Haynesville/Bossier Shale

Our horizontal Haynesville shale development program continues to yield outstanding results. As of July 25, 2011, our Haynesville/Bossier operated production was 1,173 Mmcf per day gross (365 Mmcf per day net) and with the addition of our OBO wells, we had 391 Mmcf per day of net production. Our development program in DeSoto Parish, Louisiana is focused on manufacturing on 80-acre spacing. Our program in San Augustine and Nacogdoches Counties, Texas is focused on delineation and testing of our acreage. During 2011, we plan to drill 241 gross (70.1 net) wells in the Haynesville/Bossier shale play in East Texas/North Louisiana. Of these 241 wells, 171 gross wells are operated by EXCO.

We drilled and completed 47 gross (20.4 net) operated horizontal Haynesville and Bossier wells and participated in 20 gross (0.8 net) OBO Haynesville horizontal wells during the second quarter of 2011. We utilized 22 operated rigs and spud 42 operated horizontal wells. In addition to our operated rig count, we typically have 3-6 OBO rigs drilling in the play. During the quarter, 11 OBO wells were spud. We currently have 232 operated horizontal wells and 123 OBO horizontal wells flowing to sales.

The average initial production rate (IP) during the quarter from all of our operated Haynesville horizontal wells in DeSoto Parish was 18 Mmcf per day on a managed drawdown/restricted choke program. Our manufacturing approach for simultaneous drilling followed by simultaneous completions by unit is being successfully implemented. We currently have 15 units fully drilled, completed and flowing to sales on 80-acre spacing and expect to have 25 units fully developed by year end. This high level of sustained performance in our 80-acre development program underscores the quality and consistency of our shale assets. We have a strong focus on the capital efficiencies of our drilling and completion programs. The design changes and manufacturing efficiency gains in both the drilling phase and the completion phase of our wells should result in an overall well cost reduction of approximately 7% compared to our actual costs incurred in the first half of 2011. These improvements are the result of more efficient pad and road utilization and construction processes, design changes with drill bit technology resulting in higher rates of penetration and a more efficient completion design and implementation process, among others.

We acquired the assets in our Shelby area in May 2010. At the time of acquisition, the area total production rate was 34 Mmcf per day gross from eight operated wells. Our Shelby area is currently producing 222 Mmcf per day gross from a total of 39 operated wells. Results from our testing and delineation program in our Shelby area are encouraging. In the quarter we completed four wells in the deeper part of the play in Nacogdoches County, Texas with average IP rates of 29 Mmcf per day with average flowing pressures of 9,566 psi on 28/64ths chokes. The wells in this area are just over 19,400 feet measured depth with an average completed lateral length of 4,600 feet. These wells are performing above our original expectations. We drilled and completed our first horizontal Middle Bossier test well in San Augustine County during the first quarter 2011 with an IP rate of 26 Mmcf per day from a 16 stage fracture stimulation treatment. The Middle Bossier performance is also above our original expectations. We currently have two Middle Bossier test wells drilling and a total of eight operated rigs running in the Shelby area.

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