Exco’s output falls amid low gas prices

OREANDA-NEWS. July 28, 2015. Natural gas producer Exco Resources' output declined in the second quarter by 6pc from a year earlier as the company pared back speeding because of low energy prices.

Exco's production dropped to about 361mn cf/d (10mn m?/d) even as the company boosted output from new wells in the Haynesville shale, a gas-rich formation in east Texas and northern Louisiana. Production from the Haynesville shale, the key operating area for Exco, has dropped by about 6pc from a year earlier as producers reined in development to focus on higher-return areas, according to the US Energy Information Administration.

Some producers such as Chesapeake Energy and Exco continue to improve well performance in the Haynesville. But new wells there are failing to offset output declines from aging wells. Exco is focusing its spending in east Texas, where its wells are the most lucrative.

Exco has been stung by a sharp downturn in natural gas prices. Spot prices at the Henry Hub this month are down by about 30pc from a year earlier. That decline has spurred Exco to shed assets and enter into a services and investment agreement with the private equity company Bluescape Resources.

"We are focusing on things that we can control, including cost management and improving the performance of our assets," said Exco chief financial officer Ricky Burnett during a conference call with investors today.

Exco plans to cut its east Texas well costs this year to \\$10.3mn from \\$12.5mn at the end of 2014 and is in talks with service providers to reduce drilling, completion and transportation costs.

In addition, Exco's output from the Haynesville declined from the previous three-month period because of higher downtime related to flooding during the quarter in Texas and Louisiana.

Exco reported a second quarter loss of \\$12.3mn, compared with a year-earlier profit of \\$7.3mn.