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| 8-K - FORM 8-K - EXCO RESOURCES INC | d602781d8k.htm |
 9/25/2013
KeyBanc 2013 DFW E&P Bus Tour
Exhibit 99.1
EXCO Resources, Inc. |
 2
September Investor Presentation
Management Participants
Doug Miller
Chairman and CEO
Hal Hickey
President & COO
Mark Mulhern
CFO & EVP |
 3
September Investor Presentation
Haynesville Shale: Operate ~400
horizontal wells
Eagle Ford Shale: Operate ~120
horizontal wells; developing within
partnership with KKR
Marcellus Shale: Operate ~110
horizontal wells
~650 employees
Conventional asset MLP structure
with Harbinger Group
25% equity ownership in LP and
50% interest in GP
1 rig operating in West Texas
EXCO operates ~150 Mmcfe/d
gross production
~110 employees
50% equity interest in midstream
gathering system in the core of the
Haynesville Shale
Currently flowing ~1.3 Bcf/d
~115 employees
EXCO Resources, Inc. Company Overview
Premier shale gas producer well positioned for future value creation
Renewed focus on opportunistic acquisition activity
–
Current acquisition economics remain cheaper to buy than to drill today
|
 4
September Investor Presentation
Introduction
Solid year to date 2013 financial results
–
Resulting from discipline around capital deployment and cost management
Established foundation for additional future growth through Eagle
Ford and Haynesville acquisitions
Concentration of producing properties acquired will increase cash
flow
Partnerships with KKR, Harbinger and BG bolster our financial reach
Eagle Ford transaction allows EXCO to extend its proven operational
expertise |
 5
September Investor Presentation
Strategic Focus
Grow EBITDA/Cash Flow of the company through successful
execution of recent acquisitions and evaluation of additional drilling
partnerships to minimize CAPEX and add production/revenue
Helps mitigate growth risks
Acquire
bankable
producing
properties
after
1
st
year
declines
Finance those acquisitions via net cash flows plus secured
(borrowing base) financing
Translate EBITDA growth into share price appreciation |
 6
September Investor Presentation
Approximately 60% of purchase price allocated to proved developed wellbores
Significant cash flow from producing assets; trailing 12 month EBITDA of
approximately $165 million
Substantial proved assets provide cash flow for future development
Recent Acquisition Strategic Rationale
Eagle Ford: Farmout acreage
Eagle Ford: Potential to exploit additional horizons across play (Buda & Austin
Chalk) Eagle Ford: Operational efficiencies to be gained by shifting to
manufacturing development Haynesville: Bossier formation in DeSoto Parish;
operational efficiencies from existing EXCO infrastructure
Entry
into
Eagle
Ford
DIVERSIFIES
asset
base
Adds oil exposure with solid economic returns in the oil core area
120 producing wells reduces delineation risk
Extensive inventory of identified drilling locations
Significant PDP
Cash Flow
Eagle Ford
Acquisition
Upside Potential
Haynesville
Acquisition
FORTIFIES
LEADING
POSITION
in
the
core
DeSoto
Parish
Haynesville
area
and
adds
locations
Leverages our extensive experience and cost focused development program
Core area of EXCO’s operations; perfect bolt-on acquisition
Increases inventory of locations in key focus area |
 7
September Investor Presentation
Financial Topics
Eagle Ford KKR Development Structure
2013 EBITDA and CAPEX Update
Liquidity Review |
 8
September Investor Presentation
Eagle Ford KKR Development Structure
EXCO purchased 100% of the PDP assets in the Eagle Ford
The undeveloped Eagle Ford locations are drilled and developed under a development agreement
with entities advised by Kohlberg Kravis Roberts & Co. L.P. (“KKR”),
including KKR Financial Holdings LLC (NYSE: KFN)
KKR funded approximately $131 million of the initial land purchase price (represents 50%)
Joint development program on undeveloped assets, which EXCO assigns to KKR 50% of EXCO’s
working interest in undeveloped acreage, results in KKR funding 75% of the capital and
EXCO funding 25% Development plan is to drill approximately 300 wells over the next five
years; ~30 wells to be drilled by year end 2013
When wells have been drilled under the development agreement and
produced for one year, EXCO has the right
to offer to purchase KKR’s 75% working interest at fair market value
Borrowing Base collateral package limited to 25% interest in the
PUD locations (represents EXCO’s interest in the
undeveloped locations)
Structure provides EXCO with immediate capital for undeveloped land, development capital and a
stream of future producing buyout opportunities
KKR has notable experience in the Eagle Ford Shale
Early investors in Hilcorp’s Eagle Ford assets (sold to Marathon)
Ongoing development partnership with Comstock Resources
Through its affiliate, RPM Energy, KKR has technical capabilities providing engineering and
geology expertise |
 9
September Investor Presentation
Eagle Ford KKR Development Structure
Key points
–
KKR drilling return is capped at 1.2x invested drilling capital
–
Cash
flow
in
1
st
year
gets
credited
at
buyout
(KKR
generates
vast
majority
of
their
return
from
1
st
year
production)
–
PV-10 is calculated but EXCO is not buying at PV-10; we are paying
1.2x (EXCO expects to pay less than PV-10) invested drilling capital
and sharing excess profits beyond that amount
–
Producing properties expected to generate expanded borrowing
base capacity. EXCO’s additional required Eagle Ford buyout capital
should be manageable. Amounts to be financed outside of secured
borrowing base are estimated at ~$280 million over four years or
~$70 million per year |
 10
September Investor Presentation
Note:
CNOOC
has
a
1/3
working
interest
that
is
not
included
in
the
table
above
Quoted items are defined legal terms found in the KKR Participation Agreement filed with the
SEC Amounts in table may not foot due to rounding
Single Well Net Production Example (Mboe/d) |
 11
September Investor Presentation
Total
Program
Illustrative
Example
–
300
wells
over
4
years
Capital to Drill
300 Eagle Ford Wells @ $7.2 million per well
$2.2 Billion total drilling
costs over 4 years of which
EXCO’s share is <20%
WI
Owner
WI
Share
Total
Capital
CNOOC
33.33%
$720
KKR
50%
1,080
EXCO
16.67%
360
$2,160
KKR Perspective –
Drilling
Fund Returns
KKR Invested Capital
$1,080
Return multiple
1.2X
$1,296
EXCO Invested Capital
$360
Return multiple
1.2X
$432
EXCO’s total Year 1 cash flows of $236
compares to its 16.67% share of capital
to drill ($360 million). EXCO’s share of
drilling capital will be a component of
the annual capital budget
EXCO Perspective –
Drilling
Fund Returns
EXCO will pay to KKR: $584 million for PDP
properties plus $211 million for the estimated
land return for a total of $795 million. 65% of
which can be funded through secured borrowings
leaving a $278 million shortfall to fund via cash
flow, additional debt or equity over a 4 year
period (~$70 million/year)
Drilling Capital Plan for Eagle Ford
KKR Return Contributions
EXCO Return Contributions
CNOOC
KKR
EXCO
Year 1 CF
DCRA
Year 1 CF
DCRA |
 12
September Investor Presentation
2013
2014
2015
2016
2017
2018
2019+
GAS
3.75
$
4.00
$
4.15
$
4.25
$
4.50
$
4.75
$
5.00
$
OIL
100.00
$
90.00
$
90.00
$
85.00
$
82.50
$
80.00
$
80.00
$
Total Program Illustrative Example
($ in millions)
KKR
XCO
KKR
XCO
KKR
XCO
Drilling & completion capital invested
1,080
$
360
$
Undrilled locations
300
300
Undrilled locations
300
300
Drilling multiple
1.2x
1.2x
AFE (8/8ths)
7.2
$
7.2
$
Remaining value at buyout PV-10 (50% NRI)
3.0
$
1.0
$
Capital return
1,296
$
432
$
WI%
66.7%
66.7%
Fair market value at buyout PV-10 (50% NRI)
900
$
300
$
Less: First year cash flow
712
$
236
$
Share of capital
75.0%
25.0%
Remaining required drilling return
584
$
196
$
Total drilling program capital
1,080
$
360
$
Remaining value at buyout PV-0 (50% NRI)
5.5
$
1.8
$
Fair market value at buyout PV-0 (50% NRI)
1,650
$
525
$
Fair Market Value at Buyout
900
$
300
$
Drilling Capital Return Amount
584
$
196
$
2/3 of difference btwn FMV and DCRA
211
$
208
$
Allocation of Fair Market Value
795
$
404
$
KKR
XCO
KKR
XCO
KKR
XCO
Land investment
131
$
131
$
First year cash flow
712
$
236
$
Investment
1,211
$
1,286
$
Drilling investment
1,080
360
Remaining required drilling return
584
-
Buyout drilling
-
584
Land return
211
-
Return (PV-10 based)
1,507
$
1,436
$
Buyout land
-
211
Fair market value at buyout PV-10
-
1,200
Multiple on invested capital
1.24x
1.12x
Total invested capital
1,211
$
1,286
$
Total return
1,507
$
1,436
$
Return (PV-0 based)
1,507
$
2,411
$
Multiple on invested capital
1.24x
1.88x
Project Cash Flow
Drilling & Completion Capital
Fair Maket Value At Buyout
Multiple on Invested Capital
Invested Capital
Return on Capital Invested
Note:
Assumptions
above
based
on
internal
EXCO
acquisition
economics
and
the
following
forward
NYMEX
price
deck.
Forecasted
cash flow
based on EXCO’s internal type curve estimate of 445 Mboe. Actual results could vary
materially. |
  13
September Investor Presentation
Liquidity Review
EXCO/ HGI
Partnership
TGGT
($ in thousands)
6/30/2013
7/31/2013
6/30/2013
6/30/2013
Cash and restricted cash
118,600
$
85,660
$
17,223
$
14,926
$
Amount drawn on bank credit facility
474,234
$
735,000
$
369,000
$
450,000
$
Asset sale tranche
-
269,096
-
-
Term loan
-
300,000
-
-
2018 Senior Notes
750,000
750,000
-
-
Total debt
1,224,234
$
2,054,096
$
369,000
$
450,000
$
Bank borrowing base
900,000
$
1,469,096
$
470,000
$
600,000
$
Amount drawn on bank credit facility
474,234
1,304,096
369,000
450,000
Available for borrowing
425,766
$
165,000
$
101,000
$
150,000
$
Plus: Cash and restricted cash
118,600
85,660
17,223
14,926
Less: Letters of credit
6,888
6,888
525
-
Liquidity
537,478
$
243,772
$
117,698
$
164,926
$
EXCO Resources
Chesapeake asset transaction financed with new $1.6 billion credit facility made up
of the following:
–
$900 million senior secured line of credit
–
$400 million asset sale requirement tranche (reduced to ~$269 million with KKR land
purchase)
–
$300
million
1
st
lien
term
loan |
 14
September Investor Presentation
Conclusions
Scheduled quarterly acquisitions of producing properties
Producing properties that can be readily financed through a
secured borrowing base
Acquisitions help offset declining reserve base
Lowers overall risk of business and increases predictability of
cash flows |
 15
September Investor Presentation
This
presentation
contains
forward-looking
statements,
as
defined
in
Section
27A
of
the
Securities
Act
and
Section
21E
of
the
Securities
Exchange
Act
of
1934,
or
the
Exchange
Act.
These
forward-looking
statements
relate
to,
among
other
things,
the
following:
•
our future financial and operating performance and results;
•
our business strategy;
•
market prices for oil, natural gas and natural gas liquids;
•
our future use of derivative financial instruments; and
•
our plans and forecasts.
We
have
based
these
forward-looking
statements
on
our
current
assumptions,
expectations
and
projections
about
future
events.
We use the words "may," "expect," "anticipate," "estimate,"
"believe," "continue," "intend," "plan," "budget" and other similar words to identify forward-looking statements. The statements that contain these words should be
read
carefully
because
they
discuss
future
expectations,
contain
projections
of
results
of
operations
or
our
financial
condition
and/or
state
other
"forward-looking"
information.
We
do
not
undertake
any
obligation
to
update
or revise publicly any forward-looking statements, except as required by applicable
securities law. These statements also involve risks and uncertainties that could cause our actual results or financial condition to materially
differ from our expectations in this presentation, including, but not limited to:
•
fluctuations in the prices of oil, natural gas and natural gas liquids;
•
the availability of foreign oil, natural gas and natural gas liquids;
•
future capital requirements and availability of financing;
•
our ability to meet our current and future debt service obligations;
•
disruption of credit and capital markets and the ability of financial institutions to honor
their commitments; •
estimates of reserves and economic assumptions;
•
geological concentration of our reserves;
•
risks associated with drilling and operating wells;
•
exploratory risks, primarily related to our activities in shale formations including our
recent acquisition in the Eagle Ford shale; •
risks
associated
with
operation
of
natural
gas
pipelines
and
gathering
systems;
•
discovery, acquisition, development and replacement of oil and natural gas reserves;
•
cash flow and liquidity;
•
timing and amount of future production of oil and natural gas;
•
availability of drilling and production equipment;
•
marketing of oil and natural gas;
•
political and economic conditions and events in oil-producing and natural
gas-producing countries; •
title to our properties;
•
litigation;
•
competition;
•
general economic conditions, including costs associated with drilling and operation of our
properties; •
environmental or other governmental regulations, including legislation to reduce emissions of
greenhouse gases, legislation of derivative financial instruments, regulation of hydraulic fracture
stimulation and elimination of income tax incentives available to our industry;
•
receipt and collectability of amounts owed to us by purchasers of our production and
counterparties to our derivative financial instruments; •
decisions whether or not to enter into derivative financial instruments;
•
potential acts of terrorism;
•
our
ability
to
manage
joint
ventures
with
third
parties
including
the
resolution
of
any
material
disagreements
and
our
partners’
ability
to
satisfy
obligations
under
these
arrangements;
•
actions of third party co-owners of interests in properties in which we also own an
interest; •
fluctuations in interest rates; and
•
our ability to effectively integrate companies and properties that we acquire.. Forward Looking Statements |
 16
September Investor Presentation
We
believe
that
it
is
important
to
communicate
our
expectations
of
future
performance
to
our
investors.
However,
events
may
occur
in
the
future
that
we
are
unable
to
accurately
predict,
or
over
which
we
have
no
control.
We
caution users of the financial statements not to place undue reliance on a forward-looking
statement. When considering our forward-looking statements, keep in mind the risk factors and other cautionary statements in this
presentation,
and
the
risk
factors
included
in
our
Annual
Report
on
Form
10-K
for
the
year
ended
December
31,
2012,
filed
with
the
Securities
and
Exchange
Commission,
or
the
SEC,
on
February
21,
2013,
and
our
Quarterly
Reports
on
Form 10-Q.
Our
revenues,
operating
results
and
financial
condition
substantially
depend
on
prevailing
prices
for
oil
and
natural
gas
and
the
availability
of
capital
from
our
credit
agreement,
or
the
EXCO
Resources
Credit
Agreement.
Declines
in
oil
or
natural
gas
prices
may
have
a
material
adverse
effect
on
our
financial
condition,
liquidity,
results
of
operations,
the
amount
of
oil
or
natural
gas
that
we
can
produce
economically
and
the
ability
to
fund
our
operations.
Historically,
oil
and
natural
gas
prices
and
markets
have
been
volatile,
with
prices
fluctuating
widely,
and
they
are
likely
to
continue
to
be
volatile.
The
SEC
permits
oil
and
gas
companies,
in
their
filings
with
the
SEC,
to
disclose
not
only
"proved"
reserves
(i.e.,
quantities
of
oil
and
gas
that
are
estimated
to
be
recoverable
with
a
high
degree
of
confidence),
but
also
"probable"
reserves (i.e., quantities of oil and gas that are as likely as not to be recovered) as well as
"possible" reserves (i.e., additional quantities of oil and gas that might be recovered, but with a lower probability than probable reserves). In
addition
unless
otherwise
noted,
certain
proved
reserve
numbers
and
other
reserve
numbers
provided
herein
are
not
SEC
“case”
numbers
using
flat
commodity
prices,
but
a
management
case
price
deck
using
escalating
prices
for
a
period
of
time.
As
noted
above,
statements
of
reserves
are
only
estimates
and
may
not
correspond
to
the
ultimate
quantities
of
oil
and
gas
recovered.
Any
reserve
estimates
provided
in
this
presentation
that
are
not
specifically
designated as being estimates of proved reserves may include estimated reserves not necessarily
calculated in accordance with, or contemplated by, the SEC's latest reserve reporting guidelines. Investors are urged to consider closely
the
disclosure
in
our
Annual
Report
on
Form
10-K
for
the
year
ended
December
31,
2012,
which
is
available
on
our
website
at
www.excoresources.com
under
the
Investor
Relations
tab
or
by
calling
us
at
214-368-2084.
Forward Looking Statements (Continued) |