In re Concho Resources Inc. Securities Litigation

At all relevant times, Concho was an independent oil and natural gas company engaged in the acquisition, development, exploration and production of oil and natural gas properties.  Plaintiff’s claims arise from Defendants’ allegedly false and misleading statements during the period February 21, 2018, through July 31, 2019, inclusive (the Class Period).  Labaton Keller Sucharow filed a consolidated class action Complaint on January 7, 2022, alleging violations of Section 10(b) and 20(a) of the Securities Exchange Act of 1934 against Concho and certain other defendants.

The Complaint alleges that throughout the Class Period, Defendants touted to investors that Concho had successfully transitioned to what was referred to as “large-scale development” or “manufacturing mode,” which meant that Concho was employing simultaneous completion of tightly spaced wells in its projects.  According to Defendants, its large-scale development was based on validated well spacing, lateral placement, and completion design, which would allow Concho to increase its production while lowering costs.  Moreover, Defendants also assured investors that the Company’s risk profile remained unchanged, as these large development projects were dispersed among the Company’s asset base.  Concho’s flagship large-scale project was the Dominator, a 23 well pad in the Northern Delaware Basin.

Contrary to Defendants’ Class Period statements, however, on August 1, 2019, the Company would admit that Concho had spaced its wells “too tight” across numerous projects, including the Dominator, and that the Company had been forced to significantly reduce its active rig count below prior estimates and issue weak production forecasts.  The market was shocked and Concho’s stock price collapsed.

As a result, the Complaint alleges that throughout the Class Period, Concho’s manufacturing mode development was an unverified and extremely high-risk combination of development methodologies, which included aggressively tight well spacing, and lacked a verifiable basis.  The Complaint further alleges that due to Defendants’ failure to account for the concentration of these extremely high-risk projects, both individually and on a portfolio basis, Concho issued artificially inflated production forecasts throughout the Class Period.

The case is In re Concho Resources Inc. Securities Litigation, No. 21-cv-02473, in the United States District Court for the Southern District of Texas.  Labaton Keller Sucharow represents Lead Plaintiffs Utah Retirement Systems and Construction Laborers Pension Trust for Southern California.