DALLAS--(BUSINESS WIRE)--EXCO Resources, Inc. (NYSE: XCO) (“EXCO” or the “Company”) on Wednesday announced that the Company is executing on its disciplined capital allocation approach to ensure the highest and best uses of capital. EXCO will be selectively developing its asset base during the first six months of 2016, while deferring a significant amount of the Company’s drilling inventory until commodity prices improve.

Capital Budget Overview

EXCO’s Board of Directors has approved an operated drilling and completion capital budget of $70 million for drilling nine gross wells through June 2016 and completing 18 gross wells through August 2016, a reduction of $101 million, or 59%, as compared to operated drilling and completion capital expenditures of $171 million through August 2015. Development during 2016 will be focused on natural gas drilling and completion activities in North Louisiana and East Texas where EXCO is targeting 20% to 35% rates of return.

EXCO will deploy its capital, and evaluate a second half of 2016 drilling program, based on commodity prices, drilling and completion costs and well performance and will modify its development plans based on returns as the Company preserves its liquidity and capital resources in preparation for future growth. EXCO expects to fund the capital budget with cash flow from operations and borrowings under its credit agreement. EXCO will evaluate a second half of 2016 drilling program during 2016.

The capital budget is currently allocated among the different budget categories as follows:

(1) Represents full year ’16 activity
(2) Includes $9MM of capitalized interest and $5MM of capitalized general and administrative expenses

Capital Budget Detail

Details of the plans within the various areas follow:

(1) Operated
(2) Includes $9MM of capitalized interest and $5MM of capitalized general and administrative expenses

North Louisiana:

EXCO will resume drilling in North Louisiana as the Company applies a modified Haynesville shale well design which includes enhanced completion methods that have proven to be successful in EXCO’s East Texas region, including the use of more proppant, modified well spacing and longer laterals. These initiatives are expected to increase the Haynesville shale well’s rates of return and EXCO is targeting a rate of return(*) of approximately 30% to 35% for the wells drilled in this region during 2016. EXCO expects to operate two rigs in North Louisiana during the first half of 2016 and spud and turn to sales 9 gross (5.5 net) horizontal wells in the Holly area.

East Texas:

Development in East Texas will focus on completing and turning to sales 9 gross (4.1 net) wells drilled in the Shelby area of East Texas during 2015. The wells turned-to-sales in this region during 2015 have featured enhanced completion methods that have continued to yield strong results. These methods have included the use of more than 2,700 lbs of proppant per lateral foot on certain wells. The increased use of proppant is expected to generate higher estimated ultimate recoveries (“EUR”) as a result of improved contact and conductivity with the reservoir. The initial results for the average of the wells turned-to-sales in this region during 2015 have outperformed the proved reserve type curve based on an EUR of 1.5 Bcf per 1,000 lateral feet for Haynesville shale and Bossier shale wells. This represents a 15% increase from year-end 2014 EURs and EXCO believes there is the potential for additional upside in the EURs as more production history is established. EXCO is targeting a rate of return(*) of approximately 20% to 25% for wells in this region.