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Permalink Reply by JHH on November 2, 2010 at 13:39

This came out this evening...jhh

NEW YORK--(BUSINESS WIRE)--November 02, 2010--
The Law Office of Joseph Klein is investigating the Board of Directors of EXCO Resources, Inc. ("EXCO" or the "Company") (NYSE: XCO) for possible breaches of fiduciary duty and other violations of state law in connection with the receipt of a proposal to purchase all the outstanding shares of stock of EXCO from its Chairman and Chief Executive Officer, Douglas H. Miller. Under the terms of the proposed transaction, EXCO shareholders will receive $20.50 in cash for each share of EXCO common stock. Mr. Miller currently owns approx. 2.15% of EXCO's shares and he has engaged in discussions with other significant shareholders that own approx. 27.5% of EXCO's shares to participate with him in an acquisition of EXCO.

The investigation concerns whether the EXCO Board of Directors breached their fiduciary duties to EXCO stockholders by failing to adequately shop the Company before entering into this transaction and whether Mr. Miller is underpaying for EXCO shares, thus unlawfully harming EXCO stockholders. At least one analyst set a price target for EXCO stock at $29.00 per share.

If you own common stock in EXCO and wish to obtain additional information, please contact Joseph Klein, Esq. directly, via email at jk@jkleinlawfirm.com, by telephone at 718-947-0005, Toll Free: 877-STOK-180, or visit http://www.jkleinlawfirm.com/exco-resources-xco.html.

Joseph Klein, Esq. is an experienced attorney and has also practiced as a Certified Public Accountant. Mr. Klein represents investors and participates in securities litigations involving financial fraud throughout the nation.

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Permalink Reply by Skip Peel - Mineral Consultant on November 2, 2010 at 13:49

It's one of several lawsuits challenging the due diligence of the board on behalf of share holders. Two suits were announced within the first 8 hours of the initial announcement of the offer. This is a common intervention in a proposed sale to put pressure on the board and is usually funded by large shareholders without direct representation on the board. No one wishes to be railroaded. And everyone wants top dollar. Law firms are all too willing to file this type of litigation. Those GHS members who have an interest in litigation may follow developments but the bottom line for lessors of EXCO seems to be that Mr. Miller and his buyout partners would put the brakes on HA/BO development other than that required to HBP.

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Permalink Reply by adubu on November 2, 2010 at 15:08

skip-- what interesting is Mr. Miller made a presentation in June about value of company with data that showed the NAV to be minimal $25.40 per share and that compared and using data of what BG Gourp from UK paid for JV with them that the company NAV could be $50-$60 per share by 2014 even with NG in the $5-6 range by 2014. Now in November he says company worth only $20.50. WHAT!!!!The Board or Shareholder will not let it go at this price. I bet another bid comes sometime soon and XCO will go private at >$30 share. Also this company was taken private before and then a IPO in 2003 again. Believe Mr. Miller attempting to snow the shareholder at cheap price. Just IMO I do agree with you Skip since private co do not have to answer to shareholders they will cut and lay down rig until sun comes out again (i.e. NG prices improve) Watch this stock over next few weeks the bidding not over with. Good speculative buy at $19

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Permalink Reply by Skip Peel - Mineral Consultant on November 2, 2010 at 15:24

IMO, the valuation of shale gas assets has declined materially from June to November. And that value continues to erode. The market will determine the value of EXCO's shares. However I think there will be few willing and capable bidders in the near term. 2011 will likely be the year of the fire sale which is just what the major oil companies have been waiting for. The only buyers of significant shale gas assets will be those that can pay cash and afford to hold for the long term. The Haynesville Play will stall out as far as step out development and the bulk of capital expenditures for the next few years will be infill in nature and completion of infrastructure serving existing producing units.

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Permalink Reply by Skip Peel - Mineral Consultant on November 2, 2010 at 15:33

The following is a good example of energy company opinions on the state of shale gas plays.

Pioneer Natural CEO Scott Sheffield forecasts that drilling spurred on by JV drilling carries and lease expiration is going to keep gas prices suppressed for "a very, very long time."

Gas drilling spurred on by joint-venture drilling carries and pending lease expirations is going to keep natural gas prices suppressed for "a very, very long time," according to Pioneer Natural Resources Co. chief executive Scott Sheffield.

"I'm very pessimistic on U.S. natural gas prices," he said.

Sheffield shared his dour sentiments with 2,600 industry professionals at Hart's Developing Unconventional Gas (DUG) Eagle Ford conference in San Antonio.

Of the 950 rigs currently drilling for gas in the U.S., he estimates 25% are funded by joint ventures, which could rise to 35% in the next couple of years based on the number of companies still seeking partners.

"Most of these JVs are structured where the JV partner has to continue to drill, so we have too many gas rigs drilling gas wells now. We're probably going to have to live with a $4 gas market" for some time, he said.

Pioneer itself consummated a $1.1-billion partnership with India-based Reliance Industries Ltd. in the Eagle Ford shale play, setting the high-water mark for valuations there at $12,000 per acre. But Sheffield emphasizes drilling activity within the JV will focus on the "rich and lean" condensate area of the play where 80% of Pioneer's acreage lies, "obviously because of low natural gas prices."

Under the joint venture, Pioneer is ramping up rigs from five to seven by year-end, with a target of 14 within 12 to 18 months. It plans to drill 70 wells next year, three times as many as this year, with 120 and 140 planned for 2012 and 2013. Over the life of the JV, both Pioneer and Reliance will spend some $18 billion each to develop the 2,000 drilling locations, said Sheffield.

"Joint ventures are good and bad," he said: "They’re good for us in this play, but bad for U.S. natural gas prices. More JVs add more gas into the system."

About half of the Eagle Ford's 25 billion barrel potential is credited to oil and gas condensate, making it the largest oil discovery since Prudhoe Bay. This explains why the rig count has quickly increased to 120, and could surpass 200, he said.

Already, there are not enough pressure-pumping services in South Texas, with some operators having to wait six months to get a frac crew, and more rigs will exacerbate the problem. "We either have to see a movement from the Haynesville shale or from other gas plays" where operators are laying down rigs.

Pioneer is self-solving this shortage by employing its own pressure-pumping fleet into South Texas, modeled after four such fleets it owns working the Spraberry trend in the Permian Basin.

"We're glad we did because these pressure-pumping companies have not been able to provide equipment to date. It will get worse."

Likewise, the company expects to own its own gathering system as well.

Sheffield notes that only three "decent" oil plays in the U.S. have great economics and running room—the Spraberry, the Bakken and the Eagle Ford condensate play.

Deeper drilling and more fracture stimulation stages have resulted in better recoveries in the Spraberry, making it the biggest boom play in the U.S. with 170 rigs running. "Acreage costs are beating Eagle Ford costs by 50%."

Pioneer holds a 900,000-acre Spraberry position with 20,000 drilling locations, more than double the holdings of all other companies within the trend. Here it plans to ramp up to drill 1,000 wells a year by 2012 with a 40-rig program.

"What's the key to it? People are opening up more pay and more frac stages and are getting much better results. This may turn into a major unconventional play."

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Permalink Reply by jffree1 on November 3, 2010 at 6:23

Here is an interesting POV on the offer from Mr. Miller (since we are slightly of-topic anyhow):

Is This Offer a Takeover or a Takeunder?
by Toby Shute - November 3, 2010

In reviewing the proposed management-led buyout of EXCO Resources (NYSE: XCO), I'm reminded of a classic Daily Show segment from 2003, in which President George W. Bush "debates" Gov. George W. Bush via archival footage that shows him expressing divergent points of view at different phases of his political career.

EXCO Chairman and CEO Doug Miller, who is leading the buyout proposal, had this to say about the offer: "I believe that $20.50 per share is very compelling and in the best interest of the company and its public shareholders and that the shareholders will find this proposal attractive."

That's interesting, because as recently as July, Miller (or another senior member of the EXCO management team, with Miller's blessing) was out making a very different case for the company's undervaluation. A per-share value of $20.50 was certainly not in the ballpark of estimates provided to securities analysts, portfolio managers, and other potential investors.

Here's a link to the slides in question. Scroll down to the one marked "7" and you'll see the firm's net asset value summary, pro forma for two acquisitions, including Southwestern Energy's (NYSE: SWN) East Texas Haynesville/Bossier assets, and a joint venture with BG Group in the Marcellus shale, which is EXCO's other major area of focus. (Given these regional focuses, Cabot Oil & Gas (NYSE: COG) is perhaps the most directly comparable peer.) NAV-based valuations are pretty common in E&P-land. I recently stepped through one of these calculations in my look at Bakken player GeoResources (Nasdaq: GEOI).

In the firm's low case scenario, net asset value per share is pegged at $25.43. In the high case scenario, which sees higher per-unit values assigned to reserves and a higher EBITDA multiple awarded to EXCO's 50%-owned Haynesville-area midstream business, NAV per share weighs in at $36.94.

The midpoint of those NAV estimates exceeds $31, which is more than 50% higher than the price tag that CEO Miller now deems "very compelling." So that's interesting.

Management actually pulled this slide from a September presentation, when Monday's deal was most likely in the works. They also yanked the subsequent slide, which may make selling this deal to outside shareholders even tougher. In slide 8, titled "Unmatched NAV Growth," management lays out a road map to an NAV per share of $50 to $60 by 2014. This is based on $5 to $6 natural gas, which is roughly where Chesapeake (NYSE: CHK) sees prices going over the next couple years, and management's plan of 30% to 40% annual growth for the next five years. (The latter has since been ratcheted back to 30% growth).

So is EXCO worth $20.50 per share, or far more? That depends on whether you listen to November Doug Miller or July Doug Miller. My best guess is that a higher offer would be needed to win over shareholders here. After all, they were just told their shares were worth at least $25, and should command twice that value in five years' time.

http://www.themoneytimes.com/featured/20101103/offer-takeover-or-ta...

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Permalink Reply by adubu on November 4, 2010 at 0:23

jffree1-- interesting statement in conference call Wed AM Miller said his $20.50 offer will be reviewed by the board of directors then he would make a FIRM BID. Sounds like that was a opening OFFER not a FIRM BID which most likely comes later at a higher price. It will be interesting to see what happens for I'm not selling my shares at this price at this time. IMO the bid will be $25-30 soon and maybe 3rd party competetitive bid for their assets.

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Permalink Reply by Mineralowner2010 on November 4, 2010 at 13:01

Could the mystery well be the Cameron Minerals SU 1H ?

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Permalink Reply by jffree1 on November 4, 2010 at 14:04

You get the gold star for being the only one to notice my question! I just had a discussion with someone about the mystery well. It is supposed to be a JV well not operated by Exco so I am agreeing with my cohort in the discussion that it is probably the ACLCO #1H that tested @ 35 MMcfd at some point.

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Permalink Reply by Mineralowner2010 on November 5, 2010 at 4:04

The ACLCO 1H tested at 33.092 MMcfd and was operated by EOG, was part of the old Southwestern Energy assets sold to Exco last June. Noticed that the depth on the Cameron Minerals SU 1H had been amended at 15000 instead of 13500 which would be deeper than usual.

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Permalink Reply by jffree1 on November 5, 2010 at 12:10

EOG put 34 MMcfd on the ACLCO in their latest presentation, page 18:

http://www.eogresources.com/media/slides/InvPres_1110.pdf

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