EXCO Resources: Insiders Taking Profits

[Note: See followup to this article.] The most prolific dealmakers in the natural gas business are at it again. Doug Miller & Company have put together another huge deal by buying a major producing play in Northern Louisiana from Anadarko (APC). The purchase will add 190 Mmcfe per day of production to EXCO’s Cotton Valley assets. It also includes gathering systems and production facility assets.

The key to this purchase is the cash flow that it will generate to facilitate the development of some 1100 drilling sites in East Texas/Northern Louisiana. Most of those drilling locations came from the Winchester acquisition earlier this year.

It was not disclosed if the financing would be done in EXCO Resources or EXCO Partners, the proposed MLP. Miller indicates that they will look at their options for de-leveraging the Company, which may mean the MLP will be put back on the table.

Meanwhile, insiders are doing some de-leveraging of their own. EXCO quietly filed an S-1 to sell over 16.7MM shares, all by insiders. No news of this on the wire or any press release. The filing is posted on the Company’s website. Miller, Pickens, Ares, Greenhill and Lucas are all selling about 1/3 of their holdings. Several employees, family members and other insiders are selling as well.

Not a good deal for public shareholders as EXCO has taken on substantial debt and could have used the $275MM equity. Insiders did pretty well on the IPO. I hate to see them taking more off the table just 10 months later.

Disclosure: The author sold his shares yesterday at $18 and currently has no position in XCO or APC.