EXCO Resources Announces Capital Budget for First Six Months of 2016 Drilling Activity
EXCO Resources, Inc. (NYSE: XCO) (“EXCO” or the “Company”) today
announced that the Company is executing on its disciplined capital
allocation approach to ensure the highest and best uses of capital. EXCO
will be selectively developing its asset base during the first six
months of 2016, while deferring a significant amount of the Company’s
drilling inventory until commodity prices improve.
Capital Budget Overview
EXCO’s Board of Directors has approved an operated drilling and
completion capital budget of $70 million for drilling nine gross wells
through June 2016 and completing 18 gross wells through August 2016, a
reduction of $101 million, or 59%, as compared to operated drilling and
completion capital expenditures of $171 million through August 2015.
Development during 2016 will be focused on natural gas drilling and
completion activities in North Louisiana and East Texas where EXCO is
targeting 20% to 35% rates of return.
EXCO will deploy its capital, and evaluate a second half of 2016
drilling program, based on commodity prices, drilling and completion
costs and well performance and will modify its development plans based
on returns as the Company preserves its liquidity and capital resources
in preparation for future growth. EXCO expects to fund the capital
budget with cash flow from operations and borrowings under its credit
agreement. EXCO will evaluate a second half of 2016 drilling program
during 2016.
The capital budget is currently allocated among the different budget
categories as follows:
Table 1: Capital Budget By Type
|
16; $MM
|
Type
|
|
|
Unit
|
|
|
Capital Budget
|
Drilling And Completion
|
|
|
$MM
|
|
|
70
|
Field Operations And Non-Operated(1)
|
|
|
$MM
|
|
|
13
|
Land(1)
|
|
|
$MM
|
|
|
6
|
Capitalized Costs(1),(2)
|
|
|
$MM
|
|
|
14
|
Total
|
|
|
$MM
|
|
|
103
|
(1) Represents full year ’16 activity
(2) Includes $9MM of
capitalized interest and $5MM of capitalized general and administrative
expenses
Capital Budget Detail
Details of the plans within the various areas follow:
Table 2: Development Activity And Capital Spending By Area
|
16; Mixed Measures
|
|
|
|
|
|
|
|
|
|
|
|
|
Drilling &
|
|
|
|
|
|
|
|
|
|
Gross Wells
|
|
|
Net Wells
|
|
|
Net Wells
|
|
|
Completion
|
|
|
Other
|
|
|
Total
|
|
|
|
Spud(1),
|
|
|
Spud(1),
|
|
|
Completed(1),
|
|
|
Capital(1),
|
|
|
Capital,
|
|
|
Capital,
|
Area
|
|
|
#
|
|
|
#
|
|
|
#
|
|
|
$MM
|
|
|
$MM
|
|
|
$MM
|
East TX
|
|
|
-
|
|
|
-
|
|
|
4.1
|
|
|
28
|
|
|
6
|
|
|
34
|
North LA
|
|
|
9
|
|
|
5.5
|
|
|
5.5
|
|
|
42
|
|
|
3
|
|
|
45
|
South TX
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
5
|
|
|
5
|
Appalachia
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
5
|
|
|
5
|
Corporate(2)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
14
|
|
|
14
|
Total
|
|
|
9
|
|
|
5.5
|
|
|
9.6
|
|
|
70
|
|
|
33
|
|
|
103
|
(1) Operated
(2) Includes $9MM of capitalized interest and $5MM of
capitalized general and administrative expenses
North Louisiana:
EXCO will resume drilling in North Louisiana as the Company applies a
modified Haynesville shale well design which includes enhanced
completion methods that have proven to be successful in EXCO’s East
Texas region, including the use of more proppant, modified well spacing
and longer laterals. These initiatives are expected to increase the
Haynesville shale well’s rates of return and EXCO is targeting a rate of
return(*) of approximately 30% to 35% for the wells drilled in this
region during 2016. EXCO expects to operate two rigs in North Louisiana
during the first half of 2016 and spud and turn to sales 9 gross (5.5
net) horizontal wells in the Holly area.
East Texas:
Development in East Texas will focus on completing and turning to sales
9 gross (4.1 net) wells drilled in the Shelby area of East Texas during
2015. The wells turned-to-sales in this region during 2015 have featured
enhanced completion methods that have continued to yield strong results.
These methods have included the use of more than 2,700 lbs of proppant
per lateral foot on certain wells. The increased use of proppant is
expected to generate higher estimated ultimate recoveries (“EUR”) as a
result of improved contact and conductivity with the reservoir. The
initial results for the average of the wells turned-to-sales in this
region during 2015 have outperformed the proved reserve type curve based
on an EUR of 1.5 Bcf per 1,000 lateral feet for Haynesville shale and
Bossier shale wells. This represents a 15% increase from year-end 2014
EURs and EXCO believes there is the potential for additional upside in
the EURs as more production history is established. EXCO is targeting a
rate of return(*) of approximately 20% to 25% for wells in this region.
South Texas:
As a result of current oil prices, EXCO is not allocating development
capital to its South Texas asset. The Company's acreage in South Texas
is approximately 81% held-by-production, which allows EXCO flexibility
in the timing of development of this region.
Appalachia:
Given current natural gas prices, EXCO is not allocating development
capital to its Appalachia asset. One gross Marcellus shale well is
expected to be turned-to-sales in the first quarter of 2016 when
gathering lines are completed. EXCO’s position in the Marcellus shale
requires low maintenance capital and approximately 82% of the acreage is
held-by-production, providing the optionality for future development
activities with minimal cost to hold the position.
(*) Rates of return are based on NYMEX futures prices as of October 30,
2015, including natural gas prices per Mmbtu of $2.21 for 2015, $2.57
for 2016, $2.84 for 2017, $2.95 for 2018, $3.04 for 2019, $3.15 for 2020
and $3.25 thereafter.
About EXCO
EXCO Resources, Inc. is an oil and natural gas exploration,
exploitation, acquisition, development and production company
headquartered in Dallas, Texas with principal operations in Texas, North
Louisiana and Appalachia.
Additional information about EXCO Resources, Inc. may be obtained by
contacting Chris Peracchi, EXCO’s Vice President of Finance and Investor
Relations, 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.
Forward-Looking Statements
This release may contain forward-looking statements relating to future
financial results, business expectations and business transactions.
Actual results may differ materially from those predicted as a result of
factors over which EXCO has no control. Such factors include, but are
not limited to: continued volatility in the oil and gas markets, the
estimates of reserves, commodity price changes, regulatory changes and
general economic conditions. These risk factors are included in EXCO’s
reports on file with the SEC. Except as required by applicable law, EXCO
undertakes no obligation to publicly update or revise any
forward-looking statements.
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