S&P lifts EXCO to B+

Standard & Poor's said it raised EXCO Resources Inc.'s corporate credit rating to B+ from B and removed the rating from CreditWatch, where it had been placed with positive implications on June 30. The outlook is stable.

The B- issue-level rating on EXCO's $450 million senior unsecured notes remains on CreditWatch with positive implications pending a revised recovery analysis upon receipt from the company of additional information, including updated PV-10 figures. The recovery rating remains 5.

The upgrade follows the successful completion of two transactions: one with BG Energy Holdings and the other with an affiliate of Encore Acquisition Co. S&P said that as a result of these transactions, EXCO has materially reshaped its balance sheet, removed near-term refinancing risk related to its $300 million senior unsecured term loan and improved liquidity.

The rating on EXCO continues to reflect the company's historically acquisitive growth strategy; its relatively high, though reduced, debt; a midsize, principally natural gas, reserve base; and the weak outlook for near-term natural gas prices, the agency said.

These weaknesses are partially offset by EXCO's geographically diversified base of natural gas reserves, its good growth prospects in the emerging Marcellus and Haynesville Shale, its meaningful hedge protection in 2009 and 2010 and expectations of free cash flow over the intermediate term, S&P said.

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