Wednesday, November 3, 2010

EXCO Operational Update

EXCO Resources released its third quarter earnings yesterday.  The company produced an average of 173 MMcf/day from its Haynesville properties, which represents 54% of the company's total production.  Some highlights relative to the Haynesville Shale:

  • Operating 21 rigs in the play and will end the year with 22 operated rigs. Five of the rigs are operating in the Shelby Trough, mostly in San Augustine Co.  Half of the company's rigs have less than one year remaining on lease term, which gives the company the flexibility to lay down rigs if prices stay low (and lease retention plan is on schedule). 
  • Spud 28 operated wells in Q3 and completed 23.  It is on target to spud approximately 126 operated horizontal wells in 2010.
  • Operating three dedicated fracture stimulation fleets, so it has not seen its inventory of drilled-but-not-completed wells swell.  There are currently 12 wells awaiting completion, which is low compared to competitors.
  • Testing a restricted choke program but provided few details.  It is still experimenting with completion optimization, testing frac designs, the number of frac stages as well as size and type of proppant materials.  
  • Drilling costs decreasing: current drilling costs per well is around $9.25 million, with a target of $8.75 million in 2011.
As noted previously, EXCO has stopped drilling in locations where it doesn't expect a 20% internal rate of return at $4.00 gas prices.

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