EXCO Resources completes deal with Harbinger, cuts bank debt by 52%

By Lisa Kerner

Charlotte, N.C., Feb. 21 - EXCO Resources, Inc. chairman and chief executive officer Doug Miller said 2012 was a "tough year" for his company, one in which gas prices fell "to below $2."

Miller said his group "did a spectacular job in an environment that really wasn't a lot of fun."

"Weathering the storm is getting tiresome," said Miller during EXCO's earnings conference call on Thursday.

In addition to cutting its capital program by 48% as the year progressed, EXCO had to "cut a lot of people," said Miller, "which is the worst part of this whole thing."

EXCO cut employee headcount by 16% and contractor headcount by 62%.

"We worked within cash flow and actually paid down a little debt," the CEO noted, and the company has "plenty of dry powder."

Partnership transaction

Miller highlighted EXCO's $132 million private limited partnership deal with Harbinger Group, Inc. that was completed subsequent to the quarter-end on Feb. 14. It took three months longer than expected to wrap up the deal.

The deal provided EXCO with $573 million for debt reduction, specifically outstanding borrowings under the company's credit agreement, and increased liquidity to $474 million. Bank debt was cut by 52%.

The company was able to reduce its borrowing base to $900 million in connection with the partnership transaction.

In addition, the deal provides EXCO with 25.5% ongoing interest and a vehicle to conduct conventional asset acquisitions.

EXCO ended the year on Dec. 31 with bank debt of $1.1 billion, total debt of $1.9 billion, cash of about $116 million and liquidity of about $301 million. For the period ended Feb. 19, EXCO reported bank debt of $534 million, total debt of $1.3 billion, cash of about $86 million and liquidity of about $445million.

Chief financial officer Steve Smith said the 30% decline in gas prices made for a "difficult" year.

Still, Smith said, EXCO "made a lot of progress."

"We did beat production, which is always exciting," he said.

"All in all a good year, (it was) a good quarter given the price we had to work with and the problems that arose from that price."

Revenues were down 16% year-over-year, after cash settlements from hedges.

"The hedge program obviously helped," Smith said.

According to Smith, EXCO's operating costs for the year were down 11% on a unit basis and general and administrative costs were down 24%, year-over-year.

Adjusted net income of 17 cents for the quarter beat the street estimate, said Smith.

The Dallas-based oil and natural gas company reported cash flow from operations of $105 million for the quarter and about $405 million for the year.

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