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EXCO Resources Announces Revenues, Earnings and Production for the Quarter Ended March 31, 2006

Posted on: Monday, 15 May 2006, 18:03 CDT

DALLAS, May 15 /PRNewswire-FirstCall/ -- EXCO Resources, Inc. today announced financial and operating results for the quarter ended March 31, 2006. For the quarter, EXCO reported income from continuing operations and net income of $37.2 million on oil and natural gas revenues before commodity price risk management activities of $70.3 million, and net cash provided by operating activities of $62.9 million.

For the quarter ended March 31, 2005, EXCO had a loss from continuing operations of $28.7 million (which excludes Addison Energy Inc.) and net income of $92.2 million on oil and natural gas revenues before commodity price risk management activities of $38.9 million, and net cash used in operating activities of $115.0 million. In February 2005, EXCO sold its Canadian subsidiary, Addison Energy Inc. (Addison), for $443.4 million and recognized income from discontinued operations of $120.9 million as a result. Accordingly, all of our financial and operating data contained in this press release exclude Addison. Also, the results for 2005 and the first 44 days of 2006 do not include the acquisition of producing oil and natural gas properties from ONEOK Energy completed by TXOK Acquisition, Inc., an affiliate of EXCO, on September 27, 2005 and subsequently acquired by EXCO on February 14, 2006. See below for additional information regarding this acquisition.

The first quarter 2006 results include $43.6 million of non-cash pre-tax mark to market income resulting from changes in the fair value of our derivative financial instruments. The first quarter 2005 results were impacted by a hedge termination charge of $52.6 million and $1.1 million of non-cash pre-tax mark to market expense resulting from changes in the fair value of our derivative financial instruments.

Adjusted EBITDA from continuing operations for the quarter ended March 31, 2006 was $52.8 million. For the quarter ended March 31, 2005, Adjusted EBITDA was $23.6 million. EBITDA and Adjusted EBITDA are financial measures that are calculated on a basis other than in accordance with GAAP. For a detailed summary and reconciliation of each of these non-GAAP measures to its most comparable GAAP measure, please refer to the schedule entitled "Condensed consolidated EBITDA and adjusted EBITDA reconciliations and statements of cash flows data" included at the end of this press release.

Production for the quarter ended March 31, 2006, was approximately 148 Mbbls of oil and 7.2 Bcf of natural gas, or 8.1 Bcfe, as compared to production for the quarter ended 2005 of approximately 126 Mbbls of oil and 5.2 Bcf of natural gas, or 5.9 Bcfe.

The average oil price per Bbl, before cash settlements of derivative financial instruments, received during the quarter ended March 31, 2006, was $60.76 versus $47.09 for the quarter ended March 31, 2005, a $13.67 per Bbl or 29% increase. The average natural gas price per Mcf, before cash settlements of derivative financial instruments, received during the current quarter was $8.51 versus $6.40 for the prior quarter, a $2.11 per Mcf or 33% increase.

On October 3, 2005, EXCO Holdings Inc., or EXCO Holdings, our former parent company was acquired by and merged with EXCO Holdings II, Inc., with EXCO Holdings remaining as the survivor. On February 14, 2006, in conjunction with our initial public offering (IPO), EXCO Holdings merged with and into EXCO Resources, Inc. In the IPO we sold 53,615,200 shares of our common stock for aggregate net proceeds to EXCO Resources of $662.1 million after underwriters' discount.

The net proceeds from the IPO, together with cash on hand and additional borrowings under EXCO's credit agreement, were used to repay debt issued in connection with the Equity Buyout and debt and preferred stock issued by TXOK Acquisition to purchase oil and natural gas properties from ONEOK Energy. The redemption of the preferred stock resulted in TXOK Acquisition becoming a wholly-owned subsidiary of EXCO.

The acquisition of TXOK Acquisition by EXCO Resources on February 14, 2006 for $642.9 million ($633.0 million after contractual adjustments) added approximately 223.7 Bcfe of estimated proved reserves to EXCO as of December 31, 2005. Daily net production in March 2006, attributable to these properties, was approximately 47.1 Mmcfe per day, a substantial addition to EXCO's historical production. The estimated PV-10 of the oil and natural gas properties acquired was $908.6 million at December 31, 2005 and the Standardized Measure at that date was $690.8 million.

EXCO sold 2 properties during the first quarter of 2006 for proceeds of $0.5 million.

Financial information presented in this press release includes two separate periods of accounting. Information related to any periods from January 1, 2005 to October 2, 2005, including the first quarter of 2005, are referred to as the predecessor period. The predecessor period represents the accounting period following the going private transaction on July 29, 2003 up to the Equity Buyout on October 3, 2005. The subsequent periods beginning October 3, 2005, including the first quarter of 2006, are referred to as the successor period.

EXCO will host a conference call on Tuesday, May 16, 2006 at 3:30 p.m. (CDT) to discuss the contents of this release and respond to questions. Presentation materials related to this release will also be posted on EXCO's website under the Investor Relations tab today, after market close. Please call (800) 309-5788 if you wish to participate, and ask for the EXCO conference call ID# 9256352. A digital recording will be available starting two hours after the completion of the conference call until Tuesday, May 23, 2006. Please call (800) 642-1687 and enter conference ID# 9256352 to hear the recording.

EXCO Resources, Inc. is a public oil and natural gas acquisition, exploitation, development and production company headquartered in Dallas, Texas with principal operations in Texas, Colorado, Ohio, Oklahoma, Pennsylvania, and West Virginia.

Additional information about EXCO Resources, Inc. may be obtained by contacting EXCO's President, Stephen F. Smith, at EXCO's headquarters, 12377 Merit Drive, Suite 1700, Dallas, TX 75251, telephone number (214) 368-2084, or by visiting our website at http://www.excoresources.com/ . Our SEC filings and press releases can be found under the Investor Relations tab.

This release may contain forward-looking statements relating to future financial results or business expectations. Business plans may change as circumstances warrant. 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: acquisitions, recruiting and new business solicitation efforts, commodity price changes, the extent to which EXCO is successful in integrating recently acquired businesses, regulatory changes and general economic conditions. These risk factors and additional information are included in EXCO's reports on file with the Securities and Exchange Commission.

EXCO Resources, Inc. Condensed consolidated balance sheets (In thousands) December 31, March 31, 2005 2006 (Unaudited) Assets Current assets: Cash and cash equivalents $ 226,953 $ 35,422 Accounts receivable: Oil and natural gas sales 36,895 41,887 Joint interest 1,081 7,650 Canadian income tax receivable 18,483 --- Interest and other 12,189 15,240 Oil and natural gas hedge derivatives --- 10,093 Related party 2,621 --- Deferred income taxes 29,968 44,515 Deferred costs of initial public offering 3,380 --- Other 10,955 7,022 Total current assets 342,525 161,829 Oil and natural gas properties (full cost accounting method): Unproved oil and natural gas properties 53,121 110,009 Proved developed and undeveloped oil and natural gas properties 873,595 1,400,508 Accumulated depreciation, depletion and amortization (13,281) (32,892) Oil and natural gas properties, net 913,435 1,477,625 Gas gathering, office and field equipment, net 33,271 54,042 Investment in TXOK Acquisition, Inc 20,837 --- Other assets 419 1,571 Goodwill 220,006 285,961 Total assets $1,530,493 $ 1,981,028 EXCO Resources, Inc. Condensed consolidated balance sheets (In thousands) December 31, March 31, 2005 2006 (Unaudited) Liabilities and Shareholders' Equity Current liabilities: Interim bank loan $ 350,000 $ --- Accounts payable and accrued liabilities 25,182 39,817 Accrued interest payable 23,779 7,135 Revenues and royalties payable 11,266 28,823 Income taxes payable 901 692 Current portion of asset retirement obligations 1,408 1,407 Oil and natural gas derivatives 53,189 26,382 Total current liabilities 465,725 104,256 Long-term debt 1 108,500 7 1/4% senior notes due 2011 461,801 461,075 Asset retirement obligations and other long-term liabilities 15,766 23,681 Deferred income taxes 134,912 143,355 Oil and natural gas derivatives 81,406 70,401 Commitments and contingencies --- --- Shareholders' equity: Preferred stock, $.001 par value: Authorized shares - 10,000; none issued --- --- Common stock, $.001 par value: Authorized shares - 250,000; Issued and outstanding shares-50,000 and 104,004 at December 31, 2005 and March 31, 2006, respectively 50 104 Additional paid-in capital 354,482 1,016,154 Retained earnings 16,350 53,502 Total shareholders' equity 370,882 1,069,760 Total liabilities and shareholders' equity $1,530,493 $1,981,028 EXCO Resources, Inc. Condensed consolidated statements of operations (Unaudited, in thousands except per share amounts) Three months ended March 31, 2005 2006 Predecessor Successor Revenues and other income: Oil and natural gas $ 38,929 $ 70,340 Commodity price risk management activities (57,390) 40,775 Other income 389 2,031 Total revenues and other income (18,072) 113,146 Cost and expenses: Oil and natural gas production 6,789 11,485 Depreciation, depletion and amortization 7,856 20,677 Accretion of discount on asset retirement obligations 203 302 General and administrative 5,204 5,909 Interest 8,751 16,345 Total cost and expenses 28,803 54,718 Equity in net income of TXOK Acquisition, Inc --- 1,593 Income (loss) from continuing operations before income taxes (46,875) 60,021 Income tax expense (benefit) (18,207) 22,869 Income (loss) from continuing operations (28,668) 37,152 Discontinued operations: Loss from discontinued operations (4,402) --- Gain on disposition of Addison Energy Inc 174,086 --- Income tax expense 48,800 --- Income from discontinued operations 120,884 --- Net income $92,216 $37,152 Earnings per share: Basic Net income (loss) from continuing operations $(0.25) $0.46 Net income $0.79 $0.46 Weighted average common shares outstanding 115,947 80,099 Diluted Net income (loss) from continuing operations $(0.25) $0.45 Net income $0.79 $0.45 Weighted average common and common equivalent shares outstanding 115,947 81,815 EXCO Resources, Inc. Condensed consolidated statements of cash flows (Unaudited, in thousands) Three months ended March 31, 2005 2006 Predecessor Successor Operating Activities: Net income $92,216 $37,152 Income from discontinued operations (120,884) --- Adjustments to reconcile net income to net cash provided by operating activities: Equity in net income of TXOK Acquisition, Inc --- (1,593) Gain on sale of other assets 3,461 --- Depreciation, depletion and amortization 7,856 20,677 Stock option compensation expense --- 598 Accretion of discount on asset retirement obligations 203 302 Non-cash change in fair value of derivatives 1,065 (43,570) Deferred income taxes (24,327) 22,176 Amortization of deferred financing costs 444 5,877 Effect of changes in: Accounts receivable (9,423) 47,421 Other current assets 1,320 (1,939) Accounts payable and other current liabilities (3,155) (24,221) Net cash used in operating activities of discontinued operations (63,750) --- Net cash provided by (used in) operating activities (114,974) 62,880 Investing Activities: Additions to oil and natural gas properties, gathering systems and equipment (32,953) (32,649) Advance to TXOK Acquisition, Inc --- (158,750) Cash acquired in acquisition of TXOK Acquisition, Inc --- 32,261 Proceeds from disposition of property and equipment and other 3,964 (608) Proceeds from sale of Addison Energy Inc., net of cash sold of $1,415 (discontinued operations) 443,649 --- Net cash used in investing activities of discontinued operations (442) --- Net cash provided by (used) in investing activities 414,218 (159,746) Financing Activities: Borrowings under credit agreement 41,300 184,500 Repayments under credit agreement --- (76,000) Payments on interim bank loan --- (350,000) Payments on TXOK term loan --- (200,000) Payments on TXOK credit facility --- (308,751) Payments on long-term debt (148,247) --- Proceeds from issuance of common stock, net of underwriter commissions and initial public offering costs --- 656,331 Deferred financing costs --- (745) Net cash provided by financing activities of discontinued operations 59,601 --- Net cash provided by (used in) financing activities (47,346) (94,665) Net increase (decrease) in cash 251,898 (191,531) Cash at beginning of period 26,408 226,953 Cash at end of period $278,306 $35,422 Supplemental Cash Flow Information: Interest paid $16,695 $27,398 Income taxes paid $37,290 $--- Value of shares issued in connection with redemption of TXOK preferred stock $--- $4,667 Long-term debt assumed in TXOK acquisition $--- $508,750 Elimination of deferred income taxes related to equity in net income of TXOK Acquisition, Inc. due to step acquisition $--- $899 EXCO Resources, Inc.

Reconciliation of condensed consolidated cash flow from operating activities

(Unaudited, in thousands) Predecessor Successor Quarter ended Quarter ended March 31, March 31, 2005 2006 Net cash provided by (used in) operating activities $(114,974) $62,880 Net change in working capital 11,258 (21,261) Net cash used in operating activities of discontinued operations 63,750 --- Cash flow from operations before changes in working capital, non-GAAP measure $(39,966) $41,619 EXCO Resources, Inc. Condensed consolidated EBITDA and adjusted EBITDA reconciliations and statements of cash flow data (Unaudited, in thousands) Predecessor Successor Quarter ended Quarter ended March 31, March 31, 2005 2006 Net income $92,216 $37,152 Interest expense 8,751 16,345 Income tax expense (benefit) (18,207) 22,869 Depreciation, depletion and amortization 7,856 20,677 EBITDA (A) 90,616 97,043 Accretion of discount on asset retirement obligations 203 302 Non-cash change in fair value of derivative financial instruments 1,065 (43,570) Commodity price risk management contracts termination expense 52,602 --- Stock based compensation expense --- 598 Equity in net income of TXOK Acquisition, Inc --- (1,593) Income from discontinued operations (120,884) --- Adjusted EBITDA (A) $23,602 $52,780 Interest expense (8,751) (16,345) Income tax expense (benefit) 18,207 (22,869) Amortization of deferred financing costs 444 5,877 Deferred income taxes (24,327) 22,176 Gain on sale of other assets 3,461 --- Changes in operating assets and liabilities (11,258) 21,261 Commodity price risk management contracts termination expense (52,602) --- Net cash used in operating activities of discontinued operations (63,750) --- Net cash provided by (used in) operating activities $(114,974) $62,880 EXCO Resources, Inc. Condensed consolidated EBITDA and adjusted EBITDA reconciliations and statement of cash flow data (continued) (Unaudited, in thousands) Predecessor Successor Quarter ended Quarter ended March 31, March 31, 2005 2006 Statement of Cash Flow Data: Cash flow provided by (used in): Operating activities (B) $(114,974) $62,880 Investing activities 414,218 (159,746) Financing activities (47,346) (94,665) Other Financial and Operating Data: EBITDA (A) 90,616 97,043 Adjusted EBITDA (A) 23,602 52,780 (A) Earnings before interest, taxes, depreciation, depletion and amortization, or "EBITDA," represents net income adjusted to exclude interest expense, income taxes, 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, commodity price risk management contracts termination expense, stock based compensation expense, equity in net income of TXOK Acquisition, Inc., and income from discontinued operations. We have presented Adjusted EBITDA because it is the financial measure that is used in covenant calculations required under our credit agreement and compliance with the liquidity and debt incurrence covenants included in this agreement is considered material to us. Our 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 our computations as compared to those of others. EBITDA and Adjusted EBITDA are measures that are not prescribed by generally accepted accounting principles, or 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 a company's operating, investing and financing activities. As such, we encourage investors not to use these measures as substitutes for the determination of net income, net cash provided by operating activities or other similar GAAP measures. (B) Cash flow used in operating activities for the three months ended March 31, 2005 includes $52.6 million related to the termination of commodity price risk management contracts. EXCO Resources, Inc. Summary operating data Quarter ended Quarter ended March 31, March 31, % 2005 2006 Change Production: Oil (Mbbls) 126 148 17% Gas (Mmcf) 5,156 7,205 40% Oil and natural gas (Mmcfe) 5,912 8,093 37% Average sales prices (before commodity price risk management activities): Oil (per Bbl) $47.09 $60.76 29% Gas (per Mcf) 6.40 8.51 33% Total production (per Mcfe) 6.58 8.69 32% Average costs (per Mcfe): Oil and natural gas operating costs $0.75 $0.87 16% Production and ad valorem taxes 0.40 0.55 38% General and administrative 0.88 0.73 -17% Depletion, depreciation and amortization 1.33 2.55 92%

EXCO Resources, Inc.

CONTACT: Stephen F. Smith, President of EXCO Resources, Inc.,+1-214-368-2084

Web site: http://www.excoresources.com/

Source: PRNewswire-FirstCall

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