EXCO Resources, Inc. Q2 2010 Earnings Conference Call Transcript

EXCO Resources, Inc. Q2 2010 Earnings Conference Call Transcript
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EXCO Resources Inc.

Q2 2010 Earnings Conference Call

August 4, 2010 09:00 ET

Executives

Douglas Miller

Harold Hickey

Analysts

Irene Haas – Canaccord Genuity

Jeffrey Robertson – Barclays Capital

Nicholas Pope – Dahlman & Rose

Ray Deacon – Pritchard Capital

Presentation

Operator

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Previous Statements by XCO
» EXCO Resources, Inc. Q1 2010 Earnings Call Transcript
» EXCO Resources, Inc. Q4 2009 Earnings Call Transcript
» EXCO Resources Q3 2009 Earnings Call Transcript

Good morning, my name is Maria and I will be your conference operator today. At this time I would like to welcome everyone to the Exco’s second quarter 2010 earnings release conference call. All lines have been placed on mute to prevent any background noise.

After the speakers’ remarks there will be a question-and-answer session. (Operator Instructions) Thank you, Mr. Doug Miller you may now begin.

Douglas H. Miller

Thank you. This is Doug Miller, Chairman and I will lead off the meeting but before we get started first of all I have eleven guys in here today with me so…I have Steve Smith, Harold Hickey our COO, Steve’s our President this will bring along some of our board members is with us today; we are going to board meetings right after this. John Jacobi, [Inaudible] Nicky, Chambers and Jameson are here to run all the Haynesville area F2 lies to keep me say it may be boring and Justin Clark Ramsey is here and Mark Wilson so we are going to stick with you as long as we need to.

From the question-and-answer I think things are cleaning up pretty good around here so before we get started Doug would you read our disclaimer.

Doug

Sure, thanks Doug. I would like to remind everyone that you can go to www.excoresources.com and click on the Investor Relations tab on the left hand side of our home page to access today’s presentation slides.

The statements that may be made on this conference call regarding our future financial operating performance structure and results, business strategies, market prices and future commodity price risk management activities, plans and forecasts and other statements that are not historical facts are forward-looking looking statements as defined in section 27-A of the Securities Act of 1933 and section 21-E of the Securities Exchange Act of 1934. Please refer to pages 28 and 29 of the slide presentation for the complete text regarding our forward-looking statements.

In addition please refer to our website for the earnings release which contains additional information regarding our forward-looking statements and the preparation of our financial disclosures including reconciliations and other statements regarding non-GAAP financial numbers which will be discussed on today’s call; Doug?

Douglas H. Miller

Thank you, I’m just going to make a brief statement and then we’ll come back…we’re going to go through this in detail with everybody. I just want to say that it's been a long, hard year and a half. Many of you who’ve been long term shareholders we’ve told you what we were planning on doing which is empathize our shale plays, try to figure out if we can get joint ventures done and most importantly we just did that.

We just recently done a road job and shown everybody mission accomplished. We have gone from $400 million a day to pro-foma about $200 million a day while reducing debt from $3 billion down to about $600 million. And at the same time we have closed two joint ventures with a spectacular partner who is really bringing something to the table. And we are matching forward on an aggressive development plan in Haynesville Bossier which we’ll get into in a minute. And by the way, I think we told everybody down there that we now have identified the Haynesville play as a 600,000 acre play in our mind as some of that have the economics of to turn gas prices. We have a slide in here in a minute that will talk about that.

We are beginning our planning stages for the Marcellus, we do have a rig up there running, we are going to three rigs. We are going to start drilling there, we’re going to have a busy August, September as far as prep jobs but we do have a plan but we’re in meetings with our team and BG’s team trying to get a three-year plan put together. Which, I might add, includes a lot of pipeline work; Hal will get into that in a minute but it's something that’s going to be a slower ramp up than the Haynesville was but I think it's going to be very exciting cause we have seen some interesting results in our neighborhood and we continue to look for acquisitions up there.

We just recently closed two acquisitions down the Shelby Trough; we continue to look for additional down there. We do have up three rigs or four rigs running down there.

Unidentified Company Speaker

Three.

Douglas H. Miller

Three rigs running down there, no [murram] is being prepped as with today and we have two or three more lined up. August is going to be a very, very busy month for us as far as preps go, I know that we have about ten of them coming on so everybody is running around.

I want everybody to understand that we are not looking for oil; we are not looking for additional plays. These two plays are going to keep us active for the next ten years. We continue to do tap-ons in those areas. And I also want everybody to understand that if gas prices go down from here we do have a plan and we will shut rigs down. We’re doing this for economics; I want everybody to underline that we’re doing all these over the next three to five years inside our cash flow. Having a great partner like BG allows us to that; the two carriers that we have are allowing us to stay inside the cash flow. We’re going to continue to be like that and if gas goes down we will shut down rigs; we have shut rigs down in four areas already as gas came down below $5 and they will continue to be shut down.

And we also believe that…I believe, I don’t know about we, that probably 80% of the gas drilling that’s going on right now has a low rate of returns. So this…there’s a lot of guys drilling for other than pure economics right now, whether it's conventional or part of the shales; we’re not going to do that.

With that I’m going to turn it over to Steve, are you next step?

Stephen F. Smith

w

I’m next step. It's time to take slides in the slide presentation and we’ll just do this. I’ll just reiterate a couple of things that Doug said. One is that we are up to 23 of seven degree of operate wells in the Haynesville now that the [IPs] are over 20 million a day meaning that most of them are over…average about 23 million a day.

The Shelby acreage that we bought included 23,809 acres to Exco 47,600 to the joint venture. It's going to be a tremendous focus area for us, we’re going to be granting up very rapidly and Hal will get into that. We spent about $400 million on that acreage and we think that it's going to be a really, really strong area.

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