EXCO mulls Pickens-backed CEO buyout, other deals

By Thyagaraju Adinarayan

BANGALORE (BestGrowthStock) – Oil and gas company EXCO Resources Inc (XCO.N: ) said it is mulling the CEO-led $4.36 billion buyout proposal backed by oilman T. Boone Pickens, and is also open to bids from oil majors looking to expand their shale assets.

The gas-focused explorer, which holds acreage in the Haynesville, Bossier and the Marcellus shales, said it would explore strategic alternatives.

EXCO’s CEO Douglas Miller, who has a 3.1 percent stake in the company as of October 29, had teamed up with other stakeholders to table a bid of $20.50 a share for EXCO in a bet on natural gas prices rising.

Natural gas prices have risen nearly 10 percent since Miller’s bid. And, in anticipation of a further rise, energy majors are snapping up shale assets.

EXCO’s shares were up about 3 percent at $19.93 in afternoon trade on the New York Stock Exchange, but still short of Miller’s bid. Since the bid the stock has gained 30 percent.

(Graphic on EXCO share price vs natural gas prices:


Pritchard Capital Partners analyst Ray Deacon believes that Miller’s offer undervalues EXCO’s assets, which he says are worth about $30 a share.

EXCO said on Thursday its proved reserves in 2010 jumped 56 percent, amid a rise in Haynesville shale production.

Analyst Deacon said Exxon Mobil Corp (XOM.N: ), Royal Dutch Shell (RDSa.L: ), Chevron (CVX.N: ) or India’s Reliance Industries (RELI.BO: ) could line-up rival offers.

Also, companies like Total (TOTF.PA: ), BP Plc (BP.L: ) and Statoil (STL.OL: ) have been increasing their acreage and presence in unconventional shales.


EXCO’s decision to evaluate strategic alternatives is its first formal statement regarding a sale of the company since Miller first made his offer public in early November.

“After carefully reviewing Miller’s unsolicited proposal … we intend to conduct a thorough process in which all interested parties will have an opportunity to participate on a level playing field,” director Vincent Cebula said in a statement.

The company signed an agreement with Miller, which prevents him from acquiring more shares, attempting to influence the board or seeking the support of other shareholders through proxies.

Miller was not immediately available for comment.

EXCO, with a market value of about $4 billion, adopted a shareholder rights plan with a one-year term and a 10 percent trigger.

Oilman and natural gas proponent Pickens, who is also a director in EXCO, was in favor of the deal. Miller’s bid also enjoys the backing of EXCO’s largest stakeholder, Oaktree Capital Management LP, as well as Ares Management LLC.

None of the parties were available for comment.

Pickens has a 5 percent stake in the company. Oaktree Capital has a 16.4 percent stake, while Ares Management holds a 6.1 percent stake, according to Thomson Reuters data.

Barclays Capital and Evercore Partners are serving as the special committee’s financial advisers, EXCO said

(Reporting by Thyagaraju Adinarayan in Bangalore; Editing by Jarshad Kakkrakandy, Unnikrishnan Nair)