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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
MARCH 24, 2000
(DATE OF REPORT)
EXCO RESOURCES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS
(STATE OR OTHER JURISDICTION OF INCORPORATION)
0-9204 74-1492779
(COMMISSION FILE NO.) (IRS EMPLOYER IDENTIFICATION NO.)
5735 PINELAND DRIVE
SUITE 235
DALLAS, TEXAS 75231
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (214) 368-2084
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On March 24, 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 Properties"). The Partnership is owned 50% by Taurus
Acquisition, Inc. ("Taurus") as a limited partner (Taurus is a wholly-owned
subsidiary of EXCO Resources, Inc.), 49% by certain private investors as limited
partners and 1% by EXCO Resources, Inc. ("EXCO") as general partner. The Pecos
Properties include 8 gross (4.25 net) producing wells. EXCO is the named
operator of the Pecos Properties and assumed operations of all 5 wells acquired
in the transaction. As of January 1, 2000, the Pecos Properties were estimated
to contain 25.1 billion cubic feet of natural gas.
The purchase price, before closing adjustments, was approximately $10.2
million, and, after adjustments (the adjustments principally reflect production
since January 1, 2000, the effective date of the acquisition), was approximately
$10.1 million cash. 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 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.
Purchase and Sale Agreement. The Pecos Properties were acquired pursuant to
the terms of a Purchase and Sale Agreement (the "Purchase Agreement") dated as
of February 22, 2000, entered into between Seller and the Partnership. The
Purchase Agreement includes representations, warranties, covenants, indemnities
and closing conditions customary for transactions of this type.
Limited Partnership Agreement. EXCO, Taurus and the other investors
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 Properties. The partners have established an area of
mutual interest in respect of the Pecos Properties which governs any additional
acquisitions of properties by any partner within the area.
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
Properties. Upon execution of the Partnership Agreement, the partners agreed
that the Partnership's unrealized gain in the Purchase Agreement was
approximately $3.4 million. This gain was allocated entirely to the capital
account of the three private investors who initially formed the Partnership and
arranged the Purchase Agreement with Seller. 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 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 Properties. A "Subsequent Operation" would encompass significant
drilling activities such as a new
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well, recompletion of an existing well or workover project. In the event a
partner fails to fund the project, the contributing 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.
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. The bank has sole discretion to determine the
borrowing base based on its valuation of the Partnership's reserves valued
semi-annually.
The credit facility consists of a regular revolver, which on March 24,
2000, had a borrowing base of $7.0 million. At March 31, 2000, the Partnership
had approximately $200,000 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 its guarantee.
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.
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.
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;
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
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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.
The credit facility contains a number of 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, the maintenance of a current ratio,
limitations on general and administrative expenses, and restrictions on the
payment of dividends on the equity partnership interests of the Partnership.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements.
As permitted by Form 8-K, the required historical financial
statements in respect of the Pecos Properties will be filed by
amendment to this Form 8-K no later than June 7, 2000.
(b) Pro Forma Financial Information.
As permitted by Form 8-K, the required pro forma financial
information in respect of the Pecos Properties will be filed
by amendment to this Form 8-K no later than June 7, 2000.
(c) Exhibits.
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Number Document
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10.1 Purchase and Sale Agreement between Nebraska Public Gas
Authority as seller, and Humphrey-Hill, L.P., as buyer,
dated February 22, 2000, to be filed by amendment to
this Form 8-K.
10.2 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, to be filed by amendment to this Form 8-K.
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10.3 Amended and Restated Agreement of Limited Partnership,
dated March 24, 2000, of Humphrey-Hill, L.P., to be
filed by amendment to this Form 8-K.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
EXCO RESOURCES, INC.
By: /s/ J. DOUGLAS RAMSEY
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J. Douglas Ramsey, Vice President
and Chief Financial Officer
Dated: April 10, 2000
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