent of us,
the Subsidiary Guarantors or a Trustee may treat the Person in
whose name a Debt Security is registered as the absolute owner
of the Debt Security (whether or not such Debt Security may be
overdue) for the purpose of making payment and for all other
purposes.
Governing
Law
The Indentures and the Debt Securities will be governed by, and
construed in accordance with, the law of the State of New York.
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The
Trustee
We will enter into the Indentures with a Trustee that is
qualified to act under the Trust Indenture Act of 1939, as
amended, and with any other Trustees chosen by us and appointed
in a supplemental indenture for a particular series of Debt
Securities. We may maintain a banking relationship in the
ordinary course of business with our Trustee and one or more of
its affiliates.
Resignation or Removal of Trustee. If the
Trustee has or acquires a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee must either
eliminate its conflicting interest or resign, to the extent and
in the manner provided by, and subject to the provisions of, the
Trust Indenture Act and the applicable Indenture. Any
resignation will require the appointment of a successor Trustee
under the applicable Indenture in accordance with the terms and
conditions of such Indenture.
The Trustee may resign or be removed by us with respect to one
or more series of Debt Securities and a successor Trustee may be
appointed to act with respect to any such series. The holders of
a majority in aggregate principal amount of the Debt Securities
of any series may remove the Trustee with respect to the Debt
Securities of such series.
Limitations on Trustee if It Is Our
Creditor. Each Indenture will contain certain
limitations on the right of the Trustee, in the event that it
becomes our creditor, to obtain payment of claims in certain
cases, or to realize on certain property received in respect of
any such claim as security or otherwise.
Certificates and Opinions to Be Furnished to
Trustee. Each Indenture will provide that, in
addition to other certificates or opinions that may be
specifically required by other provisions of an Indenture, every
application by us for action by the Trustee must be accompanied
by an Officers Certificate and an Opinion of Counsel
stating that, in the opinion of the signers, all conditions
precedent to such action have been complied with by us.
17
DESCRIPTION
OF CAPITAL STOCK
The following summary of our capital stock, Restated Certificate
of Incorporation (the Certificate of Incorporation)
and Amended and Restated Bylaws (the Bylaws) does
not purport to be complete and is qualified in its entirety by
reference to the provisions of applicable law and to our
Certificate of Incorporation and Bylaws.
Our authorized capital stock consists of 300,000,000 shares
of common stock, $0.001 par value per share, and
10,000,000 shares of preferred stock, $0.001 par value
per share.
Common
Stock
As of September 1, 2009, we had 85,562,638 shares of
voting common stock outstanding, including 467,692 shares
of restricted stock. The shares of restricted stock have voting
rights, rights to receive dividends and are subject to certain
forfeiture restrictions.
Our common stock commenced trading on the NYSE under the symbol
CXO on August 3, 2007 in connection with our
initial public offering. As of September 1, 2009, there
were 41,941 holders of record of our common stock.
Holders of our common stock are entitled to one vote for each
share held on all matters submitted to a vote of stockholders
and do not have cumulative voting rights. Accordingly, holders
of a majority of the shares of our common stock entitled to vote
in any election of directors may elect all of the directors
standing for election.
Holders of our common stock are entitled to receive
proportionately any dividends if and when such dividends are
declared by our board of directors, subject to any preferential
dividend rights of preferred stock that may be outstanding at
the time such dividends are declared. Upon the liquidation,
dissolution or winding up of our company, the holders of our
common stock are entitled to receive ratably our net assets
available after the payment of all debts and other liabilities
and subject to the prior rights of any outstanding preferred
stock. Holders of our common stock have no preemptive,
subscription, redemption or conversion rights. The rights,
preferences and privileges of holders of our common stock are
subject to, and may be adversely affected by, the rights of the
holders of shares of any series of preferred stock that we may
designate and issue in the future.
We have not paid, and do not intend to pay in the foreseeable
future, cash dividends on our common stock.
There are no redemption or sinking fund provisions applicable to
our common stock. All outstanding shares of our common stock are
fully paid and non-assessable.
Preferred
Stock
Under the terms of our Certificate of Incorporation, our board
of directors is authorized to designate and issue shares of
preferred stock in one or more series without further vote or
action by our stockholders. Our board of directors has the
discretion to determine the rights, preferences, privileges and
restrictions, including voting rights, dividend rights,
conversion rights, redemption privileges and liquidation
preferences, of each series of preferred stock. It is not
possible to state the actual effect of the issuance of any
shares of preferred stock upon the rights of holders of the
common stock until the board of directors determines the
specific rights of the holders of the preferred stock. However,
these effects might include:
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restricting dividends on the common stock;
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diluting the voting power of the common stock;
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impairing the liquidation rights of the common stock; and
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delaying or preventing a change in control of our company.
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We currently have no shares of preferred stock outstanding, and
we have no present plans to issue any shares of preferred stock.
Anti-Takeover
Provisions of Our Certificate of Incorporation and
Bylaws
Our Certificate of Incorporation and Bylaws contain several
provisions that could delay or make more difficult the
acquisition of us through a hostile tender offer, open market
purchases, proxy contest, merger or other takeover attempt that
a stockholder might consider in his or her best interest,
including those attempts that might result in a premium over the
market price of our common stock.
Written
Consent of Stockholders
Our Certificate of Incorporation and Bylaws provide that any
action required or permitted to be taken by our stockholders
must be taken at a duly called meeting of stockholders and not
by written consent.
Special
Meetings of Stockholders
Subject to the rights of the holders of any series of preferred
stock, our Bylaws provide that special meetings of the
stockholders may only be called by the chairman of the board of
directors or by the resolution of our board of directors
approved by a majority of the total number of authorized
directors. No business other than that stated in a notice may be
transacted at any special meeting.
Advance
Notice Procedure for Director Nominations and Stockholder
Proposals
Our Bylaws provide that adequate notice must be given to
nominate candidates for election as directors or to make
proposals for consideration at annual meetings of our
stockholders. For nominations or other business to be properly
brought before an annual meeting by a stockholder, the
stockholder must have delivered a written notice to the
Secretary of our company at our principal executive offices not
less than 45 calendar days nor more than 75 calendar days prior
to the first anniversary of the date on which we first mailed
our proxy materials for the preceding years annual
meeting; provided, however, that in the event that the date of
the annual meeting is more than 30 calendar days before or more
than 30 calendar days after the first anniversary of the date of
the preceding years annual meeting notice by the
stockholder to be timely must be so delivered not later than the
close of business on the later of the 90th calendar day
prior to such annual meeting or the 10th calendar day
following the calendar day on which public announcement, if any,
of the date of such meeting is first made by us.
Nominations of persons for election to our board of directors
may be made at a special meeting of stockholders at which
directors are to be elected pursuant to our notice of meeting
(i) by or at the direction of our board of directors, or
(ii) by any stockholder of our company who is a stockholder
of record at the time of the giving of notice of the meeting,
who is entitled to vote at the meeting and who complies with the
notice procedures set forth in our Bylaws. In the event we call
a special meeting of stockholders for the purpose of electing
one or more directors to our board of directors, any stockholder
may nominate a person or persons (as the case may be) for
election to such position(s) if the stockholder provides written
notice to the Secretary of our company at our principal
executive offices not earlier than the close of business on the
90th calendar day prior to such special meeting, nor later
than the close of business on the later of the
70th calendar day prior to such special meeting or the
10th calendar day following the day on which public
announcement, if any, is first made of the date of the special
meeting and of the nominees proposed by our board of directors
to be elected at such meeting.
These procedures may operate to limit the ability of
stockholders to bring business before a stockholders meeting,
including the nomination of directors and the consideration of
any transaction that could result in a change in control and
that may result in a premium to our stockholders.
19
Classified
Board
Our Certificate of Incorporation divides our directors into
three classes serving staggered three-year terms. As a result,
stockholders will elect approximately one-third of the board of
directors each year. This provision, when coupled with
provisions of our Certificate of Incorporation authorizing only
the board of directors to fill vacant or newly created
directorships or increase the size of the board of directors and
provisions providing that directors may only be removed for
cause and then only by the holders of not less than
662/3%
of the voting power of all outstanding voting stock, may deter a
stockholder from gaining control of our board of directors by
removing incumbent directors or increasing the number of
directorships and simultaneously filling the vacancies or newly
created directorships with its own nominees.
Authorized
Capital Stock
Our Certificate of Incorporation contains provisions that the
authorized but unissued shares of common stock and preferred
stock are available for future issuance, subject to various
limitations imposed by the New York Stock Exchange. These
additional shares may be utilized for a variety of corporate
purposes, including public offerings to raise capital, corporate
acquisitions and employee benefit plans. The existence of
authorized but unissued shares of common stock and preferred
stock could make it more difficult or discourage an attempt to
obtain control of our company by means of a proxy contest,
tender offer, merger or otherwise.
Amendment
of Bylaws
Under Delaware law, the power to adopt, amend or repeal bylaws
is conferred upon the stockholders. A corporation may, however,
in its certificate of incorporation also confer upon the board
of directors the power to adopt, amend or repeal its bylaws. Our
Certificate of Incorporation and Bylaws grant our board of
directors the power to adopt, amend and repeal our Bylaws on the
affirmative vote of a majority of the directors then in office.
Our stockholders may adopt, amend or repeal our Bylaws but only
at any regular or special meeting of stockholders by the holders
of not less than
662/3%
of the voting power of all outstanding voting stock.
Certain
Oil and Natural Gas Opportunities
Certain of our stockholders who received shares of common stock
in the combination transaction and our non-employee
directors may from time to time have investments in other
exploration and production companies that may compete with us.
Our certificate of incorporation and our Business Opportunities
Agreement provide a safe harbor under which these entities and
directors may participate in the oil and gas exploration,
exploitation, development and production business without
breaching their fiduciary duties as controlling stockholders or
directors. No participation is allowed with respect to:
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any business opportunity that is brought to the attention of a
covered individual or entity solely in such persons
capacity as a director or officer of our company and with
respect to which, at the time of such presentment, no other
covered individual or entity has independently received notice
or otherwise identified such opportunity; or
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any business opportunity that is identified by a covered
individual or entity solely through the disclosure of
information by or on behalf of us.
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The covered individuals and entities have no obligation to offer
such opportunities to us, but interested directors are required
to disclose conflicts of interest. We are not prohibited from
pursuing any business opportunity with respect to which we have
renounced any interest.
Limitation
of Liability of Directors
Our Certificate of Incorporation provides that no director shall
be personally liable to us or our stockholders for monetary
damages for breach of fiduciary duty as a director, except for
liability as follows:
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for any breach of the directors duty of loyalty to us or
our stockholders;
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for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of laws;
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for unlawful payment of a dividend or unlawful stock purchase or
stock redemption; and
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for any transaction from which the director derived an improper
personal benefit.
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The effect of these provisions is to eliminate our rights and
our stockholders rights, through stockholders
derivative suits on our behalf, to recover monetary damages
against a director for a breach of fiduciary duty as a director,
including breaches resulting from grossly negligent behavior,
except in the situations described above.
Delaware
Takeover Statute
We are subject to Section 203 of the Delaware General
Corporation Law, which prohibits a Delaware corporation from
engaging in any business combination with any interested
stockholder for a period of three years after the date that such
stockholder became an interested stockholder, with the following
exceptions:
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before such date, the board of directors of the corporation
approved either the business combination or the transaction that
resulted in the stockholder becoming an interested stockholder
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upon completion of the transaction that resulted in the
stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction began,
excluding for purposes of determining the voting stock
outstanding (but not the outstanding voting stock owned by the
interested stockholder) those shares owned (1) by persons
who are directors and also officers and (2) employee stock
plans in which employee participants do not have the right to
determine confidentially whether shares held subject to the plan
will be tendered in a tender or exchange offer; or
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on or after such date, the business combination is approved by
the board of directors and authorized at an annual or special
meeting of the stockholders, and not by written consent, by the
affirmative vote of at least
662/3%
of the outstanding voting stock that is not owned by the
interested stockholder.
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In general, Section 203 defines a business combination to
include the following:
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any merger or consolidation involving the corporation and the
interested stockholder;
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any sale, transfer, pledge or other disposition (in one
transaction or a series of transactions) of 10% or more of the
assets of the corporation involving the interested stockholder;
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subject to certain exceptions, any transaction that results in
the issuance or transfer by the corporation of any stock of the
corporation to the interested stockholder;
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any transaction involving the corporation that has the effect of
increasing the proportionate share of the stock or any class or
series of the corporation beneficially owned by the interested
stockholder; or
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the receipt by the interested stockholder of the benefit of any
loss, advances, guarantees, pledges or other financial benefits
by or through the corporation.
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In general, Section 203 defines an interested
stockholder as an entity or person who, together with the
persons affiliates and associates, beneficially owns, or
within three years prior to the time of determination of
interested stockholder status did own, 15% or more of the
outstanding voting stock of the corporation.
Transfer
Agent and Registrar
The transfer agent and registrar for our common stock is
American Stock Transfer & Trust Company.
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DESCRIPTION
OF WARRANTS
We may issue warrants for the purchase of our common stock.
Warrants may be issued independently or together with Debt
Securities, preferred stock or common stock offered by any
prospectus supplement and may be attached to or separate from
any such offered securities. Each series of warrants will be
issued under a separate warrant agreement to be entered into
between us and a bank or trust company, as warrant agent, all as
set forth in the prospectus supplement relating to the
particular issue of warrants. The warrant agent will act solely
as our agent in connection with the warrants and will not assume
any obligation or relationship of agency or trust for or with
any holders of warrants or beneficial owners of warrants. The
following summary of certain provisions of the warrants does not
purport to be complete and is subject to, and is qualified in
its entirety by reference to, all provisions of the warrant
agreements.
You should refer to the prospectus supplement relating to a
particular issue of warrants for the terms of and information
relating to the warrants, including, where applicable:
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(1)
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the number of shares of common stock purchasable upon exercise
of the warrants and the price at which such number of shares of
common stock may be purchased upon exercise of the warrants;
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(2)
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the date on which the right to exercise the warrants commences
and the date on which such right expires (the Expiration
Date);
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(3)
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United States federal income tax consequences applicable to the
warrants;
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(4)
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the amount of the warrants outstanding as of the most recent
practicable date; and
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(5)
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any other terms of the warrants.
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Warrants will be offered and exercisable for United States
dollars only. Warrants will be issued in registered form only.
Each warrant will entitle its holder to purchase such number of
shares of common stock at such exercise price as is in each case
set forth in, or calculable from, the prospectus supplement
relating to the warrants. The exercise price may be subject to
adjustment upon the occurrence of events described in such
prospectus supplement. After the close of business on the
Expiration Date (or such later date to which we may extend such
Expiration Date), unexercised warrants will become void. The
place or places where, and the manner in which, warrants may be
exercised will be specified in the prospectus supplement
relating to such warrants.
Prior to the exercise of any warrants, holders of the warrants
will not have any of the rights of holders of common stock,
including the right to receive payments of any dividends on the
common stock purchasable upon exercise of the warrants, or to
exercise any applicable right to vote.
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PLAN OF
DISTRIBUTION
We may sell the offered securities in and outside the United
States (1) through underwriters or dealers,
(2) directly to purchasers, including our affiliates and
stockholders, (3) through agents or (4) through a
combination of any of these methods. The prospectus supplement
will include the following information:
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the terms of the offering;
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the names of any underwriters or agents;
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the name or names of any managing underwriter or underwriters;
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the purchase price of the securities;
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the estimated net proceeds to us from the sale of the securities;
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any delayed delivery arrangements;
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any underwriting discounts, commissions and other items
constituting underwriters compensation;
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any discounts or concessions allowed or reallowed or paid to
dealers; and
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any commissions paid to agents.
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Sale
Through Underwriters or Dealers
If underwriters are used in the sale, the underwriters will
acquire the securities for their own account for resale to the
public, either on a firm commitment basis or a best efforts
basis. The underwriters may resell the securities from time to
time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying
prices determined at the time of sale. Underwriters may offer
securities to the public either through underwriting syndicates
represented by one or more managing underwriters or directly by
one or more firms acting as underwriters. Unless we inform you
otherwise in the prospectus supplement, the obligations of the
underwriters to purchase the securities will be subject to
certain conditions. The underwriters may change from time to
time any offering price and any discounts or concessions allowed
or reallowed or paid to dealers.
During and after an offering through underwriters, the
underwriters may purchase and sell the securities in the open
market. These transactions may include overallotment and
stabilizing transactions and purchases to cover syndicate short
positions created in connection with the offering. The
underwriters may also impose a penalty bid, which means that
selling concessions allowed to syndicate members or other
broker-dealers for the offered securities sold for their account
may be reclaimed by the syndicate if the offered securities are
repurchased by the syndicate in stabilizing or covering
transactions. These activities may stabilize, maintain or
otherwise affect the market price of the offered securities,
which may be higher than the price that might otherwise prevail
in the open market. If commenced, the underwriters may
discontinue these activities at any time.
If dealers are used, we will sell the securities to them as
principals. The dealers may then resell those securities to the
public at varying prices determined by the dealers at the time
of resale. We will include in the prospectus supplement the
names of the dealers and the terms of the transaction.
Direct
Sales and Sales Through Agents
We may sell the securities directly. In this case, no
underwriters or agents would be involved. We may also sell the
securities through agents designated from time to time. In the
prospectus supplement, we will name any agent involved in the
offer or sale of the offered securities, and we will describe
any commissions payable to the agent. Unless we inform you
otherwise in the prospectus supplement, any agent will agree to
use its reasonable best efforts to solicit purchases for the
period of its appointment.
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We may sell the securities directly to institutional investors
or others who may be deemed to be underwriters within the
meaning of the Securities Act with respect to any sale of
securities. We will describe the terms of any such sales in the
prospectus supplement.
Remarketing
Arrangements
Offered securities may also be offered and sold, if so indicated
in the applicable prospectus supplement, in connection with a
remarketing upon their purchase, in accordance with a redemption
or repayment pursuant to their terms, or otherwise, by one or
more remarketing firms, acting as principals for their own
accounts or as agents for us. Any remarketing firm will be
identified and the terms of its agreements, if any, with us and
its compensation will be described in the applicable prospectus
supplement. Remarketing firms may be deemed to be underwriters,
as that term is defined in the Securities Act, in connection
with the securities remarketed.
Delayed
Delivery Contracts
If we so indicate in the prospectus supplement, we may authorize
agents, underwriters or dealers to solicit offers from certain
types of institutions to purchase securities from us at the
public offering price under delayed delivery contracts. These
contracts would provide for payment and delivery on a specified
date in the future. The contracts would be subject only to those
conditions described in the prospectus supplement. The
prospectus supplement will describe the commission payable for
solicitation of those contracts.
General
Information
We may have agreements with the agents, dealers, underwriters
and remarketing firms to indemnify them against certain civil
liabilities, including liabilities under the Securities Act, or
to contribute with respect to payments that the agents, dealers,
underwriters or remarketing firms may be required to make.
Agents, dealers, underwriters and remarketing firms may be
customers of, engage in transactions with, or perform services
for us in the ordinary course of their businesses.
LEGAL
MATTERS
Certain legal matters in connection with the securities will be
passed upon by Vinson & Elkins L.L.P., Houston, Texas,
as our counsel. Any underwriter or agent will be advised about
other issues relating to any offering by its own legal counsel.
EXPERTS
The (i) consolidated financial statements of Concho
Resources Inc. and subsidiaries incorporated in this prospectus
by reference to our Annual Report on
Form 10-K
for the year ended December 31, 2008, retrospectively
adjusted by our Current Report on
Form 8-K
filed on September 9, 2009 and (ii) managements
assessment of the effectiveness of internal control over
financial reporting incorporated in this prospectus by reference
to our Annual Report on
Form 10-K
for the year ended December 31, 2008 have been so
incorporated by reference in reliance upon the reports of Grant
Thornton LLP, independent registered public accountants, upon
the authority of said firm as experts in auditing and accounting
in giving said reports.
The special-purpose combined financial statements of the Henry
Group Properties as of December 31, 2007 and 2006, and for
each of the years in the three-year period ended
December 31, 2007 incorporated in this prospectus by
reference to the Current Reports on
Form 8-K
filed on August 6, 2008 and October 7, 2008 have been
so incorporated by reference in reliance upon the report of
Davis, Kinard & Co., P.C., independent registered
public accounting firm, upon the authority of said firm as
experts in accounting and auditing.
Certain estimates of our net crude oil and natural gas reserves
and related information included or incorporated by reference in
this prospectus have been derived from reports prepared by
Cawley, Gillespie & Associates, Inc. and Netherland,
Sewell & Associates, Inc. All such information has
been so included or incorporated by reference on the authority
of such firms as experts regarding the matters contained in
their reports.
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4,650,000 Shares
Concho Resources Inc.
Common Stock
PROSPECTUS SUPPLEMENT
BofA Merrill Lynch
J.P. Morgan
UBS Investment Bank
Barclays Capital
Raymond James
SunTrust Robinson
Homphrey
Tudor, Pickering, Holt &
Co.
Wells Fargo
Securities
Boenning & Scattergood,
Inc.
Canaccord Adams
Dahlman Rose & Company,
LLC
Howard Weil
Incorporated
KeyBanc Capital
Markets
Lazard Capital
Markets
January 26, 2010