EXCO Resources, Inc. (NYSE:XCO) (“EXCO”) today announced a definitive agreement with Harbinger Group Inc. (NYSE: HRG) (“HGI”) whereby EXCO will contribute its conventional non-shale assets in East Texas and North Louisiana and its shallow Canyon Sand and other miscellaneous assets in West Texas to a limited partnership (the “Partnership”) with HGI. In exchange for the contribution of its assets, EXCO will receive cash consideration of $597.5 million, subject to customary purchase price adjustments to reflect an effective date of July 1, 2012, a 24.5% limited partner interest in the Partnership and a 50% interest in the general partner of the Partnership. HGI will contribute $372.5 million cash and will receive a 73.5% limited partner interest in the Partnership and a 50% interest in the general partner. The remaining $225 million of the cash consideration paid to EXCO will be funded by a revolving credit agreement to be entered into by the Partnership. The formation of the Partnership results in a $725 million valuation of the oil and gas properties included in the transaction. After giving effect to the 2% general partner interest in the Partnership, EXCO and HGI will own an economic interest in the Partnership of 25.5% and 74.5%, respectively.
The properties that will be contributed to the Partnership consist of EXCO’s existing Cotton Valley assets in its Holly, Waskom, Danville and Vernon fields in East Texas and North Louisiana. All depths from the base of the Cotton Valley and above will be included. In addition, all of EXCO’s rights (excluding all depths below the base of the Canyon Sand intervals) in its Canyon Sand field in Irion and Tom Green Counties, Texas and certain other West Texas conventional properties will be included in the Partnership.
Characteristics of the contributed Partnership properties (as of the July 1, 2012 effective date) follow:
|West Texas||East Texas / North Louisiana||Total|
|Gross Producing Wells||423||997||1,420|
|Natural Gas (Mcf/d)||7,038||74,182||81,220|
|Total Daily Production (Mcfe/d)||24,432||75,682||100,114|
|Proved Reserves (Mmcfe) (1)||113,339||415,348||528,687|
(1) The July 1, 2012 Proved Reserves used in this press release were calculated using June 29, 2012 forward strip prices. The estimated Proved Reserves attributable to the properties being contributed to the Partnership, using the unweighted average prices for the twelve months ended June 30, 2012 of $3.15 per Mmbtu of natural gas, $95.67 per Bbl of crude oil and $59.32 per Bbl of NGL as required by Regulation S-X under the Securities Act, were 466,204 Mmcfe.
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