<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
(AMENDMENT NO. 1)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
MARCH 24, 2000
(DATE OF REPORT) (DATE OF EARLIEST EVENT REPORTED)
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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<PAGE> 2
The undersigned registrant hereby amends the following "Item 7.
Financial Statements and Exhibits" of its Current Report on Form 8-K filed on
April 10, 2000, dated March 24, 2000, to include the following:
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements.
Audited Statement of Operating Revenues and Direct Operating
Expenses for EXCO's share of the Pecos County Properties for
the year ended December 31, 1999, together with report of
independent accountants, Ernst & Young LLP.
(b) Pro Forma Financial Information.
Unaudited Pro Forma Combined Condensed Financial Statements of
EXCO Resources, Inc. for the year ended December 31, 1999, and
the three months ended March 31, 2000.
(c) Exhibits.
Number Document
10.1 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.
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, filed as an Exhibit to
EXCO's Form 10-Q for the quarter ended March 31,
2000.
10.3 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.
10.4 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.
23.1 Consent of Independent Accountants, Ernst & Young LLP
(filed herewith).
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<PAGE> 3
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
---------------------------------
J. Douglas Ramsey, Vice President
And Chief Financial Officer
Dated: June 7, 2000
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<PAGE> 4
Item 7(a)
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
EXCO Resources, Inc.
We have audited the accompanying statement of operating revenues and direct
operating expenses of the share of the Pecos County Properties (as defined in
Note 1 to the accompanying statement) acquired by EXCO Resources, Inc. for the
year ended December 31, 1999. This statement is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
statement based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe our audit provides a reasonable basis for our opinion.
The accompanying statement of operating revenues and direct operating expenses
was prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission and is not intended to be a complete
presentation of revenues and expenses of the Pecos County Properties.
In our opinion, the statement of operating revenues and direct operating
expenses referred to above presents fairly, in all material respects, the
operating revenues and direct operating expenses of the share of the Pecos
County Properties acquired by EXCO Resources, Inc. for the year ended December
31, 1999 in conformity with accounting principles generally accepted in the
United States.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
Dallas, Texas
May 31, 2000
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<PAGE> 5
PECOS COUNTY PROPERTIES
STATEMENT OF OPERATING REVENUES
AND DIRECT OPERATING EXPENSES
(In thousands)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------
1999
-------------------
<S> <C>
Oil and natural gas revenues....................................... $ 1,157
Direct operating expenses.......................................... 270
-------------------
Excess of revenues over direct operating expenses.................. $ 887
===================
</TABLE>
See accompanying notes.
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<PAGE> 6
PECOS COUNTY PROPERTIES
NOTES TO STATEMENT OF OPERATING REVENUES
AND DIRECT OPERATING EXPENSES
1. BASIS OF PRESENTATION
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)(renamed Pecos-Gomez, L.P. effective April 14, 2000), 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 purchase price, before closing adjustments, was
approximately $10.2 million cash (approximately $10.1 million after contractual
adjustments).
The accompanying statement presents the interest acquired by EXCO in
the operating revenues and direct operating expenses of the Pecos County
Properties. Direct operating expenses include the actual costs of maintaining
the producing properties and their production, but do not include charges for
depletion, depreciation, and amortization, federal and state income taxes,
interest, or general and administrative expenses. Presentation of complete
historical financial statements for the year ended December 31, 1999, is not
practicable because the Pecos County Properties were not accounted for as a
separate entity by the Seller, and therefore, such statement is not available.
The operating revenues and direct operating expenses for the period presented
may not be representative of future operations.
Revenues in the accompanying Statement of Operating Revenues and Direct
Operating Expenses are recognized on the sales method. Direct operating expenses
are recognized on an accrual basis.
2. SUPPLEMENTAL OIL AND NATURAL GAS RESERVE AND STANDARDIZED MEASURE
INFORMATION (UNAUDITED)
OIL AND NATURAL GAS OPERATIONS
During the year ended December 31, 1999, no exploration or incremental
general and administrative costs were incurred.
RESERVE QUANTITY INFORMATION
The following table presents EXCO's estimate of its share of the proved
oil and natural gas reserves of the Pecos County Properties, all of which are
located in the United States, as of December 31, 1999. EXCO emphasizes that
reserve estimates are inherently imprecise and that estimates of new discoveries
are more imprecise than those of producing oil and natural gas properties.
Accordingly, the estimates are expected to change as future information becomes
available.
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<PAGE> 7
PECOS COUNTY PROPERTIES
NOTES TO STATEMENT OF OPERATING REVENUES
AND DIRECT OPERATING EXPENSES
<TABLE>
<CAPTION>
OIL (Bbls) GAS (Mcf) BOE(1)
---------------- ---------------- ---------------
(In thousands)
<S> <C> <C> <C>
Proved reserves................................................... -- 14,030 2,338
================ ================ ===============
Proved developed reserves......................................... -- 14,030 2,338
================ ================ ===============
</TABLE>
---------------
(1) Boe - Barrels of oil equivalent calculated by converting 6 Mcf of
natural gas to 1 Bbl of oil. A Bbl is one stock tank barrel, or 42 U.S.
gallons liquid volume, of crude oil or other liquid hydrocarbons. An
Mcf is one thousand cubic feet of natural gas.
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
The Standardized Measure of Discounted Future Net Cash Flows Relating
to Proved Oil and Gas Reserves (Standardized Measure) is a disclosure
requirement under Statement of Financial Accounting Standards No. 69.
The Standardized Measure does not purport to be, nor should it be
interpreted to present, the fair value of the oil and natural gas reserves of
the Pecos County Properties. An estimate of fair value would also take into
account, among other things, the recovery of reserves not presently classified
as proved, the value of unproved properties, and consideration of expected
future economic and operating conditions.
Under the Standardized Measure, future cash flows are estimated by
applying year-end prices, adjusted for fixed and determinable escalations, to
the estimated future production of year-end proved reserves. Future cash flows
are reduced by estimated future production costs, based on period-end costs, and
projected future development costs to determine net cash inflows. The Pecos
County Properties are not a separate tax paying entity. Accordingly, the
Standardized Measure for the Pecos County Properties is presented before
deduction of income taxes. Future net cash flows are discounted using a 10%
annual discount rate to arrive at the Standardized Measure.
The Standardized Measure of discounted future net cash flows relating
to proved oil and natural gas reserves of EXCO's share of the Pecos County
Properties at December 31, 1999, follows (in thousands):
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<PAGE> 8
PECOS COUNTY PROPERTIES
NOTES TO STATEMENT OF OPERATING REVENUES
AND DIRECT OPERATING EXPENSES
<TABLE>
<S> <C>
Future cash inflows............................................................................. $ 26,462
Future production costs......................................................................... 11,444
Future development costs........................................................................ 837
-------------
Future net cash flows........................................................................... 14,181
Discount of future net cash flows at 10% per annum.............................................. 8,362
-------------
Discounted future net cash flows before income taxes............................................ $ 5,819
=============
</TABLE>
Estimates of economically recoverable oil and natural gas reserves and
of future net revenues are based upon a number of variable factors and
assumptions, all of which are to some degree speculative and may vary
considerably from actual results. Therefore, actual production, revenues, taxes,
development and operating expenditures may not occur as estimated. The reserve
data are estimates only, are subject to many uncertainties, and are based on
data gained from production histories and on assumptions as to geologic
formations and other matters. Actual quantities of oil and natural gas may
differ materially from the amounts estimated.
The weighted average price of natural gas at December 31, 1999, used
in the calculation of the Standardized Measure were $1.89 per Mcf.
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<PAGE> 9
Item 7(b)
EXCO RESOURCES, INC.
PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
As discussed in "Item 2. Acquisition or Disposition of Assets," of
EXCO's Current Report on Form 8-K filed on April 10, 2000, dated March 24, 2000,
Humphrey-Hill, L.P., a Texas limited partnership, owned 50% by Taurus
Acquisition, Inc., 49% by certain private investors as limited partners, and 1%
by EXCO Resources, Inc. as general partner, purchased certain oil and gas assets
located in Pecos County, Texas (the Pecos County Properties) from Nebraska
Public Gas Agency for approximately $10.1 million cash, after contractual
adjustments.
The accompanying pro forma combined condensed financial statements are
based on the historical financial statements of EXCO for the year ended December
31, 1999, and the three months ended March 31, 2000. The pro forma combined
condensed financial statements are also based, in part, on the historical
financial statements of Rio Grande, Inc. (Rio Grande or RGI) which was acquired
on March 16, 1999, the Seward/Meade County Properties received as partial
consideration from the sale of the Jackson Parish Properties effective December
31, 1999, the Natchitoches Parish Properties acquired effective December 31,
1999, the Val Verde County Properties acquired on February 25, 2000, and EXCO's
share of the Pecos County Properties acquired on March 24, 2000.
Because the acquisition of RGI, the disposition of the Jackson Parish
Properties, the addition of the Seward/Meade County Properties, and the
acquisition of the Natchitoches Parish Properties all occurred in 1999, the Val
Verde County Properties were acquired February 25, 2000, and the Pecos County
Properties were acquired March 24, 2000, they are already included in EXCO's
March 31, 2000, balance sheet. The Pro Forma Combined Condensed Statements of
Operations for the year ended December 31, 1999, and the three months ended
March 31, 2000, have been prepared assuming the acquisition of RGI, 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 the Pecos County Properties had all been
consummated on January 1, 1999.
The pro forma adjustments are based upon available information and
assumptions that management of EXCO believes are reasonable. The pro forma
combined condensed financial statements do not purport to represent the
financial position or results of operations of EXCO which would have occurred
had such transactions been consummated on the dates indicated or EXCO's
financial position or results of operations for any future date or period.
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<PAGE> 10
EXCO RESOURCES, INC.
PRO FORMA COMBINED CONDENSED BALANCE SHEET
MARCH 31, 2000
(Unaudited)
<TABLE>
<CAPTION>
EXCO PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS COMBINED
--------------------- --------------------- ---------------------
(In thousands)
<S> <C> <C> <C>
ASSETS:
Current assets:
Cash .............................................. $ 14,393 $ -- $ 14,393
Accounts receivable and other assets .............. 4,277 -- 4,277
--------------------- --------------------- ---------------------
Total current assets .......................... 18,670 -- 18,670
Net property and equipment ............................ 36,738 -- 36,738
Other assets .......................................... 375 -- 375
Investments ........................................... 3 -- 3
--------------------- --------------------- ---------------------
Total assets .................................. $ 55,786 $ -- $ 55,786
===================== ===================== =====================
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable and accrued liabilities .......... $ 1,786 $ -- $ 1,786
Current maturities of long-term debt .............. -- -- --
--------------------- --------------------- ---------------------
Total current liabilities ..................... 1,786 -- 1,786
Long-term debt, less current maturities ............... 10,555 -- 10,555
Deferred income taxes ................................. 760 -- 760
Other long-term liabilities ........................... 227 -- 227
Stockholders' equity:
Preferred stock ................................... -- -- --
Common stock ...................................... 136 -- 136
Additional paid-in capital ........................ 36,769 -- 35,769
Treasury stock .................................... (75) -- (75)
Retained earnings ................................. 5,628 -- 5,628
--------------------- --------------------- ---------------------
Total stockholders' equity .................... 42,458 -- 42,458
--------------------- --------------------- ---------------------
Total liabilities and stockholders' equity .... $ 55,786 $ -- $ 55,786
===================== ===================== =====================
</TABLE>
See accompanying notes.
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<PAGE> 11
EXCO RESOURCES, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
SEWARD/MEADE NATCHITOCHES VAL VERDE
EXCO RIO GRANDE COUNTY PARISH COUNTY
HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL
------------ ------------ ------------ ------------ ------------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
REVENUES:
Oil and natural gas .................................... $ 5,294 $ 176 $ 185 $ 5,357 $ 2,211
Other .................................................. 2,008 23 -- -- --
Gain on disposition of property ........................ 5,102 -- -- -- --
------------ ------------ ------------ ------------ ------------
Total revenues ................................. 12,404 199 185 5,357 2,211
EXPENSES:
Oil and natural gas production ......................... 2,375 123 45 2,688 319
Depletion, depreciation and amortization ............... 1,446 9 -- -- --
General and administrative ............................. 1,934 73 -- -- --
Interest and other ..................................... 17 0 -- -- --
------------ ------------ ------------ ------------ ------------
Income (loss) before income taxes and minority interest .... 6,632 (6) 140 2,669 1,892
Minority interest in limited partnership ................... (7) 1 -- -- --
------------ ------------ ------------ ------------ ------------
Income (loss) before income taxes .......................... 6,639 (7) 140 2,669 1,892
Income tax expense (benefit) ............................... 2,139 -- -- -- --
------------ ------------ ------------ ------------ ------------
Income (loss) before extraordinary item .................... 4,500 (7) 140 2,669 1,892
Fee income from early extinguishment of debt, net of tax ... 165 -- -- -- --
------------ ------------ ------------ ------------ ------------
Net income (loss) .......................................... $ 4,665 $ (7) $ 140 $ 2,669 $ 1,892
============ ============ ============ ============ ============
Basic and diluted earnings per share ....................... $ .69 $ -- $ -- $ -- $ --
============ ============ ============ ============ ============
Weighted average number of common and common
equivalent shares outstanding:
Basic ........................................... 6,698 -- -- -- --
============ ============ ============ ============ ============
Diluted ......................................... 6,714 -- -- -- --
============ ============ ============ ============ ============
</TABLE>
See accompanying notes.
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<PAGE> 12
EXCO RESOURCES, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(Unaudited)
(Continued)
<TABLE>
<CAPTION>
PRO FORMA
PECOS ADJUSTMENTS FOR
COUNTY THE ACQUISITIONS PRO FORMA
HISTORICAL AND DISPOSITION COMBINED
------------ ----------------- ---------------
(In thousands, except per share amounts)
REVENUES:
<S> <C> <C> <C> <C>
Oil and natural gas..................................... $ 1,157 $ -- $ 14,380
Other................................................... -- (1,224) (1)(2)(7)(10)(13) 807
Gain on disposition of property......................... -- (5,102) (5) --
------------ ----------------- ---------------
Total revenues.................................. 1,157 (6,326) 15,187
EXPENSES:
Oil and natural gas production.......................... 270 -- 5,820
Depletion, depreciation and amortization................ -- 3,000 (3)(6)(8)(11) 4,455
General and administrative.............................. -- -- 2,007
Interest and other ..................................... -- 546 (9)(12) 563
------------ ----------------- ---------------
Income (loss) before income taxes and minority interest.... 887 (9,872) 2,342
Minority interest in limited partnership.................... -- -- (6)
------------ ----------------- -------------
Income (loss) before income taxes........................... 887 (9,872) 2,348
Income tax expense (benefit)................................ -- (1,670) (14) 469
------------ ----------------- ---------------
Income (loss) before extraordinary item..................... -- (8,202) 1,879
Fee income from early extinguishment of debt, net of tax.... -- (165) (4) --
------------ ----------------- ---------------
Net income (loss)........................................... $ 887 $ (8,367) $ 1,879
============ ================= ===============
Basic and diluted earnings per share........................ $ -- $ -- $ .28
============ ================= ===============
Weighted average number of common and common equivalent
shares outstanding:
Basic............................................ -- -- 6,698
============ ================= ===============
Diluted.......................................... -- -- 6,714
============ ================= ===============
</TABLE>
See accompanying notes.
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<PAGE> 13
EXCO RESOURCES, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000
(Unaudited)
<TABLE>
<CAPTION>
PRO FORMA
VAL VERDE PECOS ADJUSTMENTS
EXCO COUNTY COUNTY FOR THE PRO FORMA
HISTORICAL HISTORICAL HISTORICAL ACQUISITIONS COMBINED
------------ -------------- ------------ ------------- -------------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Oil and natural gas............... $ 4,026 $ 184 $ 224 $ -- $ 4,434
Other............................. 392 -- -- (60) (1)(2)(7)(10)(13) 332
Gain on disposition of property... 535 -- -- (535) (5) --
------------ -------------- ------------ ------------- -------------
Total revenues............ 4,953 184 224 (595) 4,766
EXPENSES:
Oil and natural gas production.... 1,384 27 70 -- 1,481
Depletion, depreciation and
amortization................... 847 -- -- 133 (3)(6)(8)(11) 980
General and administrative........ 417 -- -- -- 417
Interest and other ............... 71 -- -- -- 71
------------ -------------- ------------ ------------- -------------
Income (loss) before income taxes and
minority interest.................. 2,234 157 154 (728) 1,817
Deferred income tax provision......... -- -- -- (142) (14) 618
------------ -------------- ------------ ------------- -------------
Net income (loss)..................... $ 1,474 -- $ 154 $ (586) $ 1,199
============ ============= ============ ============= =============
Basic and diluted earnings per share $ .21 $ -- $ -- $ -- $ .17
============ ============= ============ ============= =============
Weighted average number of
common and common equivalent
shares outstanding:
Basic...................... 6,815 -- -- -- 6,815
============ ============= ============ ============= =============
Diluted.................... 6,845 -- -- -- 6,845
============ ============= ============ ============= =============
</TABLE>
See accompanying notes.
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<PAGE> 14
EXCO RESOURCES, INC.
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS
A. Pro Forma Adjustments for the Jackson Parish Properties
The accompanying unaudited Pro Forma Combined Condensed Statements of
Operations for the year ended December 31, 1999, and the three months ended
March 31, 2000, have been prepared as if EXCO's share of the disposition of the
Jackson Parish Properties, the addition of the Seward/Meade County Properties,
and the related repayment of debt had been consummated on January 1, 1999, and
reflect the following adjustments:
(1) To record a decrease in interest income as a result of the
repayment of the Venus convertible promissory note.
(2) To eliminate the 1999 equity in the earnings of EXUS Energy, LLC.
(3) To adjust depreciation, depletion and amortization of the oil and
gas properties to reflect the effect of the addition of the
Seward/Meade County Properties using the full cost method of
accounting on total pro forma proved oil and natural gas reserves.
(4) To eliminate the fee income, net of tax, on the early
extinguishment of the Venus convertible promissory note.
(5) To eliminate the gain from the sale of EXCO's share of the Jackson
Parish Properties.
B. PRO FORMA ADJUSTMENTS FOR THE NATCHITOCHES PARISH PROPERTIES
The accompanying unaudited Pro Forma Combined Condensed Statements of
Operations for the year ended December 31, 1999, and the three months ended
March 31, 2000, have been prepared as if the acquisition of the Natchitoches
Parish Properties had been consummated on January 1, 1999, and reflect the
following adjustments:
(6) To adjust depreciation, depletion and amortization of the oil and
gas properties to reflect the effect of the acquisition of the
Natchitoches Parish Properties using the full cost method of
accounting on total pro forma proved oil and natural gas reserves.
(7) To record a decrease in interest income on invested cash of $7.2
million, based on a 4% per annum interest rate.
C. PRO FORMA ADJUSTMENTS FOR THE VAL VERDE COUNTY PROPERTIES
The accompanying unaudited Pro Forma Combined Condensed Statements of
Operations for the year ended December 31, 1999, and the three months ended
March 31, 2000, have been prepared as if the acquisition of the Val Verde County
Properties had been consummated on January 1, 1999, and reflect the following
adjustments:
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<PAGE> 15
EXCO RESOURCES, INC.
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS
(8) To adjust depreciation, depletion and amortization of the oil and
gas properties to reflect the effect of the acquisition of the Val
Verde County Properties using the full cost method of accounting
on total pro forma proved oil and natural gas reserves.
(9) To adjust interest expense on the borrowings of approximately $7.1
million based on a 7.0% per annum interest rate.
(10) To record a decrease in interest income on invested cash of
approximately $4.3 million, based on a 4% per annum interest rate.
D. PRO FORMA ADJUSTMENTS FOR THE PECOS COUNTY PROPERTIES
The accompanying unaudited Pro Forma Combined Condensed Statements of
Operations for the year ended December 31, 1999, and the three months ended
March 31, 2000, have been prepared as if EXCO's share of the acquisition of the
Pecos County Properties had been consummated on January 1, 1999, and reflect the
following adjustments:
(11) To adjust depreciation, depletion and amortization of the oil and
gas properties to reflect the effect of the acquisition of the
Pecos County Properties using the full cost method of accounting
on total pro forma proved oil and natural gas reserves.
(12) To adjust interest expense on the borrowings of approximately $3.4
million based on a 7.0% per annum interest rate.
(13) To record a decrease in interest income on invested cash of $3.5
million, based on a 4% per annum interest rate.
E. PRO FORMA ADJUSTMENTS FOR INCOME TAXES
The accompanying unaudited Pro Forma Combined Statements of Operations
for the year ended December 31, 1999, and the three months ended March 31, 2000,
reflects the following adjustments:
(14) To adjust the provision for income taxes for the change in
financial taxable income resulting from the disposition of EXCO's
share of the Jackson Parish Properties and the inclusion of the
historical results of operations of Rio Grande, Inc., the
Seward/Meade County Properties, the Natchitoches Parish
Properties, the Val Verde County Properties, and EXCO's share of
the Pecos County Properties and adjustments (1), (2), (3), (5),
(6), (7), (8), (9), (10), (11),(12) and (13).
-14-
<PAGE> 16
EXCO RESOURCES, INC.
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS
F. PRO FORMA COMBINED SUPPLEMENTAL OIL AND NATURAL GAS RESERVE AND
STANDARDIZED MEASURE INFORMATION
RESERVE QUANTITY INFORMATION
The following table presents EXCO's estimate of the pro forma combined
proved oil and natural gas reserves of EXCO as of March 31, 2000. All reserves
are located in the United States. EXCO emphasizes that reserve estimates are
inherently imprecise and that estimates of new discoveries are more imprecise
than those of producing oil and natural gas properties. Accordingly, the
estimates are expected to change as future information becomes available.
<TABLE>
<CAPTION>
OIL (BBLS)(1) GAS (MCF) BOE(2)
----------------- ---------------- --------------
(In thousands)
<S> <C> <C> <C>
Proved reserves...................................................... 2,953 49,281 11,166
================= ================ ==============
Proved developed reserves............................................ 2,617 38,531 9,039
================= ================ ==============
</TABLE>
-------------
(1) Oil includes both crude oil and natural gas liquids.
(2) Boe - Barrels of oil equivalent calculated by converting 6 Mcf of natural
gas to 1 Bbl of oil. A Bbl is one stock tank barrel, or 42 U.S. gallons
liquid volume, of crude oil or other liquid hydrocarbons. An Mcf is one
thousand cubic feet of natural gas.
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING TO PROVED OIL
AND NATURAL GAS RESERVES
The Standardized Measure of Discounted Future Net Cash Flows Relating to
Proved Oil and Natural Gas Reserves (Standardized Measure) is a disclosure
requirement under Statement of Financial Accounting Standards No. 69.
The Standardized Measure does not purport to be, nor should it be
interpreted to present, the fair value of EXCO's oil and natural gas reserves.
An estimate of fair value would also take into account, among other things, the
recovery of reserves not presently classified as proved, the value of unproved
properties, and consideration of expected future economic and operating
conditions.
Under the Standardized Measure, future cash flows are estimated by
applying period-end prices, adjusted for fixed and determinable escalations, to
the estimated future production of period-end proved reserves. Future cash
inflows are reduced by estimated future production costs, based on period-end
costs, and projected future development costs to determine pre-tax cash inflows.
Future income taxes are computed by applying the statutory rate (based on the
current tax law adjusted for permanent differences and tax credits) to the
excess of pre-tax net cash flows over EXCO's income tax basis of its oil and
natural gas properties. Future net cash flows are discounted using a 10% annual
discount rate to arrive at the Standardized Measure.
-15-
<PAGE> 17
EXCO RESOURCES, INC.
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS
The pro forma Standardized Measure of discounted future net cash flows
relating to EXCO's proved oil and natural gas reserves at March 31, 2000,
follows (in thousands):
<TABLE>
<S> <C>
Future cash inflows............................................ $ 196,536
Future production costs........................................ 67,753
Future development costs....................................... 5,294
Future income taxes............................................ 27,108
-----------------
Future net cash flows.......................................... 96,381
Discount of future net cash flows at 10% per annum............. 45,368
-----------------
Pro forma Standardized Measure of discounted future
net cash flows............................................ $ 51,013
=================
Pro forma Standardized Measure of discounted future
net cash flows before income taxes........................ $ 67,070
=================
</TABLE>
The future cash flows shown above include amounts attributable to
non-producing reserves requiring approximately $5.8 million of future
development costs. If these reserves are not developed, the Standardized Measure
of discounted future net cash flows as of March 31, 2000, shown above would be
reduced significantly.
Estimates of economically recoverable oil and natural gas reserves and of
future net reserves are based upon a number of variable factors and assumptions,
all of which are to some degree speculative and may vary considerably from
actual results. Therefore, actual production, revenues, taxes, development and
operating expenditures may not occur as estimated. The reserve data are
estimates only, are subject to many uncertainties and are based on data gained
from production histories and on assumptions as to geologic formations and other
matters. Actual quantities of oil and natural gas may differ materially from the
amounts estimated.
The weighted average prices of oil (including NGLs) and natural gas at
March 31, 2000, used in the calculation of the Standardized Measure were $24.83
per Bbl and $2.49 per Mcf, respectively.
-16-
<PAGE> 18
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
10.1 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.
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, filed as an Exhibit to
EXCO's Form 10-Q for the quarter ended March 31, 2000.
10.3 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.
10.4 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.
23.1 Consent of Independent Accountants, Ernst & Young LLP (filed
herewith).
</TABLE>
