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EXCO Adds 13 Wells in 1Q; Cuts Workforce 15 Percent
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EXCO Resources, Inc. announced operating and financial results for the first quarter 2015.
2015 First Quarter Highlights:
- Drilled 13 gross (5.5 net) and turned-to-sales 29 gross (14.6 net) operated horizontal wells in the first quarter 2015, consistent with the capital budget.
- Produced 339 Mmcfe per day, or 30 Bcfe, for the first quarter 2015, consistent with the midpoint of guidance. Production increased 7 Mmcfe per day from the fourth quarter 2014 excluding the impact of an asset divestiture.
- Adjusted EBITDA was $58 million for the first quarter 2015, 28% below adjusted EBITDA for the fourth quarter 2014 primarily due to lower oil and natural gas prices and partially offset by lower operating costs.
- Drilled and completed first operated Buda well with results above expectations, including a maximum 24-hour rate of 580 Bbls of oil.
- Amended credit agreement to provide operational and financial flexibility.
- Implemented cost saving initiatives, including a 15% reduction in the workforce, and negotiated cost reductions with numerous vendors. General and administrative costs were below the low-end of guidance.
- Adjusted net income (loss), a non-GAAP measure, was a net loss of $19 million, or $0.07 per diluted share, and GAAP net income (loss) was a net loss of $318 million, or $1.17 per diluted share, for the first quarter 2015. The GAAP net loss was primarily due to the impairment of the Company’s oil and natural gas properties pursuant to the ceiling test in accordance with full cost accounting.
Key Developments
Appointment of Chief Executive Officer and Chief Operating Officer
On March 31, 2015, EXCO's Board of Directors appointed Harold L. Hickey to the position of Chief Executive Officer and President of EXCO. Mr. Hickey previously served as EXCO's President and Chief Operating Officer since February 2013 and Chief Operating Officer since October 2005. On April 17, 2015, EXCO's Board of Directors appointed Harold H. Jameson to the position of Chief Operating Officer of EXCO. Mr. Jameson most recently served as EXCO’s Vice President of Development and Production with primary responsibilities including the horizontal shale development drilling programs in the Haynesville, Eagle Ford and Marcellus assets. Mr. Jameson has served in a Vice President role at EXCO since March 2011.
Services and investment agreement
On March 31, 2015, EXCO entered into a four-year services and investment agreement with Bluescape Resources Company LLC ("Bluescape"), a Dallas-based independent energy investment and advisory company. The agreement provides that Bluescape will perform certain strategic advisory services including the development and execution of a strategic improvement plan. Pursuant to the agreement, Bluescape agreed to purchase $10 million of common shares from EXCO upon effectiveness of a resale registration statement covering such shares and $40 million of common shares through open market purchases within one year of the closing of the agreement. In exchange for the ongoing strategic advisory services, EXCO pays a monthly fee, an annual incentive payment and has issued warrants to purchase EXCO's common shares. The annual incentive payment and exercisability of the warrants are dependent on EXCO's common share price achieving certain performance hurdles as compared to a peer group. The closing of the transactions under this agreement will be subject to certain conditions, including, among others, obtaining certain approvals from EXCO’s shareholders. The warrants will automatically terminate and become void and of no force or effect if the closing does not occur. At the closing, C. John Wilder, Executive Chairman of Bluescape, will become Executive Chairman of EXCO's Board of Directors.
Operational Results
EXCO's operational update is available below:
EXCO Talks 1Q Texas, Appalachian Ops; Pilot Projects
Financial Results
EXCO’s decrease in adjusted EBITDA compared to the fourth quarter 2014 was due primarily to lower commodity prices in the current period and partially offset by lower operating costs. The GAAP net loss during the first quarter 2015 was primarily due to the impairment of the Company’s oil and natural gas properties pursuant to the ceiling test in accordance with full cost accounting.
EXCO reduced its workforce by 15% in February 2015 and incurred $2.6 million in severance costs. Excluding the impact of the severance costs, general and administrative expenses decreased 24% from the fourth quarter 2014 (excluding share-based compensation expenses).
Liquidity
On February 6, 2015, EXCO amended the EXCO Resources Credit Agreement, which resulted in a borrowing base redetermination of $725 million. The next borrowing base redetermination under the EXCO Resources Credit Agreement will occur in August 2015. Additionally, the financial covenants were amended to include an interest coverage ratio and senior secured indebtedness to consolidated EBITDA ratio. The leverage ratio was suspended until the fourth quarter 2016, and the ratio requirements thereafter were modified. The amendments to the financial covenants provide EXCO the financial flexibility to selectively develop its asset base.