EXCO Resources, Inc. (NYSE: XCO) (“EXCO”) today announced second quarter results for 2013.
- Adjusted net income, a non-GAAP measure, was $0.10 per diluted share for the second quarter 2013 compared with $0.05 per diluted share for the second quarter 2012. The non-GAAP adjustments include gains from asset sales, non-cash gains or losses from derivative financial instruments (derivatives), non-cash ceiling test write-downs and other items typically not included by securities analysts in published estimates.
- Adjusted EBITDA for the second quarter 2013 was $90 million compared with $112 million for the second quarter 2012. Adjusted EBITDA is a non-GAAP measure and is computed using earnings before interest, taxes, depletion, depreciation and amortization, and is further adjusted using gains from asset sales, ceiling test write-downs and other non-cash income and expense items.
- GAAP results were net income of $86 million, or $0.40 per diluted share, for the second quarter 2013 compared with a net loss of $496 million, or $2.32 per diluted share, for the second quarter 2012. The second quarter 2012 net loss included a $429 million pre-tax non-cash ceiling test write-down of oil and natural gas properties.
- Oil, natural gas and natural gas liquids (NGL) production was 38 Bcfe, or 420 Mmcfe per day, for the second quarter 2013 compared with 50 Bcfe, or 550 Mmcfe per day in the second quarter 2012. The second quarter 2013 production from the East Texas/North Louisiana region was 328 Mmcfe per day compared with 483 Mmcfe per day in the second quarter 2012. The decrease in production was primarily the result of the contribution of conventional properties to the EXCO/HGI Partnership and normal production declines. The second quarter 2013 production in the Appalachia region was 64 Mmcfe per day compared with 41 Mmcfe per day in the second quarter 2012. The increase in production was due to our focus on completion activities in the Marcellus shale which resulted in 32 additional wells coming on line subsequent to the second quarter 2012. Our proportionate share of production from the EXCO/HGI Partnership was 28 Mmcfe per day in the second quarter 2013.
- Oil, natural gas and NGL revenues, before cash settlements on derivatives, for the second quarter 2013 were $150 million compared with second quarter 2012 revenues of $118 million. Our average sales price per Mcfe increased to $3.93 per Mcfe for the second quarter 2013 from $2.36 per Mcfe for the second quarter 2012. When the impacts of cash settlements from derivatives are considered, oil, natural gas and NGL revenues were $151 million, or $3.95 per Mcfe in the second quarter 2013, compared with $180 million, or $3.60 per Mcfe in the second quarter 2012.
- Our direct operating costs were $0.31 per Mcfe for the second quarter 2013 compared with $0.38 per Mcfe for the second quarter 2012. We continue to focus on reducing our operating costs. Our second quarter 2013 operating costs per Mcfe were favorably impacted by the contribution of certain conventional properties to EXCO/HGI Partnership in the first quarter 2013. The conventional assets have higher operating costs than our shale assets.
- Our 50% share of TGGT's adjusted net income for the second quarter 2013 was $12 million compared with $16 million for the second quarter 2012. Our 50% share of TGGT's adjusted EBITDA was $18 million for the second quarter 2013 compared with $21 million for the second quarter 2012, after adjustments for certain non-cash items.
- On February 14, 2013, we formed the EXCO/HGI Partnership and contributed our conventional non-shale assets in East Texas and North Louisiana and our shallow Canyon Sand and other assets in the Permian Basin of West Texas. We received net proceeds of $575 million, after final purchase price adjustments, and a 25.5% economic interest in the partnership. The partnership also purchased certain shallow conventional assets from BG Group, plc (BG Group) for $131 million, after preliminary purchase price adjustments. The pro forma operating and financial information for the three and six months ended June 30, 2013 and 2012 is presented as if these transactions occurred on January 1, 2012 in a supplemental schedule to this press release.
- On July 2, 2013, we entered into definitive agreements with subsidiaries of Chesapeake Energy Corporation (Chesapeake) to acquire producing and undeveloped oil and natural gas assets in the Eagle Ford and Haynesville shale formations for an aggregate purchase price of approximately $1 billion, subject to customary purchase price adjustments. We closed the acquisition of the Haynesville assets on July 12, 2013 for $288 million, after customary preliminary purchase price adjustments, with an effective date of January 1, 2013. We closed the acquisition of the Eagle Ford assets on July 31, 2013 for $685 million, after customary preliminary purchase price adjustments, with an effective date of April 1, 2013. To facilitate the purchase of these assets, we amended our credit agreement which has an initial borrowing base of $1.6 billion including a $400 million asset sale requirement and a $300 million term loan. The asset sale requirement requires mandatory payments from proceeds of asset sales and must be repaid or refinanced within one year.
In connection with the closing of the Eagle Ford assets, we entered into a participation agreement with affiliates of Kohlberg Kravis Roberts & Co. L.P. (KKR) to sell an undivided 50% interest in the undeveloped acreage we acquired for $131 million in cash, after preliminary purchase price adjustments. After giving effect to the acquisition and the KKR payment, the credit agreement's initial borrowing base and the $400 million asset sale requirement were reduced by $131 million. We will jointly develop the Eagle Ford acreage with KKR under the participation agreement. Details of the acquisitions and terms of the KKR agreement are presented in the "Recent developments" section of this press release.