Strong Focus on Development of the Haynesville and Marcellus Shale to Map Future Growth

Monday 13 February 2012, Amsterdam

Strong Focus on Development of the Haynesville and Marcellus Shale to Map Future Growth

EXCO Resources has shifted its focus from conventional resources to unconventional resources in the recent years. The major operating areas of the company include East Texas, North Louisiana, Appalachia and Permian basin, which are primarily rich in shale resources. The major shale plays of the company are the Haynesville/Bossier and the Marcellus shale plays. The development of these shale plays is one of the key strategies of the company. The company has planned a total capital budget of $710m for 2012, out of which the company plans to spend around $469m on the development of Haynesville/Bossier shale, and $128m on the development of its acreage in the Marcellus shale. The company is thus investing significantly in the shale resources in order to support its long term production growth.

Haynesville/Bossier Shale

The Haynesville/Bossier shale play encompasses a large geographic area in the East Texas and Northwest Louisiana, and is currently the second largest producing shale play in the US after the Barnett shale. The play is spread over a large area and is over-pressured, holding more gas in place per square mile than is present in the Barnett shale. Ultimate recoveries from the Haynesville shale could exceed 250 trillion cubic feet equivalent (tcfe), potentially making it one of the five largest natural gas fields in the world. The shale lies approximately 10,000-13,500 feet below the surface and produces from both Haynesville and Bossier formations. The figure below shows major companies according to acreage in the Haynesville/Bossier shale.

See figure: Haynesville/Bossier Shale, Major Companies by Total Net Acreage (Acres), 2010

EXCO Resources began operations in the Haynesville/Bossier shale in 2008. In 2009, the company entered into a JV with the BG Group in order to develop this shale play. The primary areas of operations of the company in the shale include DeSoto Parish, Louisiana, and the Shelby area. The Shelby area was jointly acquired by the company along with the BG Group in 2010. As of December 2010, the company owned a net acreage of 76,000 acres in the Haynesville/Bossier shale, and operated 21 horizontal drilling rigs in this acreage. The table below shows the key characteristics of the company in the Haynesville/Bossier shale.

Marcellus Shale

The Marcellus shale is one of the most progressive unconventional gas shale in the US. The shale is located across some of the most prosperous states in the US, and is close to the country’s major consuming natural gas markets, which provides a benefit over other developing gas plays in the country in terms of transportation costs. Furthermore, it is estimated that around 4,359 trillion cubic feet (tcf) of natural gas is underlying the Marcellus shale play, and from this, around 262 tcf of natural gas is recoverable. Several oil and gas companies are therefore undertaking large scale investments in this shale in order to drive their future production growth. The figure below shows major companies according to acreage held within the Marcellus shale.

In 2010, EXCO Resources entered into a JV with the BG Group in order to develop the Marcellus shale play. The company also created a midstream JV with the BG Group in order to capture the production growth from this shale. As of December 2010, the company owned a net acreage of 140,000 net acres in the Marcellus shale, and operated two rigs, which were initially used in the appraisal of the existing acreage. Additionally, the company plans to develop the Marcellus shale using the technical expertise gained from conducting operations in the Haynesville/Bossier shale. The company expects the total production from the shale to be around 200MMcf/d by mid 2012. The table below shows the key characteristics of the company in the Marcellus shale.

The company is therefore focusing significantly on the development of unconventional resources in the Haynesville/Bossier and Marcellus shale. The company expects to increase its production from around 18.7 MMboe in 2010 to nearly 69.5 MMboe in 2015, at a CAGR of around 30%. This increase in production is expected to be primarily driven by the two shale plays. The development of the shale plays will therefore help the company in achieving its targeted production volumes.