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Edited Transcript of XCO earnings conference call or presentation 10-May-17 2:00pm GMT

Thomson Reuters StreetEvents

Q1 2017 EXCO Resources Inc Earnings Call

Dallas May 16, 2017 (Thomson StreetEvents) -- Edited Transcript of EXCO Resources Inc earnings conference call or presentation Wednesday, May 10, 2017 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Harold H. Jameson

EXCO Resources, Inc. - COO and VP

* Harold L. Hickey

EXCO Resources, Inc. - CEO and President

* Heather Lamparter

EXCO Resources, Inc. - VP, General Counsel and Secretary

* Tyler Farquharson

EXCO Resources, Inc. - CFO, VP and Treasurer

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Conference Call Participants

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* David Earl Beard

Coker & Palmer Investment Securities, Inc., Research Division - Senior Analyst - Exploration and Production

* Jeffrey Woolf Robertson

Barclays PLC, Research Division - Director

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Presentation

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Operator [1]

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Good morning. My name is Vanessa, and I will be your conference operator today. At this time, I would like to welcome everyone to the EXCO First Quarter 2017 Earnings Results Conference Call. (Operator Instructions) Thank you. Ms. Heather Lamparter, you may begin your conference.

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Heather Lamparter, EXCO Resources, Inc. - VP, General Counsel and Secretary [2]

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Good morning. Thank you for joining EXCO Resources First Quarter 2017 Conference Call. Hal Hickey, Chief Executive Officer and President; Harold Jameson, Vice President and Chief Operating Officer; Tyler Farquharson, Vice President and Chief Financial Officer, will provide our perspective on EXCO's results followed by a Q&A session. You can access our slides on our website at excoresources.com, and we will refer to these slides during our remarks.

Certain statements made during today's conference call, including those concerning future plans, objectives, goals, strategies or performance are forward-looking statements. These statements reflect the good faith, belief and judgments of the company and are based upon currently available information only as of the date of this conference call. These statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from current expectations. These factors include those described in the Risk Factors section of the company's periodic reports that are filed with the Securities and Exchange Commission. Forward-looking statements are not guarantees of future performance, and the company expressly disclaims any obligation to update earlier statements as a result of new information, except as required by law.

I will now turn the call over to Hal to begin.

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Harold L. Hickey, EXCO Resources, Inc. - CEO and President [3]

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Thank you, Heather. Good morning, and thank you for joining EXCO Resources First Quarter 2017 Conference Call. First, I want to note our disappointment with our share price performance. At EXCO, we have a tremendous opportunity set ahead of us, including 1.5 Tcfe approved reserves based on year-end NYMEX pricing, a multi-year liquidity path that should provide the company with runway into 2020 and a very supportive Board of Directors who continue to demonstrate their commitment to the company, the business plan and the assets. One of our guiding principles is to create value for our shareholders, and we've executed a series of transactions and initiatives that should enhance value. We have been and will continue working to improve our valuation.

This morning, I'll provide some additional introductory remarks and provide an overview of our strategic and shareholder-related efforts. Following me, Harold Jameson will discuss our assets, capital program, operational results and drilling and completion opportunities, improvements and priorities. Following Harold, Tyler Farquharson will discuss our financial results and provide guidance before we finish with a Q&A session.

Most of our assets and activity are built around natural gas, regarding significant macro trends that impact our business. Calendar year 2017 natural gas prices were trading yesterday at approximately $3.32 per MMBtu for the balance of the year. Cal-18 was at approximately $3.10. The gas rig count was at 173 rigs last week. The storage figures for natural gas indicate that there's approximately 2.25 Tcf in storage now and we're currently below last year's storage level by 14%. LNG exports are growing. Demand for natural gas in Mexico is increasing. Industrial growth calls for more natural gas feedstock. Opportunity for coal-to-gas switching for electrical generation exists. Lagging U.S. natural gas production, combined with an expected rise in export demand, is lending strong support to the forward price curve.

Since the start of the year, U.S. production has remained at its lowest level in 3 years, averaging just 70.8 Bcf per day. That compares with 72.6 Bcf per day during the same period in 2016 and 73.5 Bcf per day in 2015. Assuming U.S. production remains around current levels, rising export demand is likely to put increasing pressure on U.S. gas prices this year. Export demand is approximately 7.2 Bcf per day. However, this demand is forecast to grow to above 9 Bcf per day in October as pipeline exports to Mexico and LNG exports to global markets accelerate. Additional gas demand could lift U.S. gas prices to levels currently unforeseen by the forward markets. Additionally, weather matters. Recent analysis indicates that a 10% warmer-than-normal summer could cause us to see $3.45 per MMBtu natural gas during 2017 and natural gas as high as $3.80 in 2018, with even further upside if a warm summer could be followed by a cold winter. Of course, however, cooler summer and warmer winter temperatures could have various effects on price.

As I previously noted, at the company, we experienced a challenging year in 2016 as spot prices bottomed out at $1.73 per natural gas and $30.32 per oil. We took decisive actions to counteract some of the impact on our operations by limiting our capital spending to maintain liquidity, focusing on sustainable cost-reduction initiatives and improving our well performance. Our ability to execute on these initiatives put us in a position to close the recently announced financial transactions, positioning us to grow the business and extend our runway through at least 2020. We must deliver our expected well results, optimize and reposition our portfolio through potential acquisitions and the recently announced South Texas divestiture and continue to address debt maturities through additional liability management initiatives. We will continue to reduce our leverage and improve our debt to total capitalization. We believe this is achievable, and the continued confidence the affiliates of our Board of Directors have in the company and our team was demonstrated by the significant participation in the recent capital structure transactions, where they invested additional debt in EXCO and positioned themselves to acquire additional equity.

Now turning to Slide 2. Panel 1 highlights our recent capital structure transactions, which alleviate the overhanging of significant cash interest payment obligations that have burdened the company for years. These new debt instruments, the new $300 million 1.5 lien and the exchange $683 million 1.75 lien, allow us options to make optimal decisions for our shareholders. These options include improving future cash flows through the payment of interest into equity or debt until we enhance our cash flow through our development program. Thereafter, we'll be limiting future dilutions through the payment of interest in cash. We have potential to improve cash flow by more than $100 million per year by paying our interest in equity or debt as opposed to cash. Our pro forma liquidity, including our recently announced South Texas sale, totals approximately $425 million, which includes a credit facility of $100 million with nothing drawn.

Panel 2 references our gathering, marketing and transportation efforts. With our enhanced financing and drilling program, we particularly look forward to discussing revised, mutually beneficial rate structure with our main gatherer. Looking at Panels 3 and 4. We remain focused on managing all elements of our business, including costs, organizational structure and drilling and completion designs. Costs are down dramatically. For example, our LOE costs dropped approximately 11% on an absolute basis. Adjusted G&A is down 30% quarter-over-quarter and flat from prior quarter. Headcount is now below 180, down more than 40% since the first quarter 2016. Regarding drilling and completion. The ability to extend lateral lengths, coupled with increased fracture intensity results in more cost-efficient and more productive wells. We believe these are sustainable improvements regardless of volatility in service costs. Despite the headcount drop, we maintained our technical and commercial skills to execute our development program, which will create value for our shareholders. We believe that longer laterals, increased profit levels and fracture intensity and choke-managed pressure declines position us very well for drilling high rate of return, high net present value wells. We have a multiyear inventory of natural gas drilling in our portfolio that includes some 750 to 800 gross or 250 to 260 net specific operated locations, with rates of return in excess of 25% at varied prices.

With the recent completion of our capital transactions, we've settled on our spending program for 2017. We're excited about our opportunities, noting that with our 95% operated position based on value and our 92% held-by-production acreage position, we control the timing and extent of development spending. As Harold will discuss, at $3 pricing, the economics of drilling and development in our core Haynesville region are strong. However, we will continue to evaluate opportunities on both sides of the balance sheet through our formal prioritized capital allocation system, as noted in Panel 5, to determine where and when we'll be spending our capital. Our spending will be directed towards the highest PV/I opportunities, which could include drilling and development, acquisitions or a continued program to purchase unsecured debt, among other opportunities. We coordinated with our Board of Directors to determine our spending and development plans for 2017, and Harold will give you details regarding our program. Finally, as recently announced, we've signed a purchase and sale agreement to divest South Texas for $300 million before normal and customary phase-in adjustments for the effective date of January 1, 2017. We'll primarily use the proceeds from the sale for our drilling program in our Haynesville and Bossier area.

Slide 3 provides information regarding certain shareholder approvals now being requested and obtained through our proxy solicitation, which culminates at our Annual Shareholder Meeting in Dallas on May 31. As Fairfax, Bluescape and Oaktree continued to invest in the company and receive additional equity for both fees and PIK payment of interest due under certain New York Stock Exchange rules, we're required to obtain shareholder approval for equity issuances above certain thresholds. To take advantage of our ability under our new debt instruments to make interest payments in common stock, we'll need to exceed these thresholds. Accordingly, we solicited approval from our shareholders to allow the company to issue equity that will be used to pay our interest, preserving cash for drilling and other corporate purposes, such as acquisitions. Additionally, we desire to cure our share price noncompliance and remain listed on the New York Stock Exchange. We, therefore, are also soliciting approval to grant the board the authority to declare a reverse share split within the range of 10:1 to 20:1 as we aspire to have our shares at a price that is within NYSE compliance levels and is comparable with certain of our peers.

As part of the reverse share split, we'll amend our charter to reduce our number of authorized common shares, albeit at a disproportionate rate relative to the actual reverse share split. This disproportionate reduction will allow EXCO additional flexibility to pay our interest with common shares. The reverse share split will require the approval of at least 2/3 of the outstanding common shares entitled to vote at our annual meeting. In turn, we want to remind our stockholders that each vote will be and is important to the outcome of the reverse share split proposal. Again, approval of the reverse stock split proposal is essential to providing us the flexibility to pay interest in common stock, which in turn, will allow us to preserve cash for drilling and other purposes.

Now Harold will discuss our assets, operations and capital program.

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Harold H. Jameson, EXCO Resources, Inc. - COO and VP [4]

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Thanks, Hal. On Slide 4, the map shows the locations of our asset holdings in Texas, Louisiana and Appalachia. In Panel 1, the table illustrates the breakdown of our acreage positions, percent of acreage held-by-production, volumes for the quarter and year-end 2016 improved reserves. Our production during the quarter averaged 241 million cubic feet equivalent per day, and no new wells were turned to sales during the quarter. We reengaged our drilling operations in late January of 2017. We exited Q1 with 3 operating drilling rigs, and we are currently running 4 operating drilling rigs all in North Louisiana. Our year-end proved reserves are in excess of 1.5 Tcf equivalent based on a 12/30/16 NYMEX pricing. This is up approximately 40% from year-end 2015. As previously discussed, we reported increases nearly all of our type curves from prior year, particularly the Haynesville Shale. Approximately 75% of the company production and reserves are in the Haynesville and Bossier in North Louisiana and East Texas.

On Slide 5, I'll provide an overview of our 2017 capital budget that totals $158 million, approximately double the amount we spent in 2016. Panel 1 lists the major components and provides commentary on each of the items on the 2017 program. Our focus is clearly on North Louisiana as we are currently running 4 rigs targeting Haynesville and Bossier shales and plan to spud a total of 38 gross or 15.9 net operated wells this year. The Haynesville play has been re-energized, as industry and EXCO have significantly enhanced returns by shifting to longer laterals and modifying completion designs to include higher levels of proppant, higher volumes of fluid and tighter cluster spacing to deliver higher fracture intensity. We believe there are additional refinements to optimize the design, and the wells we drill in North Louisiana during 2017 will feature 30% more proppant, more fluid and tighter clusters than our 2016 designs. Approximately 50% of the wells we drill in our 2017 program will consist of longer laterals, including both 7,500 feet and 10,000 feet in lateral length.

Our Bossier opportunities are held-by-production, but we are conducting additional appraisal [work] in the Bossier formation in North Louisiana. Our first well drilled in 2017 was a Bossier appraisal well, with a 7,000-foot lateral and a modified completion design. This well was turned to sales last week and is currently in the flowback phase. We're planning 4 additional Bossier wells in 2017 as part of our appraisal program. We are currently fracture-stimulating a 3-well group of Haynesville wells in DeSoto Parish that will be turned to sales in June.

In Panel 2, note that $137 million of $158 million budget or 87% of the total is directed to D&C activity. This includes $15 million of D&C capital that is operated by others, or OBO, which is about 5x the OBO spending in 2016. We will evaluate each drilling opportunity one well at a time. The OBO opportunities must compete for capital [and] are held to the same return standards as our operated wells, and provide valuable information to EXCO as most, if not all, operators in the play have enhanced the well designs with larger completion and longer laterals. This OBO activity will be in both North Louisiana and East Texas. In East Texas, the activity will be in the southern part of the East Texas area, where we have realized recent well performance at 2.6 Bcf per thousand foot of lateral, the highest EUR per foot in EXCO's Haynesville portfolio. Panel 3 on the slide breaks down the EXCO operated gross and net well counts in the 2017 capital program.

Now moving on to Slide 6. I'll highlight our recent well performance in North Louisiana and East Texas. In Panel 1, the 3 curves show cumulative gas versus time for 3 different types of wells in DeSoto Parish, Louisiana, and the 3 curves show our recent progression with completion design and lateral length. The sustained uplift in well performance is significant and demonstrates why we are focused on advancing our D&C activity in this core area of the play. The progression shows nearly 150% improvement in cumulative gas rate over the time period shown. This is achieved with much stronger well performance from the improved completion designs. These longer lateral wells are currently flowing with very low pressure declines of less than 10-psi per day. The flat decline demonstrates how strong these wells really are and provides further support to our proved reserve increases at year-end 2016.

In Panel 2, the same slide is illustrated for the southern part of our East Texas area and the deeper part of the Haynesville play. The larger completion design in this area of the play has yielded a breakthrough in performance. We are choke managing these wells, just like in North Louisiana, and the average psi per day drop on these deeper wells is also less than 10-psi per day. This is a significant change in performance, and we fully expect to incorporate this area into our development program earlier than originally planned based on this improved performance.

EXCO is focused on making completion and development decisions to maximize value for each individual capital investment opportunity. With the improvements in well performance achieved with our modified well designs, we have generated additional value to our drilling locations. In the Caddo area example at Panel 4, the 8/8ths PV-10 improves from 6.9 million per location from year-end 2015 to $8.9 million per location with our current target or a 29% increase in PV-10 value. These values are based on a 3/30/17 price deck. The new designs are driving higher volumes, flatter, more sustained well performance and higher value per drilling location.

As you can see from these summary plots, our new completion designs are generating high returns on our capital invested. In the appendix of the slide deck on Slide 12, our standard table of type curves, drilling inventory, capital and economics with breakeven pricing are shown. This group of type curves represents a mix of drilling opportunities that EXCO will direct capital to in the 2017 program.

Moving to Slide 7. The chart in Panel 1 illustrates the EXCO drilling inventory ranked by breakeven gas price required to deliver a 25% before tax rate of return. We have 773 gross or 254 net high-graded company-operated drilling locations within our asset areas that generate very strong returns. As the chart shows, we have 331 gross or 95 net locations that deliver these returns below $3 per Mcf. The inventory of high-quality locations on the chart provides EXCO 19 years of drilling inventory, assuming a development phase of 4 rigs, delivering approximately 40 gross wells per year. This chart is a gas-focused, high-graded subset of our entire acreage position. There are additional drilling opportunities in the dry gas Utica play, the Upper Devonian and additional Marcellus in the Northeast and additional Tier 2 Haynesville development locations in Harrison and Panola counties in Texas and the Northern Caddo Parish acreage in North Louisiana. EXCO has many years of development drilling ahead, with high-quality opportunities within the current acreage position.

Now I'll turn the call over to Tyler to cover our Q1 2017 results and our current outlook.

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Tyler Farquharson, EXCO Resources, Inc. - CFO, VP and Treasurer [5]

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Thanks, Harold. Slide 8 compares EXCO's financial performance to previous periods. During the first quarter, EXCO took a significant step forward in its plan and reinitiated development drilling activity, which resulted in 4 new wells being drilled in North Louisiana. We are currently completing these wells and expect to turn them to sales during the second quarter. No additional wells were turned to sales during the first quarter, resulting in total daily production falling 8% from the fourth quarter due to natural declines. We forecast total daily production to hit a low point for the year during the second quarter before increasing in the second half when the majority of our new wells from our capital program are scheduled to turn to sales.

Adjusted EBITDA decreased 31% compared to the fourth quarter, primarily due to lower oil and gas production and weaker natural gas price realizations. Daily natural gas prices fell during the quarter compared to the first of the month index prices, causing a wider-than-expected natural gas price differential. Our lease operating, production tax and gathering and transportation expenses for the first quarter were up versus the prior quarter due to the decline in production. The company finished the quarter with $186 million of liquidity, which is an increase of $120 million from year-end, and we expect to further bolster our liquidity to approximately $425 million upon the closing of the South Texas divestiture.

The company's performance against guidance is shown on Slide 9. EXCO delivered operational and financial results within or better than guidance for the first quarter. First quarter total daily production came in at 241 million cubic feet per day, which was slightly above the midpoint of guidance. The company's capital program is in line with expectations for the first quarter, and we plan 11 additional spuds and 4 turn-to-sales during the second quarter. We're expecting production to trough during the second quarter before increasing during the second half of 2017, when 23 wells are scheduled to turn to sales. For second quarter production guidance, we have included the South Texas properties for 2 months. Lease operating, production taxes, G&A and interest all came in at the low end or below first quarter guidance. Moving forward, we've held adjusted G&A expenses, excluding equity-based compensation and restructuring and severance costs, flat.

This concludes our prepared commentary. We'd now like to answer your questions.

Operator, we'll take questions now.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from the line of Tarek Hamid from JPMorgan.

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Unidentified Analyst, [2]

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This is actually Kevin calling in for Tarek. Just wanted to get a little bit more detail on what kind of activity level you think might be necessary for Appalachia to start picking up. Any new update to that?

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Harold L. Hickey, EXCO Resources, Inc. - CEO and President [3]

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I'm sorry, could you repeat the question? I heard it was about Appalachia activity.

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Unidentified Analyst, [4]

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Yes. Just wanted to -- I know most of your activity right now is focused in Haynesville. And just want to see what kind of scenario would be necessary for Appalachia to start seeing increased activity?

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Harold L. Hickey, EXCO Resources, Inc. - CEO and President [5]

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Sure. What we like a lot of the Appalachian opportunity, there's some really good reserves up there. Our type curves are strong. The differentials are really restricting us at this point relative to our opportunities down in the South. So while we'd consider some appraisal activity up in Appalachia, I think it's going to be some period of time before we'd start on a development program. We need to see potentially some infrastructure buildout, which could reduce some of those differentials. And I believe that may happen as early as 2018. But right now, our focus is in our Haynesville/Bossier area down in North Louisiana and East Texas.

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Unidentified Analyst, [6]

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All right. Great. That's very helpful. And I guess, I know most of your -- understand most of your oil guidance decline is mostly due to the impact of South Texas. But just want to see, longer term, how do you guys think about your liquids mix? And how you could potentially further diversify your income stream?

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Harold L. Hickey, EXCO Resources, Inc. - CEO and President [7]

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We're virtually all dry natural gas. And that's the current makeup of the portfolio. So don't consider us to have any significant liquids component at this time.

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Unidentified Analyst, [8]

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Okay. And finally, just want to see if you have any color on any more near-term plans to address those unsecured notes? I know you mentioned it in the release, but just wanted to see if you had any updates.

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Harold L. Hickey, EXCO Resources, Inc. - CEO and President [9]

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We're working on that every day, but at this point in time, we're not prepared to announce any other near-term plans or any activity around the unsecureds. We're very conscious of when the maturities are in '18.

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Operator [10]

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Your next question comes from the line of David Beard from Coker & Palmer.

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David Earl Beard, Coker & Palmer Investment Securities, Inc., Research Division - Senior Analyst - Exploration and Production [11]

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Just like a little bit more color on the transportation costs, specifically in the Haynesville, what does your transportation costs look like there relative to firm pipeline commitments or [spot], given that we have excess capacity in the basin?

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Harold L. Hickey, EXCO Resources, Inc. - CEO and President [12]

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Tyler?

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Tyler Farquharson, EXCO Resources, Inc. - CFO, VP and Treasurer [13]

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Yes, so for the quarter, we turned in about $1.25 -- actually, $1.26 per Mcfe. A majority of that is fixed referenced firm transport costs. We put slides out before that show what we think that makeup is between firm charges and what we use and don't use. It's a significant component of that gathering charge. So as you see our production coming down, our per unit has actually gone up. As we move forward, we discussed that we think in the second half of the year, our production will actually increase. I would expect that per unit gathering and transport charge to start coming down.

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David Earl Beard, Coker & Palmer Investment Securities, Inc., Research Division - Senior Analyst - Exploration and Production [14]

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Okay. And just are there any goals or where could that come down to running the 4-rig program into '18?

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Tyler Farquharson, EXCO Resources, Inc. - CFO, VP and Treasurer [15]

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We haven't said anything publicly yet. We are working with our largest gatherer on potentially getting some rate relief. So that would help moving forward, but we haven't discussed longer-term plans yet on where we expect that number to go.

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David Earl Beard, Coker & Palmer Investment Securities, Inc., Research Division - Senior Analyst - Exploration and Production [16]

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Okay. And then, just switching to -- again, staying in Louisiana, but switching over to well design. There have been some other operators that more sand loadings for 10,000-foot lateral. Are you kind of watching them and considering more sand loadings? Or is it really just an issue of costs and economics? And then, adjunct to that would be, just what have you based in for cost inflation in your $9 million to $12 million in well costs?

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Harold L. Hickey, EXCO Resources, Inc. - CEO and President [17]

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Okay, sure.

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Harold H. Jameson, EXCO Resources, Inc. - COO and VP [18]

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I'll take that. This is Harold Jameson. The first part of that is our program for 2017 includes a combination of lateral links. We have 4,500-foot laterals in certain cases, and we also have 7,500-foot laterals, and then we have some 10,000-foot laterals program for 2017. So that will be part of the program or the EXCO operated activity in 2017. As far as proppant loading, we're making a shift, as I mentioned in the comments, we're moving up about 30% in terms of proppant loading. Our base design for '17 is 3,500 pounds per foot, and that's the proppant loading. We're also increasing our fluid volumes, and our cluster spacings are tighter than what we implemented in 2016. On the outside operated investments, we are actively participating with certain operators that are very active in North Louisiana and in East Texas. And as a partner in those wells, that data is available to us. We're tracking, comparing, monitoring that well performance alongside our well performance. So as we -- in some of the comments regarding our decisions on proppant size, completion design, it's all about value. We're not very focused on trying to deliver a target high 24-hour IP rate. We're more interested in the value of the well, choke managing the well and delivering value to the shareholders. That's our objective. As far as the last part of your question regarding costs, our costs in our current 2017 program are grounded in current costs, in current well design. And so that's our basis of where we are. We have realized an increase in costs -- service costs compared to 2017, but those costs increases and design changes are factored into our 2017 budget.

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Operator [19]

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Your next question comes from the line of Jeff Robertson from Barclays.

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Jeffrey Woolf Robertson, Barclays PLC, Research Division - Director [20]

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Hal, can you talk about what leverage, if any, the increased capital program in Louisiana gives-- or in Haynesville -- gives you with efforts to try to rework some of your midstream contracts?

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Harold L. Hickey, EXCO Resources, Inc. - CEO and President [21]

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Sure. You're onto something there, and obviously, the more we drill, the more volumes we put in and the more opportunity we have to negotiate. If we could -- there are certain things, and I'm not saying these are necessarily the ones that we're going to utilize. But if you can show a volume increase, if you could show a commitment around a certain amount of drilling activity, if you could show some growth in the program and you can create a win-win situation that shows we're going to create more volume for you that's going to give you the opportunity to generate more revenue, it really is helpful. And that's the approach we're taking. We've obviously moved past some of the more onerous situations we were in a year or so ago when we didn't know if we were going to make it or not. We've always strived to work this thing in the right way to maintain the equity value and to maintain some program for our investors. And that's what we're doing, so we're optimistic about what this opportunity presents. So yes, there's something there to be said around the fact that if you can commit or if you can generate or you can show increased activity and increased volumes, it does give you additional leverage for the discussion.

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Jeffrey Woolf Robertson, Barclays PLC, Research Division - Director [22]

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And secondly, can you all talk about what, if any, flowback changes you're making as you move to bigger stimulations in your Haynesville wells?

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Harold L. Hickey, EXCO Resources, Inc. - CEO and President [23]

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Yes, Harold?

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Harold H. Jameson, EXCO Resources, Inc. - COO and VP [24]

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Sure. As far as rates, with the bigger completion design, we're bringing the rates up slightly. But in terms of our overall flowback process, our objective is to start the well out, clean the well up, bring the well up to rate, a predetermined maximum rate, depending on how the well performs, and then we'll bring the rate back down. And [put a] downhole calculation on drawdown, we've had that program in place for some time. But the larger completions are allowing us to produce the wells at slightly higher rates as a result of a larger investment and a larger completion design. And it's all about how the well performs. We're going to monitor every well on a well-by-well basis. We have a routine. We do calculations on a daily and hourly basis, actually. That data is distributed to the team members, and then those choke changes are dialed in and programmed as the well cleans up. But it's similar to what we've done in the past, but we are pushing the rates a little bit harder with the larger completion designs, which is generating larger volumes over time.

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Jeffrey Woolf Robertson, Barclays PLC, Research Division - Director [25]

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So Harold, you're still a firm believer in managed production on these wells?

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Harold H. Jameson, EXCO Resources, Inc. - COO and VP [26]

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Absolutely.

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Operator [27]

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(Operator Instructions) There are no further questions at this time. Please continue.

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Harold L. Hickey, EXCO Resources, Inc. - CEO and President [28]

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Thank you all for joining our call. We're excited to have our development program underway. We look forward to updating you on progress throughout the year. We'd like to remind everyone that there are important proposals pending this year for our annual meeting, so please vote your proxy as soon as possible. And in addition, we welcome shareholders to attend EXCO's Annual Meeting in person on May 31 at our offices here in Dallas.

Operator, this concludes our call. Thank you, everyone.

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Operator [29]

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This concludes today's conference call. Thank you for participating. You may all disconnect.