Doug Miller - Chairman
Steve Smith - Vice Chairman
Doug Ramsey - CFO
Hal Hickey - COO
Paul Rudnicki - VP, Financial Planning
Wei Romualdo - Stone Harbor
EXCO Resources Inc. (XCO) Q3 2007 Earnings Call November 6, 2007 10:00 AM ET
Good morning. My name is Heather, and I will be your conference operator today. At this time, I would like to welcome everyone to the EXCO Resources Third Quarter Earnings Release Conference Call. (Operator Instructions)
Thank you. Mr. Miller, you may begin your conference.
Thank you, Heather. This is Doug Miller. I am Chairman of EXCO Resources and with me today, I have Steve Smith, he is our Vice Chairman; Doug Ramsey, who is our CFO; Hal Hickey, who is our COO; Mark Wilson, who is our Chief Accounting Officer; Paul Rudnicki, who most of you know does all our modeling, he is a Vice President in charge of Financial Planning; John Jacobi, who is in charge of our acquisition and divestitures. Andy Springer is also here, who is our Tax Manager; and Lanny Boeing and Justin Clark, who are General Counsels, are also with me.
With that, I am going to introduce you over to Doug Ramsey and let him read our forward-looking statement, and I will get back to you. Doug?
All right, Thanks, Doug. I'd like to remind everyone that you can go to www.excoresources.com and click on the Investor Relations tab on the left-hand side of our home page to access today's presentation slides. The first page that will come up after you hit the Investor Relations tab has a presentation slide link. Just double click on the link, it will launch a slide presentation that you can follow along with.
The statements that may be made on this conference call regarding our future financial operating performance, structure and results, business strategies, market prices and future commodity price, risk management activities, plans and forecasts and other statements that are not historical facts are forward-looking statements as defined in Section 27(a) of the Securities Act of 1933 and Section 21(e) of the Securities Exchange Act of 1934. Please refer to pages four and five of the slide presentation for the complete text regarding our forward-looking statements. Doug?
Okay. Thanks, Doug. Before we get started, I just want to nip something in the bud and that is our MLP which is filed. We are on track with the MLP. It is filed at the SEC to be able to do that either in the fourth quarter or the first quarter of ’08. I am not going to be able to answer any other questions. However, the filing is on EDGAR and that’s where you have to get that. So, I want to get that cleaned up because lawyers have me in the penalty box.
Let me start with, kind of, an overview of where we are because I know, we have been running off of FAS and a lot of you are struggling to keep up with what we are doing. And where we are, is we have just completed some massive acquisitions, which includes some massive growth, and I would say actually where we are right now compared to where we thought we are going to be when we went public in February, is about three or four years ahead of schedule. That happened with our ability to close two or three large, large transactions including Progress Energy's other oil and gas assets in East Texas, a significant acquisition or two from Anadarko. But most importantly, as we were able to buy those, the people that we are able to hire and bring along with them, gave us the ability to not only close those things, but set us up where we are today, where we can continue our growth.
We have restructured into four main areas, and those four main areas are Appalachia, East Texas, West Texas and the Mid-Continent. We now have 631 employees, but we hired 200 to 300 people over the last 12 to 18 months, and Ramsey has led an effort to consolidate all of the accounting systems, all of the engineering systems, all the production systems, and every one of those has gone perfect. We’re completed with, all but one, and it is scheduled to be complete by January 1st of next year.
So, it’s been explosive growth. I know we have fogged up our financial statements, but let me tell you, 375 million a day with 25 rigs running and great people in place, I want to tell you that I don’t know, if we put out press releases yet or not, but the four people that are running those four areas are Mike Chambers, who we brought in from Anadarko. He is running the entire East Texas/North Louisiana area, where we have some 240 to 250 million a day, and that includes the Vernon acquisition over there. Wendy Strothman, who we are able to get from Dominion; she is running our Appalachian unit and I think we are actually going to -- we disclosed the small deal out there. She is bringing in people and that production is heading towards $45 million a day over the next week or so. So that’s been running about 40. Charles Evans, who many of you know, who is our COO here for a long time, has moved up to Tulsa and is running that division, and that’s between 60 and 65 million a day. And then, Tommy Knowles has come to work here in Dallas and he is going to be running our West Texas operation. Most recently, we bought in a partner and we are going to have a significant development plan out on the Sugg Ranch. Hal will get into that in a little while.
Coupled with buying $3 or $4 billion worth of assets, we have also set out and completed, all but one, $500 million worth of sales in assets that really didn’t fit us. We actually have our last one, which is about a $23 million deal, going to close on Friday. At that time, all of our assets will be on those four areas with the slight exception of little leftover in the Rockies, but 95% of our assets will be in areas, where we have significant development locations and we’ll get into that in a minute.
We also believe that because of the good people that we brought on, the ability for us to grow this thing at 25% plus over the next three to five years has been enhanced. That is what we think an equity growth profile should look like, and I believe that we have that, between our development-driven program and the acquisitions we are looking at right now, I am very confident that we can still achieve our 25% growth over the next three to five years.
We target, and you will see on slide six, we target at least 25% growth in three main areas. That’s reserve, that's production and that's EBITDA. Then once we are able to do that, we take about 50% of our EBITDA and that becomes our capital program for the next year.
While we have been doing this aggressive growth strategy, Hal is going crazy. We have been working on not only the S1, but we have a capital budget meeting next week with our full board that will be going on Tuesday and Wednesday of next week, and we expect to approach the board with a $500 million plus capital program for ’08. I think, I am not lying on that, I would, because we have tentatively reviewed it, and we have plenty of locations and $500 million will be an easy transaction for us.
Going into the -- people want to know about what we think about commodities, oil price, who can believe that oil is about 95 other than Boone called this two years ago. Nobody called 95, but Boone is on our board and he has been saying for two years that the rubber was going to meet the road on oil in the fourth quarter of ’07, and boy, was he ever right. I can’t believe, but we wish we had a lot more production. I think we are at 5,500 to 6,000 barrels a day today. So, I wish, we have more of it.
Gas, I’ll tell you little, gas, we are pretty much hedged and you will see later on in the presentation that the hedges have worked for this last quarter. Gas storage seems full, and I think Boone has been neutral to fairly negative because of that, I think, maybe crude oil is tugging it up, but I would say that two weeks ago we actually notified of shutting up in Appalachia for a week, 2 million a day. And then, as recently as last week, we had a major marketer in here offering us $0.10 premium per 20 million a day of gas to go to the Midwest. So, as cold weather comes, it looks like gas prices might firm up, and I heard a rumor today that Chicago actually had a freeze last night.
So, the weather has been great around the country. It has put a lot of pressure on gas prices, but we continue to monitor and add to our hedging program. I think, Paul, over the last two weeks, we sold gas in 2009 at 850 and we’ve sold that in 2010 at 830 and above. I think it continues to be there, it continues to be strong in the out. So, our hedging program continues to work.
The deal flow, which we expected to slow down, now the major, major deals have slowed down, however, the number of deals has not. I would say we are looking at approximately 40 deals today in our four key areas. Probably half of them are smallish deals, private in Appalachia, but we are seeing a lot of deals in East Texas, some deals in West Texas.
John Jacobi is leading that effort. We are so busy now; we are meeting three times a week on him. We have bids out. Again, we don’t have any closed, but we have the people available and the capital resources available to continue to do what we have been doing.
Again, we have 25 rigs running today. One of the things that is interesting is with these 25 rigs running, I noted yesterday we have over 50 wells that are drilled and paid for encased, waiting on completion, and that ranges anywhere from in Appalachia, where we have 15 or 20 for the wells will come on 30,000 to 40,000 a day, to East Texas and North Louisiana normal Cotton Valley wells that will come on anywhere from 0.8 to 1.2 million a day to Vernon, where we have two of them waiting on completion, where those wells will come on between 5 and 10 million a day. So, we have a lot of wells that are paid for, that are completed waiting on completion either a frac or a pipeline hookup, and Hal will get into that.
With that, the slide, the thing that I love the most on the slide is the EBIDTA growth from the third quarter of ’06. Our adjusted EBIDTA was roughly $71 million. We accomplished $215 million for this most recent quarter, and with that I am going to turn it over to Steve and he can go through the numbers in detail. Thanks.
All right. Thanks, Doug. Let’s focus on slide six to start with. Obviously, our growth in revenue is very strong, 2.5 times what we had in the third quarter of ’06, and the nine months is about 2.5 times what we had in nine months of ’06, very strong. Net income, obviously in our company is somewhat difficult to assess because of the -- we do mark-to-market on the hedges, so that kind of distorts the numbers a little bit.
The other thing in the third quarter that we had was, we had an $11 million valuation allowance charge to income taxes, and what we did was, we substituted a net operating loss from 2006 for foreign tax credits, which we have previously used against our gain on sale of the Canadian sub. And so, because we freed up foreign tax credits that are not useful right now, because we don’t have any foreign operations right now, we were required to provide a valuation allowance.
On the other hand, it resulted in us getting a $6 million cash refund, so we thought that was a pretty fair trade. The net income, we’ve got a slide back on page 25 that I’ll just refer you to, that, sort of, reconciles net income reported to what we would consider to be more normal net income figures. But in any event, we on a preferred stock dividend basis we had $56.5 million of net income and about 10.7 after the preferred. On a normalized kind of a basis, that’s $36 million roughly before preferred dividends, a $0.09 loss afterwards.
Operating cash flow, it was also extremely strong. Operating cash flow is simply EBITDA less interest and a few miscellaneous adjustments, and it was $189 million for the quarter and $415 million for the nine months, extremely strong. And as Doug said, EBITDA also was very strong, 215 for the quarter and 538. All of these numbers, obviously, are dramatically more than they were in the '06 period.
So things are rocking along. As Doug said, we’ve got some oil around 5,200 to 5,500 barrels a day. We will get into that in just a second. But, so let’s just go on over to -- one other thing on the $375 million a day, that includes or that excludes $3.5 million a day production that was shut in due to a flooding of a pipeline up in the Mid-Continent. So, that hit us pretty good little late in the third quarter.
Let’s going over to slide eight, the operating results obviously, what we have done here is we have broken out all of our revenues oil, natural gas, our pipeline, interest and other, and then our cash settlements on derivatives. The revenues, we just discussed, did not include the cash settlements on derivatives. But this slide shows all of the elements except the mark-to-market, which is a non-cash type item. But this slide details the adjusted EBITDA calculation. Obviously, we are up in all areas on oil and gas revenues.
In the quarter, about $143 million of the total increase was due to volume, and about a $9 million decrease due to price. For the nine months, it was $376 million, up due to volumes and $22 million down due to price. So, that’s kind of the way that’s working.
Pipeline operating income is running about $6.6 million a quarter. We have about, we are moving 440 million a day now through our pipeline systems. These mainly came through the acquisition at Winchester, and to an extent at Vernon. And we’ve got an expansion going about 67 mile expansion that should increase this by at least around $100 million a day. So as far as moving, gas movements.
So, that’s a strong business for us, right now, and we have decided we will break it out separately on the slide. We will get into the operating cost and production taxes. It’s easier to explain on them on a per unit basis, but we are pretty pleased with the trend on operating cost and we are making real headway there.
Obviously, G&A is tracking along with the dramatic increase in personnel. During the nine months, we increased G&A by about $23 million of which $15 million was personnel cost, probably $5 million was incremental costs due to our first year of compliance with Sarbanes-Oxley, and $4 or $5 million was due to all of the changes, the dramatic changes we made in our IT areas, the systems, the production systems et cetera. And then, we had a lot of deal cost that we had a very active nine months in terms of deals, and not all of them ended up being successful in terms of our bid. So we spent some money that ended up in G&A.
Now, we are on page nine. Let’s talk about this. This is to me, one of the more meaningful slides in the whole presentation. As far as our volumes are concerned, again, we have got dramatic increases, were pretty flat with the second quarter, but we are making real headway when all things are considered in terms of organic growth. We have had some falloff at Vernon, but not even close to being as much as we thought we would have. So, we are very pleased with where we are at 375 million a day of volume.
Now look at pricing quarter-to-quarter, oil is up $4.40 since gas is down $0.71 and overall, were down $0.78 on Mcf. For the nine months, oil was actually down $1.54 and gas was down $0.87.
Production cost, the trend is good. We had $0.88 in the third quarter of '06 compared to 86 now. That was 85 during the second quarter. So, we are holding pretty steady in terms of our operating cost. We have made some very important improvements in our saltwater disposal costs in East Texas, North Louisiana and where we should have our bids out and construction beginning on a pipeline to handle saltwater in that area, certainly by the end of the year. And so, that could decrease saltwater disposal costs by 40%. The trend is good on production cost and production taxes are pretty stable.
Now, let’s look at the operating margin. I think, this is the key number in our whole presentation. In the second quarter of '07, we had an operating margin of $6.11. That’s where the price of about $0.12, well more than that, about $0.85 more than we are saving now. So, 507 of cash operating margin, we had cash settlements on derivatives $1.34, for net operating cash margin 6.41.
So, it went from 6.11 to 6.41 between the two '07 quarters. It’s down a little bit from '06. So our price is, and then for the nine-months pretty steady. That just shows you, that’s why we hedge, would you like to hear that, that says it all. Our hedges are working and our hedging program is working extremely well.
So, I think, with that I’m going to turn the presentation over to Doug Ramsey and let him talk a little bit about our liquidity and financial position, and then we will get into the hedging even a little bit more.
All right, thanks, Steve. Taking a look at the financial position for the quarter ended September 30th, we had cash on hand of $147 million. Our bank debt between the EXCO Resources Credit Agreement and the EPA credit agreement totaled just over $1.5 billion. We still have the senior notes outstanding which had a principal amount of just under $445 million outstanding.
So, total debt between the bonds and the bank debt is just under $2 billion. We issued the preferred stock, which is on the books for just under $2 billion and then we have book equity of $1.1 billion, total cap of 5.1, and that gives us a debt-to-total capitalization ratio of 39% and the aggregate following days $2.2 billion with unused capacity net of $4.3 million on letters of credit of $672 million, fast forward October 31st.
During October, we closed the 45% additional interest increase in West Texas for a $156.6 million, and the effect or the payment for that acquisition, part of it came from an increase in bank debt and you see that went up by $65 million, the rest came from cash on hand.
So, at the end of October, we now have just slightly over $2 billion of total debt outstanding and availability under the combined credit agreements of $607 million.
All right, flip into the next slide, slide 11. This just breaks down the two credit agreements by the amounts outstanding and the respective availability under each credit agreement, and you could see that they add to the same aggregate totals that I just covered on slide 10.
With that, I’ll turn it over to Paul Rudnicki to cover the hedging strategy in our outstanding hedge positions.
Thanks, Doug. Slide on page 12 shows you the derivatives that we have got in place and this does include everything that we’ve entered into since quarter end. As you can see, for the fourth quarter, on a combined basis, we have got about $355 million a day hedged and when we get into our guidance it’s about 92% of the midpoint of our guidance.
For 2008, we are at about $291 million a day hedged, which is 76% of that same midpoint number, and we really have been focusing on 2009 and 2010 lately. You can see those volumes are up significantly from where they were last quarter. We are now at $236 million a day for 2009, which is about 61% of that production level, and 2010 we are again focusing on and it’s only at $83 million a day, which is about 22%.
As prices move around with weather coming in, we will look to enter into some more hedges there. As Doug mentioned, prices are strong and there is a lot of liquidity out there, and there is definitely some good buying out there. All in all, you can see, we have got 261 Bcf hedged at a weighted average price of approximately $8.15, which more than covers the debt that we’ve got on the books.
Page 13, just to highlight the fourth quarter guidance that we are issuing, the production guidance, as you can see, is 380 to 390 million a day, a nice little uptick from this quarter. Differentials to NYMEX, oil we believe we are going to have a little bit better than what we have been getting in the past. Gas, we are going to guide to basically the same range of 90% to 95%.
Lease operating expenses, $30 to $33 million and the production tax rate at 7% to 7.5%. Midstream income is the other big number there $6.5 million to $7 million for the quarter, and again, that will uptick as we start adding production from the expansion.
We have decided to break out our depreciation rate per Mcfe as the pipeline activity is becoming a little more significant, you can see those numbers as well. We still believe that our tax rate is going to be around 40%. Again, this quarter was a little anomalous with the transactions that Steve talked about.
And now that the preferred is all converted or transformed, as you may to 7%, our dividends will be running $35 million a quarter.
And with that, I will hand it over to Hal for the operations.
Thank you, Paul. Slide 15 shows a snapshot of our third quarter activity from an operations perspective. You can see that quarter-on-quarter, between Q3 of '07 and Q3 of '06, we had significant growth and our sales volumes were up 191% at 375 million a day range. Couple of events occurred in the quarter. One, Steve mentioned earlier, where we lost 3.5 million a day in the Mid-Continent area due to the shut-in of a third party pipeline following some weather related matters.
While we didn’t have any acquisitions that we closed in the third quarter, we did close some sales. We actually closed the Cement sale that had a negative impact on our volumes of about 6.5 million a day over the quarter. Our proved reserves remain at over 1.8 Tcf. Reserve life is about 13 years. You will note that reserve life is down year-on-year, that’s just following the acquisition particularly of the Vernon assets. In East Texas/North Louisiana, I would say R/P is about 10 to 11 years; Permian and Mid-Continent area it is 13 to 14 years; and Appalachia remains over 25 years.
Drilling locations: We have more then 7600. Will drill more than 500 this year. We have more than 2,500 proved locations remained having a strong acreage position over 1.5 million acres, about 800,000 of that remains in Appalachia.
I will talk in a few minutes about our position in the Shale, where we have some 350,000 acres, and about 200,000 that we are very excited about in the Marcellus area. Well count is over 10,000. We have 8,300 plus net wells. We operate more than 90% of our value based on reserves.
As noted early, we have over 630 employees, more than 370 of those support field operations and we had 26 rigs running. At the end of the third quarter, we actually have 25 today.
You will note that our reserves are based on $8 natural gas and $60 odd oil pricing and they are adjusted for differentials and excluding the effect of hedging. And on slide 16, you can see some further detail on our portfolio. Our 3P reserves are about 3.8 Tcfe and we continue to believe we have developing potential of about 2.7 Tcfe, that’s principally the Shale plays in Appalachia.
More than 50% of our reserves, more than 60% of our production is located in East Texas/North Louisiana area. We run East Texas/North Louisiana out of Dallas, but we also have offices in The Woodlands, Texas which we opened up to support Vernon. We have offices in Shreveport; we have offices in Tyler and Gladewater.
Vernon, of course, is a very significant part of our portfolio in East Texas/North Louisiana. Volume over the last few days has been 135 million cubic feet equivalent per day, flat from the last quarter. At this point in time, when we made the acquisition of Vernon we thought we need to be down to having one rig, one drilling rig operating, if not zero. We are actually at three today, remain very optimistic about the opportunities in Vernon as it continues to grow. We have got an excellent teamwork in that area, and as we’re drilling wells we have just drilled the well recently on the southern side of field, as the most southern most well in the field. We are very excited about it. The logs looked very good. So it’s going to continue to open up opportunities for us in Vernon.
In Appalachia, which is our second largest area in terms of proved reserves as 23% of proved reserves have 6,500 wells, we’ve been operating with five drilling rigs up there most recently. It is run out of Akron, Ohio and we’ve got a significant, significant opportunity we are studying in the Marcellus shale. We’ve got over 200,000 acres in the Marcellus that we’re evaluating. We’ve been in touch with service companies. We are evaluating what some of our competitors are doing, and we are very excited about where we’re going to take this thing, so standby for news on that.
Mid-Continent, over 1500 producing wells, 320 Bcf of proved reserves, about 17% of our overall portfolio and between 60 million and 65 million a day of production. And in the Permian, we’ve had a recent acquisition and we will discuss on the next slide. Got about 8% of our proved reserves, 400 wells in a growing position. We’ve actually recently opened up an office in San Angelo following our acquisition, that is depicted on slide 17.
We acquired for $156.6 million additional interest in the Sugg Ranch field. This is in West Texas Canyon Sand that also has producing formations in the Clearfork and the Wolfcamp. This is located primarily in Irion County, Texas. We increased our networking interest from 52% to approximately 97% in this field, and our NRI is about 73%. We closed this subsequent to the close of the quarter, closed it on 10/09; we took over operations literally this week.
We’ve added about 10 employees to support these assets and we had a 60 Bcf of proved reserves, 129 Bcf of 3P reserves and current net production is in the 21 million to 22 million a day range. When we made this acquisition, there were two rigs running, drilling in that field. We are up to three today. There is a possibility we'll go to four rigs operating early next year.
Our scientists and engineers have said there may be as much as 600 locations in the field. There are about 180 of these approved. In addition to this acquisition, just this last week, we closed a small acquisition in Appalachia, where we acquired assets from a private producer there. We spent $16.7 million and we acquired about 12 Bcf of proved reserves, 14 Bcf of 3P, and about 1.4 million a day of production.
On slide 18, I will talk about the Mid-Continent sale, but I mentioned just a moment ago, we sold some non-operated interest of some wells that were as deep as 18,000 feet to a field operator. We got over $100 million for these assets. The effective date of sale was back in January, we closed it in July. We sold 29 Bcf of total proved reserves; 3P was about 47 Bcf; net production at the time of sale was approximately $8 million a day.
Slide 19 is the slide similar to what you have seen before. It details our '07 capital budget, which exceeds $500 million. More than 80% of that will be spend on drilling and completion, where we still anticipate drilling in excess of 500 wells. We are preparing for the ’08 budget. Like Doug said, we are going to present that to the board next week, it will be at least this big, if not larger. On this slide, you can see how we have broken it down into our four divisions or regional areas, so you can see the spinning among them.
East Texas/North Louisiana, as you would expect, where we have some 15 rigs drilling for us today is going to get the bulk of our dollars more than $300 of the $500 million Appalachia about $70 million, where we will drill 230 wells. Permian Rockies, $32 million, where we will drill some 80 wells of the Mid-Continent, it will spin about $33 and drill 37 wells.
The midstream, which Steve referenced earlier, the $48.6 million about 80% of that is going towards the expansion of our TGG interstate pipeline system. We are going to add some 67 miles or so of 20 inch pipeline further into East Texas and we anticipate picking up some incremental $100 million a day of production from third-party producers to transport on that system.
Page 20 gives us some further breakdown on the drilling program. Third quarter ’07, we actually drilled a 135 wells, a 133 of those were productive. Year-to-date ’07, 334 have been drilled and completed, six dry, total of 340.
We have had actually spud 412 wells this year, and as Doug was mentioning, we have got some 50 wells that are either awaiting completion or turn to sales, and this is supporting our continued organic growth of somewhere in the range of 6%. And of these wells that are awaiting either turns of sale or completion, the bulk of them, volume wise, are going to add incremental volumes in East Texas/North Louisiana.
We will add about $1 million a day in Appalachia from the wells, we have spinning up about $1 million a day in the Mid-Continent from wells spinning there. We could add some 25 million a day or more in East Texas/North Louisiana. Now, I caution everyone that’s an IP rate and don’t forget that in East Texas/North Louisiana, you have declines that are about 70% in the first year.
But these production volumes that will come on will definitely help us offset or decline, and help continue to support our organic growth of 6% or 7%. But we also have some volumes that are come on in the Permian particularly at Sugg Ranch, we think, there may be about a 3 million a day or so incremental volume that will result from wells that are pending turn on in that region.
And with that, I’ll turn it back over to Doug Miller.
One of the things that we are excited about in the West Texas is upholders quite a bit of oil. Recently, we have had a couple of wells that came on between 100 to 200 barrels a day and so none of which is booked, all of which is potential. We are in the throws of a 3D seismic shootout there, and we have a geologist, who is about 100 years old. That has done an excellent job there, and if we can keep him alive, I think, we are going to find quite a bit of oil. And I think, the potential there is for some pretty significant growth in both production and reserves over the next couple of years.
I want to emphasize one last time that the only way that we have been able to grow this company as explosive as we have, is the people and with 25 rigs running, we have had to really expand our legal and our land department. When you got 25 rigs running, whether it’s in Appalachia or it’s in East Texas, you have to have title opinions and you have to have a lot of work done and keep ahead of those.
And we try to keep about five locations ahead per rig, and that takes a lot of people and a lot of time. So, Rick Hodges has done an excellent job on that, and I don’t think we would be going to 30 rigs, but it will be a people issue more than anything else. But by year end we kind of think that maybe 26, 27 rigs what we’ll have running without any other acquisition.
Let me emphasize the other thing, we are expecting a $100 to $200 million of free cash after our capital program for '08, and Ramsey just showed you that he has got $600 million of availability, but our comp and cash on hand is something that we could use to.
So theoretically, we could do between $1 and $2 billion worth of additional acquisitions here without touching the capital market, and Jacobi has got enough of those deals in-house that I am sure we will have an opportunity to do that.
With that, I am going to open it up to questions. And I am sure we have some. Where is Heather?
(Operator Instructions) Your first question comes from Wei Romualdo with Stone Harbor.
Wei Romualdo- Stone Harbor
Yeah, what's your plan for the EXCO Resources bonds once the MLP is completed?
I’d say right now, we are probably going to leave those outstanding. As you know, they are callable at 11, and with the recent turmoil in the debt markets and a lot of the transactions that we have out there, 7.25% debt looks awfully cheap in case we do a $1 billion or $2 billion. So, right now we are planning on leaving those out.
Wei Romualdo- Stone Harbor
Okay. And does the transaction deplete the restricted payment basket if you leave them out?
I’m going to ask a lawyer to answer that one because we did look at this. Go ahead, Doug, do you have that?
We are working on it right now.
Yeah. We are working on all that, and we are going to -- we’re actually going to begin a fairness opinion for the bondholders to make sure we are all with inspects on that, okay.
Wei Romualdo- Stone Harbor
Okay. Do you plan to have a new revolver putting after the MLP or is that -- okay?
Yeah. We’re probably going to have two revolvers. Actually, we’ve just recently had a meeting, and there will be a revolver at the MLP and a revolver at EXCO Resources, pretty much the way it is set up today.
Wei Romualdo- Stone Harbor
Okay. But at the EXCO Resources revolver, do you have an idea what the size of that may be after the MLP?
I think it’s around a $1 billion.
Wei Romualdo- Stone Harbor
And there will be a significant amount of liquidity left there, not that much outstanding.
Wei Romualdo- Stone Harbor
Okay, that's independent of the EPOP revolver though?
Wei Romualdo- Stone Harbor
Okay, got you. All right, thank you.
(Operator Instructions) There are no further questions at this time.
Kelly Krenger, you got to be out there somewhere, you didn’t even ask a question. Okay so, hopefully we did a good enough job, but I think the way we were structured today, the fog is going to start lifting quarter-by-quarter here. So, we appreciate your patience. It has been explosive around here, and I think a lot of you who are on, have to call then and come in and visit us, and so understand exactly what's going on. We bought everybody some Newton issues, so we are getting everything consolidated and we’re going to be off and running again. Again, thanks very much for your patience and meeting adjourned.
This concludes today's conference call. You may now disconnect.
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