EXCO Resources, Inc

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====Central PA activity==== ====Central PA activity====
-During 2010, EXCO continued to ramp up activity in [[Centre]] and [[Clearfield]] counties where it controlled approximately 20,000 acres. By September, 2010 it had drilled 18 wells in Centre Co. Three had been completed during August and early September, 2010 and at the time, eight more were to be drilled. The company also planned an extensive gas gathering infrastructure in Centre Co. and other areas of the play. It had budgeted approximately $100 million/year to be invested for this purpose.+During 2010, EXCO continued to ramp up activity in [[Centre]] and [[Clearfield]] counties where it controlled approximately 20,000 acres. By September, 2010 it had drilled 18 wells in Centre Co. Three had been completed during August and early September, 2010 and at the time, eight more were soon to be drilled. The company also planned extensive gas gathering infrastructure in Centre Co. and other areas of the play. It had budgeted approximately $100 million/year to be invested for this purpose.
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====Drilling in the Huron shale==== ====Drilling in the Huron shale====
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===Spotlight Issues=== ===Spotlight Issues===
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* The company had pursued an aggressive, yet somewhat restrained Marcellus shale drilling program in 2009. It has been negotiating for a joint venture partner, so it may have been holding back until a partner was on board. By early 2010, this strategy appeared to be shifting to a more active drilling program with 11 horizontal wells set to drill. '''''Update''''': In May, 2010 EXCO entered into a further joint venture with BG to develop its Appalachian acreage. See above. * The company had pursued an aggressive, yet somewhat restrained Marcellus shale drilling program in 2009. It has been negotiating for a joint venture partner, so it may have been holding back until a partner was on board. By early 2010, this strategy appeared to be shifting to a more active drilling program with 11 horizontal wells set to drill. '''''Update''''': In May, 2010 EXCO entered into a further joint venture with BG to develop its Appalachian acreage. See above.
-* Once EXCO begins drilling in earnest, it is extremely well positioned in central Pennsylvania. A January, 2010 news release mentioned that EXCO had been granted 60 drilling permits for future operations in Pennsylvania. According to a February, 2010 company update, this sum had increased to 70 drilling permits ready to go.+* Once EXCO began drilling in earnest, it was extremely well positioned in central Pennsylvania. A January, 2010 news release mentioned that EXCO had been granted 60 drilling permits for future operations in Pennsylvania. According to a February, 2010 company update, this sum had increased to 70 drilling permits ready to go. By September, 2010 drilling activity in [[Clearfield]] and [[Centre]] counties were clearly on the upswing with several wells having been recently drilled and eight more planned.
* The same as other E & P firms developing in the Marcellus, EXCO had begun experimenting with long-lateral horizontal drilling. This program was starting to bear fruit by mid-2010. * The same as other E & P firms developing in the Marcellus, EXCO had begun experimenting with long-lateral horizontal drilling. This program was starting to bear fruit by mid-2010.

Revision as of 20:50, 20 September 2010

EXCO_skyline.GIF
EXCO rig, 2009, Skyline Golf Course on Route 247,
Greenfield Twp in Lackawanna Co., PA

Photo credit -Robin Scala

Dallas, Texas-based EXCO Resources, Inc. (NYSE: XCO), an oil and gas exploration and production company, has an active drilling program in Pennsylvania, Ohio, and West Virginia. During 2008 and 2009 it had been shifting resources to drill in both the Marcellus and Huron shale formations. EXCO's Marcellus leasehold consists of 343,000 net acres in the Marcellus shale fairway. Approximately 186,000 acres (106,000 net) are in the core area of the play where shale is over 100 feet thick and over-pressured. 70% of its acreage is held by production, and it owns 100% of the working interest with high net revenue interest. The company also controls 130,000 acres in the Huron shale play. Much of EXCO's Appalachian drilling has been conducted through its Akron, Ohio-based subsidiary, EXCO - North Coast Energy, Inc. North Coast Energy has been a wholly-owned subsidiary of EXCO since 2004.

Contents

Latest Operational Developments

As of July, 2010 EXCO had conducted 3d seismic targeting over 53 square miles of its Marcellus acreage with additional seismic studies planned for 2010-2011.

During the first half of 2010, the company had drilled 5 horizontal and 3 vertical wells primarily in central Pennsylvania where it had easy access to pipeline capacity and strong land position. To date it had fielded 1 rig in the play.

At the time of the July update, EXCO's most recent well had been one with a 4,800 foot lateral and initial production (IP) of 4 Mmcf/d. 3 horizontal wells had also been drilled from a common pad and were scheduled for completion during the third quarter. Each of these three had laterals in excess of 5,000 feet in length.

The company planned to exit 2010 with 15 gross operated wells drilled in Pennsylvania and fielding 3 horizontal rigs there. It also expected to drill one gross operated Marcellus well and one outside-operated one in West Virginia.

2008 Development Timeline

During 2008 EXCO was primarily involved in drilling Marcellus shale test wells in Pennsylvania. Several horizontal Huron shale wells were also drilled in West Virginia.

Water withdrawal misstep in the Susquehanna Basin

In September, 2008, EXCO - North Coast Energy was reported to be actively drilling in the Susquehanna Basin of Pennsylvania. It had paid a fine to the Susquehanna River Basin Commission of $20,000 for not complying with limits on water withdrawal for wells in the Basin.

Seismic testing in Centre County

An October, 2008 report found EXCO - North Coast carrying out a 3-D seismic survey on 15,000 acres in central Pennsylvania where it owned drilling rights that were mainly on state game lands in Burnside Township, Centre County. It had already drilled two horizontal wells in the Burnside area that were undergoing testing.

The Company was working with Dawson Geophysical Company to carry out the seismic survey.

First Marcellus shale wells

EXCO's first two Marcellus wells, the Litke 1H and 2H, located in Burnside Township, Centre County, Pennsylvania were producing 1 and 2.6 Mmcfe/d, respectively. Both were horizonal, hydro-fractured wells.

Snow Shoe or Burnside?

A December, 2008 report indicated EXCO had a well near Snow Shoe, Pennsylvania (near Burnside Township) that was producing 1 Mmcfe/d at the depth of 1700 feet. It may or may not be the same one mentioned in the previous paragraph.

4th Quarter Drilling Plans

According to a November, 2008 report EXCO planned to drill four additional horizontal wells in the Huron shale and five vertical ones in the Marcellus during the last quarter of 2008.

2009 Development Timeline

In 2009 EXCO continued to test its Marcellus shale acreage and to drill in West Virginia's Huron shale.

West Virginia drilling activities

In February, 2009 EXCO announced that it had two horizontal wells in West Virginia that were to be undergoing four and seven stage completions in March-April, 2009. These were probably a couple of the same ones mentioned above that were scheduled for drilling during the 4th quarter of 2008. Also, as of February the company had received four additional permits for horizontal wells in West Virginia.

Vertical drilling in central PA counties

The same report as above indicated that EXCO had several vertical wells in Indiana, Clearfield and Centre Counties in Pennsylvania. Also, an April, 2009 update from the company mentioned that EXCO had a number of drilling permits for vertical wells in Indiana County, PA as well as other counties in Pennsylvania. As of that time it had applied for three Marcellus shale permits in Indiana Co.

During the third quarter of 2009 EXCO had drilled and completed four vertical wells in the Marcellus shale and planned to spud one horizontal well late in the forth quarter of the year.

Third quarter completions

According to the previously mentioned April, 2009 update, EXCO had recently finished drilling and casing one horizontal Marcellus well, and another one was still underway. The company expected to complete both wells during the third quarter of 2009. The situation was similar for the Huron shale: drilling had recently finished on one well and was still underway for two or three additional wells. Completion was scheduled for these wells during the third quarter of 2009.

Decision on joint venture partner deferred

Further mention was made in the April, 2009 update that the investment banking firm, Goldman Sachs, had been retained to facilitate a joint venture (JV), presumably to gain greater access to capital for EXCO's capex program, but no details were then available. Another update provided by EXCO at the end of July, 2009 indicated that the company was seeking a compatible JV partner that could help develop its Marcellus shale acreage. A decision about selecting a partner had been deferred until the 4th quarter of 2009 or 1st quarter of 2010.

Shifting emphasis to the Haynesville

A May, 2009 company update indicated that EXCO was scaling back its Marcellus shale drilling as well as its pipeline infrastructure projects. Instead, it planned to favor Haynesville shale drilling. The reason given for the pull-back was the on-going collapse in natural gas prices. However, EXCO was still expecting to maintain an aggressive overall posture so far as the Marcellus shale. For the remainder of 2009, the company intended to focus on integrating its existing well data with seismic data in order to better model its still, as yet, undrilled acreage blocks and for further planning.

Golf course permits in Lackawanna Co.

A July, 2009 report had EXCO being issued the first drilling permits in Lackawanna County, PA, home of the City of Scranton. EXCO was issued two permits for drilling near the Skyline Public Golf Course in Greenfield Township. The drilling rights had been purchased as part of Greenfield Gas Group's negotiated lease for 25,000 acres. EXCO paid $2,100 per acre with an 18% royalty on production. No starting date for drilling had been set. EXCO had five other pending permits to drill in Greenfield Twp.

Update: During December, 2009 EXCO - North Coast Energy was reported to have been evaluating the core from the above pictured well drilled during September-October in Greenfield Township, PA. It was named Skyline Golf Course Unit 6V and located east of State Route 247 adjacent to the golf course. This had been the first Marcellus shale well drilled in Lackawanna County, PA. The company also had a permit to drill a second well at the golf course location. The company had drilled another Marcellus well in July, 2009 in nearby Clifford Township in Susquehanna County, PA.

Management evaluates its options - sells wells

A November, 2009 EXCO update stated that the company continued to be in more or less of a holding pattern regarding the Marcellus shale. Management indicated that it was in the process of evaluating its Marcellus acreage by drilling test wells and building its staff in the region. No firm development plans for 2010 had yet been released. The company also announced that the company had sold 3,200 (presumably shallow) wells for $145 million that were in Ohio and northwestern Pennsylvania. The deal was to close in November, 2009. During the fourth quarter of 2009, EXCO moved its office from Akron (North Coast - EXCO) to Warrendale, PA (north suburban Pittsburgh area) where it leased 56,000 square feet of office space.

BG JV

Other factors affecting EXCO included a 50-50 joint venture (JV) with BG Group pertaining to acreage in the Haynesville shale play in East Texas and North Louisiana signed in June, 2009 for $1.3 billion (US).

In May, 2010 BG group announced that it had extended its JV with EXCO to include a 50% interest in the latter's 654,000 acre Appalachian Basin leasehold. This included both producing and non-producing acreage. It increased BG's net gas resources by 2.4 Tcf.

BG's total investment amounted to $950 million. The joint venture was to be based in Pittsburgh, PA. EXCO and BG were each to have a 50-50 interest in both upsteam and midstream assets. BG was to acquire 5,900 shallow producing wells securing leases with production of 35 million Mmcf/d.

The JV agreement gave BG the right to participate in future EXCO lease acquisitions,

Of the $950 million total investment, $800 million was to be paid up front in cash. The remaining $150 was to be paid out as a drilling carry for 75% of EXCO's future drilling expenses.

2010 Development Timeline

During 2010, EXCO designated five core areas in the Marcellus shale on which it planned to focus. It was in negotiation to add 40,000 to 50,000 additional acres in these core areas.

Drilling longer laterals

EXCO was also in the process of completing its first long lateral horizontal well. The lateral was to be 4,650 feet long. It was expected to be complete by late first quarter or early second quarter of the year. Update #1: EXCO announced in May, 2010 that it had identified damage to the casing on this well at about 2,600 feet into the lateral and opted to complete only the first 2,500 of the lateral with an 8 stage frac. Pending further analysis of the productivity of the well, the company planned to complete the full length of the lateral later in the year. The initial production (IP) from this well averaged 2.3 Mmcf/d, but was expected to improve once the full length of the lateral had been completed. Update #2: The company had also drilled a second horizontal well at the beginning of the second quarter of 2010. This one had a 2,500 lateral with initial production (IP) of 2.2 Mmcf/d. It had also been completed with an eight stage frac.

2010 Plans

EXCO planned to continue building its Marcellus leasehold targeting contiguous acreage suitable for multi-well pad operations. It also intended to pursue a strategy of using joint ventures to develop and improve the value of its Marcellus position.

The company had also fielded one horizontal rig in the Marcellus during the 2010, and spud its first well using it in March. The company planned to operate the rig throughout the year to drill 11 operated wells, and 4 non-operated ones. EXCO planned a three rig program using fit-for-purpose rigs to be added later in 2010.

EXCO had 70 drilling permits in hand. However, getting sufficient gathering pipeline in place still required additional time.

Land portfolio

EXCO owned 106,000 acres in central Pennsylvania of Marcellus shale fairway. It planned to drill 9 out of 11 horizontal wells in that region during 2010. Its other core holdings included 10,000 acres in northeastern Pennsylvania, another 10,000 in southwestern Pennsylvania and northern West Virginia, and finally 26,000 acres in other parts of West Virginia that the company believed were prospective for Marcellus shale.

Central PA activity

During 2010, EXCO continued to ramp up activity in Centre and Clearfield counties where it controlled approximately 20,000 acres. By September, 2010 it had drilled 18 wells in Centre Co. Three had been completed during August and early September, 2010 and at the time, eight more were soon to be drilled. The company also planned extensive gas gathering infrastructure in Centre Co. and other areas of the play. It had budgeted approximately $100 million/year to be invested for this purpose.

Drilling in the Huron shale

EXCO had also drilled five horizontal Huron shale wells in West Virginia. Production rates on these five wells had been averaging greater than 400 Mcf per day.

Spotlight Issues

  • The company had pursued an aggressive, yet somewhat restrained Marcellus shale drilling program in 2009. It has been negotiating for a joint venture partner, so it may have been holding back until a partner was on board. By early 2010, this strategy appeared to be shifting to a more active drilling program with 11 horizontal wells set to drill. Update: In May, 2010 EXCO entered into a further joint venture with BG to develop its Appalachian acreage. See above.
  • Once EXCO began drilling in earnest, it was extremely well positioned in central Pennsylvania. A January, 2010 news release mentioned that EXCO had been granted 60 drilling permits for future operations in Pennsylvania. According to a February, 2010 company update, this sum had increased to 70 drilling permits ready to go. By September, 2010 drilling activity in Clearfield and Centre counties were clearly on the upswing with several wells having been recently drilled and eight more planned.
  • The same as other E & P firms developing in the Marcellus, EXCO had begun experimenting with long-lateral horizontal drilling. This program was starting to bear fruit by mid-2010.

Key Exeucutive Contacts

  • Douglas H. Miller is EXCO's Chairman and CEO.
  • Stephen F. Smith is Vice Chairman, President and Secretary.
  • J. Douglas Ramsey is Vice President, CFO and Treasurer.
  • William L. Lanny Boeing is Vice President and COO.
  • Wendy L. Straatmann is Vice President of EXCO and President of EXCO - North Coast Energy, Inc.
  • Paul B. Rudnicki is Vice President of Financial Planning and Analysis.
  • Hal Hickey is the company's Vice President and also COO.
  • Dan Kortum is Vice President of Midstream and Marketing.
  • Thomas R. Moore is Chief Geoscientist, EXCO - North Coast Energy.
  • David Cox is Manager of Geosciences, EXCO - North Coast Energy.
  • Rita McConnell is a spokesperson for EXCO.
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