NYSE: XCO Change:
, data delayed 15 minutes
Investor Relations

EXCO Resources, Inc. Reports Third Quarter 2017 Results

11/07/2017

Dateline:

DALLAS

Public Company Information:

NYSE:
XCO
US2692794025

DALLAS--(BUSINESS WIRE)--EXCO Resources, Inc. (NYSE: XCO) ("EXCO" or the "Company") today announced operating and financial results for third quarter 2017.

2017 Third Quarter Highlights

  • Drilled 11 gross (6.5 net) horizontal wells in North Louisiana during third quarter 2017.
  • Produced 237 Mmcfe per day, or 22 Bcfe, for third quarter 2017, a decrease of 4% compared to second quarter 2017, primarily due to natural production declines.
  • GAAP net loss was $19 million, or $0.81 per diluted share, and Adjusted net loss, a non-GAAP measure, was $21 million, or $0.91 per diluted share, for third quarter 2017.
  • Adjusted EBITDA, a non-GAAP measure, was $10 million for third quarter 2017.
  • Liquidity was $106 million as of September 30, 2017. Borrowed remaining unused commitments and had no availability remaining under the Company's credit agreement ("Credit Agreement"), including letters of credit, as of September 30, 2017.
  • Paid $17 million and $26 million of interest on the Company's senior secured 1.5 lien notes due March 20, 2022 ("1.5 Lien Notes") and senior secured 1.75 lien term loans due October 26, 2020 ("1.75 Lien Term Loans"), respectively, through the issuance of additional 1.5 Lien Notes and 1.75 Lien Term Loans in September 2017.
  • Paid $5 million of cash interest on the senior unsecured notes due September 15, 2018 ("2018 Notes") and $3 million of cash interest on the senior unsecured notes due April 15, 2022 ("2022 Notes") in September 2017 and October 2017, respectively.
  • Hired financial advisors to explore strategic alternatives to strengthen the Company's balance sheet and maximize the value of the Company, which may include, but not be limited to, seeking a comprehensive out-of-court restructuring or reorganization under Chapter 11 of the U.S. Bankruptcy Code, and engaged in negotiations with certain stakeholders.

Operational Results

Table 1: Summary of operating activities and operational results
Historical vs. guidance; mixed measures

    Quarter-to-Date   Year-to-Date   Q3   Q4
9/30/17   6/30/17   9/30/16 9/30/17   9/30/16 2017 (2) 2017
Factors Unit Actual Actual   % Actual   % Actual Actual   % Guidance Guidance
Drilling rig counts (1) # 4 4   100   3 1 200   4 3
 
Net wells drilled (1)
North Louisiana # 6.5 6.1 7   100   16.1 5.2 210   N/A N/A
East Texas #       N/A N/A
South Texas #       N/A N/A
Appalachia and other #       N/A N/A
Total net wells drilled # 6.5 6.1 7   100   16.1 5.2 210   5.3 4.3
 
Net wells turned-to-sales (1)
North Louisiana # 3.5 (100 ) 2.7 (100 ) 3.5 5.2 (33 ) N/A N/A
East Texas #     3.6 (100 ) N/A N/A
South Texas #       N/A N/A
Appalachia and other #       N/A N/A
Total net wells turned-to-sales # 3.5 (100 ) 2.7 (100 ) 3.5 8.8 (60 ) 6.6
 
Daily production
North Louisiana Mmcfe/d 150 131 15   159 (6 ) 138 152 (9 ) N/A N/A
East Texas Mmcfe/d 41 46 (11 ) 69 (41 ) 47 69 (32 ) N/A N/A
South Texas Mmcfe/d 20 22 (9 ) 27 (26 ) 22 33 (33 ) N/A N/A
Appalachia and other Mmcfe/d 27 29 (7 ) 33 (18 ) 29 39 (26 ) N/A N/A
Total daily production Mmcfe/d 237 229 3   288 (18 ) 236 293 (19 ) 220-230 235-245
 
Production
Oil Mbbls 276 303 (9 ) 391 (29 ) 910 1,388 (34 ) 175-195 235-255
Natural gas Bcf 20.2 19.1 6   24.1 (16 ) 59.0 71.9 (18 ) 19.2-20.0 20.2-21.0
Total production Bcfe 21.8 20.9 4   26.5 (18 ) 64.4 80.3 (20 ) 20.2-21.2 21.6-22.5
 
Capital expenditures   $MM   49   40   23     14   250     107   70   53     N/A   60
 
(1)   Includes average drilling rigs during the period and wells operated by EXCO, and excludes rigs and wells operated by others.
(2) Q3 2017 guidance assumed South Texas divestiture occurred on September 1, 2017; however, the purchase and sale agreement to divest the Company's oil and natural gas properties in South Texas was terminated on August 15, 2017.
 

North Louisiana

Highlights:

  • Produced 150 Mmcfe per day, an increase of 19 Mmcfe per day, or 15%, from second quarter 2017 and a decrease of 9 Mmcfe per day, or 6%, from third quarter 2016.
  • Drilled 10 gross (5.7 net) operated Haynesville shale wells and one gross (0.8 net) operated Bossier shale well.

EXCO’s increase in production compared to second quarter 2017 was primarily the result of additional wells turned-to-sales during late second quarter 2017. The decrease from third quarter 2016 was primarily due to natural production declines.

The Company is expected to turn-to-sales nine gross (5.8 net) Haynesville shale wells and one gross (0.8 net) cross-unit Bossier shale appraisal well during fourth quarter 2017. The Company will monitor the results of the Bossier shale wells completed during 2017 to assess potential for future development of Bossier shale locations in North Louisiana.

EXCO closed the acquisition of certain oil and natural gas properties and undeveloped acreage in North Louisiana for $20 million, subject to customary post-closing purchase price adjustments, during third quarter 2017.

East Texas

Highlights:

  • Produced 41 Mmcfe per day, a decrease of 5 Mmcfe per day, or 11%, from second quarter 2017 and a decrease of 28 Mmcfe per day, or 41%, from third quarter 2016.

EXCO’s decrease in production compared to second quarter 2017 and third quarter 2016 was primarily due to natural production declines. The Company has not turned an operated well to sales in the region since first quarter 2016.

EXCO's development activities in the East Texas region during 2017 primarily include participation in wells operated by others. EXCO is participating with another operator in the drilling of an extended lateral Bossier shale well that will be completed as a stacked pair with a Haynesville shale well in the southern portion of this region. The wells are expected to turn-to-sales in fourth quarter 2017. The Company plans to closely monitor the results of this stacked lateral test for future development.

South Texas

Highlights:

  • Produced 3.3 Mboe per day, a decrease of 0.4 Mboe per day, or 9%, from second quarter 2017 and a decrease of 1.2 Mboe per day, or 26%, from third quarter 2016.

EXCO’s decrease in production compared to second quarter 2017 and third quarter 2016 was primarily due to natural production declines. The Company has not turned an operated well to sales in the region since fourth quarter 2015.

The purchase and sale agreement to divest the Company's oil and natural gas properties in South Texas was terminated on August 15, 2017. The Company was not able to satisfy certain closing conditions due to the purported termination of a natural gas sales contract by Chesapeake Energy Marketing L.L.C. ("Chesapeake"). On June 6, 2017, EXCO filed a lawsuit against Chesapeake asserting breach of contract, tortious interference with existing contract, tortious interference with prospective business relations, and declaratory relief that the contract is still in full force and effect. The lawsuit remains pending in federal court. See further discussion regarding this transaction in the Company's Current Reports on Form 8-K filed with the SEC on April 13, 2017, June 23, 2017, August 16, 2017 and periodic filings with the SEC.

Appalachia

Highlights:

  • Produced 27 Mmcfe per day, a decrease of 2 Mmcfe per day, or 7%, from second quarter 2017, and a decrease of 6 Mmcfe per day, or 18%, from third quarter 2016.

EXCO’s production decreased from second quarter 2017 due to natural production declines. The decrease from third quarter 2016 was primarily due to natural production declines and the sale of the Company's conventional assets in 2016. Production in the Appalachia region will be impacted by net shut-in volumes of approximately 0.4 Bcfe during October 2017 due to low regional natural gas prices.

Financial Results

Table 2: Summary of operational earnings
Historical vs. guidance; mixed measures

    Quarter-to-Date   Year-to-Date   Q3   Q4
9/30/17   6/30/17   9/30/16 9/30/17   9/30/16 2017 (5) 2017
Factors Unit Actual Actual   % Actual   % Actual Actual   % Guidance Guidance
Operating revenues
Oil revenues $MM 13   14   (7 ) 16   (19 ) 43   50   (14 ) N/A N/A
Natural gas revenues $MM 48   50   (4 ) 55   (13 ) 152   127   20   N/A N/A
Total oil and natural gas revenues $MM 61   64   (5 ) 71   (14 ) 195   177   10   N/A N/A
Realized oil prices $/Bbl 46.76   47.21   (1 ) 41.47   13   47.70   35.80   33   N/A N/A
Oil price differentials $/Bbl (1.26 ) (1.41 ) (11 ) (3.57 ) (65 ) (1.91 ) (4.70 ) (59 ) (2.00-3.00) (2.00-3.00)
Realized gas prices $/Mcf 2.39   2.63   (9 ) 2.27   5   2.57   1.77   45   N/A N/A
Gas price differentials $/Mcf (0.61 ) (0.56 ) 9   (0.54 ) 13   (0.60 ) (0.52 ) 15   (0.55-0.65) (0.55-0.65)
 
Derivative financial instruments
Cash settlements (payments) $MM 1   (1 ) (200 ) 5   (80 ) (5 ) 38   (113 ) N/A N/A
Cash settlements (payments) $/Mcfe 0.03   (0.05 ) (160 ) 0.18   (83 ) (0.08 ) 0.47   (117 ) N/A N/A
 
Costs and expenses
Oil and natural gas operating costs $MM 9   8   13   9     26   26     N/A N/A
Production and ad valorem taxes $MM 3   3     4   (25 ) 10   13   (23 ) N/A N/A
Gathering and transportation $MM 29   27   7   28   4   83   80   4   N/A N/A
Oil and natural gas operating costs $/Mcfe 0.42   0.39   8   0.33   27   0.40   0.32   25   0.35-0.40 0.40-0.45
Production and ad valorem taxes $/Mcfe 0.14   0.16   (13 ) 0.14     0.15   0.17   (12 ) 0.15-0.20 0.15-0.20
Gathering and transportation $/Mcfe 1.32   1.30   2   1.06   25   1.29   0.99   30   1.25-1.30 1.25-1.30
General and administrative (1) $MM 11   7   57   9   22   24   24     7-8 18-19
 
Operational earnings
Adjusted EBITDA (2) $MM 10   18   (44 ) 25   (60 ) 47   70   (33 ) N/A N/A
GAAP net income (loss) (3) $MM (19 ) 121   (116 ) 51   (137 ) 110   (191 ) (158 ) N/A N/A
Adjusted net loss (2) $MM (21 ) (5 ) 320   (6 ) 250   (31 ) (39 ) (21 ) N/A N/A
GAAP diluted shares outstanding (4) MM 23   20   15   19   21   21   19   11   N/A N/A
Adjusted diluted shares outstanding (4) MM 23   20   15   19   21   21   19   11   N/A N/A
GAAP diluted EPS (4) $/Share (0.81 ) 6.13   (113 ) 2.73   (130 ) 5.35   (10.24 ) (152 ) N/A N/A
Adjusted diluted EPS (4)   $/Share   (0.91 )   (0.23 )   296     (0.31 )   194     (1.51 )   (2.08 )   (27 )   N/A   N/A
 
(1)   Excludes equity-based compensation income of $0.9 million and $8.0 million, and expense of $1.4 million for the three months ended September 30, 2017, June 30, 2017 and September 30, 2016, respectively, and income of $11.2 million and expense of $14.6 million for the nine months ended September 30, 2017 and 2016, respectively. Q4 2017 guidance includes approximately $9 million of professional fees in connection with the Company's restructuring activities.
(2) Adjusted EBITDA and Adjusted net loss are non-GAAP measures. See Financial Data section for definitions and reconciliations.
(3) GAAP net income (loss) included $18 million and $122 million of gains related to the revaluation of common share warrants issued in connection with the 1.5 Lien Notes and 1.75 Lien Term Loans for the three months ended September 30, 2017 and June 30, 2017, respectively, and $147 million for the nine months ended September 30, 2017. GAAP net income (loss) included impairments of oil and natural gas properties of $161 million for the nine months ended September 30, 2016.
(4) During second quarter 2017, the Company effected a 1-for-15 reverse share split which required retrospective adjustments to diluted shares outstanding and diluted EPS to reflect the impact of the reverse share split.
(5) Q3 2017 guidance assumed South Texas divestiture occurred on September 1, 2017; however, the purchase and sale agreement to divest the Company's oil and natural gas properties in South Texas was terminated on August 15, 2017.
 

EXCO's GAAP net income decreased from net income of $121 million in second quarter 2017 to a net loss of $19 million in third quarter 2017 primarily due to the change in unrealized gains on common share warrants issued in connection with the issuance of the 1.5 Lien Notes and 1.75 Lien Term Loans. The Company recorded gains on the revaluation of the warrants of $122 million and $18 million during the second and third quarter 2017, respectively, primarily due to a decrease in EXCO's share price.

EXCO's decrease in Adjusted EBITDA compared to second quarter 2017 was primarily due to lower natural gas prices and higher costs and expenses, primarily general and administrative, due to higher professional and legal fees incurred in connection with restructuring initiatives.

Cash Flow Results

Table 3: Summary of key cash flow items
Historical vs. guidance; mixed measures

    Quarter-to-Date   Year-to-Date   Q3   Q4
9/30/17   6/30/17   9/30/16 9/30/17   9/30/16 2017 2017
Factors Unit Actual Actual   % Actual   % Actual Actual   % Guidance Guidance
Cash flow provided by (used in)
Operating activities $MM 18   28   (36 ) (50 ) (136 ) 51   (4 ) NM N/A N/A
Investing activities $MM (70 ) (47 ) 49   (13 ) 438   (137 ) (56 ) 145   N/A N/A
Financing activities $MM 126   (4 ) NM 39   223   160   51   214   N/A N/A
Net increase (decrease) in cash $MM 73   (23 ) (417 ) (24 ) (404 ) 73   (9 ) (911 ) N/A N/A
 
Other key cash flow items
Adjusted operating cash flow (1) $MM 8   19   (58 ) 11   (27 ) 29   23   26   N/A N/A
Free cash flow (1)   $MM   (29 )   (4 )   625     (65 )   (55 )   (40 )   (74 )   (46 )   N/A   N/A
 
(1)   Adjusted operating cash flow and Free cash flow are non-GAAP measures. See Financial Data section for definitions and reconciliations.
 

The Company's net cash used in investing activities during third quarter 2017 primarily consisted of acquisitions of oil and natural gas properties of $20 million and capital expenditures of $47 million. EXCO's increase in financing cash flows in third quarter 2017 compared to second quarter 2017 was primarily due to $126 million of net borrowings under the Credit Agreement.

Liquidity Results

Table 4: Financial flexibility measures
Historical vs. guidance; mixed measures

    Quarter-to-Date   Year-to-Date   Q3   Q4
9/30/17   6/30/17   9/30/16 9/30/17   9/30/16 2017 2017
Factors Unit Actual Actual   % Actual   % Actual Actual   % Guidance Guidance
Cash (1) $MM 106 31 242   22 382   106 22 382   N/A N/A
Gross debt (2) $MM 1,371 1,202 14   1,116 23   1,371 1,116 23   N/A N/A
Net debt (3) $MM 1,265 1,170 8   1,094 16   1,265 1,094 16   N/A N/A
Adjusted EBITDA (4) $MM 10 18 (44 ) 25 (60 ) 47 70 (33 ) N/A N/A
Cash interest expenses (5) $MM 5 3 67   16 (69 ) 23 51 (55 ) 3-5 5-6
Adjusted EBITDA/Interest (6) x 2.00 6.00 (67 ) 1.56 28   2.04 1.37 49   N/A N/A
Sr. Secured debt/LTM Adj. EBITDA (6) x 1.73 100   1.84 (6 ) 1.73 1.84 (6 ) N/A N/A
Net debt/LTM Adjusted EBITDA   x   17.33   13.15   32     9.35   85     17.33   9.35   85     N/A   N/A
 
(1)   Includes restricted cash of $23 million, $22 million and $18 million as of September 30, 2017, June 30, 2017 and September 30, 2016, respectively.
(2) Represents total principal balance outstanding. See Table 5 below for reconciliation to carrying value.
(3) Net debt represents principal amount of outstanding debt less cash and cash equivalents and restricted cash.
(4) Adjusted EBITDA is a non-GAAP measure. See Financial Data section for definition and reconciliation.
(5) Cash interest expenses exclude interest paid or accrued in-kind, the amortization of debt issuance costs, discount on notes and capitalized interest. In addition, cash payments under the second lien term loan ("Exchange Term Loan") and a portion of the 1.75 Lien Term Loans are not considered interest expense per FASB ASC 470-60, Troubled Debt Restructuring by Debtors ("ASC 470-60") and are excluded from the cash interest expenses amounts shown. See Table 5 below for additional information on the accounting treatment of the Exchange Term Loan and a portion of the 1.75 Lien Term Loans.
(6) These ratios differ in certain respects from the calculations of comparable measures in the Credit Agreement. As of September 30, 2017, the ratio of consolidated EBITDAX to consolidated interest expense (as defined in the agreement) was 2.2 to 1.0. The Company's ratio of aggregate revolving credit exposure to consolidated EBITDAX ("Aggregate Revolving Credit Exposure Ratio") of 1.9 to 1.0 exceeded the maximum of 1.2 to 1.0 as of September 30, 2017. See discussion below of the waiver of an event of default as a result of a failure to comply with this ratio as of September 30, 2017.
 

Table 5: Reconciliation of carrying value to principal
3Q 17; $MM

    9/30/17 (Actual)
Factors Unit Carrying value  

Deferred
reduction in
carrying
value (1)

 

Unamortized
discount/deferred
financing costs

 

Principal
balance

EXCO Resources Credit Agreement $MM 126     126
1.5 Lien Notes $MM 172     145 317
1.75 Lien Term Loans $MM 844   (154 ) 19 709
Exchange Term Loan $MM 24   (6 ) 17
2018 Notes $MM 131     132
2022 Notes $MM 70     70
Deferred financing costs, net $MM (13 )   13
Total debt   $MM   1,355     (160 )   176   1,371
 
(1)   The Exchange Term Loan and a portion of the 1.75 Lien Term Loans are accounted for in accordance with ASC 470-60. As a result, the carrying amounts of the Exchange Term Loan and a portion of the 1.75 Lien Term Loans are equal to the total undiscounted future cash payments, including interest and principal. All payments under the terms of these loans, whether designated as interest or as principal amount, reduce the carrying amount of each loan.
 

EXCO paid $17 million and $26 million of interest on the 1.5 Lien Notes and 1.75 Lien Term Loans, respectively, through the issuance of additional 1.5 Lien Notes and 1.75 Lien Term Loans in September 2017. In addition, EXCO paid $5 million of cash interest on the 2018 Notes and $3 million of cash interest on the 2022 Notes in September 2017 and October 2017, respectively.

Table 6: Liquidity schedule
Historical vs. guidance; $MM

    Quarter-to-Date   Year-to-Date   Q3   Q4
9/30/17   6/30/17   9/30/16 9/30/17   9/30/16 2017 2017
Factors Unit Actual Actual   % Actual   % Actual Actual   % Guidance Guidance
Borrowing capacity on revolver $MM 150 150   300 (50 ) 150 300 (50 ) N/A N/A
Amount drawn on revolver $MM 126 100   215 (41 ) 126 215 (41 ) N/A N/A
Letters of credit $MM 24 12 100   10 140   24 10 140   N/A N/A
Available for borrowing $MM 138 (100 ) 75 (100 ) 75 (100 ) N/A N/A
Cash (1) $MM 106 31 242   22 382   106 22 382   N/A N/A
Liquidity (2)   $MM   106   170   (38 )   97   9     106   97   9     N/A   N/A
 
(1)   Includes restricted cash of $23 million, $22 million and $18 million as of September 30, 2017, June 30, 2017 and September 30, 2016, respectively.
(2) Liquidity is calculated as the available borrowing capacity under the Credit Agreement plus cash and cash equivalents and restricted cash.
 

EXCO's Liquidity is currently significantly constrained. The Company's capital expenditures are expected to exceed its operating cash flows for the remainder of 2017 and future periods. The Company's Liquidity is not expected to be sufficient to fund this cash flow deficit and conduct its business operations unless it is able to restructure its current obligations under its existing outstanding debt and address near-term liquidity needs.

Near-term Liquidity risks

During third quarter 2017, the Company borrowed its remaining unused commitments, and had $126 million of outstanding indebtedness and $24 million of outstanding letters of credit under the Credit Agreement as of September 30, 2017. As a result, the Company had no availability remaining under the Credit Agreement, including letters of credit, as of September 30, 2017. The redetermination of the borrowing base scheduled for November 2017 is currently in process.

As of September 30, 2017, the Aggregate Revolving Credit Exposure Ratio under the Credit Agreement exceeded the allowed maximum of 1.2 to 1.0. In anticipation of the potential default, on September 29, 2017, the Company obtained a waiver from the lenders under the Credit Agreement waiving a potential event of default as a result of a failure to comply with the Aggregate Revolving Credit Exposure Ratio as of September 30, 2017. In addition, the Credit Agreement requires that the Company's liquidity, as defined in the Credit Agreement, exceeds $50 million as of the end of a fiscal month and $70 million as of the end of a fiscal quarter. It is probable that the Company will not be in compliance with these covenants at December 31, 2017. Therefore, the Company has classified the amounts outstanding under the Credit Agreement, as well as any outstanding debt with cross-default provisions, as a current liability on its Condensed Consolidated Balance Sheet as of September 30, 2017.

The Company's ability to make future interest payments in common shares is subject to a Resale Registration Statement (as defined in the indenture governing the 1.5 Lien Notes or the credit agreement governing the 1.75 Lien Term Loans, as applicable) being declared effective by the SEC, which has not yet occurred. The Company's ability to pay interest in additional indebtedness is limited to $7 million due to limitations on its aggregate secured indebtedness within its debt agreements. EXCO's next quarterly interest payment of approximately $27 million, based on the paid in-kind interest rate of 15.0% on the 1.75 Lien Term Loans, is scheduled to occur on December 20, 2017, and is required to be paid in-kind pursuant to the terms of the indenture governing the 1.5 Lien Notes. Unless the Company amends its debt agreements or obtains a waiver or other forbearance from certain lenders, it will not be able to make its next interest payment on the 1.75 Lien Term Loans on December 20, 2017.

If the Company is unable to comply with the covenants under the Credit Agreement, or is unable to make scheduled interest payments on its debt, there will be an event of default. Any event of default may cause a default or accelerate the Company’s obligations with respect to other indebtedness including the 1.5 Lien Notes, 1.75 Lien Term Loans, 2018 Notes and 2022 Notes. If this occurs and the Company's indebtedness is accelerated and becomes immediately due and payable, its Liquidity would not be sufficient to pay such indebtedness and the Company may be forced to seek protection from creditors under the U.S. Bankruptcy Code.

These factors raise substantial doubt about the Company's ability to continue as a going concern. See further information on the risks related to EXCO’s ability to continue as a going concern in the Company’s periodic filings with the SEC.

Management's plans

The Company, together with the Audit Committee of the Board of Directors, is currently exploring strategic alternatives to strengthen the Company's balance sheet and maximize the value of the Company, which may include, but not be limited to, seeking a comprehensive out-of-court restructuring, or reorganization under Chapter 11 of the U.S. Bankruptcy Code. The Company's plans may include obtaining additional financing or relief from debtholders to support operations throughout the restructuring process, delevering its capital structure, and reducing the financial burden of certain gathering, transportation and other commercial contracts. At the direction of the Audit Committee, the Company has retained PJT Partners LP as financial advisors and Alvarez & Marsal North America, LLC as restructuring advisors. The Company is actively engaged in negotiations with its stakeholders to evaluate the feasibility of a consensual in-court or out-of-court restructuring. The Company continues to retain Kirkland & Ellis LLP as its legal advisor to assist the Audit Committee and management team with the strategic review process. If the Company is unable to restructure its current obligations under its existing outstanding debt, and address near-term liquidity needs, it may need to seek relief under the U.S. Bankruptcy Code.

Risk Management Results

Table 7: Hedging position
3Q 17; mixed measures

    Three Months Ended   Twelve Months Ended
12/31/17 12/31/18
Factors Unit Volume  

Strike
Price

Volume  

Strike
Price

Natural gas
Fixed price swaps - Henry Hub Bbtu/ $/Mmbtu 9,200 3.05 3,650   3.15
Collars - Henry Hub Bbtu 2,760      
Sold call options $/Mmbtu   3.28  
Purchased put options $/Mmbtu   2.87  
 
Oil
Fixed price swaps - WTI   Mbbl/ $/Bbl   46   50.00      
 

The Company's derivative financial instruments covered approximately 59% of natural gas production and 17% of oil production during third quarter 2017.

Financial Data

The following financial statements are attached.

Attachment   Statements   Company   Period
1 Condensed Consolidated Balance Sheets EXCO Resources, Inc. 9/30/2017
2 Condensed Consolidated Statements Of Operations EXCO Resources, Inc. 9/30/2017
3 Condensed Consolidated Statements Of Cash Flows EXCO Resources, Inc. 9/30/2017
4 EBITDA, Adjusted EBITDA, Adjusted Operating Cash Flow and Free Cash Flow Reconciliations EXCO Resources, Inc. 9/30/2017
5 GAAP Net Income (Loss) and Adjusted Net Loss Reconciliation EXCO Resources, Inc. 9/30/2017
6   Other Non-GAAP Financial Measures   EXCO Resources, Inc.   9/30/2017
 

Additional information about EXCO Resources, Inc. may be obtained by contacting Tyler Farquharson, EXCO’s Vice President, Chief Financial Officer and Treasurer, at EXCO’s headquarters, 12377 Merit Drive, Suite 1700, Dallas, TX 75251, telephone number (214) 368-2084, or by visiting EXCO’s website at www.excoresources.com. EXCO’s SEC filings and press releases can be found under the Investor Relations tab.

This press release contains statements that are forward-looking statements as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, among others, statements regarding estimates, expectations and production forecasts, estimates of costs and expenses, and EXCO’s drilling program. It is important to communicate expectations of future performance to investors. However, events may occur in the future that EXCO is unable to accurately predict, or over which EXCO has no control. Users of the financial statements are cautioned not to place undue reliance on a forward-looking statement. Any number of factors could cause actual results to differ materially from those in EXCO's forward-looking statements, including, but not limited to, the volatility of oil and natural gas prices, future capital requirements and the availability of capital and financing, uncertainties about reserve estimates, the outcome of future drilling activity, environmental risks, regulatory changes, ability to pay interest under certain debt instruments, ability to comply with debt covenants, the outcome of EXCO's restructuring activities, and the ability to continue as a going concern. Declines in oil or natural gas prices may have a material adverse effect on EXCO's financial condition, liquidity, results of operations, ability to fund operations and the amount of oil or natural gas that can be produced economically. Historically, oil and natural gas prices and markets have been volatile, with prices fluctuating widely, and they are likely to continue to be volatile. EXCO undertakes no obligation to publicly update or revise any forward-looking statements. When considering EXCO's forward-looking statements, investors are urged to read the cautionary statements and the risk factors included in EXCO's Annual Report on Form 10-K for the year ended December 31, 2016, filed with the SEC on March 16, 2017, and its other periodic filings with the SEC.

Attachment   Statements   Company   Period
1   Condensed Consolidated Balance Sheets   EXCO Resources, Inc.   9/30/2017
 
(in thousands)   September 30, 2017   December 31, 2016
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 82,459 $ 9,068
Restricted cash 23,379 11,150
Accounts receivable, net:
Oil and natural gas 39,457 52,674
Joint interest 25,555 25,905
Other 2,104 3,813
Derivative financial instruments - commodity derivatives 1,512
Inventory and other 15,915   8,007  
Total current assets 190,381   110,617  
Equity investments 25,373 24,365
Oil and natural gas properties (full cost accounting method):
Unproved oil and natural gas properties and development costs not being amortized 112,935 97,080
Proved developed and undeveloped oil and natural gas properties 3,055,258 2,939,923
Accumulated depletion (2,738,103 ) (2,702,245 )
Oil and natural gas properties, net 430,090   334,758  
Other property and equipment, net 21,078 23,661
Deferred financing costs, net 4,376
Derivative financial instruments - commodity derivatives 97 482
Goodwill 163,155   163,155  
Total assets $ 830,174   $ 661,414  
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable and accrued liabilities $ 60,731 $ 54,762
Revenues and royalties payable 132,917 120,845
Accrued interest payable 6,097 4,701
Current portion of asset retirement obligations 344 344
Income taxes payable
Derivative financial instruments - commodity derivatives 1,401 27,711
Current maturities of long-term debt 1,333,989   50,000  
Total current liabilities 1,535,479   258,363  
Long-term debt 21,388 1,258,538
Deferred income taxes 5,885 2,802
Derivative financial instruments - commodity derivatives 464
Derivative financial instruments - common share warrants 14,555
Asset retirement obligations and other long-term liabilities 13,233 13,153
Shareholders’ equity:
Common shares, $0.001 par value; 260,000,000 authorized shares; 21,670,959 shares issued and 21,631,314 shares outstanding at September 30, 2017; 18,915,952 shares issued and 18,876,307 shares outstanding at December 31, 2016 22 19
Additional paid-in capital 3,539,498 3,538,080
Accumulated deficit (4,292,254 ) (4,402,373 )
Treasury shares, at cost; 39,645 shares at September 30, 2017 and December 31, 2016 (7,632 ) (7,632 )
Total shareholders’ equity (760,366 ) (871,906 )
Total liabilities and shareholders’ equity $ 830,174   $ 661,414  
 
Attachment   Statements   Company   Period
2   Condensed Consolidated Statements Of Operations (Unaudited)   EXCO Resources, Inc.   9/30/2017
 
  Three Months Ended   Nine Months Ended
(in thousands, except per share data)

September 30,
2017

 

June 30,
2017

 

September 30,
2016

September 30,
2017

 

September 30,
2016

Revenues:
Oil and natural gas $ 61,229 $ 64,487 $ 70,862 $ 195,072 $ 176,732
Purchased natural gas and marketing 5,507   6,528   6,324   19,208   15,335  
Total revenues 66,736 71,015 77,186 214,280 192,067
Costs and expenses:
Oil and natural gas operating costs 9,215 8,215 8,797 25,928 25,835
Production and ad valorem taxes 3,044 3,415 3,811 9,894 13,308
Gathering and transportation 28,743 27,087 27,979 83,183 79,828
Purchased natural gas 5,388 6,353 6,586 18,193 17,273
Depletion, depreciation and amortization 13,518 11,622 15,910 36,648 63,995
Impairment of oil and natural gas properties 160,813
Accretion of discount on asset retirement obligations 221 215 325 648 2,006
General and administrative 10,035 (1,394 ) 10,746 13,056 38,626
Other operating items 1,714   286   (1,110 ) 3,069   23,936  
Total costs and expenses 71,878   55,799   73,044   190,619   425,620  
Operating income (loss) (5,142 ) 15,216 4,142 23,661 (233,553 )
Other income (expense):
Interest expense, net (32,888 ) (22,480 ) (16,997 ) (75,320 ) (54,186 )
Gain (loss) on derivative financial instruments - commodity derivatives 860 6,541 8,209 22,934 (11,632 )
Gain on derivative financial instruments - common share warrants 18,286 122,295 146,585
Gain (loss) on restructuring and extinguishment of debt (108 ) 57,421 (6,380 ) 119,374
Other income (loss) 25 (25 ) 12 4 37
Equity income (loss) 354   338   (823 ) 1,009   (8,824 )
Total other income (expense) (13,363 ) 106,561   47,822   88,832   44,769  
Income (loss) before income taxes (18,505 ) 121,777 51,964 112,493 (188,784 )
Income tax expense 319   1,027   1,028   2,374   1,775  
Net income (loss) $ (18,824 ) $ 120,750   $ 50,936   $ 110,119   $ (190,559 )
Earnings (loss) per common share: (1)
Basic:
Net income (loss) $ (0.81 ) $ 6.13   $ 2.73   $ 5.35   $ (10.24 )
Weighted average common shares outstanding 23,319   19,702   18,670   20,599   18,612  
Diluted:
Net income (loss) $ (0.81 ) $ 6.07   $ 2.72   $ 5.35   $ (10.24 )
Weighted average common shares and common share equivalents outstanding 23,319   19,886   18,749   20,599   18,612  
 
(1)   Earnings (loss) per common share data has been retroactively adjusted to reflect a 1-for-15 reverse share split that the Company effected during second quarter 2017.
 
Attachment   Statements   Company   Period
3   Condensed Consolidated Statements Of Cash Flows (Unaudited)   EXCO Resources, Inc.   9/30/2017
 
  Nine Months Ended September 30,
(in thousands) 2017   2016
Operating Activities:
Net income (loss) $ 110,119 $ (190,559 )
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Deferred income tax expense 3,083 1,775
Depletion, depreciation and amortization 36,648 63,995
Equity-based compensation (11,207 ) 14,558
Accretion of discount on asset retirement obligations 648 2,006
Impairment of oil and natural gas properties 160,813
(Gain) loss from equity investments (1,009 ) 8,824
(Gain) loss on derivative financial instruments - commodity derivatives (22,934 ) 11,632
Cash receipts (payments) of commodity derivative financial instruments (4,967 ) 38,097
Gain on derivative financial instruments - common share warrants (146,585 )
Amortization of deferred financing costs and discount on debt issuance 18,744 7,250
Other non-operating items 2,019 24,068
(Gain) loss on restructuring and extinguishment of debt 6,380 (119,374 )
Paid in-kind interest expense 38,386
Effect of changes in:
Restricted cash with related party 2,100
Accounts receivable 13,183 (12,752 )
Other current assets (6,210 ) (1,207 )
Accounts payable and other liabilities 14,809   (14,966 )
Net cash provided by (used in) operating activities 51,107   (3,740 )
Investing Activities:
Additions to oil and natural gas properties, gathering assets and equipment (91,009 ) (70,455 )
Property acquisitions (24,665 )
Proceeds from disposition of property and equipment 25 11,242
Restricted cash (12,229 ) 686
Net changes in amounts due to joint ventures (9,498 ) 2,377  
Net cash used in investing activities (137,376 ) (56,150 )
Financing Activities:
Borrowings under EXCO Resources Credit Agreement 163,401 390,897
Repayments under EXCO Resources Credit Agreement (265,592 ) (243,797 )
Proceeds received from issuance of 1.5 Lien Notes, net 295,530
Payments on Exchange Term Loan (11,602 ) (38,056 )
Repurchases of senior unsecured notes (53,298 )
Debt financing costs and other (22,077 ) (4,569 )
Net cash provided by financing activities 159,660   51,177  
Net increase (decrease) in cash 73,391 (8,713 )
Cash at beginning of period 9,068   12,247  
Cash at end of period $ 82,459   $ 3,534  
Supplemental Cash Flow Information:
Cash interest payments $ 23,072 $ 51,975
Income tax payments
Supplemental non-cash investing and financing activities:
Capitalized equity-based compensation $ 852 $ 432
Capitalized interest 4,627 3,939
 
Attachment   Statements   Company   Period
4   EBITDA, Adjusted EBITDA, Adjusted Operating Cash Flow and Free Cash Flow Reconciliations (Unaudited)   EXCO Resources, Inc.   9/30/2017
  Three Months Ended   Nine Months Ended
(in thousands)

September 30,
2017

 

June 30,
2017

 

September 30,
2016

September 30,
2017

 

September 30,
2016

Net income (loss) $ (18,824 ) $ 120,750 $ 50,936 $ 110,119 $ (190,559 )
Interest expense 32,888 22,480 16,997 75,320 54,186
Income tax expense 319 1,027 1,028 2,374 1,775
Depletion, depreciation and amortization 13,518   11,622   15,910   36,648   63,995  
EBITDA (1) $ 27,901 $ 155,879 $ 84,871 $ 224,461 $ (70,603 )
Accretion of discount on asset retirement obligations 221 215 325 648 2,006
Impairment of oil and natural gas properties 160,813
(Gain) loss on divestitures and other items impacting comparability 1,779 300 (1,062 ) 2,079 23,636
(Gain) loss on restructuring and extinguishment of debt 108 (57,421 ) 6,380 (119,374 )
Equity (income) loss (354 ) (338 ) 823 (1,009 ) 8,824
(Gain) loss on derivative financial instruments - commodity derivatives (860 ) (6,541 ) (8,209 ) (22,934 ) 11,632
Cash receipts (payments) of commodity derivative financial instruments 591 (1,099 ) 4,709 (4,967 ) 38,097
Gain on derivative financial instruments - common share warrants (18,286 ) (122,295 ) (146,585 )
Equity-based compensation (866 ) (7,959 ) 1,417   (11,207 ) 14,558  
Adjusted EBITDA (1) $ 10,126 $ 18,270 $ 25,453 $ 46,866 $ 69,589
Interest expense (32,888 ) (22,480 ) (16,997 ) (75,320 ) (54,186 )
Current income tax expense 709 709
Amortization of deferred financing costs and discount 7,307 7,035 2,251 18,744 7,250
Paid in-kind interest expense 22,472 15,914 38,386
Non-operating items and other operating items impacting comparability (21 ) (18 ) (21 ) (60 ) 432
Changes in working capital 9,801   9,684   (60,351 ) 21,782   (26,825 )
Net cash provided by (used in) operating activities $ 17,506   $ 28,405   $ (49,665 ) $ 51,107   $ (3,740 )
 

 

Three Months Ended Nine Months Ended
(in thousands)

September 30,
2017

June 30,
2017

September 30,
2016

September 30,
2017

September 30,
2016

Cash flow from operations, GAAP $ 17,506 $ 28,405 $ (49,665 ) $ 51,107 $ (3,740 )
Net change in working capital (9,801 ) (9,684 ) 60,351 (21,782 ) 26,825
Non-operating items and other operating items impacting comparability         402  
Adjusted operating cash flow, non-GAAP measure (2) $ 7,705   $ 18,721   $ 10,686   $ 29,325   $ 23,487  
 
Three Months Ended Nine Months Ended
(in thousands)

September 30,
2017

June 30,
2017

September 30,
2016

September 30,
2017

September 30,
2016

Cash flow from operations, GAAP $ 17,506 $ 28,405 $ (49,665 ) $ 51,107 $ (3,740 )
Less: Additions to oil and natural gas properties, gathering assets and equipment (46,525 ) (32,627 ) (15,492 ) (91,009 ) (70,455 )
Free cash flow, non-GAAP measure (3) $ (29,019 ) $ (4,222 ) $ (65,157 ) $ (39,902 ) $ (74,195 )
 
(1)   Earnings before interest, taxes, depreciation, depletion and amortization (“EBITDA”) represents net income (loss) adjusted to exclude interest expense, income taxes and depreciation, depletion and amortization. “Adjusted EBITDA” represents EBITDA adjusted to exclude accretion of discount on asset retirement obligations, non-cash changes in the fair value of derivative financial instruments, non-cash impairments of assets, equity-based compensation, income or losses from equity investments, non-operating items and other operating items impacting comparability. Non-operating items and other items impacting comparability have been excluded as they do not reflect the Company's on-going operating activities such as gains or losses from asset sales and certain legal settlements.
 
EXCO has presented EBITDA and Adjusted EBITDA because they are measures widely used by investors, analysts and rating agencies for valuations, peer comparisons and investment recommendations. In addition, similar measures are used in covenant calculations required under the Credit Agreement, the indenture governing the 1.5 Lien Notes, the indenture governing the 2018 Notes, the indenture governing the 2022 Notes and the term loan credit agreement governing the 1.75 Lien Term Loans. Compliance with the liquidity and debt incurrence covenants included in these agreements is considered material to the Company. EXCO's computations of EBITDA and Adjusted EBITDA may differ from computations of similarly titled measures of other companies due to differences in the inclusion or exclusion of items in the Company's computations as compared to those of others. EBITDA and Adjusted EBITDA are measures that are not prescribed by GAAP. EBITDA and Adjusted EBITDA specifically exclude changes in working capital, capital expenditures and other items that are set forth on a cash flow statement presentation of the Company’s operating, investing and financing activities. As such, investors are encouraged not to use these measures as substitutes for the determination of net income, net cash provided by operating activities or other similar GAAP measures. The calculation of EBITDA and Adjusted EBITDA as presented herein differ in certain respects from the calculation of comparable measures in the Credit Agreement, the indentures and the term loan credit agreement.
 
(2) Adjusted operating cash flow is presented because the Company believes it is a useful financial indicator for companies in its industry. This non-GAAP disclosure is widely accepted as a measure of an oil and natural gas company’s ability to generate cash used to fund development and acquisition activities and service debt or pay dividends. Adjusted operating cash flow is not a measure of financial performance pursuant to GAAP and should not be used as an alternative to cash flows from operating, investing, or financing activities. Other operating items impacting comparability have been excluded as they do not reflect the Company's on-going operating activities.
 
(3) Free cash flow is cash flow from operating activities less capital expenditures. This non-GAAP measure is used predominantly as a forecasting tool to estimate cash available to fund indebtedness and other investments.
 
Attachment   Statements   Company   Period
5   GAAP Net Income (Loss) and Adjusted Net Loss Reconciliations (Unaudited)   EXCO Resources, Inc.   9/30/2017
 
  Three Months Ended   Nine Months Ended
September 30, 2017   June 30, 2017   September 30, 2016 September 30, 2017   September 30, 2016
(in thousands, except per share amounts) Amount   Per share Amount   Per share Amount   Per share Amount   Per share Amount   Per share
Net income (loss), GAAP $ (18,824 ) $ 120,750 $ 50,936 $ 110,119 $ (190,559 )
Adjustments:
(Gain) loss on derivative financial instruments - commodity derivatives (860 ) (6,541 ) (8,209 ) (22,934 ) 11,632
Cash receipts (payments) of commodity derivative financial instruments 591 (1,099 ) 4,709 (4,967 ) 38,097
Gain on derivative financial instruments - common share warrants (18,286 ) (122,295 ) (146,585 )
(Gain) loss on restructuring and extinguishment of debt 108 (57,421 ) 6,380 (119,374 )
Impairment of oil and natural gas properties 160,813
Adjustments included in equity loss 25 7,891
(Gain) loss on divestitures and other items impacting comparability 1,779 300 (1,062 ) 2,079 23,636
Deferred finance cost amortization acceleration 417 1,855 1,430
Income taxes on above adjustments (1) 6,710 51,811 24,616 65,669 (49,650 )
Adjustment to deferred tax asset valuation allowance (2) 7,721   (47,684 ) (19,758 ) (42,623 ) 77,289  
Total adjustments, net of taxes (2,345 ) (125,400 ) (56,683 ) (141,126 ) 151,764  
Adjusted net loss (5) $ (21,169 ) $ (4,650 ) $ (5,747 ) $ (31,007 ) $ (38,795 )
 
Net income (loss), GAAP (3) $ (18,824 ) $ (0.81 ) $ 120,750 $ 6.13 $ 50,936 $ 2.73 $ 110,119 $ 5.35 $ (190,559 ) $ (10.24 )
Adjustments shown above (3) (2,345 ) (0.10 ) (125,400 ) (6.36 ) (56,683 ) (3.04 ) (141,126 ) (6.86 ) 151,764 8.16
Dilution attributable to equity-based payments (4)                    
Adjusted net loss (5) $ (21,169 ) $ (0.91 ) $ (4,650 ) $ (0.23 ) $ (5,747 ) $ (0.31 ) $ (31,007 ) $ (1.51 ) $ (38,795 ) $ (2.08 )
 
Common shares and equivalents used for net loss per share:
Weighted average common shares outstanding 23,319 19,702 18,670 20,599 18,612
Dilutive stock options
Dilutive restricted shares and restricted share units
Dilutive warrants          
Shares used to compute diluted loss per share for adjusted net loss 23,319   19,702   18,670   20,599   18,612  
 
(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) Dilution attributable to equity-based payments represents dilution per share attributable to common share equivalents from in-the-money stock options and warrants, dilutive restricted shares and diluted restricted share units calculated in accordance with the treasury stock method.
(5) Adjusted net loss, a non-GAAP measure, includes adjustments for gains or losses from asset sales, non-cash changes in the fair value of derivative financial instruments, non-cash impairments and other items typically not included by securities analysts in published estimates. Adjusted net loss is a useful metric in evaluating the Company's performance and facilitating comparisons with its peer companies, many of which use similar non-GAAP financial measures to supplement results under GAAP. Adjusted net loss may not be comparable to other similarly titled measures reported by other companies.
 
Attachment   Statements   Company   Period
6   Other Non-GAAP Financial Measures (Unaudited)   EXCO Resources, Inc.   9/30/2017
 

Adjusted general and administrative expenses

The Company believes this non-GAAP measure is used by investors, analysts and management for valuations, peer comparisons and other recommendations. The exclusion of equity-based compensation is important to users that are evaluating the impact of the Company's cash-based general and administrative costs on its credit metrics and ability to service its indebtedness. In addition, the exclusion of cash-based costs, such as restructuring and severance, assists in the comparability between periods and similar measures are used in debt covenant calculations required under certain of the Company's debt agreements. Restructuring costs include legal and advisory costs incurred in connection with the Company's strategic initiatives focused on restructuring its indebtedness and other commercial contracts, and severance costs relate primarily to the Company's reductions in workforce.

  Three Months Ended   Nine Months Ended
(in thousands)

September 30,
2017

 

June 30,
2017

 

September 30,
2016

September 30,
2017

 

September 30,
2016

General and administrative, GAAP $ 10,035 $ (1,394 ) $ 10,746 $ 13,056 $ 38,626
Less: Equity-based compensation 866 7,959 (1,417 ) 11,207 (14,558 )
Less: Restructuring and severance costs (2,404 ) (208 ) (2,697 ) (3,387 ) (1,709 )
Adjusted general and administrative, non-GAAP measure $ 8,497   $ 6,357   $ 6,632   $ 20,876   $ 22,359  

Contact:

EXCO Resources, Inc.
Tyler Farquharson, 214-368-2084
Vice President, Chief Financial Officer and Treasurer

Stock Information

NYSE: XCO Change: 
, data delayed 15 minutes
Business Wire InvestorHQ℠