S&P upgrades EXCO Resources

Standard & Poor's said it raised the corporate credit rating on EXCO Resources Inc. to BB- from B+.

The outlook is stable.

At the same time, S&P raised the issue-level rating on EXCO's $450 million senior unsecured notes due 2011 from B- to B and removed the rating from CreditWatch, where it was placed with positive implications on June 30, 2009. S&P also revised the recovery rating on the senior unsecured notes to 6 from 5, indicating the expectation of negligible recovery (0% to 10%) in the event of a payment default.

"The rating on EXCO reflects the company's historically acquisitive growth strategy; a midsize, predominantly natural gas reserve base; and the weak outlook for near-term natural gas prices," said S&P credit analyst Patrick Lee in a news release.

These weaknesses are partially offset by EXCO's promising growth prospects in the emerging Marcellus and Haynesville Shale; its reduced capital expenditures in the near term due to the BG Group joint venture announced earlier this year; its meaningful hedge protection in 2009 and 2010; good liquidity; and expectations of free cash flow over the intermediate term, the agency said.

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