<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number 0-9204
EXCO RESOURCES, INC.
(Exact name of registrant as specified in its charter)
TEXAS 74-1492779
(State of incorporation) (I.R.S. Employer
Identification No.)
5735 PINELAND DR., SUITE 235
DALLAS, TEXAS 75231
(Address of principal executive offices) (Zip Code)
(214) 368-2084
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--- ---
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the last practicable date.
Class: Common Stock, par value $0.02 per share
Outstanding at August 4, 2000: 6,837,250 shares
(excludes 10,446 treasury shares)
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EXCO RESOURCES, INC.
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)..............................2
Condensed Consolidated Balance Sheets
December 31, 1999 and June 30, 2000...........................2
Condensed Consolidated Statements of Operations
Three and Six Months Ended June 30, 1999 and 2000.............3
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, 1999 and 2000.......................4
Notes to Condensed Consolidated Financial Statements..........5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................18
Item 3. Quantitative and Qualitative Disclosure About Market Risk....23
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.............................26
Signatures...............................................................31
Index to Exhibits........................................................32
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
EXCO RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except per share data)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------ --------
1999 2000
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ......................................... $ 9,972 $ 15,961
Accounts receivables:
Oil and natural gas sales ................................. 824 3,831
Joint interest ............................................ 1,914 448
Interest and other ........................................ 18,818 118
Other ............................................................. 71 259
-------- --------
Total current assets .................................... 31,599 20,617
Oil and natural gas properties (full cost accounting method):
Proved developed and undeveloped oil and natural gas properties ... 24,177 45,144
Allowance for depreciation, depletion and amortization ............ (5,503) (7,288)
-------- --------
Oil and natural gas properties, net ............................... 18,674 37,856
Office and field equipment, net ...................................... 264 271
Deferred financing costs ............................................. 8 140
Investment in EXUS Energy, LLC ....................................... 257 --
Deferred tax asset ................................................... -- 130
Other assets ......................................................... 130 157
-------- --------
Total assets ............................................ $ 50,932 $ 59,171
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable .................................................. $ 3,870 $ 1,237
Revenues and royalties payable .................................... 1,136 1,404
Accrued interest payable .......................................... 10 180
Current maturities of long-term debt .............................. 5,001 --
-------- --------
Total current liabilities ............................... 10,017 2,821
Long-term debt, less current maturities .............................. -- 10,834
Deferred income taxes ................................................ -- 1,426
Other long-term liabilities .......................................... 227 227
Minority interest in limited partnership ............................. (192) --
Stockholders' equity:
Preferred stock, $.01 par value:
Authorized shares - 10,000,000
Outstanding shares - None ................................. -- --
Common stock, $.02 par value:
Authorized shares - 25,000,000
Issued and outstanding shares - 6,805,196 and 6,842,696
at December 31, 1999 and June 30, 2000, respectively ...... 136 137
Additional paid-in capital ........................................ 46,941 47,295
Notes receivable-officers ......................................... (1,552) (1,605)
Deficit eliminated in quasi-reorganization ........................ (8,799) (8,799)
Retained earnings since December 31, 1997 ......................... 4,154 6,924
Treasury stock, at cost: 0 and 10,446 shares at
December 31, 1999 and June 30, 2000, respectively .............. -- (89)
-------- --------
Total stockholders' equity .............................. 40,880 43,863
-------- --------
Total liabilities and stockholders' equity .............. $ 50,932 $ 59,171
======== ========
</TABLE>
See accompanying notes.
2
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EXCO RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
1999 2000 1999 2000
------- ------- ------- -------
<S> <C> <C> <C> <C>
REVENUES:
Oil and natural gas ................................ $ 1,381 $ 5,204 $ 2,050 $ 9,229
Other income ....................................... 317 354 632 747
Equity in the earnings of EXUS Energy, LLC ......... 126 -- 126 --
Gain on disposition of property .................... -- -- -- 535
------- ------- ------- -------
Total revenues .............................. 1,824 5,558 2,808 10,511
COSTS AND EXPENSES:
Oil and natural gas production ..................... 611 1,827 979 3,211
Depreciation, depletion and amortization ........... 445 1,024 739 1,871
General and administrative ......................... 448 532 922 949
Interest ........................................... 0 213 1 284
------- ------- ------- -------
Total costs and expenses .................... 1,504 3,596 2,641 6,315
------- ------- ------- -------
Income before income taxes and minority interest ...... 320 1,962 167 4,196
Minority interest in limited partnership .............. (5) -- (5) --
------- ------- ------- -------
Income before income taxes ............................ 325 1,962 172 4,196
Deferred income tax provision ......................... -- 667 -- 1,426
------- ------- ------- -------
Net income ............................................ $ 325 $ 1,295 $ 172 $ 2,770
======= ======= ======= =======
Basic and diluted earnings per share .................. $ .05 $ .19 $ .03 $ .40
======= ======= ======= =======
Weighted average number of common and
common equivalent shares outstanding:
Basic .......................................... 6,688 6,822 6,688 6,819
======= ======= ======= =======
Diluted ........................................ 6,719 6,880 6,718 6,863
======= ======= ======= =======
</TABLE>
See accompanying notes.
3
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EXCO RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------
1999 2000
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<S> <C> <C>
OPERATING ACTIVITIES:
Net income ...................................................... $ 172 $ 2,770
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization ................. 739 1,871
Deferred income taxes .................................... -- 1,426
Gain on disposition of properties ........................ -- (535)
Effect of changes in:
Accounts receivable .................................. (810) 17,159
Other current assets ................................. 104 (188)
Accounts payable and other current liabilities ....... 384 (2,195)
-------- --------
Net cash provided by operating activities ................... 589 20,308
INVESTING ACTIVITIES:
Additions to property and equipment ............................. (748) (20,288)
Proceeds from disposition of property and equipment ............. 1,340 570
Investment in Rio Grande, Inc. promissory note .................. 7,451 --
Acquisition of Rio Grande, Inc. ................................. (7,017) --
Investment in EXUS Energy, LLC .................................. (7,340) 257
Purchase of Venus Exploration, Inc. promissory note ............. (7,000) --
Other investing activities ...................................... (13) (340)
-------- --------
Net cash used in investing activities ....................... (13,327) (19,801)
FINANCING ACTIVITIES:
Proceeds from long-term debt .................................... -- 10,834
Payments on long-term debt ...................................... (10) (5,280)
Proceeds from exercise of stock options ......................... -- 225
Interest income on notes receivable - officers .................. (46) (53)
Purchase of treasury stock (cost method) ........................ -- (89)
Deferred financing costs ........................................ (4) (155)
-------- --------
Net cash provided by (used in) financing activities ......... (60) 5,482
-------- --------
Net increase (decrease) in cash ................................. (12,798) 5,989
Cash at beginning of period ..................................... 21,493 9,972
-------- --------
Cash at end of period ........................................... $ 8,695 $ 15,961
======== ========
SUPPLEMENTAL CASH FLOWS INFORMATION:
Interest paid ................................................... $ 1 $ 114
======== ========
Income taxes paid ............................................... $ -- $ --
======== ========
</TABLE>
See accompanying notes.
4
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EXCO RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
1. BASIS OF PRESENTATION
In management's opinion, the accompanying financial statements contain
all adjustments (consisting solely of normal recurring accruals) necessary to
present fairly the financial position of EXCO Resources, Inc. as of December 31,
1999 and June 30, 2000, the results of operations for the three and six month
periods ended June 30, 1999 and 2000, and the cash flows for the six month
periods ended June 30, 1999 and 2000.
We have prepared the accompanying unaudited financial statements
pursuant to the rules and regulations of the Securities and Exchange Commission.
We have omitted certain information and disclosures normally included in annual
financial statements prepared in accordance with accounting principles generally
accepted in the United States pursuant to those rules and regulations, although
we believe that the disclosures we have made are adequate to make the
information presented not misleading. You should read these financial statements
in conjunction with our financial statements and notes included in our Annual
Report on Form 10-K for the year ended December 31, 1999. The accompanying
condensed consolidated financial statements include the financial statements of
EXCO Resources, Inc., EXCO (Delaware), Inc., Rio Grande Gulfmex, Ltd., EXUS
Energy, LLC, and Pecos-Gomez, L.P. The financial statements of Pecos-Gomez, L.P.
have been consolidated proportionally based on EXCO's 55.1% aggregate ownership
interest in the partnership. As discussed in Note 13. Quarterly Financial
Results to our consolidated financial statements included in our Annual Report
filed on Form 10-K for the year ended December 31, 1999, the condensed
consolidated balance sheets as of June 30, 1999 and September 30, 1999, the
condensed consolidated statements of operations for the three and six month
periods ended June 30, 1999, and the three and nine month periods ended
September 30, 1999, and the condensed consolidated statements of cash flows for
the six month period ended June 30, 1999 and the nine month period ended
September 30, 1999, have been restated to reflect a change from the proportional
consolidation method to the equity method of accounting for our investment in
EXUS Energy, LLC. Any comparisons made in this Form 10-Q to the three and six
month periods ended June 30, 1999, use these restated results.
The results of operations for the three and six month periods ended
June 30, 2000, are not necessarily indicative of the results we expect for the
full year.
Effective January 1, 1998, we adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" which establishes standards
for reporting and display of comprehensive income and its components in a full
set of general purpose financial statements. Comprehensive income includes net
income and other comprehensive income, which includes, but is not limited to,
unrealized gains from marketable securities and futures contracts, foreign
currency translation adjustments and minimum pension liability adjustments. For
the three and six month periods ended June 30, 1999 and 2000, our net income and
comprehensive income were the same.
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS 133). SFAS 133 establishes accounting
and reporting standards requiring that every
5
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EXCO RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
derivative instrument (including certain derivative instruments embedded in
other contracts) be recorded on the balance sheet as either an asset or
liability measured at its fair value. SFAS 133 requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results from the hedged
item on the income statement. Companies must formally document, designate, and
assess the effectiveness of transactions that receive hedge accounting.
SFAS 133 is effective for fiscal years beginning after June 15, 2000;
however, beginning June 16, 1998, companies may implement the statement as of
the beginning of any subsequent fiscal quarter. SFAS 133, when adopted by us,
cannot be applied retroactively and must be applied to (a) derivative
instruments and (b) certain derivative instruments embedded in hybrid contracts
that were issued, acquired, or substantively modified after December 31, 1997.
We may apply, at our election, SFAS 133 to the derivative instruments listed in
(a) and (b) above if they were issued, acquired, or modified before January 1,
1998. We have not yet quantified the impact of adopting SFAS 133 on the
financial statements and have not determined the timing of or method of adoption
of SFAS 133.
Certain prior year amounts have been reclassified to conform to current
year presentation.
2. QUASI-REORGANIZATION
Effective December 31, 1997, we effected a quasi-reorganization by
applying approximately $8.8 million of our additional paid-in capital account to
eliminate our accumulated deficit. Our board of directors decided to effect a
quasi-reorganization given the change in management, the infusion of new equity
capital and an increase in our activities. Our accumulated deficit was primarily
related to past operations and properties that have been disposed of. We did not
adjust the historical carrying values of our assets and liabilities in
connection with the quasi-reorganization.
3. EARNINGS PER SHARE
Statement of Financial Accounting Standards No. 128, "Earnings per
Share" which became effective in 1997, requires presentation of two calculations
of earnings per common share. Basic earnings per common share equals net income
divided by weighted average common shares outstanding during the period. Diluted
earnings per common share equals net income divided by the sum of weighted
average common shares outstanding during the period plus any dilutive shares
assumed to be issued. Common stock equivalents are shares assumed to be issued
if outstanding stock options were in-the-money, and exercised.
6
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EXCO RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
4. REVERSE STOCK SPLITS
At our 1996 annual meeting of shareholders, our shareholders approved
an amendment to our articles of incorporation, authorizing a one-for-five
reverse stock split of our common stock, which became effective July 19, 1996.
At our 1998 annual meeting of shareholders, our shareholders approved an
amendment to our articles of incorporation, authorizing a one-for-two reverse
stock split of our common stock, which became effective March 31, 1998. We have
adjusted all share and per share numbers retroactively to record the effects of
the reverse stock splits.
5. OIL AND NATURAL GAS PROPERTIES
We have recorded oil and natural gas properties at cost using the full
cost method of accounting, as prescribed by the Securities and Exchange
Commission. Under the full cost method, all costs associated with the
acquisition, exploration or development of oil and natural gas properties are
capitalized as part of the full cost pool. Capitalized costs are limited to the
aggregate of the present value of future net reserves plus the lower of cost or
fair market value of unproved properties.
Depreciation, depletion, and amortization of evaluated oil and natural
gas properties is accounted for using the unit-of-production method based on
total proved reserves, as determined by independent petroleum reservoir
engineers.
Sales, dispositions, and other oil and natural gas property retirements
are accounted for as adjustments to the full cost pool, with no recognition of
gain or loss unless the disposition would significantly alter the amortization
rate.
6. BANK OF AMERICA CREDIT AGREEMENTS
EXCO Resources, Inc.
On February 11, 1998, we entered into a credit facility with
NationsBank of Texas, N.A. The credit facility provided for borrowings up to $50
million, subject to borrowing base limitations. On September 21, 1998, we
entered into the first amendment to the credit facility with NationsBank, N.A.
(successor by merger to NationsBank of Texas, N.A.). The first amendment
provides for borrowings up to $150 million, subject to borrowing base
limitations, as determined by the lenders from time to time. On February 11,
2000, we entered into the second amendment to the credit facility with Bank of
America, N.A. (successor by merger to NationsBank, N.A.). The second amendment
provides for a new termination date, an increase in our borrowing base, subject
to certain conditions, and an increase in certain thresholds customary for a
growing company. Under the credit facility, we are required to pay a fee equal
to .25% on any accepted increase in the borrowing base in excess of the
previously determined borrowing
7
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EXCO RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
base and an unused commitment fee of .30% to .425% based on the ratio of
outstanding credit to the borrowing base. The maturity date of the credit
facility is February 11, 2002.
The credit facility provides that if our outstanding credit is less
than $5 million, then our interest rate will be LIBOR plus 1.5%. If our
outstanding credit is greater than $5 million, then the credit facility provides
that our interest rate will be either Bank of America's prime rate or LIBOR plus
between 1% and 1.75% based on the ratio of outstanding credit to the borrowing
base.
There are no scheduled principal payments due on the credit facility
until maturity. However, the borrowing base will be redetermined on or around
April 1st and October 1st of each year. A borrowing base deficiency is created
in the event that the outstanding loan balances exceed the borrowing base, as
determined by the lenders in their sole discretion. Upon such event the
borrowing base deficiency must be repaid by:
o mandatory reductions of the deficiency over a period of not
more than 6 months;
o making a lump sum payment equal to the deficiency; or
o providing additional collateral acceptable to lenders in their
sole discretion sufficient to increase the borrowing base and
eliminate the deficiency.
Borrowings under the credit facility are secured by first and prior
liens covering 90% of the recognized value of all proved mineral interests owned
by us. The credit facility contains various restrictive covenants, including
limitations on the granting of liens, restrictions on the issuance of additional
debt, requirements to maintain a net worth of at least $500,000 plus 50% of our
consolidated cumulative net income beginning January 1, 1999, and to maintain a
current ratio of not less than 1.0 to 1.0, and currently prohibits the payment
of dividends on our capital stock.
Pecos-Gomez, L.P.
See Note 8. Acquisitions - Pecos County Properties Acquisition for a
description of the Pecos-Gomez, L.P. credit facility.
7. HEDGING ACTIVITIES
In an effort to reduce the effects of the volatility of the price of
oil and natural gas on our operations, management has adopted a policy of
hedging oil and natural gas prices whenever such prices are in excess of the
prices anticipated in our operating budget and profit plan through the use of
commodity futures, options, and swap agreements. Hedging transactions require
the approval of our board of directors.
8
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EXCO RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
On September 21, 1999, we entered into an oil commodity swap with a
counterparty to sell notional volumes of 7,000 barrels (Bbls) per month at a
fixed price of $21.00 per Bbl based on NYMEX pricing. The transaction was
effective October 1, 1999, and terminates September 30, 2000. On March 13, 2000,
we entered into an oil commodity swap with a counterparty to sell notional
volumes of 10,000 Bbls per month at prices ranging from $24.90 to $29.23 per Bbl
based on NYMEX pricing. The transaction was effective April 1, 2000, and
terminates September 30, 2000. On March 13, 2000, we entered into a natural gas
commodity swap with a counterparty to sell notional volumes of 60,000 million
British thermal units (Mmbtus) per month at prices ranging from $2.70 to $2.75
per Mmbtu based on NYMEX pricing. The transaction was effective April 1, 2000,
and terminates September 30, 2000. The fair value at June 30, 2000, of all of
our commodity swaps was a liability of approximately $578,000 and has been
estimated from a quote provided by the counterparty. This liability represents
the estimated amount that we would expect to pay to terminate the agreements on
June 30, 2000.
The following table sets forth our oil and natural gas prices, both
realized before hedge results, and realized including hedge results; and the net
effects of settlements of oil and natural gas price hedges on revenue:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
------------ -----------
2000 2000
----------- -----------
<S> <C> <C>
Average price per Bbl - realized before hedge results ........... $ 27.41 $ 27.39
Average price per Bbl - realized including hedge results ........ $ 24.87 $ 25.04
Average price per Mcf - realized before hedge results ........... $ 3.12 $ 2.82
Average price per Mcf - realized including hedge results ........ $ 3.05 $ 2.77
Total reduction in revenue ...................................... $ 249,000 $ 412,000
</TABLE>
8. ACQUISITIONS
We have accounted for the following acquisitions in accordance with APB
No. 16, "Business Combinations" where applicable.
EXCO Energy Investors, L.L.C.
On October 9, 1998, we formed a $50 million joint venture with an
institutional investor to acquire oil and natural gas related assets and
securities. Under the terms of the joint venture agreement, we were required to
contribute 5% of the joint venture's capital expenditures.
9
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EXCO RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
Related to an investment made by the joint venture, we presented a
restructuring plan to National Energy Group, Inc.'s bondholders' committee on
February 24, 1999. The proposal consisted of a combination of shares of our
common stock and approximately $58 million cash to satisfy all secured and
unsecured liabilities and to acquire the assets of National Energy. The plan
anticipated no consideration for the preferred or common equity of National
Energy. The plan was subject to conditions which included approval by (1) EXCO's
board of directors; (2) EXCO's shareholders; (3) EXCO's bank lenders; (4) due
diligence and (5) the U. S. Bankruptcy Court. This proposal was not accepted by
National Energy, its creditors' constituencies or the U.S. Bankruptcy Court.
On November 1, 1999, we participated in an auction of National Energy's
oil and natural gas properties. We were not the winning bidder on these assets.
The joint venture sold the debt securities of National Energy it owned on
November 11, 1999, and was subsequently dissolved on December 3, 1999. We made a
pre-tax gain of approximately $65,000 on our investment in the joint venture.
Rio Grande, Inc. Acquisition
On November 2, 1998, we acquired a promissory note from a Texas bank
for $6.4 million which was secured by substantially all of the assets of Rio
Grande, Inc., its subsidiaries and affiliated entities. Rio Grande, Inc. was an
oil and natural gas producer with principal operations in Texas, Oklahoma,
Louisiana, and Mississippi. At the same time we purchased the note, we also
entered into an agreement with Rio Grande, Inc. and Rio Grande, Inc.'s sole
holder of preferred stock, regarding plans for the ultimate satisfaction of Rio
Grande, Inc.'s debt, including the proposed acquisition of Rio Grande, Inc. or
its assets by us.
On November 12, 1998, Rio Grande, Inc. announced that it had filed for
reorganization under Chapter 11 of the Bankruptcy Code. As the largest secured
creditor, we had negotiated a plan for financial restructuring with Rio Grande,
Inc. and the holder of its preferred stock. On March 5, 1999, the court
confirmed the proposed plan. Pursuant to the terms of the plan, Rio Grande, Inc.
fully repaid its trade creditors. Several of the subsidiaries or affiliates were
merged into Rio Grande, Inc. Then, the outstanding shares of Rio Grande, Inc.'s
common and preferred stock were canceled. We were issued new shares of Rio
Grande, Inc. as settlement of Rio Grande Inc.'s $13 million secured indebtedness
owed to us. The new shares represented all of the outstanding capital stock of
Rio Grande, Inc., and we became the owners of Rio Grande, Inc. effective on
March 16, 1999. On March 30, 1999, Rio Grande, Inc. was merged into EXCO. The
acquisition was recorded as a purchase.
Jackson Parish Properties Acquisition and Disposition
On June 30, 1999, we formed a joint venture with Venus Exploration,
Inc. called EXUS Energy, LLC. On June 30, 1999, EXUS Energy, LLC, a Delaware
limited liability company,
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EXCO RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
owned 50% by EXCO and 50% by Venus Exploration, Inc., completed the acquisition
from Apache Corporation of certain oil and natural gas properties located in
Jackson Parish, Louisiana (the Jackson Parish Properties). Venus is a
publicly-held oil and gas exploration company based in San Antonio, Texas. The
purchase price, before closing adjustments, was approximately $28.5 million
cash, (approximately $27.6 million after contractual adjustments). EXCO and
Venus initially capitalized EXUS with $14 million of equity capital, all of
which was applied to fund the purchase of the Jackson Parish Properties. EXUS
also arranged a credit facility through NationsBank, N.A. to fund $14 million of
the Jackson Parish Properties acquisition, additional development drilling of
the properties and additional acquisitions. The purchase price was determined
based upon arms-length negotiations between Apache Corporation and Venus taking
into account reserve estimates and other items customarily considered in
acquisitions of this type.
Of the initial $14 million of EXUS equity capital, $7 million was
provided by EXCO from its cash on hand, and $7 million was provided by Venus
from borrowed funds. On June 30, 1999, Venus borrowed $7 million from EXCO under
the terms of an $8 million convertible promissory note. A provision of the note
provided for a voluntary prepayment on any or all of the note by Venus (subject
to a prepayment penalty of 3.57% of the principal prepaid for any prepayment
occurring on or prior to July 1, 2000).
On December 31, 1999, EXUS conveyed 100% of the leasehold and mineral
interests it held in Jackson Parish, Louisiana, to its equity members in
proportion to their respective membership interests.
Then on December 31, 1999, pursuant to the terms of a Purchase, Sale
and Exchange agreement dated December 17, 1999, and subsequent amendment dated
December 31, 1999, between EXCO, as seller, and Anadarko Petroleum Corporation,
as buyer, EXCO sold to Anadarko the property interests conveyed to it by EXUS.
The gross consideration was approximately $18.7 million cash ($18.8 million cash
after final adjustments which principally reflect production since October 1,
1999, the effective date of the sale), and oil and gas leasehold interests
located in Seward and Meade Counties, Kansas, valued by the parties at $800,000.
EXCO recorded a pre-tax gain from the sale of approximately $5.1 million in
December 1999, and $535,000 in March 2000. The price was determined through
arms-length negotiation between the parties.
The instruments of conveyance were executed and delivered into escrow
on and dated as of December 31, 1999. The cash consideration was paid to the
escrow agent on January 6, 2000. The conveyance documents were delivered by the
escrow agent to Anadarko on January 6, 2000. The payment of cash was delayed due
to the anticipation of the potential for a Y2K disruption to the banking system.
The Jackson Parish Properties which were sold included 17 gross (7.125
net to EXCO's interest) producing wells. EXCO was the named operator of the
Jackson Parish Properties. The
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EXCO RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
Jackson Parish Properties sold included approximately 6,410 gross (2,830 net to
EXCO's interest) developed acres and approximately 1,530 gross (570 net to
EXCO's interest) undeveloped acres. As of October 1, 1999, the Jackson Parish
Properties were estimated to contain net total proved reserves to EXCO's
interest of 1,340 Bbls of oil and natural gas liquids, and 32.7 billion cubic
feet (Bcf) of natural gas. Net production to EXCO's interest as of November
1999, was running approximately 85.7 million cubic feet (Mmcf) per month of
natural gas, and no barrels of oil or condensate. Anadarko took over operations
on January 1, 2000.
The proceeds received by EXCO were placed in a tax-deferred escrow
account with Texas Escrow Company, Inc. of Dallas, Texas, under terms of a
Deferred Exchange Agreement between EXCO and Texas Escrow executed on December
31, 1999. The Exchange Agreement is designed to comply with the like-kind
exchange provisions of Section 1031 of the Internal Revenue Code which permits
the deferral of gains from a sale of assets if specific like-kind exchange
reinvestment criteria are met. If EXCO is successful in meeting the like-kind
exchange provisions, some, if not most, of the federal and state tax payments on
the gain from the sale of the Jackson Parish Properties will be deferred to
future periods. A portion of the assets purchased in Natchitoches Parish,
Louisiana, and Val Verde County, Texas, described below, meet the requirements
for a like-kind exchange. Therefore, EXCO will be permitted to defer at least
some of its gain on the sale of the Jackson Parish Properties.
Under terms of the Escrow Agreement For Closing Funds and Closing
Documents (the Escrow Agreement) dated December 31, 1999, by and among Anadarko,
Venus, EXUS, EXCO, Wells Fargo Bank (Texas), N.A., Texas Escrow and American
Escrow Company, the Credit Agreement among EXUS, as borrower, and NationsBank,
N.A., as Administrative Agent, was paid in full on January 6, 2000. The payoff
amount consisted of $14.2 million of principal, and approximately $28,000 for
accrued interest and unused line fees.
Also, on December 31, 1999, pursuant to the terms of a separate
Purchase and Sale Agreement dated December 17, 1999, between Venus, as seller,
and Anadarko, as buyer, Venus sold to Anadarko the property interests conveyed
to it by EXUS. The gross consideration was approximately $18.9 million cash
($19.0 million cash after final adjustments which principally reflect production
since October 1, 1999, the effective date of the sale). The proceeds received by
Venus were placed in an escrow account with American Escrow.
Then, under terms of the Escrow Agreement, Venus paid in full $7.0
million of principal, approximately $369,000 of accrued interest, and a $250,000
pre-payment penalty owed to EXCO under terms of the $8 million convertible
promissory note made between Venus and EXCO dated June 30, 1999.
As a result of the sale, EXUS was dissolved effective December 31,
1999, with a nominal amount of working capital retained to wind-up the affairs
of the joint venture.
12
<PAGE> 14
EXCO RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
Natchitoches Parish Properties Acquisition
On December 31, 1999, under terms of a Purchase and Sale Agreement
dated November 16, 1999, which was subsequently amended on December 21, 1999,
between Western Gas Resources, Inc., as seller, and EXCO, as buyer, EXCO
purchased certain oil and gas assets located in Natchitoches Parish, Louisiana
from Western (the Natchitoches Parish Properties) for consideration of $7.8
million cash (approximately $7.2 million after contractual adjustments). All
risk of loss and rights associated with the properties were transferred to EXCO
on December 31, 1999. The assets include Western's interest in the Black Lake
Unit and the Black Lake processing and treating facilities.
Of the $7.8 million purchase price, a $5.0 million non-refundable cash
deposit was paid by EXCO to Western on December 22, 1999, and a current
liability in the form of a note payable to Western in the approximate amount of
$2.2 million (reflecting contractual adjustments) was booked by EXCO on December
31, 1999. This note was subsequently paid off on January 7, 2000. The payment of
the note payable was delayed due to the anticipation of the potential for a Y2K
disruption to the banking system. Of the $7.2 million net purchase price,
approximately $1.4 million has been allocated to the plants. The plants are not
subject to the like-kind exchange treatment as the cash used for this portion of
the purchase was paid directly from EXCO. After deducting the value allocated
and paid on the plants, approximately $5.8 million was allocated to the
leasehold interests, mineral interests, and equipment. This amount was paid with
tax-deferred exchange proceeds held by Texas Escrow. This use of tax-deferred
exchange proceeds is in compliance with the like-kind exchange provisions of
Section 1031 of the Internal Revenue Code described in EXCO's Form 8-K filed on
January 18, 2000, dated December 31, 1999. The price was determined through
arms-length negotiation between the parties.
The Natchitoches Parish Properties include 29 gross (20.0 net)
producing wells out of a total of 75 gross wells. EXCO is the named operator of
the Natchitoches Parish Properties and assumed operations of all 75 wells
acquired in the transaction. The Natchitoches Parish Properties include
approximately 14,250 gross (10,590 net) developed acres and approximately 10,390
gross (8,320 net) undeveloped acres. As of September 1, 1999, the Natchitoches
Parish Properties were estimated to contain net reserves of 570,000 Bbls of oil
and natural gas liquids and 4.5 Bcf of natural gas. EXCO took over operations on
January 7, 2000.
Val Verde County Properties Acquisition
On February 25, 2000, EXCO purchased certain oil and gas assets located
in Val Verde County, Texas from RVC Energy, Inc. (the Val Verde County
Properties). The Val Verde County Properties include 21 gross (9.8 net)
producing wells. EXCO is operator of 18 of the wells acquired in the
transaction. The Val Verde County Properties include approximately 5,330 gross
(3,370 net) developed acres and approximately 2,030 gross (510 net) undeveloped
acres. As of December 31, 1999, total proved reserves net to EXCO's interest
included 19.1 Bcf of natural gas. Production for December 1999, net to EXCO's
interest was approximately 106 Mmcf of natural gas.
13
<PAGE> 15
EXCO RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
The purchase price of $12.2 million cash (approximately $11.4 million
after contractual adjustments) was paid from existing working capital and
borrowings of $7.1 million under EXCO's credit facility. The effective date of
the acquisition was October 1, 1999. These assets qualify as eligible
replacement properties under EXCO's tax-deferred exchange agreement. This use of
tax-deferred exchange proceeds is in compliance with the like-kind exchange
provisions of Section 1031 of the Internal Revenue Code. The price was
determined through arms-length negotiation between the parties.
Pecos County Properties Acquisition
On March 24, 2000, under terms of a purchase and sale agreement dated
February 22, 2000, Humphrey-Hill, L.P., a Texas limited partnership (the
Partnership), completed the acquisition from the Nebraska Public Gas Agency
(Seller) of certain oil and natural gas properties located in Pecos County,
Texas (the Pecos County Properties). On March 24, 2000, the Partnership was
owned 50% by Taurus Acquisition, Inc. as a limited partner (Taurus is a
wholly-owned subsidiary of EXCO), 49% by certain private investors as limited
partners and 1% by EXCO as general partner. The Pecos County Properties include
8 gross (4.25 net) producing wells. EXCO is the named operator and assumed
operations of 5 of the wells acquired in the transaction. As of January 1, 2000,
the Pecos County Properties were estimated to contain 25.1 Bcf of natural gas.
The purchase price, before closing adjustments, was approximately $10.2
million cash (approximately $10.1 million after contractual adjustments). The
purchase price was paid with $6.6 million drawn under a new credit facility
established by the Partnership and $3.5 million of Partnership equity capital.
The effective date of the acquisition was January 1, 2000. The purchase price
was determined based upon arms-length negotiations between Seller and the
Partnership, taking into account reserve estimates and other items customarily
considered in acquisitions of this type.
Limited Partnership Agreement. EXCO, Taurus and the other investors
(the Humphrey-Hill Partners) have entered into an Amended and Restated
Agreement of Limited Partnership (the Partnership Agreement). The partners share
ratably in the profits and losses of the Partnership, subject to special
allocations in certain events. The Partnership's principal business purpose is
initially the management and development of the Pecos County Properties. The
partners have established an area of mutual interest in respect of the Pecos
County Properties which governs any additional acquisitions of properties by any
partner within the area.
Effective April 14, 2000, the Humphrey-Hill Partners entered into a
Transfer and Assignment Agreement which transferred Taurus' 50% partnership
interest to EXCO
14
<PAGE> 16
EXCO RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
(Delaware), Inc., a Delaware corporation. EXCO (Delaware) is a wholly owned
subsidiary of EXCO. Also effective April 14, 2000, the partnership name was
changed to Pecos-Gomez, L.P. under an Amended and Restated Certificate of
Limited Partnership. Subsequently, the Partnership Agreement was amended to
reflect the transfer of the Taurus partnership interest and name change.
Effective May 16, 2000, under terms of a Transfer and Assignment Agreement
dated May 16, 2000, EXCO (Delaware), Inc. purchased an additional 4.13742%
limited partnership interest in Pecos-Gomez, L.P., from one of the other
limited partners. As a result, as of May 16, 2000, EXCO (Delaware), Inc. now
owns a 54.13742% limited partnership interest, and EXCO still owns a 1% general
partnership interest in Pecos-Gomez, L.P.
The Partnership is managed by EXCO as general partner. Certain
Partnership actions require consent of partners holding 70% of the partnership
interests including: merger, sale of all of the Partnership's assets,
liquidation, conversion of the legal form of the entity to another form or
amending the Partnership Agreement to change any minority partnership interest
protection.
EXCO and Taurus initially capitalized the Partnership with $3.5 million
of equity capital, all of which was applied to fund the purchase of the Pecos
County Properties. Upon execution of the Partnership Agreement, the partners
agreed that the value of the Partnership's Purchase Agreement was approximately
$3.4 million. This value was allocated entirely to the capital accounts of the
three private investors who initially formed the Partnership and arranged the
Purchase Agreement with the Seller. Accordingly, the Partnership's full cost
pool has been increased by $3.4 million. This value will be amortized over the
economic reserve life of the Pecos County Properties. The Partnership also
arranged a credit facility (discussed in greater detail below) through Bank of
America, N.A. to fund a portion of the Pecos County Properties acquisition and
to fund additional development drilling of the properties.
The Partnership Agreement permits the general partner to call for
additional capital contributions from the partners to fund the capital needs of
the Partnership. Furthermore, the general partner or well operator may propose a
Subsequent Operation (as that term is defined in the Partnership Agreement) on
the Pecos County Properties. A "Subsequent Operation" would encompass
significant drilling activities such as a new well, recompletion of an existing
well or workover project. In the event a partner fails to fund the project, the
contributing Humphrey-Hill Partners may elect to proceed with the Subsequent
Operation in the Partnership's name, but the project will be funded solely by
the contributing partners. In that event, all expenses, losses, gain or income
from the project shall be specially allocated solely to the contributing
partners until the contributing partners have recouped a sum equal to 300% of
the additional capital contribution that would have been funded by the
non-contributing partner had it participated in the project. Thereafter, all
losses, expenses, gain or income shall be allocated to the partners pro rata
according to their equity interest in the Partnership.
The Partnership Agreement includes other customary terms including
terms governing transfers of partnership interests (including a buy/sell right),
voting, meetings and tax matters.
15
<PAGE> 17
EXCO RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
Partnership Credit Facility
On March 24, 2000, the Partnership entered into a credit facility with
Bank of America, N.A. as administrative agent and lender. The credit facility
provides for borrowings up to $25 million, subject to borrowing base
limitations.
All borrowings under the credit facility are secured by a first lien
mortgage providing a security interest in substantially all assets owned by the
Partnership including all mineral interests. In addition, EXCO has guaranteed
the Partnership's obligations under the credit facility. EXCO has pledged its
Partnership interest to secure the credit facility.
The credit facility provides that if the aggregate outstanding
indebtedness of the Partnership is less than 75% of the borrowing base, then
advances will bear interest at 1.5% over LIBOR. If the borrowing base usage
equals or exceeds 75%, then advances will bear interest at 1.75% over LIBOR.
Commencing on August 15, 2000, and continuing quarterly thereafter
until maturity, the Partnership shall make mandatory prepayments on the credit
facility in an amount equal to 75% of the Partnership's Net Revenues (as defined
in the credit facility) for the immediately preceding calendar quarter if NYMEX
gas prices for the immediately preceding calendar quarter averaged $3.00 per
Mmbtu or less, otherwise, the dedication rate is 60% . Each such payment shall
be applied first to accrued but unpaid interest and then to principal. However,
if a borrowing base deficiency were to exist after giving effect to a
redetermination, then the Partnership would have to do one of the following:
o make a lump sum payment equal to the deficiency;
o make six consecutive mandatory prepayments of principal on the
revolving loan each of which shall be in the amount of one sixth
(1/6th) of the amount of the borrowing base deficiency; or
o provide additional collateral acceptable to the banks in their
sole discretion sufficient to increase the borrowing base and
eliminate the deficiency.
The credit facility matures on March 24, 2003. The next borrowing base
redetermination is scheduled for September 1, 2000, and on or about each March 1
and September 1, thereafter.
Under the terms of the credit facility, the Partnership must maintain a
current ratio of not less than 1.0 to 1.0 at any time. Furthermore, the
Partnership must not incur or pay general and administrative expenses in an
aggregate amount exceeding $75,000 during the period from March 24, 2000 through
December 31, 2000, or $100,000 during any fiscal year thereafter. Additionally,
the credit facility contains a number of other covenants affecting the liquidity
and
16
<PAGE> 18
capital resources of the Partnership, including restrictions on the ability to
incur indebtedness at any time in an amount exceeding $25,000 or to pledge
assets outside of the credit facility, and restrictions on the payment of
dividends on the equity partnership interests of the Partnership.
Pro Forma Results of Operations
The following table reflects the pro forma results of operations as
though the acquisition of Rio Grande, Inc., the disposition of the Jackson
Parish Properties, the addition of the Seward/Meade County Properties, and the
acquisitions of the Natchitoches Parish Properties, the Val Verde County
Properties, and EXCO's share of the Pecos County Properties, and the related
borrowings had been consummated on January 1, 1999.
<TABLE>
<CAPTION>
PRO FORMA
SIX MONTHS ENDED
JUNE 30,
---------------------------------
1999 2000
-------------- --------------
(Unaudited, in thousands, except
per share amounts)
<S> <C> <C>
Revenues ......................................... $ 7,483 $ 10,384
Net Income ....................................... $ 973 $ 2,544
Basic and diluted per share ...................... $ .14 $ .37
</TABLE>
17
<PAGE> 19
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
Before you invest in our common stock, you should be aware that there
are various risks associated with an investment. Some of the information in this
quarterly report may contain forward-looking statements. We use words such as
"may," "will," "expect," "anticipate," "estimate," "believe," "continue" or
other similar words to identify forward-looking statements. You should read
statements that contain these words carefully because they: (1) discuss future
expectations; (2) contain projections of results of operations or of our
financial conditions; or (3) state other "forward-looking" information. We
believe that it is important to communicate our future expectations to our
investors. However, there may be events in the future that we are unable to
accurately predict or over which we have no control. When considering our
forward-looking statements, you should keep in mind the cautionary statements
in this quarterly report and the risk factors contained in our other public
filings.
The following discussion of the results of operations and financial
condition should be read in conjunction with the financial statements and
related notes included in this quarterly report.
OUR RESULTS OF OPERATIONS
Comparison of Three Months Ended June 30, 1999 and 2000
Revenues. Our total revenues for the three month period ended June 30,
2000, increased $3.7 million, or 205%, to $5.5 million versus $1.8 million for
the corresponding period of 1999. The increase in revenues was due to both
volume increases as a result of the acquisitions of Rio Grande, Inc., the
Natchitoches Parish Properties, the Val Verde County Properties, and the Pecos
County Properties, and oil and natural gas price increases.
We sold 70,400 Bbls of oil during the three months ended June 30, 2000,
versus 62,100 Bbls in the corresponding three months of 1999, a 13% increase. We
sold 980,000 Mcf of natural gas during the current three months versus 207,800
Mcf in the second quarter of 1999, a 372% increase. We sold 20,900 Bbls of
natural gas liquids during the three months ended June 30, 2000 versus 0 Bbls in
1999. The increases in oil and natural gas volumes were primarily attributable
to the Rio Grande, Inc., the Natchitoches Parish Properties, the Val Verde
County Properties, and the Pecos County Properties acquisitions.
The average oil price excluding hedge results received during the three
months ended June 30, 2000, was $27.41 versus $15.77 for the three months ended
June 30, 1999, an $11.64 per barrel or 74% increase. The average natural gas
price excluding hedge results received during the current three months was $3.12
versus $1.93 for the corresponding three months of the prior year, a $1.19 per
Mcf or 62% increase. The average natural gas liquids price received during the
three months ended June 30, 2000, was $22.17. We did not sell any natural gas
liquids during the three months ended June 30, 1999.
18
<PAGE> 20
Costs and Expenses. Costs and expenses for the three month period ended
June 30, 2000, increased by $2.1 million, or 139%, to $3.6 million as compared
to $1.5 million for the corresponding period of 1999. The increase was due
primarily to the Rio Grande, Inc., the Natchitoches Parish Properties, the Val
Verde County Properties, and the Pecos County Properties acquisitions.
Net Income. We had net income for the three months ended June 30, 2000,
of $1.3 million compared to a net income of $325,000 for the corresponding three
months of 1999, representing $.19 and $.05 per basic and diluted share, for each
respective period.
Comparison of Six Months Ended June 30, 1999 and 2000
Revenues. EXCO's total revenues for the six month period ended June 30,
2000, increased $7.7 million, or 274%, to $10.5 million versus $2.8 million for
the corresponding period of 1999. The increase in revenues was due to both
volume increases as a result of the acquisitions of Rio Grande, Inc., the
Natchitoches Parish Properties, the Val Verde County Properties, and the Pecos
County Properties, and oil and natural gas price increases.
EXCO sold 144,400 Bbls of oil during the six months ended June 30,
2000, versus 100,200 Bbls in the corresponding six months of 1999, a 44%
increase. EXCO sold 1,686 Mmcf of natural gas during the current six months
versus 359 Mmcf in the first six months of 1999, a 370% increase. We sold 41,100
Bbls of natural gas liquids during the six months ended June 30, 2000, versus 0
Bbls in 1999. The increase in volumes was due to the Rio Grande, Inc., the
Natchitoches Parish Properties, the Val Verde County Properties, and the Pecos
County Properties acquisitions.
The average oil price excluding hedge results received during the six
months ended June 30, 2000, was $27.39 versus $14.20 for the six months ended
June 30, 1999, a $13.19 per barrel or 93% increase. The average natural gas
price excluding hedge results received during the current six months was $2.82
versus $1.75 for the corresponding six months of the prior year, a $1.07 per Mcf
or 61% increase. The average natural gas liquids price received during the six
months ended June 30, 2000, was $22.80 per barrel. We did not sell any natural
gas liquids during the six months ended June 30, 1999.
In March 2000, we recorded an additional pre-tax gain of approximately
$535,000 from the sale of the Jackson Parish Properties.
Cost and Expenses. Cost and expenses for the six month period ended
June 30, 2000, increased by $3.7 million, or 139%, to $6.3 million as compared
to $2.6 million for the corresponding period of 1999. This was primarily due to
the Rio Grande, Inc., the Natchitoches Parish Properties, the Val Verde County
Properties, and the Pecos County Properties acquisitions.
Net Income. EXCO had a net income for the six months ended June 30,
2000, of $2.8 million compared to a net income of $172,000 for the corresponding
six months of 1999, representing $.40 and $.03 per basic and diluted share, for
each respective period.
19
<PAGE> 21
LIQUIDITY AND CAPITAL RESOURCES
General
Consistent with our strategy of acquiring and developing reserves, we
have an objective of maintaining financing flexibility. We cannot assure you
that cash from operations will be sufficient in the future to meet our stated
strategy. Low oil prices may impact our general strategy. In the past, we have
utilized a variety of sources of capital to fund our acquisition, development
and exploitation programs, and fund our operations.
Our general financial strategy is to use cash from operations, bank
financing and the issuance of equity securities to service interest when we have
outstanding indebtedness, to pay ongoing operating expenses, and to contribute
limited amounts toward further development of our existing proved reserves as
well as additional acquisitions. We cannot assure you that cash from operations
will be sufficient in the future to cover all of these purposes.
We have planned development and exploitation activities for our major
operating areas. We have budgeted approximately $1.0 million for our development
and exploitation activities in the year 2000, of which $1.0 million is
discretionary. In addition, we are continuing to evaluate oil and natural gas
properties for future acquisition. Historically, we have used the proceeds from
the issuance of equity securities and borrowings under our credit facilities to
raise cash to fund acquisitions. However, we cannot assure you that funds will
be available to us in the future to meet our budgeted capital spending.
Furthermore, our ability to borrow other than under our credit facilities is
subject to restrictions imposed by our credit facilities. If we cannot secure
additional funds for our planned development and exploitation activities, then
we will be required to delay or reduce substantially both of these activities.
Credit Facility - EXCO Resources, Inc.
On February 11, 1998, we entered into a credit facility with
NationsBank of Texas, N.A. The credit facility provided for borrowings up to $50
million, subject to borrowing base limitations. On September 21, 1998, we
entered into the first amendment to the credit facility with NationsBank, N.A.
(successor by merger to NationsBank of Texas, N.A.). The first amendment
provides for borrowings up to $150 million, subject to borrowing base
limitations, as determined by the lenders from time to time. On February 11,
2000, we entered into the second amendment to the credit facility with Bank of
America, N.A. (successor by merger to NationsBank, N.A.). The second amendment
provides for a new termination date, an increase in our borrowing base, subject
to certain conditions, and an increase in certain thresholds customary for a
growing company. The bank has sole discretion to determine our borrowing base
based on its semi-annual valuation of our reserves.
The credit facility consists of a regular revolver which on December
31, 1999, had a borrowing base of $5.5 million. On February 17, 2000, our
borrowing base was increased to $7.5 million. On February 29, 2000, our
borrowing base was increased to $13.0 million. On June 30, 2000, our borrowing
base was increased to $18.0 million of which $7.1 million was borrowed, $.3
million was committed to letters of credit, and $10.6 was available for
20
<PAGE> 22
borrowing. All borrowings under the credit facility are secured by tangible and
intangible assets representing at least 90% of the assessed present value of our
oil and natural gas properties.
The credit facility provides that if our aggregate outstanding
indebtedness is less than $5 million, advances will bear interest at 1.5% over
the appropriate LIBOR rate. If our aggregate outstanding indebtedness is greater
than $5 million, then our advances will bear interest at 1.0% over LIBOR if the
borrowing base usage is less than 50%, 1.25% over LIBOR if the borrowing base
usage is between 50-70%, 1.5% over LIBOR if the borrowing base usage is between
70-90%, and 1.75% over LIBOR if the borrowing base usage exceeds 90%. At June
30,2000, the 6 month LIBOR rate was 7.00%, which would result in an interest
rate of approximately 8.00% on any new indebtedness we may incur. At June 30,
2000, the interest rate on our outstanding indebtedness was approximately 7.42%,
and was fixed at this rate through July 10, 2000. The credit facility also
permits us to repay and reborrow amounts under the credit facility without any
penalty, thereby allowing us the flexibility to utilize any available cash to
reduce our outstanding indebtedness and thus, our costs of borrowed funds.
Under the terms of the credit facility, we must not permit our current
ratio of consolidated current assets to our consolidated current liabilities to
be less than 1.0 to 1.0 at any time. In addition, we must maintain a tangible
net worth of at least $500,000 plus (i) subsequent to December 31, 1998, 50% of
our consolidated cumulative net income and (ii) an amount equal to 75% of the
net proceeds we receive from the issuance of any equity securities after
December 31, 1998. At June 30, 2000, we were required to maintain a tangible net
worth of at least $4.4 million. On December 31, 1999, and June 30, 2000, we were
in compliance with both the consolidated tangible net worth covenant and the
current ratio covenant.
No principal amortization will be required during the term of the
credit facility as long as the aggregate principal balance does not exceed the
borrowing base then in effect. However, if a borrowing base deficiency were to
exist after giving effect to a redetermination, then we would have to do one of
the following:
o eliminate the borrowing base deficiency by making a single
mandatory prepayment of principal on the revolving loan in an
amount equal to the entire amount of the borrowing base
deficiency on the first monthly date following the date on which
the borrowing base deficiency is determined to exist;
o eliminate the deficiency by making six consecutive mandatory
prepayments of principal on the revolving loan each of which
shall be in the amount of one sixth (1/6th) of the amount of the
borrowing base deficiency commencing on the first monthly date
following the date on which the borrowing base deficiency is
determined to exist and continuing on each monthly date
thereafter; or
o eliminate the borrowing base deficiency by submitting additional
mineral interests to the banks on the first monthly date
following the date on which the borrowing base deficiency is
determined to exist for evaluation as borrowing base properties
which the banks, in their sole discretion, determine have a value
sufficient to increase the borrowing base by at least the amount
of the borrowing base deficiency.
21
<PAGE> 23
The credit facility matures on February 11, 2002. Our next borrowing
base redetermination is scheduled for no later than October 1, 2000, and
semi-annually thereafter. We may seek additional borrowing capacity at that time
for our development drilling program. However, we cannot assure you that our
current development program will result in increased collateral values or that
these values will enable us to borrow the funds we need to continue the program.
The credit facility contains a number of covenants affecting our
liquidity and capital resources, including restrictions on our ability to incur
indebtedness at any time in an amount exceeding $100,000 or to pledge assets
outside of the credit facility.
Credit Facility - Pecos-Gomez, L.P.
On March 24, 2000, Pecos-Gomez, L.P. entered into a credit facility
with Bank of America, N.A. as administrative agent and lender. The credit
facility provides for borrowings up to $25 million, subject to borrowing base
limitations. The bank has sole discretion to determine the borrowing base based
on its semi-annual valuation of the Partnership's reserves.
The credit facility consists of a regular revolver, which on June 30,
2000, had a borrowing base of $7.0 million. At June 30, 2000, the Partnership
had approximately $249,000 available for borrowing under the credit facility. A
portion of the borrowing base is available for the issuance of letters of
credit. All borrowings under the credit facility are secured by a first lien
mortgage providing a security interest in substantially all assets owned by the
Partnership including all mineral interests. In addition, EXCO has guaranteed
the Partnership's obligations under the credit facility. EXCO has pledged its
Partnership interest to secure the credit facility.
The credit facility provides that if the aggregate outstanding
indebtedness of the Partnership is less than 75% of the borrowing base, then
advances will bear interest at 1.5% over LIBOR. If the borrowing base usage
equals or exceeds 75%, then advances will bear interest at 1.75% over LIBOR.
Commencing on August 15, 2000, and continuing quarterly thereafter
until maturity, the Partnership shall make mandatory prepayments on the credit
facility in an amount equal to 75% of the Partnership's Net Revenues (as defined
in the credit facility) for the immediately preceding calendar quarter if NYMEX
gas prices for the immediately preceding calendar quarter averaged $3.00 per
Mmbtu or less, otherwise, the dedication rate is 60% . Each such payment shall
be applied first to accrued but unpaid interest and then to principal. However,
if a borrowing base deficiency were to exist after giving effect to a
redetermination, then the Partnership would have to do one of the following:
o eliminate the borrowing base deficiency by making a single
mandatory prepayment of principal on the revolving loan in an
amount equal to the entire amount of the borrowing base
deficiency on the first monthly date following the date on which
the borrowing base deficiency is determined to exist;
22
<PAGE> 24
o eliminate the deficiency by making six consecutive mandatory
prepayments of principal on the revolving loan each of which
shall be in the amount of one sixth (1/6th) of the amount of the
borrowing base deficiency commencing on the first monthly date
following the date on which the borrowing base deficiency is
determined to exist and continuing on each monthly date
thereafter; or
o eliminate the borrowing base deficiency by submitting additional
mineral interests to the banks on the first monthly date
following the date on which the borrowing base deficiency is
determined to exist for evaluation as borrowing base properties
which the banks, in their sole discretion, determine have a value
sufficient to increase the borrowing base by at least the amount
of the borrowing base deficiency.
The credit facility matures on March 24, 2003. The next borrowing base
redetermination is scheduled for September 1, 2000, and on or about each March 1
and September 1, thereafter. The Partnership may seek additional borrowing
capacity at that time for its development drilling program. However, there can
be no assurance that the current development program of the Partnership will
result in increased collateral values or that these values will enable the
Partnership to borrow the funds the Partnership needs to continue the program.
Under the terms of the credit facility, the Partnership must not permit
its consolidated current assets to its consolidated current liabilities to be
less than 1.0 to 1.0 at any time. Furthermore, the Partnership must not incur or
pay general and administrative expenses in an aggregate amount exceeding $75,000
during the period from March 24, 2000 through December 31, 2000, or $100,000
during any fiscal year thereafter. Additionally, the credit facility contains a
number of other covenants affecting the liquidity and capital resources of the
Partnership, including restrictions on the ability to incur indebtedness at any
time in an amount exceeding $25,000 or to pledge assets outside of the credit
facility, and restrictions on the payment of dividends on the equity partnership
interests of the Partnership.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Some of the information below contains forward-looking statements. The
primary objective of the following information is to provide forward-looking
quantitative and qualitative information about our potential exposure to market
risks. The term "market risk" refers to the risk of loss arising from adverse
changes in oil and natural gas prices and interest rates earned on cash
equivalent investments. The disclosure is not meant to be a precise indicator of
expected
23
<PAGE> 25
future losses, but rather an indicator of reasonably possible losses. This
forward-looking information provides an indicator of how we view and manage our
ongoing market risk exposures. Our market risk sensitive instruments were
entered into for hedging purposes, not for trading purposes.
Commodity Price Risk
Our major market risk exposure is in the pricing applicable to our oil
and natural gas production. Realized pricing is primarily driven by the
prevailing worldwide price for crude oil and spot market prices for natural gas.
Pricing for oil and natural gas production is volatile.
In an effort to reduce the effects of the volatility of the price of
oil and natural gas on our operations, management has adopted a policy of
hedging oil and natural gas prices whenever such prices are in excess of the
prices anticipated in our operating budget and profit plan through the use of
commodity futures, options, and swap agreements. Hedging transactions require
the approval of the board of directors.
On September 21, 1999, we entered into an oil commodity swap with a
counterparty to sell notional volumes of 7,000 Bbls per month at a fixed price
of $21.00 per Bbl based on NYMEX pricing. The transaction was effective October
1, 1999, and terminates September 30, 2000. On March 31, 2000, we entered into
an oil commodity swap with a counterparty to sell notional volumes of 10,000
Bbls per month at prices ranging from $24.90 to $29.23 per Bbl based on NYMEX
pricing. The transaction was effective April 1, 2000, and terminates September
30, 2000. On March 13, 2000, we entered into a natural gas commodity swap with a
counterparty to sell notional volumes of 60,000 Mmbtus per month at prices
ranging from $2.70 to $2.75 per Mmbtu based on NYMEX pricing. The transaction
was effective April 1, 2000, and terminates September 30, 2000. These commodity
swap agreements are accounted for as derivative commodity instruments. Realized
gains or losses from the settlement of the swaps are recorded separately in the
financial statements as increases or decreases in total revenues. For example,
using the oil swap entered into on September 21, 1999, for a given month when
the settlement price exceeds $21.00, then a reduction in total revenues is
recorded for the difference between the settlement price and $21.00 multiplied
by the notional volume of 7,000 Bbls. Conversely, if the settlement price is
less than $21.00, then an increase in total revenues is recorded for the
difference between the settlement price and $21.00 multiplied by the notional
volume of 7,000 Bbls. For example, for a given month, if the settlement price is
$22.00, then total revenues will decrease by $7,000. Conversely, if the
settlement price for a given month is $20.00, total revenues will increase by
$7,000. The fair value at June 30, 2000, of the commodity swaps was a liability
of approximately $578,000 and has been estimated from a quote provided by the
counterparty. This liability represents the estimated amount that we would
expect to pay to terminate the agreements on June 30, 2000.
We report average oil and natural gas prices including the effects of
quality, gathering and transportation costs but excluding the net effect of the
oil and natural gas hedges. The following table sets forth our oil and natural
gas prices, both realized before hedge results and realized including hedge
results; and the net effects of settlements of oil price hedges on revenue:
24
<PAGE> 26
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
------------ ------------
2000 2000
------------ ------------
<S> <C> <C>
Average price per Bbl - realized before hedge results ....... $ 27.41 $ 27.39
Average price per Bbl - realized including hedge results .... $ 24.87 $ 25.04
Average price per Mcf - realized before hedge results ....... $ 3.12 $ 2.82
Average price per Mcf - realized including hedge results .... $ 3.05 $ 2.77
Total reduction in revenue .................................. $ 249,000 $ 412,000
</TABLE>
Interest Rate Risk
We currently invest a portion of our idle cash in commercial paper
which typically mature in 30 to 60 days. Our exposure to changes in the interest
rates on these investments is considered to be nominal. As of June 30, 2000, we
had $11.6 million face value invested in commercial paper.
25
<PAGE> 27
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are included herein:
No. Description of Exhibit
2.1 First Amended Joint Chapter 11 Plan of Reorganization of Rio
Grande, Inc., Rio Grande Drilling Company, Rio Grande Desert
Oil Company, Rio Grande Offshore, Ltd., and Rio Grande
GulfMex, Ltd., dated January 25, 1999 and modified March 4,
1999, previously filed as an exhibit to Rio Grande, Inc.'s
Form 8-K/A filed March 23, 1999 and incorporated by reference
herein.
2.2 Confirmation Order for the Plan of Reorganization, dated March
4, 1999, previously filed as an exhibit to Rio Grande, Inc.'s
Form 8-K/A filed March 23, 1999 and incorporated by reference
herein.
2.3 Findings of Fact and Conclusions of Law regarding Confirmation
Order (which set forth the March 4, 1999 modifications to the
Plan), previously filed as an exhibit to Rio Grande, Inc.'s
Form 8-K/A filed March 23, 1999 and incorporated by reference
herein.
3.1 Restated Articles of Incorporation of EXCO filed as an Exhibit
to EXCO's Annual Report on Form 10-K for the year ended
December 31, 1996 and incorporated by reference herein.
3.2 Bylaws of EXCO, as amended filed as an Exhibit to EXCO's
Annual Report on Form 10-K for the year ended December 31,
1996 and incorporated by reference herein.
4.1 Restated Articles of Incorporation of EXCO filed as an Exhibit
to EXCO's Annual Report on Form 10-K for the year ended
December 31, 1996 and incorporated by reference herein.
4.2 Restated Bylaws of EXCO, as amended, filed as an Exhibit to
EXCO's Annual Report on Form 10-K for the year ended December
31, 1996 and incorporated by reference herein.
4.3 Specimen Stock Certificate for the Common Stock of EXCO filed
as an Exhibit to EXCO's Pre-Effective Amendment No. 1 to Form
S-2 filed on June 2, 1998 and incorporated by reference
herein.
10.1 Standby Purchase Commitment between EXCO Resources, Inc. on
the one hand and Ares Management, L.P. on behalf of Ares
Leveraged Investment Fund, L.P. on the other hand dated July
16, 1998 filed as an Exhibit to
26
<PAGE> 28
EXCO's Form 8-K filed August 25, 1998 and incorporated by
reference herein.
10.2 Standby Purchase Commitment between EXCO Resources, Inc. on
the one hand and Oaktree Capital Management, LLC on behalf of
OCM Principal Opportunities Fund, L.P. on the other hand,
dated July 16, 1998 filed as an Exhibit to EXCO's Form 8-K
filed August 25, 1998 and incorporated by reference herein.
10.3 Credit Agreement among EXCO Resources, Inc., as borrower, and
NationsBank of Texas, N.A., as agent, and financial
institutions listed on Schedule I, dated February 11, 1998
filed as an Exhibit to EXCO's Form 8-K filed February 25, 1998
and incorporated by reference herein.
10.4 First Amendment to Credit Agreement among EXCO Resources,
Inc., as borrower, NationsBank, N.A. (successor by merger to
NationsBank of Texas, N.A.), as agent, and financial
institutions listed on Schedule I, dated September 21, 1998,
filed as an Exhibit to EXCO's Form 8-K filed September 28,
1998 and incorporated by reference herein.
10.5 Purchase and Sale Agreement among EXCO Resources, Inc. and
Osborne Oil Company, et al., dated January 27, 1998 filed as
an Exhibit to EXCO's Form 8-K filed August 25, 1998 and
incorporated by reference herein.
10.6 EXCO Energy Investors, L.L.C. Operating Agreement, dated
October 9, 1998, filed as an Exhibit to EXCO's Annual Report
on Form 10-K for the year ended December 31, 1998 and
incorporated by reference herein.
10.7 Purchase and Sale Agreement among EXCO Resources, Inc. and
Osborne Oil Company, et al., dated January 27, 1998, filed as
an Exhibit to EXCO's Form 8-K dated February 25, 1998 and
incorporated by reference herein.
10.8 Stock Purchase Agreement between EXCO Resources, Inc. and
Jacobi- Johnson Energy, Inc., dated May 1, 1998, filed as an
Exhibit to EXCO's Form 8-K filed May 15, 1998 and incorporated
by reference herein.
10.9 EXCO Resources, Inc. 1998 Stock Option Plan, filed as Appendix
A to EXCO's Proxy Statement dated March 17, 1998 and
incorporated by reference herein.
10.10 Amendment No. 1 to the EXCO Resources, Inc. 1998 Stock Option
Plan, filed as Exhibit 10.10 to EXCO's Form 10-Q dated May 17,
1999 and incorporated by reference herein.
10.11 EXCO Resources, Inc. 1998 Director Compensation Plan filed as
Appendix D to EXCO's Proxy Statement dated March 16, 1999 and
incorporated by reference herein.
27
<PAGE> 29
10.12 Purchase and Sale Agreement dated June 24, 1998, by and
between Humphrey Oil Interests, L.P. on the one hand and EXCO
Resources, Inc. on the other, filed as an Exhibit to EXCO's
Form 8-K dated June 30, 1998 and incorporated by reference
herein.
10.13 Purchase and Sale Agreement dated June 24, 1998, by and
between J. M. Hill, Individually and as Trustee, Walter O.
Hill, and Steven J. Devos on the one hand and EXCO Resources,
Inc. on the other, filed as an Exhibit to EXCO's Form 8-K
dated June 30, 1998 and incorporated by reference herein.
10.14 Purchase and Sale Agreement between Apache Corporation as
seller, and Venus Exploration, Inc., buyer, dated May 13,
1999, filed as an Exhibit to EXCO's Form 8-K filed July 15,
1999 and incorporated by reference herein.
10.15 Credit Agreement among EXUS Energy, LLC, as borrower,
NationsBank, N.A., as administrative agent, and financial
institutions listed on Schedule I, dated June 30, 1999, filed
as an Exhibit to EXCO's Form 8-K filed July 15, 1999 and
incorporated by reference herein.
10.16 Limited Liability Company Agreement of EXUS Energy, LLC dated
June 30, 1999, filed as an Exhibit to EXCO's Form 8-K filed
July 15, 1999 and incorporated by reference herein.
10.17 Convertible Promissory Note made by Venus Exploration, Inc. in
favor of EXCO Resources, Inc., dated June 30, 1999, filed as
an Exhibit to EXCO's Form 8-K filed July 15, 1999 and
incorporated by reference herein.
10.18 Pledge Agreement made by Venus Exploration, Inc. for the
benefit of EXCO Resources, Inc., dated June 30, 1999, filed as
an Exhibit to EXCO's Form 8-K filed July 15, 1999 and
incorporated by reference herein.
10.19 Registration Rights Agreement between EXCO Resources, Inc. and
Venus Exploration, Inc., dated June 30, 1999, filed as an
Exhibit to EXCO's Form 8- K filed July 15, 1999 and
incorporated by reference herein.
10.20 Agreement Among Members between EXCO Resources, Inc. and Venus
Exploration, Inc., dated June 30, 1999, filed as an Exhibit to
EXCO's Form 8- K filed July 15, 1999 and incorporated by
reference herein.
10.21 Second Amendment to Credit Agreement among EXCO Resources,
Inc., as borrower, Bank of America, N.A. (successor by merger
to NationsBank, N.A., successor by merger to NationsBank of
Texas, N.A.), as agent, and Bank of America , N.A. (successor
by merger to NationsBank, N.A., successor by merger to
NationsBank of Texas, N.A.), as the sole bank, dated February
11, 2000 and incorporated by reference herein.
28
<PAGE> 30
10.22 Purchase, Sale and Exchange Agreement between EXCO Resources,
Inc., as seller, and Anadarko Petroleum Corporation, as buyer,
dated December 17, 1999, filed as an Exhibit to EXCO's Form
8-K filed January 18, 2000 and incorporated by reference
herein.
10.23 Amendment to Purchase, Sale and Exchange Agreement dated as of
December 17, 1999, between EXCO Resources, Inc., as seller,
and Anadarko Petroleum Corporation, as buyer, dated December
31, 1999, filed as an Exhibit to EXCO's Form 8-K filed January
18, 2000 and incorporated by reference herein.
10.24 Purchase and Sale Agreement between Western Gas Resources,
Inc., as seller, and EXCO Resources, Inc., as buyer, dated
November 16, 1999, filed as an Exhibit to EXCO's Form 8-K
filed January 18, 2000 and incorporated by reference herein.
10.25 Amendment No. 1 to Purchase and Sale Agreement between Western
Gas Resources, Inc., as seller, and EXCO Resources, Inc., as
buyer, dated December 21, 1999, filed as an Exhibit to this
Form 8-K filed January 18, 2000 and incorporated by reference
herein.
10.26 Purchase and Sale Agreement between Nebraska Public Gas
Authority as seller, and Humphrey-Hill, L.P., as buyer, dated
February 22, 2000, filed as an Exhibit to EXCO's Form 10-Q for
the quarter ended March 31, 2000 and incorporated by reference
herein.
10.27 Credit Agreement among Humphrey-Hill, L.P., as borrower, Bank
of America, N.A., as administrative agent, and financial
institutions listed on Schedule I, dated March 24, 2000, filed
as an Exhibit to EXCO's Form 10-Q for the quarter ended March
31, 2000 and incorporated by reference herein.
10.28 Amended and Restated Agreement of Limited Partnership of
Humphrey-Hill, L.P., dated March 24, 2000, filed as an Exhibit
to EXCO's Form 10-Q for the quarter ended March 31, 2000 and
incorporated by reference herein.
10.29 Amendment to Amended and Restated Agreement of Limited
Partnership of Humphrey-Hill, L.P., dated April 14, 2000,
filed as an Exhibit to EXCO's Form 10-Q for the quarter ended
March 31, 2000 and incorporated by reference herein.
10.30 First Amendment to Credit Agreement among Pecos-Gomez, L.P.,
as borrower, and Bank of America, N.A., as agent and sole
bank, dated June 30, 2000 (filed herewith).
16.1 Letter from Belew Averitt LLP regarding change in certifying
accountant dated January 20, 1998 filed as an Exhibit to
EXCO's Form 8-K filed January 21, 1998 and incorporated by
reference herein.
29
<PAGE> 31
18.1 Letter from Ernst & Young LLP regarding change in accounting
principles dated February 11, 1998 filed as an Exhibit to
EXCO's Annual Report on Form 10-K for the year ended December
31, 1997 and incorporated by reference herein.
27.1 Financial Data Schedule (filed herewith).
99.1 Voting Agreement dated October 30, 1998 between Rio Grande,
Inc., Rio Grande Drilling Company, Rio Grande Offshore, Ltd.,
Rio Grande Desert Oil Company and Rio Grande GulfMex, Ltd. and
EXCO Resources, Inc. filed as an Exhibit to Rio Grande, Inc.'s
Form 8-K dated November 12, 1998 and incorporated by reference
herein.
(b) Reports on Form 8-K:
Current Report on Form 8-K/A dated February 25, 2000 filed May
17, 2000 pursuant to Item 7 incorporating by reference from
EXCO's Form 10-K for the year ended December 31, 1999
Financial Statements of the Val Verde County Properties and
the Pro Forma Financial Statements of EXCO, amending its
Current Report on Form 8-K dated February 25, 2000 filed March
6, 2000.
Current Report on Form 8-K dated March 24, 2000 filed June 7,
2000 pursuant to Item 7 containing Financial Statements of the
Pecos County Properties and the Pro Forma Financial Statements
of EXCO, amending its Current Report on Form 8-K dated March
24, 2000 filed April 10, 2000.
30
<PAGE> 32
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.
EXCO RESOURCES, INC.
(Registrant)
Date: August 8, 2000 By: /s/ J. DOUGLAS RAMSEY
-----------------------------------------
J. Douglas Ramsey
Vice President and Chief Financial Officer
31
<PAGE> 33
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
2.1 First Amended Joint Chapter 11 Plan of Reorganization of Rio Grande,
Inc., Rio Grande Drilling Company, Rio Grande Desert Oil Company, Rio
Grande Offshore, Ltd., and Rio Grande GulfMex, Ltd., dated January 25,
1999 and modified March 4, 1999, previously filed as an exhibit to Rio
Grande, Inc.'s Form 8-K/A filed March 23, 1999 and incorporated by
reference herein.
2.2 Confirmation Order for the Plan of Reorganization, dated March 4, 1999,
previously filed as an exhibit to Rio Grande, Inc.'s Form 8-K/A filed
March 23, 1999 and incorporated by reference herein.
2.3 Findings of Fact and Conclusions of Law regarding Confirmation Order
(which set forth the March 4, 1999 modifications to the Plan),
previously filed as an exhibit to Rio Grande, Inc.'s Form 8-K/A filed
March 23, 1999 and incorporated by reference herein.
3.1 Restated Articles of Incorporation of EXCO filed as an Exhibit to
EXCO's Annual Report on Form 10-K for the year ended December 31, 1996
and incorporated by reference herein.
3.2 Bylaws of EXCO, as amended filed as an Exhibit to EXCO's Annual Report
on Form 10-K for the year ended December 31, 1996 and incorporated by
reference herein.
4.1 Restated Articles of Incorporation of EXCO filed as an Exhibit to
EXCO's Annual Report on Form 10-K for the year ended December 31, 1996
and incorporated by reference herein.
4.2 Restated Bylaws of EXCO, as amended, filed as an Exhibit to EXCO's
Annual Report on Form 10-K for the year ended December 31, 1996 and
incorporated by reference herein.
4.3 Specimen Stock Certificate for the Common Stock of EXCO filed as an
Exhibit to EXCO's Pre-Effective Amendment No. 1 to Form S-2 filed on
June 2, 1998 and incorporated by reference herein.
10.1 Standby Purchase Commitment between EXCO Resources, Inc. on the one
hand and Ares Management, L.P. on behalf of Ares Leveraged Investment
Fund, L.P. on the other hand dated July 16, 1998 filed as an Exhibit to
EXCO's Form 8-K filed August 25, 1998 and incorporated by reference
herein.
10.2 Standby Purchase Commitment between EXCO Resources, Inc. on the one
hand and Oaktree Capital Management, LLC on behalf of OCM Principal
</TABLE>
32
<PAGE> 34
<TABLE>
<S> <C>
Opportunities Fund, L.P. on the other hand, dated July 16, 1998 filed
as an Exhibit to EXCO's Form 8-K filed August 25, 1998 and incorporated
by reference herein.
10.3 Credit Agreement among EXCO Resources, Inc., as borrower, and
NationsBank of Texas, N.A., as agent, and financial institutions listed
on Schedule I, dated February 11, 1998 filed as an Exhibit to EXCO's
Form 8-K filed February 25, 1998 and incorporated by reference herein.
10.4 First Amendment to Credit Agreement among EXCO Resources, Inc., as
borrower, NationsBank, N.A. (successor by merger to NationsBank of
Texas, N.A.), as agent, and financial institutions listed on Schedule
I, dated September 21, 1998, filed as an Exhibit to EXCO's Form 8-K
filed September 28, 1998 and incorporated by reference herein.
10.5 Purchase and Sale Agreement among EXCO Resources, Inc. and Osborne Oil
Company, et al., dated January 27, 1998 filed as an Exhibit to EXCO's
Form 8-K filed August 25, 1998 and incorporated by reference herein.
10.6 EXCO Energy Investors, L.L.C. Operating Agreement, dated October 9,
1998, filed as an Exhibit to EXCO's Annual Report on Form 10-K for the
year ended December 31, 1998 and incorporated by reference herein.
10.7 Purchase and Sale Agreement among EXCO Resources, Inc. and Osborne Oil
Company, et al., dated January 27, 1998, filed as an Exhibit to EXCO's
Form 8-K dated February 25, 1998 and incorporated by reference herein.
10.8 Stock Purchase Agreement between EXCO Resources, Inc. and Jacobi-
Johnson Energy, Inc., dated May 1, 1998, filed as an Exhibit to EXCO's
Form 8-K filed May 15, 1998 and incorporated by reference herein.
10.9 EXCO Resources, Inc. 1998 Stock Option Plan, filed as Appendix A to
EXCO's Proxy Statement dated March 17, 1998 and incorporated by
reference herein.
10.10 Amendment No. 1 to the EXCO Resources, Inc. 1998 Stock Option Plan,
filed as Exhibit 10.10 to EXCO's Form 10-Q dated May 17, 1999 and
incorporated by reference herein.
10.11 EXCO Resources, Inc. 1998 Director Compensation Plan filed as Appendix
D to EXCO's Proxy Statement dated March 16, 1999 and incorporated by
reference herein.
10.12 Purchase and Sale Agreement dated June 24, 1998, by and between
Humphrey Oil Interests, L.P. on the one hand and EXCO Resources, Inc.
on the other, filed as an Exhibit to EXCO's Form 8-K dated June 30,
1998 and incorporated by reference herein.
</TABLE>
33
<PAGE> 35
<TABLE>
<S> <C>
10.13 Purchase and Sale Agreement dated June 24, 1998, by and between J. M.
Hill, Individually and as Trustee, Walter O. Hill, and Steven J. Devos
on the one hand and EXCO Resources, Inc. on the other, filed as an
Exhibit to EXCO's Form 8-K dated June 30, 1998 and incorporated by
reference herein.
10.14 Purchase and Sale Agreement between Apache Corporation as seller, and
Venus Exploration, Inc., buyer, dated May 13, 1999, filed as an Exhibit
to EXCO's Form 8-K filed July 15, 1999 and incorporated by reference
herein.
10.15 Credit Agreement among EXUS Energy, LLC, as borrower, NationsBank,
N.A., as administrative agent, and financial institutions listed on
Schedule I, dated June 30, 1999, filed as an Exhibit to EXCO's Form 8-K
filed July 15, 1999 and incorporated by reference herein.
10.16 Limited Liability Company Agreement of EXUS Energy, LLC dated June 30,
1999, filed as an Exhibit to EXCO's Form 8-K filed July 15, 1999 and
incorporated by reference herein.
10.17 Convertible Promissory Note made by Venus Exploration, Inc. in favor of
EXCO Resources, Inc., dated June 30, 1999, filed as an Exhibit to
EXCO's Form 8-K filed July 15, 1999 and incorporated by reference
herein.
10.18 Pledge Agreement made by Venus Exploration, Inc. for the benefit of
EXCO Resources, Inc., dated June 30, 1999, filed as an Exhibit to
EXCO's Form 8-K filed July 15, 1999 and incorporated by reference
herein.
10.19 Registration Rights Agreement between EXCO Resources, Inc. and Venus
Exploration, Inc., dated June 30, 1999, filed as an Exhibit to EXCO's
Form 8- K filed July 15, 1999 and incorporated by reference herein.
10.20 Agreement Among Members between EXCO Resources, Inc. and Venus
Exploration, Inc., dated June 30, 1999, filed as an Exhibit to EXCO's
Form 8- K filed July 15, 1999 and incorporated by reference herein.
10.21 Second Amendment to Credit Agreement among EXCO Resources, Inc., as
borrower, Bank of America, N.A. (successor by merger to NationsBank,
N.A., successor by merger to NationsBank of Texas, N.A.), as agent, and
Bank of America , N.A. (successor by merger to NationsBank, N.A.,
successor by merger to NationsBank of Texas, N.A.), as the sole bank,
dated February 11, 2000 and incorporated by reference herein.
10.22 Purchase, Sale and Exchange Agreement between EXCO Resources, Inc., as
seller, and Anadarko Petroleum Corporation, as buyer, dated December
17, 1999, filed as an Exhibit to EXCO's Form 8-K filed January 18, 2000
and incorporated by reference herein.
</TABLE>
34
<PAGE> 36
<TABLE>
<S> <C>
10.23 Amendment to Purchase, Sale and Exchange Agreement dated as of December
17, 1999, between EXCO Resources, Inc., as seller, and Anadarko
Petroleum Corporation, as buyer, dated December 31, 1999, filed as an
Exhibit to EXCO's Form 8-K filed January 18, 2000 and incorporated by
reference herein.
10.24 Purchase and Sale Agreement between Western Gas Resources, Inc., as
seller, and EXCO Resources, Inc., as buyer, dated November 16, 1999,
filed as an Exhibit to EXCO's Form 8-K filed January 18, 2000 and
incorporated by reference herein.
10.25 Amendment No. 1 to Purchase and Sale Agreement between Western Gas
Resources, Inc., as seller, and EXCO Resources, Inc., as buyer, dated
December 21, 1999, filed as an Exhibit to this Form 8-K filed January
18, 2000 and incorporated by reference herein.
10.26 Purchase and Sale Agreement between Nebraska Public Gas Authority as
seller, and Humphrey-Hill, L.P., as buyer, dated February 22, 2000,
filed as an Exhibit to EXCO's Form 10-Q for the quarter ended March 31,
2000 and incorporated by reference herein.
10.27 Credit Agreement among Humphrey-Hill, L.P., as borrower, Bank of
America, N.A., as administrative agent, and financial institutions
listed on Schedule I, dated March 24, 2000, filed as an Exhibit to
EXCO's Form 10-Q for the quarter ended March 31, 2000 and incorporated
by reference herein.
10.28 Amended and Restated Agreement of Limited Partnership of Humphrey-Hill,
L.P., dated March 24, 2000, filed as an Exhibit to EXCO's Form 10-Q for
the quarter ended March 31, 2000 and incorporated by reference herein.
10.29 Amendment to Amended and Restated Agreement of Limited Partnership of
Humphrey-Hill, L.P., dated April 14, 2000, filed as an Exhibit to
EXCO's Form 10-Q for the quarter ended March 31, 2000 and incorporated
by reference herein.
10.30 First Amendment to Credit Agreement among Pecos-Gomez, L.P., as
borrower, and Bank of America, N.A., as agent and sole bank, dated June
30, 2000 (filed herewith).
16.1 Letter from Belew Averitt LLP regarding change in certifying accountant
dated January 20, 1998 filed as an Exhibit to EXCO's Form 8-K filed
January 21, 1998 and incorporated by reference herein.
18.1 Letter from Ernst & Young LLP regarding change in accounting principles
dated February 11, 1998 filed as an Exhibit to EXCO's Annual Report on
Form 10-K for the year ended December 31, 1997 and incorporated by
reference herein.
</TABLE>
35
<PAGE> 37
<TABLE>
<S> <C>
27.1 Financial Data Schedule (filed herewith).
99.1 Voting Agreement dated October 30, 1998 between Rio Grande, Inc., Rio
Grande Drilling Company, Rio Grande Offshore, Ltd., Rio Grande Desert
Oil Company and Rio Grande GulfMex, Ltd. and EXCO Resources, Inc. filed
as an Exhibit to Rio Grande, Inc.'s Form 8-K dated November 12, 1998
and incorporated by reference herein.
</TABLE>
36
