1358071--2/27/2009--CONCHO_RESOURCES

related topics

{gas, price, oil}

{loss, insurance, financial}

{debt, indebtedness, cash}

{cost, regulation, environmental}

{operation, natural, condition}

{stock, price, share}

{provision, law, control}

{cost, contract, operation}

{acquisition, growth, future}

{operation, international, foreign}

{capital, credit, financial}

{personnel, key, retain}

Drilling for and producing crude 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. 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. 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 crude oil and natural gas reserves. 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 deterioration of the credit and capital markets. Our lenders can limit our borrowing capabilities, which may materially impact our operations. Our producing properties are located in the Permian Basin of Southeastern 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. Future price declines could result in a reduction in the carrying value of our proved oil and gas properties, which could adversely affect our results of operations. 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. Our commodity price risk management program may cause us to forego additional future profits or result in our making cash payments to our counterparties. We have entered into interest rate derivative instruments that may subject us to loss of income. 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. Nonperformance by the counterparties to our derivative instruments and commodity purchase agreements could adversely affect our financial condition and results of operations. Our identified inventory of drilling locations and recompletion opportunities are scheduled out over several years, making them susceptible to uncertainties that could materially alter the occurrence or timing of their drilling. Approximately 44.3 percent of our total estimated net proved reserves at December 31, 2008, were undeveloped, and those reserves may not ultimately be developed. Because we do not control the development 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. Unless we replace our crude oil and natural gas reserves, our reserves and production will decline, which would adversely affect our cash flow, our ability to raise capital and the value of our common stock. 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. The acquisition of the Henry Entities could expose us to potentially significant liabilities. Properties acquired may prove to be worth less than we paid because of uncertainties in evaluating recoverable reserves and potential liabilities. Competition in the oil and gas industry is intense, making it more difficult for us to acquire properties, market crude oil and natural gas and secure trained personnel. 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. Our exploration and development drilling may not result in commercially productive reserves. We periodically evaluate our unproved oil and gas properties for impairment, and could be required to recognize noncash charges to earnings of future periods. We may incur substantial losses and be subject to substantial liability claims as a result of our crude 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. Market conditions or operational impediments may hinder our access to crude oil and natural gas markets or delay our production. 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. We may incur substantial costs to comply with, and demand for our products may be reduced by, climate change legislation and regulatory initiatives. Our operations expose us to significant costs and liabilities with respect to environmental and operational safety matters. The loss of our chief executive officer or other key personnel could negatively impact our ability to execute our business strategy. Uncertainties associated with enhanced recovery methods may result in us not realizing an acceptable return on our investments in such projects. Our indebtedness could restrict our operations and make us more vulnerable to adverse economic conditions. Our credit facility imposes restrictions on us that may affect our ability to successfully operate our business. A terrorist attack or armed conflict could harm our business by decreasing our revenues and increasing our costs. Risks Relating to Our Common Stock Our restated certificate of incorporation, amended and restated 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. Because we have no plans to pay dividends on our common stock, stockholders must look solely to stock appreciation for a return on their investment in us.

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1358071--2/27/2009--CONCHO_RESOURCES_INC