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EXCO Resources, Inc. Reports Second Quarter 2012 Results

Stocks in this article: XCO

Marcellus Shale

Our current gross Marcellus shale production as of July 18, 2012, is approximately 146 Mmcf per day (30.1 Mmcf per day net), which represents an increase of more than 28% since the end of 2011. We have more than 32 Mmcf per day (6.6 Mmcf per day net) of production shut in due primarily to offset drilling and completion activities. We have implemented a development program within our acreage in Northeast Pennsylvania and are concluding an appraisal program in Central Pennsylvania. Our budget, as revised in February 2012, was to drill 49 gross (12.4 net) operated wells in the Marcellus shale play in our Appalachia region. Of the 49 wells, 46 gross (11.5 net) are development wells and 3 gross (0.9 net) are appraisal wells. Most of our drilling activity will be in Lycoming County, Pennsylvania where we are realizing our best returns in the Marcellus shale. However, our last four wells in Central Pennsylvania realized average IPs of 7.2 Mmcf per day from average lateral lengths of approximately 4,700 feet, exceeding our forecasts. During the second quarter of 2012, we utilized three operated rigs in the play. We are currently drilling with one operated rig. We continue to evaluate our 2012 Marcellus program, which could impact our rig count, activity levels and number of wells turned to sales. Our net drilling dollars are reduced by the effect of the carry we receive from BG Group. Approximately $8.0 million of the carry remains available to us from BG Group as of June 30, 2012. We expect that the remaining carry will be used in the third quarter 2012.

During the second quarter 2012, we spud 9 new operated wells and drilled and completed 12 gross (4.0 net) operated wells in the Marcellus shale. These 12 completed wells included eight wells in Northeast Pennsylvania and four wells in Central Pennsylvania. We are also focused on building our field infrastructure, particularly water handling lines, storage and disposal facilities, in support of our expected levels of activity. These infrastructure investments are expected to be the primary drivers to reduce our average development well costs.

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