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EXCO Resources Inc. Message Board

  • quantuon quantuon Apr 2, 2012 5:17 PM Flag

    Here are XCO's problems

    Here is the rub:

    1) NG supplies and inventory levels are high and they will grow and reach capacity ~Sep/Oct even assuming a large 4% increase in demand. This implies a larger production decline than XCO states like down to 470Mcfe/day reducing revenue and cash-flow.

    2) Their pricing assumptions are overly optimistic. Price of NG probably won't rebound from ~2.25 until Nov, when demand finally starts reducing bloated inventory. Once again this will reduce EBITDA and cash-flow

    3) Their EBITDA will come dangerously close to covenant limits putting pressure on them to sell assets and raise cash

    4) Banks will redetermine them come April and Nov to 1.2 to 1.4

    5) Book value will take a $500-$800 bn hit by the end of year when they perform ceiling tests at the end of each quarter and the effect of low NG prices take hold

    6) Dividend has to be cut

    all thought out responses/counterarguments welcome

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