Exco Resources May Buy Properties From Its Next CEO

Exco Resources Inc. said it may acquire properties owned by its next chief executive officer a day after a board member said the oil and natural gas producer has been approached by buyers.

Exco hasn’t yet chosen a new CEO and is in “various stages of discussions with candidates,” the Dallas-based company said in a statement today. Exco board member T. Boone Pickens said yesterday that the company has drawn interest from buyers. He refused to identify the companies. Exco didn’t respond to voicemails seeking comment.

The company’s announcement was “one of the more bizarre releases I’ve seen,” said Leo Mariani, an RBC Capital Markets LLC analyst in Houston who cut his target price for the shares this month. “Obviously, they’re concerned about the rapid degradation of their stock price so they are trying to articulate that they have some sort of plan.”

The company rejected an $18.50-a-share buyout bid in 2011 from Chairman and CEO Douglas Miller. Miller resigned last year and the company has operated without a designated CEO. The stock, which has dropped by half in the past month, fell 2.5 percent to $2.31 at the close in New York. Exco is the second-worst performer on the S&P Oil & Gas Exploration and Production Index this year.

“Small-capped, over-levered E&Ps have been annihilated over the past few months,” Mariani said. Exco “was set up to need higher natural gas prices and confidence in natural gas prices has really waned over the last few months.”

Chesapeake Assets

The company, which has a market value of $630 million, owns acreage in the Eagle Ford as well as the Haynesville and Bossier shale formations in Texas and Louisiana. It also holds about 290,000 acres in Appalachia, including the prolific Marcellus Shale, according to its website.

Exco bought Chesapeake Energy Corp. assets for $1 billion last year to increase oil production as gas prices fell. Oil made up about 30 percent of its sales for the first six months of the year.

Pickens, the CEO of Dallas-based BP Capital Management LP, yesterday expressed his support for Exco’s management.

“Somebody suggested that Exco is a candidate for bankruptcy,” he said. “They have $750 million of liquidity. They’re not a prospect for bankruptcy. But when it gets down like $2.50 a share, that starts the talk that they’re a prospect.”

Pickens sold more than 2 million shares of Exco in March, when the price was above $5. He is the 11th-largest shareholder in the company, with 1.8 percent of the stock, according to data compiled by Bloomberg.

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