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EXCO Resources Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 2, 2012 05:00PM
EXCO Resources Inc. (XCO) filed Quarterly Report for the period ended 2012-03-31.
Highlight of Business Operations:impact of derivative financial instruments, increased 7.9% to $97.14 per Bbl for the three months ended March 31, 2012 from $90.01 per Bbl for the three months ended March 31, 2011. Our average natural gas sales price, excluding the impact of derivative financial instruments, was $2.45 per Mcf for the three months ended March 31, 2012 compared with $4.05 per Mcf for the three months ended March 31, 2011, a decrease of 39.5%.
The price we receive for the oil and natural gas we produce is largely a function of market supply and demand. Demand is impacted by general economic conditions, estimates of oil and natural gas in storage, weather and other seasonal conditions, including hurricanes and tropical storms. Market conditions involving over or under supply of natural gas can result in substantial price volatility. Historically, commodity prices have been volatile and we expect the volatility to continue in the future. Weakness in natural gas prices persists. Changes in oil and natural gas prices have a significant impact on our oil and natural gas revenues, cash flows, quantities of estimated Proved Reserves and related liquidity. Assuming we maintain our three months ended March 31, 2012 average production levels for the remainder of the year, a change in the average sales price of $0.10 per Mcf of natural gas sold would result in an increase or decrease in revenues and cash flows of approximately $14.2 million and a change in the average sales price of $1.00 per Bbl of oil sold would result in an increase or decrease in revenues and cash flow of approximately $0.6 million, without considering the effects of derivative financial instruments.
For the three months ended March 31, 2012, production and ad valorem taxes increased by $1.6 million, or 28.5%, over the same period in 2011. On a percentage basis, before the impact of derivative financial instruments, production and ad valorem taxes were 5.3% of gross oil and natural gas revenues for the three months ended March 31, 2012 compared with 3.5% during same period in the prior year.
Our other operating expenses for the three months ended March 31, 2012 were $1.6 million compared with $2.5 million for the three months ended March 31, 2011. The three months ended March 31, 2012 balance is primarily related to a $2.0 million retroactive Pennsylvania impact fee discussed in Production and ad valorem taxes. We have elected to report the retroactive portion of the Pennsylvania impact fee as a component of other operating items as the retroactive amount would disproportionately impact comparative periods in future quarters. This amount was offset by miscellaneous gains from inventory sales. The three months ended March 31, 2011 balance primarily related to costs associated with various lawsuits and the former acquisition proposal that terminated in July 2011.
Our total cash settlements for the three months ended March 31, 2012 increased revenue by $50.1 million, or $1.03 per Mcfe, compared to $26.9 million, or $0.73 per Mcfe, for the same period in 2011. The significant fluctuations between settlements of receipts on our derivative financial instruments demonstrate volatility in prices.