Exco Resources Inc · OTC:EXCE
Exco Resources — Investor Presentation (November 2009)
39 slides from Exco Resources's investor presentation, Nov 2, 2009
Slide 1: EXCO's State of the Company and Corporate Governance Discussion
Exhibit 99.1 EXCO’s State of the Company and Corporate Governance Discussion Boston, MA November 2, 2009
Slide 2: Forward Looking Statements
Forward Looking Statements This presentation contains forward-looking statements, as defined in Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, or the Exchange Act. These forward-looking statements relate to, among other things, the following: our future fin
Slide 3: Forward Looking Statements (continued)
Forward Looking Statements (continued) We believe that it is important to communicate our expectations of future performance to our investors. However, events may occur in the future that we are unable to accurately predict, or over which we have no control. You are cautioned not to place undue reli
Slide 4: Agenda
Agenda Welcome Doug Miller Chairman and CEO State of the Industry Boone Pickens Chairman, BP Capital, L.P. EXCO Plans Doug Miller Financial Review Steve Smith President & CFO Operations Review Hal Hickey Vice President and COO Corporate Governance Doug Ramsey Vice President - Finance and Treasurer O
Slide 5: Company Overview
Company Overview (1) Significant shale upside with a solid base of conventional assets • 1.2 Tcfe of Proved Reserves – 235 Mmcfe/d of current net production, reserve life of 14.3 years and 68% Proved Developed – 120 Bcfe of shale assets booked as proved with potential for significant reserve adds in
Slide 6: Keys to EXCO's Strategy
Keys to EXCO’s Strategy Right Assets Right People Right Strategy We have a significant position We have a dedicated, industry We are financially and in two of the most prolific leading technical staff and a operationally positioned resource plays in North America management team with a to effectivel
Slide 7: Delivering What We Promise
Delivering What We Promise Executing on our 2009 strategic plans Joint venture partner – Joint venture with BG Group positions EXCO for dramatic upstream and midstream growth – Received $1.0 billion of cash and $400 million carry on future deep drilling Asset sales – Closed ~$440 million in divestit
Slide 8: Looking Forward
Looking Forward Plans and expectations for 2010 • Focus on our shale assets – Haynesville and Bossier shales in East Texas / North Louisiana – Marcellus shale in Pennsylvania and West Virginia • Significantly increase our acreage position in both shale areas • Continue to emphasize free cash flow ge
Slide 9: Financial Review
Financial Review Steve Smith
Slide 10: Financial Snapshot
Financial Snapshot Significant liquidity with tremendous organic growth Remaining 2009 As of September 30, 2009 ($ in thousands) Actual (1) Divestitures (2) Pro Forma (3) Cash $ 125,664 $ (14,500) $ 111,164 Bank debt (L + 175 - 250bps) 1,239,645 (685,000) 554,645 Senior notes (7 1/4%) (4) 444,720 -
Slide 11: Summary Financial Highlights
Summary Financial Highlights Year Ended Year Ended Estimated December 31, December 31, Full Year ($ in millions) 2007 2008 2009 (1) Oil and natural gas revenues (before effects of derivative financial instruments) $ 846.1 $ 1,404.8 $ 545.9 (2) Adjusted EBITDA $ 765.6 $ 978.3 $ 705.8 (2) Adjusted net
Slide 12: Production Profile and Proved Reserve Growth
Production Profile and Proved Reserve Growth Drilling program funded within cash flow Projected Average Production 1,400 1,200 1,000 800 600 400 200 - 2010E 2011E 2012E 2013E 2014E Base Conventional Wedge Haynesville Wedge Marcellus Wedge Proved Reserves (Tcfe) 2010E 2011E 2012E 2013E 2014E Low 1.5
Slide 13: Derivatives Position
Derivatives Position NYMEX Contract Contract Equivalent Contract natural gas price per NYMEX oil price per Per day price per Percent (in thousands, except price) Mmbtu Mmbtu Bbls Bbl Hedged Equivalent hedged (1) Q4 2009 23,450 8.08 398 80.66 280.9 8.58 112% 2010 66,298 7.62 1,568 104.64 207.4 8.84 6
Slide 14: Operations Review
Operations Review Hal Hickey
Slide 15: EXCO Snapshot
EXCO Snapshot Our 2009 divestitures and JV’s reduce net production by approximately 175 Mmcfe/d and proved reserves by approximately 890 Bcfe December 31, December 31, September 30, (1) 2007 2008 2009 Average daily sales (Mmcfe/d) 377 395 235 (2)(3) Proved reserves (Bcfe) 1,865 1,940 1,224 (4) Total
Slide 16: Reserve Base
Reserve Base Pro forma for BG transaction and 2009 divestiture program(1) Appalachia Proved Reserves = 1.2 Tcfe 3P Reserves = 3.0 Tcfe Proved: 0.3 Tcfe 3P: 0.5 Tcfe 3P+ Reserves = 11.6 – 17.2 Tcfe 3P+: 7.5 – 13.1 Tcfe Current Production = 235 Mmcfe/d Production: 37 Mmcfe/d Gross acreage: 714,000 Gro
Slide 17: Joint Venture With BG Group
Joint Venture With BG Group Strategic partner with shared vision • Sold 50% interest in Area of Mutual Interest (AMI) – 580 Bcfe of proved reserves and 155 Mmcfe/d within AMI • Cash flow implications – Haynesville development will be accelerated, but capital expenditures will be reduced – In additio
Slide 18: Our People
Our People Key driver of our future growth • Outstanding growth in technical and support staff – Focus on people has resulted in a tremendous technical staff buildup in the last two years – Technical headcount has increased 70% since January 2008 • Relentless focus on Environmental, Health and Safet
Slide 19: Haynesville Assets and Efforts
Haynesville Assets and Efforts • 44,000 net Haynesville acres – Actively working to acquire 14,000 – 15,000 net acres to the joint venture – Significant additional opportunities continue to be identified • 2009 Haynesville activity – Initiate drilling of 42 operated horizontal wells – Plan to have 1
Slide 20: EXCO Operated Horizontal Haynesville Shale Production
EXCO Operated Horizontal Haynesville Shale Production Currently 18 wells producing; nine completions expected in Q4 2009 with an additional 24 completions in Q1 2010 EXCO Haynesville Production East Texas / North Louisiana 200,000 180,000 185 Mmcf/d Gross Production 160,000 140,000 3/14/08: 120,000
Slide 21: Haynesville Operations Snapshot
Haynesville Operations Snapshot • Production: 213 Mmcf/d gross, 40.7 Mmcf/d net on 10/16/2009 – Operated: 160.2 Mmcf/d gross, 37 Mmcf/d net – OBO: 52.6 Mmcf/d gross, 3.7 Mmcf/d net – Cumulative gross Haynesville production: 24.3 Bcfe • Drilling: 10 operated horizontal rigs now drilling – 4 additiona
Slide 22: Bossier
Bossier The next frontier Top Bossier +/- 10,000’ Top Haynesville +/- 11,500’ Top Limestone +/- 11,900’ • Potential net gas in place on the JV acreage is ~17 Tcf • Recovery factor to be determined 22
Slide 23: EXCO Midstream Operations
EXCO Midstream Operations East Texas/North Louisiana – Positioned for Growth 23
Slide 24: Midstream – TGGT Holdings, LLC (TGGT)
Midstream – TGGT Holdings, LLC (TGGT) East Texas/North Louisiana – Positioned for Growth • Current TGGT Assets – Strategically positioned for industry activity – September revenue throughput averaged 535 Mmcf/d; EXCO equity revenue throughput of 268 Mmcf/d • Talco System – 625 miles of gathering lin
Slide 25: Midstream – TGGT Holdings, LLC (TGGT)
Midstream – TGGT Holdings, LLC (TGGT) Throughput by System 4.5 4.3 4.0 3.8 3.5 3.3 3.0 2.8 2.5 2.3 2.0 1.8 1.5 1.3 1.0 0.8 0.5 0.3 0.0 Q4 2009 2010 2011 2012 2013 2014 TGG Legacy TGG Header Talco 25
Slide 26: Marcellus Opportunity
Marcellus Opportunity • Largest areal extent of the major Marcellus Fairway shale plays – EXCO has 348,000 net acres in the play • Approximately 223,000 net acres in the over-pressured Marcellus Fairway fairway • 70% of acreage is HBP PA • Key PA average WI 100%, OH average NRI 84% • Massive reserve
Slide 27: Marcellus Development Strategy
Marcellus Development Strategy Identified six distinct geologic regions Marcellus Leasehold Geologic Regions of the Marcellus • Southwest – 53,000 net acres • Southeast – 18,000 net acres • Central – 69,000 net acres • North – 41,000 net acres • Northeast – 42,000 net acres • Northwest – minimal acr
Slide 28: Current Marcellus Activity
Current Marcellus Activity Preparing to implement horizontal program • Drill verticals to test the play: – Obtain additional reservoir data (core, 2009 Drilling Program pressure data, etc.) – Test drilling, completion, and production techniques – Identify horizontal drilling targets • Acquire seismi
Slide 29: 2010 Capital Focus
2010 Capital Focus Preliminary capital plan Haynesville capital is net of $240 million of EXCO capital carried by BG Group (dollars in millions) 2010E Haynesville Drilling $ 65 Land 25 Seismic 5 Exploration 15 Non-shale Other 15 Total Haynesville 125 31% Marcellus 63% Shale Corporate Drilling 75 6%
Slide 30: Corporate Governance
Corporate Governance Doug Ramsey
Slide 31: Board and Executive Leadership
Board and Executive Leadership • Experience – Board and executive officers average 32 years of industry experience • Substantial Equity Ownership – 33.8% of common stock owned by directors (including affiliated funds) and named executive officers • 9 Member Board – 2 inside directors, 7 outside dire
Slide 32: Board of Directors
Board of Directors • Independent Directors – Jeff Benjamin, 48 • Senior Advisor to Cyrus Capital Partners, LP – Vince Cebula, 45 • Managing Director, Jefferies Capital Partners – Earl Ellis, 68 • Chairman and CEO, Whole Harvest Products • Former Managing Partner, Benjamin Jacobson & Sons, LLC, a NYS
Slide 33: Named Executive Officers
Named Executive Officers • Douglas H. Miller, 62 – Chairman and Chief Executive Officer • Stephen F. Smith, 68 – President and Chief Financial Officer • Harold L. Hickey, 53 – Vice President and Chief Operating Officer • J. Douglas Ramsey, Ph.D., 49 – Vice President – Finance, Treasurer and Special
Slide 34: Corporate Governance Ratings
Corporate Governance Ratings • RiskMetrics Group (formerly ISS) Corporate Governance Quotient (CGQ) at October 15, 2009 1 – Outperform 83.0% of the Russell 3000 – Outperform 74.7% of the Energy group • Corporate Governance Highlights – 7 of 9 directors are independent under NYSE rules – Full board e
Slide 35: Board Compensation
Board Compensation • Board – Non-employee directors receive $25,000 annual retainer in cash or EXCO common stock at director’s election – Employee directors are not separately compensated for director service – One time option grant of 50,000 shares upon joining the board – Reasonable out-of-pocket
Slide 36: Named Executive Officer Compensation
Named Executive Officer Compensation • Named Executive Officers have not received salary or bonus increases since April 2007 • Executive salaries and bonuses range from the 25th to the 50th percentile of those paid by peer companies • EXCO has retained Hewitt Associates to review executive compensat
Slide 37: Ownership Table As of October 15, 2009
Ownership Table As of October 15, 2009 Name Position Common Stock Ownership (1) Options Weighted Average Exercise Direct Affiliated (2) Total Percent (3) Granted Vested Price Doug Miller Chairman and CEO 4,565,644 0 4,565,644 2.2% 1,925,000 1,810,000 $ 8.36 Steve Smith President and CFO 579,405 0 57
Slide 38: Stock Option Grants
Stock Option Grants • Policy – New Hires: • In 2009, we shifted our policy from granting options to all new employees to granting options on a discretionary basis to selected new employees. This shift significantly reduced our burn rate. – Annual Option Bonus: • In 2008, 150 selected employees recei
Slide 39: Other Employee Benefits
Other Employee Benefits • EXCO’s officers participate in employee benefit plans including the 401(k) plan and medical, dental, vision, life and disability insurance on the same basis as the rest of EXCO’s employees • EXCO matches 100% of employee contributions to the 401(k) plan up to IRS limits • N
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