DALLAS--(BUSINESS WIRE)-- EXCO Resources, Inc. (NYSE: XCO) today announced first quarter results for 2012.

Haynesville/Bossier Shale

Our horizontal Haynesville shale development program continues to be a significant asset for EXCO and continues to yield strong results. As of April 16, 2012, our Haynesville/Bossier shale operated production was 1,219 Mmcf per day gross (366.5 Mmcf per day net) and with the addition of net production from our OBO wells, we had 401.0 Mmcf per day of total Haynesville/Bossier shalenet production. In response to low natural gas prices, we have made a significant reduction to our drilling program. In 2011 we averaged 22 operated rigs in the Haynesville/Bossier shale throughout the year. We began to reduce our rig count in late 2011 and have further reduced the rig count in the first quarter. We currently have eight active operated rigs drilling in the play and will reduce to seven rigs in May. We will evaluate product pricing and project economics and make further decisions on rig count throughout the year. Our development drilling program for 2012 is focused in DeSoto Parish, Louisiana where we continue our 80-acre spacing manufacturing program. Our assets in San Augustine and Nacogdoches Counties, Texas have been delineated and tested and almost all of our core acreage in that area is held by production. We do not have plans to drill additional wells in the East Texas area in 2012 and are now focused on evaluation and planning for future full field development. During 2012, we plan to drill approximately 68 gross (24.5 net) operated wells in the Haynesville/Bossier shale play with almost all of these wells in DeSoto Parish, Louisiana.

We drilled and completed 30 gross (8.4 net) operated horizontal Haynesville/Bossier wells and participated in 10 gross (1.6 net) OBO Haynesville/Bossier horizontal wells during the first quarter 2012. We utilized an average of 14 operated rigs and spud 23 operated horizontal wells during the quarter. We averaged one OBO rig drilling in the play and spud three OBO wells during the quarter. We currently have no OBO rigs drilling. In total, we have 324 operated horizontal wells and 177 OBO horizontal wells flowing to sales.

The average initial production rate from our operated Haynesville horizontal wells completed in the first quarter 2012 in DeSoto Parish was 13.3 Mmcf per day with an average of 8,250 psi flowing casing pressure on an average 18/64ths choke. This 18/64ths choke size is indicative of our new restricted choke management program we have implemented in DeSoto Parish, based on the strong results we realized in our East Texas area. We believe that the current choke management program will result in a higher estimated ultimate recovery per well than our initial choke program.

We have a major cost reduction and efficiency program underway and are beginning to see significant improvements in capital efficiency. Our DeSoto Parish well costs in the fourth quarter 2011 were approximately $9.3 to $9.5 million per well. With the changes implemented to date, our current estimated well cost in the DeSoto Parish area is $8.5 million, approximately $1.0 million or 10% less than actual costs at year end 2011. We are expecting to realize additional improvements in capital efficiency during 2012 and are targeting $8.0 million per well by year end 2012.

We completed a significant spacing test in our Shelby Area of East Texas in the first quarter 2012 to fully develop the Haynesville and Bossier shales across two units. EXCO and an offset operator drilled 14 new horizontal wells and one vertical monitor well to test and properly evaluate the Haynesville/Bossier shale well spacing to assess the proper development strategy. All wells were turned to sales late in the first quarter 2011 and were completed on schedule. The peak production rate for the project was 215 Mmcf per day gross with flowing casing pressures of 9,085 psi on average with a restricted choke program. Our plans are to evaluate the performance of this spacing pilot before proceeding with additional development in the East Texas area. By enhancing our understanding of reservoir performance, we plan to maximize the EUR from our drilling and completion programs.

Marcellus Shale

Our current gross Marcellus shale production is approximately 116 Mmcf per day (20.2 Mmcf per day net), which represents an increase of more than 7% since the end of 2011. We have more than 35 Mmcf per day (7.4 Mmcf per day net) of production shut in due primarily to offset drilling and completion activities. We have implemented a development program within our acreage in northeast Pennsylvania and are concluding an appraisal program in central Pennsylvania. We plan to drill 49 gross (12.4 net) operated wells in the Marcellus shale play in our Appalachia region during 2012. Of the 49 wells, 46 gross (11.5 net) will be development wells and 3 gross (0.9 net) will be appraisal wells. Most of our drilling activity will be in Lycoming County, Pennsylvania where we are realizing our best returns in the Marcellus shale. We are currently drilling with three operated rigs in the play. Our net drilling dollars are reduced by the effect of the carry we receive from BG Group. Approximately $29.7 million of the carry remains available to us from BG Group as of March 31, 2012. We expect that the remaining carry will be used in 2012.

During the first quarter 2012, we spud 11 new operated wells and drilled and completed 3 gross (1.2 net) operated wells in the Marcellus shale. These three completed wells included two appraisal wells in Central Pennsylvania and one delineation well in Northeast Pennsylvania. The two Central Pennsylvania appraisal wells are currently awaiting pipeline connections. We are also focused on building our field infrastructure in support of our expected levels of activity. Along with efficiency gains derived from our drilling and completion program, these infrastructure investments are expected to be the primary drivers to reduce our average development well costs.


We drilled and completed 9 gross (8.8 net) wells in our Sugg Ranch area during the first quarter 2012 with 100% drilling success. We currently are running one operated rig and plan to drill and complete 36 gross (34.9 net) wells in 2012. Our oil production at Sugg Ranch has increased by 4% to approximately 1,700 net barrels per day in the first quarter of 2012 as compared to the fourth quarter of 2011, and economics for this drilling activity typically have rates-of-return in excess of 50%. In addition to the oil production, we also produced approximately 1,300 net barrels of natural gas liquids per day and 5.8 net Mmcf of natural gas per day, resulting in a total of approximately 4,000 barrels per day of net oil equivalent production from our Permian operations.

Based on industry results surrounding our Permian acreage position, we are currently evaluating our shale potential. We are drilling a vertical test well and are evaluating core samples. Based on those results, we may spud a horizontal test well during the second quarter of 2012.

Douglas H. Miller, EXCO’s Chief Executive Officer, commented, “During the first quarter 2012, we made significant progress on accomplishing many of our key target actions for the year.

“We continued our very successful development activities in the Haynesville and Marcellus shale areas and met our production goals for the quarter with an average of 533 Mmcfe per day. Operationally, we reduced our company-wide rig count from 23 at year end to 14 at the end of the quarter in response to low natural gas prices. We intend to further decrease our rig count during the remainder of the year and expect to end the year with 8 to 10 rigs. We have also reduced our estimated per well drilling costs in the Haynesville from approximately $9.5 million to $8.5 million through a combination of supplier cost reductions and well design changes. We continued to reduce our operating and general and administrative costs.

“As expected, we completed a redetermination of our borrowing base with our lender group at $1.4 billion, which should provide adequate liquidity for our operations going forward. We will seek to reduce our debt levels through asset sales, including all or part of our midstream assets, and sales or joint ventures of certain of our conventional assets.

“We continue to review and evaluate strategic producing and non-producing property acquisitions in our core areas and are also evaluating potential acquisitions in other basins, particularly those that are oil and liquid prone.

“Although the present natural gas environment is difficult, we are positioned financially and operationally to continue successfully maintaining our significant core asset base and capitalizing on opportunities as they arise.”