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EXCO Earnings Fall Short of Estimate

Zacks Equity Research

Texas-based energy explorer, EXCO Resources Inc. (XCO) reported second quarter 2013 adjusted earnings – excluding one-time items such as gains from asset sales and other non-cash gains – of 10 cents per share, missing the Zacks Consensus Estimate by a penny. The lower profitability could be attributed to a drop in production levels.

However, the predominantly natural gas-focused exploration and production company’s earnings doubled year over year on the back of a sharp rise in the commodity’s price.

During the three-month period ended Jun 30, EXCO generated total revenue of $150.3 million, up 27.4% year over year and above the Zacks Consensus Estimate of $140.0 million.


In the second quarter, overall production decreased to 420 million cubic feet equivalent (Mmcfe) per day from 550 Mmcfe in second quarter 2012.

In the East Texas/North Louisiana region, production dropped to 328 Mmcfe/d from 483 Mmcfe/d in the year-ago quarter. The decrease was due to the normal field declines and conventional properties’ contribution to the EXCO-HGI partnership.

In the Appalachian region, however, the trends were positive and production levels increased to 64 Mmcfe/d from 41 Mmcfe/d in the prior-year quarter owing to solid Marcellus shale play performance.

Realized Prices

Natural gas, which comprised 98.5% of the total production for EXCO, was sold at a realized price of $3.83 per thousand cubic feet (Mcf), up 91% from $2.01 in the prior-year quarter. The natural gas equivalent price realizations also increased 67% year over year to $3.93 per thousand cubic feet equivalent (Mcfe).

Drilling Statistics, Balance Sheet & Capital Spending

Net wells drilled during the quarter were 6.5, apart from the 0.2 net wells operated by others. The company’s drilling activities enjoyed cent percent success.

As of Jun 30, 2013, EXCO had approximately $80.4 million in cash and cash equivalents and long-term debt of $1,310.4 million, representing a debt-to-capitalization ratio of 77.5%.

The company’s capital expenditure (excluding spending related to the partnership with HGI) for the quarter was $60.5 million, lower than the previous quarter expenditure of $68.4 million.

Zacks Rank & Stock Picks

EXCO Resources currently carries a Zacks Rank #2 (Buy), implying that it is expected to perform well in the broader U.S. equity market over the next one to three months.

Apart from EXCO, one can look at certain other firms in the Exploration and Production (E&P) industry that are expected to significantly outperform the broader U.S. equity market over the same time frame are Cabot Oil & Gas Corp. (COG), Range Resources Corp. (RRC) and Voc Energy Trust (VOC). All three stocks sport a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on RRC

Read the Full Research Report on COG

Read the Full Research Report on VOC

Read the Full Research Report on XCO

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