EXCO Resources, Inc. Reports Fourth Quarter and Full Year 2013 Results

  EXCO Resources, Inc. Reports Fourth Quarter and Full Year 2013 Results

Business Wire

DALLAS -- February 25, 2014

EXCO Resources, Inc. (NYSE: XCO) (“EXCO”) today announced fourth quarter and
full year operating and financial results for 2013.

  *Adjusted EBITDA was $124 million for the fourth quarter 2013 and $418
    million for the full year 2013, which exceeded our mid-point guidance.
  *Reduced leverage and improved liquidity since the third quarter 2013
    through a $273 million rights offering of our common stock and $305
    million of closed and announced divestitures.
  *Capital expenditures were $101 million for the fourth quarter 2013 and
    $340 million for the full year 2013. Actual capital expenditures were
    below our mid-point guidance reflecting continued fiscal discipline.
  *Drilled and completed 26 gross (11.8 net) operated wells for the fourth
    quarter 2013 and 99 gross (49.0 net) operated wells for the full year
    2013.
  *Production was 41 Bcfe, or 446 Mmcfe per day, for the fourth quarter 2013
    and 162 Bcfe, or 444 Mmcfe per day, for the full year 2013, which exceeded
    our mid-point guidance.

Jeff Benjamin, EXCO’s chairman, commented, “The company completed numerous
transactions and operational initiatives in 2013 to improve its balance sheet
and position itself for future growth. Most recently, we closed a successful
rights offering of our common stock and raised $273 million which the company
used to reduce indebtedness. This rights offering demonstrated the support we
have from both our broad shareholder base and our principal investors. We will
continue to demonstrate capital discipline in 2014 as we develop our asset
base in the Haynesville, Marcellus and Eagle Ford shales.”

Financial results

Adjusted EBITDA for the fourth quarter 2013 was $124 million compared with
$108 million for the third quarter 2013. Adjusted EBITDA for the year ended
2013 was $418 million compared with $468 million for the year ended 2012.
Adjusted EBITDA is a non-GAAP measure and is computed using earnings before
interest, taxes, depletion, depreciation and amortization, and is further
adjusted for gains from asset sales, impairments of our oil and natural gas
properties, other non-cash income and expenses, and other items impacting
comparability.

Adjusted net income, a non-GAAP measure, was $0.04 per diluted share for the
fourth quarter 2013 compared with $0.04 per diluted share for the third
quarter 2013. Adjusted net income was $0.30 per diluted share for the year
ended 2013 compared with $0.38 per diluted share for the year ended 2012. The
non-GAAP adjustments include gains from asset sales, unrealized gains or
losses from derivative financial instruments, non-cash asset impairments and
other items typically not included by securities analysts in published
estimates.

GAAP results were a net loss of $123 million, or $0.57 per diluted share, for
the fourth quarter 2013 compared with a net loss of $99 million, or $0.46 per
diluted share, for the third quarter 2013. The net loss for the fourth quarter
2013 was primarily due to the non-cash impairment of $98 million to our oil
and natural gas properties. The impairment was primarily due to downward
revisions of our reserves in the Haynesville shale as a result of operational
matters, and the narrowing of basis differentials between oil price indices
and higher costs associated with the gathering and transportation of our
natural gas production from the Eagle Ford shale. In the Haynesville shale, we
have modified our spacing program in our core area from eight wells per
section to six wells per section in order to optimize our rate of return and
value for each section. We also have plans to reduce line pressure in the
field, alleviate loading and expand our artificial lift program. In the Eagle
Ford shale, we are developing a long term solution to increase capacity of the
gathering system for our core area in order to reduce our costs and improve
market access. However, these planned improvements will not be incorporated
into our proved reserves until we have the results to support and objectively
quantify these amounts. GAAP results were net income of $22 million, or $0.10
per diluted share, for the year ended 2013 compared with a net loss of $1.4
billion, or $6.50 per diluted share, for the year ended 2012. The net income
for the year ended 2013 was primarily the result of income from operations
benefiting from higher commodity prices and the gain on the divestiture of
certain oil and natural gas properties and related assets in connection with
the formation of the EXCO/HGI Partnership, which was partially offset by asset
impairments. The pro forma operating and financial information for the years
ended December31, 2013 and 2012 is presented in a supplemental schedule to
this press release as if the acquisitions of the Haynesville and Eagle Ford
assets from subsidiaries of Chesapeake Energy Corporation ("Chesapeake") and
the formation of the EXCO/HGI Partnership had occurred on January 1, 2012.

Oil, natural gas and natural gas liquids ("NGL") production was 41 Bcfe, or
446 Mmcfe per day, for the fourth quarter 2013 compared with 42 Bcfe, or 455
Mmcfe per day, in the third quarter 2013. Fourth quarter 2013 production from
the East Texas/North Louisiana region was 311 Mmcfe per day compared with 340
Mmcfe per day in the third quarter 2013. The decrease in production was
primarily the result of higher downtime for completion activities, timing of
wells turned-to-sales and normal production declines. Fourth quarter
production from the South Texas region was 656 Mbbls, or 7 Mboe per day,
compared with 377 Mbbls, or 6 Mboe per day, subsequent to the acquisition in
the third quarter 2013. The increase in production was the result of our
continued development within the Eagle Ford shale including 13 gross wells
turned-to-sales and the installation of artificial lift on certain wells
during the quarter. The fourth quarter 2013 production in the Appalachia
region averaged 66 Mmcfe per day compared with 64 Mmcfe per day in the third
quarter 2013. Our proportionate share of production from the EXCO/HGI
Partnership was 26 Mmcfe per day in the fourth quarter 2013 compared to 27
Mmcfe per day in the third quarter 2013. Oil, natural gas and NGL production
was 162 Bcfe, or 444 Mmcfe per day, for the year ended 2013 compared with 190
Bcfe, or 519 Mmcfe per day, for the year ended 2012. The decrease in year over
year production was primarily the result of our contribution of properties to
the EXCO/HGI Partnership and natural production declines, partially offset by
our acquisition of Haynesville and Eagle Ford assets during 2013.

Oil, natural gas and NGL revenues for the fourth quarter 2013 were $180
million compared with $165 million for the third quarter 2013. Our average
sales price per Mcfe increased to $4.39 per Mcfe for the fourth quarter 2013
from $3.95 per Mcfe for the third quarter 2013. Our sales price per Mcfe was
positively impacted by higher oil production for the fourth quarter 2013
compared to the third quarter 2013. When the impacts of cash settlements from
derivatives are considered, oil, natural gas and NGL revenues were $194
million, or $4.73 per Mcfe for the fourth quarter 2013, compared with $176
million, or $4.21 per Mcfe for the third quarter 2013. Oil, natural gas and
NGL revenues for the year ended 2013 were $634 million compared with $547
million for the year ended 2012. Our average sales price per Mcfe increased to
$3.92 per Mcfe for the full year 2013 from $2.88 per Mcfe for the full year
2012. When the impacts of cash settlements from derivatives are considered,
oil, natural gas and NGL revenues were $676 million, or $4.18 per Mcfe for the
full year 2013, compared with $749 million, or $3.94 per Mcfe for the full
year 2012.

Our direct operating costs were $0.45 per Mcfe for the fourth quarter 2013
compared with $0.41 per Mcfe for the third quarter 2013. The increase was
primarily the result of higher direct operating costs per Mcfe associated with
increased oil production in the Eagle Ford shale. Our direct operating costs
were $0.38 per Mcfe for the year ended 2013 compared with $0.41 per Mcfe for
the year ended 2012. The decrease was primarily attributable to the
contribution of properties to the EXCO/HGI Partnership, which typically have
higher operating costs per Mcfe, and was partially offset by higher direct
operating costs per Mcfe associated with our oil production in the Eagle Ford
shale.

Cash flow from operations before changes in working capital and other
operating items impacting comparability, a non-GAAP measure, was $100 million
for the fourth quarter 2013 compared with $87 million for the third quarter
2013. Cash flow from operations before changes in working capital and other
operating items impacting comparability was $345 million for the year ended
2013 compared to $404 million for the year ended 2012. During 2013, we
primarily used our cash flow from operations and available borrowing capacity
in our credit agreement to fund our drilling and development programs and
acquire oil and natural gas properties.

Recent developments

TGGT sale

On November 15, 2013, we closed the sale of 100% of our equity interests in
midstream assets in East Texas and North Louisiana ("TGGT") to Azure Midstream
Holdings LLC ("Azure") for net cash proceeds of $240 million and approximately
4% of the total outstanding equity interests of Azure. The proceeds from the
sale were used to reduce indebtedness under the asset sale requirement of the
EXCO Resources Credit Agreement.

Rights offering

We closed a rights offering of our common stock on January 17, 2014 which
resulted in the issuance of 54,574,734 shares for net proceeds of $273
million. We used the net proceeds to pay indebtedness under the EXCO Resources
Credit Agreement, including payment in full of the remaining indebtedness
related to the asset sale requirement as well as a portion of the indebtedness
outstanding under the revolving commitment under the EXCO Resources Credit
Agreement. The elimination of the asset sale requirement resulted in a
decrease in our interest rate of 100 basis points on the revolving commitment.
After giving effect to the repayment of indebtedness using proceeds from the
rights offering, the available borrowing base on the revolving commitment
under the EXCO Resources Credit Agreement was $900 million with approximately
$491 million of outstanding indebtedness and approximately $402 million of
unused borrowing base, net of letters of credit. This improved our leverage
ratio, as defined in the EXCO Resources Credit Agreement, from 3.6 to 1.0
prior to the rights offering, to 3.0 to 1.0 after the rights offering. We have
presented information in a supplemental schedule to this press release
relating to our liquidity as of December31, 2013 as well as on a pro forma
basis as if the closing of the Rights Offering had occurred on December 31,
2013.

Permian JV sale agreement

On February 13, 2014, we entered into a purchase and sale agreement to sell
our non-operated interest in a joint venture in the Permian Basin for
approximately $65 million, subject to customary purchase price adjustments and
the receipt of certain third-party consents. This sale includes our interest
in producing wells and undeveloped acreage with horizontal drilling
opportunities. The effective date of the transaction will be January 1, 2014
and is expected to close in the first half of 2014. We plan to use the
proceeds to reduce indebtedness under the EXCO Resources Credit Agreement,
which will improve our liquidity and reduce our leverage.

Operations activity and outlook

We spent $66 million on development and exploration activities, drilling 24
gross (5.8 net) operated wells and completing 26 gross (11.8 net) operated
wells in the fourth quarter 2013. In addition, we participated in the drilling
of 11 gross (1.9 net) wells operated by others ("OBO") during the fourth
quarter 2013. We spent $265 million on development and exploration activities,
drilling 64 gross (26.7 net) operated wells and completing 99 gross (49.0 net)
operated wells for the full year 2013. In addition, we participated in the
drilling of 22 gross (3.6 net) OBO wells for the full year 2013. Our
development and exploration activities were focused on our Haynesville shale
and Eagle Ford shale properties during 2013.

Our actual capital expenditures for the fourth quarter 2013, full year 2013,
and 2014 capital budget are presented in the following table.

                                                               
(in thousands)                      Fourth Quarter   Full Year     2014 Budget
Capital expenditures (1):
Development capital expenditures    $   66,055       $ 265,120     $  294,000
Lease purchases                     10,605           14,835        19,000
Seismic                             3,912            10,217        2,000
Field operations, gathering and     12,238           12,379        24,000
water pipelines
Corporate and other                 8,496           37,287       29,000
Total capital expenditures          $   101,306     $ 339,838    $  368,000

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


Our board of directors approved a capital budget of $368 million for 2014 of
which $294 million is allocated to development and completion activities. Our
developmental activities in the East Texas/ North Louisiana region are
primarily focused on our core area in DeSoto Parish, Louisiana as well as a
limited drilling program in the Shelby area of East Texas. Our developmental
activities in the South Texas region will primarily be focused on our core
area in the Eagle Ford shale. We believe the capital budget is appropriate for
current commodity prices and our capital structure, and was designed to manage
our capital expenditures in relation to our operating cash flow. These capital
expenditures exclude the EXCO/HGI Partnership, which funds its capital
expenditures through internally generated cash flow and its credit agreement.

Proved Reserves

Our estimated proved reserves as of December31, 2013, were 1.1 Tcfe with a
PV-10 of $1.3 billion calculated pursuant to SEC pricing rules. For 2013, the
SEC reference price was $3.67 per Mmbtu for natural gas, $96.78 per Bbl for
oil, and $39.92 per barrel for NGLs, in each case adjusted for geographical
and historical differentials. Our estimated proved reserves would have been
1.3 Tcfe with a PV-10 of $1.6 billion using NYMEX futures strip prices at
December31, 2013, as adjusted for energy content, quality and basis
differentials, of $4.24 per Mcf for natural gas, $80.83 per Bbl for oil, and
$38.88 per Bbl for NGLs. The discussion of reserves within this press release
relates to our estimated proved reserves calculated pursuant to SEC pricing
rules.

During 2013, we added 400 Bcfe of proved reserves through acquisitions
including 260 Bcfe in the Haynesville shale, 116 Bcfe in the Eagle Ford shale,
and 25 Bcfe for our proportionate share of the EXCO/HGI Partnership's
acquisition of Cotton Valley properties. We also added 86 Bcfe through
discoveries and extensions primarily as a result of our development programs
in the Haynesville and Eagle Ford shales, as well as completion activities in
the Marcellus shale.

Our revisions of previous estimates during 2013 included upward revisions to
our proved reserve quantities of 280 Bcfe as a result of an increase in price,
which extended the economic life of certain producing properties and resulted
in the reclassification of unproved locations to proved undeveloped properties
that became economical when using the prices prescribed by the SEC. The upward
revisions due to changes in price were partially offset by downward revisions
of 127 Bcfe in proved reserves due to other factors. These downward revisions
were primarily related to operational matters for our Haynesville shale
properties such as scaling, liquid loading due to high-line pressure and the
impact of drainage on new wells drilled directly offset to the unit wells. We
have modified our spacing program from eight wells per section to six wells
per section in order to maximize our rate of return for each section. We also
have plans to reduce line pressure in the field, alleviate loading and
implement an artificial lift program. However, these planned improvements will
not be incorporated into our proved reserves until we have the results to
support and objectively quantify these amounts.

We sold 358 Bcfe of proved reserves during the year, including 328 Bcfe as
part of our contribution of properties to the EXCO/HGI Partnership and 30 Bcfe
as part of the participation agreement in the Eagle Ford shale. Additionally,
we produced 162 Bcfe during the year. The following table presents the details
of our changes in proved reserves:


                                                    Natural       Equivalent
                     Oil           Natural gas      gas           natural
                    (Mbbls)      (Mmcf)          liquids    
                                                                  gas (Mmcfe)
                                                    (Mbbls)
Proved Developed     11,274        657,116          2,088         737,291
Reserves
Proved
Undeveloped          4,104        359,363         495          386,954    
Reserves
Total Proved         15,378       1,016,479       2,583        1,124,245  
Reserves
The changes in
reserves for the
year are as
follows:
January 1, 2013      5,570         936,132          6,639         1,009,386
Purchases of         16,022        290,933          2,201         400,271
reserves in place
Discoveries and      5,960         46,834           513           85,672
extensions
Revisions of
previous
estimates (1):
Reclassification
to unproved          (190    )     (1,509     )     (196    )     (3,825     )
reserves (2)
Changes in price     457           272,614          686           279,472
Other factors        (3,029  )     (105,186   )     (545    )    (126,630   )
Sales of reserves    (8,224  )     (270,018   )     (6,472  )     (358,194   )
in place
Production           (1,188  )     (153,321   )     (243    )     (161,907   )
December 31, 2013    15,378       1,016,479       2,583        1,124,245  

(1) Revisions of previous estimates include both reserves in place at the
beginning of the year and acquisitions during the year.
(2) Represents proved undeveloped reserves reclassified to unproved pursuant
to the five year development rule established by the SEC. This
reclassification was a result of decisions not to commit development capital
to certain conventional properties held by the EXCO/HGI Partnership in the
Permian Basin. While these locations qualify as proved undeveloped reserves as
they directly offset a proved location, our planned capital programs do not
support development at this time, resulting in the reclassification.



Our drilling program during 2013 was primarily focused on the Haynesville
shale and our recently acquired properties in the Eagle Ford shale.
Additionally, our activities in the Marcellus shale focused on completing our
inventory of drilled locations and a limited appraisal and development
program. During 2013, our capital expenditures in the Haynesville shale were
focused on the development of our core area in DeSoto Parish. Due to our
extensive history of development in the core DeSoto Parish area, most of the
locations were reflected as discoveries and extensions in prior years. In the
Eagle Ford shale, our development included both converting proved undeveloped
reserves to developed as well as extensions and discoveries of locations
within our core area and adjacent acreage as part of a farmout agreement.
Additionally, our completion activities in the Marcellus shale resulted in
additional discoveries and extensions of proved undeveloped locations
offsetting the proved developed producing properties. Our finding and
development costs to convert reserves to the proved developed reserves were
$1.69 per Mcfe during 2013 compared to $1.60 per Mcfe during 2012. The
increase from prior year was primarily attributable to higher finding and
development costs per Mcfe associated with our oil properties in the Eagle
Ford shale. The following table details the components of our 2013 proved
developed additions:


                           Year Ended
(dollars in thousands)      December 31, 2013            December 31, 2012
Development costs           $      218,353                $       329,013
Exploration costs           38,579                       3,450
Total development and       $      256,932                $       332,463
exploration (1)
                                                          
Additions to proved
developed reserves          152,007                       207,320
(Mmcfe) (2)
                                                          
Finding and
development costs per       $      1.69                   $       1.60
Mcfe

(1) Excludes $13 million and $71 million for the years ended December 31, 2013
and 2012, respectively, of rig termination fees, field operations capital and
other leasehold development costs which are not directly associated with
future proved developed reserve additions.
(2) Our additions to proved developed reserves include both proved undeveloped
reserves converted to proved developed reserves, and unproved reserves
converted to proved developed reserves.



Financial Data

Our consolidated balance sheets as of December31, 2013 and December31, 2012,
consolidated statements of operations for the three months ended December31,
2013 and September 30, 2013 and for the year ended December31, 2013 and 2012
and consolidated statements of cash flows for the year ended December31, 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.

EXCO will host a conference call on Wednesday, February 26, 2014 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#43723853. 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, February 25, 2014. A digital recording
will be available starting two hours after the completion of the conference
call until March 12, 2014. Please call (800) 585-8367 and enter conference
ID#43723853 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 Chris Peracchi, EXCO’s Director of Finance and Investor Relations
and Treasurer 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
as amended by Amendment No. 1 to Annual Report on Form 10-K/A on August 30,
2013 and after February 26, 2014 our annual Report on Form 10-K for the year
ended December 31, 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, filed with the SEC on February21, 2013 and as amended by Amendment
No. 1 to Annual Report on Form 10-K/A on August 30, 2013, and after February
26, 2014 our Annual Report on Form 10-K for the year ended December 31, 2013
which is available on our website at www.excoresources.com under the Investor
Relations tab.






EXCO Resources, Inc.
Consolidated Balance Sheets


(in thousands)                                  December 31,   December 31,
                                                 2013            2012
                                                                 
Assets
Current assets:
Cash and cash equivalents                        $ 50,483        $ 45,644
Restricted cash                                  20,570          70,085
Accounts receivable, net:
Oil and natural gas                              128,352         84,348
Joint interest                                   70,759          69,446
Other                                            18,022          15,053
Inventory                                        3,087           5,705
Derivative financial instruments                 8,226           49,500
Other                                            6,355          22,085      
Total current assets                             305,854        361,866     
Equity investments                               57,562          347,008
Oil and natural gas properties (full cost
accounting method):
Unproved oil and natural gas properties and      425,307         470,043
development costs not being amortized
Proved developed and undeveloped oil and         3,554,210       2,715,767
natural gas properties
Accumulated depletion                            (2,183,464  )   (1,945,565  )
Oil and natural gas properties, net              1,796,053      1,240,245   
Gathering assets                                 33,473          130,830
Accumulated depreciation and amortization        (10,338     )   (34,364     )
Gathering assets, net                            23,135         96,466      
Office, field and other equipment, net           27,204          20,725
Deferred financing costs, net                    28,807          22,584
Derivative financial instruments                 6,829           16,554
Goodwill                                         163,155         218,256
Other assets                                     29             28          
Total assets                                     $ 2,408,628    $ 2,323,732 







EXCO Resources, Inc.
Consolidated Balance Sheets


(in thousands, except per share and share       December 31,   December 31,
data)                                            2013            2012
                                                                 
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable and accrued liabilities         $ 132,188       $ 83,240
Revenues and royalties payable                   154,862         134,066
Accrued interest payable                         18,144          17,029
Current portion of asset retirement              191             1,200
obligations
Income taxes payable                             —               —
Derivative financial instruments                 11,919          2,396
Current maturities of long-term debt             31,866         —           
Total current liabilities                        349,170        237,931     
Long-term debt                                   1,858,912       1,848,972
Deferred income taxes                            —               —
Derivative financial instruments                 9,671           26,369
Asset retirement obligations and other           42,970          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; 218,783,540 shares issued
and 218,244,319 shares outstanding at December   215             215
31, 2013; 218,126,071 shares issued and
217,586,850 shares outstanding at December 31,
2012
Subscription rights, $0.001 par value,
54,574,734 issued and outstanding at December    55              —
31, 2013
Additional paid-in capital                       3,219,748       3,200,067
Accumulated deficit                              (3,064,634  )   (3,043,410  )
Treasury stock, at cost; 539,221 shares at       (7,479      )   (7,479      )
December 31, 2013 and December 31, 2012
Total shareholders’ equity                       147,905        149,393     
Total liabilities and shareholders’ equity       $ 2,408,628    $ 2,323,732 







EXCO Resources, Inc.
Consolidated Statements of Operations


                  Three Months Ended            Year Ended December 31,
(in thousands,     December 31,   September 30,
except per share                                 2013         2012
data)              2013           2013
Revenues:          (Unaudited)    (Unaudited)
Total revenues     $ 180,440      $  165,314      $ 634,309     $ 546,609
Costs and
expenses:
Oil and natural
gas operating      18,571         17,187          61,277        77,127
costs
Production and     6,668          6,074           21,971        27,483
ad valorem taxes
Gathering and      26,096         26,665          100,645       102,875
transportation
Depletion,
depreciation and   82,580         74,499          245,775       303,156
amortization
Impairment of
oil and natural    97,839         —               108,546       1,346,749
gas properties
Accretion of
discount on        649            619             2,514         3,887
asset retirement
obligations
General and        25,383         21,937          91,878        83,818
administrative
(Gain) loss on
divestitures and   1,985         2,739          (177,518  )   17,029       
other operating
items
Total costs and    259,771       149,720        455,088      1,962,124    
expenses
Operating income   (79,331    )   15,594          179,221       (1,415,515   )
(loss)
Other income
(expense):
Interest           (30,818    )   (36,474     )   (102,589  )   (73,492      )
expense, net
Gain (loss) on
derivative         (19,495    )   7,443           (320      )   66,133
financial
instruments
Other income       (1,168     )   94              (828      )   969
(expense)
Equity income      7,949         (85,308     )   (53,280   )   28,620       
(loss)
Total other        (43,532    )   (114,245    )   (157,017  )   22,230       
income (expense)
Income (loss)
before income      (122,863   )   (98,651     )   22,204        (1,393,285   )
taxes
Income tax         —             —              —            —            
expense
Net income         $ (122,863 )   $  (98,651  )   $ 22,204     $ (1,393,285 )
(loss)
Earnings (loss)
per common
share:
Basic:
Net income         $ (0.57    )   $  (0.46    )   $ 0.10       $ (6.50      )
(loss)
Weighted average
common shares      215,410       215,056        215,011      214,321      
outstanding
Diluted:
Net income         $ (0.57    )   $  (0.46    )   $ 0.10       $ (6.50      )
(loss)
Weighted average
common shares
and common share   215,410       215,056        230,912      214,321      
equivalents
outstanding







EXCO Resources, Inc.
Consolidated Statements of Cash Flows


                                                Year Ended December 31,
(in thousands)                                   2013          2012
Operating Activities:
Net income (loss)                                $   22,204     $ (1,393,285 )
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depletion, depreciation and amortization         245,775        303,156
Share-based compensation expense                 10,748         8,926
Accretion of discount on asset retirement        2,514          3,887
obligations
Impairment of oil and natural gas properties     108,546        1,346,749
(Income) loss from equity investments            53,280         (28,620      )
(Gain) loss on derivative financial              320            (66,133      )
instruments
Cash settlements of derivative financial         42,119         202,078
instruments
Deferred income taxes                            —              —
Amortization of deferred financing costs and     29,624         9,788
discount on debt issuance
(Gain) loss on divestitures and other            (185,163   )   1,303
non-operating items
Effect of changes in:
Accounts receivable                              (46,176    )   112,919
Other current assets                             9,627          7,090
Accounts payable and other current liabilities   57,216        6,928        
Net cash provided by operating activities        350,634       514,786      
Investing Activities:
Additions to oil and natural gas properties,     (320,538   )   (534,175     )
gathering assets and equipment
Property acquisitions                            (976,714   )   (2,748       )
Proceeds from disposition of property and        749,628        38,045
equipment
Equity method investments                        236,289        (14,907      )
Restricted cash                                  49,515         85,840
Net changes in advances to joint ventures        10,645         851
Other                                            (1,303     )   —            
Net cash used in investing activities            (252,478   )   (427,094     )
Financing Activities:
Borrowings under credit agreements               1,004,523      53,000
Repayments under credit agreements               (1,022,785 )   (93,000      )
Proceeds from issuance of common stock           1,712          1,968
Payment of common stock dividends                (43,214    )   (34,358      )
Deferred financing costs and other               (33,553    )   (1,655       )
Net cash used in financing activities            (93,317    )   (74,045      )
Net increase (decrease) in cash                  4,839          13,647
Cash at beginning of period                      45,644        31,997       
Cash at end of period                            $   50,483    $ 45,644     
Supplemental Cash Flow Information:
Cash interest payments                           $   88,936     $ 86,298
Income tax payments                              —              —
Supplemental non-cash investing and financing
activities:
Capitalized share-based compensation             $   7,288      $ 7,513
Capitalized interest                             18,729         23,809
Issuance of common stock for director services   93             597
Accrued restricted stock dividends               214            300
EXCO/HGI Partnership debt upon formation, net    58,613         —
Issuance of subscription rights                  55             —







EXCO Resources, Inc.
Consolidated EBITDA
And Adjusted EBITDA Reconciliations and Statement of Cash Flow Data
(Unaudited)


                  Three Months Ended            
                   December 31,   September 30,
(in thousands)                                   2013         2012
                   2013           2013
Net income         $ (122,863 )   $  (98,651  )   $ 22,204      $ (1,393,285 )
(loss)
Interest expense   30,818         36,474          102,589       73,492
Income tax         —              —               —             —
expense
Depletion,
depreciation and   82,580        74,499         245,775      303,156      
amortization
EBITDA(1)          $ (9,465   )   $  12,322       $ 370,568     $ (1,016,637 )
Accretion of
discount on        649            619             2,514         3,887
asset retirement
obligations
Impairment of
oil and natural    97,839         —               108,546       1,346,749
gas properties
(Gain) loss on
divestitures and
other items        8,143          2,653           (170,550  )   17,928
impacting
comparability
Equity (income)    (7,949     )   85,308          53,280        (28,620      )
loss
Net (gains)
losses on
derivative         19,495         (7,443      )   320           (66,133      )
financial
instruments
Cash settlements
on derivative      13,703         10,904          42,119        202,078
financial
instruments
Share based
compensation       1,255         3,170          10,748       8,926        
expense
Adjusted EBITDA    $ 123,670      $  107,533      $ 417,545     $ 468,178
(1)
Interest expense   (30,818    )   (36,474     )   (102,589  )   (73,492      )
Income tax         —              —               —             —
expense
Amortization of
deferred           7,184          15,843          29,624        9,788
financing costs
and discount
Deferred income    —              —               —             —
taxes
Other operating
items impacting    (6,840     )   (2,769      )   (14,613   )   (16,625      )
comparability
Changes in         34,067        (31,994     )   20,667       126,937      
working capital
Net cash
provided by        $ 127,263     $  52,139      $ 350,634    $ 514,786    
operating
activities







EXCO Resources, Inc.
Consolidated EBITDA
And Adjusted EBITDA Reconciliations and Statement of Cash Flow Data
(Unaudited)


              Three Months Ended                
(in            December 31,      September 30,
thousands)                                       2013         2012
               2013              2013
Statement
of cash
flow data:
Cash flow
provided by
(used in):
Operating      $  127,263        $  52,139        $ 350,634     $ 514,786
activities
Investing      146,114           (881,644   )     (252,478  )   (427,094     )
activities
Financing      (256,387    )     815,749          (93,317   )   (74,045      )
activities
Other
financial
and
operating
data:
EBITDA(1)      $  (9,465   )     $  12,322        $ 370,568     $ (1,016,637 )
Adjusted       123,670           107,533          417,545       468,178
EBITDA(1)

(1) 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 other operating items impacting
comparability, 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
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.







EXCO Resources, Inc.
Consolidated Adjusted Net Income and Adjusted Net Income Reconciliations
(Unaudited)


               Three Months Ended                                  Year Ended
                December 31, 2013         September 30, 2013        December 31, 2013      December 31, 2012
(in
thousands,                     Per                       Per                      Per                         Per
except per      Amount                    Amount                   Amount                 Amount         
share                          share                     share                    share                       share
amounts)
Net income      $ (122,863 )               $ (98,651 )               $ 22,204                $ (1,393,285 )
(loss), GAAP
Adjustments:
Total net
(gain) loss     19,495                     (7,443    )               320                     (66,133      )
on
derivatives
Cash receipts
on derivative   13,703                     10,904                    42,119                  202,078
financial
instruments
Impairment of
oil and         97,839                     —                         108,546                 1,346,749
natural gas
properties
Adjustments
included in     (4,736     )               94,580                    90,214                  27,088
equity
(income) loss
(Gain) loss
on
divestitures
and other       8,143                      2,653                     (170,550 )              17,928
items
impacting
comparability
Deferred
finance cost    4,256                      13,183                    20,974                  3,000
amortization
acceleration
Income taxes
on above        (55,480    )               (45,551   )               (36,649  )              (612,284     )
adjustments
(1)
Adjustment to
deferred tax
asset           49,145                    39,460                   (8,882   )              557,314      
valuation
allowance (2)
Total
adjustments,    132,365                   107,786                  46,092                 1,475,740    
net of taxes
Adjusted net    $ 9,502                   $ 9,135                  $ 68,296               $ 82,455     
income
                                                                                                              
Net income
(loss), GAAP    $ (122,863 )   $ (0.57 )   $ (98,651 )   $ (0.46 )   $ 22,204     $ 0.10     $ (1,393,285 )   $ (6.50 )
(3)
Adjustments
shown above     132,365        0.61        107,786       0.50        46,092       0.20       1,475,740        6.88
(3)
Dilution
attributable
to
share-based     —              —          —            —          —           —         —               —       
payments and
rights
outstanding
(4)
Adjusted net    $ 9,502       $ 0.04     $ 9,135      $ 0.04     $ 68,296    $ 0.30    $ 82,455        $ 0.38  
income
                                                                                                              
Common stock
and
equivalents
used for
earnings per
share (EPS):
Weighted
average         215,410                    215,056                   215,011                 214,321        
common shares
outstanding
Dilutive        —                          274                       —                       —               
stock options
Dilutive
restricted      327                        902                       420                     —              
shares
Dilutive
subscription    7,118                     —                        15,481                 —            
rights
Shares used
to compute
diluted EPS     222,855                   216,232                  230,912                214,321       
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.
(4) Represents dilution per share attributable to common share equivalents from in-the-money stock options, dilutive
restricted shares and subscription rights calculated in accordance with the treasury stock method.







EXCO Resources, Inc.
Consolidated Cash Flow from Operations before Working Capital Changes and
Other Operating
Items Impacting Comparability and Reconciliations
(Unaudited)


                  Three Months Ended               
                   December 31,      September 30,
(in thousands)                                      2013         2012
                   2013              2013
Cash flow from
operations,        $  127,263        $  52,139       $ 350,634     $ 514,786
GAAP
Net change in      (34,067     )     31,994          (20,667   )   (126,937  )
working capital
Other operating
items impacting    6,840            2,769          14,613       16,625    
comparability
Cash flow from
operations
before changes
in working
capital and        $  100,036       $  86,902      $ 344,580    $ 404,474 
other operating
items impacting
comparability,
non-GAAP
measure (1)

(1) Cash flow from operations before working capital changes and other
operating items impacting comparability is 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 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. Other operating
items impacting comparability have been excluded as they do not reflect our
on-going operating activities.







EXCO Resources, Inc.
Summary of Operating Data
(Unaudited)


                 Three Months Ended    %       Year Ended December  %
                                                  31,
                  December   September
                 31,       30,         Change   2013      2012       Change

                  2013       2013
Production:
Oil (Mbbls)       653        383         70  %    1,188      704        69  %
Natural gas       65         53          23  %    243        510        (52 )%
liquids (Mbbls)
Natural gas       36,765     39,268      (6  )%   153,321    182,644    (16 )%
(Mmcf)
Total
production        41,073     41,884      (2  )%   161,907    189,928    (15 )%
(Mmcfe) (1)
Average daily
production        446        455         (2  )%   444        519        (14 )%
(Mmcfe)
Average sales
price (before
cash
settlements of
derivative
financial
instruments):
Oil (per Bbl)     $ 90.79    $ 102.60    (12 )%   $ 93.80    $ 88.24    6   %
Natural gas
liquids (per      35.51      32.04       11  %    35.23      43.27      (19 )%
Bbl)
Natural gas       3.23       3.17        2   %    3.35       2.53       32  %
(per Mcf)
Natural gas
equivalent (per   4.39       3.95        11  %    3.92       2.88       36  %
Mcfe)
Costs and
expenses (per
Mcfe):
Oil and natural
gas operating     $ 0.45     $ 0.41      10  %    $ 0.38     $ 0.41     (7  )%
costs
Production and
ad valorem        0.16       0.15        7   %    0.14       0.14       —   %
taxes
Gathering and     0.64       0.64        —   %    0.62       0.54       15  %
transportation
Depletion         1.97       1.74        13  %    1.47       1.52       (3  )%
Depreciation
and               0.04       0.04        —   %    0.05       0.08       (38 )%
amortization
General and       0.62       0.52        19  %    0.57       0.44       30  %
administrative







Selected Pro Forma Financial Information
(Unaudited)



The EXCO/HGI Partnership was formed on February 14, 2013, which resulted in
the reduction of our economic interest in certain oil and natural gas
properties contributed to the partnership. On March 5, 2013, the EXCO/HGI
Partnership purchased the remaining shallow Cotton Valley assets from an
affiliate of BG Group, plc. During the third quarter of 2013, we closed the
acquisitions of oil and natural gas properties in the Haynesville and Eagle
Ford shale formations from Chesapeake. The following table presents selected
pro forma operating and financial information for the years ended December 31,
2013 and 2012 as if these transactions had occurred on January 1, 2012. The
pro forma information is not necessarily indicative of what actually would
have occurred if the transactions had been completed as of January 1, 2012,
nor is it necessarily indicative of future consolidated results of operations.


                   Year ended December 31, 2013
                                    EXCO/HGI           Chesapeake

(dollars in         Historical      Partnership pro    Properties
thousands,                                           pro          Pro forma
except per unit     EXCO            forma                            EXCO
rate)                                                  forma
                                    adjustments
                                                       adjustments
Production:                                                        
Total production    161,907         (2,705       )     27,279        186,481
(Mmcfe)
Average
production          444             (7           )     75            512
(Mmcfe/d)
Revenues:
Oil and natural     $  634,309      $  (12,657   )     $  150,319    $ 771,971
gas revenues
Average realized    3.92            4.68               5.51          4.14
price ($/Mcfe)
Expenses:
Direct operating    61,277          (3,489       )     22,564        80,352
costs
Per Mcfe            0.38            1.29               0.83          0.43
Production and      21,971          (1,545       )     5,965         26,391
ad valorem taxes
Per Mcfe            0.14            0.57               0.22          0.14
Gathering and
transportation      100,645         (782         )     —             99,863
(1)
Per Mcfe            0.62            0.29               —             0.54
Excess of
revenues over       $  450,416      $  (6,841    )     $  121,790    $ 565,365
operating
expenses
                                                                     
                                                                     
                    Year ended December 31, 2012
                                    EXCO/HGI           Chesapeake

(dollars in         Historical      Partnership pro    Properties    Pro forma
thousands,                                             pro         
except per unit     EXCO            forma                            EXCO
rate)                                                  forma
                                    adjustments
                                                       adjustments
Production:
Total production    189,928         (25,077      )     46,414        211,265
(Mmcfe)
Average
production          519             (69          )     127           577
(Mmcfe/d)
Revenues:
Oil and natural     $  546,609      $  (111,276  )     $  168,677    $ 604,010
gas revenues
Average realized    2.88            4.44               3.63          2.86
price ($/Mcfe)
Expenses:
Direct operating    77,127          (29,081      )     28,173        76,219
costs
Per Mcfe            0.41            1.16               0.61          0.36
Production and      27,483          (13,379      )     9,217         23,321
ad valorem taxes
Per Mcfe            0.14            0.53               0.20          0.11
Gathering and
transportation      102,875         (7,892       )     —             94,983
(1)
Per Mcfe            0.54            0.31               —             0.45
Excess of
revenues over       $  339,124      $  (60,924   )     $  131,287    $ 409,487
operating
expenses

(1) The oil and natural gas revenues for the Chesapeake Properties are
presented net of gathering and treating expenses.








Selected Pro Forma Financial Information
(Unaudited)

The following table presents information relating to our liquidity as of
December31, 2013 as well as on a pro forma basis as if the closing of the
Rights Offering had occurred on December 31, 2013. The pro forma information
is not considered to be complete and excludes the impact of all other
transactions subsequent to December 31, 2013.


(in thousands)                December 31, 2013            Pro forma
Cash (1)(2)                    $     66,518                  $    66,518
Revolving credit
facility under the EXCO        735,000                       490,992
Resources Credit
Agreement
Asset sale requirement
under the EXCO Resources       28,866                        —
Credit Agreement
Term loan under the EXCO
Resources Credit               298,500                       298,500
Agreement (3)
2018 Notes (4)                 750,000                      750,000
Total debt (5)                 $     1,812,366              $    1,539,492
Net debt                       $     1,745,848              $    1,472,974
Borrowing base (6)             $     1,228,866               $    1,200,000
Unused borrowing base          $     158,112                 $    402,120
(7)
Unused borrowing base          $     224,630                 $    468,638
plus cash (1)(7)

(1)Includes restricted cash of $20.6 million at December31, 2013.
(2)Excludes our proportionate share of cash related to the EXCO/HGI
Partnership of $4.5 million at December31, 2013.
(3)Excludes unamortized discount of $2.8 million at December31, 2013.
(4)Excludes unamortized discount of $7.3 million at December31, 2013.
(5)Excludes our proportionate share of the debt related to the EXCO/HGI
Partnership of $88.5 million as of December31, 2013.
(6)Includes the borrowing base for the revolving commitment and term loan
under the EXCO Resources Credit Agreement.
(7)Net of $6.9 million in letters of credit and $1.5 million in repayments
under the term loan as of December31, 2013.




Contact:

EXCO Resources, Inc.
Chris Peracchi, 214-368-2084
Director of Finance and Investor Relations and Treasurer
www.excoresources.com
 
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