Exhibit 99.1

 

Lender Presentation $750 Million Second Lien Term Loan September 2006 EXCO Partners Operating Partnership, LP

Exhibit 99.1

 

Forward Looking Statements This presentation contains forward-looking statements, as defined in Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, or the Exchange Act. These forward-looking statements relate to, among other things, the following: • our future financial and operating performance and results; • our business strategy; • market prices; • our future commodity price risk management activities; and • our plans and forecasts. We have based these forward-looking statements on our current assumptions, expectations and projections about future events. We use the words "may," "expect," "anticipate," "estimate," "believe," "continue," "intend," "plan," "budget" and other similar words to identify forward-looking statements. You should read statements that contain these words carefully because they discuss future expectations, contain projections of results of operations or of our financial condition and/or state other "forward-looking" information. We do not undertake any obligation to update or revise publicly any forward-looking statements, except as required by law. These statements also involve risks and uncertainties that could cause our actual results or financial condition to materially differ from our expectations in this presentation, including, but not limited to: • fluctuations in prices of oil and natural gas; • future capital requirements and availability of financing; • estimates of reserves; • geological concentration of our reserves; • risks associated with drilling and operating wells; • discovery, acquisition, development and replacement of oil and natural gas reserves; • cash flow and liquidity; • timing and amount of future production of oil and natural gas; • availability of drilling and production equipment; • marketing of oil and natural gas; • developments in oil-producing and natural gas-producing countries; • competition; • general economic conditions; • governmental regulations; • receipt of amounts owed to us by purchasers of our production and counterparties to our commodity price risk management contracts; • hedging decisions, including whether or not to enter into derivative financial instruments; • actions of third party co-owners of interests in properties in which we also own an interest; • fluctuations in interest rates; and • our ability to effectively integrate companies and properties that we acquire.. We believe that it is important to communicate our expectations of future performance to our investors. However, events may occur in the future that we are unable to accurately predict, or over which we have no control. You are cautioned not to place undue reliance on a forward-looking statement. When considering our forward-looking statements, keep in mind the risk factors and other cautionary statements in this presentation, and the risk factors included in the Annual Report on Form 10-K for the year ended December 31, 2005.

 

Forward Looking Statements (continued) Our revenues, operating results, financial condition and ability to borrow funds or obtain additional capital depend substantially on prevailing prices for oil and natural gas. Declines in oil or natural gas prices may materially adversely affect our financial condition, liquidity, ability to obtain financing and operating results. Lower oil or natural gas prices also may reduce the amount of oil or natural gas that we can produce economically. A decline in oil and/or natural gas prices could have a material adverse effect on the estimated value and estimated quantities of our oil and natural gas reserves, our ability to fund our operations and our financial condition, cash flow, results of operations and access to capital. Historically, oil and natural gas prices and markets have been volatile, with prices fluctuating widely, and they are likely to continue to be volatile.The SEC has generally permitted oil and natural gas companies, in filings made with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. We use the terms “probable”, “possible” or “unproved” to describe volumes of reserves potentially recoverable through additional drilling or recovery techniques that the SEC’s guidelines may prohibit us from including in filings with the SEC. These estimates are by their nature more speculative than estimates of proved reserves and accordingly are subject to substantially greater risk of being actually realized by the company. While we believe our calculations of unproved drillsites and estimation of unproved reserves have been appropriately risked and are reasonable, such calculations and estimates have not been reviewed by third party engineers or appraisers.

 

Welcome and Introduction Adam Bernard J.P. Morgan Securities Inc. Transaction Overview Doug Miller, Chairman and CEO Steve Smith, President Asset Overview Doug Miller Steve Smith EXCO Resources, Inc. Overview Doug Miller Steve Smith Agenda Financial Projections Paul Rudnicki, Vice President Private Questions & Answers Second Lien Term Loan Overview Al Ranaudo J.P. Morgan Securities Inc. Public Questions & Answers

 

Transaction Overview Doug Miller, Chairman and CEO Steve Smith, President

 

Transaction Overview On July 24, 2006, EXCO Resources, Inc. (“EXCO”) announced an agreement to acquire Winchester Energy Company, Ltd. (“Winchester”) from Progress Energy, Inc. for $1.2 billion EXCO Partners Operating Partnership, LP (“EPOP” or the “Borrower”) will beformed as a new subsidiary of EXCO to acquire certain East Texas oil and gas properties from EXCO (the “EXCO Assets”) and Winchester The EXCO Assets have an estimated fair market value of approximately $475 million, with cash proceeds to EXCO of approximately $200 million. The balance represents EXCO’s equity investment in EPOP Acquisition financing will be non-recourse to EXCO and will consist of: $750 million Senior Secured Revolving Credit Facility $750 million Senior Secured Second Lien Term Loan

 

EXCO Today (1) Other areas include Mid Continent, Permian Basin and Rockies (2) Average production for June 2006 (3) Appalachia and other: SEC 12/31/05 total proved reserves, pro forma for the TXOK acquisition using SEC 12/31/05 total proved reserves, including proved reserves as of the effective date of acquisitions closed through 6/30/06. East Texas based on 6/22/06 NYMEX pricing (4) Senior notes have a restricted payments basket of $285 million and the amount excludes unamortized bond premium EXCO Assets have an estimated fair market value of approximately $475 million Cash proceeds to EXCO of approximately $200 million will be used to repay EXCO’s bank debt Appalachia East Texas Other (1) Total Production (2) 4 3 Mmcfe/d 3 6 Mmcfe/d 5 1 Mmcfe/d 130 Mmcfe/d Reserves (3) Proved 4 43 Bcfe 19 7 Bcfe 258 Bcfe 89 8 Bcfe Total 547 Bcfe 27 7 Bcfe 4 31 Bcfe 1,2 5 5 Bcfe Capitalization ( $ millions) June 30, 2006 Cash $ 39 Bank debt $ 324 Senior notes ( 4 ) 445 Total debt $ 769 Shareholders’ equity 1,102 Total capitalization $ 1,871

 

EXCO Partners Operating Partnership, LP (1) Average daily production for June 2006 (2) Reserves effective July 1, 2006; NYMEX 6/22/06 pricing without the effects of hedges (3) Estimated annual EBITDA at current run-rate (4) Based on 10.0x EBITDA attributable to pipeline and gathering assets EXCO East Texas Winchester Total Production (1) 3 6 Mmcfe/d 75 Mmcfe/d 111 Mmcfe/d Reserves (2) Proved 19 7 Bcfe 40 3 Bcfe 600 Bcfe Total 277 Bcfe 699 Bcfe 976 Bcfe PV - 10 (2) Proved $ 462 million $ 801 million $1,2 63 million Total $ 54 0 million $ 1,097 million $ 1,637 million Midstream Assets Miles of Pipeline 16 54 70 Miles of Gathering Systems 151 300 451 EBITDA (3) $1 million $15 million $16 million Est. Fair Market Value (4) $10 million $150 million $160 million Undev eloped Acreage Acres 13, 65 0 53,525 67,175 Est. Fair Market Value $5 million $45 million $50 million

 

Financing Plan EPOP Purchase Winchester for $1.2 billion $750 million Revolver $750 million 2nd Lien Term Loan Contribute $475 million of EXCO Assets $200 million cash to repay EXCO debt and 52 million units (100%) Repay EPOP debt EXCO Resources, Inc. Unrestricted Subsidiary as General Partner Step 1 Step 2 Step 3

 

Sources and Uses $ Millions Sources: Senior S ecured R evolving C redit F acility (1) $6 6 7 Senior Secured Second Lien Term L oan 750 EXCO E quity I nvestment (2) 2 75 Total Sources $ 1, 6 92 Uses: Purchase of Winchester $1,200 Purchase of EXCO Assets (2) 4 75 F ees and E xpenses 1 7 T otal Uses $1,6 92 (1) Initial borrowing base set a t $ 750 million (2) Assumes the fair market value of the EXCO Assets is $475 million with $200 million of cash proceeds to EXCO

 

Asset Overview Doug Miller Steve Smith

 

EPOP Snapshot (1) Based upon total proved reserves as of July 1, 2006 and June 2006 production annualized Net Production ( 6 /0 6 ): 111.1 Mmcfe/d 10 5 . 1 Mmcfe/d gas 994 Bbls/d oil Total Proved Reserves ( 7 /0 6 ) : 600 Bcfe ( 5 2 % PD, 96 % gas) Reserve Life (1) : 1 4 . 8 years Total Reserves: 9 76 B cfe Drilling Locations: 1,025 (374 proved) Approximate Net Acreage: 1 59 , 85 7 net acres (92, 682 developed) Well Count: 1,0 97 gross (7 70 net) 978 operated ( 754 net) Gathering Lines: 451 miles Pipelines: 70 miles

 

Asset Highlights The EPOP assets are primarily located in two areas: East Texas Fields Upshur, Gregg, Smith, Shelby and Rusk Counties 308.9 Bcfe of total proved reserves 56.5 Mmcfe of daily production North Louisiana Fields Caddo and Desoto Parishes 291.0 Bcfe of total proved reserves 54.6 Mmcfe of daily production East Texas and LA Fields Gas pipelines Henry Hub EPOP producing areas Major pipelines (3rd party)

 

Asset Highlights (continued) (1) Does not include 1 Bcfe from miscellaneous locations outside the key fields/areas The assets are primarily located in seven key fields/areas(1): Holly/Caspiana Desoto Parish, LA 221 Bcfe of total proved reserves Longwood/Greenwood/Various ETX Caddo Parish, LA/Various Counties, ETX 168 Bcfe of total proved reserves Gladewater Area Gregg & Upshur Counties, TX 130 Bcfe of total proved reserves Overton Smith County, TX 26 Bcfe of total proved reserves Garrison Shelby County, TX 14 Bcfe of total proved reserves Oak Hill Rusk County, TX 20 Bcfe of total proved reserves Minden Rusk County, TX 20 Bcfe of total proved reserves

 

Total Oil and Gas Reserves(1) As of 7/06 (1) Pro forma reserves effective July 1, 2006; NYMEX 6/22/06 pricing without the effects of hedges Oil/Liq. Gas Equiv. PV 10 Net Reserve Category Mbbls MMcf MMcfe $000 Proved Developed Producing 2. 4 2 5 2. 0 266.6 $ 8 25 . 0 Proved Developed Non - Producing 0. 2 42.5 43.7 76.2 Proved Undeveloped 1. 3 281.7 289.6 362.2 Total Proved Reserves 3.9 57 6 . 2 59 9 . 9 $ 1, 263 . 5 Probable 1.8 3 17 . 9 328.8 350.9 Possible 0.4 45.6 47.4 22.7 Total Reserves 6.1 939.7 976.1 $ 1, 637 .1 Est. Fair Market Value of Pipeline and Gathering Systems 160.0 Est. Fair Market Value of Undeveloped Acreage 50.0 Effects of Hedging 12.4 Total $ 1, 859 . 5

 

Midstream Assets Overview Pipeline assets 70 miles in East Texas 120 Mmcf/d of current gross throughput with total capacity of 180 Mmcf/d Connections to 12 interstate pipeline markets Gathering assets 451 miles in East Texas and North Louisiana 177 Mmcf/d of current gross throughput Estimated current annualized EBITDA of $14 - $16 million High drilling activity in the area provides for numerous expansion opportunities of midstream operations Ability to capture premium pricing through ownership of pipeline and gathering assets Pipelines and gathering systems have an estimated fair market value of $160 million

 

Reserve Summary Proved Reserves by Commodity Total Reserves by Category Proved Reserves by Category Proved Reserves by Entity 44% 48% 8% PDP PUD PDNP 67% 33% Winchester EXCO 61% 34% 5% Proved Probable Possible 96% 4% Oil Natural Gas

 

Net Production Volumes June 2006 Production Oil/Liq. Bopd Gas Mmcfpd Equiv. Mmcfcpd East Texas 513.0 53.4 56.5 North Louisiana 481.0 51.7 54.6 Total Production 994.0 105.1 111.1 68%32%Winchester EXCO

 

Total Well Count As of 6/06 Net Wells (All) Gross Wells (All) (1,097 Total) (770 Total) All Wells Operated Wells Area Gross Net Gross Net East Texas 786 5 42 707 528 North Louisiana 3 11 228 271 226 Total Well Count 1,0 97 770 978 754 58% 42% Winchester EXCO 54% 46% Winchester EXCO

 

Business Strategy Grow production and reserves while maintaining free cash flow Long life reserves, onshore East Texas and North Louisiana Development potential Growth projects – probables and possibles Operating efficiencies and cost reductions Free cash flow to repay indebtedness or maximize distributions Continue to: Aggressively market commodities Eliminate high cost wells Hedge commodity prices Maintain general and administrative discipline Consider acquisition opportunities in area of interest

 

Investment Considerations Geographically concentrated properties with multi pay potential High working interest, more than 90% of properties are operated Midstream assets group provides timely hookups, enhanced production surveillance and operating control $14 - $16 million of estimated annual cash flow Attractive core area which continues to afford growth opportunities 61% of proved production hedged for 3 years near current market prices Experienced management team with 20+ years experience and in depth knowledge of core operating fields

 

Hedging Overview (1) July 1 - December 31, 2006 95% of proved developed production hedged from 2007 to 2010 61% of proved production hedged for 3 years near current market prices 2006 1 2007 2008 2009 2010 Gas (Mmbtus) Swaps 10, 326 , 662 2 8 , 028 , 900 2 6 , 561 , 7 00 21,566,400 3,205,200 $ 8.9 5 $ 9. 24 $8. 91 $8.32 $7.38 Collars 2,034,000 Ceiling $ 9.55 Floor $ 6.25 Oil (Bbls) Swaps 32,520 84,750 56,040 47,040 42,960 $ 69.99 $66.59 $62.25 $60.80 $59.85 Collars 21,600 Ceiling $60.00 Floor $50.35

 

Summary Pro Forma Historical Financials and Credit Statistics Note: Historical financials are preliminary and subject to change (1) Total revenue for 2004, 2005 and 6/30/06 YTD does not include historical effects of hedging. 6/30/06 YTD Annualized data is pro forma as if the 2007 hedging profile was in place for the 6/30/06 YTD period (2) Historical G&A expenses not available for 2004, 2005 and 6/30/06 YTD, and EBITDA does not include the impact of G&A for these periods. Current estimated annual G&A of $12.5 million is included in EBITDA for the 6/30/06 YTD Annualized period (3) PV-10 includes proved and probable reserves, including the effects of hedging, plus 10.0x EBITDA attributable to pipeline and gathering assets $ in Millions 2004 2005 6/30/06 YTD 6 /3 0 /0 6 YTD Annualized Total Revenue (1) $1 8 8. 0 $ 308.6 $1 5 0 .7 $ 3 39 . 5 Oil & Gas EBITDA $154.0 $259.7 $121.0 $267.6 Pipeline and G athering EBITDA 9.6 10.7 6.2 12.4 EBITDA ( 2 ) $163.6 $270.4 $12 7.2 $2 8 0 . 0 Margin 8 7.0% 87.6% 84. 4 % 8 2 . 5 % Operating Statistics Production ( B cfe) 30.1 38.1 20.2 40.4 Average Unhedged Selling Price $5.93 $7.83 $7. 1 4 $7.14 LOE / Mcfe $0.49 $0.56 $0.69 $0.69 Production taxes / Mcfe $0.32 $0.45 $0.47 $0.47 Total Proved Reserve s (Bcfe) 600 PD Reserves (Bcfe) 310 PV - 10 (3 ) $1, 750 . 8 Pro Forma Capital Structure Cash $23 .0 Revolving Credit Facility $667.0 2nd Lien Term Loan 750.0 Total Debt $1,417.0 Net Debt $1,394.0 Credit Statistics 1st Lien Net Debt / EBITDA 2. 3 x Net Debt / EBITDA 5.0 x Net Debt / Total Proved Reserves ($/boe) $1 3 . 94 Net Debt / PD Reserves ($/boe) $2 6 . 98 PV - 10 / Net debt 1.3x

 

Repayment of EPOP Debt (1) Reflects estimated effects of potential asset sales (2) Actual and pro forma as of 6/30/06 (3) MLP EBITDA is for the 6/30/06 YTD Annualized period and is pro forma as if the 2007 hedging profile was in place for the 6/30/06 YTD period. Additionally, historical G&A expense are not available, but EBITDA includes the impact of current estimated annual G&A of $12.5 million. EXCO EBITDA of $191.4 million is for the YTD period ended 6/30/06 annualized (4) PV-10 includes proved and probable reserves, including the effects of hedging, plus 10.0x EBITDA attributable to pipeline and gathering assets EPOP - Standalone EPOP - Proceeds Repay All Debt EPOP - Proceeds Repay Only 2nd Lien Debt EXCO Consolidated EXCO Consolidated with $500 Million Asset Sale Capital Structure (2) Total Debt $1,417.0 $0.0 $667.0 $1,985.7 $1,485.7 Book Equity 275.0 1,692.0 1,025.0 1,102.3 1,102.3 Total Book Capitalization $1,692.0 $1,692.0 $1,692.0 $3,088.0 $2,588.0 Income Statement (Run Rate) Total EBITDA (3) $280.0 $280.0 $280.0 $471.4 $400.0 Pro Forma Estimated Interest Expense $118.7 $1.9 $48.2 $150.5 $114.5 Reserve Data Proved Reserves (Mmboe) 100.0 100.0 100.0 216.8 191.8 Proved Developed Reserves (Mmboe) 51.7 51.7 51.7 130.7 114.5 PV-10 (4) $1,750.8 $1,750.8 $1,750.8 NA NA Credit Statistics Debt / Book Capitalization 83.7% 0.0% 39.4% 64.3% 57.4% Debt / EBITDA 5.1x 0.0x 2.4x 4.2x 3.7x EBITDA / Interest Expense 2.4x 149.3x 5.8x 3.1x 3.5x Total Debt / Boe $14.17 $0.00 $6.67 $9.16 $7.74 Total Debt / PD Boe $27.43 $0.00 $12.91 $15.19 $12.98 PV-10 / Total Debt 1.2x NA 2.6x NA NA (1)

 

EXCO Resources, Inc. Overview Doug Miller Steve Smith

 

Company History Bought control of EXCO in December 1997 Prior to that, certain members of management grew Coda Energy from $0 to $380 million and sold Coda in November 1997 From 12/31/97 to 6/30/06(1): $1.7 billion of proved reserve acquisitions 1.2 Tcfe in 139 transactions Proved reserves grew from 5 Bcfe to 891 Bcfe Production grew from less than 1 Mmcfe/d to 130.0 Mmcfe/d Sold Canadian subsidiary in 2005 for $445 million (1) Excluding the impact of the pending acquisition of Winchester Energy Company, Ltd. and the formation of EPOP

 

Recent Activity February 2006: Completed IPO on February 14, 2006 with sale of 53.6 million shares and net proceeds of $662 million Retired $735.5 million of Equity Buyout and TXOK acquisition debt Redeemed $158.8 million of preferred stock and recorded the acquisition of TXOK properties April 2006: Completed West Texas acquisition for $85.7 million Completed Appalachian acquisition for $115 million May 2006: Completed East Texas acquisition for $51.6 million July 2006: Announced agreement to acquire Winchester Energy Company, Ltd. for $1.2 billion

 

Appalachia 442.6 Bcfe Proved (63%) 546.9 Bcfe Total (56%) 42.5 Mmcfe/d (45%) Permian Basin 91.1 Bcfe Proved (13%) 213.3 Bcfe Total (22%) 13.0 Mmcfe/d (14%) Other Areas 5.1 Bcfe Proved (1%) 8.5 Bcfe Total (1%) 1.5 Mmcfe/d (2%) (1) SEC 12/31/05 total proved reserves, pro forma for the TXOK acquisition using SEC 12/31/05 total proved reserves, including proved reserves as of the effective date of acquisitions closed through 6/30/06, and pro forma for the contribution of the EXCO Assets to EPOP (2) Includes probable and possible reserves Notes: Total production for June 2006 was approximately 94 Mmcfe/d Rockies 46.8 Bcfe Proved (7%) 52.8 Bcfe Total (5%) 8.0 Mmcfe/d (8%) Mid Continent 115.2 Bcfe Proved (16%) 156.3 Bcfe Total (16%) 29.2 Mmcfe/d (31%) Diversified Reserve Base(1) (Excluding EPOP reserves) Total proved reserves = 701 Bcfe Total reserves(2) = 978 Bcfe

 

(1) Pro forma for the contribution of the EXCO Assets to EPOP, which is non-recourse to EXCO and shown unconsolidated (2) Excludes unamortized bond premium (3) Pro forma borrowing base as indicated by lead lender Liquidity and Financial Position ( $ million s) June 30 , 2006 Pro Forma (1) Cash $ 39 $ 39 Debt: Bank debt $ 324 $ 124 Senior notes ( 2 ) 445 445 Total debt $ 769 $ 569 Shareholders’ equity 1,102 1,102 Total capitalization $ 1,871 $ 1,671 Borrowing base ( 3 ) $ 750 $ 6 00 Unused borrowing base $ 426 $ 476