This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

EXCO Resources, Inc. Reports Second Quarter 2012 Results

TGGT's capital spending for the second quarter of 2012 was $28 million and the total capital for the first half of 2012 was $97 million. We expect that TGGT will spend approximately $35 million during the second half of 2012. The additional capital spending will be primarily in the Holly area associated with pipeline laterals, permanent treating facilities and well connects.

Financial Data

Our consolidated balance sheets as of June 30, 2012 and December 31, 2011 and consolidated statements of operations for the three and six months ended June 30, 2012 and 2011, and consolidated statements of cash flows for the six months ended June 30, 2012 and 2011, 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, August 1, 2012 at 8:00 a.m. (Dallas 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# 94605622. 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, July 31, 2012.

A digital recording will be available starting two hours after the completion of the conference call until 11:59 p.m., August 15, 2012. Please call 800-585-8367 and enter conference ID# 94605622 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, Douglas H. Miller, or its President, Stephen F. Smith, 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. You are cautioned not to place undue reliance on a forward-looking statement. When considering our forward-looking statements, keep in mind the risk factors and other cautionary statements in this press release and the risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2011, and our other periodic filings with the SEC.

Our revenues, operating results, financial condition and ability to borrow funds or obtain additional capital depend substantially on prevailing prices for oil and natural gas. A decline in oil and/or natural gas prices could have a material adverse effect on the estimated value and estimated quantities of our oil and natural gas reserves, our ability to fund our operations and our financial condition, cash flow, results of operations and access to capital. 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 its filings with the SEC. 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, 2011, which is available on our website at www.excoresources.com under the Investor Relations tab.

EXCO Resources, Inc.
Consolidated balance sheets
   
(in thousands) June 30, 2012 December 31, 2011
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 52,396 $ 31,997
Restricted cash 60,758 155,925
Accounts receivable, net:
Oil and natural gas 49,510 88,518
Joint interest 105,741 170,918
Interest and other 24,098 28,488
Inventory 7,428 8,345
Derivative financial instruments 111,830 164,002
Other 19,676   29,815  
Total current assets 431,437   678,008  
Equity investments 320,214 302,833
Oil and natural gas properties (full cost accounting method):
Unproved oil and natural gas properties and development costs not being amortized 592,172 667,342
Proved developed and undeveloped oil and natural gas properties 3,027,501 3,392,146
Accumulated depletion (1,826,196 ) (1,657,165 )
Oil and natural gas properties, net 1,793,477   2,402,323  
Gas gathering assets 136,903 136,203
Accumulated depreciation and amortization (32,433 ) (29,104 )
Gas gathering assets, net 104,470   107,099  
Office, field and other equipment, net 24,217 42,384
Deferred financing costs, net 25,317 29,622
Derivative financial instruments 24,851 11,034
Goodwill 218,256 218,256
Other assets 28   28  
Total assets $ 2,942,267   $ 3,791,587  
EXCO Resources, Inc.
Consolidated balance sheets
   
(in thousands) June 30, 2012 December 31, 2011
(Unaudited)
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable and accrued liabilities $ 98,200 $ 117,968
Revenues and royalties payable 107,421 148,926
Accrued interest payable 17,459 17,973
Current portion of asset retirement obligations 732 732
Income taxes payable
Derivative financial instruments 1,556   1,800  
Total current liabilities 225,368   287,399  
Long-term debt 1,848,389 1,887,828
Deferred income taxes
Derivative financial instruments 35,242
Asset retirement obligations and other long-term liabilities 60,167 58,028
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; 217,183,193 shares issued and 216,643,972 shares outstanding at June 30, 2012; 217,245,504 shares issued and 216,706,283 shares outstanding at December 31, 2011 215 215
Additional paid-in capital 3,191,236 3,181,063
Accumulated deficit (2,410,871 ) (1,615,467 )
Treasury stock, at cost; 539,221 shares at June 30, 2012 and December 31, 2011 (7,479 ) (7,479 )
Total shareholders’ equity 773,101   1,558,332  
Total liabilities and shareholders’ equity $ 2,942,267   $ 3,791,587  
EXCO Resources, Inc.
Consolidated statements of operations
(Unaudited)
   
Three Months Ended June 30, Six Months Ended June 30,
(in thousands, except per share data) 2012   2011 2012   2011
Revenues:
Oil and natural gas $ 117,978 $ 206,828 $ 252,826 $ 368,056
Costs and expenses:
Oil and natural gas operating costs 18,863 20,697 41,659 39,742
Production and ad valorem taxes 6,789 6,448 13,982 12,047
Gathering and transportation 25,913 19,504 52,336 36,790
Depreciation, depletion and amortization 87,337 85,412 176,919 153,342
Write-down of oil and natural gas properties 428,801 704,665
Accretion of discount on asset retirement obligations 964 933 1,911 1,790
General and administrative 18,637 23,137 40,142 46,560
Other operating items 6,710   1,669   8,335   4,126  
Total costs and expenses 594,014   157,800   1,039,949   294,397  
Operating income (loss) (476,036 ) 49,028 (787,123 ) 73,659
Other income (expense):
Interest expense (20,369 ) (13,679 ) (37,133 ) (28,495 )
Gain (loss) on derivative financial instruments (15,258 ) 43,273 38,607 46,694
Other income 197 202 440 362
Equity income 15,033   3,538   7,127   12,083  
Total other income (expense) (20,397 ) 33,334   9,041   30,644  
Income (loss) before income taxes (496,433 ) 82,362 (778,082 ) 104,303
Income tax expense        
Net income (loss) $ (496,433 ) $ 82,362   $ (778,082 ) $ 104,303  
Earnings (loss) per common share:
Basic:
Net income (loss) $ (2.32 ) $ 0.39   $ (3.63 ) $ 0.49  
Weighted average common shares outstanding 214,164   213,888   214,154   213,710  
Diluted:
Net income (loss) $ (2.32 ) $ 0.38   $ (3.63 ) $ 0.48  
Weighted average common and common equivalent shares outstanding 214,164   217,513   214,154   217,313  
EXCO Resources, Inc.
Consolidated statement of cash flows
(Unaudited)
 
Six Months Ended June 30,
(in thousands) 2012   2011
Operating Activities:
Net income (loss) $ (778,082 ) $ 104,303
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization 176,919 153,342
Share-based compensation expense 5,455 5,087
Accretion of discount on asset retirement obligations 1,911 1,790
Write-down of oil and natural gas properties 704,665
Income from equity investments (7,127 ) (12,083 )
Non-cash change in fair value of derivatives 73,353 3,458
Deferred income taxes
Amortization of deferred financing costs and discount on the 2018 Notes 6,440 3,747
Effect of changes in:
Accounts receivable 107,693 (48,445 )
Other current assets 4,997 (3,590 )
Accounts payable and other current liabilities (15,756 ) 20,424  
Net cash provided by operating activities 280,468   228,033  
Investing Activities:
Additions to oil and natural gas properties, gathering systems and equipment (305,969 ) (474,838 )
Property acquisitions (2,748 ) (722,032 )
Equity method investments (10,254 ) (10,279 )
Proceeds from disposition of property and equipment 17,000 410,870
Restricted cash 95,167 12,502
Net changes in advances (to) from Appalachia JV 5,193 (1,309 )
Distributions from equity method investments 125,000
Deposit on acquisitions 464,151
Other   (1,250 )
Net cash used in investing activities (201,611 ) (197,185 )
Financing Activities:
Borrowings under the EXCO Resources Credit Agreement 53,000 380,000
Repayments under the EXCO Resources Credit Agreement (93,000 ) (377,500 )
Proceeds from issuance of common stock 297 11,063
Payment of common stock dividends (17,132 ) (17,106 )
Deferred financing costs and other (1,623 ) (6,348 )
Net cash used in financing activities (58,458 ) (9,891 )
Net increase in cash 20,399 20,957
Cash at beginning of period 31,997   44,229  
Cash at end of period $ 52,396   $ 65,186  
Supplemental Cash Flow Information:
Cash interest payments $ 42,454   $ 37,564  
Income tax payments $   $ 1,458  
Supplemental non-cash investing and financing activities:
Capitalized stock option compensation $ 3,894   $ 2,800  
Capitalized interest $ 12,525   $ 15,748  
Issuance of common stock for director services $ 527   $ 34  
Accrued restricted stock dividends $ 190   $  
EXCO Resources, Inc.
Consolidated EBITDA
And Adjusted EBITDA reconciliations and statement of cash flow data
(Unaudited)
   
Three months ended Six months ended
June 30, June 30,
(in thousands) 2012   2011 2012   2011
Net income (loss) $ (496,433 ) $ 82,362 $ (778,082 ) $ 104,303
Interest expense 20,369 13,679 37,133 28,495
Income tax expense
Depreciation, depletion and amortization 87,337   85,412   176,919   153,342  
EBITDA(1) (388,727 ) 181,453 (564,030 ) 286,140
Accretion of discount on asset retirement obligations 964 933 1,911 1,790
Non-cash write down of oil and natural gas properties 428,801 704,665
Non-recurring other operating items 6,673 2,980 8,625 5,955
Equity income (15,033 ) (3,538 ) (7,127 ) (12,083 )
Non-cash change in fair value of derivative financial instruments 77,073 (20,056 ) 73,353 3,458
Stock based compensation expense 2,591   2,419   5,455   5,087  
Adjusted EBITDA (1) $ 112,342 $ 164,191 $ 222,852 $ 290,347
Interest expense (20,369 ) (13,679 ) (37,133 ) (28,495 )
Income tax expense

Amortization of deferred financing costs and discount on the 2018 Notes

4,690 1,800 6,440 3,747
Deferred income taxes
Non-recurring other operating items (6,673 ) (2,980 ) (8,625 ) (5,955 )
Changes in working capital 45,355   (372 ) 96,934   (31,611 )
Net cash provided by operating activities $ 135,345   $ 148,960   $ 280,468   $ 228,033  
  Three months ended   Six months ended
June 30, June 30,
(in thousands) 2012   2011 2012   2011
Statement of cash flow data (unaudited):
Cash flow provided by (used in):
Operating activities $ 135,345 $ 148,960 $ 280,468 $ 228,033
Investing activities (33,723 ) (343,646 ) (201,611 ) (197,185 )
Financing activities (79,797 ) 251,344 (58,458 ) (9,891 )
Other financial and operating data:
EBITDA(1) (388,727 ) 181,453 (564,030 ) 286,140
Adjusted EBITDA(1) 112,342 164,191 222,852 290,347
 

(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 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 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 Six Months Ended
June 30, June 30,
(in thousands) 2012   2011 2012   2011
 
Equity Income (loss) $ 15,033 $ 3,538 $ 7,127 $ 12,083
Amortization of the difference in the historical basis of our contribution to TGGT (402 ) (402 ) (804 ) (804 )
Equity loss of other investments 1,715   371   2,594   630  
EXCO's share of TGGT net income (loss) 16,346 3,507 8,917 11,909
BG Group's share of TGGT net income 16,346   3,507   8,917   11,909  
TGGT net income (loss) 32,692 7,014 17,834 23,818
Interest expense 2,683 2,324 6,557 3,867
Margin tax expense 30 384 268 719
Depreciation and amortization 6,942   6,328   14,823   12,232  
TGGT EBITDA(1) 42,347 16,050 39,482 40,636
Asset impairments and non-recurring other operating items   13,460   37,598   13,460  
TGGT Adjusted EBITDA(1) $ 42,347   $ 29,510   $ 77,080   $ 54,096  
EXCO's share of TGGT Adjusted EBITDA (2) $ 21,174   $ 14,755   $ 38,540   $ 27,048  
 

(1)  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 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 Six Months Ended
June 30, June 30,
(in thousands) 2012   2011 2012   2011
Net income (loss), GAAP $ 32,692 $ 7,014 $ 17,834 $ 23,818
Adjustments:
Loss on asset disposal 1,399
Asset impairment 13,460 35,343 13,460
Other non-cash items 856
Income taxes on above adjustments      
Total adjustments, net of taxes   13,460   37,598   13,460
Adjusted net income $ 32,692   $ 20,474   $ 55,432   $ 37,278
 
EXCO's 50% share of TGGT's adjusted net income (1) $ 16,346   $ 10,237   $ 27,716   $ 18,639
 

(1) TGGT’s net income, computed in accordance with GAAP, includes certain 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 Six months ended
June 30, % June 30, %
  2012   2011 Change 2012   2011 Change
Production:
Oil (Mbbls) 182 178 2 % 374 371 1 %
Natural gas liquids (Mbbls) 131 123 7 % 253 248 2 %
Natural gas (Mmcf) 48,162 44,080 9 % 95,154 79,217 20 %
Total production (Mmcfe) (1) 50,040 45,886 9 % 98,916 82,931 19 %
Average daily production (Mmcfe) 550 504 9 % 543 458 19 %
Average sales price (before cash settlements of derivative financial instruments):
Oil (per Bbl) $ 86.38 $ 99.16 (13 )% $ 91.90 $ 94.40 (3 )%
Natural gas liquids (per Bbl) 40.15 60.47 (34 )% 46.30 56.88 (19 )%
Natural gas (per Mcf) 2.01 4.12 (51 )% 2.17 4.03 (46 )%
Natural gas equivalent (per Mcfe) 2.36 4.51 (48 )% 2.56 4.44 (42 )%
Costs and expenses (per Mcfe):
Oil and natural gas operating costs $ 0.38 $ 0.45 (16 )% $ 0.42 $ 0.48 (13 )%
Production and ad valorem taxes 0.14 0.14 % 0.14 0.15 (7 )%
Gathering and transportation 0.52 0.43 21 % 0.53 0.44 20 %
Depletion 1.67 1.76 (5 )% 1.71 1.74 (2 )%
Depreciation and amortization 0.08 0.10 (20 )% 0.08 0.11 (27 )%
General and administrative 0.37 0.50 (26 )% 0.41 0.56 (27 )%
 

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





7 of 8

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,160.17 +129.03 0.76%
S&P 500 2,000.82 +16.69 0.84%
NASDAQ 4,548.3870 +29.4850 0.65%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs