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Exco is marketing its positions from the Haynesville and Eagle Ford shales to Appalachia to help repay about $1.3 billion in debt. (Image: Hart Energy)
Exco Resources Inc. followed its entry into bankruptcy this week with a push on Jan. 17 to market its holdings in Appalachia and the Haynesville and Eagle Ford shales or seek a deal for the entire company.
In a Jan. 17 regulatory filing, Exco said it had distributed asset information to potential buyers of its leasehold, which spans 329,000 net acres and is between 87% and 95% HBP.
Prior to bankruptcy, Exco was in the process of selling the bulk of its production in the Eagle Ford Shale and focusing on operations in the Haynesville and Bossier shales. In addition to its 85,000 largely contiguous acres in the plays, the company has preferential rights to buy Royal Dutch Shell Plc’s (NYSE: RDS.A) Haynesville/Bossier rights in the event of a divestiture.
Exco’s leverage is about 16.5x based on estimated 2017 EBITDA of $80 million, according to regulatory filings. The company owes about $1.3 billion in debt and on Oct. 17 had a market value of $29 million.
Exco put its enterprise value at $845 million and will continue to operate while in restructuring.
Harold L. Hickey, Exco’s president and CEO, said the company’s financial position has been undermined by the sustained downturn in commodity prices and uncertainty in the energy market.
“Despite having taken actions to mitigate the impact of these factors, including renegotiating certain commercial contracts, reducing costs, restructuring our balance sheet and divesting assets, we continue to face increasing liquidity pressures as we navigate the competitive environment,” Hickey said.
In addition to its positions in Texas and Louisiana, Exco also said a pending deal “may significantly increase its working interests” in Appalachia.
In August, Exco broke off a $300 million sale of its Eagle Ford assets to Venado Oil and Gas LLC after Exco was unable to come to terms with Chesapeake Energy Corp. (NYSE: CHK) over an associated gas contract dispute. Despite the tenuousness of the deal and liquidity problems, Exco purchased North Louisiana assets in June and August for a total of $19.1 million.
Hickey said at the time that the acquisition created value for the company “regardless of what situation we may end up.”
Exco intended to use Eagle Ford sale proceeds for Haynesville development.
The company also holds at least 30,000 net acres in the Bossier in DeSoto Parish, La. In 2017, the company ran three rigs in the plays, but faced growing debt payment concerns after the Eagle Ford deal failed.
On Dec. 21, Exco said it entered forbearance agreements with a majority of its lenders after failing to make a debt payment. At the time, the company also received a commitment for a $250 million debtor-in-possession financing in the event it pursued Chapter 11 reorganization.
In addition to its East Texas and Louisiana assets, Exco owns resource potential in the Marcellus, Upper Devonian and Utica that is for sale.
The company’s acreage includes 82,300 net acres in Pennsylvania and 80,600 net acres in West Virginia. The company estimates that about 40,000 of its Appalachia acres are prospective for the Utica Shale.
Exco also owns about 25 miles of gathering lines and three compressor stations in Armstrong and Centre counties, Pa.
The company’s midstream infrastructure is being expanded to accommodate more than 15 billion cubic feet per day of gas takeaway capacity by the end of 2019.
Exco plans to conduct a two-stage sales process. In the first stage, it plans to gauge interest from potential buyers through March 9. The bankruptcy is filed in the U.S. Southern District of Texas in Houston.
Darren Barbee can be reached at dbarbee@hartenergy.com.
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