Monday, January 24, 2011

EXCO Year End 2010 Update

Exco Resources released its 2010 operating results today.  It makes for good reading, especially where it concerns the Haynesville Shale, where the company has become a big player.  The company drilled 92 gross (38.4) wells in 2010 and remains focused on its acreage in DeSoto Parish, LA and the Shelby Trough area in Texas.  The company plans to run 22 rigs in the play through 2011 but has the ability to drop down to 11 if commodity prices don't support drilling activity.

In DeSoto, EXCO has shifted phases from testing and delineation of its acreage to a full field development program using a "manufacturing process" with 80 acre spacing.  During the year, the company performed several multi-well pad drilling and completion operations.  Typically, EXCO uses four drilling rigs per 640 acre unit and two to three fracture stimulation fleets to simultaneously complete the operation. In June 2010, the company completed a four well spacing test over 320 acres and in October it completed an eight well 640 acre (full unit) test.  At year end, the company had 12 units in progress for the full 80 acre development plan and hope to target another 15 in 2011.  The single pad operations save time and money, take less surface land out of commerce and concentrate resources such as water.

EXCO is running six of its 22 rigs in the Shelby Trough area, which includes Shelby, San Augustine and Nacogdoches Counties, TX.  The operational focus here remains evaluation and delineation of the land while holding the acreage by production.  Management is probably pretty excited with some fat wells coming in, particularly two with IP rates of 23 and 28 MMcf/day with 8,979 psi and 9,520 psi flowing pressures, respectively.

Some interesting factoids from the report:
  • The company has modified some of its estimated ultimate recoveries (EUR) based on operating results.  It is using 6.6 Bcf for all of its Haynesville wells, but in the DeSoto area, the company has increased its EUR from 6.2 Bcf to 7.2 Bcf per well.  For 640 acre units, the overall EUR has increased from 26.4 Bcf/unit to 48.4 Bcf/unit.  This change results from smaller spacing and higher per well EURs.
  • EXCO has budgeted $782 million for N. LA/E. TX for 2011.  Of that, $683 million will fund EXCO's share of 233 gross wells (65.2 net to EXCO).  Of the gross number, 163 will be EXCO operated and 70 will not.
  • The company claims only 17 wells in its to-be-completed inventory.  That's pretty darn good for a company running 22 drilling rigs all out.
  • EXCO recently completed 168 square miles of 3-D seismic in DeSoto Parish and acquired another 126 square miles in the Shelby Trough area. It also monitored five wells with micro-seismic and another 19 wells with a buried array monitoring system.
  • The company has hedged 86.6 Bcf of its 2011 production at $5.30/MMBtu.  In 2012, 53.1 Bcf of production is hedged at $5.37/MMBtu.  In 2013, only 5.5 Bcf is hedged at $5.99/MMBtu.

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