Tuesday, July 9, 2013

More on EXCO Acquisition of Chesapeake DeSoto Acreage

EXCO Resources held a conference call yesterday to provide more details of its $1 billion asset acquisition of certain Chesapeake Energy assets in the Haynesville and Eagle Ford shales (link to conference call - only temporary; link to presentation).  In the 9,600 net acre Haynesville deal, EXCO is acquiring around 5,600 acres in sections already operated by EXCO and about 4,000 acres in sections operated by Chesapeake.  The Haynesville acreage produced 114 MMcf/day in May (including about 1.5 to 2.0 MMcf/day of Cotton Valley production that will be sold into the company's existing partnership with Harbinger Group).

The acquisition also allows for 55 new Haynesville drilling locations in the Chesapeake acreage.  EXCO noted in the conference call that it might add three new rigs going forward, but that decision has not been finalized.  All of the acreage is in DeSoto Parish, as shown on the map below.

Analysts seem generally pleased with EXCO's acquisition, noting that the company got a relative bargain. But even bargains come at a price.  EXCO is selling off its TGGT midstream assets (either all of it or a majority interest) to pay down debt, which is especially necessary given this transaction.  Additionally, the company is on the hunt for other deals, which will require lots of liquidity, especially since EXCO is not looking to raise equity any time soon.  The company has received four offers but has not made a deal yet.

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