Exco Resources Inc · OTC:EXCE
Exco Resources — Investor Presentation (December 2007)
36 slides from Exco Resources's investor presentation, Dec 5, 2007
Slide 1: Investor Presentation December 2007
12/07 Investor Presentation December 2007
Slide 2: Disciplined Growth Strategy
Disciplined Growth Strategy EXCO’s formula for creating equity value enables us to deliver strong, sustainable equity returns over the long term
Slide 3: Key Investment Highlights
Key Investment Highlights Our track record and reserve base have positioned us as a Top 25 oil and natural gas company Outstanding Track Record 37.7% annualized growth in common share value since 1998 42% and 71% compounded growth rates in production and reserves since 2004 Outstanding Reserve Base
Slide 4: Business Strategy
Business Strategy Value creation from acquisitions occurs from effective development and efficient operation of our asset base Acquire quality assets Long life is key 50-75% producing 25-50% non-producing upside Focus on key areas with follow-on acquisition opportunities Develop and exploit Limit de
Slide 5: Execution of Acquisition Strategy: Dec - Sept
4,444 Execution of Acquisition Strategy: Dec 03 - Sept 07 Identifying additional unbooked upside on acquired assets provides future growth opportunities and value creation Acquired 1.8 Tcfe at $2.36 per Mcfe Added 254 Bcfe at $2.39 per Mcfe through the drill-bit Identified additional 2.3 Tcfe of low
Slide 6: Acquisition Economics are Driven by Market Conditions
Acquisition Economics are Driven by Market Conditions Accretive acquisitions can be made in various price environments $2.32 $2.42 $3.81 $4.06 $3.65 $5.13 $6.11 $8.53 23% 18% 20% 20% 29% 22% 24% 15% Acquisition cost as % of NYMEX gas prices 3-mo LIBOR $8.83 21% $8.24 29% Acquisition cost ($/Mcfe) Ma
Slide 7: Execution of Development & Exploitation Strategy: 2004-2007E
Execution of Development & Exploitation Strategy: 2004-2007E Spending ≈ 50% of EBITDA on development and exploitation has grown our proved reserves by 15% while leaving free cash to make acquisitions Capital as a % EBITDA 50% 41% 75% 54% 2005 2004 2006 2007E $37 $53 $214 $412 $759 $287 $129 $74 $0 $
Slide 8: Example of Value Enhancement on Acquired Properties
Example of Value Enhancement on Acquired Properties Since the acquisition of the Vernon Field, we have identified significant additional reserves and drilling locations Acquisition Effective Date of November 1, 2006 September 30, 2007 Proved Reserves Bcfe Unproved Upside Reserves Bcfe Production Bcf
Slide 9: Average Daily Production
Average Daily Production Acquisition and development efforts have more than tripled our production in 3 years 42 % CAGR Our balanced growth strategy has consistently provided growth for the company 19 33 34 34 63 65 136 334 380 29 36 48 2 6 6 8 0 50 100 150 200 250 300 350 400 1998 1999 2000 2001 20
Slide 10: Focus on Efficient Operations
Focus on Efficient Operations Operations Initiatives Operating Costs North Louisiana salt water disposal costs reduced from $2.40/Bbl in Q1 to $1.80/Bbl currently; further reduction to $0.85/Bbl expected by mid-2008 Brought many formerly contracted operations “in house” to reduce costs and schedulin
Slide 11: Free Cash Margin
Free Cash Margin Free cash margin has expanded providing more cash flow for growth $2.89 $2.31 $4.55 $4.06 Margin % Free Cash Margin Net Realized Price $2.31 $5.00 $2.89 $5.03 $4.55 $7.76 52% $4.06 $7.79 $4.06 Free Cash Margin per Mcfe $1.38 Operating Costs per Mcfe $2.35 Maintenance Capital per Mcf
Slide 12: Equity Performance
Equity Performance 5% $1,000 Invested 2/8/06 (IPO) 34% $1,000 Invested 10/3/05 (Equity restructuring) 54% $1,000 Invested 7/29/03 (Go private transaction) 38% $1,000 Invested 8/12/98 (First equity raise) Value as of November 29, 2007 Rate of Return Current Situation Trading below normal range of EBI
Slide 13: Reserve Base
Reserve Base Our regionally focused reserve base totals approximately 8.7 Tcfe 13 Bcfe Proved (<1%) 234 Bcfe 3P (5%) 1,234 Bcfe 3P+ (14%) 2 Mmcfe/d (1%) Proved Reserves = 1,920 Bcfe 3P Reserves = 4,245 Bcfe 3P+ Reserves = 8,689 Bcfe Rockies 147 Bcfe Proved (8%) 349 Bcfe 3P (8%) 648 Bcfe 3P+ (8%) 28
Slide 14: Undrilled, Low-Risk Upside by Region
Rockies Permian Basin East Texas / North Louisiana Undrilled, Low-Risk Upside Totals Approximately 2.9 Tcfe PUD Reserves = 554 Bcfe PRB Reserves = 736 Bcfe POS Reserves = 1,589 Bcfe 226 Bcfe Lance, Fort Union, Tensleep, Frontier, Mesa Verde formations Conventional limestone traps at 5,000’-17,500’ 1
Slide 15: Estimated Unbooked Potential
Rockies Permian Basin Appalachia Mid-Continent East Texas / North Louisiana 299 Bcfe Potential 22,000 acre field extension in progress Horizontal play in Dean / Sprayberry at Ackerly Wolfcamp / Clearfork oil play being evaluated by 3D 20,000 acre Tannehill shallow oil being worked – drilling 6 wells
Slide 16: Inventory for the Future
Inventory for the Future Includes over 18,000 drilling locations and 7.3 Tcfe of reserves
Slide 17: Midstream Operations
TGG 20” Extension – Adding 100+ Mmbtu/d of throughput to the existing TGG system. Adds additional sales points and targets a new area where we have an already established customer base Talco – located in extremely active area where Talco has long term dedication from the active producers Vernon – op
Slide 18: Performance Highlights
Performance Highlights $ In Millions 2004 2005 2006 9 Months 07 4 th Q 07 E 2007 E Oil & Natural Gas Revenue $ 142 $ 203 $ 356 $ 590 $ 214 $ 804 LOE $ 20 $ 20 $ 47 $ 81 $ 32 $ 113 Production Taxes 6 Total Production Costs $ 28 $ 31 $ 69 $ 121 $ 48 $ 168 Cash Operating Margin $ 114 $ $ 287 $ 469 $ 16
Slide 19: 2008 Capital Budget and Drilling Schedule
2008 Capital Budget and Drilling Schedule Drilling & Completion $462 MM (609 projects) Exploitation $32 MM (82 projects) Operations & Other $95 MM Midstream $19 MM East TX / N LA $ 338 MM Appalachia $ 69 MM Midcontinent $ 57 MM Permian / Rockies $ 125 MM Midstream $ 19 MM Total $ 608 MM $625MM inclu
Slide 20: Current Hedge Position
Current Hedge Position Mitigates market risk and locks in future cash flow for development and acquisition program Target hedging 65-80% of production volumes for 3-5 years Hedging program covers long term debt Only 14% of Proved Reserves hedged Gas Mm cf Contract price per Mm cf Oil Mb bls Contract
Slide 21: Net Asset Value Summary
Net Asset Value Summary In millions, except per share and per unit Low High Proved Reserves 1.9 Tcfe at $2.50 to $3.00 per Mcfe $ 4,8 00 $ 5,760 Low - risk Unproved Upside 2. 3 Tcfe at $0.50 to $0.75 per Mcfe 1, 166 1,748 Potential Upside 4.4 Tcfe - - Midstream Assets 500 500 Total Asset Value $6, 4
Slide 22: Peer Operational and Financial Profile
Peer Operational and Financial Profile 1) Peer reserves as of 12/31/06 and adjusted based on latest disclosed acquisitions and dispositions since 12/31/06 2) Peer daily production as of 9/30/07 per third quarter 2007 report and XCO fourth quarter daily production estimate 3) Enterprise value based o
Slide 23: Peer Operational and Financial Profile
Peer Operational and Financial Profile 1) Peer reserves as of 12/31/06 and production based on most recently filed quarterly run-rate, both pro forma for announced acquisitions and dispositions. 2) Peer data as of 12/31/06 per 2006 10-K; EXCO pro forma for closed acquisitions and dispositions 3) 200
Slide 24: Regional Overviews
Regional Overviews
Slide 25: Areas of Operation
Areas of Operation Wyoming Acreage Mocane Laverne Watonga Chickasha Golden Trend Longwood / Waskom Vernon Holly / Caspiana Gladewater Tyler Area Sugg Ranch Ackerly Northern WV Eastern OH Northwestern PA Central PA Southern WV Pecos Slope Vinegarone New Albany Shale Northern WV Reydon
Slide 26: East Texas/North Louisiana
East Texas/North Louisiana East Texas overview: Part of the Cotton Valley Sand trend, which covers parts of the East Texas Basin and Northern Louisiana Salt Basin Long-life reserves in a concentrated geographical area High drilling success rates (98+%) Relatively high initial production rates Drilli
Slide 27: East Texas/North Louisiana Low-risk and potential upside
East Texas/North Louisiana Low-risk and potential upside Gladewater Downspacing Geoscience evaluation ongoing Horizontal Drilling Longwood/Waskom Complete in Hosston Downspacing Vernon Drilled 24 wells in 2008 Testing field limits Downspacing opportunities Increased locations from 15 to 281 100+ ref
Slide 28: Appalachia
Appalachia EXCO entered the Appalachia Basin in January 2004 through its acquisition of North Coast Energy, Inc for $224 million. Have grown through acquisitions, completing more than 10 acquisitions totaling $320 million since entry into the basin in 2004. Investing $69 MM of total capital to drill
Slide 29: Appalachia
Appalachia Central PA 182,231 net acres 379 Bcfe 3P reserves 3,813 3P drill sites 2008 drilling – 132 wells Northwest PA 77,274 net acres 95 Bcfe 3P reserves 768 3P drill sites 2008 drilling – 29 wells Eastern OH 215,823 net acres 84 Bcfe 3P reserves 397 locations 2008 drilling – 31 wells Northern W
Slide 30: Appalachia Potential Marcellus Shale
Appalachia Potential Marcellus Shale EXCO’s Marcellus opportunity totals 2.6 Tcfe Overpressured Marcellus acreage (counties in yellow) – 192,027 (Gross) 185,830 (Net) Total Marcellus acreage – 350,000+ (Gross) Commingling the normal to under-pressured shale located in shallower areas in the basin wi
Slide 31: Permian / Rockies
Permian / Rockies The Permian Basin and Wyoming’s Big Horn basin are characterized as mature oil focused areas EXCO’s activities are focused on conventional gas properties Targeting prolific shallow natural gas reservoirs Potential for multi-pay horizons including Wolfcamp and Clearfork oil pay Long
Slide 32: Permian / Rockies Low-risk and potential upside
Permian / Rockies Low-risk and potential upside Wyoming Leasehold 122,000 net acres total in Wind River, Powder River and Big Horn Basins (26,000 net) Will drill 8 wells in 2008, testing in Wind River and Big Horn Basins Evaluating Boone Dome Considering JV Ackerly 2 horizontal tests in 2008 40 more
Slide 33: Mid-Continent
Mid-Continent Mid-Continent overview: Properties located in the Anadarko Shelf and Anadarko Basin of Oklahoma, Texas and Kansas Stratigraphic plays with multiple, stacked pay zones Number of fields in area have long production histories Future acquisition opportunities Small operators seeking liquid
Slide 34: Mid-Continent Potential upside
Mid-Continent Potential upside Mocane Laverne Atoka recompletions Drill Basal Chester Evaluating 3D applicability to detect deeper hydrocarbons Considering future horizontal drilling opportunities Golden Trend Downspacing to 40 acres in Chitwood Blowdown Norge Marchand Unit Future horizontal drillin
Slide 35: 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 f
Slide 36: Forward Looking Statements (continued)
(continued) Forward Looking Statements 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
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