EXCO Resources Posts Second Quarter Results

EXCO Resources has announced its second quarter 2009 results of operations. Highlights during the quarter include:

  • Oil and natural gas production was 36.5 Bcfe, or 401 Mmcfe per day for the second quarter 2009 compared with 35.9 Bcfe, or 394 Mmcfe per day during the second quarter 2008. Results from our Haynesville shale operations contributed 43 Mmcf per day of net production, which more than offsets the impacts of our reduced conventional drilling and the effects of asset sales closed during the second quarter of 2009.
  • Oil and natural gas revenues, as adjusted for the cash settlements of our derivative financial instruments (derivatives), were $288 million for the second quarter 2009 compared with $338 million for the second quarter 2008. The lower revenues reflect realized price declines of 68% for natural gas and 54% for oil from the prior year’s second quarter, which were largely offset by the cash settlements of our derivatives. Oil and natural gas revenues for the second quarter 2009 were $146 million, exclusive of the impacts of derivatives, compared with the second quarter 2008 oil and natural gas revenues of $429 million.
  • Adjusted net income available to common shareholders, a non-GAAP measure adjusting for unrealized derivative gains and losses and other non-cash items typically not included by securities analysts in published estimates, was $0.29 per diluted share for the second quarter 2009. While down from the $0.34 per diluted share for the second quarter 2008, adjusted net income increased from $0.19 per diluted share for the first quarter 2009.
  • Adjusted EBITDA, defined as earnings before interest, taxes, depreciation, depletion and amortization, and other non-cash income and expense items (a non-GAAP measure) for the second quarter 2009 was $210 million compared with $263 million in the second quarter 2008.
  • Midstream operating profit, before the effect of intercompany eliminations, was $9 million for the second quarter 2009, compared with $12 million in the prior year’s second quarter. Almost all of the decreased operating profit in the midstream operations was due to lower revenue from natural gas and condensate sales resulting from lower commodity prices.
  • We announced a joint venture with BG Group in a large area of mutual interest which contains most of our oil and natural gas assets in our East Texas/North Louisiana area, excluding the Vernon Field, and 50% of our related midstream assets. Cash proceeds are expected to be approximately $900 million, plus estimated closing cost adjustments, and closing is expected in the third quarter 2009. BG Group will also fund $400 million of future capital attributable to our 50% interest, with BG Group paying 75% of our share of drilling and completion costs related to the Haynesville and Bossier shales until the $400 million commitment is satisfied. Production from the 50% interest in the assets to be sold to BG Group was 69 Mmcfe per day for the second quarter of 2009.
  • Our asset divestiture program activities gained significant traction during the second quarter 2009. During the quarter, we closed $51 million of asset sales representing 9 Mmcfe per day of net production. We expect to close over $390 million of additional asset sales in the third quarter 2009, including the previously announced sales of assets in East Texas and our Mid-Continent regions to an affiliate of Encore Acquisition Company for $375 million. Production from these assets was 36 Mmcfe per day for the second quarter of 2009. We also have certain of our non-strategic Appalachian assets located in Ohio and Northwest Pennsylvania for sale which produced 16 Mmcfe per day for the second quarter of 2009.
  • In light of the continuing success of our Haynesville shale development and the expected closing of the joint venture with BG Group, we expect to increase our development drilling and leasing activities in East Texas/North Louisiana. We now plan on drilling 37 operated Haynesville wells as compared to our original budget of 27 operated wells in 2009. Although our level of activity will increase, our actual capital expenditures for 2009 will remain at approximately $500 million as a result of BG Group funding 75% of our costs on deep drilling. If the estimated purchase price adjustment for capital expenditures since the effective date of the transactions with BG Group is considered, our 2009 captial expenditures would be approximately $360 million.

Douglas H. Miller, EXCO's Chairman and CEO, commented, "The second quarter of 2009 was one of outstanding accomplishments for EXCO. On June 30, 2009 we announced East Texas/North Louisiana upstream and midstream joint ventures with BG Group which will result in approximately $900 million in cash plus closing adjustments, with an additional $400 million invested over the next 2-3 years in the form of drilling and completion funding equal to 75% of our capital expenditures for deep wells. We are very pleased to have BG Group as a partner. This partnership with BG Group, given their strong technical, business and financial capabilities, will allow us to ramp up our exploration and development and midstream activities in East Texas/North Louisiana, particularly in the Haynesville and Bossier shales, and will also enhance our gas marketing activities.

"In addition to our joint venture announcement and our asset divestitures, we continued to realize outstanding drilling results in the Haynesville shale. We have completed 11 Haynesville horizontal wells this year, of which seven were in the second quarter. Our average operated completions in DeSoto Parish, Louisiana this year have resulted in initial production rates of 24 million cubic feet of natural gas per day. We also completed a successful horizontal Haynesville well in Caddo Parish.

"For the remainder of 2009, we will continue increasing our drilling and completion activity in the Haynesville shale as we plan to drill an additional 26 operated wells. We will also continue to evaluate our strong Marcellus shale position in Appalachia by drilling test wells, building our operating staff and developing our plans for 2010 and beyond. Activities in other areas will be dependent upon a strengthening of commodity prices."

For the six months ended June 30, 2009, adjusted net income available to common shareholders was $0.48 per diluted share compared with adjusted net income of $0.45 per dilutive share for the six months ended June 30, 2008. Adjusted EBITDA for the six months ended June 30, 2009 was $405 million compared with $517 million for the six months ended June 30, 2008, a decrease of approximately 22% due primarily to lower commodity prices in 2009.

Equivalent production for the six months ended June 30, 2009 was 72.9 Bcfe, an increase of 3% from the prior year’s six month period equivalent production of 71.0 Bcfe. The increase in production reflects the impacts from our Haynesville drilling program which more than offset decreases attributable to suspension of our vertical drilling activities, normal decline in our other operating areas and sales of assets during the six months ended June 30, 2009.

The average price per barrel of oil, excluding derivatives, was $46.34 per Bbl for the six months ended June 30, 2009 compared with $109.21 for the prior year’s six month period. The average natural gas price, excluding derivatives for the six months ended June 30, 2009 and 2008 was $4.07 and $9.87 per Mcf, respectively, a decrease of approximately 59%.


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