Wednesday, February 26, 2014

Outlook: EXCO Resources

EXCO Resources reported its 2013 earnings this morning and gave a peek into its 2014 plans.  Most of this is on the slide below, but the company is currently operating 439 wells in the NLA/ETX region (most of which are Haynesville) and has 1,206 gross drilling opportunities left in its curret inventory.  Around 98% of the company's approximately 70,000 net acres is HBP.

Looking forward, the company is planning a $368 million capital budget for 2014, up 8.3% from 2013 ($339.8 million).  Of that budget, 50%, or approximately $184 million, will be dedicated to the Haynesville.  In a conference call last year, the CEO called the Haynesville the company's "number one comfort zone."  The current plan calls for five Haynesville rigs, three in the Holly field in Louisiana two in the Shelby Trough in Texas.

While there has been a massive "flight to liquids" among the independent E&P companies, EXCO has maintained something of a gas-centric profile.  This strategy has cost the company in the past, but it creates some M&A opportunities as other E&P companies evaluate their holdings.  Over the past year, EXCO has sold off non-core assets, such as its midstream business, but it is not in "yard sale" mode, as evidenced by the purchase of 9,600 acres of complementary well sites from Chesapeake in July 2013.  I'd look for more acquisitions in 2014.

EXCO has achieved strong efficiencies in its well economics from pad drilling on the Louisiana side, with wells running around $7.2 million apiece.  The company hopes to replicate some of these efficiencies on the Texas side, where EXCO wells now cost around $10 million.  The current high cost largely come from different geology in the Shelby area and the lack of the economies of scale achieved in Louisiana.

Overall, look for EXCO to make some hay while the sun is shining on gas prices right now, but don't look for more than a slight increase in Haynesville activity from the company in 2014.  With five operating rigs and a budget north of $175 million they will remain a Haynesville stalwart, but not an engine of growth.

1 comment:

Anonymous said...

Exco also announced that the Haynesville can't support 8 wells per section and the new model calls for only 6 wells per section.