Exco Falls to Lowest Ever on Gas Price HedgingDavid Wethe
Exco Resources Inc., the Dallas-based natural gas producer, fell to its lowest level ever after announcing derivative contracts that would limit profit if gas prices rise.
Exco fell 4.9 percent to $2.90 at the close in New York, the lowest price since its February 2006 initial public offering.
Exco entered into derivative contracts with a ceiling price for gas of $4.45 per million British thermal units in 2015, the company said today in a statement. Exco investors expecting gas to climb as high as $6 per million Btu will miss out on returns if prices rise, Leo Mariani, an analyst at RBC Capital Markets in Austin, said in a phone interview.
“This company’s assets are set up to work in a $5 or $6 gas environment, not a $4 and below gas environment,” said Mariani, who rates the shares the equivalent of a sell and owns none. “Now you’re giving away some of the upside that people hoped for over the next year or two.”
Gas fell 1.4 percent to $3.966 in New York.
T. Boone Pickens sold more than 2 million shares of Exco in March and now has a 1.8 percent stake in the company, according to data compiled by Bloomberg.
Exco, which has three hold and six sell ratings from analysts, has fallen 47 percent so far this year.