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EXCO Resources, Inc. Closes $725 Million Partnership With Harbinger Group Inc. Related To Conventional Oil And Natural Gas Properties In Texas And Louisiana

Stocks in this article: XCO

EXCO Resources, Inc. (NYSE: XCO) (“EXCO”) announced today that it closed its conventional oil and natural gas partnership (the “Partnership”) with Harbinger Group Inc. (NYSE: HRG) (“HGI”), effective February 14, 2013, and received net proceeds of $573.3 million, after preliminary closing adjustments. The cash proceeds received by EXCO were used to repay a portion of its revolving credit facility. EXCO’s revolving credit facility now has a $900 million borrowing base with $541 million drawn.

The Partnership holds conventional oil and natural gas assets previously owned by EXCO in West Texas, including and above the Canyon Sand formation, as well as in the Danville, Waskom, Holly and Vernon fields in East Texas and North Louisiana, including and above the Cotton Valley formation. Under the terms of the definitive agreements announced on November 5, 2012, the Partnership acquired the oil and natural gas assets from EXCO for $725 million of total consideration. The purchase by the Partnership was funded with approximately $225 million of bank debt, $348.3 million (after preliminary closing adjustments) in cash contributed from HGI and $119.2 million (after preliminary closing adjustments) in oil and natural gas properties and related assets being contributed by EXCO. EXCO has a 50% interest in the general partner of the Partnership and a 24.5% limited partnership interest in the Partnership. After giving effect to the 2% general partner interest in the Partnership, EXCO and HGI own an economic interest in the Partnership of 25.5% and 74.5%, respectively. The Partnership will be governed by a Board of Directors of the general partner consisting of two EXCO directors and two HGI directors. EXCO will continue to manage and operate the assets as contract operator of the properties and provide services pursuant to contract operating and administrative service agreements with the Partnership.

EXCO and HGI intend to opportunistically add incremental cash flow to the Partnership through the acquisition of other mature, conventional assets over time. On February 14, 2013, the Partnership agreed to acquire certain conventional oil and natural gas assets in the Danville, Waskom and Holly fields in East Texas and North Louisiana, including and above the Cotton Valley formation, from an affiliate of BG Group plc for $132.5 million, with an economic effective date of January 1, 2013 and subject to customary closing adjustments. These properties represent an incremental working interest in properties that EXCO contributed to the Partnership. This transaction is expected to close in March 2013. The Partnership intends to fund the acquisition using its revolving credit agreement. In connection with this acquisition, EXCO and BG Group plc agreed to remove these assets from their East Texas/North Louisiana joint venture arrangement, including the termination of the area of mutual interest that was previously applicable to shallow rights acquisitions in the East Texas/North Louisiana area.

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