Breaking News

Tweet TWEET

EXCO Resources, Inc. Reports First Quarter 2013 Results

  EXCO Resources, Inc. Reports First Quarter 2013 Results

Business Wire

DALLAS -- April 30, 2013

EXCO Resources, Inc. (NYSE: XCO) (“EXCO”) today announced first quarter
results for 2013.

  *Adjusted net income, a non-GAAP measure adjusting for gains from asset
    sales, non-cash gains or losses from derivative financial instruments
    (derivatives), non-cash ceiling test write-downs and other items typically
    not included by securities analysts in published estimates, was $0.13 per
    diluted share for the first quarter 2013 compared to $0.03 per diluted
    share for the first quarter 2012.
  *Adjusted earnings before interest, taxes, depreciation, depletion and
    amortization, gains on asset sales, ceiling test write-downs and other
    non-cash income and expense items (adjusted EBITDA, a non-GAAP measure)
    for the first quarter 2013 were $96 million compared with $111 million in
    the first quarter 2012.
  *GAAP results were net income of $158 million, or $0.74 per diluted share,
    for the first quarter 2013 compared with a net loss of $282 million, or
    $1.32 per diluted share, for the first quarter 2012. The first quarter
    2013 includes a $187 million gain from the contribution of 74.5% of our
    interests in certain conventional properties to our partnership with
    Harbinger Group Inc. (HGI). The first quarter 2012 net loss was primarily
    due to a $276 million non-cash ceiling test write-down of oil and natural
    gas properties.
  *Oil, natural gas and natural gas liquids (NGL) production was 41 Bcfe, or
    452 Mmcfe per day, for the first quarter 2013 compared with 49 Bcfe, or
    537 Mmcfe per day in the first quarter 2012. The decreases in production
    reflect the impact of the properties contributed to the partnership with
    HGI and our reduced drilling program initiated in 2012. First quarter 2013
    production from our Haynesville/Bossier shale was 337 Mmcf per day
    compared with 390 Mmcf per day in the first quarter 2012. First quarter
    2013 production in our Appalachia region was 56 Mmcfe per day, a 37%
    increase from the first quarter 2012. The increase reflects drilling in
    the Marcellus shale and completion activities which resulted in 41
    additional wells coming on-line subsequent to first quarter 2012.
  *Oil, natural gas and NGL revenues, before cash settlements on derivatives,
    for the first quarter 2013 were $138 million compared with first quarter
    2012 revenues of $135 million. Our average sales price per Mcfe increased
    to $3.40 per Mcfe for the first quarter 2013 from $2.76 per Mcfe for the
    first quarter 2012. When the impacts of cash settlements from derivatives
    are considered, oil, natural gas and NGL revenues were $155 million for
    the first quarter 2013, compared with $185 million in the first quarter
    2012.
  *Our direct operating costs were $0.33 per Mcfe for the first quarter 2013
    compared with $0.47 per Mcfe for the first quarter 2012. We continue
    taking significant steps in reducing our operating costs in all operating
    areas. In addition, our first quarter 2013 operating costs per Mcfe were
    favorably impacted by the contribution of certain conventional properties
    to the partnership with HGI. The conventional assets have higher operating
    costs than our horizontal wells.
  *TGGT’s average throughput was approximately 1.4 Bcf per day during the
    first quarter 2013, compared with 1.5 Bcf per day during the fourth
    quarter 2012 and 1.5 Bcf per day in the first quarter 2012. Our 50% share
    of TGGT’s adjusted EBITDA in the first quarter 2013 was $18 million
    compared with $17 million in the first quarter 2012.
  *On February14, 2013, we formed a partnership with HGI. We contributed our
    conventional non-shale assets in East Texas and North Louisiana and our
    shallow Canyon Sand and other assets in the Permian Basin of West Texas to
    the partnership in exchange for net proceeds of $573 million, after
    customary preliminary purchase price adjustments and a 25.5% economic
    interest in the partnership. HGI's economic interest in the partnership is
    74.5%. We report our 25.5% interest in the partnership using proportional
    consolidation. The primary strategy of the partnership is to acquire
    conventional producing oil and natural gas properties to enhance asset
    value and cash flow. Immediately following the closing, the partnership
    entered into an agreement to purchase certain shallow conventional assets
    from BG Group, plc (BG Group) for $131 million, after customary
    preliminary purchase price adjustments. This acquisition represented
    incremental working interest in properties operated by the partnership.
    The following table presents selected pro forma operating and financial
    information for the three months ended March31, 2013 and 2012 as if these
    transactions occurred on January 1, 2012:

                 Three months ended March 31, 2013           Three months ended March 31, 2012
(dollars in                       Pro forma                                      Pro forma
thousands,         Historical   adjustments   Pro forma       Historical   adjustments   Pro forma
except per         EXCO           (1)             EXCO            EXCO           (1)             EXCO
unit rate)
Production:
Total
production            40,697        (2,705  )       37,992           48,876        (6,606  )       42,270
(Mmcfe)
Average
production            452           (30     )       422              537           (73     )       464
(Mmcfe/d)
Revenues:
Revenues,
excluding          $  138,223     $ (12,657 )     $ 125,566       $  134,848     $ (30,758 )     $ 104,090
derivatives
Average
realized price        3.40          4.68            3.31             2.76          4.66            2.46
($/Mcfe)
Expenses:
Direct
operating          $  13,617      $ (3,489  )     $ 10,128        $  22,796      $ (8,420  )     $ 14,376
costs
Per Mcfe              0.33          1.29            0.27             0.47          1.27            0.34
Production and
ad valorem            5,248         (1,545  )       3,703            7,193         (3,531  )       3,662
taxes
Per Mcfe              0.13          0.57            0.10             0.15          0.53            0.09
Gathering and         24,476        (782    )       23,694           26,423        (2,502  )       23,921
transportation
Per Mcfe              0.60          0.29            0.62             0.54          0.38            0.57
Excess of
revenues over      $  94,882      $ (6,841  )     $ 88,041        $  78,436      $ (16,305 )     $ 62,131
operating
expenses

      The 2013 pro forma adjustments reflect the contribution of our interest
      in certain properties from January 1, 2013 to February 14, 2013 and the
(1)  acquisition of certain shallow conventional assets from BG Group from
      January 1, 2013 to March 31, 2013. The 2012 pro forma adjustments
      reflect the impact of these transactions from January 1, 2012 to March
      31, 2012.
      

  *We improved our liquidity by using the proceeds received upon formation of
    the partnership with HGI to reduce outstanding borrowings under our credit
    agreement. As a result of this transaction, our borrowing base under our
    credit agreement was reduced to $900 million. In addition, we utilized
    cash flows from operations and other divestitures to reduce outstanding
    borrowings under our credit agreement by an additional $40 million during
    the three months ended March 31, 2013.

Douglas H. Miller, EXCO's Chief Executive Officer, commented, “We are pleased
with the positive financial results achieved in the first quarter through a
continued focus on reducing expenses. Our operations team also continues to
make drilling cost reductions in the Haynesville and Marcellus, and we are
encouraged by the recent increase in natural gas prices.

“The Harbinger partnership transaction completed in February establishes a
strong partnership that will enhance the long term value of EXCO while giving
us flexibility and liquidity in the short term. We are excited to work with
Harbinger Group Inc. to make strategic acquisitions to grow and develop this
partnership.

“With our new senior leadership team in place, we will continue to actively
evaluate acquisition opportunities and develop our properties within cash flow
to grow the value of the Company. Regardless of commodity prices in 2013, we
expect to continue to preserve liquidity, focus on cost controls and deliver
stable cash flows.”

Adjusted net income

Our reported net income (loss) shown below, a GAAP measure, includes certain
items not typically included by securities analysts in their published
estimates of financial results. The following table provides a reconciliation
of our net income (loss) to the non-GAAP measure of adjusted net income:

                 Three Months Ended
                   March 31, 2013                March 31, 2012
(in thousands,
except per         Amount         Per share       Amount         Per share
share amounts)
Net income         $ 158,120                        $ (281,649 )
(loss), GAAP
Adjustments:
Non-cash
mark-to-market
(gains) losses
on derivative        60,232                           (3,720   )
financial
instruments,
before taxes
Non-cash write
down of oil
and natural          10,707                           275,864
gas
properties,
before taxes
Adjustments
included in          (286     )                       18,799
equity
(income) loss
(Gain) loss on
divestitures
and other            (184,386 )                       1,952
operating
items
Deferred
finance cost         3,535                            —
amortization
acceleration
Income taxes
on above             44,079                           (117,158 )
adjustments
(1)
Adjustment to
deferred tax
asset               (63,248  )                      112,660  
valuation
allowance (2)
Total
adjustments,        (129,367 )                      288,397  
net of taxes
Adjusted net       $ 28,753                        $ 6,748    
income
Net income
(loss), GAAP       $ 158,120        $ 0.74          $ (281,649 )     $ (1.32 )
(3)
Adjustments
shown above          (129,367 )       (0.60 )         288,397          1.35
(3)
Dilution
attributable        —              (0.01 )        —              —     
to share-based
payments (4)
Adjusted net       $ 28,753        $ 0.13         $ 6,748         $ 0.03  
income
                                                                     
Common stock
and
equivalents
used for
earnings per
share (EPS):
Weighted
average common       214,784                          214,145
shares
outstanding
Dilutive stock       5                                451
options
Dilutive
restricted          72                             —        
shares
Shares used to
compute
diluted EPS         214,861                        214,596  
for adjusted
net income

(1)  The assumed income tax rate is 40% for all periods.
(2)   Deferred tax valuation allowance has been adjusted to reflect the
      assumed income tax rate of 40% for all periods.
(3)   Per share amounts are based on weighted average number of common shares
      outstanding.
      Represents dilution per share attributable to common share equivalents
(4)   from in-the-money stock options and dilutive restricted shares
      calculated in accordance with the treasury stock method.
      

Cash flow

Our cash flow from operations before changes in working capital was $81
million for the first quarter 2013. We use our cash flow and available
borrowing capacity in our credit agreement to fund our drilling and
development programs and acquire producing properties.

                                                    Three Months Ended
                                                      March 31,
(in thousands)                                        2013       2012
Cash flow from operations, GAAP                       $ 43,214     $ 145,123
Net change in working capital                           34,990       (51,579 )
Non-recurring other operating items                    2,652       1,952   
Cash flow from operations before changes in
working capital and non-recurring other operating     $ 80,856     $ 95,496  
items, non-GAAP measure (1)

      Cash flow from operations before working capital changes and
      non-recurring other operating items are presented because management
      believes it is a useful financial indicator for companies in our
      industry. This non-GAAP disclosure is widely accepted as a measure of an
      oil and natural gas company’s ability to generate cash used to fund
(1)  development and acquisition activities and service debt or pay
      dividends. Cash flow from operations before changes in working capital
      is not a measure of financial performance pursuant to GAAP and should
      not be used as an alternative to cash flows from operating, investing,
      or financing activities. Non-recurring other operating items have been
      excluded as they do not reflect our on-going operating activities.
      

Operations activity and outlook

We spent $59 million on development and exploitation activities, drilling and
completing 28 gross (14.2 net) operated wells in the first quarter 2013. In
addition, we participated in 2 gross (0.1 net) wells operated by others (OBO)
during the first quarter 2013. We had an overall drilling success rate of 100%
for the first quarter 2013. We spent $77 million on development and
exploitation activities, drilling and completing 43 gross (18.9 net) operated
wells in the fourth quarter 2012. In addition, we participated in 1 gross (0.2
net) well operated by others (OBO) during the fourth quarter 2012.

Our actual capital expenditures for the first quarter 2013 and our full year
2013 capital budget are presented in the following table:

                           Three Months       April - December     Full Year
(in thousands)           Ended            2013               2013
                           March 31, 2013     Forecast             Forecast
Capital expenditures
(1):
Development capital        $    58,715        $     161,285        $  220,000
Gas gathering and               —                   —                 —
water pipelines
Lease acquisitions and          —                   14,000            14,000
seismic
Capitalized interest            5,038               9,962             15,000
Corporate and other            4,596              19,404           24,000
Total                      $    68,349        $     204,651        $  273,000

(1)  Excludes capital expenditures related to our partnership with HGI.
      

Our 2013 capital budget, as approved by our Board of Directors, is highly
dependent upon natural gas prices and is therefore subject to change. Further,
our renewed focus on acquisitions of producing properties and our interest in
obtaining outside participation in certain of our drilling activities and
acquisitions of drilling locations could have an impact on the 2013 approved
capital budget. We will update our capital spending plans on a quarterly basis
during the year.

Haynesville/Bossier Shale

Our horizontal Haynesville shale development program is a significant asset
for EXCO and continues to yield strong results. At the end of the first
quarter 2013, our Haynesville/Bossier shale operated production was 1,067 Mmcf
per day gross (316 Mmcf per day net) and with the addition of production from
our OBO wells, we had 338 Mmcf per day of total net Haynesville/Bossier shale
production. We currently have three operated rigs drilling in the play. While
our current plan is to maintain three rigs through 2013, we will continue to
assess product pricing and project economics to make further decisions on our
drilling activity. Our development drilling program for the first quarter 2013
was focused in DeSoto Parish, Louisiana where we continued our 80-acre spacing
manufacturing program. We currently have 37 units fully developed in the
Haynesville in DeSoto Parish. We completed and turned to sales 19 gross (7.8
net) operated Haynesville horizontal wells in the quarter. We utilized an
average of three operated rigs and spud eight operated horizontal wells during
the quarter. We participated in two OBO wells during the quarter and currently
have one OBO rig drilling. In total, we have 396 operated horizontal wells and
179 OBO horizontal wells flowing to sales.

During 2013, we plan to drill 26 gross (15.5 net) operated wells with a three
rig program. We plan to complete and turn to sales a total of 42 gross wells
(22.1 net), including completions carried into 2013 from wells drilled in late
2012.

The average initial production rate from the 19 operated Haynesville
horizontal wells completed and turned to sales in the first quarter 2013 in
DeSoto Parish was 13.7 Mmcf per day with an average 7,811 psi flowing casing
pressure on an average 18/64ths choke. This maximum choke size is indicative
of our modified restricted choke management program in DeSoto Parish.

Our cost reduction and efficiency program is delivering positive results. We
continue to see improvements in drilling times, stimulation costs and overall
capital efficiency. Our current DeSoto Parish well costs are averaging
approximately $7.8 million per well. The largest factors in our cost reduction
efforts to date are fracture stimulation market conditions, fracture
stimulation design changes, modified tubing program, reduced drilling times
and overall improved management of all rental items. Our operations control
room in our Dallas headquarters plays a significant role in our well
surveillance and gas scheduling process. We have reduced our overall
production downtime in the Haynesville to approximately 4.9% through better
coordination and scheduling in all aspects of our field activities. From this
control room, we have the ability to continuously monitor and remotely control
natural gas flow 24 hours per day, 365 days per year.

Marcellus Shale

Our gross operated Marcellus shale production at the end of the first quarter
2013 was 181 Mmcf per day (48.3 Mmcf per day net). This represents a 15%
increase since year end 2012. Our focus through 2013 is to complete and turn
to sales our remaining drilled well inventory while reducing the size of our
appraisal drilling program due to low product pricing. In the first quarter
2013, we spud one Marcellus appraisal well in Northeast Pennsylvania and
completed five gross operated (2.5 net) Marcellus wells in Central and
Northeast Pennsylvania. We turned to sales eight Marcellus wells in late 2012
in West Lycoming County Pennsylvania that resulted in some of our highest well
performances to date as the IP rates ranged from 7.1 to 11.8 Mmcf per day with
an average of 8.9 Mmcf per day per well. During the remainder of 2013, we plan
to turn to sales an additional 13 Marcellus wells (nine in our Central
Pennsylvania area and four in the East Lycoming County area). Our development
planning for 2014 is underway and will be a combination of development
drilling in our highest rate of return areas and selective appraisal drilling
to delineate more of our acreage base.

In addition to the Marcellus shale production in Appalachia, we averaged 32
gross (13.2 net) operated Mmcf per day of conventional production in the
region.

Partnership with HGI

The following discussion of operating results, capital expenditures and
planned operations addresses our partnership with HGI. We contributed the
conventional Permian and East Texas/North Louisiana assets to the partnership
with HGI on February 14, 2013. On March 5, 2013 the partnership acquired
additional oil and natural gas assets, including and above the Cotton Valley
formation in the Danville, Waskom, and Holly fields in East Texas and North
Louisiana from an affiliate of BG Group. The capital budget for the
partnership with HGI for 2013 is approximately $40.0 million, which is
primarily focused on development of its Permian Basin assets in West Texas and
recompletion projects in North Louisiana.

Permian

During the first quarter 2013, 8 gross (7.8 net) wells were drilled and
completed in the Sugg Ranch area with 100% drilling success. Economics for
this drilling activity typically have high rates-of-return driven by oil and
NGL content. The partnership with HGI expects to run one operated rig and
drill and complete 36 gross (34.9 net) wells at Sugg Ranch in 2013. At the end
of the first quarter 2013, production from the 445 partnership wells averaged
approximately 3,700 barrels per day of net oil equivalents. This average
production rate consisted of 1,360 net barrels of oil, 6,000 net Mcf of
natural gas, and 1,330 net barrels of natural gas liquids per day.

East Texas/North Louisiana

The Vernon Field in Jackson Parish, Louisiana is the most significant
producing field in this group of assets. At the end of the first quarter 2013,
production from the operated partnership wells averaged approximately 45 Mmcfe
per day of net natural gas from the lower Cotton Valley and Bossier Sand
formations. With current low commodity prices, the primary focus in the Vernon
Field is to minimize operating expense while maintaining production.

The partnership with HGI has additional acreage and production in Caddo and
DeSoto Parishes, Louisiana, primarily in four fields - Holly, Kingston,
Caspiana and Longwood. In addition, the partnership with HGI has acreage and
production in Harrison, Panola and Gregg Counties in Texas, primarily across
three fields - Carthage, Waskom, and Danville. Production from these areas is
primarily from Cotton Valley, Travis Peak and Hosston sands. At the end of the
first quarter 2013, production from the operated partnership wells in these
fields averaged approximately 37 Mmcfe per day of net natural gas. Due to low
commodity prices, the partnership with HGI is not actively drilling in these
fields. Capital spending during the first quarter 2013 was focused on
maintaining a strong emphasis on base production performance. The partnership
typically runs multiple service rigs replacing tubing, changing pumps,
cleaning out fill and implementing general repairs to maintain optimum
production levels. During the remainder of the year, the partnership will
initiate recompletions in 9 wells in the Holly field targeting Cotton Valley
and Hosston sands. In East Texas/North Louisiana, the partnership with HGI
currently has 906 wells flowing to sales with a total gross operated
production rate of approximately 119 Mmcfe per day (82 Mmcfe per day net).

TGGT

Our jointly held midstream company, TGGT, had total throughput which averaged
approximately 1.4 Bcf per day during the first quarter of 2013. TGGT's
adjusted EBITDA was $37 million for the first quarter of 2013, which was a 6%
increase over TGGT's adjusted EBITDA of $35 million for the first quarter of
2012. Through an effective asset optimization program, TGGT continues to
significantly reduce its operating expenses, which were 21% less in the first
quarter of 2013 than the fourth quarter of 2012.

TGGT's capital spending for the first quarter of 2013 was $7 million, which
was 61% lower than the $18 million spent in the fourth quarter of 2012.
Capital spending has transitioned from major facility and pipeline projects to
primarily installation of field infrastructure pipelines to support producer
drilling activity in North Louisiana and East Texas.

Financial Data

Our consolidated balance sheets as of March31, 2013 and December31, 2012,
consolidated statements of operations for the three months ended March31,
2013 and 2012 and consolidated statements of cash flows for the three months
ended March31, 2013 and 2012, are included on the following pages. We have
also included reconciliations of non-GAAP financial measures referred to in
this press release which have not been previously reconciled.

EXCO will host a conference call on Wednesday, May 1, 2013 at 9:00 a.m.
(Central time) to discuss the contents of this release and respond to
questions. Please call (800) 309-5788 if you wish to participate, and ask for
the EXCO conference call ID#32095842. The conference call will also be webcast
on EXCO’s website at www.excoresources.com under the Investor Relations tab.
Presentation materials related to this release will be posted, after market
close, on EXCO’s website on Tuesday, April 30, 2013.

A digital recording will be available starting two hours after the completion
of the conference call until 11:59 p.m., May 15, 2013. Please call (800)
585-8367 and enter conference ID#32095842 to hear the recording. A digital
recording of the conference call will also be available on EXCO’s website.

Additional information about EXCO Resources, Inc. may be obtained by
contacting EXCO’s Chairman and Chief Executive Officer, Douglas H. Miller, or
its President and Chief Operating Officer, Harold L. Hickey, or its Executive
Vice President and Chief Financial Officer, Mark F. Mulhern, at EXCO’s
headquarters, 12377 Merit Drive, Suite 1700, Dallas, TX 75251, telephone
number (214) 368-2084, or by visiting EXCO’s website at www.excoresources.com.
EXCO’s SEC filings and press releases can be found under the Investor
Relations tab.

We believe that it is important to communicate our expectations of future
performance to our investors. However, events may occur in the future that we
are unable to accurately predict, or over which we have no control. We caution
users of the financial statements not to place undue reliance on a
forward-looking statement. When considering our forward-looking statements,
keep in mind the cautionary statements and the risk factors included in our
Annual Report on Form10-K for the year ended December31, 2012, filed with
the Securities and Exchange Commission, or the SEC, on February21, 2013 and
our other periodic filings with the SEC.

Our revenues, operating results and financial condition substantially depend
on prevailing prices for oil and natural gas and the availability of capital
from our credit agreement, or the EXCO Resources Credit Agreement. Declines in
oil or natural gas prices may have a material adverse effect on our financial
condition, liquidity, results of operations, the amount of oil or natural gas
that we can produce economically and the ability to fund our operations.
Historically, oil and natural gas prices and markets have been volatile, with
prices fluctuating widely, and they are likely to continue to be volatile.

The SEC permits oil and natural gas companies in filings made with the SEC to
disclose proved reserves that a company has demonstrated by actual production
or conclusive formation tests to be economically and legally producible under
existing economic and operating conditions. The SEC permits optional
disclosure of “probable” and “possible” reserves in filings with the
commission. EXCO may use broader terms to describe additional reserve
opportunities such as “potential,” “unproved,” or “unbooked potential,” to
describe volumes of reserves potentially recoverable through additional
drilling or recovery techniques that the SEC’s guidelines strictly prohibit us
from including in filings with the SEC. These estimates are by their nature
more speculative than estimates of proved, probable or possible reserves and
accordingly are subject to substantially greater risk of actually being
realized by the company. While we believe our calculations of unproved
drillsites and estimation of unproved reserves have been appropriately risked
and are reasonable, such calculations and estimates have not been reviewed by
third party engineers or appraisers. Investors are urged to consider closely
the disclosure in our Annual Report on Form 10-K for the year ended December
31, 2012, which is available on our website at www.excoresources.com under the
Investor Relations tab.

                                                           
EXCO Resources, Inc.
Consolidated Balance Sheets
                                                                
(in thousands)                               March 31,          December 31,
                                             2013               2012
                                             (Unaudited)
Assets
Current assets:
Cash and cash equivalents                    $ 26,646           $ 45,644
Restricted cash                                53,292             70,085
Accounts receivable, net:
Oil and natural gas                            70,687             84,348
Joint interest                                 71,690             69,446
Other                                          18,230             15,053
Inventory                                      4,218              5,705
Derivative financial instruments               10,653             49,500
Other                                         18,647           22,085     
Total current assets                          274,063          361,866    
Equity investments                             359,739            347,008
Oil and natural gas properties (full
cost accounting method):
Unproved oil and natural gas properties
and development costs not being                389,998            470,043
amortized
Proved developed and undeveloped oil and       2,618,292          2,715,767
natural gas properties
Accumulated depletion                         (1,984,556 )      (1,945,565 )
Oil and natural gas properties, net           1,023,734        1,240,245  
Gas gathering assets                           33,810             130,830
Accumulated depreciation and                  (9,236     )      (34,364    )
amortization
Gas gathering assets, net                     24,574           96,466     
Office, field and other equipment, net         19,156             20,725
Deferred financing costs, net                  19,257             22,584
Derivative financial instruments               6,440              16,554
Goodwill                                       163,155            218,256
Other assets                                  28               28         
Total assets                                 $ 1,890,146       $ 2,323,732  
                                                                             

                                                           
EXCO Resources, Inc.
Consolidated Balance Sheets
                                                                
(in thousands, except per share and          March 31,          December 31,
share data)                                  2013               2012
                                             (Unaudited)
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable and accrued liabilities     $ 59,125           $ 83,240
Revenues and royalties payable                 112,710            134,066
Accrued interest payable                       3,089              17,029
Current portion of asset retirement            395                1,200
obligations
Income taxes payable                           —                  —
Derivative financial instruments              17,639           2,396      
Total current liabilities                     192,958          237,931    
Long-term debt                                 1,331,376          1,848,972
Deferred income taxes                          —                  —
Derivative financial instruments               23,783             26,369
Asset retirement obligations and other         42,085             61,067
long-term liabilities
Commitments and contingencies                  —                  —
Shareholders’ equity:
Preferred stock, $0.001 par value;
10,000,000 authorized shares; none             —                  —
issued and outstanding
Common stock, $0.001 par value;
350,000,000 authorized shares;
218,049,105 shares issued and
217,509,884 shares outstanding at March        215                215
31, 2013; 218,126,071 shares issued and
217,586,850 shares outstanding at
December 31, 2012
Additional paid-in capital                     3,203,364          3,200,067
Accumulated deficit                            (2,896,156 )       (3,043,410 )
Treasury stock, at cost; 539,221 shares       (7,479     )      (7,479     )
at March 31, 2013 and December 31, 2012
Total shareholders’ equity                    299,944          149,393    
Total liabilities and shareholders’          $ 1,890,146       $ 2,323,732  
equity
                                                                             

                                              
EXCO Resources, Inc.
Consolidated Statements of Operations
(Unaudited)
                                                 
                                                 Three Months Ended March 31,
(in thousands, except per share data)            2013           2012
Revenues:
Oil and natural gas                              $ 138,223        $ 134,848
Costs and expenses:
Oil and natural gas operating costs                13,617           22,796
Production and ad valorem taxes                    5,248            7,193
Gathering and transportation                       24,476           26,423
Depletion, depreciation and amortization           41,308           89,582
Write-down of oil and natural gas properties       10,707           275,864
Accretion of discount on asset retirement          690              947
obligations
General and administrative                         17,984           21,505
(Gain) loss on divestitures and other             (184,882 )      1,625    
operating items
Total costs and expenses                          (70,852  )      445,935  
Operating income (loss)                            209,075          (311,087 )
Other income (expense):
Interest expense                                   (20,192  )       (16,764  )
Gain (loss) on derivative financial                (43,514  )       53,865
instruments
Other income                                       88               243
Equity income (loss)                              12,663         (7,906   )
Total other income (expense)                      (50,955  )      29,438   
Income (loss) before income taxes                  158,120          (281,649 )
Income tax expense                                —              —        
Net income (loss)                                $ 158,120       $ (281,649 )
Earnings (loss) per common share:
Basic:
Net income (loss)                                $ 0.74          $ (1.32    )
Weighted average common shares outstanding        214,784        214,145  
Diluted:
Net income (loss)                                $ 0.74          $ (1.32    )
Weighted average common and common                214,861        214,145  
equivalent shares outstanding
                                                                             

                                              
EXCO Resources, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
                                                 
                                                 Three Months Ended March 31,
(in thousands)                                   2013           2012
Operating Activities:
Net income (loss)                                $ 158,120        $ (281,649 )
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depletion, depreciation and amortization           41,308           89,582
Share-based compensation expense                   1,735            2,864
Accretion of discount on asset retirement          690              947
obligations
Write-down of oil and natural gas properties       10,707           275,864
(Income) loss from equity investments              (12,663  )       7,906
Non-cash change in fair value of derivatives       60,232           (3,720   )
Deferred income taxes                              —                —
Amortization of deferred financing costs and       5,113            1,750
discount on the 2018 Notes
Gain on divestitures                               (187,038 )       —
Effect of changes in:
Accounts receivable                                8,518            78,796
Other current assets                               (1,628   )       1,871
Accounts payable and other current                (41,880  )      (29,088  )
liabilities
Net cash provided by operating activities         43,214         145,123  
Investing Activities:
Additions to oil and natural gas properties,       (72,911  )       (169,756 )
gathering systems and equipment
Property acquisitions                              (33,390  )       (1,402   )
Equity method investments                          (68      )       (137     )
Proceeds from disposition of property and          611,203          981
equipment
Restricted cash                                    16,793           (8,117   )
Net changes in advances from Appalachia JV        3,633          10,543   
Net cash provided by (used in) investing          525,260        (167,888 )
activities
Financing Activities:
Borrowings under credit agreements                 46,757           53,000
Repayments under credit agreements                 (623,266 )       (23,000  )
Proceeds from issuance of common stock             22               2
Payment of common stock dividends                  (10,739  )       (8,663   )
Deferred financing costs and other                (246     )      —        
Net cash provided by (used in) financing          (587,472 )      21,339   
activities
Net decrease in cash                               (18,998  )       (1,426   )
Cash at beginning of period                       45,644         31,997   
Cash at end of period                            $ 26,646        $ 30,571   
                                                                  
                                                                  
Supplemental Cash Flow Information:
Cash interest payments                           $ 33,624        $ 34,883   
Income tax payments                              $ —             $ —        
Supplemental non-cash investing and
financing activities:
Capitalized share-based compensation             $ 1,527         $ 1,931    
Capitalized interest                             $ 5,079         $ 6,302    
Issuance of common stock for director            $ 13            $ 17       
services
Accrued restricted stock dividends               $ 127           $ 97       
Debt assumed upon formation of EXCO/HGI          $ 58,613        $ —        
Partnership, net
                                                                             

                                              
EXCO Resources, Inc.
Consolidated EBITDA
And Adjusted EBITDA Reconciliations and Statement of Cash Flow Data
(Unaudited)
                                                 
                                                 Three Months Ended
                                                 March 31,
(in thousands)                                   2013           2012
Net income (loss)                                $ 158,120        $ (281,649 )
Interest expense                                   20,192           16,764
Income tax expense                                 —                —
Depletion, depreciation and amortization          41,308         89,582   
EBITDA(1)                                          219,620          (175,303 )
Accretion of discount on asset retirement          690              947
obligations
Non-cash write down of oil and natural gas         10,707           275,864
properties
(Gain) on divestitures and other                   (184,386 )       1,952
non-recurring operating items
Equity (income) loss                               (12,663  )       7,906
Non-cash change in fair value of derivative        60,232           (3,720   )
financial instruments
Share based compensation expense                  1,735          2,864    
Adjusted EBITDA (1)                              $ 95,935         $ 110,510
Interest expense                                   (20,192  )       (16,764  )
Income tax expense                                 —                —
Amortization of deferred financing costs and       5,113            1,750
discount on the 2018 Notes
Non-recurring other operating items                (2,652   )       (1,952   )
Changes in working capital                        (34,990  )      51,579   
Net cash provided by operating activities        $ 43,214        $ 145,123  
                                                                             

                                     
                                        Three Months Ended
                                        March 31,
(in thousands)                          2013           2012
Statement of cash flow data:
Cash flow provided by (used in):
Operating activities                    $ 43,214         $ 145,123
Investing activities                      525,260          (167,888 )
Financing activities                      (587,472 )       21,339
Other financial and operating data:
EBITDA (1)                                219,620          (175,303 )
Adjusted EBITDA (1)                       95,935           110,510

      Earnings before interest, taxes, depreciation, depletion and
      amortization, or “EBITDA” represents net income adjusted to exclude
      interest expense, income taxes and depreciation, depletion and
      amortization. “Adjusted EBITDA” represents EBITDA adjusted to exclude
      non-recurring other operating items, accretion of discount on asset
      retirement obligations, non-cash changes in the fair value of
      derivatives, non-cash write-downs of assets, stock-based compensation
      and income or losses from equity method investments. We have presented
      EBITDA and Adjusted EBITDA because they are a widely used measure by
      investors, analysts and rating agencies for valuations, peer comparisons
      and investment recommendations. In addition, these measures are used in
      covenant calculations required under our credit agreement and the
(1)  indenture governing our 7.5% senior notes due September 15, 2018.
      Compliance with the liquidity and debt incurrence covenants included in
      these agreements is considered material to us. Our computations of
      EBITDA and Adjusted EBITDA may differ from computations of similarly
      titled measures of other companies due to differences in the inclusion
      or exclusion of items in our computations as compared to those of
      others. EBITDA and Adjusted EBITDA are measures that are not prescribed
      by generally accepted accounting principles, or GAAP. EBITDA and
      Adjusted EBITDA specifically exclude changes in working capital, capital
      expenditures and other items that are set forth on a cash flow statement
      presentation of a company’s operating, investing and financing
      activities. As such, we encourage investors not to use these measures as
      substitutes for the determination of net income, net cash provided by
      operating activities or other similar GAAP measures.
      

                                                 
TGGT Holdings, LLC
EBITDA and Adjusted EBITDA Reconciliation
(Unaudited)
                                                    
                                                    Three Months Ended
                                                    March 31,
(in thousands)                                      2013         2012
                                                                   
Equity income (loss)                                $ 12,663       $ (7,906  )
Amortization of the difference in the                 (402   )       (402    )
historical basis of our contribution to TGGT
Equity loss of other investments                     190          879     
EXCO's share of TGGT net income (loss)                12,451         (7,429  )
BG Group's share of TGGT net income (loss)           12,451       (7,429  )
TGGT net income (loss)                                24,902         (14,858 )
Interest expense                                      3,340          3,874
Margin tax expense                                    110            238
Depreciation and amortization                        8,758        7,881   
TGGT EBITDA (1)                                       37,110         (2,865  )
Asset impairments and non-recurring other            (571   )      37,598  
operating items
TGGT Adjusted EBITDA (1)                            $ 36,539      $ 34,733  
EXCO's share of TGGT Adjusted EBITDA (2)            $ 18,270      $ 17,367  

      Earnings before interest, taxes, depreciation, depletion and
      amortization, or “EBITDA” represents net income adjusted to exclude
      interest expense, income taxes and depreciation and amortization.
      “Adjusted EBITDA” represents EBITDA adjusted to exclude asset
      impairments, gains and losses on divestitures and non-recurring other
      operating items. We have presented EBITDA and Adjusted EBITDA because
      they are a widely used measure by investors, analysts and rating
      agencies for valuations, peer comparisons and investment
      recommendations. Our computations of EBITDA and Adjusted EBITDA may
(1)  differ from computations of similarly titled measures of other companies
      due to differences in the inclusion or exclusion of items in our
      computations as compared to those of others. EBITDA and Adjusted EBITDA
      are measures that are not prescribed by generally accepted accounting
      principles, or GAAP. EBITDA and Adjusted EBITDA specifically exclude
      changes in working capital, capital expenditures and other items that
      are set forth on a cash flow statement presentation of a company’s
      operating, investing and financing activities. As such, we encourage
      investors not to use these measures as substitutes for the determination
      of net income, net cash provided by operating activities or other
      similar GAAP measures.
(2)   Represents our 50% equity share in TGGT.
      

                                                 
TGGT Holdings, LLC
Computation of Adjusted Net Income
(Unaudited)
                                                    
                                                    Three Months Ended
                                                    March 31,
(in thousands)                                      2013         2012
Net income (loss), GAAP                             $ 24,902       $ (14,858 )
Adjustments:
Loss on asset disposal                                190            1,399
Asset impairment, net of insurance recoveries         264            35,343
Other non-cash items                                 (1,025 )      856     
Total adjustments                                    (571   )      37,598  
Adjusted net income                                 $ 24,331      $ 22,740  
                                                                   
EXCO's 50% share of TGGT's adjusted net income      $ 12,166      $ 11,370  
(1)

      TGGT’s net income, computed in accordance with GAAP, includes certain
(1)  items not typically included by securities analysts in published
      estimates of financial results. This table provides a reconciliation of
      GAAP net income to a non-GAAP measure of adjusted net income.
      

                                                                   
EXCO Resources, Inc.
Summary of Operating Data
                                                                        
                                              Three Months Ended
                                              March 31,                 %
                                             2013       2012         Change
Production:
Oil (Mbbls)                                     102          192        (47 )%
Natural gas liquids (Mbbls)                     82           122        (33 )%
Natural gas (Mmcf)                              39,593       46,992     (16 )%
Total production (Mmcfe) (1)                    40,697       48,876     (17 )%
Average daily production (Mmcfe)                452          537        (16 )%
Average sales price (before cash
settlements of derivative financial
instruments):
Oil (per Bbl)                                 $ 81.71      $ 97.14      (16 )%
Natural gas liquids (per Bbl)                   37.72        52.90      (29 )%
Natural gas (per Mcf)                           3.20         2.34       37  %
Natural gas equivalent (per Mcfe)               3.40         2.76       23  %
Costs and expenses (per Mcfe):
Oil and natural gas operating costs           $ 0.33       $ 0.47       (30 )%
Production and ad valorem taxes                 0.13         0.15       (13 )%
Gathering and transportation                    0.60         0.54       11  %
Depletion                                       0.96         1.75       (45 )%
Depreciation and amortization                   0.06         0.08       (25 )%
General and administrative                      0.44         0.44       —   %

      Effective with the second quarter 2012, we began reporting NGL volumes
(1)  separately and have recast prior period volumes to conform to current
      period reporting.

Contact:

EXCO Resources, Inc.
Douglas H. Miller, 214-368-2084
Chairman and Chief Executive Officer
or
Harold L. Hickey, 214-368-2084
President and Chief Operating Officer
or
Mark F. Mulhern, 214-368-2084
Executive Vice President and Chief Financial Officer
 
Press spacebar to pause and continue. Press esc to stop.