EXCO Resources Inc. has reported its first quarter results for 2011.

The company’s first quarter 2011 operating and financial results reflect the company’s activity in the Haynesville/Bossier shale area and expansion of Marcellus shale operations. During the quarter, EXCO completed two strategic acreage-intensive acquisitions in Pennsylvania and have expanded our development activities and midstream infrastructure in our Haynesville/Bossier focus areas. Highlights include:

  • Adjusted net earnings, a non-GAAP measure adjusting for non-cash gains and losses from derivative financial instruments (derivatives), gains from early termination of derivatives, gains on divestitures, costs we have incurred in connection with a buyout proposal received from our Chairman and Chief Executive Officer and items typically not included by securities analysts in published estimates, were $0.13 per share for the first quarter 2011 compared to $0.15 per share for the first quarter 2010.
  • GAAP results were net income of $0.10 per diluted share for the first quarter 2011 compared with net income of $0.54 per diluted share for the first quarter 2010.
  • Oil and natural gas production was 37 Bcfe, or 408 Mmcfe per day, for the first quarter 2011 compared with 350 Mmcfe per day in the fourth quarter 2010 and 264 Mmcfe per day in the first quarter 2010.
  • Oil and natural gas revenues for the first quarter 2011 were $161 million compared with the first quarter 2010 oil and natural gas revenues of $131 million. Our average sales price per Mcfe decreased by 20% from the prior year period, but was more than offset by a 55% increase in production. When the impacts of cash settlements from our oil and natural gas derivatives are considered, excluding gains from early termination of $38 million in the first quarter 2010, oil and natural gas revenues were $188 million for the first quarter 2011 compared with $170 million for the first quarter 2010.
  • Adjusted earnings before interest, taxes, depreciation, depletion and amortization and other non-cash income and expense items (adjusted EBITDA, a non-GAAP measure) for the first quarter 2011 were $126 million.

"We are very pleased with our first quarter results, both financially and operationally," said Douglas H. Miller, chief executive officer. "We continue to increase our daily production, averaging 408 Mmcfe per day in the first quarter of 2011, a 17% increase over the fourth quarter of 2010."

Operational Highlights

Haynesville/Bossier Shale

EXCO’s horizontal Haynesville shale development program continues to yield outstanding results. As of May 1, 2011, our Haynesville/Bossier operated production was 1,041 Mmcf per day gross (333 Mmcf per day net) and with the addition of our OBO wells, we had 356 Mmcf per day of net production. The company’s development program in DeSoto Parish, Louisiana is focused on manufacturing on 80-acre spacing. EXCO’s program in San Augustine and Nacogdoches, Counties, Texas (the Shelby Trough) is focused on delineation and testing of its acreage. During 2011, the company plans to drill 233 gross (65.2 net) wells in the Haynesville/Bossier shale play in East Texas/North Louisiana. Of these 233 wells, 163 gross wells are operated by EXCO.

The company drilled and completed 42 gross (17.2 net) operated horizontal Haynesville and Bossier wells and participated in 17 gross (0.7 net) OBO Haynesville horizontal wells during the first quarter of 2011.

The average initial production rate during the quarter from all of the company’s operated Haynesville horizontal wells in DeSoto Parish was 18.1 Mmcf per day on a managed drawdown/restricted choke program.

EXCO also reported the results from its testing and delineation program in the Shelby Trough. The company drilled and completed our first horizontal Middle Bossier test in San Augustine County during the first quarter 2011 with an initial production rate of 25.5 Mmcf per day from a 16 stage fracture stimulation treatment. EXCO has recently tested two Haynesville horizontal wells in Nacogdoches County with initial production rates of 31.5 and 31.7 Mmcf per day and flowing pressures of 9,280 and 10,000 psi, respectively.

Marcellus Shale

During the first quarter 2011 in the Marcellus shale, the company spud 8 new operated wells and drilled and completed 5 gross (2.0 net) operated wells. The initial production rates of these wells ranged from 2.1 Mmcf per day to 10.6 Mmcf per day from lateral lengths between 2,250 feet and 4,500 feet. The average initial production rates from these wells were above the expected production type curve, which forecasts that we will have initial production rates of 1.0 Mmcf per day for every 1,000 feet of completed lateral. EXCO is implementing a development program within its recently acquired acreage in northeast Pennsylvania and certain of its acreage in west central Pennsylvania. Additionally, the company is implementing an appraisal program across much of its other acreage, primarily in central Pennsylvania.

EXCO plans to drill 64 gross (23.6 net) operated wells in the Marcellus shale play in its Appalachia region during 2011. Of the 64 wells, 57 gross (20.5 net) will be development wells and 7 gross (3.1 net) will be appraisal wells. This drilling will be within the EXCO/BG Group Appalachian JV area.

Permian

EXCO drilled and completed 18 gross (16.9 net) wells in our Permian area Canyon Sand field during the first quarter 2011 with 95% drilling success as one of its wells was a dry hole. The company continues to run two operated rigs in the Canyon Sand field and plans to spend $48 million to drill 72 gross (69.8 net) wells in 2011. Oil production at Sugg Ranch has increased by 40% in the first quarter of 2011 as compared to the first quarter of 2010, and economics for this drilling activity typically have rates-of-return in excess of 60%.

Midstream

Through EXCO’s jointly held midstream company, TGGT, the company continues its major infrastructure expansion efforts in the Shelby Trough area of East Texas in order to meet the expected throughput volume increase. EXCO is also continuing to develop its gathering and treating capacity in the DeSoto Parish area of northwest Louisiana. Total throughput for TGGT averaged approximately 1.2 Bcf per day for the first quarter of 2011 compared with total average throughput of 1.0 Bcf per day in the fourth quarter 2010. EXCO’s throughput as of May 1, 2011 was approximately 1.4 Bcf per day.