EXCO Resources, Inc. Reports Record Operating and Financial Results for the First Quarter 2008

Business Wire,  May 6, 2008  

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DALLAS -- EXCO Resources, Inc. (NYSE: XCO) today announced first quarter results for 2008.

* Adjusted net earnings available to common shareholders, a non-GAAP measure adjusting for non-cash derivative losses and items typically not included by securities analysts in published estimates, were $0.28 per share for the first quarter 2008 compared with $0.07 per share for the first quarter 2007.

* Oil and natural gas revenues for the quarter were $318 million, exclusive of derivative financial instrument activities (derivatives) and $321 million inclusive of cash settlements on derivatives. Oil and natural gas revenues for the prior year's quarter were $118 million before derivatives, and $151 million including cash settlements on derivatives.

* Oil and natural gas production for the quarter set a record at 35 Bcfe, or 386 Mmcfe per day comprised of 352 Mmcf per day of natural gas and 5,575 barrels per day of oil, which was more than 100% higher than the first quarter 2007 production of 17 Bcfe, or 192 Mmcfe per day, and approximately 2% higher than the fourth quarter 2007 production of 377 Mmcfe per day. Presently our daily average production exceeds 400 Mmcfe per day.

* Adjusted earnings before interest, taxes, depreciation, depletion and amortization and other non-cash income and expense items (adjusted EBITDA, a non-GAAP measure) for the quarter were $254 million, approximately 2.2 times the prior year's quarter.

* Direct operating expenses for the quarter were $0.95 per Mcfe compared with $1.25 per Mcfe in the prior year's quarter, a reduction of 24%, and slightly lower than the fourth quarter 2007 direct operating expense rate of $0.97 per Mcfe. Production and ad valorem taxes for the first quarter 2008 were 6.1% of oil and natural gas revenues before derivatives ($0.55 per Mcfe) compared with 7.1% during the first quarter 2007 ($0.48 per Mcfe).

* Drilling and development capital expenditures for the quarter totaled a record $152 million compared with first quarter 2007 capital expenditures of $76 million. Total capital expenditures for the first quarter 2008, which includes leasing, midstream projects and corporate expenditures, were $184 million, an increase of 111% from the prior year's quarter.

Douglas H. Miller, EXCO's Chief Executive Officer commented, "Obviously, we are pleased with our first quarter accomplishments, which included records in production, adjusted EBITDA and capital spending. We have several very positive trends taking place at EXCO including our growing focus on the Marcellus and Huron shales in Appalachia and the Haynesville shale in East Texas and North Louisiana. In addition, we continue to have outstanding development drilling results in the Vernon and Holly/Caspiana Fields in Louisiana and in our Sugg Ranch area in the Permian Basin. We have successfully reduced the number of days from spud to rig release by 30% in some areas, and production volumes and the number of drilling locations in the Vernon Field are significantly more than we thought they would be a year ago. These development activities are providing substantial cash flows to help fund our expected increased drilling in the shales in the coming quarters."

Revenues and adjusted revenues

Our first quarter 2008 adjusted revenues, a non-GAAP measure defined as revenues which exclude the non-cash impact of our oil and natural gas derivatives, were $329 million, an increase of $172 million, or 109% from the first quarter 2007. The increase was primarily attributable to our higher production volumes reflecting acquisitions closed during 2007. Realized prices, after cash settlements on derivatives, were $9.14 per Mcfe and $8.70 per Mcfe for the three months ended March 31, 2008 and 2007, respectively.

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(1) EXCO does not designate its derivatives as hedges. As a result, unrealized gains or losses in the fair market value of our derivatives are recognized as a component of current revenues. Adjusted revenues are not a measure of revenues in accordance with GAAP. Management believes that adjusted revenues are a meaningful measure to investors and rating agencies as they present the combination of actual revenues before the impact of oil and natural gas derivatives in accordance with GAAP, combined with the actual cash receipts or settlements arising from the oil and natural gas derivative program. Adjusted revenues specifically exclude the non-cash unrealized gains or losses from derivative activities as the non-cash impact of the changes in the fair value of derivatives does not impact our current liquidity and cash flows used to fund our operations, execute our capital program and make acquisitions.

Cash Flow

Our cash flow from operations before working capital changes and adjustments for settlements of derivative financial instruments with a financing element for the current quarter was $222 million, or a 364% increase from 2007. We utilized this cash flow primarily to fund $184 million of capital expenditures (exclusive of acquisitions).