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.

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