1358071--3/28/2008--CONCHO_RESOURCES

related topics

{gas, price, oil}

{loss, insurance, financial}

{debt, indebtedness, cash}

{operation, natural, condition}

{cost, regulation, environmental}

{operation, international, foreign}

{acquisition, growth, future}

{personnel, key, retain}

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. Reserve estimates depend on many assumptions that may turn out to be inaccurate. Any material inaccuracies in these reserve estimates or underlying assumptions could materially reduce the estimated quantities and present value of our reserves. Almost all of our producing properties are located in the Permian Basin region of Southeast New Mexico and West Texas, making us vulnerable to risks associated with operating in one major geographic area. In addition, a substantial portion of our proved reserves as of December 31, 2007, are from a single producing horizon within this area. 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. 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. 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. 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 46% of our total estimated net proved reserves as of December 31, 2007, 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 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 integrate acquired companies, and any inability to do so may disrupt our business and hinder our ability to grow through the acquisition of businesses. 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 natural gas industry is intense, making it more difficult for us to acquire properties, market 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 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. Market conditions or operational impediments may hinder our access to 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. 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 our chief operating 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 the investments we make to use such methods. Our indebtedness could restrict our operations and make us more vulnerable to adverse economic conditions. Our existing bank credit facilities impose 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.

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1358071--3/28/2008--CONCHO_RESOURCES_INC