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EXCO Resources, Inc. Reports Fourth Quarter And Full Year 2012 Results

"In addition to significant cost reductions, we also negotiated and entered into a private limited partnership with Harbinger Group, Inc. which provided us with $573 million to reduce our debt as well as a 25.5% ongoing interest and a vehicle to conduct conventional asset acquisitions in the future.

"We intend to pursue producing property acquisitions during 2013 across core and new areas, and also plan to engage partners to provide financial support for undrilled locations and drilling costs associated with future acquisitions. We are convinced that the economics of producing property acquisitions are presently superior to drill bit economics.

"We are encouraged that natural gas prices have increased since the 2nd quarter 2012 and are optimistic about the future of the natural gas industry in general and our prospects for the future. We begin 2013 with significant liquidity, a much better price than the average realized in 2012 and an acquisition strategy which should produce stronger results.

"We appreciate the tremendous efforts of our employees and contractors during the difficult year just completed, we are grateful for the support of our Directors and Shareholders, and we look forward to implementing our strategy during 2013 and beyond to improve our results.”

Net income

Our reported net income (loss) shown below, a GAAP measure, includes certain items not typically included by securities analysts in their published estimates of financial results. The following table provides a reconciliation of our net income (loss) to the non-GAAP measure of adjusted net income:

   
Three Months Ended Years Ended
December 31, 2012   December 31, 2011 December 31, 2012   December 31, 2011
(in thousands, except per share amounts)   Amount   Per share Amount   Per share Amount   Per share Amount   Per share
Net income (loss), GAAP $ (269,029 ) $ (166,652 ) $ (1,393,285 ) $ 22,596
Adjustments:
Non-cash mark-to-market (gains) losses on derivative financial instruments, before taxes (8,394 ) (36,425 ) 135,945 (84,313 )
Non-cash write down of oil and natural gas properties, before taxes 324,040 233,239 1,346,749 233,239
Adjustments included in equity income 5,405 27,088
Non-recurring other operating items 8,200 118 17,928 27,660
Deferred finance cost amortization acceleration 1,689 3,000 1,689
Income taxes on above adjustments (1) (131,700 ) (79,448 ) (612,284 ) (71,310 )
Adjustment to deferred tax asset valuation allowance (2)   107,612     66,661     557,314     (9,036 )
Total adjustments, net of taxes   305,163     185,834     1,475,740     97,929  
Adjusted net income $ 36,134   $ 19,182   $ 82,455   $ 120,525  
 
Net income (loss), GAAP (3) $ (269,029 ) $ (1.25 ) $ (166,652 ) $ (0.78 ) $ (1,393,285 ) $ (6.50 ) $ 22,596 $ 0.11
Adjustments shown above (3) 305,163 1.42 185,834 0.87 1,475,740 6.88 97,929 0.46
Dilution attributable to stock options (4)                               (0.01 )
Adjusted net income $ 36,134   $ 0.17   $ 19,182   $ 0.09   $ 82,455   $ 0.38   $ 120,525   $ 0.56  
 
Common stock and equivalents used for earnings per share (EPS):
Weighted average common shares outstanding 214,672 214,137 214,321 213,908
Dilutive stock options   816     1,479         2,797  
Shares used to compute diluted EPS for adjusted net income   215,488     215,616     214,321     216,705  

(1) The assumed income tax rate is 40% for all periods.(2) Deferred tax valuation allowance has been adjusted to reflect the assumed income tax rate of 40% for all periods.(3) Per share amounts are based on weighted average number of common shares outstanding.(4) Represents dilution per share attributable to common stock equivalents from in-the-money stock options.

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