<PAGE> 1
================================================================================
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
DECEMBER 31, 1999
(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
================================================================================
<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
January 18, 2000, dated December 31, 1999 to include the following:
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements.
Audited Statements of Operating Revenues and Direct Operating
Expenses for EXCO's share of the Natchitoches Parish
Properties for the years ended December 31, 1997, 1998, and
1999, together with report of independent auditors, 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, 1998 and
the nine months ended September 30, 1999.
(c) Exhibits.
Number Document
10.1 Purchase, Sale and Exchange Agreement between
EXCO Resources, Inc., as seller, and Anadarko
Petroleum Corporation, as buyer, dated
December 17, 1999, previously filed as an
exhibit to this Form 8-K filed January 18,
2000.
10.2 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, previously filed as
an exhibit to this Form 8-K filed January 18,
2000.
10.3 Purchase and Sale Agreement between Western
Gas Resources, Inc., as seller, and EXCO
Resources, Inc., as buyer, dated November 16,
1999, previously filed as an exhibit to this
Form 8-K filed January 18, 2000.
10.4 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, previously
filed as an exhibit to this Form 8-K filed
January 18, 2000.
23.1 Consent of Independent Auditors, Ernst &
Young LLP (filed herewith).
23.2 Consent of Independent Auditors, KPMG LLP
(filed herewith).
-1-
<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/ T. W. EUBANK
-------------------------------
T.W. Eubank, President
Dated: March 6, 2000
-2-
<PAGE> 4
Item 7(a)
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
EXCO Resources, Inc.
We have audited the accompanying statements of operating revenues and direct
operating expenses of the share of the Natchitoches Parish Properties (as
defined in Note 1 to the accompanying statements) acquired by EXCO Resources,
Inc. for the years ended December 31, 1997, 1998 and 1999. These statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. 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 audits provide a reasonable basis for our
opinion.
The accompanying statements of operating revenues and direct operating expenses
were prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission and are not intended to be a complete
presentation of revenues and expenses of the Natchitoches Parish Properties.
In our opinion, the statements of operating revenues and direct operating
expenses referred to above present fairly, in all material respects, the
operating revenues and direct operating expenses of the share of the
Natchitoches Parish Properties acquired by EXCO Resources, Inc. for the years
ended December 31, 1997, 1998, and 1999 in conformity with accounting principles
generally accepted in the United States.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
Dallas, Texas
January 12, 2000
-3-
<PAGE> 5
NATCHITOCHES PARISH PROPERTIES
STATEMENTS OF OPERATING REVENUES
AND DIRECT OPERATING EXPENSES
(In thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Oil and natural gas sales ............................. $ 14,259 $ 6,070 $ 5,357
Direct operating expenses ............................. 3,607 2,975 2,688
-------- -------- --------
Excess of revenues over direct operating expenses ..... $ 10,652 $ 3,095 $ 2,669
======== ======== ========
</TABLE>
See accompanying notes.
-4-
<PAGE> 6
NATCHITOCHES PARISH PROPERTIES
NOTES TO STATEMENTS OF OPERATING REVENUES
AND DIRECT OPERATING EXPENSES
1. BASIS OF PRESENTATION
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. (Western), as seller, and EXCO Resources, Inc.
(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.
The accompanying statements present the interest acquired by EXCO in the
operating revenues and direct operating expenses of the Natchitoches Parish
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 years ended December 31, 1997, 1998, and
1999 is not practicable because the Natchitoches Parish Properties were not
accounted for as a separate entity by Western, and therefore, such statements
are not available. The operating revenues and direct operating expenses for the
periods presented may not be representative of future operations.
Revenues in the accompanying Statements 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 years ended December 31, 1997, 1998 and 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 Natchitoches Parish 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.
-5-
<PAGE> 7
NATCHITOCHES PARISH PROPERTIES
NOTES TO STATEMENTS OF OPERATING REVENUES
AND DIRECT OPERATING EXPENSES
<TABLE>
<CAPTION>
OIL (BBLS)(1) GAS (MCF) BOE(2)
------------- -------- --------
(In thousands)
<S> <C> <C> <C>
Proved reserves ................... 609 4,740 1,399
======== ======== ========
Proved developed reserves ......... 609 4,740 1,399
======== ======== ========
</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
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 Natchitoches Parish 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
Natchitoches Parish Properties are not a separate tax paying entity.
Accordingly, the Standardized Measure for the Natchitoches Parish 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 Natchitoches Parish
Properties at December 31, 1999 follows (in thousands):
-6-
<PAGE> 8
NATCHITOCHES PARISH PROPERTIES
NOTES TO STATEMENTS OF OPERATING REVENUES
AND DIRECT OPERATING EXPENSES
<TABLE>
<CAPTION>
<S> <C>
Future cash inflows ........................................ $ 22,561
Future production costs .................................... 12,526
Future development costs ................................... --
--------
Future net cash flows ...................................... 10,035
Discount of future net cash flows at 10% per annum ......... 1,816
--------
Discounted future net cash flows before income taxes ....... $ 8,219
========
</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 natural gas and oil may differ materially from the
amounts estimated.
The weighted average prices of oil (including NGLs) and natural gas at
December 31, 1999 used in the calculation of the Standardized Measure were
$20.89 per Bbl and $2.08 per Mcf, respectively.
-7-
<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 January 18, 2000, dated December 31, 1999,
EXUS Energy, LLC, a Delaware limited liability company (EXUS), owned 50% by EXCO
Resources, Inc. (EXCO) and 50% by Venus Exploration, Inc. (Venus), completed the
disposition of the Jackson Parish Properties on December 31, 1999. Additionally,
effective December 31, 1999, EXCO purchased certain oil and gas assets located
in Natchitoches Parish, Louisiana (the Natchitoches Parish Properties) from
Western Gas Resources, Inc. for $7.2 million cash, after adjustments.
The accompanying pro forma combined condensed financial statements are
based on the historical financial statements of EXCO for the year ended December
31, 1998, and the nine months ended September 30, 1999. The pro forma combined
condensed financial statements are also based, in part, on the historical
financial statements of Jacobi-Johnson Energy, Inc. (Jacobi-Johnson) which was
acquired by EXCO effective May 8, 1998, Rio Grande, Inc. (Rio Grande or RGI)
which was acquired by EXCO effective March 16, 1999, and on EXCO's share of the
historical operating revenues and direct operating expenses of the Dawson County
Properties (described in EXCO's Form 8-K dated June 30, 1998), the Seward/Meade
County, Kansas properties as partial consideration for the Jackson Parish
Properties (the Seward/Meade County Properties), and the Natchitoches Parish
Properties.
The Pro Forma Combined Condensed Balance Sheet as of September 30, 1999,
assumes the disposition of the Jackson Parish Properties, the addition of the
Seward/Meade County Properties and the related repayment of borrowings, and the
acquisition of the Natchitoches Parish Properties for cash had all been
consummated on that date. Because RGI was acquired on March 16, 1999,
Jacobi-Johnson and the Dawson County Properties were both acquired in 1998, and
the common stock Rights Offering was completed in 1998, they are already
included in EXCO's September 30, 1999 balance sheet. The Pro Forma Combined
Condensed Statements of Operations for the year ended December 31, 1998, and the
nine months ended September 30, 1999, have been prepared assuming the
acquisition of Jacobi-Johnson, the Dawson County Properties, and RGI, the
related borrowings, the common stock Rights Offering, the disposition of the
Jackson Parish Properties, the addition of the Seward/Meade County Properties,
and the acquisition of the Natchitoches Parish Properties had been consummated
on January 1, 1998.
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.
-8-
<PAGE> 10
EXCO RESOURCES, INC.
PRO FORMA COMBINED CONDENSED BALANCE SHEET
SEPTEMBER 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
FOR THE
ACQUISITIONS
EXCO AND PRO FORMA
HISTORICAL DISPOSITION COMBINED
---------- -------------- ----------
(In thousands)
ASSETS:
Current assets:
<S> <C> <C> <C>
Cash .............................................. $ 10,428 $ 10,941 (7)(8)(13) $ 21,369
Accounts receivable and other assets .............. 2,337 (338)(7)(13) 1,999
---------- ---------- ----------
Total current assets .......................... 12,765 10,603 23,368
Net property and equipment ............................ 25,770 (5,700)(8)(13) 20,070
Other assets .......................................... 664 (279)(7) 385
Note receivable ....................................... 7,000 (7,000)(8) --
Investments ........................................... 344 -- 344
---------- ---------- ----------
Total assets .................................. $ 46,543 $ (2,376) $ 44,167
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable and accrued liabilities .......... $ 2,576 $ 1,630 (7)(8)(13) $ 4,206
Current maturities of long-term debt .............. 1 -- 1
---------- ---------- ----------
Total current liabilities ..................... 2,577 1,630 4,207
Long-term debt, less current maturities ............... 6,862 (6,862)(8) --
Other long-term liabilities ........................... 227 (113)(7) 114
Stockholders' equity:
Preferred stock ................................... -- -- --
Common stock ...................................... 134 -- 134
Additional paid-in capital ........................ 36,610 -- 36,610
Minority interest in limited partnership .......... (187) -- (187)
Retained earnings ................................. 320 2,969 (8) 3,289
---------- ---------- ----------
Total stockholders' equity .................... 36,877 2,969 39,846
---------- ---------- ----------
Total liabilities and stockholders' equity .... $ 46,543 $ (2,376) $ 44,167
========== ========== ==========
</TABLE>
-9-
<PAGE> 11
EXCO RESOURCES, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
FOR THE 1998
JACOBI- DAWSON ACQUISITIONS ADJUSTED
EXCO JOHNSON COUNTY & RIGHTS EXCO RIO GRANDE
HISTORICAL HISTORICAL HISTORICAL OFFERING HISTORICAL HISTORICAL
---------- ---------- ---------- ------------ ---------- ----------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Oil and natural gas ................ $ 1,385 $ 236 $ 479 $ -- $ 2,100 $ 4,407
Other .............................. 690 -- -- (315)(4) 375 351
-------- -------- -------- -------- -------- --------
Total revenues ................. 2,075 236 479 (315) 2,475 4,758
EXPENSES:
Oil and natural gas production ..... 786 140 106 -- 1,032 2,060
Abandonment costs .................. -- -- -- -- -- 137
Depletion, depreciation and
amortization .................... 465 32 -- 142 (1) 639 6,097
General and administrative ......... 1,231 7 -- 16 (2) 1,254 1,350
Interest and other ................. 104 10 -- (114)(3) -- 939
-------- -------- -------- -------- -------- --------
Income (loss) before income taxes
and minority interest ................ (511) 47 373 (359) (450) (5,825)
Minority interest in limited
partnership ............................ -- -- -- -- -- (127)
-------- -------- -------- -------- -------- --------
Income (loss) before income taxes ...... (511) 47 373 (359) (450) (5,698)
Income taxes ........................... -- -- -- -- -- 10
-------- -------- -------- -------- -------- --------
Net income (loss) ...................... (511) 47 373 (359) (450) (5,708)
Dividends on preferred stock ........... -- -- -- -- -- (817)
-------- -------- -------- -------- -------- --------
Net income (loss) applicable to
common stock ......................... $ (511) $ 47 $ 373 $ (359) $ (450) $ (6,525)
======== ======== ======== ======== ======== ========
Basic and diluted earnings (loss)
per share ........................... $ (0.18) $ -- $ -- $ -- $ (0.07) $ --
======== ======== ======== ======== ======== ========
Weighted average number of
common and common
equivalent shares outstanding:
Basic ............................... 2,871 -- -- 3,711 (5) 6,582 --
-------- -------- -------- -------- -------- --------
Diluted ............................. 2,874 -- -- 3,711 6,585 --
======== ======== ======== ======== ======== ========
</TABLE>
-10-
<PAGE> 12
EXCO RESOURCES, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(Unaudited)
(Continued)
<TABLE>
<CAPTION>
PRO FORMA
SEWARD/MEADE NATCHITOCHES ADJUSTMENTS
COUNTY PARISH FOR THE 1999 PRO FORMA
HISTORICAL HISTORICAL ACQUISITIONS COMBINED
------------ ------------ ------------ ----------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
REVENUES:
Oil and natural gas ................. $ 161 $ 6,070 $ -- $ 12,738
Other ............................... -- -- -- 726
---------- ---------- ---------- ----------
Total revenues .............. 161 6,070 -- 13,464
EXPENSES:
Oil and natural gas production ...... 46 2,975 -- 6,113
Abandonment costs ................... -- -- -- 137
Depletion, depreciation and
amortization ................... -- -- 1,816 (12)(14) 8,552
General and administrative .......... -- -- -- 2,604
Interest and other .................. -- -- (939)(6) --
---------- ---------- ---------- ----------
Income (loss) before income taxes
and minority interest .......... 115 3,095 (877) (3,942)
Minority interest in limited
partnership .................... -- -- -- (127)
---------- ---------- ---------- ----------
Income (loss) before income taxes ... 115 3,095 (877) (3,815)
Income taxes ........................ -- -- -- 10
---------- ---------- ---------- ----------
Net income (loss) ................... 115 3,095 (877) (3,825)
Dividends on preferred stock ........ -- -- 817 (6) --
---------- ---------- ---------- ----------
Net income (loss) applicable to
common stock ................... $ 115 $ 3,095 $ (60) $ (3,825)
========== ========== ========== ==========
Basic and diluted earnings (loss)
per share ...................... $ -- $ -- $ -- $ (.58)
========== ========== ========== ==========
Weighted average number of
common and common equivalent
shares outstanding:
Basic .......................... -- -- -- 6,582
========== ========== ========== ==========
Diluted ........................ -- -- -- 6,585
========== ========== ========== ==========
</TABLE>
-11-
<PAGE> 13
EXCO RESOURCES, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
SEWARD/ FOR THE
RIO MEADE NATCHITOCHES ACQUISITIONS
EXCO GRANDE COUNTY PARISH AND PRO FORMA
HISTORICAL HISTORICAL HISTORICAL HISTORICAL DISPOSITION COMBINED
---------- ---------- ---------- ------------ ------------ ---------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Oil and natural gas ................ $ 4,482 $ 176 $ 130 $ 3,859 $ (896)(10) $ 7,751
Other .............................. 970 23 -- -- (320)(9)(15) 673
------- ------- ------- ------- ------- -------
Total revenues ............. 5,452 199 130 3,859 (1,216) 8,424
EXPENSES:
Oil and natural gas production ..... 1,694 123 22 1,846 (107)(10) 3,578
Depletion, depreciation and
amortization .................... 1,382 9 -- -- 802 (10)(12)(14) 2,193
General and administrative ......... 1,425 73 -- -- (12)(10) 1,486
Interest and other ................. 125 0 -- -- (124)(11) 1
------- ------- ------- ------- ------- -------
Income (loss) before income taxes and
minority interest .................... 826 (6) 108 2,013 (1,775) 1,166
Minority interest ...................... (5) 1 -- -- -- (4)
Income taxes ........................... -- -- -- -- 69 (16) 69
------- ------- ------- ------- ------- -------
Net income (loss) ...................... $ 831 $ (7) $ 108 $ 2,013 $(1,844) $ 1,101
======= ======= ======= ======= ======= =======
Basic and diluted earnings per share ... $ .12 $ -- $ -- $ -- $ -- $ .16
======= ======= ======= ======= ======= =======
Weighted average number of
common and common equivalent
shares outstanding:
Basic ............................. 6,688 -- -- -- -- 6,688
======= ======= ======= ======= ======= =======
Diluted ........................... 6,698 -- -- -- -- 6,698
======= ======= ======= ======= ======= =======
</TABLE>
-12-
<PAGE> 14
EXCO RESOURCES, INC.
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS
A. PRO FORMA ADJUSTMENTS FOR THE ACQUISITIONS OF JACOBI-JOHNSON AND THE DAWSON
COUNTY PROPERTIES
The accompanying unaudited Pro Forma Combined Condensed Statement of
Operations for the year ended December 31, 1998 has been prepared as if the
acquisitions of Jacobi-Johnson and the Dawson County Properties had been
consummated on January 1, 1998 and reflects the following adjustments:
(1) To adjust depreciation, depletion and amortization of the oil and gas
properties to reflect the effect of the acquisitions of Jacobi-Johnson
and the Dawson County Properties using the full cost method of
accounting on total pro forma proved oil and natural gas reserves.
(2) To adjust general and administrative expense for unused line fees on
the Credit Facility.
(3) To eliminate interest expense on EXCO's and Jacobi-Johnson's
historical borrowings.
B. PRO FORMA ADJUSTMENTS FOR THE COMMON STOCK RIGHTS OFFERING
The accompanying unaudited Pro Forma Combined Condensed Statement of
Operations for the year ended December 31, 1998 has been prepared as if the
common stock Rights Offering had been consummated on January 1, 1998 and
reflects the following adjustments:
(4) To adjust interest income on surplus cash of $7.0 million, based on a
4.0% per annum interest rate.
(5) To adjust the weighted average common shares outstanding as a result
of the exercise of the common stock purchase rights by shareholders in
connection with the Rights Offering.
C. PRO FORMA ADJUSTMENTS FOR THE ACQUISITION OF RIO GRANDE
The accompanying unaudited Pro Forma Combined Condensed Statement of
Operations for the year ended December 31, 1998 has been prepared as if the
acquisition of RGI had been consummated on January 1, 1998 and reflects the
following adjustment:
(6) To eliminate the accrued interest on RGI's bank note and RGI's accrued
preferred stock dividends as a result of RGI's bankruptcy settlement.
D. PRO FORMA ADJUSTMENTS FOR THE DISPOSITION OF THE JACKSON PARISH PROPERTIES
The accompanying unaudited Pro Forma Combined Condensed Balance Sheet
has been prepared as if EXCO's share of the proceeds from the disposition of the
Jackson Parish Properties, the addition of the Seward/Meade County Properties,
and the related repayment of borrowings and recognition of a gain on the sale
and deferred tax liability had been consummated on September 30, 1999, and
reflects the following adjustments:
-13-
<PAGE> 15
EXCO RESOURCES, INC.
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS
(7) To eliminate EXCO's share of the working capital in EXUS.
(8) To record EXCO's proceeds of cash and the Seward/Meade County Properties,
and the reduction in properties and equipment from the sale of its interest
in the Jackson Parish Properties, the after-tax gain therefrom, the
repayment of the EXUS credit facility, and the repayment of $7 million of
principal owed by Venus to EXCO under a related convertible promissory
note.
The accompanying unaudited Pro Forma Combined Condensed Statements of
Operations for the year ended December 31, 1998, and the nine months ended
September 30, 1999 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,
1998 and reflect the following adjustments:
(9) To record a decrease in interest income as a result of the repayment of the
Venus convertible promissory note.
(10) To eliminate the historical operating revenues and expenses of the Jackson
Parish Properties.
(11) To eliminate the historical interest expense for EXCO's share of the EXUS
credit facility.
(12) 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.
E. PRO FORMA ADJUSTMENTS FOR THE ACQUISITION OF THE NATCHITOCHES PARISH
PROPERTIES
The accompanying unaudited Pro Forma Combined Condensed Balance Sheet has
been prepared as if EXCO's share of the acquisition of the Natchitoches Parish
Properties had been consummated on September 30, 1999, and reflects the
following adjustment:
(13) To record the acquisition of the Natchitoches Parish Properties in exchange
for consideration of approximately $7.2 million in cash and related
professional fees.
The accompanying unaudited Pro Forma Combined Condensed Statements of
Operations for the year ended December 31, 1998 and the nine months ended
September 30, 1999 have been prepared as if EXCO's share of the acquisition of
the Natchitoches Parish Properties had been consummated on January 1, 1998 and
reflect the following adjustments:
(14) 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.
-14-
<PAGE> 16
EXCO RESOURCES, INC.
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS
(15) To record a decrease in interest income on invested cash of $7.2 million,
based on a 4% per annum interest rate.
(16) To adjust the provision for income taxes for the change in financial
taxable income resulting from inclusion of the historical results of
operations of Rio Grande, Inc., the Seward/Meade County Properties, and the
Natchitoches Parish Properties, and adjustments (9), (10), (11), (14) and
(15).
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 after giving effect to the
disposition of EXCO's share of the Jackson Parish Properties, the
acquisition of Rio Grande, Inc., the addition of the Seward/Meade County
Properties, and the acquisition of the Natchitoches Parish Properties as of
September 30, 1999. 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 ................... 3,091 19,095 6,273
======== ======== ========
Proved developed reserves ......... 2,845 16,788 5,643
======== ======== ========
</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
-15-
<PAGE> 17
EXCO RESOURCES, INC.
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS
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 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.
The pro forma Standardized Measure of discounted future net cash flows
relating to EXCO's proved oil and natural gas reserves at September 30, 1999,
follows (in thousands):
<TABLE>
<S> <C>
Future cash inflows ........................................ $110,579
Future production costs .................................... 43,610
Future development costs ................................... 2,433
Future income taxes ........................................ 13,103
--------
Future net cash flows ...................................... 51,433
Discount of future net cash flows at 10% per annum ......... 22,694
--------
Pro forma Standardized Measure of discounted future
net cash flows .......................................... $ 28,739
========
</TABLE>
The future cash flows shown above include amounts attributable to
non-producing reserves requiring approximately $2.4 million of future
development costs. If these reserves are not developed, the Standardized Measure
of discounted future net cash flows as of September 30, 1999, 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
September 30, 1999 used in the calculation of the Standardized Measure were
$20.86 per Bbl and $2.40 per Mcf, respectively.
-16-
<PAGE> 18
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.1 Purchase, Sale and Exchange Agreement between
EXCO Resources, Inc., as seller, and Anadarko
Petroleum Corporation, as buyer, dated
December 17, 1999, previously filed as an
exhibit to this Form 8-K filed January 18,
2000.
10.2 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, previously filed as
an exhibit to this Form 8-K filed January 18,
2000.
10.3 Purchase and Sale Agreement between Western
Gas Resources, Inc., as seller, and EXCO
Resources, Inc., as buyer, dated November 16,
1999, previously filed as an exhibit to this
Form 8-K filed January 18, 2000.
10.4 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, previously
filed as an exhibit to this Form 8-K filed
January 18, 2000.
23.1 Consent of Independent Auditors, Ernst &
Young LLP (filed herewith).
23.2 Consent of Independent Auditors, KPMG LLP
(filed herewith).
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We Consent to the incorporation by reference in the Registration Statement
Form S-3 (No. 333-49135) and related Prospectus for the registration of
2,112,491 shares of its Common Stock and Registration Statement Form S-8 (No.
333-64331) EXCO Resources, Inc. 1998 Stock Option Plan, EXCO Resources, Inc.
1998 Director Compensation Plan both of EXCO Resources, Inc. of our report
dated January 12, 2000, with respect to the statement of revenues and direct
operating expenses of the share of the Nathitoches Parish Properties acquired by
EXCO Resources, Inc. for the years ended December 31, 1997, 1998 and 1999 and
included in its Current Report on Form 8-K/A No. 1 dated December 31, 1999 and
filed with the Securities and Exchange Commission on March 6, 2000.
/s/ Ernst & Young LLP
Ernst & Young LLP
March 3, 2000
-17-
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
EXCO Resources, Inc.:
We consent to the incorporation by reference in the registration statements Form
S-3 (No. 333-49135) and Form S-8 (No. 333-64331) of EXCO Resources, Inc. of our
report dated August 11, 1998, with respect to the consolidated balance sheet of
Rio Grande, Inc. and subsidiaries as of January 31, 1998, and the related
consolidated statements of operations, stockholders' equity (deficit), and cash
flows for the year ended January 31, 1998, which report appears in the Form 8-KA
of EXCO Resources, Inc. dated March 17, 1999.
Our report dated August 11, 1998, contains an explanatory paragraph that states
that Rio Grande, Inc. has suffered recurring losses from operations and has net
capital deficiencies, which raise substantial doubt about its ability to
continue as a going concern. The consolidated financial statements and financial
statement schedules do not include any adjustments that might result from the
outcome of that uncertainty.
/s/ KPMG LLP
KPMG LLP
San Antonio, Texas
March 3, 2000
-18-
