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
resultsHistorical 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 earningsHistorical 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 itemsHistorical 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 measuresHistorical 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
principal3Q 17; $MM
9/30/17 (Actual) Factors Unit
Carrying value
Deferredreduction
incarryingvalue (1)
Unamortizeddiscount/deferredfinancing
costs
Principalbalance
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 scheduleHistorical 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 position3Q 17; mixed measures
Three Months Ended Twelve Months
Ended 12/31/17 12/31/18 Factors
Unit Volume
StrikePrice
Volume
StrikePrice
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
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version on businesswire.com: http://www.businesswire.com/news/home/20171107006620/en/
EXCO Resources, Inc.Tyler Farquharson, 214-368-2084Vice
President, Chief Financial Officer and Treasurer