March 27, 2017
Exco Resources to Divest Acreage in Eagle Ford
Stratas Advisors
This excerpt is from a report that is available to subscribers of Stratas Advisors’ North America and North American Shale services, and also Global Energy Perspectives.
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It’s no secret that the level of operator activity in the Eagle Ford decreased substantially over the course of the supply glut from 2014 to 2016. In the process, many Eagle
Ford operators with diversified play portfolios have found themselves high-grading their assets and focusing resources to their core, top-tier locations elsewhere. Enter
Exco Resources (NYSE: XCO).
After receiving notice from the NYSE in mid-January that its shares were trading below the minimum threshold to remain listed, EXCO expressed interest to divest all properties located in
Dimmit, Frio, and Zavala counties, Texas (roughly 50,860 net acres). Additional motivation behind selling Eagle Ford assets is based on the company’s stance to maintain its higher
producing assets in the Haynesville formation with the liquidity created from the sale.
Looking at some of the specs of Exco’s core assets within the Haynesville play, it becomes more obvious as to why the operator is looking to bolster its position in the region and
supply extra capital from its impending divestiture of its less impressive Eagle Ford holdings.
Exco currently has 96,300 net acres (87% held by production) in its East Texas/North Louisiana operation, with average daily production of 209 MMcfe/d and proved
reserves totaling 1,110 Bcfe.
By way of comparison, the South Texas assets encompass 49,300 net acres (95% held by production) with average daily production of 27 MMcfe/d and proved reserves estimated at 155
Bcfe. Seeing that the Haynesville is currently producing almost eight times the output of Exco’s EF assets with reserves potential being approximately seven times greater in the
Haynesville, the operator clearly has some justification in the decision to shore up its East Texas/North Louisiana acreage.
XCO’s Haynesville operations have shown significant upside potential since mid-2016, while its Eagle Ford assets on average have been operating at a loss since mid-2015. With
commodity prices continuously parrying with increased US output and the lack of stabilization above $50/bbl oil, tied in with lackluster potential from its Eagle Ford position, it seems that
Exco is making the smart play in high-grading to the Haynesville.
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