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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
JANUARY 16, 2001
(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.)
6500 GREENVILLE AVENUE
SUITE 600, LB 17
DALLAS, TEXAS 75206
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (214) 368-2084
5735 PINELAND DRIVE
SUITE 235
DALLAS, TX 75231
(FORMER NAME OR FORMER ADDRESS, IF CHANGE SINCE LAST REPORT)
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ITEM 9. REGULATION FD DISCLOSURE
On January 16, 2001, EXCO Resources, Inc. ("EXCO") will commence
discussions regarding its expected fiscal year 2000 results and EXCO's outlook,
strategy and financial projections for fiscal year 2001. EXCO is filing this
report pursuant to Regulation FD in connection with its planned disclosure and
discussion of the topics disclosed herein. This report will not be deemed an
admission as to the materiality of any information in this report that is
required to be disclosed solely by Regulation FD. The information "furnished" in
this report shall not be deemed "filed" for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated
by reference in any filing under the Securities Act of 1933, as amended.
DEFINITIONS
The following discussion includes reference to various abbreviations
relating to volumetric production terms and other defined terms. These
definitions are as follows:
"Bcf" means billion cubic feet.
"Bcfe" means billion cubic feet equivalent, calculated by
converting one barrel of oil to six Mcf of natural gas.
"Boe" means equivalent barrels of oil, calculated by
converting six Mcf of natural gas to one barrel of oil.
"Mbbls" means thousand barrels.
"Mboe" means thousand Boe.
"MMBbls" means million barrels.
"Mmbtus" means million British thermal units.
"Mcf" means thousand cubic feet.
"Mmcf" means million cubic feet.
"Mmcfe" means million cubic feet equivalent, calculated by
converting one barrel of oil to six Mcf of natural gas.
"NGL" means natural gas liquids.
"Oil" includes crude oil and condensate.
FORWARD-LOOKING ESTIMATES
This current report contains forward-looking statements within the
meaning of the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995, relating to future financial results or business
expectations. Business plans may change as circumstances warrant. Actual results
may differ materially from those predicted as a result of factors over which
EXCO has no control. Such factors include, but are not limited to: acquisitions,
recruiting and new business solicitation efforts, commodity price changes, the
extent to which EXCO is successful in integrating recently acquired businesses,
regulatory changes and general economic conditions. These risk factors and
additional information are included in this current report as well as EXCO's
other reports on file with the Securities and Exchange Commission. We refer you
to these other reports, such as our Forms 10-Q and 10-K, which contain
additional important factors
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that could cause actual results to differ from the forward-looking statements
contained in this report.
The forward-looking statements provided in this discussion are based on
management's examination of historical operating trends, the information which
will be used to prepare the December 31, 2000 reserve report of independent
petroleum engineers and other data in EXCO Resources, Inc.'s ("EXCO's")
possession or available from third parties. EXCO cautions that its future oil,
natural gas and NGL production, revenues and expenses are subject to all of the
risks and uncertainties normally incident to the exploration for and development
and production and sale of oil and natural gas. These risks include, but are not
limited to, price volatility, inflation or lack of availability of goods and
services, environmental risks, drilling risks, regulatory changes, the
uncertainty inherent in estimating future oil and gas production or reserves,
and other risks as outlined below. Additional risks are discussed below in the
context of line items most affected by such risks. EXCO disclaims any obligation
or intention to update or revise any forward-looking statement unless necessary
to do so in accordance with applicable law.
SPECIFIC ASSUMPTIONS AND RISKS RELATED TO PRICE AND PRODUCTION
ESTIMATES Prices for oil, natural gas and NGLs are determined primarily by
prevailing market conditions. Market conditions for these products are
influenced by regional and worldwide economic growth, the available supply of
oil and natural gas, weather and other substantially variable factors. These
factors are beyond EXCO's control and are difficult to predict. In addition to
volatility in general, EXCO's oil, natural gas and NGL prices may vary
considerably due to differences between regional markets, transportation
availability and demand for different grades of oil, natural gas and NGLs. Over
95% of EXCO's revenues are attributable to sales of these three commodities.
Consequently, EXCO's financial results and resources are highly influenced by
this price volatility.
Estimates for EXCO's future production of oil, natural gas and NGLs are
based on the assumption that market demand, supply and prices for oil and
natural gas will continue at levels that allow for profitable production of
these products. There can be no assurance of such stability. Additionally, OPEC
production policies and U.S. federal government intervention through releases of
oil from the Strategic Petroleum Reserve can adversely affect the market prices
which EXCO receives for its oil production.
The production, transportation and marketing of oil, natural gas and
NGLs are complex processes which are subject to disruption due to transportation
and processing availability, unforeseen changes in reserves and production
rates, mechanical failure, human error, meteorological events, including, but
not limited to, hurricanes, and numerous other factors. The following
forward-looking statements were prepared assuming demand, curtailment,
producibility and general pricing and market conditions for EXCO's oil, natural
gas and NGLs during 2001 will be substantially similar to those experienced in
2000, unless otherwise noted. EXCO's estimated production is based in part on
planned development and exploitation activities for its major operating areas.
EXCO may experience delays and cancelation of its development and exploitation
activities based on risks addressed in this section and below in Capital
Sources, Uses and Liquidity-Capital Expenditures, other operating risks
associated with
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these activities, or EXCO's inability to finance these activities. Given the
general limitations expressed herein, EXCO's forward-looking statements for 2001
are set forth below.
The forward-looking data provided below does not include the financial
and operating effects of potential corporate acquisitions or mergers, property
acquisitions or divestitures during the year 2001. The timing and ultimate
results of such acquisition and divestiture activity is difficult to predict.
YEAR-END 2000 PROVED OIL AND NATURAL GAS RESERVES
EXCO's preliminary estimate of its December 31, 2000, proved oil and
natural gas reserves is that such reserves will total between 140 and 150 Bcfe.
These preliminary estimates are subject to completion of EXCO's reserve
estimation process, and are based on NYMEX forward curve prices. EXCO will
announce its final reserve estimates in March 2001.
YEAR 2001 POTENTIAL OPERATING ITEMS
OIL, NATURAL GAS AND NGL PRODUCTION Set forth in the following
paragraphs are individual estimates of EXCO's oil, natural gas and NGL
production in 2001. On a combined basis, EXCO estimates its 2001 oil, natural
gas and NGL production will total between 11.5 and 12.5 Bcfe. EXCO's 2001
estimates of 2001 production do not include certain oil, natural gas and NGL
production from various properties that were sold during 2000. The properties
which were sold produced approximately 163.5 Mmcfe in 2000 that will not be
produced in 2001.
OIL PRODUCTION EXCO expects its oil production in 2001 to total between
850,000 barrels and 940,000 barrels.
OIL PRICES - FIXED EXCO has fixed the NYMEX price it will receive in
2001 on a portion of its oil production through an oil swap. EXCO has executed
the oil swap for 481,000 barrels in 2001 at an average price of $28.77 per
barrel. These fixed-price volumes represent 51% - 57% of EXCO's expected
consolidated oil production in 2001.
OIL PRICES - FLOATING For the oil production for which prices have not
been fixed, EXCO's 2001 average realized price is expected to differ from the
New York Mercantile Exchange price ("NYMEX") as set forth in the following
table:
<TABLE>
<CAPTION>
EXPECTED RANGE OF OIL PRICES
GREATER THAN (LESS THAN) NYMEX
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<S> <C>
Floating Oil Prices (2.10) to (2.45)
</TABLE>
NATURAL GAS PRODUCTION EXCO expects its 2001 natural gas production to
total between 6.2 Bcf and 6.6 Bcf.
NATURAL GAS PRICES - FIXED EXCO has fixed the NYMEX price if will
receive in 2001 on a portion of its natural gas production. EXCO has executed a
natural gas swap for 2001 of
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2,383,500 Mmbtus at $4.915 per Mmbtu. These volumes with fixed prices represent
36% - 38% of EXCO's expected consolidated natural gas production in 2001.
NATURAL GAS PRICES - FLOATING For the natural gas production for which
prices have not been fixed, EXCO's 2001 average realized price is expected to
differ from NYMEX as set forth in the following table:
<TABLE>
<CAPTION>
EXPECTED RANGE OF GAS PRICES
GREATER THAN (LESS THAN) NYMEX
------------------------------
<S> <C>
Floating Gas Prices (.20) to (.35)
</TABLE>
NGL PRODUCTION EXCO expects its 2001 production of NGL's to total
between 75,000 barrels and 80,000 barrels.
OTHER REVENUES EXCO's other revenues in 2001 are expected to be between
$125,000 and $135,000.
PRODUCTION AND OPERATING EXPENSES EXCO's production and operating
expenses vary in response to several factors. Among the most significant of
these factors are additions to or deletions from EXCO's property base, changes
in production taxes, general changes in the prices of services and materials
that are used in the operation of the properties and the amount of repair and
workover activity required.
Oil, natural gas and NGL prices will have a direct effect on production
taxes to be incurred in 2001. Future prices also could have an effect on whether
proposed workover projects are economically feasible. These factors, coupled
with the uncertainty of future oil, natural gas and NGL prices, increase the
uncertainty inherent in estimating future production and operating costs. Given
these uncertainties, EXCO estimates that year 2001 total production and
operating costs will be between $17.0 million and $18.5 million.
DEPRECIATION, DEPLETION AND AMORTIZATION ("DD&A") The 2001 oil and
natural gas property DD&A rate will depend on various factors. Most notable
among such factors are the amount of proved reserves that will be added from
drilling or acquisition efforts in 2001 compared to the costs incurred for such
efforts, and the revisions to EXCO's year-end 2000 reserve estimates that, based
on prior experience, are likely to be made during 2001.
On average for 2001, EXCO expects its consolidated oil and natural gas
property DD&A rate will be approximately $.82 per Mcfe. Based on the range of
production expected for 2001, oil and natural gas property related DD&A expense
for 2001 should be between $9.4 million and $10.0 million.
Additionally, EXCO expects its 2001 DD&A expense related to non-oil and
natural gas property fixed assets to total between $175,000 and $250,000.
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GENERAL AND ADMINISTRATIVE EXPENSES ("G&A") EXCO's G&A includes the
costs of many different goods and services used in support of its business.
These goods and services are subject to general price level increases or
decreases. In addition, EXCO's G&A varies with its level of activity and the
related staffing needs as well as with the amount of professional services
required during any given period. Should EXCO's needs or the prices of the
required goods and services differ significantly from current expectations,
actual G&A could vary materially from the estimate. Given these limitations,
consolidated G&A in 2001 is expected to be between $3.9 million and $4.2
million.
INTEREST EXPENSE Future interest rates and oil, natural gas and NGL
prices have a significant effect on EXCO's interest expense. All of EXCO's
September 30, 2000, long-term debt balance of $42.9 million bears interest at
variable rates. Also, EXCO can only marginally influence the prices it will
receive in 2001 from sales of oil, natural gas and NGLs and the resulting cash
flow. These factors increase the margin of error inherent in estimating future
interest expense. Other factors which affect interest expense, such as the
amount and timing of capital expenditures, are to a large extent, within EXCO's
control. Given the uncertainty of future interest rates and commodity prices,
and assuming that the variable rate debt remains in place, and the current
interest rate used to determine interest expense in 2001 of 8.1% and the
long-term debt balance of $42.9 million remain constant throughout the year,
EXCO estimates that the consolidated interest expense in 2001 will be between
$2.5 million and $2.7 million.
REDUCTION OF CARRYING VALUE OF OIL AND GAS PROPERTIES As of December
31, 2000, EXCO does not expect to record a reduction in 2001 of its carrying
value of oil and natural gas properties under the full-cost accounting ceiling
test. At this time the ceiling for the full-cost pool exceeds EXCO's carrying
value of oil and natural gas properties, less deferred income taxes. However,
such excess could be eliminated by declines in oil and/or natural gas prices
between now and the end of any quarter during 2001 or in subsequent periods.
INCOME TAXES EXCO expects its consolidated financial income tax rate in
2001 to be between 36% and 40%. The current income tax rate is expected to be
between 35% and 38%. The deferred income tax rate is expected to be between 1%
and 2%. Significant changes in estimated production levels of oil, natural gas
and NGLs, the prices of such products, or any of the various expense items could
materially alter the effect of the aforementioned items on 2001's financial
income tax rates.
NET INCOME Based on the range of values set forth for the Year 2001
Potential Operating Items described above, and using assumed NYMEX prices of
$28.00 per barrel of oil and $4.40 per Mcf of natural gas, EXCO expects
consolidated net income in 2001 to be between $13.7 million and $15.4 million,
or $2.00 and $2.25 per share. Additionally, based on the assumptions and
limitations described in this document, EXCO expects consolidated net income for
the fourth quarter of 2000 to be between $3.0 million and $3.4 million, or $.45
and $.50 per share. The per share amounts are based on the actual shares
outstanding at December 31, 2000.
CASH FLOW FROM OPERATIONS Based on the range of values set forth for
the Year 2001 Potential Operating Items described above, EXCO expects cash flow
from operations in 2001 to be between $22.3 million and $24.0 million, or $3.25
and $3.50 per share. Additionally, based
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on the assumptions and limitations described in this document, EXCO expects cash
flow from operations for the fourth quarter of 2000 to be between $3.7 million
and $4.1 million, or $.55 and $.60 per share. Cash flow from operations as used
in this document means net income, plus depreciation, depletion and
amortization, plus deferred income taxes. The per share amounts are based on the
actual shares outstanding at December 31, 2000.
CAPITAL SOURCES, USES AND LIQUIDITY
CAPITAL EXPENDITURES Though EXCO has completed several major property
acquisitions in recent years, these transactions are opportunity driven. Thus,
EXCO does not "budget", nor can it reasonably predict, the timing or size of
such possible acquisitions, if any.
EXCO's capital expenditures budget is based on an expected range of
future oil, natural gas and NGL prices as well as the expected costs of the
capital additions. Should EXCO's price expectations for its future production or
rig availability change significantly, some projects may be accelerated or
deferred and, consequently, may increase or decrease total 2001 capital
expenditures. In addition, if the actual costs of the budgeted items vary
significantly from the anticipated amounts, actual capital expenditures could
vary materially from EXCO's estimates.
Given the limitations discussed, EXCO expects its 2001 capital
expenditures for drilling and development efforts plus related facilities to
total between $13 million and $19 million. EXCO expects these capital
expenditures to be incurred as follows:
<TABLE>
<CAPTION>
2001 CAPITAL EXPENDITURES
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<S> <C>
1st Quarter $2.0 million to $3.1 million
2nd Quarter $4.4 million to $6.7 million
3rd Quarter $3.1 million to $4.4 million
4th Quarter $3.5 million to $4.8 million
</TABLE>
These amounts include between $12 million and $18 million for drilling and
facilities costs related to reserves expected to be classified as proved as of
year-end 2000.
EXCO also expects to capitalize between $550,000 and $700,000 of G&A expenses in
accordance with the full cost method of accounting. In addition, EXCO expects to
pay between $100,000 and $300,000 for plugging and abandonment charges in 2001.
Finally, EXCO expects to spend between $400,000 and $500,000 for non-oil and
natural gas property fixed assets.
OTHER CASH USES EXCO's management expects the policy of not paying a
common stock dividend to continue.
CAPITAL RESOURCES AND LIQUIDITY EXCO's estimated 2001 cash uses,
including its drilling and development activities, are expected to be funded
primarily through a combination of working capital and operating cash flow, with
the remainder, if any, funded with borrowings from EXCO's credit facility. The
amount of operating cash flow to be generated during 2001 is uncertain due to
the factors affecting revenues and expenses as previously cited. However,
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EXCO expects its combined capital resources to be more than adequate to fund its
anticipated capital expenditures and other cash uses for 2001. As of September
30, 2000, EXCO had $5.0 million available under its $45 million credit facility
and $5.6 million of cash. If significant acquisitions or other unplanned capital
requirements arise during the year, EXCO could utilize its existing credit
facilities and/or seek to establish and utilize other sources of financing.
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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: January 16, 2001
