Organization And Basis Of Presentation

9 Months Ended

Sep. 30, 2011

Organization And Basis Of Presentation [Abstract]

Organization And Basis Of Presentation

1. Organization and basis of presentation

Unless the context requires otherwise, references in this quarterly report on Form 10-Q to "EXCO," "EXCO Resources," "Company," "we," "us," and "our" are to EXCO Resources, Inc. and its consolidated subsidiaries.

We are an independent oil and natural gas company engaged in the exploration, exploitation, development and production of onshore U.S. oil and natural gas properties. Our principal operations are conducted in key U.S. oil and natural gas areas including East Texas, North Louisiana, Appalachia and the Permian Basin in West Texas. In addition to our oil and natural gas producing operations, we own 50% interests in two midstream joint ventures located in East Texas/North Louisiana and Appalachia, respectively.

Our primary strategy is to appraise, develop and exploit our Haynesville, Bossier and Marcellus shale resources, primarily through horizontal drilling, and to leverage our complementary midstream gathering facilities to promptly transport our production to multiple market outlets. Future acquisitions are primarily targeted on supplementing our shale resource holdings in the East Texas/North Louisiana and Appalachian areas. We continue to develop vertical drilling opportunities in our Permian Basin area as this region has high oil reserves and natural gas with a high liquid content. In order to accelerate our development efforts, we have entered into the following four separate joint ventures with affiliates of BG Group, plc, or BG Group. A brief description of each joint venture follows:

• A joint venture with BG Group covering an undivided 50% interest in a substantial portion of our assets in the East Texas/North Louisiana area including the Haynesville/Bossier shale and conventional shallow producing assets, or the East Texas/North Louisiana JV. The East Texas/North Louisiana JV is governed by a joint development agreement with our subsidiary, EXCO Operating Company, LP, or EOC, serving as operator. Under the terms of the agreement, BG Group funded 75% of our share of deep drilling and completion costs within our joint venture area up to a total of $400.0 million, or the East Texas/North Louisiana Carry. During the first quarter of 2011, we utilized the remaining balance of the East Texas/North Louisiana Carry. We report the operating results and financial position of the East Texas/North Louisiana JV using proportional consolidation.

• A joint venture with BG Group in which we both own a 50% interest in TGGT Holdings, LLC, or TGGT, which holds most of our East Texas/North Louisiana midstream assets. We use the equity method to account for our 50% investment in TGGT.

• A 50/50 joint venture with BG Group covering our shallow producing assets and Marcellus shale acreage in the Appalachia region, or the Appalachia JV. EXCO and BG Group jointly operate the Appalachia JV operations through a 50/50 owned operating entity, or OPCO, which holds a 0.5% working interest in all of the shallow conventional assets and the deep rights in the Appalachia JV. Under the terms of the agreement, BG Group agreed to fund 75% of our share of deep drilling and completion costs within our joint venture area up to a total of $150.0 million, or the Appalachia Carry. As of September 30, 2011, the remaining balance of the Appalachia Carry was approximately $78.8 million. We use the equity method to account for our investment in OPCO and proportionally consolidate our 49.75% non-operating interest in the Appalachia area oil and natural gas exploration, development and production.

• A jointly-owned midstream company, or the Appalachia Midstream JV, to provide take-away capacity in the Marcellus shale. We use the equity method to account for our 50% investment in the Appalachia Midstream JV.

We expect to continue to grow by leveraging our management and technical team's experience, developing our shale resource plays, and exploiting our multi-year inventory of development drilling locations. We also continue to pursue acquisitions primarily in the core areas of our shale plays. We employ the use of debt along with a comprehensive derivative financial instrument program to support our strategy. These approaches enhance our ability to execute our business plan over the entire commodity price cycle, protect our returns on investments and manage our capital structure.

The accompanying Condensed Consolidated Balance Sheets as of September 30, 2011 and December 31, 2010, the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2011 and 2010, the Condensed Consolidated Statements of Cash Flows and the Condensed Consolidated Statements of Changes in Shareholders' Equity for the nine months ended September 30, 2011 and 2010 are for EXCO and its subsidiaries. The condensed consolidated financial statements and related footnotes are presented in accordance with accounting principles generally accepted in the United States of America, or GAAP. All intercompany transactions have been eliminated.

We have prepared the accompanying unaudited interim financial statements pursuant to the rules and regulations of the Securities and Exchange Commission, or the SEC, and in the opinion of management, such financial statements reflect all adjustments necessary to present fairly the consolidated financial position of EXCO at September 30, 2011 and its results of operations and cash flows for the periods presented. We have omitted certain information and disclosures normally included in annual financial statements prepared in accordance with GAAP pursuant to those rules and regulations, although we believe that the disclosures we have made are adequate to make the information presented not misleading. These unaudited interim financial statements should be read in conjunction with our audited consolidated financial statements and related footnotes included in our Annual Report on Form 10-K, as amended, for the year ended December 31, 2010.

In preparing the accompanying financial statements, management has made certain estimates and assumptions that affect reported amounts in the financial statements and disclosures. The results of operations for the interim periods are not necessarily indicative of the results we expect for the full year. Certain prior quarter amounts have been reclassified to conform to current quarter reporting.