EXCO RESOURCES INC (Form: 10-Q, Received: 07/27/2015 16:07:48)

Large accelerated filer

Accelerated filer

Non-accelerated filer

o (Do not check if a smaller reporting company)

Smaller reporting company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________

FORM 10-Q

______________________________



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2015



o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-32743

______________________________

EXCO RESOURCES, INC.

(Exact name of registrant as specified in its charter)

______________________________



Texas		74-1492779
(State of incorporation)		(I.R.S. Employer Identification No.)

12377 Merit Drive Suite 1700, LB 82 Dallas, Texas		75251
(Address of principal executive offices)		(Zip Code)

(214) 368-2084

(Registrant’s telephone number, including area code)

______________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant is required to submit and post such files). YES x NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o NO x

The number of shares of common stock, par value $0.001 per share, outstanding as of July 24, 2015 was 277,186,096 .

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EXCO RESOURCES, INC.

INDEX



PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements	2
	Condensed Consolidated Balance Sheets at June 30, 2015 and December 31, 2014	2
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2015 and 2014	4
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2015 and 2014	5
	Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Six Months Ended June 30, 2015 and 2014	6
	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	44
Item 4.	Controls and Procedures	44

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	45
Item 1A.	Risk Factors	45
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45
Item 5.	Other Information	45
Item 6.	Exhibits	46
	Signatures	47

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PART I—FINANCIAL INFORMATION


Item 1.	Financial Statements

EXCO RESOURCES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS



(in thousands)	June 30, 2015			December 31, 2014
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	49,907		$	46,305
Restricted cash	17,581			23,970
Accounts receivable, net:
Oil and natural gas	55,479			81,720
Joint interest	40,231			65,398
Other	8,164			8,945
Derivative financial instruments	55,111			97,278
Inventory and other	7,859			7,150
Total current assets	234,332			330,766
Equity investments	55,188			55,985
Oil and natural gas properties (full cost accounting method):
Unproved oil and natural gas properties and development costs not being amortized	248,196			276,025
Proved developed and undeveloped oil and natural gas properties	3,385,948			3,852,073
Accumulated depletion	(2,537,476		)	(2,414,461		)
Oil and natural gas properties, net	1,096,668			1,713,637
Other property and equipment, net	23,937			24,644
Deferred financing costs, net	26,385			30,636
Derivative financial instruments	3,772			2,138
Deferred income taxes	18,669			35,935
Goodwill	163,155			163,155
Total assets	$	1,622,106		$	2,356,896

See accompanying notes.

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EXCO RESOURCES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS



(in thousands, except per share and share data)	June 30, 2015			December 31, 2014
	(Unaudited)
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable and accrued liabilities	$	93,721		$	110,211
Revenues and royalties payable	135,180			152,651
Drilling advances	30,077			37,648
Accrued interest payable	26,046			26,265
Current portion of asset retirement obligations	1,769			1,769
Income taxes payable	—			—
Deferred income taxes	18,669			35,935
Derivative financial instruments	320			892
Total current liabilities	305,782			365,371
Long-term debt	1,537,243			1,446,535
Asset retirement obligations	36,502			34,986
Commitments and contingencies	—			—
Shareholders’ equity:
Common shares, $0.001 par value; 350,000,000 authorized shares; 274,328,625 shares issued and 273,750,583 shares outstanding at June 30, 2015; 274,351,756 shares issued and 273,773,714 shares outstanding at December 31, 2014	270			270
Additional paid-in capital	3,507,050			3,502,209
Accumulated deficit	(3,757,126		)	(2,984,860		)
Treasury shares, at cost; 578,042 shares at June 30, 2015 and December 31, 2014	(7,615		)	(7,615		)
Total shareholders’ equity	(257,421		)	510,004
Total liabilities and shareholders’ equity	$	1,622,106		$	2,356,896

See accompanying notes.

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EXCO RESOURCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands, except per share data)	2015			2014			2015			2014
Revenues:
Oil	$	31,545		$	56,055		$	52,428		$	108,385
Natural gas	62,197			126,911			127,634			273,053
Total revenues	93,742			182,966			180,062			381,438
Costs and expenses:
Oil and natural gas operating costs	14,135			15,827			29,076			34,614
Production and ad valorem taxes	5,603			7,364			10,464			14,973
Gathering and transportation	24,785			26,038			50,500			50,651
Depletion, depreciation and amortization	61,658			67,253			124,147			136,528
Impairment of oil and natural gas properties	394,327			—			670,654			—
Accretion of discount on asset retirement obligations	568			695			1,124			1,376
General and administrative	12,597			19,504			27,834			36,842
Other operating items	1,534			2,973			1,346			5,719
Total costs and expenses	515,207			139,654			915,145			280,703
Operating income (loss)	(421,465		)	43,312			(735,083		)	100,735
Other income (expense):
Interest expense, net	(25,571		)	(25,968		)	(53,061		)	(46,132		)
Gain (loss) on derivative financial instruments	(6,631		)	(14,718		)	17,079			(57,740		)
Other income	47			77			98			123
Equity income (loss)	(535		)	(410		)	(1,300		)	701
Total other expense	(32,690		)	(41,019		)	(37,184		)	(103,048		)
Income (loss) before income taxes	(454,155		)	2,293			(772,267		)	(2,313		)
Income tax expense	—			—			—			—
Net income (loss)	$	(454,155	)	$	2,293		$	(772,267	)	$	(2,313	)
Earnings (loss) per common share:
Basic:
Net income (loss)	$	(1.67	)	$	0.01		$	(2.84	)	$	(0.01	)
Weighted average common shares outstanding	271,549			270,492			271,536			265,631
Diluted:
Net income (loss)	$	(1.67	)	$	0.01		$	(2.84	)	$	(0.01	)
Weighted average common shares and common share equivalents outstanding	271,549			271,226			271,536			265,631

See accompanying notes.

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EXCO RESOURCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



	Six Months Ended June 30,
(in thousands)	2015			2014
Operating Activities:
Net loss	$	(772,267	)	$	(2,313	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depletion, depreciation and amortization	124,147			136,528
Share-based compensation expense	3,119			3,252
Accretion of discount on asset retirement obligations	1,124			1,376
Impairment of oil and natural gas properties	670,654			—
(Income) loss from equity method investments	1,300			(701		)
(Gain) loss on derivative financial instruments	(17,079		)	57,740
Cash receipts (payments) of derivative financial instruments	57,039			(34,469		)
Amortization of deferred financing costs and discount on debt issuance	6,975			7,697
Effect of changes in:
Restricted cash	(600		)	—
Accounts receivable	50,758			30,796
Other current assets	790			(577		)
Accounts payable and other current liabilities	(17,756		)	68,793
Net cash provided by operating activities	108,204			268,122
Investing Activities:
Additions to oil and natural gas properties, gathering assets and equipment	(204,600		)	(197,341		)
Property acquisitions	(7,608		)	(426		)
Proceeds from disposition of property and equipment	7,397			76,266
Restricted cash	6,989			5,349
Net changes in advances to joint ventures	5,756			(10,540		)
Equity method investments	(503		)	1,749
Net cash used in investing activities	(192,569		)	(124,943		)
Financing Activities:
Borrowings under credit agreements	90,000			—
Repayments under credit agreements	—			(882,424		)
Proceeds received from issuance of 2022 Notes	—			500,000
Proceeds (payments) for issuance of common shares, net	(2		)	271,772
Payments of common share dividends	(15		)	(27,066		)
Deferred financing costs and other	(2,016		)	(10,066		)
Net cash provided by (used in) financing activities	87,967			(147,784		)
Net increase (decrease) in cash	3,602			(4,605		)
Cash at beginning of period	46,305			50,483
Cash at end of period	$	49,907		$	45,878
Supplemental Cash Flow Information:
Cash interest payments	$	52,069		$	39,576
Income tax payments	—			—
Supplemental non-cash investing and financing activities:
Capitalized share-based compensation	$	1,936		$	2,955
Capitalized interest	7,027			10,255
Issuance of common shares for director services	100			129

See accompanying notes.

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EXCO RESOURCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)



	Common shares				Subscription rights					Treasury shares					Additional paid-in capital		Accumulated deficit			Total shareholders’ equity
(in thousands)	Shares		Amount		Shares		Amount			Shares		Amount			Additional paid-in capital		Accumulated deficit			Total shareholders’ equity
Balance at December 31, 2013	218,783		$	215	54,575		$	55		(539	)	$	(7,479	)	$	3,219,748	$	(3,064,634	)	$	147,905
Issuance of common shares	54,579		55		(54,575	)	(55		)	—		—			271,901		—			271,901
Share-based compensation	—		—		—		—			—		—			6,200		—			6,200
Restricted shares issued, net of cancellations	(84	)	—		—		—			—		—			—		—			—
Common share dividends	—		—		—		—			—		—			—		(27,111		)	(27,111		)
Net loss	—		—		—		—			—		—			—		(2,313		)	(2,313		)
Balance at June 30, 2014	273,278		$	270	—		$	—		(539	)	$	(7,479	)	$	3,497,849	$	(3,094,058	)	$	396,582
Balance at December 31, 2014	274,352		$	270	—		$	—		(578	)	$	(7,615	)	$	3,502,209	$	(2,984,860	)	$	510,004
Issuance of common shares	—		—		—		—			—		—			98		—			98
Share-based compensation	—		—		—		—			—		—			4,743		—			4,743
Restricted shares issued, net of cancellations	(23	)	—		—		—			—		—			—		—			—
Common share dividends	—		—		—		—			—		—			—		1			1
Net loss	—		—		—		—			—		—			—		(772,267		)	(772,267		)
Balance at June 30, 2015	274,329		$	270	—		$	—		(578	)	$	(7,615	)	$	3,507,050	$	(3,757,126	)	$	(257,421	)

See accompanying notes.

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EXCO RESOURCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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.

• East Texas and North Louisiana

The East Texas and North Louisiana regions are primarily comprised of our Haynesville and Bossier shale assets. We have a joint venture with BG Group, plc ("BG Group") covering an undivided 50% interest in certain Haynesville/Bossier shale assets in East Texas and North Louisiana. The East Texas and North Louisiana regions also include assets outside of the joint venture in the Haynesville and Bossier shales. We serve as the operator for most of our properties in both the East Texas and North Louisiana regions.

• South Texas

The South Texas region is primarily comprised of our Eagle Ford shale assets. We have a joint venture with affiliates of Kohlberg Kravis Roberts & Co. L.P. ("KKR") to develop certain assets in the Eagle Ford shale. The South Texas region also includes assets outside of the joint venture in the Eagle Ford shale, Buda and other formations. We serve as the operator for most of our properties in the South Texas region.

• Appalachia

The Appalachia region is primarily comprised of Marcellus shale assets as well as shallow conventional assets in other formations. We have a joint venture with BG Group covering our shallow conventional assets and Marcellus shale assets in the Appalachia region ("Appalachia JV"). EXCO and BG Group each own an undivided 50% interest in the Appalachia JV and a 49.75% working interest in the Appalachia JV's properties. The remaining 0.5% working interest is held by a jointly owned operating entity ("OPCO") that operates the Appalachia JV's properties. We own a 50% interest in OPCO.

The accompanying Condensed Consolidated Balance Sheets as of June 30, 2015 and December 31, 2014 , Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2015 and 2014 , Condensed Consolidated Statements of Cash Flows and Condensed Consolidated Statements of Changes in Shareholders’ Equity for the six months ended June 30, 2015 and 2014 are for EXCO and its subsidiaries. The condensed consolidated financial statements and related footnotes are presented in accordance with generally accepted accounting principles in the United States ("GAAP"). Certain reclassifications have been made to prior period information to conform to current period presentation.

We have prepared the accompanying unaudited interim financial statements pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") and in the opinion of management, such financial statements reflect all adjustments necessary to fairly present the consolidated financial position of EXCO at June 30, 2015 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 EXCO's Annual Report on Form 10-K for the year ended December 31, 2014 , filed with the SEC on February 25, 2015 , as amended by Amendment No. 1 to Annual Report on Form 10-K/A, filed with the SEC on April 10, 2015 ("2014 Form 10-K").

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.

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2. Significant accounting policies

We consider significant accounting policies to be those related to our estimates of proved reserves, oil and natural gas properties, derivatives, business combinations, share-based compensation, goodwill, revenue recognition, asset retirement obligations and income taxes. The policies include significant estimates made by management using information available at the time the estimates were made. However, these estimates could change materially if different information or assumptions were used. These policies and others are summarized in the 2014 Form 10-K.

Goodwill

We perform an impairment test for goodwill at least annually or more frequently as impairment indicators arise. Our impairment test is typically performed during the fourth quarter; however, we performed an impairment test as of June 30, 2015 as a result of continued depressed commodity prices and recent impairments of oil and natural gas properties. As a result of our testing, the fair value of our business exceeded the carrying value of net assets and we did not record an impairment charge during the second quarter of 2015.

Recent accounting pronouncements

In April 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs ("ASU 2015-03"). ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. We currently recognize debt issuance costs as assets on our balance sheet. The recognition and measurement guidance for debt issuance costs are not affected by ASU 2015-03. ASU 2015-03 is effective for annual and interim periods beginning after December 15, 2015 and early adoption is permitted. We are currently assessing the potential impact the adoption of ASU 2015-03 will have on our consolidated financial statements.

3. Acquisitions

Eagle Ford acquisition program

We have a participation agreement with a joint venture partner in the Eagle Ford shale to mitigate the impact of development expenditures on our capital resources and liquidity ("Participation Agreement"). The Participation Agreement requires us to offer to purchase our joint venture partner's working interest in wells that have been on production for at least one year . The offers are made on a quarterly basis for a group of wells based on prices defined in the Participation Agreement, subject to specific well criteria and return hurdles.

We closed the first acquisition of our joint venture partner's interest in 3 gross ( 1.4 net) wells on March 11, 2015 for a total purchase price of $7.6 million . We revised our second offer in July 2015 based on an independent evaluation from a reserve engineering firm, which included a total of 10 gross ( 5.2 net) wells for a total offer price of $16.3 million . Our joint venture partner did not accept our offer and these wells will be included in future offers. The offer for these wells did not meet the specified return hurdle in the Participation Agreement; therefore, our joint venture partner was not required to sell us the wells included in this offer. Our next offer will occur in the third quarter of 2015, which is expected to include a total of up to 26 gross ( 13.6 net) wells. The total purchase price will depend on our joint venture partner's acceptance of the offer as well as our joint venture partner's option to retain an undivided 15% of their collective interest in certain wells. If our joint venture partner accepts the offer, we expect the offer and acceptance process to be completed and the acquisition to close in the third quarter of 2015.

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4. Asset retirement obligations

The following is a reconciliation of our asset retirement obligations for the six months ended June 30, 2015 :



(in thousands)
Asset retirement obligations at beginning of period	$	36,755
Activity during the period:
Liabilities incurred during the period	693
Liabilities settled during the period	(65		)
Adjustment to liability due to acquisitions	43
Adjustment to liability due to divestitures	(279		)
Accretion of discount	1,124
Asset retirement obligations at end of period	38,271
Less current portion	1,769
Long-term portion	$	36,502

Our asset retirement obligations are determined using discounted cash flow methodologies based on inputs and assumptions developed by management. We do not have any assets that are legally restricted for purposes of settling asset retirement obligations.

5. Oil and natural gas properties

We use the full cost method of accounting, which involves capitalizing all acquisition, exploration, exploitation and development costs of oil and natural gas properties. Once we incur costs, they are recorded in the depletable pool of proved properties or in unproved properties, collectively, the full cost pool. We review our unproved oil and natural gas property costs on a quarterly basis to assess for impairment or the need to transfer unproved costs to proved properties as a result of extensions or discoveries from drilling operations or determination that no proved reserves are attributable to such costs. The majority of our undeveloped properties are held-by-production, which reduces the risk of impairment as a result of lease expirations. There were no impairments of unproved properties during the six months ended June 30, 2015 and 2014 .

At the end of each quarterly period, companies that use the full cost method of accounting for their oil and natural gas properties must compute a limitation on capitalized costs ("ceiling test"). The ceiling test involves comparing the net book value of the full cost pool, after taxes, to the full cost ceiling limitation defined below. In the event the full cost ceiling limitation is less than the full cost pool, we are required to record an impairment of our oil and natural gas properties. The full cost ceiling limitation is computed as the sum of the present value of estimated future net revenues from our proved reserves by applying the average price as prescribed by the SEC, less estimated future expenditures (based on current costs) to develop and produce the proved reserves, discounted at 10% , plus the cost of properties not being amortized and the lower of cost or estimated fair value of unproved properties included in the costs being amortized, net of income tax effects.

The ceiling test for each period presented was based on the following average spot prices, in each case adjusted for quality factors and regional differentials to derive estimated future net revenues. Prices presented in the table below are the trailing 12 month simple average spot prices at the first of the month for natural gas at Henry Hub ("HH") and West Texas Intermediate ("WTI") crude oil at Cushing, Oklahoma. The fluctuations demonstrate the volatility in oil and natural gas prices between each of the periods and have a significant impact on our ceiling test limitation.



	Trailing 12 month simple average spot prices
	Oil (per Bbl)		Natural gas (per Mmbtu)
June 30, 2015	$	71.68	$	3.39
March 31, 2015	82.72		3.88
December 31, 2014	94.99		4.35

We recognized an impairment to our proved oil and natural gas properties of $394.3 million and $670.7 million for the three and six months ended June 30, 2015 , respectively. The impairments were primarily due to the decline in oil and natural gas prices. We did no t recognize impairments to our proved oil and natural gas properties for the three and six months ended June 30, 2014 . We may incur additional impairments to our oil and natural gas properties in 2015 if prices do not increase.

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The possibility and amount of any future impairment is difficult to predict, and will depend, in part, upon future oil and natural gas prices to be utilized in the ceiling test, estimates of proved reserves and future capital expenditures and operating costs.

The evaluation of impairment of our oil and natural gas properties includes estimates of proved reserves. There are numerous uncertainties inherent in estimating quantities of proved reserves, in projecting the future rates of production and in the timing of development activities. The accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation and judgment. Results of drilling, testing and production subsequent to the date of the estimate may justify revisions of such estimate. Accordingly, reserve estimates often differ from the quantities of oil and natural gas that are ultimately recovered.

6. Earnings (loss) per share

The following table presents the basic and diluted earnings (loss) per share computations for the three and six months ended June 30, 2015 and 2014 :



	Three Months Ended June 30,					Six Months Ended June 30,
(in thousands, except per share data)	2015			2014		2015			2014
Basic net income (loss) per common share:
Net income (loss)	$	(454,155	)	$	2,293	$	(772,267	)	$	(2,313	)
Weighted average common shares outstanding	271,549			270,492		271,536			265,631
Net income (loss) per basic common share	$	(1.67	)	$	0.01	$	(2.84	)	$	(0.01	)
Diluted net income (loss) per common share:
Net income (loss)	$	(454,155	)	$	2,293	$	(772,267	)	$	(2,313	)
Weighted average common shares outstanding	271,549			270,492		271,536			265,631
Dilutive effect of:
Stock options	—			—		—			—
Restricted shares and restricted share units	—			734		—			—
Weighted average common shares and common share equivalents outstanding	271,549			271,226		271,536			265,631
Net income (loss) per diluted common share	$	(1.67	)	$	0.01	$	(2.84	)	$	(0.01	)

Diluted net income (loss) per common share for the three and six months ended June 30, 2015 and 2014 is computed in the same manner as basic income (loss) per share after assuming the issuance of common shares for all potentially dilutive common share equivalents, which include stock options, restricted share units and restricted share awards, whether exercisable or not. The computation of diluted earnings (loss) per share excluded 12,152,822 and 12,855,434 antidilutive share equivalents for the three months ended June 30, 2015 and 2014 , respectively, and 12,657,675 and 13,853,885 antidilutive share equivalents for the six months ended June 30, 2015 and 2014 , respectively.

7. Derivative financial instruments

Our primary objective in entering into derivative financial instruments is to manage our exposure to commodity price fluctuations, protect our returns on investments and achieve a more predictable cash flow from operations. These transactions limit exposure to declines in commodity prices, but also limit the benefits we would realize if commodity prices increase. When prices for oil and natural gas are volatile, a significant portion of the effect of our derivative financial instruments consists of non-cash income or expense due to changes in the fair value. Cash losses or gains only arise from payments made or received on monthly settlements of contracts or if we terminate a contract prior to its expiration. We do not designate our derivative financial instruments as hedging instruments for financial accounting purposes and, as a result, we recognize the change in the respective instruments’ fair value in earnings.

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The table below outlines the classification of our derivative financial instruments on our Condensed Consolidated Balance Sheets and their financial impact on our Condensed Consolidated Statements of Operations.

Fair Value of Derivative Financial Instruments



(in thousands)	June 30, 2015			December 31, 2014
Derivative financial instruments - Current assets	$	55,111		$	97,278
Derivative financial instruments - Long-term assets	3,772			2,138
Derivative financial instruments - Current liabilities	(320		)	(892		)
Derivative financial instruments - Long-term liabilities	—			—
Net derivative financial instruments	$	58,563		$	98,524

Effect of Derivative Financial Instruments



	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands)	2015			2014			2015		2014
Gain (loss) on derivative financial instruments	$	(6,631	)	$	(14,718	)	$	17,079	$	(57,740	)

Settlements in the normal course of maturities of our derivative financial instrument contracts result in cash receipts from, or cash disbursements to, our derivative contract counterparties. Changes in the fair value of our derivative financial instrument contracts, which includes both cash settlements and non-cash changes in fair value, are included in earnings with a corresponding increase or decrease in the Condensed Consolidated Balance Sheets fair value amounts.

Our oil and natural gas derivative instruments are comprised of the following instruments:

Swaps : These contracts allow us to receive a fixed price and pay a floating market price to the counterparty for the hedged commodity.

Basis swaps : These contracts allow us to receive a fixed price differential between market indices for oil prices based on the delivery point. Our oil basis swaps typically have a positive differential to NYMEX WTI oil prices.

Call options : These contracts give our trading counterparties the right, but not the obligation, to buy an agreed quantity of oil or natural gas from us at a certain time and price in the future. At the time of settlement, if the market price exceeds the fixed price of the call option, we pay the counterparty the excess. If the market price settles below the fixed price of the call option, no payment is due from either party. In exchange for selling this option, we received upfront proceeds which we used to obtain a higher fixed price on our swaps. These transactions were conducted contemporaneously with a single counterparty and resulted in a net cashless transaction.

Three-way collars : A three-way collar is a combination of options including a sold call, a purchased put and a sold put. These contracts allow us to participate in the upside of commodity prices to the ceiling of the call option and provide us with partial downside protection through the combination of the put options. If the market price is below the strike price of the purchased put at the time of settlement then the counterparty pays us the excess, unless the market price falls below the strike price of the sold put at which point the counterparty pays us the difference between the strike prices of the purchased put and sold put. If the market price is above the strike price of the sold call at the time of settlement, we pay the counterparty the excess. These transactions were conducted contemporaneously with a single counterparty and resulted in a net cashless transaction.

We place our derivative financial instruments with the financial institutions that are lenders under our credit agreement that we believe have high quality credit ratings. To mitigate our risk of loss due to default, we have entered into master netting agreements with counterparties to our derivative financial instruments that allow us to offset our asset position with our liability position in the event of a default by the counterparty.

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The following table presents the volumes and fair value of our oil and natural gas derivative financial instruments as of June 30, 2015 :



(in thousands, except prices)	Volume Mmbtu/Bbl	Weighted average strike price per Mmbtu/Bbl		Fair value at June 30, 2015
Natural gas:
Swaps:
Remainder of 2015	25,300	$	4.02	$	28,102
2016	16,470	3.30		2,046
2017	7,300	3.42		409
Call options:
Remainder of 2015	10,120	4.29		(150		)
Three-way collars:
Remainder of 2015	13,800			6,029
Sold call		4.47
Purchased put		3.83
Sold put		3.33
2016	10,980			3,615
Sold call		4.80
Purchased put		3.90
Sold put		3.40
Total natural gas				$	40,051
Oil:
Swaps:
Remainder of 2015	644	$	86.44	$	16,371
2016	732	64.82		1,986
Basis swaps:
Remainder of 2015	46	6.10		158
Call options:
Remainder of 2015	184	100.00		(3		)
Total oil				$	18,512
Total oil and natural gas derivative financial instruments				$	58,563

At December 31, 2014 , we had outstanding swap, call option and three-way collar contracts covering 42,888 Mmmbtu, 20,075 Mmmbtu and 38,355 Mmmbtu, respectively, of natural gas and we had outstanding swap, basis swap and call option contracts covering 1,095 Mbbls, 91 Mbbls and 365 Mbbls, respectively, of oil.

At June 30, 2015 , the average forward NYMEX WTI oil prices per Bbl for the remainder of 2015 and calendar year 2016 were $60.12 , and $61.90 , respectively, the average forward NYMEX Louisiana Light Sweet ("LLS") oil prices per Bbl for the remainder of 2015 and calendar year 2016 were $62.88 , and $64.51 , respectively, and the average forward NYMEX HH natural gas prices per Mmbtu for the remainder of 2015 and calendar years 2016 and 2017 were $2.93 , $3.17 and $3.36 , respectively.

Our derivative financial instruments covered approximately 65% and 67% of production volumes for the three months ended June 30, 2015 and 2014 , respectively, and 65% and 67% of production volumes for the six months ended June 30, 2015 and 2014 , respectively.

8. Fair value measurements

We value our derivatives and other financial instruments according to FASB ASC 820, Fair Value Measurements and Disclosures , which defines fair value as the exchange price that would be received for an asset or paid to transfer a liability

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("exit price") in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

We categorize the inputs used in measuring fair value into a three-tier fair value hierarchy. These tiers include:

Level 1 – Observable inputs, such as quoted market prices in active markets, for substantially identical assets and liabilities.

Level 2 – Observable inputs other than quoted prices within Level 1 for similar assets and liabilities. These include quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data. If the asset or liability has a specified or contractual term, the input must be observable for substantially the full term of the asset or liability.

Level 3 – Unobservable inputs that are supported by little or no market activity, generally requiring development of fair value assumptions by management.

Fair value of derivative financial instruments

The fair value of our derivative financial instruments may be different from the settlement value based on company-specific inputs, such as credit rating, futures markets and forward curves, and readily available buyers or sellers. During the six months ended June 30, 2015 and 2014 there were no changes in the fair value level classifications. The following table presents a summary of the estimated fair value of our derivative financial instruments as of June 30, 2015 and December 31, 2014 .



	June 30, 2015
(in thousands)	Level 1		Level 2		Level 3		Total
Oil and natural gas derivative financial instruments	$	—	$	58,563	$	—	$	58,563
	December 31, 2014
(in thousands)	Level 1		Level 2		Level 3		Total
Oil and natural gas derivative financial instruments	$	—	$	98,524	$	—	$	98,524

We evaluate derivative assets and liabilities in accordance with master netting agreements with the derivative counterparties, but report them on a gross basis on our Condensed Consolidated Balance Sheets. Net derivative asset values are determined primarily by quoted futures prices and utilization of the counterparties’ credit-adjusted risk-free rate curves and net derivative liabilities are determined by utilization of our credit-adjusted risk-free rate curve. The credit-adjusted risk-free rates of our counterparties are based on an independent market-quoted credit default swap rate curve for the counterparties’ debt plus the London Interbank Offered Rate ("LIBOR") curve as of the end of the reporting period. Our credit-adjusted risk-free rate is based on the blended rate of independent market-quoted credit default swap rate curves for companies that have the same credit rating as us plus the LIBOR curve as of the end of the reporting period.

The valuation of our commodity price derivatives, represented by oil and natural gas swaps, basis swaps, call option and three-way collar contracts, is discussed below.

Oil derivatives . Our oil derivatives are swap, basis swap and call option contracts for notional Bbls of oil at fixed (in the case of swap and basis swap contracts) or interval (in the case of call option contracts) NYMEX oil index prices. The asset and liability values attributable to our oil derivatives as of the end of the reporting period are based on (i) the contracted notional volumes, (ii) independent active NYMEX futures price quotes for oil index prices, (iii) the applicable credit-adjusted risk-free rate curve, as described above, and (iv) the implied rate of volatility inherent in the call option contracts. The implied rates of volatility were determined based on average NYMEX oil index prices.

Natural gas derivatives . Our natural gas derivatives are swap, three-way collar and call option contracts for notional Mmbtus of natural gas at posted price indexes, including NYMEX HH swap and option contracts. The asset and liability values attributable to our natural gas derivatives as of the end of the reporting period are based on (i) the contracted notional volumes, (ii) independent active NYMEX futures price quotes for HH for natural gas swaps, (iii) the applicable credit-adjusted risk-free rate curve, as described above, and (iv) the implied rate of volatility inherent in the option contracts. The implied rates of volatility were determined based on average HH natural gas prices.

See further details on the fair value of our derivative financial instruments in “Note 7. Derivative financial instruments”.

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Fair value of other financial instruments

Our financial instruments include cash and cash equivalents, accounts receivable and payable and accrued liabilities. The carrying amount of these instruments approximates fair value because of their short-term nature.

The carrying values of our borrowings under the revolving commitment of our credit agreement ("EXCO Resources Credit Agreement") approximate fair value, as these are subject to short-term floating interest rates that approximate the rates available to us for those periods.

The estimated fair values of our 7.5% senior unsecured notes due September 15, 2018 ("2018 Notes") and our 8.5% senior unsecured notes due April 15, 2022 ("2022 Notes") have been calculated based on market quotes and are presented below.



	June 30, 2015
(in thousands)	Level 1		Level 2		Level 3		Total
2018 Notes	$	476,250	$	—	$	—	$	476,250
2022 Notes	255,310		—		—		255,310
	December 31, 2014
(in thousands)	Level 1		Level 2		Level 3		Total
2018 Notes	$	558,750	$	—	$	—	$	558,750
2022 Notes	373,500		—		—		373,500

9. Debt

Our total debt is summarized as follows:



(in thousands)	June 30, 2015			December 31, 2014
EXCO Resources Credit Agreement	$	292,492		$	202,492
2018 Notes	750,000			750,000
Unamortized discount on 2018 Notes	(5,249		)	(5,957		)
2022 Notes	500,000			500,000
Total debt	$	1,537,243		$	1,446,535

Terms and conditions of our debt obligations as of June 30, 2015 are discussed below.

EXCO Resources Credit Agreement

As of June 30, 2015 , the EXCO Resources Credit Agreement had $292.5 million of outstanding indebtedness, $725.0 million borrowing base and $425.9 million of unused borrowing base, net of letters of credit. The maturity date of the EXCO Resources Credit Agreement is July 31, 2018 . The interest rate grid for the revolving commitment under the EXCO Resources Credit Agreement ranges from LIBOR plus 175 bps to 275 bps (or alternate base rate ("ABR") plus 75 bps to 175 bps), depending on our borrowing base usage. On June 30, 2015 , the one month LIBOR was 0.2% , which resulted in an interest rate of approximately 2.2% .

The financial covenants under the EXCO Resources Credit Agreement include a ratio of consolidated EBITDAX to consolidated interest expense ("Interest Coverage Ratio") and a ratio of senior secured indebtedness to consolidated EBITDAX ("Secured Indebtedness Ratio"). The ratio of consolidated funded indebtedness to consolidated EBITDAX ("Leverage Ratio") is suspended until the fourth quarter of 2016. The following table presents the maximum Leverage Ratio allowed for the following periods:



Period		Ratio
The fiscal quarter ending December 31, 2016		6.00 to 1.00
The fiscal quarter ending March 31, 2017 and June 30, 2017		5.75 to 1.00
The fiscal quarter ending September 30, 2017		5.25 to 1.00
The fiscal quarter ending December 31, 2017		4.75 to 1.00
Each fiscal quarter ending thereafter		4.50 to 1.00

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The Leverage Ratio will be calculated based on the consolidated EBITDAX for the trailing four quarter period ending on the last day of such fiscal quarter, except, the consolidated EBITDAX for the quarter period ending December 31, 2016 shall be consolidated EBITDAX for quarter ending December 31, 2016 multiplied by 4.0 , consolidated EBITDAX for the two quarter period ending March 31, 2017 shall be consolidated EBITDAX for such period multiplied by 2.0 , and consolidated EBITDAX for the three quarter period ending June 30, 2017 shall be consolidated EBITDAX for such period multiplied by 4/3.

As of June 30, 2015 , we were in compliance with the financial covenants (as defined in the EXCO Resources Credit Agreement), which require that we:


•	maintain a consolidated current ratio of at least 1.0 to 1.0 as of the end of any fiscal quarter;


•	maintain an Interest Coverage Ratio of at least 2.0 to 1.0 as of the end of any fiscal quarter; and


•	not permit our Secured Indebtedness Ratio to be greater than 2.5 to 1.0 as of the end of any fiscal quarter.

On July 27, 2015, we amended the EXCO Resources Credit Agreement which decreased our borrowing base from $725.0 million to $600.0 million in connection with our semi-annual borrowing base redetermination. Subsequent redeterminations will occur semi-annually with us and the lenders having the right to request interim unscheduled redeterminations in certain circumstances. The next scheduled borrowing base redetermination for the EXCO Resources Credit Agreement will occur in the first quarter of 2016. The amendment also included modifications to our financial covenants, interest rate grid and borrowing base if we issue certain indebtedness subordinated to the EXCO Resources Credit Agreement. In the event of the incurrence of such indebtedness, the borrowing base will be automatically reduced by an amount equal to 33% of the principal amount of such indebtedness incurred; provided that in no event shall the borrowing base be less than $362.5 million . The interest rate grid will be increased by 50 bps if we incur such indebtedness in excess of $300.0 million . If we have not incurred $300.0 million in such indebtedness by December 31, 2016, the Secured Indebtedness Ratio will be temporarily suspended until the issuance of this indebtedness. The issuance of such indebtedness in excess of $300.0 million would result in a modification to the Interest Coverage Ratio to require that we maintain a ratio of at least 1.25 to 1.00 as of the end of any fiscal quarter and the termination of the Leverage Ratio.

While we believe our existing capital resources, including our cash flow from operations and borrowing capacity under the EXCO Resources Credit Agreement are sufficient to conduct our operations through 2015 and 2016, there are certain risks arising from depressed oil and natural gas prices and declines in production volumes that could impact our ability to meet debt covenants in future periods. Our ability to maintain compliance with these covenants may be negatively impacted if oil and/or natural gas prices remain depressed for an extended period of time.

We are currently evaluating transactions that would further enhance our liquidity and provide us with additional financial flexibility to accelerate the development of our oil and natural gas properties. This may include, but is not limited to, plans to refinance our existing indebtedness, incur additional senior or subordinated indebtedness, issue equity or divest assets. We may not undertake or be able to complete these transactions, and the extent and timing of these transactions are dependent upon financial, business, economic, regulatory and other factors. The issuance of subordinated indebtedness to the EXCO Resources Credit Agreement may result in a further reduction in our borrowing base.

2018 Notes

The 2018 Notes are guaranteed on a senior unsecured basis by a majority of EXCO’s subsidiaries, with the exception of certain non-guarantor subsidiaries and our jointly-held equity investments with BG Group. Our equity investments, other than OPCO, have been designated as unrestricted subsidiaries under the indenture governing the 2018 Notes.

As of June 30, 2015 , $750.0 million in principal was outstanding on the 2018 Notes. The unamortized discount on the 2018 Notes at June 30, 2015 was $5.2 million . Interest accrues at 7.5% per annum and is payable semi-annually in arrears on March 15 and September 15 of each year.

The indenture governing the 2018 Notes contains covenants, which may limit our ability and the ability of our restricted subsidiaries to:


•	incur or guarantee additional debt and issue certain types of preferred stock;


•	pay dividends on our capital stock or redeem, repurchase or retire our capital stock or subordinated debt;


•	make certain investments;


•	create liens on our assets;


•	enter into sale/leaseback transactions;


•	create restrictions on the ability of our restricted subsidiaries to pay dividends or make other payments to us;

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•	engage in transactions with our affiliates;


•	transfer or issue shares of stock of subsidiaries;


•	transfer or sell assets; and


•	consolidate, merge or transfer all or substantially all of our assets and the assets of our subsidiaries.

2022 Notes

As of June 30, 2015 , $500.0 million in principal was outstanding on the 2022 Notes. The 2022 Notes were issued at 100.0% of the principal amount and bear interest at a rate of 8.5% per annum, payable in arrears on April 15 and October 15 of each year.

The 2022 Notes rank equally in right of payment to any existing and future senior unsecured indebtedness of the Company (including the 2018 Notes) and are guaranteed on a senior unsecured basis by EXCO’s consolidated subsidiaries that are guarantors of the indebtedness under the EXCO Resources Credit Agreement. The 2022 Notes were issued under the same base indenture governing the 2018 Notes and the supplemental indenture governing the 2022 Notes contains similar covenants to those in the supplemental indenture governing the 2018 Notes.

10. Income taxes

We evaluate our estimated annual effective income tax rate based on current and forecasted business results and enacted tax laws on a quarterly basis and apply this tax rate to our ordinary income or loss to calculate our estimated tax liability or benefit. We have accumulated financial deferred tax assets primarily due to losses arising from impairments to the carrying value of our oil and natural gas properties that are subject to valuation allowances. Our valuation allowances increased $299.3 million for the six months ended June 30, 2015 . As a result of cumulative financial operating losses, we have recognized net valuation allowances of approximately $1.1 billion which have fully offset our net deferred tax assets as of June 30, 2015 . The valuation allowances will continue to be recognized until the realization of future deferred tax benefits are more likely than not to become utilized. The valuation allowances do not impact future utilization of the underlying tax attributes.

11. Related party transactions

OPCO serves as the operator of our wells in the Appalachia JV and we advance funds to OPCO on an as needed basis. We did not advance any funds to OPCO for the three and six months ended June 30, 2015 and 2014. OPCO may distribute any excess cash equally between us and BG Group when its operating cash flows are sufficient to meet its capital requirements. There are service agreements between us and OPCO whereby we provide administrative and technical services for which we are reimbursed. For the three and six months ended June 30, 2015 and 2014 , these transactions included the following:



	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2015		2014		2015		2014
Amounts received from OPCO	$	8,273	$	11,259	$	16,566	$	20,971

As of June 30, 2015 and December 31, 2014 , the amounts owed were as follows:



(in thousands)	June 30, 2015		December 31, 2014
Amounts due to EXCO (1)	$	2,447	$	2,799
Amounts due from EXCO (1)	5,502		—


(1)	Advances to OPCO are recorded in "Other current assets" on our Condensed Consolidated Balance Sheets. Any amounts we owe to OPCO are netted against the advance until the advances are utilized. If the advances are fully utilized, we record amounts owed in "Accounts payable and accrued liabilities" on our Condensed Consolidated Balance Sheets.

12. Services and Investment Agreement

On March 31, 2015 , we entered into a four year services and investment agreement with Energy Strategic Advisory Services LLC (“ESAS”), a wholly-owned subsidiary of Bluescape Resources Company LLC (“Bluescape”). As part of the agreement, ESAS will provide certain strategic advisory services, including the development and execution of a strategic improvement plan.

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The closing of the transactions contemplated by this agreement will be subject to certain conditions, including, among others, obtaining certain approvals from EXCO’s shareholders at EXCO's 2015 Annual Meeting of Shareholders, to be held on August 5, 2015 ("Annual Meeting"). At the closing, C. John Wilder, Executive Chairman of Bluescape, will become Executive Chairman of EXCO's Board of Directors.

Pursuant to the agreement, ESAS has agreed to purchase 5,882,353 common shares from EXCO, par value $0.001 per share, at a price per share of $1.70 , upon the effectiveness of a resale registration statement. In April 2015, ESAS deposited $10.0 million in escrow to be paid to EXCO upon acquisition of such shares. In addition, ESAS will be obligated to purchase at least $40.0 million additional common shares through open market purchases during the one year following the closing such that ESAS will own common shares of EXCO with an aggregate cost basis of at least $50.0 million as of the first anniversary of the closing date, subject to certain extensions and exceptions.

As consideration for the services to be provided under the agreement, EXCO will pay ESAS a monthly fee of $300,000 and an annual incentive payment of up to $2.4 million per year that will be based on EXCO’s common share price achieving certain performance hurdles as compared to a peer group, provided that payment for the services will be held in escrow and contingent upon completion of the entire first year of services and required investment in EXCO. If EXCO’s performance rank is in the bottom half of the peer group, then the incentive payment will be zero . The incentive payment increases linearly from $1.0 million to $2.4 million as EXCO’s performance rank increases from the 50th to 75th percentile, as compared to the peer group. If EXCO’s performance rank is in the 75th percentile or above, then the incentive payment will be $2.4 million . As of June 30, 2015, we did not recognize any expense for the annual incentive payment as a result of EXCO's performance rank.

As additional performance incentives, EXCO has issued warrants to ESAS in four tranches to purchase an aggregate of 80,000,000 common shares. The table below lists the number of common shares issuable upon exercise of the warrants at each exercise price and the term of the warrants.



Number of shares issuable	Exercise Price	Term (in months)
15,000,000	$2.75	49
20,000,000	$4.00	60
20,000,000	$7.00	72
25,000,000	$10.00	72

The warrants will vest on the fourth anniversary of the agreement and their exercisability is subject to EXCO’s common share price achieving certain performance hurdles as compared to the peer group. If EXCO’s performance rank is in the bottom half of the peer group, then the warrants will be forfeited and void. The number of the exercisable shares under the warrants increases linearly from 32,000,000 to 80,000,000 as EXCO’s performance rank increases from the 50th to 75th percentile, as compared to the peer group. If EXCO’s performance rank is in the 75th percentile or above, then all 80,000,000 warrants will be exercisable. The performance measurement period began on March 31, 2015 and will end on the fourth anniversary of the execution of the agreement.

Prior to March 31, 2019, if EXCO terminates the agreement for any reason other than for cause (as defined in the agreement), or ESAS terminates the agreement for cause (as defined in the agreement), then all of the warrants will fully vest and become exercisable. Prior to March 31, 2019, if ESAS terminates the agreement for any reason other than for cause, or EXCO terminates the agreement for cause, then all of the warrants will be canceled and forfeited. The closing of the transactions contemplated by this agreement is subject to certain conditions, including, among others, certain approvals from EXCO's shareholders. The warrants will automatically terminate and become void and of no force or effect if the closing does not occur. At the Annual Meeting, EXCO’s shareholders will be asked to vote on proposals to, among other things, approve (i) the issuance of the warrants, (ii) an amendment to EXCO’s Third Amended and Restated Articles of Incorporation, as amended (the “Charter”), to increase the authorized number of common shares available for issuance to 780,000,000 and (iii) an amendment to the Charter to include a waiver of the duty of directors to present corporate opportunities to EXCO. The approval by our shareholders of these proposals will allow us, subject to the satisfaction or waiver of the other conditions contained in the services and investment agreement, to consummate the closing of the agreement.

In accordance with FASB ASC Topic 718, Compensation - Stock Compensation ("ASC 718"), the grant date related to these warrants will be established upon approval of EXCO’s shareholders and closing of the transactions contemplated by the agreement and the related compensation costs will be recognized over the requisite service period from the grant date to the termination of the agreement. The fair value of the warrants on the grant date will be dependent on factors such as our share price, historical volatility, risk-free rate and performance relative to our peer group. The measurement of the warrants will be

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accounted for in accordance with ASC Topic 505-50, Equity-Based Payments to Non-Employees , which requires the warrants to be re-measured each interim reporting period until the completion of the services under the agreement.

13. Condensed consolidating financial statements

As of June 30, 2015 , the majority of EXCO’s subsidiaries were guarantors under the EXCO Resources Credit Agreement and the indentures governing the 2018 Notes and 2022 Notes. All of our non-guarantor subsidiaries were considered unrestricted subsidiaries under the indentures governing the 2018 Notes and 2022 Notes, with the exception of our equity investment in OPCO.

Set forth below are condensed consolidating financial statements of EXCO, the guarantor subsidiaries and the non-guarantor subsidiaries. The 2018 Notes and 2022 Notes, which were issued by EXCO Resources, Inc., are jointly and severally guaranteed by some of our subsidiaries (referred to as Guarantor Subsidiaries). For purposes of this footnote, EXCO Resources, Inc. is referred to as Resources to distinguish it from the Guarantor Subsidiaries. Each of the Guarantor Subsidiaries is a 100% owned subsidiary of Resources and the guarantees are unconditional as they relate to the assets of the Guarantor Subsidiaries.

The following financial information presents consolidating financial statements, which include:


•	Resources;


•	the Guarantor Subsidiaries;


•	the Non-Guarantor Subsidiaries;


•	elimination entries necessary to consolidate Resources, the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries; and


•	EXCO on a consolidated basis.

Investments in subsidiaries are accounted for using the equity method of accounting for the disclosures within this footnote. The financial information for the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries is presented on a combined basis. The elimination entries primarily eliminate investments in subsidiaries and intercompany balances and transactions.

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EXCO RESOURCES, INC.

CONDENSED CONSOLIDATING BALANCE SHEET

(Unaudited)

June 30, 2015



(in thousands)	Resources			Guarantor Subsidiaries			Non-Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	68,969		$	(19,062	)	$	—	$	—		$	49,907
Restricted cash	600			16,981			—		—			17,581
Other current assets	65,397			101,447			—		—			166,844
Total current assets	134,966			99,366			—		—			234,332
Equity investments	—			—			55,188		—			55,188
Oil and natural gas properties (full cost accounting method):
Unproved oil and natural gas properties and development costs not being amortized	—			248,196			—		—			248,196
Proved developed and undeveloped oil and natural gas properties	330,776			3,055,172			—		—			3,385,948
Accumulated depletion	(330,776		)	(2,206,700		)	—		—			(2,537,476		)
Oil and natural gas properties, net	—			1,096,668			—		—			1,096,668
Other property and equipment, net	905			23,032			—		—			23,937
Investments in and advances to affiliates, net	1,140,229			—			—		(1,140,229		)	—
Deferred financing costs, net	26,385			—			—		—			26,385
Derivative financial instruments	3,772			—			—		—			3,772
Goodwill	13,293			149,862			—		—			163,155
Deferred income taxes	18,669			—			—		—			18,669
Total assets	$	1,338,219		$	1,368,928		$	55,188	$	(1,140,229	)	$	1,622,106
Liabilities and shareholders' equity
Current liabilities	$	58,397		$	247,385		$	—	$	—		$	305,782
Long-term debt	1,537,243			—			—		—			1,537,243
Other long-term liabilities	—			36,502			—		—			36,502
Payable to parent	—			2,183,057			—		(2,183,057		)	—
Total shareholders' equity	(257,421		)	(1,098,016		)	55,188		1,042,828			(257,421		)
Total liabilities and shareholders' equity	$	1,338,219		$	1,368,928		$	55,188	$	(1,140,229	)	$	1,622,106

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EXCO RESOURCES, INC.

CONDENSED CONSOLIDATING BALANCE SHEET

December 31, 2014



(in thousands)	Resources			Guarantor Subsidiaries			Non-Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	86,837		$	(40,532	)	$	—	$	—		$	46,305
Restricted cash	—			23,970			—		—			23,970
Other current assets	110,145			150,346			—		—			260,491
Total current assets	196,982			133,784			—		—			330,766
Equity investments	—			—			55,985		—			55,985
Oil and natural gas properties (full cost accounting method):
Unproved oil and natural gas properties and development costs not being amortized	—			276,025			—		—			276,025
Proved developed and undeveloped oil and natural gas properties	335,838			3,516,235			—		—			3,852,073
Accumulated depletion	(330,771		)	(2,083,690		)	—		—			(2,414,461		)
Oil and natural gas properties, net	5,067			1,708,570			—		—			1,713,637
Other property and equipment, net	1,269			23,375			—		—			24,644
Investments in and advances to affiliates, net	1,746,931			—			—		(1,746,931		)	—
Deferred financing costs, net	30,636			—			—		—			30,636
Derivative financial instruments	2,138			—			—		—			2,138
Goodwill	13,293			149,862			—		—			163,155
Deferred income tax	35,935			—			—		—			35,935
Total assets	$	2,032,251		$	2,015,591		$	55,985	$	(1,746,931	)	$	2,356,896
Liabilities and shareholders' equity
Current liabilities	$	75,441		$	289,930		$	—	$	—		$	365,371
Long-term debt	1,446,535			—			—		—			1,446,535
Other long-term liabilities	271			34,715			—		—			34,986
Payable to parent	—			2,058,683			—		(2,058,683		)	—
Total shareholders' equity	510,004			(367,737		)	55,985		311,752			510,004
Total liabilities and shareholders' equity	$	2,032,251		$	2,015,591		$	55,985	$	(1,746,931	)	$	2,356,896

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EXCO RESOURCES, INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(Unaudited)

For the three months ended June 30, 2015



(in thousands)	Resources			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Consolidated
Revenues:
Oil and natural gas	$	(18	)	$	93,760		$	—		$	—	$	93,742
Costs and expenses:
Oil and natural gas production	(15		)	19,753			—			—		19,738
Gathering and transportation	—			24,785			—			—		24,785
Depletion, depreciation and amortization	245			61,413			—			—		61,658
Impairment of oil and natural gas properties	1,551			392,776			—			—		394,327
Accretion of discount on asset retirement obligations	—			568			—			—		568
General and administrative	(3,503		)	16,100			—			—		12,597
Other operating items	1,916			(382		)	—			—		1,534
Total costs and expenses	194			515,013			—			—		515,207
Operating loss	(212		)	(421,253		)	—			—		(421,465		)
Other income (expense):
Interest expense, net	(25,571		)	—			—			—		(25,571		)
Loss on derivative financial instruments	(6,631		)	—			—			—		(6,631		)
Other income	39			8			—			—		47
Equity loss	—			—			(535		)	—		(535		)
Net loss from consolidated subsidiaries	(421,780		)	—			—			421,780		—
Total other income (expense)	(453,943		)	8			(535		)	421,780		(32,690		)
Loss before income taxes	(454,155		)	(421,245		)	(535		)	421,780		(454,155		)
Income tax expense	—			—			—			—		—
Net loss	$	(454,155	)	$	(421,245	)	$	(535	)	$	421,780	$	(454,155	)

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EXCO RESOURCES, INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(Unaudited)

For the three months ended June 30, 2014



(in thousands)	Resources			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Oil and natural gas	$	306		$	169,795	$	12,865		$	—		$	182,966
Costs and expenses:
Oil and natural gas production	76			18,196		4,919			—			23,191
Gathering and transportation	—			24,899		1,139			—			26,038
Depletion, depreciation and amortization	727			61,840		4,686			—			67,253
Accretion of discount on asset retirement obligations	4			522		169			—			695
General and administrative	962			17,949		593			—			19,504
Other operating items	(12		)	2,977		8			—			2,973
Total costs and expenses	1,757			126,383		11,514			—			139,654
Operating income (loss)	(1,451		)	43,412		1,351			—			43,312
Other income (expense):
Interest expense, net	(25,301		)	—		(667		)	—			(25,968		)
Loss on derivative financial instruments	(13,958		)	—		(760		)	—			(14,718		)
Other income	59			14		4			—			77
Equity loss	—			—		(410		)	—			(410		)
Net income from consolidated subsidiaries	42,944			—		—			(42,944		)	—
Total other income (expense)	3,744			14		(1,833		)	(42,944		)	(41,019		)
Income (loss) before income taxes	2,293			43,426		(482		)	(42,944		)	2,293
Income tax expense	—			—		—			—			—
Net income (loss)	$	2,293		$	43,426	$	(482	)	$	(42,944	)	$	2,293

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EXCO RESOURCES, INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(Unaudited)

For the six months ended June 30, 2015



(in thousands)	Resources			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Consolidated
Revenues:
Oil and natural gas	$	4		$	180,058		$	—		$	—	$	180,062
Costs and expenses:
Oil and natural gas production	23			39,517			—			—		39,540
Gathering and transportation	—			50,500			—			—		50,500
Depletion, depreciation and amortization	524			123,623			—			—		124,147
Impairment of oil and natural gas properties	6,891			663,763			—			—		670,654
Accretion of discount on asset retirement obligations	4			1,120			—			—		1,124
General and administrative	(4,224		)	32,058			—			—		27,834
Other operating items	2,068			(722		)	—			—		1,346
Total costs and expenses	5,286			909,859			—			—		915,145
Operating loss	(5,282		)	(729,801		)	—			—		(735,083		)
Other income (expense):
Interest expense, net	(53,061		)	—			—			—		(53,061		)
Gain on derivative financial instruments	17,079			—			—			—		17,079
Other income	73			25			—			—		98
Equity loss	—			—			(1,300		)	—		(1,300		)
Net loss from consolidated subsidiaries	(731,076		)	—			—			731,076		—
Total other income (expense)	(766,985		)	25			(1,300		)	731,076		(37,184		)
Loss before income taxes	(772,267		)	(729,776		)	(1,300		)	731,076		(772,267		)
Income tax expense	—			—			—			—		—
Net loss	$	(772,267	)	$	(729,776	)	$	(1,300	)	$	731,076	$	(772,267	)

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EXCO RESOURCES, INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(Unaudited)

For the six months ended June 30, 2014



(in thousands)	Resources			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Oil and natural gas	$	3,296		$	351,856		$	26,286		$	—		$	381,438
Costs and expenses:
Oil and natural gas production	375			39,617			9,595			—			49,587
Gathering and transportation	—			48,348			2,303			—			50,651
Depletion, depreciation and amortization	1,884			125,507			9,137			—			136,528
Accretion of discount on asset retirement obligations	9			1,032			335			—			1,376
General and administrative	727			34,795			1,320			—			36,842
Other operating items	(16		)	5,731			4			—			5,719
Total costs and expenses	2,979			255,030			22,694			—			280,703
Operating income	317			96,826			3,592			—			100,735
Other income (expense):
Interest expense, net	(44,796		)	—			(1,336		)	—			(46,132		)
Loss on derivative financial instruments	(54,637		)	—			(3,103		)	—			(57,740		)
Other income (loss)	152			(37		)	8			—			123
Equity income	—			—			701			—			701
Net income from consolidated subsidiaries	96,651			—			—			(96,651		)	—
Total other expense	(2,630		)	(37		)	(3,730		)	(96,651		)	(103,048		)
Income (loss) before income taxes	(2,313		)	96,789			(138		)	(96,651		)	(2,313		)
Income tax expense	—			—			—			—			—
Net income (loss)	$	(2,313	)	$	96,789		$	(138	)	$	(96,651	)	$	(2,313	)

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EXCO RESOURCES, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(Unaudited)

For the six months ended June 30, 2015



(in thousands)	Resources			Guarantor Subsidiaries			Non-Guarantor Subsidiaries		Eliminations		Consolidated
Operating Activities:
Net cash provided by operating activities	$	19,024		$	89,180		$	—	$	—	$	108,204
Investing Activities:
Additions to oil and natural gas properties, gathering assets and equipment and property acquisitions	(1,174		)	(211,034		)	—		—		(212,208		)
Proceeds from disposition of property and equipment	686			6,711			—		—		7,397
Restricted cash	—			6,989			—		—		6,989
Net changes in advances to joint ventures	—			5,756			—		—		5,756
Equity method investments	—			(503		)	—		—		(503		)
Advances/investments with affiliates	(124,371		)	124,371			—		—		—
Net cash used in investing activities	(124,859		)	(67,710		)	—		—		(192,569		)
Financing Activities:
Borrowings under credit agreements	90,000			—			—		—		90,000
Payments for issuance of common shares, net	(2		)	—			—		—		(2		)
Payments of common share dividends	(15		)	—			—		—		(15		)
Deferred financing costs and other	(2,016		)	—			—		—		(2,016		)
Net cash provided by financing activities	87,967			—			—		—		87,967
Net increase (decrease) in cash	(17,868		)	21,470			—		—		3,602
Cash at beginning of period	86,837			(40,532		)	—		—		46,305
Cash at end of period	$	68,969		$	(19,062	)	$	—	$	—	$	49,907

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EXCO RESOURCES, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(Unaudited)

For the six months ended June 30, 2014



(in thousands)	Resources			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating Activities:
Net cash provided by (used in) operating activities	$	(54,003	)	$	310,651		$	11,474		$	—		$	268,122
Investing Activities:
Additions to oil and natural gas properties, gathering assets and equipment and property acquisitions	(1,639		)	(193,606		)	(2,522		)	—			(197,767		)
Proceeds from disposition of property and equipment	68,242			8,017			7			—			76,266
Restricted cash	—			5,349			—			—			5,349
Net changes in advances to joint ventures	—			(10,540		)	—			—			(10,540		)
Equity method investments	—			1,749			—			—			1,749
Distributions received from Compass	3,311			—			—			(3,311		)	—
Advances/investments with affiliates	107,240			(107,240		)	—			—			—
Net cash provided by (used) in investing activities	177,154			(296,271		)	(2,515		)	(3,311		)	(124,943		)
Financing Activities:
Repayments under credit agreements	(879,874		)	—			(2,550		)	—			(882,424		)
Proceeds received from issuance of 2022 Notes	500,000			—			—			—			500,000
Proceeds from issuance of common shares, net	271,772			—			—			—			271,772
Payments of common share dividends	(27,066		)	—			—			—			(27,066		)
Compass cash distribution	—			—			(3,311		)	3,311			—
Deferred financing costs and other	(10,066		)	—			—			—			(10,066		)
Net cash provided by (used in) financing activities	(145,234		)	—			(5,861		)	3,311			(147,784		)
Net increase in cash	(22,083		)	14,380			3,098			—			(4,605		)
Cash at beginning of period	81,840			(35,892		)	4,535			—			50,483
Cash at end of period	$	59,757		$	(21,512	)	$	7,633		$	—		$	45,878

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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.

Forward-looking statements

This Quarterly Report on Form 10-Q contains forward-looking statements, as defined in Section 27A of the Securities Act of 1933, as amended ("Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"). These forward-looking statements relate to, among other things, the following:


•	our future financial and operating performance and results;


•	our business strategy;


•	market prices;


•	our future use of derivative financial instruments; and


•	our plans and forecasts.

We have based these forward-looking statements on our current assumptions, expectations and projections about future events. We use the words “may,” “expect,” “anticipate,” “estimate,” “believe,” “continue,” “intend,” “plan,” “potential,” “project,” “budget” and other similar words to identify forward-looking statements. The statements that contain these words should be read carefully because they discuss future expectations, contain projections of results of operations or our financial condition and/or state other “forward-looking” information. We do not undertake any obligation to update or revise any forward-looking statements, except as required by applicable securities laws. These statements also involve risks and uncertainties that could cause our actual results or financial condition to materially differ from our expectations in this Quarterly Report on Form 10-Q, including, but not limited to:


•	fluctuations in the prices of oil and natural gas;


•	the availability of oil and natural gas;


•	future capital requirements and availability of financing;


•	our ability to meet our current and future debt service obligations, including our ability to maintain compliance with our debt covenants;


•	disruption of credit and capital markets and the ability of financial institutions to honor their commitments;


•	estimates of reserves and economic assumptions, including estimates related to acquisitions and dispositions of oil and natural gas properties;


•	geological concentration of our reserves;


•	risks associated with drilling and operating wells;


•	exploratory risks, including those related to our activities in shale formations;


•	discovery, acquisition, development and replacement of oil and natural gas reserves;


•	cash flow and liquidity;


•	timing and amount of future production of oil and natural gas;


•	availability of drilling and production equipment;


•	availability of water and other materials for drilling and completion activities;


•	marketing of oil and natural gas;


•	political and economic conditions and events in oil-producing and natural gas-producing countries;


•	title to our properties;


•	litigation;


•	competition;


•	our ability to attract and retain key personnel;


•	general economic conditions, including costs associated with drilling and operations of our properties;


•	our ability to comply with the listing requirements of, and maintain the listing of our common shares on, the New York Stock Exchange ("NYSE");


•	environmental or other governmental regulations, including legislation to reduce emissions of greenhouse gases, legislation of derivative financial instruments, regulation of hydraulic fracture stimulation and elimination of income tax incentives available to our industry;


•	receipt and collectability of amounts owed to us by purchasers of our production and counterparties to our derivative financial instruments;


•	decisions whether or not to enter into derivative financial instruments;


•	potential acts of terrorism;


•	our ability to manage joint ventures with third parties, including the resolution of any material disagreements and our partners’ ability to satisfy obligations under these arrangements;

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•	actions of third party co-owners of interests in properties in which we also own an interest;


•	fluctuations in interest rates;


•	our ability to effectively integrate companies and properties that we acquire; and


•	shareholder approval and closing of the transactions contemplated by the investment and services agreement with Energy Strategic Advisory Services LLC ("ESAS") and changes to our business strategy and other corporate actions developed in connection with the performance of the related services.

We believe that it is important to communicate our expectations of future performance to our investors. However, events may occur in the future that we are unable to accurately predict, or over which we have no control. We caution users of the financial statements not to place undue reliance on any forward-looking statements. When considering our forward-looking statements, keep in mind the cautionary statements in this Quarterly Report on Form 10-Q, and the risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2014 , filed with the Securities and Exchange Commission ("SEC") on February 25, 2015 , as amended by Amendment No. 1 to the Annual Report on Form 10-K/A, filed with the SEC on April 10, 2015 ("2014 Form 10-K").

Our revenues, operating results and financial condition depend substantially on prevailing prices for oil and natural gas and the availability of capital. Declines in oil or natural gas prices may have a material adverse effect on our financial condition, liquidity, results of operations, the amount of oil or natural gas that we can produce economically and the ability to fund our operations. Historically, oil and natural gas prices and markets have been volatile, with prices fluctuating widely, and they are likely to continue to be volatile.

Overview and history

We are an independent oil and natural gas company engaged in the exploration, exploitation, acquisition, development and production of onshore U.S. oil and natural gas properties with a focus on shale resource plays. Our principal operations are conducted in certain key U.S. oil and natural gas areas including Texas, Louisiana and the Appalachia region. Our primary strategy focuses on the exploitation and development of our shale resource plays and the pursuit of leasing and undeveloped acreage acquisition opportunities in Texas and Louisiana. We plan to carry out this strategy by executing on a strategic improvement plan that incorporates the following focus areas: (i) liability management; (ii) operational performance; (iii) capital deployment; (iv) risk management; (v) portfolio repositioning; and (vi) performance management. We believe this strategy will allow us to create long-term value for our shareholders.

Like all oil and natural gas exploration and production companies, we face the challenge of natural production declines. We attempt to offset the impact of this natural decline by implementing drilling and exploitation projects to identify and develop additional reserves and adding reserves through leasing and undeveloped acreage acquisition opportunities.

Recent developments

Capital budget update

In May 2015, the Company's board of directors approved an increase to our 2015 capital budget from $275.0 million to $300.0 million to pursue certain oil and natural gas leasing opportunities in EXCO's core operating areas of East Texas and South Texas. As a result of our ability to generate higher returns due to recent improvements to drilling and completion performance and cost reductions, we are currently evaluating potential increases to our development plans. In connection with the potential increased development plans, we are currently evaluating transactions that would further enhance our liquidity and provide additional financial flexibility. This may include, but is not limited to, plans to refinance our existing indebtedness, incur additional indebtedness, issue equity or divest assets.

EXCO Resources Credit Agreement amendments

On February 6, 2015, we amended our credit agreement ("EXCO Resources Credit Agreement") to include, among other things, a ratio of consolidated EBITDAX to consolidated interest expense ("Interest Coverage Ratio") and a ratio of senior secured indebtedness to consolidated EBITDAX ("Secured Indebtedness Ratio"). The ratio of consolidated funded indebtedness to consolidated EBITDAX ("Leverage Ratio") was suspended until the fourth quarter of 2016 and the ratio requirements thereafter were modified.

On July 27, 2015 , we amended the EXCO Resources Credit Agreement which decreased our borrowing base to $600.0 million in connection with our semi-annual borrowing base redetermination. The next scheduled borrowing base redetermination for the EXCO Resources Credit Agreement will occur in the first quarter of 2016 . The amendment also included modifications to our financial covenants, interest rate grid and borrowing base if we issue certain indebtedness

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subordinated to the EXCO Resources Credit Agreement. For a more detailed discussion of the amendments to the EXCO Resources Credit Agreement, see "Note. 9. Debt" in the Notes to our Condensed Consolidated Financial Statements.

Appointment of Chief Executive Officer and Chief Operating Officer

On March 31, 2015, our Board of Directors appointed Harold L. Hickey to the position of President and Chief Executive Officer of EXCO. Mr. Hickey previously served as EXCO's President and Chief Operating Officer since February 2013 and Chief Operating Officer since October 2005.

On April 17, 2015, our Board of Directors appointed Harold H. Jameson to the position of Chief Operating Officer of EXCO. Mr. Jameson most recently served as EXCO’s Vice President of Development and Production with primary responsibilities including the horizontal shale development drilling programs in the Haynesville, Eagle Ford and Marcellus assets. Mr. Jameson has served in a Vice President role at EXCO since March 2011.

Services and Investment Agreement

On March 31, 2015, we entered into a four year services and investment agreement with ESAS, a wholly-owned subsidiary of Bluescape Resources Company LLC (“Bluescape”). The agreement provides that ESAS will provide certain strategic advisory services including the development and execution of a strategic improvement plan. Pursuant to the agreement:


•	ESAS agreed to purchase 5,882,353 common shares from EXCO at a price of $1.70 per share, upon effectiveness of a resale registration statement;


•	ESAS agreed to purchase additional common shares of EXCO through open market purchases such that ESAS will own common shares of EXCO with an aggregate cost basis of at least $50.0 million as of the first anniversary of the closing date, subject to certain extensions and exceptions;


•	EXCO agreed to pay ESAS a monthly fee of $300,000 for the term of the agreement;


•	EXCO agreed to pay ESAS an annual incentive payment of up to $2.4 million per year based on the price of our common shares achieving certain performance hurdles as compared to a peer group; and


•	EXCO issued to ESAS warrants to purchase an aggregate of 80,000,000 common shares with exercise prices ranging from $2.75 to $10.00 per share. The warrants will vest on the fourth anniversary of the agreement and their exercisability is subject to EXCO’s common share price achieving certain performance hurdles as compared to the peer group.

The closing of the transactions under this agreement will be subject to certain conditions, including, among others, obtaining certain approvals from EXCO’s shareholders. At EXCO’s 2015 Annual Meeting of Shareholders to be held on August 5, 2015 (“Annual Meeting”), EXCO’s shareholders will be asked to vote on proposals to, among other things, approve (i) the issuance of the warrants, (ii) an amendment to EXCO’s Third Amended and Restated Articles of Incorporation, as amended (the “Charter”), to increase the authorized number of common shares available for issuance to 780,000,000 and (iii) an amendment to the Charter to include a waiver of the duty of directors to present corporate opportunities to EXCO. The approval by shareholders of these proposals will allow us, subject to the satisfaction or waiver of the other conditions contained in the services and investment agreement, to consummate the closing of the agreement and appoint C. John Wilder, Executive Chairman of Bluescape, as Executive Chairman of EXCO's Board of Directors. For a more detailed discussion of this agreement, see "Note. 12. Services and Investment Agreement" in the Notes to our Condensed Consolidated Financial Statements as well as EXCO's Current Report on Form 8-K that was filed with the SEC on April 2, 2015, as amended by Amendment No. 1 to EXCO's Current Report on Form 8-K/A, filed with the SEC on May 26, 2015.

Critical accounting policies

We consider accounting policies related to our estimates of proved reserves, oil and natural gas properties, derivative financial instruments, business combinations, share-based compensation, goodwill, revenue recognition, asset retirement obligations and income taxes as critical accounting policies. The policies include significant estimates made by management using information available at the time the estimates were made. However, these estimates could change materially if different information or assumptions are used. These policies are summarized in Management’s Discussion and Analysis of Financial Condition and Results of Operations in EXCO's 2014 Form 10-K.

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Our results of operations

A summary of key financial data for the three and six months ended June 30, 2015 and 2014 related to our results of operations is presented below:



	Three Months Ended June 30,						Quarter to quarter change			Six Months Ended June 30,						Period to period change
(dollars in thousands, except per unit prices)	2015			2014			Quarter to quarter change			2015			2014			Period to period change
Production:
Oil (Mbbls)	594			579			15			1,098			1,172			(74		)
Natural gas (Mmcf)	29,310			31,396			(2,086		)	56,764			64,472			(7,708		)
Total production (Mmcfe) (1)	32,874			34,870			(1,996		)	63,352			71,504			(8,152		)
Average daily production (Mmcfe)	361			383			(22		)	350			395			(45		)
Revenues before derivative financial instrument activities:
Oil	$	31,545		$	56,055		$	(24,510	)	$	52,428		$	108,385		$	(55,957	)
Natural gas	62,197			126,911			(64,714		)	127,634			273,053			(145,419		)
Total revenues	$	93,742		$	182,966		$	(89,224	)	$	180,062		$	381,438		$	(201,376	)
Oil and natural gas derivative financial instruments:
Gain (loss) on derivative financial instruments	$	(6,631	)	$	(14,718	)	$	8,087		$	17,079		$	(57,740	)	$	74,819
Average sales price (before cash settlements of derivative financial instruments):
Oil (per Bbl)	$	53.11		$	96.81		$	(43.70	)	$	47.75		$	92.48		$	(44.73	)
Natural gas (per Mcf)	2.12			4.04			(1.92		)	2.25			4.24			(1.99		)
Natural gas equivalent (per Mcfe)	2.85			5.25			(2.40		)	2.84			5.33			(2.49		)
Costs and expenses:
Oil and natural gas operating costs	$	14,135		$	15,827		$	(1,692	)	$	29,076		$	34,614		$	(5,538	)
Production and ad valorem taxes	5,603			7,364			(1,761		)	10,464			14,973			(4,509		)
Gathering and transportation	24,785			26,038			(1,253		)	50,500			50,651			(151		)
Depletion	61,115			65,800			(4,685		)	123,015			133,536			(10,521		)
Depreciation and amortization	543			1,453			(910		)	1,132			2,992			(1,860		)
General and administrative (2)	12,597			19,504			(6,907		)	27,834			36,842			(9,008		)
Interest expense, net	25,571			25,968			(397		)	53,061			46,132			6,929
Costs and expenses (per Mcfe):
Oil and natural gas operating costs	$	0.43		$	0.45		$	(0.02	)	$	0.46		$	0.48		$	(0.02	)
Production and ad valorem taxes	0.17			0.21			(0.04		)	0.17			0.21			(0.04		)
Gathering and transportation	0.75			0.75			—			0.80			0.71			0.09
Depletion	1.86			1.89			(0.03		)	1.94			1.87			0.07
Depreciation and amortization	0.02			0.04			(0.02		)	0.02			0.04			(0.02		)
Net income (loss) (3)	$	(454,155	)	$	2,293		$	(456,448	)	$	(772,267	)	$	(2,313	)	$	(769,954	)


(1)	Mmcfe is calculated by converting one barrel of oil into six Mcf of natural gas.


(2)	Share-based compensation expense included in general and administrative expense was $1.4 million and $1.7 million for the three months ended June 30, 2015 and 2014 , respectively, and $3.1 million and $3.3 million for the six months ended June 30, 2015 and 2014 , respectively.


(3)	Net loss for the three and six months ended June 30, 2015 included a $394.3 million and $670.7 million impairment of oil and natural gas properties, respectively. See "Note 5. Oil and natural gas properties" in the Notes to Condensed Consolidated Financial Statements for further discussion.

The following is a discussion of our financial condition and results of operations for the three and six months ended June 30, 2015 and 2014 . The comparability of our results of operations for the three and six months ended June 30, 2015 and 2014 was affected by:


•	the sale of Compass Productions Partners, LP ("Compass") during the fourth quarter of 2014;


•	fluctuations in oil and natural gas prices, which impact our oil and natural gas reserves, revenues, cash flows and net income or loss;

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•	impairments of our oil and natural gas properties during the first and second quarter of 2015;


•	mark-to-market gains and losses from our derivative financial instruments;


•	changes in proved reserves and production volumes and their impact on depletion;


•	the impact of declining natural gas production volumes from our reduced horizontal drilling activities in certain shale formations; and


•	significant changes in our capital structure as a result of the rights offering and related private placement of our common shares ("Rights Offering") in the first quarter of 2014 and debt financing transactions in 2014.

General

The availability of a ready market and the prices for oil and natural gas are dependent upon a number of factors that are beyond our control. These factors include, among other things:


•	supply and demand for oil and natural gas and expectations regarding supply and demand;


•	the level of domestic production;


•	the availability of imported oil and natural gas;


•	federal regulations generally prohibiting the export of U.S. crude oil;


•	federal regulations applicable to the export of, and construction of export facilities for natural gas;


•	political and economic conditions and events in foreign oil and natural gas producing nations, including embargoes, continued hostilities in the Middle East and other sustained military campaigns, and acts of terrorism or sabotage;


•	the ability of members of the Organization of Petroleum Exporting Countries to agree to and maintain oil price and production controls;


•	the cost and availability of transportation and pipeline systems with adequate capacity;


•	the cost and availability of other competitive fuels;


•	fluctuating and seasonal demand for oil, natural gas and refined products;


•	concerns about global warming or other conservation initiatives and the extent of governmental price controls and regulation of production;


•	regional price differentials and quality differentials of oil and natural gas;


•	the availability of refining capacity;


•	technological advances affecting oil and natural gas production and consumption;


•	weather conditions and natural disasters;


•	foreign and domestic government relations; and


•	overall domestic and global economic conditions.

Accordingly, in light of the many uncertainties affecting the supply and demand for oil, natural gas and refined petroleum products, we cannot accurately predict the prices or marketability of oil and natural gas from any producing well in which we have or may acquire an interest.

Oil and natural gas production, revenues and prices

The following table presents our production, revenue and average sales prices for the three and six months ended June 30, 2015 and 2014 :



	Three Months Ended June 30,
	2015							2014					Quarter to quarter change
(dollars in thousands, except per unit rate)	Production (Mmcfe)		Revenue			$/Mcfe		Production (Mmcfe)	Revenue		$/Mcfe		Production (Mmcfe)		Revenue			$/Mcfe
Producing region:
North Louisiana	21,049		$	47,391		$	2.25	21,374	$	89,776	$	4.20	(325	)	$	(42,385	)	$	(1.95	)
East Texas	3,664		9,269			2.53		1,994	8,905		4.47		1,670		364			(1.94		)
South Texas	3,874		30,082			7.77		3,575	50,890		14.23		299		(20,808		)	(6.46		)
Appalachia	4,291		7,018			1.64		5,629	20,225		3.59		(1,338	)	(13,207		)	(1.95		)
Other	(4	)	(18		)	4.50		2,298	13,170		5.73		(2,302	)	(13,188		)	(1.23		)
Total	32,874		$	93,742		$	2.85	34,870	$	182,966	$	5.25	(1,996	)	$	(89,224	)	$	(2.40	)

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	Six Months Ended June 30,
	2015					2014					Period to period change
(dollars in thousands, except per unit rate)	Production (Mmcfe)	Revenue		$/Mcfe		Production (Mmcfe)	Revenue		$/Mcfe		Production (Mmcfe)		Revenue			$/Mcfe
Producing region:
North Louisiana	39,690	$	94,061	$	2.37	44,666	$	196,609	$	4.40	(4,976	)	$	(102,548	)	$	(2.03	)
East Texas	7,702	21,087		2.74		3,932	17,869		4.54		3,770		3,218			(1.80		)
South Texas	7,119	49,632		6.97		7,079	95,708		13.52		40		(46,076		)	(6.55		)
Appalachia	8,839	15,278		1.73		11,125	41,673		3.75		(2,286	)	(26,395		)	(2.02		)
Other	2	4		2.00		4,702	29,579		6.29		(4,700	)	(29,575		)	(4.29		)
Total	63,352	$	180,062	$	2.84	71,504	$	381,438	$	5.33	(8,152	)	$	(201,376	)	$	(2.49	)

Production for the three and six months ended June 30, 2015 decrease d by 2.0 Bcfe, or 6% , and 8.2 Bcfe, or 11% , respectively, as compared with the same periods in 2014 . Significant components of the changes in production were a result of:

•

decrease d production of 0.3 Bcfe and 5.0 Bcfe for the three and six months ended June 30, 2015, respectively, in the North Louisiana region primarily due to production declines in excess of additional volumes from recent wells turned-to-sales. We also implemented additional rate restrictions during the flowback of recent wells turned-to-sales in this region, which reduced the initial production but are expected to improve the long-term performance of the wells.


•	increased production of 1.7 Bcfe and 3.8 Bcfe for the three and six months ended June 30, 2015, respectively, in the East Texas region due to additional development as we resumed our drilling program in this region during 2014.

•

increased production in the South Texas region of 0.3 Bcfe for the three months ended June 30, 2015 due to additional volumes from recent wells turned-to-sales in the Eagle Ford shale and Buda formation. Production in the South Texas region remained consistent for the six months ended June 30, 2015 compared to the same period in the prior year as the additional volumes from recent wells turned-to-sales offset higher downtime associated with flooding and construction and maintenance of central production facilities.

•

decrease d production of 1.3 Bcfe and 2.3 Bcfe for the three and six months ended June 30, 2015, respectively, in the Appalachia region as a result of production declines and higher downtime due to a pipeline disruption in Northeast Pennsylvania during 2015. The downtime as a result of the pipeline disruption reduced our production volumes by 0.3 Bcfe for the three and six months ended June 30, 2015.


•	decreased production in the Other region primarily due to the sale of our interest in Compass during the fourth quarter of 2014.

Oil and natural gas revenues for the three months ended June 30, 2015 decrease d by $89.2 million , or 49% , as compared with the same period in 2014 . The decrease in revenues was primarily the result of a decrease in oil and natural gas prices as well as decreased production. Our average natural gas sales price decreased 48% to $2.12 per Mcf for the three months ended June 30, 2015 from $4.04 per Mcf for the three months ended June 30, 2014 , primarily due to lower market prices. Our average sales price of oil per Bbl decreased 45% to $53.11 per Bbl for the three months ended June 30, 2015 from $96.81 per Bbl for the three months ended June 30, 2014 , primarily due to lower market prices.

Oil and natural gas revenues for the six months ended June 30, 2015 decrease d by $201.4 million , or 53% , as compared with the same period in 2014 . The decrease in revenues was primarily the result of a decrease in oil and natural gas prices as well as decreased production. Our average natural gas sales price decreased 47% to $2.25 per Mcf for the six months ended June 30, 2015 from $4.24 per Mcf for the six months ended June 30, 2014 , primarily due to lower market prices. Our average sales price of oil per Bbl decreased 48% to $47.75 per Bbl for the six months ended June 30, 2015 from $92.48 per Bbl for the six months ended June 30, 2014 , primarily due to lower market prices.

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Oil and natural gas operating costs

The following tables present our operating costs for the three and six months ended June 30, 2015 and 2014 :



	Three Months Ended June 30,
	2015								2014						Quarter to quarter change
(in thousands)	Lease operating expenses			Workovers and other		Total			Lease operating expenses		Workovers and other		Total		Lease operating expenses			Workovers and other			Total
Producing region:
North Louisiana	$	3,224		$	1,022	$	4,246		$	3,873	$	875	$	4,748	$	(649	)	$	147		$	(502	)
East Texas	936			683		1,619			775		42		817		161			641			802
South Texas	4,555			772		5,327			2,598		173		2,771		1,957			599			2,556
Appalachia	2,823			125		2,948			3,711		—		3,711		(888		)	125			(763		)
Other	(5		)	—		(5		)	3,240		540		3,780		(3,245		)	(540		)	(3,785		)
Total	$	11,533		$	2,602	$	14,135		$	14,197	$	1,630	$	15,827	$	(2,664	)	$	972		$	(1,692	)

	Three Months Ended June 30,
	2015								2014						Quarter to quarter change
(per Mcfe)	Lease operating expenses			Workovers and other		Total			Lease operating expenses		Workovers and other		Total		Lease operating expenses			Workovers and other			Total
Producing region:
North Louisiana	$	0.15		$	0.05	$	0.20		$	0.18	$	0.04	$	0.22	$	(0.03	)	$	0.01		$	(0.02	)
East Texas	0.26			0.19		0.45			0.39		0.02		0.41		(0.13		)	0.17			0.04
South Texas	1.18			0.20		1.38			0.73		0.05		0.78		0.45			0.15			0.60
Appalachia	0.66			0.03		0.69			0.66		—		0.66		—			0.03			0.03
Other	1.25			—		1.25			1.41		0.23		1.64		(0.16		)	(0.23		)	(0.39		)
Total	$	0.35		$	0.08	$	0.43		$	0.40	$	0.05	$	0.45	$	(0.05	)	$	0.03		$	(0.02	)



	Six Months Ended June 30,
	2015						2014						Period to period change
(in thousands)	Lease operating expenses		Workovers and other		Total		Lease operating expenses		Workovers and other		Total		Lease operating expenses			Workovers and other			Total
Producing region:
North Louisiana	$	6,428	$	2,385	$	8,813	$	7,489	$	2,330	$	9,819	$	(1,061	)	$	55		$	(1,006	)
East Texas	2,016		789		2,805		1,473		111		1,584		543			678			1,221
South Texas	10,833		812		11,645		8,449		298		8,747		2,384			514			2,898
Appalachia	5,658		125		5,783		7,084		6		7,090		(1,426		)	119			(1,307		)
Other	30		—		30		6,291		1,083		7,374		(6,261		)	(1,083		)	(7,344		)
Total	$	24,965	$	4,111	$	29,076	$	30,786	$	3,828	$	34,614	$	(5,821	)	$	283		$	(5,538	)

	Six Months Ended June 30,
	2015						2014						Period to period change
(per Mcfe)	Lease operating expenses		Workovers and other		Total		Lease operating expenses		Workovers and other		Total		Lease operating expenses			Workovers and other			Total
Producing region:
North Louisiana	$	0.16	$	0.06	$	0.22	$	0.17	$	0.05	$	0.22	$	(0.01	)	$	0.01		$	—
East Texas	0.26		0.10		0.36		0.37		0.03		0.40		(0.11		)	0.07			(0.04		)
South Texas	1.52		0.11		1.63		1.19		0.04		1.23		0.33			0.07			0.40
Appalachia	0.64		0.01		0.65		0.64		—		0.64		—			0.01			0.01
Other	15.00		—		15.00		1.34		0.23		1.57		13.66			(0.23		)	13.43
Total	$	0.39	$	0.07	$	0.46	$	0.43	$	0.05	$	0.48	$	(0.04	)	$	0.02		$	(0.02	)

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Oil and natural gas operating costs for the three and six months ended June 30, 2015 decrease d by $1.7 million , or 11% , and $5.5 million , or 16% , respectively, as compared with the same periods in 2014 . The decrease was primarily due to the sale of our interest in Compass in the fourth quarter of 2014 and cost reduction efforts in the North Louisiana and Appalachia regions. This was partially offset by higher oil and natural gas operating costs in the East Texas and South Texas regions as a result of additional producing wells compared to prior periods. Workovers and other expenses increased due to repairs of damage as a result of offset frac activities, including a significant amount of expenses incurred for non-operated wells in the North Louisiana region. The decrease in oil and natural operating costs per Mcfe was primarily due to the sale of our interest Compass which typically had a higher average cost per Mcfe compared to the average for the rest of our properties.

Gathering and transportation

Gathering and transportation expenses for the three months ended June 30, 2015 decrease d by $1.3 million , or 5% , as compared with the same period in 2014 primarily due to reduced rates on a renegotiated firm transportation contract in the North Louisiana region. Gathering and transportation expenses for the six months ended June 30, 2015 were consistent with the same period in 2014 . Gathering and transportation expenses were $0.80 per Mcfe for the six months ended June 30, 2015 as compared to $0.71 per Mcfe for the same period in 2014. The increase in gathering and transportation expenses on a per Mcfe basis was primarily due to lower volumes in relation to fixed costs under firm transportation contracts in the East Texas and North Louisiana regions.

Production and ad valorem taxes

The following table presents our production and ad valorem taxes on a percentage of revenue basis and per Mcfe basis for the three and six months ended June 30, 2015 and 2014 :



	Three Months Ended June 30,
	2015							2014
(in thousands, except per unit rate)	Production and ad valorem taxes			% of revenue		Taxes $/Mcfe		Production and ad valorem taxes		% of revenue		Taxes $/Mcfe
Producing region:
North Louisiana	$	2,468		5.2	%	$	0.12	$	2,029	2.3	%	$	0.09
East Texas	174			1.9	%	0.05		314		3.5	%	0.16
South Texas	2,607			8.7	%	0.67		3,209		6.3	%	0.90
Appalachia	365			5.2	%	0.09		597		3.0	%	0.11
Other	(11		)	N/M		N/M		1,215		9.2	%	0.53
Total	$	5,603		6.0	%	$	0.17	$	7,364	4.0	%	$	0.21

	Six Months Ended June 30,
	2015							2014
(in thousands, except per unit rate)	Production and ad valorem taxes			% of revenue		Taxes $/Mcfe		Production and ad valorem taxes		% of revenue		Taxes $/Mcfe
Producing region:
North Louisiana	$	4,962		5.3	%	$	0.13	$	4,291	2.2	%	$	0.10
East Texas	300			1.4	%	0.04		422		2.4	%	0.11
South Texas	4,707			9.5	%	0.66		6,461		6.8	%	0.91
Appalachia	503			3.3	%	0.06		1,204		2.9	%	0.11
Other	(8		)	N/M		N/M		2,595		8.8	%	0.55
Total	$	10,464		5.8	%	$	0.17	$	14,973	3.9	%	$	0.21

Production and ad valorem taxes for the three months ended June 30, 2015 decrease d by $1.8 million , or 24% , as compared with the same period in 2014 . Production and ad valorem taxes for the six months ended June 30, 2015 decrease d by $4.5 million , or 30% , as compared with the same period in 2014 . The decrease was primarily due to lower production volumes and lower commodity prices. The lower commodity prices primarily impacted properties located in Texas since production taxes are based on a fixed percentage of gross value of production sold. The decrease in the rate per Mcfe was primarily due to the sale of our interest in Compass in the fourth quarter of 2014 which typically had higher average production and ad valorem taxes per Mcfe compared to the average for the rest of our properties. Also, the recent wells turned-to-sales in the East Texas region received severance tax exemptions which reduced the rate per Mcfe.

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In our North Louisiana region, we currently receive severance tax holidays on certain horizontal wells which reduce the effective rate of these taxes. Our horizontal wells in the state of Louisiana are eligible for an exemption from severance taxes for the earlier of two years from the date of first production or until payout of qualified costs. In July 2014, the state of Louisiana increased its severance tax rate for wells that do not receive exemptions from $0.118 per Mcf to $0.163 per Mcf. In July 2015, the effective severance tax rate decreased to $0.158 per Mcf.

Depletion, depreciation and amortization

Depletion expense for the three months ended June 30, 2015 decrease d by $4.7 million , or 7% , as compared with the same period in 2014 primarily due to a decrease in production. On a per Mcfe basis, the depletion rate for the three months ended June 30, 2015 was $1.86 per Mcfe, compared with $1.89 per Mcfe in the same period in 2014 . Depletion expense for the six months ended June 30, 2015 decrease d by $10.5 million , or 8% , as compared with the same period in 2014 primarily due to a decrease in production and the depletion rate. On a per Mcfe basis, the depletion rate for the six months ended June 30, 2015 was $1.94 per Mcfe, compared with $1.87 per Mcfe in the same period in 2014 . The decrease in the depletion rate was primarily due to the impairment of our oil and natural gas properties during 2015, which lowered our depletable base.

Depreciation and amortization costs for the three months ended June 30, 2015 decreased by $0.9 million , or 63% , as compared with the same period in 2014 . Depreciation and amortization costs for the six months ended June 30, 2015 decrease d by $1.9 million , or 62% , as compared with the same period in 2014 . The decrease was primarily due to lower depreciable assets as a result of the sale of our interest in Compass.

Impairment of oil and natural gas properties

For the three and six months ended June 30, 2015 , we recorded impairments to our oil and natural gas properties of $394.3 million and $670.7 million , respectively, primarily due to the significant decline in oil and natural gas prices. The trailing twelve month reference prices at June 30, 2015 were $3.39 per Mmbtu for natural gas and $71.68 per Bbl of oil. For the three and six months ended June 30, 2014 , we did not record an impairment to our oil and natural gas properties. We may incur additional impairments to our oil and natural gas properties in 2015 if prices do not increase. The possibility and amount of any future impairment is difficult to predict, and will depend, in part, upon future oil and natural gas prices to be utilized in the ceiling test, estimates of proved reserves and future capital expenditures and operating costs.

If the simple average of oil and natural gas prices as of the first day of each month for the trailing 12-month period ended June 30, 2015 had been $3.07 per Mmbtu for natural gas and $60.99 per Bbl of oil while all other factors remained constant, our ceiling test limitation related to the net book value of our proved oil and natural gas properties would have been reduced by approximately $267 million . The aforementioned prices were calculated based on a 12-month simple average, which includes the oil and natural gas prices on the first day of the month for the 10 months ended July 2015 and the prices for July 2015 were held constant for the remaining two months. This reduction would have increased the impairment of our oil and natural gas properties pursuant to the ceiling test by approximately $267 million on a pro forma basis. The pro forma reduction in our ceiling test limitation is partially the result of a pro forma decrease in our proved undeveloped reserves of approximately 14% , which was primarily due to certain locations that would not be economical when using the pro forma prices. This calculation of the impact of lower commodity prices is prepared based on the presumption that all other inputs and assumptions are held constant with the exception of oil and natural gas prices. Therefore, this calculation strictly isolates the impact of commodity prices on our ceiling test limitation and proved reserves. The impact of price is only a single variable in the estimation of our proved reserves and other factors could have a significant impact on future reserves and the present value of future cash flows. The other factors that impact future estimates of proved reserves include, but are not limited to, extensions and discoveries, changes in costs, drilling results, revisions due to performance and other factors, changes in development plans and production. There are numerous uncertainties inherent in the estimation of proved reserves and accounting for oil and natural gas properties in subsequent periods and this pro forma estimate should not be construed as indicative of our development plans or future results.

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General and administrative

The following table presents our general and administrative expenses for the three and six months ended June 30, 2015 and 2014 :



	Three Months Ended June 30,									Six Months Ended June 30,
(in thousands, except per unit rate)	2015			2014			Quarter to quarter change			2015			2014			Period to period change
General and administrative expenses:
Gross general and administrative expenses	$	22,628		$	33,825		$	(11,197	)	$	48,985		$	64,877		$	(15,892	)
Technical services and service agreement charges	(3,947		)	(6,778		)	2,831			(8,773		)	(12,783		)	4,010
Operator overhead reimbursements	(3,315		)	(3,480		)	165			(6,544		)	(6,833		)	289
Capitalized salaries and share-based compensation	(2,769		)	(4,063		)	1,294			(5,834		)	(8,419		)	2,585
General and administrative expenses	$	12,597		$	19,504		$	(6,907	)	$	27,834		$	36,842		$	(9,008	)

General and administrative expenses for the three and six months ended June 30, 2015 decrease d by $6.9 million , or 35% , and $9.0 million , or 24% , respectively, compared with the same periods in the prior year. Significant components of the changes in general and administrative expenses were a result of:


•	decreased personnel costs of $7.1 million and $8.8 million for the three and six months ended June 30, 2015 , respectively, compared to the same periods in the prior year. The decrease is primarily the result of reductions in our workforce that occurred during the second quarter of 2014 and the first quarter of 2015;


•	decreased various other gross general and administrative expenses of $4.1 million and $7.1 million for the three and six months ended June 30, 2015 , respectively, compared to the same periods in the prior year. These decreases reflect our efforts to reduce our general and administrative costs such as office expenses, professional fees, travel and software licenses;


•	decreased technical services and service agreement recoveries of $2.8 million and $4.0 million for the three and six months ended June 30, 2015 , respectively, compared to the same periods in the prior year. These decreases were primarily a result of reduced headcount and lower recoveries in connection with the service agreement with Compass that terminated in April 2014; and


•	decreased capitalized salaries and share-based compensation expense of $1.3 million and $2.6 million for the three and six months ended June 30, 2015 , respectively, compared to the same periods in the prior year. These decreases were primarily as a result of a reduction in employee headcount.

The services and investment agreement entered into with ESAS could materially impact our general and administrative expenses in future periods. The agreement will result in cash payments ranging from $3.6 million to $6.0 million on an annual basis based on EXCO’s common share price achieving certain performance hurdles as compared to the peer group. As of June 30, 2015, we did not recognize any expense for the annual incentive payment as a result of EXCO's performance rank. ESAS also received warrants to purchase 80,000,000 common shares that are subject to exercisability restrictions based on our common share price achieving certain performance hurdles as compared to the peer group. We currently estimate the fair value of the warrants on the grant date will range from approximately $15.0 million to $20.0 million and the related compensation costs will be recognized over the requisite service period from the grant date to the termination of the agreement. This estimated range may differ from the actual fair value on the grant date and is dependent on factors such as our share price, historical volatility, risk-free rate and performance relative to our peer group. The closing of the transactions contemplated by this agreement is subject to certain conditions, including, among others, certain approvals from our shareholders.

Other operating items

Other operating items were net losses of $1.5 million and $1.3 million for the three and six months ended June 30, 2015 , respectively. The net losses for both periods primarily consisted of various legal expenses and other assessments. Other operating items were net losses of $3.0 million and $5.7 million for the three and six months ended June 30, 2014, respectively. The net losses for both periods primarily consisted of legal expenses.

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Interest expense, net

The following table presents our interest expense, net for the three and six months ended June 30, 2015 and 2014 :



	Three Months Ended June 30,									Six Months Ended June 30,
(in thousands)	2015			2014			Quarter to quarter change			2015			2014			Period to period change
Interest expense, net:
2018 Notes	$	14,420		$	14,393		$	27		$	28,833		$	28,780		$	53
2022 Notes	10,625			8,854			1,771			21,250			8,854			12,396
EXCO Resources Credit Agreement	2,019			5,096			(3,077		)	3,648			13,021			(9,373		)
Compass Production Partners Credit Agreement	—			604			(604		)	—			1,210			(1,210		)
Amortization of deferred financing costs	1,742			2,292			(550		)	6,267			4,263			2,004
Capitalized interest	(3,293		)	(5,465		)	2,172			(7,027		)	(10,255		)	3,228
Other	58			194			(136		)	90			259			(169		)
Total interest expense, net	$	25,571		$	25,968		$	(397	)	$	53,061		$	46,132		$	6,929

Interest expense, net for the three months ended June 30, 2015 decrease d $0.4 million from the same period in 2014 . The decrease in interest expense was primarily due to the write-off of the $2.6 million unamortized discount on the term loan under the EXCO Resources Credit Agreement upon repayment in April 2014. This was partially offset by a reduction in capitalized interest related to lower balances of unproved oil and natural gas properties.

Interest expense, net for the six months ended June 30, 2015 increase d $6.9 million from the same period in 2014 . The increase in interest expense was primarily due to higher average interest rates as a result of the issuance of the 2022 Notes and the acceleration of deferred financing costs associated with the reduction in our borrowing base under the EXCO Resources Credit Agreement in February 2015. This was partially offset by the write-off of the unamortized discount on the term loan under the EXCO Resources Credit Agreement upon repayment in April 2014, reduction in capitalized interest related to lower balances of unproved oil and natural gas properties and reduction in interest expense related to the Compass Production Partners Credit Agreement as a result of the sale of our remaining interest in Compass.

Derivative financial instruments

Our oil and natural gas derivative financial instruments resulted in net loss es of $6.6 million and $14.7 million for the three months ended June 30, 2015 and 2014 , respectively. Our oil and natural gas derivative financial instruments resulted in a net gain of $17.1 million and a net loss of $57.7 million for the six months ended June 30, 2015 and 2014 , respectively. Based on the nature of our derivative contracts, increases in the related commodity price typically result in a decrease to the value of our derivatives contracts. The significant fluctuations demonstrate the high volatility in oil and natural gas prices between each of the periods. The ultimate settlement amount of the unrealized portion of the derivative financial instruments is dependent on future commodity prices.

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The following table presents our oil and natural gas prices, before and after the impact of the cash settlement of our derivative financial instruments:



	Three Months Ended June 30,								Six Months Ended June 30,
Average realized pricing:	2015		2014			Quarter to quarter change			2015		2014			Period to period change
Natural gas (per Mcf):
Net price, excluding derivatives	$	2.12	$	4.04		$	(1.92	)	$	2.25	$	4.24		$	(1.99	)
Cash receipts (payments) on derivatives	0.70		(0.36		)	1.06			0.65		(0.45		)	1.10
Net price, including derivatives	$	2.82	$	3.68		$	(0.86	)	$	2.90	$	3.79		$	(0.89	)
Oil (per Bbl):
Net price, excluding derivatives	$	53.11	$	96.81		$	(43.70	)	$	47.75	$	92.48		$	(44.73	)
Cash receipts (payments) on derivatives	14.73		(6.02		)	20.75			18.36		(4.45		)	22.81
Net price, including derivatives	$	67.84	$	90.79		$	(22.95	)	$	66.11	$	88.03		$	(21.92	)
Natural gas equivalent (per Mcfe):
Net price, excluding derivatives	$	2.85	$	5.25		$	(2.40	)	$	2.84	$	5.33		$	(2.49	)
Cash receipts (payments) on derivatives	0.89		(0.42		)	1.31			0.90		(0.48		)	1.38
Net price, including derivatives	$	3.74	$	4.83		$	(1.09	)	$	3.74	$	4.85		$	(1.11	)

Our total cash receipts for the three months ended June 30, 2015 were $29.4 million , or $0.89 per Mcfe, compared to cash payments $14.7 million , or $0.42 per Mcfe, for the three months ended June 30, 2014 . Our total cash receipts for the six months ended June 30, 2015 were $57.0 million , or $0.90 per Mcfe, compared to cash payments $34.5 million , or $0.48 per Mcfe for the six months ended June 30, 2014 . The differences between the cash receipts during 2015 and cash payments during 2014 were primarily due to the significant decline in oil and natural gas prices. As noted above, the significant fluctuations between settlements on our derivative financial instruments demonstrate the volatility in commodity prices. We have recently updated our hedging strategy to increase the percentage of forecasted volumes covered by derivative financial instruments. Therefore, we plan to enter into additional derivative financial instruments in future periods as we implement this strategy.

Income taxes

Our effective income tax rate for the three and six months ended June 30, 2015 and 2014 was zero, primarily due to prior losses arising from impairments of oil and natural gas properties which created deferred tax assets. These deferred tax assets have been fully reserved with valuation allowances. Our accumulated valuation allowance as of June 30, 2015 was approximately $1.1 billion and can be used to offset future taxable income. We will continue to recognize deferred tax valuation allowances until the realization of deferred benefits becomes more likely than not. The effective income tax rates, excluding the impact of the valuation allowances, would have been 38.5% and 38.8% for the three and six months ended June 30, 2015 , respectively, and 162.1% and 150.6% for the three and six months ended June 30, 2014 , respectively. The effective tax rates, excluding the impact of the valuation allowance, differ from the statutory tax rates primarily due to permanent differences between the amounts recorded for financial reporting purposes and the amounts used for income tax purposes.

Our liquidity, capital resources and capital commitments

Overview

Our primary sources of capital resources and liquidity are internally generated cash flows from operations, borrowing capacity under the EXCO Resources Credit Agreement, dispositions of non-strategic assets, joint ventures and capital markets when conditions are favorable. Factors that could impact our liquidity, capital resources and capital commitments include the following:


•	the level of planned drilling activities;


•	the results of our ongoing drilling programs;


•	our ability to fund, finance or repay financing incurred in connection with acquisitions of oil and natural gas properties;


•	the integration of acquisitions of oil and natural gas properties or other assets;


•	our ability to effectively manage operating, general and administrative expenses and capital expenditure programs;

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•	reduced oil and natural gas revenues resulting from, among other things, depressed oil and natural gas prices and lower production from reductions to our drilling and development activities;


•	our ability to mitigate commodity price volatility with derivative financial instruments;


•	our ability to meet minimum volume commitments under firm transportation agreements and other fixed commitments;


•	potential acquisitions and/or dispositions of oil and natural gas properties or other assets, including our ability to obtain financing in order to fund the acquisition of properties under a participation agreement with a joint venture partner in the Eagle Ford shale;


•	reductions to our borrowing base; and


•	our ability to maintain compliance with debt covenants.

Recent events affecting liquidity

On February 6, 2015, we amended the financial covenants in the EXCO Resources Credit Agreement to include an Interest Coverage Ratio and Secured Indebtedness Ratio. The Leverage Ratio was suspended until the fourth quarter of 2016 and the ratio requirements thereafter were modified.

As a result of the decline in commodity prices, we have implemented cost reduction initiatives in order to mitigate the impact on our cash flows and liquidity. We have negotiated reductions in development and operating costs with several key vendors and plan to continue to pursue further reductions. Also, we have implemented initiatives to reduce our general and administrative costs including a 15% reduction in our workforce in February 2015. Our 2015 capital budget is expected to exceed our cash flows from operations and the deficit will be funded with borrowings under the EXCO Resources Credit Agreement.

The following table presents our liquidity as of June 30, 2015 :



(in thousands)	June 30, 2015
EXCO Resources Credit Agreement	$	292,492
2018 Notes (1)	750,000
2022 Notes	500,000
Total debt	$	1,542,492
Net debt	$	1,475,004
Borrowing base (2)	$	725,000
Unused borrowing base (2) (3)	$	425,935
Cash (4)	$	67,488
Unused borrowing base plus cash (2)	$	493,423


(1)	Excludes unamortized discount of $5.2 million as of June 30, 2015 .


(2)	On July 27, 2015 , we amended the EXCO Resources Credit Agreement which decreased our borrowing base to $600.0 million. On a pro forma basis, our unused borrowing base would have been $300.9 million and the unused borrowing base plus cash would have been $368.4 million if this amendment had occurred on June 30, 2015.


(3)	Net of $6.6 million in letters of credit as of June 30, 2015 .


(4)	Includes restricted cash of $17.6 million as of June 30, 2015 .

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We are currently evaluating potential increases to our development plans that could impact 2015 and future years. In connection with the potential increased development plans, we are currently evaluating transactions that would further enhance our liquidity and provide additional financial flexibility. This may include, but is not limited to, plans to refinance our existing indebtedness, incur additional indebtedness, issue equity or divest assets. The issuance of indebtedness subordinated to the EXCO Resources Credit Agreement may result in a further reduction in our borrowing base. As part of this evaluation process, the financing strategies will be designed to allow us to preserve our liquidity in order to execute on our development program and corporate strategies. We may not undertake or be able to complete these transactions, and the extent and timing of these transactions are dependent upon financial, business, economic, regulatory and other factors.

Credit agreements and long-term debt

As of June 30, 2015 , our consolidated debt consisted of the EXCO Resources Credit Agreement, the 2018 Notes and the 2022 Notes (see "Note 9. Debt" in the Notes to our Condensed Consolidated Financial Statements for a further description of each agreement).

As of June 30, 2015 , we were in compliance with the financial covenants (each as defined in the EXCO Resources Credit Agreement):


•	our consolidated current ratio of 2.1 to 1.0 exceeded the minimum of at least 1.0 to 1.0 as of the end of any fiscal quarter;


•	our Interest Coverage Ratio of 2.8 to 1.0 exceeded the minimum of at least 2.0 to 1.0 as of the end of any fiscal quarter; and


•	our Secured Indebtedness Ratio of 1.0 to 1.0 did not exceed the maximum of 2.5 to 1.0 as of the end of any fiscal quarter.

The indentures governing the 2018 Notes and 2022 Notes contain incurrence covenants which restrict our ability to incur additional indebtedness, incur liens to secure any such additional indebtedness or pledge assets. These incurrence covenants include a limitation on our indebtedness that is based, in part, on the greater of a monetary threshold or the value of our assets. Therefore, our ability to incur additional indebtedness could be limited under the indentures to the extent that low oil and natural gas prices negatively impact the value of our assets.

There are certain risks arising from volatility in oil and/or natural gas prices that could restrict our liquidity or impact our ability to meet debt covenants in future periods. Accordingly, our ability to effectively execute our corporate strategies and manage our operating, general and administrative expenses and capital expenditure programs is critical to our financial condition, liquidity and our results of operations. Significant reductions in our borrowing capacity as a result of a redetermination of our borrowing base under the EXCO Resources Credit Agreement could have an impact on our capital resources and liquidity. The borrowing base redetermination process considers assumptions related to future commodity prices; therefore, our borrowing capacity could be negatively impacted by further declines in oil and natural gas prices. Our ability to maintain compliance with debt covenants is negatively impacted when oil and/or natural gas prices and/or production declines over an extended period of time. In particular, our Interest Coverage Ratio, Secured Indebtedness Ratio, and Leverage Ratio, each as defined in the EXCO Resources Credit Agreement, are computed using EBITDAX for a trailing period.

In the event that our liquidity is not sufficient to fund our operating activities and development program or we are not able to meet our debt covenants in future periods, we may attempt to refinance all or part of our existing debt, sell assets, incur additional indebtedness or raise equity. These alternatives may not be available on terms acceptable to us, which could adversely affect our business, financial condition and results of operations. Further, failing to comply with the financial and other restrictive covenants in the EXCO Resources Credit Agreement, 2018 Notes and 2022 Notes could result in an event of default, which could adversely affect our business, financial condition and results of operations. Also, we may be required to surrender certain assets pursuant to the security provisions of the EXCO Resources Credit Agreement if we are not able to meet our debt covenants in future periods. See "Note 9. Debt" in the Notes to our Condensed Consolidated Financial Statements for a description of our covenants under the EXCO Resources Credit Agreement, 2018 Notes and 2022 Notes.

Capital expenditures

For the six months ended June 30, 2015 , our capital expenditures totaled $178.4 million , of which $151.4 million was related to drilling and development activities. Our development program during the six months ended June 30, 2015 included three operated drilling rigs focused primarily on the Haynesville and Bossier shales in the Shelby area of East Texas. Our development activities in North Louisiana during 2015 included limited drilling as well as completion activities in Caddo and DeSoto Parishes, Louisiana. We continued our development program in the South Texas region which included an average of one operated drilling rig focused on the Eagle Ford shale and the Buda formation. Our capital expenditures in the South Texas

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region also included the leasing of acreage in Zavala County, Texas. We drilled an appraisal well in the Marcellus shale in Northeast Pennsylvania which is expected to be turned-to-sales during the second half of the year. In response to the downturn in commodity prices, we have negotiated reductions in service costs with certain key vendors utilized in our drilling and completion activities and plan to pursue further reductions.

The following table presents our capital expenditures for the six months ended June 30, 2015 and our forecasted capital expenditures for the remainder of 2015. In May 2015, our board of directors approved an increase to our capital budget from $275.0 million to $300.0 million to pursue certain oil and natural gas leasing opportunities in EXCO's core operating areas of East Texas and South Texas. Our capital program allocates a higher proportionate share of our expenditures towards the beginning of the year primarily as a result of completion activities related to wells that were in various stages of the development process at the end of 2014.



	Six Months Ended		July - December Forecast		Full Year Forecast
(in thousands)	June 30, 2015		2015		2015
Capital expenditures:
Development capital expenditures	$	151,361	$	63,639	$	215,000
Field operations, gathering and water pipelines	3,634		12,366		16,000
Lease purchases and seismic	8,843		20,157		29,000
Corporate and other	14,570		25,430		40,000
Total	$	178,408	$	121,592	$	300,000

We are currently evaluating potential increases to our development plans that could impact 2015 and future years. The potential additional development would be focused on drilling and completion activities in our East Texas and South Texas regions.

Capital commitments

We have a participation agreement with a joint venture partner in our core area of the Eagle Ford shale to mitigate the impact of development expenditures on our capital resources and liquidity ("Participation Agreement"). The Participation Agreement requires us to offer to purchase our joint venture partner's interests in wells that have been on production for at least one year. The offers are made on a quarterly basis for a group of wells based on prices defined in the Participation Agreement, subject to specific well criteria and return hurdles. The wells included in the offer process that meet all of the specific well criteria are deemed to be "Committed Wells" and wells that do not meet the criteria are deemed to be "Uncertainty Wells." Our joint venture partner is required to accept our offer on Committed Wells if they meet the established return thresholds and may accept our offers on Uncertainty Wells.

As of June 30, 2015 , we had spud 92 wells and turned-to-sales 87 wells since the inception of the Participation Agreement. The most recent well subject to the Participation Agreement was drilled in the first quarter of 2015 and our development plans do not include drilling any additional wells subject to the Participation Agreement during the remainder of 2015. There were 5 wells in various stages of development as of June 30, 2015 that will be turned-to-sales during the remainder of 2015 and included in future offers. The timing of these offers is dependent upon the date these wells are turned-to-sales, downtime during the year preceding the offer process and other factors. As of June 30, 2015 , we had approximately 90 locations remaining to be drilled in the area under the Participation Agreement. The future development plans in this region are dependent on market conditions and operational decisions that impact the number of locations including spacing between wells, lateral lengths and other factors. Furthermore, any of the remaining locations that are not drilled prior to July 31, 2018 will not be subject to the offer process.

We revised our second offer in July 2015 based on an independent evaluation from a reserve engineering firm, which included a total of 10 gross (5.2 net) wells for a total offer price of $16.3 million . Our joint venture partner did not accept our offer and these wells will be included in future offers. The offer for these wells did not meet the specified return hurdle in the Participation Agreement; therefore, our joint venture partner was not required to sell us the wells included in this offer. Our next offer will occur in the third quarter of 2015, which is expected to include a total of up to 26 gross ( 13.6 net) wells. The total purchase price will depend on our joint venture partner's acceptance of the offer as well as our joint venture partner's option to retain an undivided 15% of their collective interest in certain wells. If our joint venture partner accepts the offer, we expect the offer and acceptance process to be completed and the acquisition to close in the third quarter of 2015.

We currently estimate that 10 to 15 additional gross wells will qualify to be included in offers during the remainder of 2015 and 40 to 50 additional gross wells will qualify to be included in offers during 2016. However, the extent and timing of

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these acquisitions in future periods will be dependent on the terms and conditions of the offer process. The amounts for future acquisitions will depend on future reserves, commodity prices, capital expenditures, production, revenues, expenses, as well as our joint venture partner's intentions to accept offers and exercise their right to retain an interest. As such, it is not possible to reasonably estimate the amounts for future acquisitions under the agreement. If our offers for the wells included in the first four quarters of the offer process do not meet the established return thresholds, we must increase our offer to meet the thresholds or our joint venture partner will no longer be required to accept future offers for Committed Wells that meet the established return thresholds. However, we are required to continue to offer to purchase wells under the agreement and our joint venture partner will retain the ability to accept or decline our offer.

Historical sources and uses of funds

Our primary sources of cash for the six months ended June 30, 2015 were cash flows from operations and borrowings under the EXCO Resources Credit Agreement.

Net increases (decreases) in cash are summarized as follows:



	Six Months Ended June 30,
(in thousands)	2015			2014
Net cash provided by operating activities	$	108,204		$	268,122
Net cash used in investing activities	(192,569		)	(124,943		)
Net cash provided by (used in) financing activities	87,967			(147,784		)
Net increase (decrease) in cash	$	3,602		$	(4,605	)

Operating activities

The primary factors impacting our cash flows from operating activities generally include: (i) levels of production from our oil and natural gas properties, (ii) prices we receive from sales of oil and natural gas production, including settlement proceeds or payments related to our oil and natural gas derivatives, (iii) operating costs of our oil and natural gas properties, (iv) costs of our general and administrative activities and (v) interest expense. Our cash flows from operating activities have historically been impacted by fluctuations in oil and natural gas prices and our production volumes.

For the six months ended June 30, 2015 , our net cash provided by operating activities was $108.2 million as compared to $268.1 million for the six months ended June 30, 2014 . The decrease was primarily attributable to lower revenues from lower production and decreased oil and natural gas prices. In addition, the decrease was due to changes in accounts payable resulting from lower collections from advance billings to other working interest owners in the Eagle Ford shale as well as lower collections of revenues that are payable to other owners. The decrease was partially offset by cash receipts of $57.0 million on derivative contracts for the six months ended June 30, 2015 compared to cash payments of $34.5 million for the same period in the prior year.

Investing activities

Our investing activities consist primarily of drilling and development expenditures, acquisitions and divestitures. Future acquisitions are dependent on oil and natural gas prices, availability of producing properties and attractive acreage, acceptable rates of return, availability of borrowing capacity under the EXCO Resources Credit Agreement and availability of other sources of capital.

For the six months ended June 30, 2015 , our net cash used in investing activities was $192.6 million primarily due to our drilling and development activities in the East Texas, North Louisiana and South Texas regions. The cash used in investing activities for the six months ended June 30, 2015 included a significant amount of expenditures related to the wells drilled in 2014. For the six months ended June 30, 2014 , our net cash used in investing activities was $124.9 million primarily due to drilling and development activities in the East Texas, North Louisiana and South Texas regions. This was partially offset by approximately $68.2 million of proceeds received from the sale of our interest in certain non-operated assets in the Permian Basin.

Financing activities

For the six months ended June 30, 2015 , our net cash provided by financing activities was $88.0 million primarily due to $90.0 million in borrowings under the EXCO Resources Credit Agreement. For the six months ended June 30, 2014 , our net cash used in financing activities was $147.8 million primarily due to $879.9 million in payments of the outstanding borrowings

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under the EXCO Resources Credit Agreement, $27.1 million of dividend payments and $10.1 million of deferred financing costs primarily related to issuance of the 2022 Notes. This was offset by $500.0 million of gross proceeds received from issuance of the 2022 Notes and approximately $272.9 million of gross proceeds received from the Rights Offering.

Derivative financial instruments

Our production is generally sold at prevailing market prices. However, we periodically enter into oil and natural gas derivative contracts for a portion of our production when market conditions are deemed favorable and oil and natural gas prices exceed our minimum internal price targets. Our objective in entering into oil and natural gas derivative contracts is to mitigate the impact of commodity price fluctuations and achieve a more predictable cash flow associated with our operations. These transactions limit our exposure to declines in prices, but also limit the benefits we would realize if oil and natural gas prices increase.

Our derivative financial instruments are comprised of oil and natural gas swaps, basis swaps, three-way collars and call option contracts. As of June 30, 2015 , we had derivative financial instruments in place for the volumes and prices shown below:



(in thousands, except prices)	NYMEX gas volume - Mmbtu	Weighted average contract price per Mmbtu		NYMEX oil volume - Bbls	Weighted average contract price per Bbl
Swaps:
Remainder of 2015	25,300	$	4.02	644	$	86.44
2016	16,470	3.30		732	64.82
2017	7,300	3.42		—	—
Basis swaps:
Remainder of 2015	—	—		46	6.10
Call options:
Remainder of 2015	10,120	4.29		184	100.00
Three-way collars:
Remainder of 2015	13,800			—
Sold call		4.47			—
Purchased put		3.83			—
Sold put		3.33			—
2016	10,980			—
Sold call		4.80			—
Purchased put		3.90			—
Sold put		3.40			—

We had derivative financial instruments that covered approximately 65% of production volumes during both the three and six months ended June 30, 2015 .

See further details on our derivative financial instruments in "Note 7. Derivative financial instruments" and "Note 8. Fair value measurements" in the Notes to our Condensed Consolidated Financial Statements.

Off-balance sheet arrangements

As of June 30, 2015 , we had no arrangements or any guarantees of off-balance sheet debt to third parties.

Contractual obligations and commercial commitments

There have been no material changes outside the ordinary course of business to our contractual obligations and commercial commitments since December 31, 2014 .

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Some of the information below contains forward-looking statements. The primary objective of the following information is to provide forward-looking quantitative and qualitative information about our potential exposure to market risks. The term “market risk” refers to the risk of loss arising from adverse changes in oil and natural gas prices, interest rates charged on borrowings and earned on cash equivalent investments, and adverse changes in the market value of marketable securities. The disclosure is not meant to be a precise indicator of expected future losses, but rather an indicator of reasonably possible losses. This forward-looking information provides an indicator of how we view and manage our ongoing market risk exposures. Our market risk sensitive instruments were entered into for hedging and investment purposes, not for trading purposes.

Commodity price risk

Our objective in entering into derivative financial instruments is to manage our exposure to commodity price fluctuations, protect our returns on investments, and achieve a more predictable cash flow in connection with our financing activities and borrowings related to these activities. These transactions limit exposure to declines in prices, but also limit the benefits we would realize if oil and natural gas prices increase. When prices for oil and natural gas are volatile, a significant portion of the effect of our derivative financial instrument management activities consists of non-cash income or expense due to changes in the fair value of our derivative financial instrument contracts. Cash losses or gains only arise from payments made or received on monthly settlements of contracts or if we terminate a contract prior to its expiration.

Our most significant market risk exposure is in the pricing applicable to our oil and natural gas production. Realized pricing is primarily driven by the prevailing worldwide price for crude oil and spot market prices for natural gas as well as local and regional differentials. Pricing for oil and natural gas production is volatile.

Our use of derivative financial instruments could have the effect of reducing our revenues and the value of our securities. For the six months ended June 30, 2015 , a $1.00 increase in the average commodity price per Mcfe would have resulted in an increase in cash settlement payments (or a decrease in settlements received) of approximately $27.3 million for our oil and natural gas swap contracts. The ultimate settlement amount of our outstanding derivative financial instrument contracts is dependent on future commodity prices. We may incur significant unrealized losses in the future from our use of derivative financial instruments to the extent market prices increase and our derivatives contracts remain in place.

Interest rate risk

At June 30, 2015 , our exposure to interest rate changes related primarily to borrowings under the EXCO Resources Credit Agreement. The interest rate per annum on the 2018 Notes is fixed at 7.5% and the interest rate per annum on the 2022 Notes is fixed at 8.5%. Interest is payable on borrowings under the EXCO Resources Credit Agreement based on a floating rate as more fully described in "Note 9. Debt" in the Notes to our Condensed Consolidated Financial Statements. At June 30, 2015 , we had approximately $292.5 million in outstanding borrowings under the EXCO Resources Credit Agreement. A 1% increase in interest rates (100 bps) based on the variable borrowings as of June 30, 2015 would result in an increase in our interest expense of approximately $2.9 million per year. The interest we pay on these borrowings is set periodically based upon market rates.

Item 4. Controls and Procedures

Disclosure controls and procedures . Pursuant to Rule 13a-15(b) under the Exchange Act, EXCO's management has evaluated, under the supervision and with the participation of our principal executive officer and principal financial officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act), as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer have concluded that EXCO's disclosure controls and procedures were effective as of June 30, 2015 to ensure that information that is required to be disclosed by EXCO in the reports it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms and (ii) accumulated and communicated to EXCO's management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in internal control over financial reporting. There were no changes in EXCO's internal control over financial reporting that occurred during the quarter ended June 30, 2015 that have materially affected, or are reasonably likely to materially affect, EXCO's internal control over financial reporting.

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PART II—OTHER INFORMATION


Item 1.	Legal Proceedings

In the ordinary course of business, we are periodically a party to various litigation matters. We do not believe that any resulting liability from existing legal proceedings, individually or in the aggregate, will have a material adverse effect on our results of operations or financial condition.


Item 1A.	Risk Factors

During the second quarter of 2015, there were no material changes to the Risk Factors disclosed in our 2014 Form 10-K, except for the following:

If we fail to comply with the continued listing standards of the NYSE, it may result in a delisting of our common shares from the NYSE.

Our common shares are currently and have been listed for trading on the NYSE, and the continued listing of our common shares on the NYSE is subject to our compliance with a number of listing standards. To maintain compliance with these continued listing standards, the Company is required to maintain an average closing price of $1.00 or more over a consecutive 30 trading-day period. Beginning in early July 2015, the closing price of our common shares, as reported on the NYSE, has been less than $1.00. There can be no assurance that we will be able to continue to meet the continued listing standards of the NYSE. The delisting of our common shares from the NYSE could result in even further reductions in our share price, would substantially limit the liquidity of our common shares, and materially adversely affect our ability to raise capital or pursue strategic restructuring, refinancing or other transactions on acceptable terms, or at all. Delisting from the NYSE could also have other negative results, including the potential loss of confidence by institutional investors.

We currently have negative shareholders’ equity, which could adversely affect our financial condition and otherwise adversely impact our business and growth prospects.

We have recently experienced losses as a result of the recent decline in oil and natural gas prices, and, as of June 30, 2015, we had negative shareholders’ equity of $257.4 million, which means that our total liabilities exceeded our total assets. The continuing existence of negative shareholders’ equity may limit our ability to obtain future debt or equity financing or to pay future dividends or other distributions. If we are unable to obtain financing in the future, it could have a negative effect on our operations and our liquidity.


Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

Issuer repurchases of common shares

The following table details our repurchase of common shares for the three months ended June 30, 2015 :



Period	Total Number of Shares Purchased (1)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions) (1)
April 1, 2015 - April 30, 2015	—	$	—	—	$	192.5
May 1, 2015 - May 31, 2015	—	—		—	192.5
June 1, 2015 - June 30, 2015	—	—		—	192.5
Total	—	$	—	—


(1)	On July 19, 2010, we announced a $200.0 million share repurchase program.

Item 5. Other Information

Pursuant to Section 13(r) of the Exchange Act, if during the quarter ended June 30, 2015, we or any of our “affiliates,” as that term is defined in Rule 12b-2 promulgated under the Exchange Act (“Rule 12b-2”), had engaged in certain transactions with Iran or with persons or entities designated under certain executive orders, we would be required to disclose information

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regarding such transactions in this Quarterly Report on Form 10-Q as required under Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 (“ITRA”). During the quarter ended June 30, 2015, we did not engage in any transactions with Iran or with persons or entities related to Iran.

Oaktree Capital Group Holdings GP, LLC, an affiliate of Oaktree Capital Management, LP (“Oaktree”), is the beneficial owner of approximately 16.5% of our common shares. B. James Ford, a Managing Director of Oaktree, has served on our Board of Directors since 2007. Additionally, pursuant to a letter agreement among the Company, Oaktree and certain of the funds managed by Oaktree, Oaktree has the right to nominate a director to the Company’s Board of Directors at any annual meeting of shareholders so long as Oaktree beneficially owns at least 10,000,000 of our common shares. As a result of the foregoing, Oaktree may be deemed to be an affiliate of the Company under Rule 12b-2.

Oaktree has informed us that a company indirectly owned by funds managed by Oaktree has engaged in a transaction with Iran or with persons or entities related to Iran during the quarter ended June 30, 2015. Because of the broad definition of the term affiliate under Rule 12b-2, this company that is indirectly owned by funds managed by Oaktree may also be deemed to be an affiliate of ours. Accordingly, we are including the following disclosure, which has been provided to us by Oaktree and which we have not independently verified, to satisfy our reporting requirements under ITRA:

On or around April 28, 2015, the Maersk Tigris, a Marshall Islands-flagged vessel (the “Vessel”) that is indirectly owned by funds managed by Oaktree as investment manager, was seized by the Iran Revolutionary Guard Corps and escorted towards the Iranian port of Bandar Abbas. The Vessel was detained by the Iran Revolutionary Guard until May 7, 2015. During the pendency of the Vessel’s seizure, the Vessel’s ship master purchased certain necessary provisions to maintain the health, safety and/or security of the Vessel’s crew. Neither the Vessel nor any entity affiliated with the Vessel derived any revenues or profits from this activity, and neither the Vessel nor any entity affiliated with the Vessel intends for the activity to continue.


Item 6.	Exhibits

See “Index to Exhibits” for a description of our exhibits.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		EXCO RESOURCES, INC.
		(Registrant)

Date:	July 27, 2015	/s/ Harold L. Hickey
		Harold L. Hickey
		Chief Executive Officer and President

		/s/ Richard A. Burnett
		Richard A. Burnett
		Vice President, Chief Financial Officer
		and Chief Accounting Officer

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INDEX TO EXHIBITS

Exhibit


Number	Description of Exhibits


2.1	Haynesville Purchase and Sale Agreement, by and among Chesapeake Louisiana, L.P., Empress, L.L.C., Empress Louisiana Properties, L.P. and EXCO Operating Company, LP, dated July 2, 2013, filed as an Exhibit to EXCO’s Quarterly Report on Form 10-Q for the Quarter Ended September 30, 2013 filed on October 30, 2013 and incorporated by reference herein.


2.2	Eagle Ford Purchase and Sale Agreement, by and between Chesapeake Exploration, L.L.C. and EXCO Operating Company, LP, dated July 2, 2013, filed as an Exhibit to EXCO’s Quarterly Report on Form 10-Q for the Quarter Ended September 30, 2013 filed on October 30, 2013 and incorporated by reference herein.


2.3	Contribution Agreement, by and among BG US Gathering Company, LLC, EXCO Operating Company, LP and Azure Midstream Holdings LLC, dated as of October 16, 2013, filed as an Exhibit to EXCO's Current Report on Form 8-K, dated October 16, 2013 and filed on October 22, 2013 and incorporated by reference herein.

2.4

Purchase Agreement, dated October 6, 2014, by and among EXCO Resources, Inc., a Texas corporation, EXCO Operating Company, LP, a Delaware limited partnership, EXCO Holding MLP, Inc., a Texas corporation, HGI Energy Holdings, LLC, a Delaware limited liability company, Compass Production Services, LLC, a Delaware limited liability company, and Compass Energy Operating, LLC, a Delaware limited liability company, filed as an Exhibit to EXCO's Current Report on Form 8-K, dated October 6, 2014 and filed on October 10, 2014 and incorporated by reference herein.


3.1	Third Amended and Restated Articles of Incorporation of EXCO Resources, Inc., filed as an Exhibit to EXCO’s Current Report on Form 8-K (File No. 001-32743), dated February 8, 2006 and filed on February 14, 2006 and incorporated by reference herein.


3.2	Articles of Amendment to the Third Amended and Restated Articles of Incorporation of EXCO Resources, Inc., filed as an Exhibit to EXCO’s Current Report on Form 8-K (File No. 001-32743), dated August 30, 2007 and filed on September 5, 2007 and incorporated by reference herein.


3.3	Second Amended and Restated Bylaws of EXCO Resources, Inc., filed as an Exhibit to EXCO’s Current Report on Form 8-K (File No. 001-32743), dated March 4, 2009 and filed on March 6, 2009 and incorporated by reference herein.


4.1	Indenture, dated September 15, 2010, by and between EXCO Resources, Inc. and Wilmington Trust Company, as trustee, filed as an Exhibit to EXCO’s Current Report on Form 8-K, dated September 10, 2010 and filed on September 15, 2010 and incorporated by reference herein.


4.2	First Supplemental Indenture, dated September 15, 2010, by and among EXCO Resources, Inc., certain of its subsidiaries and Wilmington Trust Company, as trustee, including the form of 7.500% Senior Notes due 2018, filed as an Exhibit to EXCO’s Current Report on Form 8-K, dated September 10, 2010 and filed on September 15, 2010 and incorporated by reference herein.


4.3	Second Supplemental Indenture, dated as of February 12, 2013, by and among EXCO Resources, Inc., EXCO/HGI JV Assets, LLC, EXCO Holding MLP, Inc. and Wilmington Trust Company, as trustee, filed as an Exhibit to EXCO’s Current Report on Form 8-K, dated February 12, 2013 and filed on February 19, 2013 and incorporated by reference herein.


4.4	Third Supplemental Indenture, dated April 16, 2014, by and among EXCO Resources, Inc., certain of its subsidiaries and Wilmington Trust Company, as trustee, including the form of 8.500% Senior Notes due 2022, filed as an Exhibit to EXCO’s Current Report on Form 8-K, dated April 11, 2014 and filed on April 16, 2014 and incorporated by reference herein.

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4.5	Fourth Supplemental Indenture, dated May 12, 2014, by and among EXCO Resources, Inc., EXCO Land Company, LLC and Wilmington Trust Company, as trustee, filed as an Exhibit to EXCO's Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2014 and filed on July 30, 2014 and incorporated by reference herein.


4.6	Specimen Stock Certificate for EXCO’s common stock, filed as an Exhibit to EXCO’s Registration Statement on Form S-3 (File No. 333-192898), filed on December 17, 2013 and incorporated by reference herein.


4.7	First Amended and Restated Registration Rights Agreement dated as of December 30, 2005, by and among EXCO Holdings Inc. and the Initial Holders (as defined therein), filed as an Exhibit to EXCO’s Amendment No. 1 to its Registration Statement on Form S-1 (File No. 333-129935), filed on January 6, 2006 and incorporated by reference herein.


4.8	Registration Rights Agreement, dated March 28, 2007, by and among EXCO Resources, Inc. and the other parties thereto with respect to the 7.0% Cumulative Convertible Perpetual Preferred Stock and the Hybrid Preferred Stock, filed as an Exhibit to EXCO’s Current Report on Form 8-K (File No. 001-32743), dated March 28, 2007 and filed on April 2, 2007 and incorporated by reference herein.


4.9	Registration Rights Agreement, dated March 28, 2007, by and among EXCO Resources, Inc. and the other parties thereto with respect to the Hybrid Preferred Stock, filed as an Exhibit to EXCO’s Current Report on Form 8-K (File No. 001-32743), dated March 28, 2007 and filed on April 2, 2007 and incorporated by reference herein.

4.10

Joinder Agreement to Registration Rights Agreement, dated January 17, 2014, by and among EXCO Resources, Inc. and WLR IV Exco AIV One, L.P., WLR IV Exco AIV Two, L.P., WLR IV Exco AIV Three, L.P., WLR IV Exco AIV Four, L.P., WLR IV Exco AIV Five, L.P., WLR IV Exco AIV Six, L.P., WLR Select Co-Investment XCO AIV, L.P., WLR/GS Master Co-Investment XCO AIV, L.P. and WLR IV Parallel ESC, L.P, filed as an Exhibit to EXCO’s Current Report on Form 8-K, dated January 17, 2014 and filed on January 21, 2014 and incorporated by reference herein.

4.11

Joinder Agreement to Registration Rights Agreement, dated January 17, 2014, by and among EXCO Resources, Inc. and Advent Syndicate 780, Clearwater Insurance Company, Northbridge General Insurance Company, Odyssey Reinsurance Company, Clearwater Select Insurance Company, Riverstone Insurance Limited, Zenith Insurance Company and Fairfax Master Trust Fund, filed as an Exhibit to EXCO’s Current Report on Form 8-K, dated January 17, 2014 and filed on January 21, 2014 and incorporated by reference herein.


10.1	Amended and Restated 2005 Long-Term Incentive Plan, filed as an Exhibit to EXCO’s Current Report on Form 8-K (File No. 001-32743), dated November 14, 2007 and filed on November 16, 2007 and incorporated by reference herein.*


10.2	Form of Incentive Stock Option Agreement for the EXCO Resources, Inc. Amended and Restated 2005 Long-Term Incentive Plan, filed as an Exhibit to EXCO’s Current Report on Form 8-K (File No. 001-32743), dated November 14, 2007 and filed on November 16, 2007 and incorporated by reference herein.*


10.3	Form of Nonqualified Stock Option Agreement for the EXCO Resources, Inc. Amended and Restated 2005 Long-Term Incentive Plan, filed as an Exhibit to EXCO’s Current Report on Form 8-K (File No. 001-32743), dated November 14, 2007 and filed on November 16, 2007 and incorporated by reference herein.*


10.4	Form of Restricted Stock Award Agreement for the EXCO Resources, Inc. Amended and Restated 2005 Long-Term Incentive Plan, filed as an Exhibit to EXCO’s Current Report on Form 8-K, dated August 4, 2011 and filed on August 10, 2011 and incorporated by reference herein.*


10.5	Form of Restricted Stock Award Agreement for Named Executive Officers for the EXCO Resources, Inc. Amended and Restated 2005 Long-Term Incentive Plan, filed herewith.*


10.6	Form of Performance-Based Restricted Stock Unit Agreement for the EXCO Resources, Inc. Amended and Restated 2005 Long-Term Incentive Plan, filed as an Exhibit to EXCO’s Current Report on Form 8-K, dated June 30, 2014 and filed on July 3, 2014 and incorporated by reference herein.*

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10.7	Form of Performance-Based Share Unit Agreement for the EXCO Resources, Inc. Amended and Restated 2005 Long-Term Incentive Plan, filed as an Exhibit to EXCO’s Current Report on Form 8-K, dated July 1, 2015 and filed on July 8, 2015 and incorporated by reference herein.*


10.8	Form of Performance-Based Share Unit Agreement for Named Executive Officers for the EXCO Resources, Inc. Amended and Restated 2005 Long-Term Incentive Plan, filed as an Exhibit to EXCO’s Current Report on Form 8-K, dated July 1, 2015 and filed on July 8, 2015 and incorporated by reference herein.*


10.9	Fourth Amended and Restated EXCO Resources, Inc. Severance Plan, filed as an Exhibit to EXCO’s Current Report on Form 8-K, dated March 16, 2011 and filed on March 22, 2011 and incorporated by reference herein.*


10.10	Amended and Restated 2007 Director Plan of EXCO Resources, Inc., filed as an Exhibit to EXCO’s Current Report on Form 8-K (File No. 001-32743), dated November 14, 2007 and filed on November 16, 2007 and incorporated by reference herein.*


10.11	Amendment Number One to the Amended and Restated 2007 Director Plan of EXCO Resources, Inc., filed as an Exhibit to EXCO’s Annual Report on Form 10-K for 2009 filed on February 24, 2010 and incorporated by reference herein.*


10.12	Amendment Number Two to the Amended and Restated 2007 Director Plan of EXCO Resources, Inc., effective as of May 22, 2014, filed as an Exhibit to EXCO’s Current Report on Form 8-K, dated May 22, 2014 and filed on May 29, 2014 and incorporated by reference herein.*


10.13	Letter Agreement, dated March 28, 2007, with OCM Principal Opportunities Fund IV, L.P. and OCM EXCO Holdings, LLC, filed as an Exhibit to EXCO’s Form 8-K (File No. 001-32743), dated March 28, 2007 and filed on April 2, 2007 and incorporated by reference herein.


10.14	Amendment Number One to the EXCO Resources, Inc. Amended and Restated 2005 Long-Term Incentive Plan, filed as an exhibit to EXCO’s Current Report on Form 8-K, dated June 4, 2009 and filed on June 10, 2009 and incorporated by reference herein.*


10.15	Amendment Number Two to the EXCO Resources, Inc. Amended and Restated 2005 Long-Term Incentive Plan, dated as of October 6, 2011, filed as an Exhibit to EXCO’s Current Report on Form 8-K, dated October 6, 2011 and filed on October 7, 2011 and incorporated by reference herein.*


10.16	Amendment Number Three to the EXCO Resources, Inc. Amended and Restated 2005 Long-Term Incentive Plan, dated as of June 11, 2013, filed as an Exhibit to EXCO's Current Report on Form 8-K, dated June 11, 2013 and filed on June 12, 2013 and incorporated by reference herein.*


10.17	Form of Restricted Stock Award Agreement, filed as an Exhibit to EXCO's Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2013 filed on August 7, 2013 and incorporated by reference herein.*


10.18	Joint Development Agreement, dated August 14, 2009, by and among BG US Production Company, LLC, EXCO Operating Company, LP and EXCO Production Company, LP, filed as an Exhibit to EXCO’s Current Report on Form 8-K, dated August 11, 2009 and filed on August 17, 2009 and incorporated by reference herein.


10.19	Amendment to Joint Development Agreement, dated February 1, 2011, by and among BG US Production Company, LLC and EXCO Operating Company, LP, filed as an Exhibit to EXCO’s Annual Report on Form 10-K for 2010 filed February 24, 2011 and incorporated by reference herein.


10.20	Amendment to Joint Development Agreement, dated October 14, 2014, by and among BG US Production Company, LLC and EXCO Operating Company, LP, filed as an Exhibit to EXCO’s Annual Report on Form 10-K for 2014 filed on February 25, 2015 and incorporated by reference herein.


10.21	Joint Development Agreement, dated as of June 1, 2010, by and among EXCO Production Company (PA), LLC, EXCO Production Company (WV), LLC, BG Production Company, (PA), LLC, BG Production Company, (WV), LLC and EXCO Resources (PA), LLC, filed as an Exhibit to EXCO’s Current Report on Form 8-K, dated June 1, 2010 and filed on June 7, 2010 and incorporated by reference herein.

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10.22	Amendment to Joint Development Agreement, dated February 4, 2011, by and among EXCO Production Company (PA), LLC, EXCO Production Company (WV), LLC, BG Production Company, (PA), LLC, BG Production Company, (WV), LLC and EXCO Resources (PA), LLC, filed as an Exhibit to EXCO’s Annual Report on Form 10-K for 2010 filed February 24, 2011 and incorporated by reference herein.


10.23	Amendment to Joint Development Agreement, dated October 14, 2014, by and among EXCO Production Company (PA), LLC, EXCO Production Company (WV), LLC, BG Production Company, (PA), LLC, BG Production Company, (WV), LLC and EXCO Resources (PA), LLC, filed as an Exhibit to EXCO’s Annual Report on Form 10-K for 2014 filed on February 25, 2015 and incorporated by reference herein.


10.24	Second Amended and Restated Limited Liability Company Agreement of EXCO Resources (PA), LLC, dated June 1, 2010, by and among EXCO Holding (PA), Inc., BG US Production Company, LLC and EXCO Resources (PA), LLC, filed as an Exhibit to EXCO’s Current Report on Form 8-K, dated June 1, 2010 and filed on June 7, 2010 and incorporated by reference herein.


10.25	Amendment to Second Amended and Restated Limited Liability Company Agreement of EXCO Resources (PA), LLC, dated October 14, 2014, by and among EXCO Holding (PA), Inc., BG US Production Company, LLC and EXCO Resources (PA), LLC, filed as an Exhibit to EXCO’s Annual Report on Form 10-K for 2014 filed on February 25, 2015 and incorporated by reference herein.


10.26	Second Amended and Restated Limited Liability Company Agreement of Appalachia Midstream, LLC, dated June 1, 2010, by and among EXCO Holding (PA), Inc., BG US Production Company, LLC and Appalachia Midstream, LLC, filed as an Exhibit to EXCO’s Current Report on Form 8-K, dated June 1, 2010 and filed on June 7, 2010 and incorporated by reference herein.

10.27

Amendment to Second Amended and Restated Limited Liability Company Agreement of Appalachia Midstream, LLC (n/k/a EXCO Appalachia Midstream, LLC), dated October 14, 2014, by and among EXCO Holding (PA), Inc., BG US Production Company, LLC and EXCO Appalachia Midstream, LLC, filed as an Exhibit to EXCO’s Annual Report on Form 10-K for 2014 filed on February 25, 2015 and incorporated by reference herein.


10.28	Letter Agreement, dated June 1, 2010 and effective as of May 9, 2010, by and between EXCO Holding (PA), Inc. and BG US Production Company, LLC, filed as an Exhibit to EXCO’s Current Report on Form 8-K, dated June 1, 2010 and filed on June 7, 2010 and incorporated by reference herein.


10.29	Guaranty, dated May 9, 2010, by BG Energy Holdings Limited in favor of EXCO Holding (PA), Inc., EXCO Production Company (PA), LLC and EXCO Production Company (WV), LLC, filed as an Exhibit to EXCO’s Current Report on Form 8-K, dated June 1, 2010 and filed on June 7, 2010 and incorporated by reference herein.


10.30	Performance Guaranty, dated May 9, 2010, by EXCO Resources, Inc. in favor of BG US Production Company, LLC, filed as an Exhibit to EXCO’s Current Report on Form 8-K, dated June 1, 2010 and filed on June 7, 2010 and incorporated by reference herein.


10.31	Guaranty, dated June 1, 2010, by BG North America, LLC in favor of (i) EXCO Production Company (PA), LLC, EXCO Production Company (WV), LLC and EXCO Resources (PA), LLC; and (ii) EXCO Resources (PA), LLC and EXCO Holding (PA), Inc, filed as an Exhibit to EXCO’s Current Report on Form 8-K, dated June 1, 2010 and filed on June 7, 2010 and incorporated by reference herein.


10.32	Guaranty, dated June 1, 2010, by EXCO Resources, Inc., in favor of: (i) BG Production Company (PA), LLC, BG Production Company (WV), LLC and EXCO Resources (PA), LLC; and (ii) EXCO Resources (PA), LLC and BG US Production Company, LLC, filed as an Exhibit to EXCO’s Current Report on Form 8-K, dated June 1, 2010 and filed on June 7, 2010 and incorporated by reference herein.


10.33	Transition Consulting Agreement, dated February 28, 2013, by and between EXCO Resources, Inc. and Stephen F. Smith, filed as an Exhibit to EXCO's Current Report on Form 8-K, dated February 28, 2013 and filed on March 6, 2013 and incorporated by reference herein.*


10.34	Amended and Restated Credit Agreement, dated as of July 31, 2013, among EXCO Resources, Inc., as Borrower, certain subsidiaries of Borrower, as Guarantors, the lender parties thereto, and JPMorgan Chase Bank, N.A., as

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Administrative Agent, filed as an Exhibit to EXCO's Form 8-K, dated as of August 19, 2013 and filed on August 23, 2013 and incorporated by reference herein.


10.35	First Amendment to Amended and Restated Credit Agreement, dated as of August 28, 2013, among EXCO Resources, Inc., as Borrower, certain subsidiaries of Borrower, as Guarantors, the lender parties thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent, filed as an Exhibit to EXCO's Form 8-K, dated as of August 28, 2013 and filed on September 4, 2013 and incorporated by reference herein.


10.36	Second Amendment to Amended and Restated Credit Agreement, dated as of July 14, 2014, by and among EXCO Resources, Inc., as Borrower, certain subsidiaries of Borrower, as Guarantors, the Lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent, filed as an Exhibit to EXCO's Form 8-K, dated as of July 14, 2014 and filed on July 18, 2014 and incorporated by reference herein.

10.37

Third Amendment to Amended and Restated Credit Agreement, dated as of October 21, 2014, by and among EXCO Resources, Inc., as Borrower, certain subsidiaries of Borrower, as Guarantors, the Lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent, filed as an Exhibit to EXCO’s Current Report on Form 8-K, dated October 21, 2014 and filed on October 27, 2014 and incorporated by reference herein.

10.38

Fourth Amendment to Amended and Restated Credit Agreement, dated as of February 6, 2015, among EXCO Resources, Inc., as Borrower, certain subsidiaries of Borrower, as Guarantors, the lender parties thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent, filed as an Exhibit to EXCO's Form 8-K, dated as of February 6, 2015 and filed on February 12, 2015 and incorporated by reference herein.


10.39	Participation Agreement, dated July 31, 2013, among Admiral A Holding L.P., Admiral B Holding L.P. and EXCO Operating Company, LP, filed as an Exhibit to EXCO's Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2013 filed on August 7, 2013 and incorporated by reference herein.


10.40	Amendment No. 1 to Participation Agreement, dated April 17, 2014, among EXCO Operating Company, LP, Admiral A Holding L.P. and Admiral B Holding L.P., filed as an Exhibit to EXCO's Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2014 and filed on July 30, 2014 and incorporated by reference herein.


10.41	Amendment No. 2 to Participation Agreement, dated June 1, 2015, among EXCO Operating Company, LP, Admiral A Holding L.P., TE Admiral A Holding L.P. and Colt A Holding L.P., filed herewith.


10.42	Form of Director Indemnification Agreement, filed as an Exhibit to EXCO’s Current Report on Form 8-K, dated November 10, 2010 and filed on November 12, 2010 and incorporated by reference herein.


10.43	MVC Letter Agreement, dated November 15, 2013, among BG US Production Company, LLC, BG US Gathering Company, LLC, EXCO Operating Company, LP, Azure Midstream Energy LLC (formerly known as TGGT Holdings, LLC) and TGG Pipeline, Ltd, filed as an Exhibit to EXCO’s Current Report on Form 8-K, dated November 15, 2013 and filed on November 21, 2013 and incorporated by reference herein.

10.44

Letter Agreement, dated March 28, 2014, by and among EXCO Resources, Inc. and Ares Corporate Opportunities Fund, L.P., ACOF EXCO L.P, ACOF EXCO 892 Investors, L.P., Ares Corporate Opportunities Fund II, L.P., Ares EXCO, L.P. and Ares EXCO 892 Investors, L.P., filed as an Exhibit to EXCO’s Current Report on Form 8-K, dated March 27, 2014 and filed on April 1, 2014 and incorporated by reference herein.


10.45	EXCO Resources, Inc. 2014 Management Incentive Plan, filed as an Exhibit to EXCO’s Current Report on Form 8-K, dated April 21, 2014 and filed on April 25, 2014 and incorporated by reference herein.*


10.46	Amendment Number One to the EXCO Resources, Inc. Management Incentive Plan, effective as of September 1, 2014, filed as an Exhibit to Amendment No. 1 to EXCO's Current Report on Form 8-K/A, dated August 6, 2014 and filed on September 5, 2014 and incorporated by reference herein.*


10.47	EXCO Resources, Inc. 2015 Management Incentive Plan, dated March 4, 2015, filed as an Exhibit to EXCO’s Current Report on Form 8-K, dated March 4, 2015 and filed on March 10, 2015 and incorporated by reference herein.*

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10.48	Retention Agreement, dated May 14, 2015, by and between Harold H. Jameson and EXCO Resources, Inc., filed as an Exhibit to EXCO’s Current Report on Form 8-K, dated May 14, 2015 and filed on May 20, 2015 and incorporated by reference herein.*


10.49	Amended and Restated Retention Agreement, dated May 14, 2015, by and between William L. Boeing and EXCO Resources, Inc., filed as an Exhibit to EXCO’s Current Report on Form 8-K, dated May 14, 2015 and filed on May 20, 2015 and incorporated by reference herein.*


10.50	Amended and Restated Retention Agreement, dated May 14, 2015, by and between Richard A. Burnett and EXCO Resources, Inc., filed as an Exhibit to EXCO’s Current Report on Form 8-K, dated May 14, 2015 and filed on May 20, 2015 and incorporated by reference herein.*


10.51	Amended and Restated Retention Agreement, dated May 14, 2015, by and between Harold L. Hickey and EXCO Resources, Inc., filed as an Exhibit to EXCO’s Current Report on Form 8-K, dated May 14, 2015 and filed on May 20, 2015 and incorporated by reference herein.*


10.52	Services and Investment Agreement, dated as of March 31, 2015, by and among EXCO Resources, Inc. and Energy Strategic Advisory Services LLC, filed as an Exhibit to Amendment No. 1 to EXCO’s Current Report on Form 8-K/A, dated March 31, 2015 and filed on May 26, 2015 and incorporated by reference herein.


10.53	Acknowledgement of Amendment to Services and Investment Agreement, dated as of May 26, 2015, by and between EXCO Resources, Inc. and Energy Strategic Advisory Services LLC, filed as an Exhibit to EXCO’s Current Report on Form 8-K, dated May 26, 2015 and filed on June 1, 2015 and incorporated by reference herein.


10.54	Form of Nomination Letter Agreement, filed as an Exhibit to EXCO’s Current Report on Form 8-K, dated March 31, 2015 and filed on April 2, 2015 and incorporated by reference herein.


10.55	Warrant, dated as of March 31, 2015, filed as an Exhibit to EXCO’s Current Report on Form 8-K, dated March 31, 2015 and filed on April 2, 2015 and incorporated by reference herein.


10.56	Warrant, dated as of March 31, 2015, filed as an Exhibit to EXCO’s Current Report on Form 8-K, dated March 31, 2015 and filed on April 2, 2015 and incorporated by reference herein.


10.57	Warrant, dated as of March 31, 2015, filed as an Exhibit to EXCO’s Current Report on Form 8-K, dated March 31, 2015 and filed on April 2, 2015 and incorporated by reference herein.


10.58	Warrant, dated as of March 31, 2015, filed as an Exhibit to EXCO’s Current Report on Form 8-K, dated March 31, 2015 and filed on April 2, 2015 and incorporated by reference herein.


10.59	Registration Rights Agreement, dated as of April 21, 2015, by and between EXCO Resources, Inc. and Energy Strategic Advisory Services LLC, filed as an Exhibit to EXCO’s Current Report on Form 8-K, dated April 21, 2015 and filed on April 27, 2015 and incorporated by reference herein.


10.60	Registration Rights Waiver, dated as of April 10, 2015, by and among EXCO Resources, Inc. and Jeffrey D. Benjamin, filed as an Exhibit to EXCO’s Current Report on Form 8-K, dated April 21, 2015 and filed on April 27, 2015 and incorporated by reference herein.


10.61	Registration Rights Waiver, dated as of April 10, 2015, by and among EXCO Resources, Inc. and Robert L. Stillwell, filed as an Exhibit to EXCO’s Current Report on Form 8-K, dated April 21, 2015 and filed on April 27, 2015 and incorporated by reference herein.


10.62	Registration Rights Waiver, dated as of April 10, 2015, by and among EXCO Resources, Inc. and Harold L. Hickey, filed as an Exhibit to EXCO’s Current Report on Form 8-K, dated April 21, 2015 and filed on April 27, 2015 and incorporated by reference herein.

10.63

Registration Rights Waiver, dated as of April 13, 2015, by and among EXCO Resources, Inc. and Advent Capital (No. 3) Limited, Clearwater Insurance Company, Clearwater Select Insurance Company, Fairfax Financial Holdings Master Trust Fund, Northbridge General Insurance Company, Odyssey Reinsurance Company, RiverStone Insurance Limited, Zenith Insurance Company and Hamblin Watsa Investment Counsel, Ltd., filed as an Exhibit to

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EXCO’s Current Report on Form 8-K, dated April 21, 2015 and filed on April 27, 2015 and incorporated by reference herein.

10.64

Registration Rights Waiver, dated as of April 13, 2015, by and among EXCO Resources, Inc. and OCM EXCO Holdings, LLC, OCM Principal Opportunities Fund IV Delaware, L.P., OCM Principal Opportunities Fund III, L.P., OCM Principal Opportunities Fund IIIA, L.P. and Oaktree Value Opportunities Fund Holdings, L.P., filed as an Exhibit to EXCO’s Current Report on Form 8-K, dated April 21, 2015 and filed on April 27, 2015 and incorporated by reference herein.

10.65

Registration Rights Waiver, dated as of April 21, 2015, by and among EXCO Resources, Inc. and WLR IV Exco AIV One, L.P., WLR IV Exco AIV Two, L.P., WLR IV Exco AIV Three, L.P., WLR IV Exco AIV Four, L.P., WLR IV Exco AIV Five, L.P., WLR IV Exco AIV Six, L.P., WLR Select Co-Investment XCO AIV, L.P., WLR/GS Master Co-Investment XCO AIV, L.P. and WLR IV Parallel ESC, L.P., filed as an Exhibit to EXCO’s Current Report on Form 8-K, dated April 21, 2015 and filed on April 27, 2015 and incorporated by reference herein.


31.1	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Principal Executive Officer of EXCO Resources, Inc., filed herewith.


31.2	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Principal Financial Officer of EXCO Resources, Inc., filed herewith.


32.1	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Principal Executive Officer and Principal Financial Officer of EXCO Resources, Inc., filed herewith.


101.INS	XBRL Instance Document.


101.SCH	XBRL Taxonomy Extension Schema Document.


101.CAL	XBRL Taxonomy Calculation Linkbase Document.


101.DEF	XBRL Taxonomy Definition Linkbase Document.


101.LAB	XBRL Taxonomy Label Linkbase Document.


101.PRE	XBRL Taxonomy Presentation Linkbase Document.


*	These exhibits are management contracts.

Exhibit 10.5

RESTRICTED STOCK AWARD AGREEMENT

EXCO RESOURCES, INC.

AMENDED AND RESTATED 2005 LONG-TERM INCENTIVE PLAN

1. Award of Restricted Stock . Pursuant to the EXCO Resources, Inc. Amended and Restated 2005 Long-Term Incentive Plan (the “ Plan ”) for Employees, Consultants, and Outside Directors of EXCO Resources, Inc., a Texas corporation (the “ Company ”), and its Subsidiaries,

_________________________________

(the “ Participant ”)

has been granted a Restricted Stock Award under the Plan for _____________ shares of Common Stock of the Company (the “ Awarded Shares ”). The Date of Grant of this Restricted Stock Award is July 1, 2015, and it shall be effective as of the date it is signed and dated by both parties hereto.

2. Subject to Plan . This Award Agreement is subject to the terms and conditions of the Plan, and the terms of the Plan shall control to the extent not otherwise inconsistent with the provisions of this Agreement. To the extent the terms of the Plan are inconsistent with the provisions of this Agreement, this Agreement shall control. The capitalized terms used herein that are defined in the Plan shall have the same meanings assigned to them in the Plan. This Award Agreement is subject to any rules promulgated pursuant to the Plan by the Board or the Committee and communicated to the Participant in writing.

3. Vesting . Except as specifically provided in this Agreement and subject to certain restrictions and conditions set forth in the Plan, the Awarded Shares shall be vested as follows:

(a) one-third (1/3 ^rd ) of the Awarded Shares (rounded to the next whole share for any fractional shares) shall vest on the first anniversary of the Date of Grant, provided the Participant is employed by (or, if the Participant is a Consultant or an Outside Director, is providing services to) the Company or a Subsidiary on the applicable vesting date .

(b) one-third (1/3 ^rd ) of the Awarded Shares (rounded to the next whole share for any fractional shares) shall vest on the second anniversary of the Date of Grant, provided the Participant is employed by (or, if the Participant is a Consultant or an Outside Director, is providing services to) the Company or a Subsidiary on the applicable vesting date .

(c) the remaining unvested portion of the Awarded Shares shall vest on the third anniversary of the Date of Grant, provided the Participant is employed by (or, if the Participant is a Consultant or an Outside Director, is providing services to) the Company or a Subsidiary on the applicable vesting date.

Notwithstanding the foregoing, all of the unvested Awarded Shares shall be automatically fully vested upon the first to occur of a Change in Control, the death of the Participant or the Total and Permanent Disability of the Participant, provided the Participant is still employed by (or, if the Participant is a Consultant or an Outside Director, providing services to) the Company as of the date such event.

Notwithstanding the foregoing, all of the unvested Awarded Shares shall be automatically fully vested upon the occurrence of a Qualifying Termination (as such term is defined in that certain [ Amended and Restated ] Retention Agreement, by and between the Company and the Participant, dated May ___, 2015.

4. Forfeiture of Awarded Shares . Except as otherwise provided in Section 3 , the Participant shall immediately forfeit all unvested Awarded Shares on the date of the Participant’s Termination of Service for any reason prior to the time the Awarded Shares become vested in accordance with Section 3 . Upon any forfeiture, all rights of the Participant with respect to the forfeited Awarded Shares shall cease and terminate, without any further obligation on the part of the Company.

5. Restrictions on Awarded Shares . Subject to the provisions of the Plan and the terms of this Agreement, from the Date of Grant until the date the Awarded Shares are vested in accordance with Section 3 and are no longer subject to forfeiture in accordance with Section 4 (the “ Restriction Period ”), the Participant shall not be permitted to sell, transfer, pledge, hypothecate, margin, assign or otherwise encumber any of the Awarded Shares, other than by will or the laws of decent and distribution. Except for these limitations, the Committee may in its sole discretion, remove any or all of the restrictions on such Awarded Shares whenever it may determine that, by reason of changes in applicable laws or changes in circumstances after the date of this Agreement, such action is appropriate.

6. Legend . The following legend shall be placed on all certificates representing Awarded Shares (in addition to any legend required under applicable state securities laws):

On the face of the certificate:

“TRANSFER OF THIS STOCK IS RESTRICTED IN ACCORDANCE WITH CONDITIONS PRINTED ON THE REVERSE OF THIS CERTIFICATE.”

On the reverse:

“THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO AND TRANSFERABLE ONLY IN ACCORDANCE WITH THAT CERTAIN EXCO RESOURCES, INC. AMENDED AND RESTATED 2005 LONG-TERM INCENTIVE PLAN, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY IN DALLAS, TEXAS, AND THAT CERTAIN RESTRICTED STOCK AWARD AGREEMENT, DATED AS OF JULY 1, 2015, BY AND BETWEEN THE COMPANY AND _____________________. NO TRANSFER OR PLEDGE OF THE SHARES EVIDENCED HEREBY MAY BE MADE EXCEPT IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF SAID PLAN AND AWARD AGREEMENT. BY ACCEPTANCE OF THIS CERTIFICATE, ANY HOLDER, TRANSFEREE OR PLEDGEE HEREOF AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF SAID PLAN AND AWARD AGREEMENT.”

All Awarded Shares owned by the Participant shall be subject to the terms of this Agreement and shall be represented by a certificate or certificates bearing the foregoing legend.

7. Delivery of Certificates . Certificates for Awarded Shares free of restriction under this Agreement shall be delivered to the Participant promptly after, and only after, the Restriction Period has expired without forfeiture pursuant to Section 4 . The Participant, by his acceptance of the Awarded Shares and execution of this Agreement, irrevocably grants the Company a power of attorney to transfer any shares forfeited pursuant to Section 4 to the Company and agrees to execute any documents requested by the Company in connection with any such forfeiture and transfer.

8. Rights of a Shareholder; Voting . Subject to the terms and conditions of this Agreement, the Participant shall have, with respect to such Awarded Shares, all of the rights of a shareholder of the Company, including the right to vote the shares, and the right to receive any dividends or other distributions thereon, subject to the provisions of this Section 8 . Any stock dividends paid with respect to Awarded Shares (whether vested or unvested) shall at all times be treated as Awarded Shares and shall be subject to all restrictions placed on Awarded Shares; any such stock dividends paid with respect to Awarded Shares shall vest as the unvested Awarded Shares become vested. Any cash dividends paid with respect to unvested Awarded Shares shall at all times be subject to the provisions of this Agreement (including the vesting and forfeiture provisions set forth above); any such cash dividends paid with respect to unvested Awarded Shares shall vest as the unvested Awarded Shares become vested, and shall be paid to the Participant on the date the Awarded Shares to which such cash dividends relate become vested. The Participant, as record holder of the Awarded Shares, has the exclusive right to vote, or consent with respect to, such Awarded Shares until such time as the Awarded Shares are transferred in accordance with this Agreement; provided , however , that this Section 8 shall not create any voting right where the holders of such Awarded Shares otherwise have no such right.

9. Adjustment to Number of Awarded Shares . The number of Awarded Shares shall be subject to adjustment in accordance with Articles 11-13 of the Plan; provided , however , that any fractional shares resulting from such adjustment shall be eliminated, except as otherwise provided by Section 10 . Any adjustments determined by the Board shall be final, binding and conclusive.

10. No Fractional Shares . No fractional shares of capital stock shall be issued pursuant to this Agreement. The Board may determine whether cash, other awards, or other property shall be issued or paid in lieu of any fractional share(s) resulting from any adjustment(s) or whether such fractional shares and/or any rights thereto shall be forfeited or otherwise eliminated.

11. Notices . Any communication(s) to be given hereunder by either party to the other shall be deemed to have been duly given if given in writing and personally delivered or sent by mail, registered or certified, postage prepaid with return receipt requested, or via fax as follows:


Company:	EXCO Resources, Inc.

Attn: Chief Financial Officer

12377 Merit Drive, Suite 1700

Dallas, TX 75251

Fax: (214) 368-2087


With a copy to:	EXCO Resources, Inc.

Attn: General Counsel

12377 Merit Drive, Suite 1700

Dallas, TX 75251

Fax: (214) 368-2087

Notice to the Participant shall be addressed and delivered as set forth on the signature page.

Notices delivered personally shall be deemed communicated as of actual receipt; mailed notices shall be deemed communicated as of three (3) days after mailing. A fax shall be deemed communicated on the date it is actually received.

12. Entire Agreement; Modification . This Agreement together with the Plan terminates, supersedes, and replaces all prior written and oral agreements between the parties hereto with respect to the subject matter of this Agreement and constitutes a complete and exclusive statement of the terms of the agreement by and among the parties hereto with respect to the subject matter of this Agreement. All prior negotiations and agreements between the parties with respect to the subject matter hereof are merged into this Agreement. Each party to this Agreement acknowledges that no representations, inducements, promises, or agreements, orally or otherwise, have been made by any party or by anyone acting on behalf of any party, which are not embodied in this Agreement or the Plan and that any agreement, statement or promise that is not contained in this Agreement or the Plan shall not be valid or binding or of any force or effect. This Agreement may not be amended, restated, supplemented, or otherwise modified except by a written agreement executed by any and all parties to be charged with or otherwise affected by any such amendment. Notwithstanding the preceding sentence, the Company may amend the Plan to the extent permitted by the Plan.

13. Assignments, Successors, and No Third-Party Rights . Neither this Agreement nor any portion hereof may be assigned by the Participant without the prior express written consent of the Company. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors, and permitted assigns. No person shall be permitted to acquire any Awarded Shares without first executing and delivering an agreement in the form satisfactory to the Company making such person or entity subject to the restrictions on transfer contained herein. Nothing expressed or referred to in this Agreement shall be construed to give any party other than the parties to this Agreement any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement. This Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the parties to this Agreement and the successors, heirs, personal representatives, and permitted assigns of the parties hereto.

14. No Right to Continue Service or Employment . Neither this Agreement nor any action taken hereunder shall be construed to confer upon the Participant the right to continue in the employ or to provide services to the Company or any Subsidiary, whether as an Employee or as a Consultant or as an Outside Director, or interfere with or restrict in any way the right of the Company or any Subsidiary to discharge the Participant as an Employee, Consultant, or Outside Director at any time.

15. Specific Performance . The parties acknowledge that remedies at law will be inadequate remedies for breach of this Agreement and consequently agree that this Agreement shall be enforceable by specific performance. The remedy of specific performance shall be cumulative of all of the rights and remedies at law or in equity of the parties under this Agreement.

16. Jurisdiction; Service of Process; Governing Law . Any action or other proceeding seeking to enforce any provision of, or based on any right arising out of, this Agreement may be brought against any of the parties in the courts of the State of Texas and each of the parties consents to the jurisdiction of such court(s) (and of the appropriate appellate courts) in any such action or other proceeding and waives any objection to venue laid therein. The validity, construction, interpretation, and effect of this Agreement shall be exclusively governed by and determined in accordance with the laws of the State of Texas without regard to conflict of laws principles.

17. Participant’s Representations . Notwithstanding any of the provisions hereof, the Participant hereby agrees that he or she will not acquire any Awarded Shares, and that the Company will not be obligated to issue any Awarded Shares to the Participant hereunder, if the issuance of such Awarded Shares may constitute a violation by the Company or the Participant of any provision of any applicable law or regulation of any governmental authority. Any determination in this connection by the Company shall be final, binding, and conclusive. The rights and obligations of the Company and the rights and obligations of the Participant are subject to all applicable laws, rules, and regulations.

18. Participant’s Acknowledgments . The Participant acknowledges that a copy of the Plan has been made available for his review by the Company, and represents that he is familiar with the terms and provisions thereof, and hereby accepts this Restricted Stock Award subject to all the terms and provisions thereof. The Participant hereby agrees to accept as binding, conclusive, and final all decisions or interpretations of the Committee or the Board, as appropriate, upon any questions arising under the Plan or this Agreement.

19. Severability; Reformation . In the event that any sentence, paragraph, provision, section, or article of this Agreement is declared to be void by a court of competent jurisdiction, such sentence, paragraph, provision, section, or article shall be deemed severed from the remainder of this Agreement and the balance of this Agreement shall remain in effect. In the event any court of competent jurisdiction holds any provision of this Agreement to be invalid, unenforceable, and/or unreasonable as written, the court may reform the Agreement to make it valid, enforceable, and reasonable and the Agreement shall remain in full force and effect as reformed by the court.

20. Covenants and Agreements as Independent Agreements . Each of the covenants and agreements that are set forth in this Agreement shall be construed as a covenant and agreement independent of any other provision of this Agreement. The existence of any claim or cause of action of the Participant against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of the covenants and agreements that are set forth in this Agreement.

21. Fees and Expenses . If any civil action, whether at law or in equity, is necessary to enforce or interpret any of the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys’ fees, court costs, and other reasonable expenses of litigation, in addition to any other relief to which such party may be entitled.

22. Time of the Essence . With regard to all dates and time periods set forth or referred to in this Agreement, time is of the essence.

23. Waiver . Neither the failure to exercise, nor any delay by any party in exercising, any right, power, or privilege under this Agreement shall operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege shall preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege. To the maximum extent permitted by applicable law, (a) no claim or right arising out of this Agreement may be discharged by one (1) party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by each other party hereto, (b) no waiver that may be given by any party hereto shall be applicable except in the specific instance when and for which such waiver is given, and (c) no notice to or demand on one (1) party shall be deemed to be a waiver of any obligation of such party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement.

24. Section Headings; Construction . The headings of Sections in this Agreement are provided for convenience only and shall not affect the construction or interpretation of this Agreement. All references to “Section” or “Sections” refer to the corresponding Section or Sections of this Agreement. All words used in this Agreement shall be construed to be of such gender or number as the circumstances require. Unless otherwise expressly provided, the word “including” does not limit the preceding words or terms.

25. Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original copy of this Agreement and all of which, when taken together, shall be deemed to constitute one (1) and the same agreement.

26. Tax Requirements . The Participant is hereby advised to consult immediately with his or her own tax advisor regarding the tax consequences of this Agreement , the method and timing for filing an election to include this Agreement in income under Section 83(b) of the Code, and the tax consequences of such election. By execution of this Agreement, the Participant agrees that if the Participant makes such an election, the Participant shall provide the Company with written notice of such election in accordance with the regulations promulgated under Section 83(b) of the Code. The Company or, if applicable, any Subsidiary (for purposes of this Section 26 , the term “ Company ” shall be deemed to include any applicable Subsidiary), shall have the right to deduct from all amounts paid in cash or other form in connection with the Plan, any Federal, state, provincial, local, or other taxes required by law to be withheld in connection with this Award. The Company may, in its sole discretion, also require the Participant receiving shares of Common Stock issued under the Plan to pay the Company the amount of any taxes that the Company is required to withhold in connection with the Participant’s income arising with respect to this Award. Such payments shall be required to be made when requested by Company and may be required to be made prior to the delivery of any certificate representing shares of Common Stock. Such payment may be made (i) by the delivery of cash to the Company in an amount that equals or exceeds (to avoid the issuance of fractional shares under (iii) below) the required tax withholding obligations of the Company; (ii) if the Company, in its sole discretion, so consents in writing, the actual delivery by the Participant to the Company of shares of Common Stock, other than shares that the Participant has acquired from the Company within six (6) months prior thereto, which shares so delivered have an aggregate Fair Market Value that equals or exceeds (to avoid the issuance of fractional shares under (iii) below) the required tax withholding payment; (iii) if the Company, in its sole discretion, so consents in writing, the Company’s withholding of a number of shares to be delivered upon the vesting of this Award, which shares so withheld have an aggregate Fair Market Value that equals (but does not exceed) the required tax withholding payment; or (iv) any combination of (i), (ii), or (iii). The Company may, in its sole discretion, withhold any such taxes from any other cash remuneration otherwise paid by the Company to the Participant.

27. Dispute Resolution; Arbitration; Emergency Relief . All claims, disputes, and controversies of any kind, character, and nature between any parties to this Agreement relating to or arising out of or in connection with this Agreement or any transaction(s) contemplated by this Agreement as to the construction, validity, interpretation, meaning, performance, non-performance, enforcement, operation, or breach shall be submitted to arbitration pursuant to the following procedures:

(a) After a claim, dispute, or controversy arises, any such party may, in a written notice delivered to the other party to this Agreement, demand such arbitration and name the arbitrator (who shall be an impartial person) appointed by the demanding party in such notice together with a statement of the matter(s) claimed or in dispute or controversy.

(b) Within thirty (30) calendar days after receipt of such demand, the other party to this Agreement shall, in a written notice delivered to the demanding party, name the arbitrator (who shall be an impartial person) appointed by the receiving party. If any party to this Agreement fails to name and appoint an arbitrator, then the arbitrator of such party shall be named and appointed by the American Arbitration Association (the “ AAA ”). The two arbitrators so appointed shall name and appoint a third arbitrator (who shall be an impartial person) within thirty (30) calendar days or, if the two arbitrators so appointed shall fail to name a third arbitrator within such thirty (30) day period, the third arbitrator shall be named and appointed by the AAA. If any arbitrator appointed hereunder shall die, resign, refuse, or become unable to act before an arbitration decision is rendered, then the vacancy shall be filled by the method set forth in this Section 27(b) for the original appointment of such arbitrator.

(c) Each party shall bear its own arbitration costs and expenses. The arbitration hearing shall be held in Dallas, Texas at a location designated by a majority of the arbitrators. The Commercial Arbitration Rules of the American Arbitration Association shall be incorporated by reference at such hearing and the substantive laws of the State of Texas (without regard to conflict of laws principles) shall apply.

(d) The arbitration hearing shall be concluded within ten (10) calendar days unless otherwise ordered by the arbitrators and a written award thereon shall be made within fifteen (15) calendar days after the close of submission of evidence. An award rendered by a majority of the arbitrators appointed pursuant to this Agreement shall be final and binding on all parties to the proceeding, shall resolve the question of costs of the arbitrators and all related matters, and judgment on such award may be entered and enforced by either party in any court of competent jurisdiction.

(e) Except as set forth in Section 27(g) , the parties to this Agreement agree, intend, and expressly stipulate that the provisions of this Section 27 shall be a complete defense to any suit, action, or proceeding instituted in any federal, state, or local court or before any administrative tribunal with respect to any claim, controversy, or dispute relating to or arising out of or in connection with this Agreement or any transaction(s) contemplated by this Agreement. The arbitration provisions of this Agreement shall, with respect to any such claim, controversy, or dispute, survive the termination or expiration of this Agreement.

(f) No party to an arbitration may disclose the existence or results of any arbitration hereunder without the prior express written consent of the other party to this Agreement nor shall any party to an arbitration disclose to any third party any confidential information disclosed by any other party to such arbitration in the course of an arbitration hereunder without the prior express written consent of such other party.

(g) Notwithstanding anything in this Section 27 to the contrary, any party may seek from a court any provisional remedy that may be necessary to protect any rights or property of such party pending the establishment of the arbitral tribunal or its determination of the merits of the claim, controversy, or dispute or to enforce the rights of such party under this Section 27 .

* * * * * * * * * *

[ Remainder of Page Intentionally Left Blank.

Signature Page Follows ]

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer, and the Participant, to evidence his or her consent and approval of all the terms hereof, has duly executed this Agreement, as of the date specified in Section 1 hereof.

COMPANY:

EXCO RESOURCES, INC.

By:

Name:

Title:

PARTICIPANT:

Signature

Name:

Address:

15235596_1

Exhibit 10.41

Execution Version

June 1, 2015

Admiral A Holding L.P.

TE Admiral A Holding L.P.

Colt Admiral A Holding L.P.

600 Travis Street, Suite 7200

Houston, TX 77002

Attention: Dash Lane

Facsimile: (713) 583-9430

Re: Amendment No. 2 to Participation Agreement (the “ Second Amendment ”)

Reference is made to that certain Participation Agreement (as amended by that certain letter agreement dated April 17, 2014 and from time to time, the “ PA ”), dated as of July 31, 2013, between EXCO Operating Company, LP, a Delaware limited partnership (“ EOC ”), Admiral A Holding L.P., a Delaware limited partnership (“ Admiral A ”), and Admiral B Holding L.P., a Delaware limited partnership (“ Admiral B ”). Pursuant to (a) that certain assignment dated effective January 1, 2014, Admiral A assigned, among other assets, 3.19529% of its interest in and to the PA to TE Admiral A Holding L.P., a Delaware limited partnership (“ Admiral TE ”) and 50.00000% of its interest in and to the PA to Colt Admiral A Holding L.P., a Delaware limited partnership (“ Admiral Colt ”) and (b) that certain Certificate of Merger dated effective July 1, 2014, Admiral Colt merged with and into Admiral B with Admiral Colt being the sole-surviving entity. EOC, Admiral A, Admiral TE and Admiral Colt, may be referred to herein collectively as the “ Parties ” or individually as a “ Party .” Unless otherwise noted, capitalized terms used but not defined in this Second Amendment shall have the meaning set forth in the PA.

Pursuant to this Second Amendment, the Parties intend to set forth their agreement to, among other things, (a) jointly participate in the acquisition of those certain oil and gas leases set forth on Annex A-1 attached hereto (EOC’s interest in and to such oil and gas leases as of the date hereof, the “ Existing Acquired Leases ”) on a 50/50 basis with each other, (b) jointly participate in the drilling, testing, completing and equipping of the Approved Affected Wells (defined below) on a 50/50 basis (to the extent of the Parties’ collective jointly-owned Working Interest in the Existing Acquired Leases and Area 1 Leases contributing to such Approved Affected Well) with each other, (c) provide that the Affected Wells (defined below) will not be included in the Offer Wells or otherwise subject to Article 6 of the PA, (d) memorialize the approval of the 2015 Development Plan (defined below) and (e) clarify certain matters relating to the EXCO Offer process under Article 6 of the PA.

NOW, THEREFORE, in consideration of the mutual agreements herein, the benefits to be derived by the Parties, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows as of the date hereof (the “ Effective Date ”):

1. Amendments to PA .

(a) The following definitions shall be added in alphabetical order to Article 1 of the PA:

“ Affected Well ” means any Well located on an Existing Acquired Lease or lands pooled or unitized therewith, including those Wells set forth on Annex A-2 to Amendment No. 2 to Participation Agreement.

“ Approved Affected Well ” means an Affected Well in which the KKR Parties have Elected to participate.

“ Complete Development ” means such time as no additional Wells may be proposed by EXCO that satisfy the Qualifying Well Criteria (excluding subclause (g) and (h) of the definition of Qualifying Well Criteria, and any requirement that the Well be included in a Next Quarter Detail Plan).

“ Dispute Notice ” has the meaning set forth in Section 6.9(a) .

“ Existing Acquired Leases ” has the meaning set forth in the preamble of Amendment No. 2 to Participation Agreement.

“ Working Capital ” means (i) accrued revenue not yet paid to the KKR Parties, less (ii) costs incurred but not yet paid by the KKR Parties (each of (i) and (ii) as of the Transfer Effective Date), in each case with respect to the KKR Parties’ interest in each Well included in an EXCO Offer, First Year Retained Well Offer or Retained Well Offer, as applicable.

(b) The following definitions in Article 1 of the PA shall be deleted and replaced in their entirety with the following:

“ Approved Outside Well ” means an Approved Non-Core Well, an Approved Farmout Well or an Approved Affected Well, as the context requires.

“ Area 1 Development Period ” means the period from the Closing Date until the first to occur of (i) the fifth anniversary of the Closing Date and (ii) such time as EXCO has Drilled, Completed and Equipped (or participated with a Third Party, so long as EXCO is the operator, to Drill, Complete and Equip) the lesser of (a) 240 Wells on the Area 1 Leases and (b) the number of Wells Drilled, Completed and Equipped upon Complete Development.

“ Area 1 Well ” means any Well located on an Area 1 Lease, other than an Existing Well or an Affected Well.

“ Offer Well ” means, as of the date of determination, any Approved Well that (i) has commenced production of oil at least 365 days prior to such date or (ii) the Drilling Parties have agreed to plug and abandon.

“ Outside Leases ” means, collectively, (i) the Outside Non-Core Leases, (ii) the Farmout Leases and (iii) the Existing Acquired Leases.

“ Outside Well ” means, a Non-Core Well, a Farmout Well or an Affected Well, as the context requires.

“and together with the Outside Non-Core Leases, the “ Outside Leases ””

(d) the following clause shall be added in numerical order to the definition of KKR Share:

“(v) for an Approved Affected Well, 100% of the KKR Parties’ right, title and interest in and to such Approved Affected Well (after giving effect to the assignment contemplated by Section 2(b) of Amendment No. 2 to Participation Agreement)”

(e) the following clause shall be deleted in its entirety from the parenthetical in Section 4.2(c) of the PA:

“and each of an Approved Farmout Well and an Approved Non-Core Well, an “ Approved Outside Well ””

(f) the last sentence of Section 7.3(a) of the PA shall be deleted and replaced in its entirety with the following:

“The Parties shall execute and deliver the applicable documents and take such other actions as shall be reasonably required to accomplish the transfer within 15 Business Days after the Non-Acquiring Party’s exercise of its option.”

2. Existing Acquired Leases .

(a) The Parties acknowledge and agree that (i) EOC has acquired the Existing Acquired Leases; (ii) the aggregate costs and expenses associated with acquisition of the Existing Acquired Leases are $1,603,976.56 (the “ Acquisition Costs ”); (iii) the KKR Parties are responsible for 50% of the Acquisition Costs (the “ KKR Payment ”) and, upon payment of such Acquisition Costs, shall be entitled, collectively, to an undivided 50% of the Existing Acquired Leases (such undivided 50% of the Existing Acquired Leases, the “ KKR Existing Acquired Leases ”); (iv) upon the assignment to the KKR Parties of the KKR Existing Acquired Leases, the Existing Acquired Leases shall be Outside Leases for purposes of the PA; and (v) for the avoidance of doubt, the Existing Acquired Leases are not Acquired Interests and are not subject to Article 7 of the PA.

(b) Within 10 Business Days following the execution of this Second Amendment, the KKR Parties shall pay the KKR Payment to EOC in cash by wire transfer of immediately available funds and within 15 Business Days of receipt of such funds, EOC shall execute, acknowledge and deliver to the KKR Parties an assignment of the KKR Existing Acquired Leases, substantially in the form attached hereto as Annex B (an “ Acquired Lease Assignment ”), which assignment will entitle each KKR Party to its Proportionate Share of the KKR Existing Acquired Leases.

(c) EOC agrees to reasonably cooperate in good faith with the KKR Parties to the extent the KKR Parties elect to conduct additional title or environmental diligence on the Existing Acquired Leases; provided that any such additional title or environmental diligence shall be at the sole cost and expense of the KKR Parties.

3. Participation in Affected Wells . The Parties agree that the KKR Parties will have the right to participate in the drilling, testing, completing and equipping of each Affected Well with EOC on a 50/50 basis (to the extent of the Parties’ collective jointly-owned Working Interest in the Existing Acquired Leases and Area 1 Leases contributing to such Affected Well) and that the Affected Wells shall not be considered Offer Wells under the PA or otherwise subject to Article 6 of the PA. The Parties further agree that the KKR Parties will have the right to propose wells on the Existing Acquired Leases.

4. 2015 Development Plan .

(a) Each Drilling Party has authorized and approved the Development Plan attached hereto as Annex C for Operations to be performed by EXCO during the calendar year 2015 (the “ 2015 Development Plan ”).

(b) Notwithstanding anything to the contrary in the PA, EXCO shall be excused from its obligations under Section 5.4(b)(i) of the PA and Section 5.4(b)(ii)(B) of the PA from January 1, 2015 to December 31, 2015. For the avoidance of doubt, the period of four consecutive Quarters referenced in Section 5.4(b)(i) of the PA and Section 5.4(b)(ii)(B) of the PA shall commence on January 1, 2016 and, in no case will EXCO be deemed in breach thereof unless and until it fails to satisfy such obligations by January 1, 2017.

5. Right to Retain . The Parties acknowledge and agree that Section 6.6 of the PA shall be amended to add “or a First Year Retained Well Offer” following each instance of “Retained Well Offer” therein.

6. Offer Prices . The Parties acknowledge and agree that, for each EXCO Offer, First Year Retained Well Offer or Retained Well Offer, the “Oil Pricing” and “Gas Pricing” set forth on Exhibit H to the PA shall be determined as of the last day of the Quarter immediately prior to the date such EXCO Offer, First Year Retained Well Offer or Retained Well Offer, as applicable, is made by EXCO.

7. Fair Market Value . The Parties acknowledge and agree that the “Fair Market Value” for each Offer Well included in an EXCO Offer, First Year Retained Well Offer or Retained Well Offer shall be increased or decreased, as applicable, by an amount equal to the Working Capital for such Wells. The Working Capital estimate will be expressly identified for each Offer Well included in an EXCO Offer, First Year Retained Well Offer or Retained Well Offer.

8. Fair Market Value Dispute Period .

(a) The Parties acknowledge and agree that the second and third sentences of Section 6.9(a) of the PA shall be deleted in their entirety and replaced with the following:

“Within 15 Business Days of receipt of an EXCO Offer, First Year Retained Well Offer or Retained Well Offer, the KKR Parties may deliver a notice of dispute of the determination of Fair Market Value included in such EXCO Offer, First Year Retained Well Offer or Retained Well Offer or the classification of specific Offer Well(s) or Retained Well(s) pursuant to Section 6.1 (each such notice, a “ Dispute Notice ” and each matter in dispute subject to a Dispute Notice, a “ Disputed Matter ”) to EXCO and a petroleum engineer (with at least 10 years’ experience in petroleum reserve matters in Texas) at the petroleum engineering firm DeGolyer and MacNaughton, or such other Person as the Parties may mutually select (the “ Reserve Engineer ”).”

(b) The Parties acknowledge and agree that the second sentence of Section 6.9(b) of the PA shall be deleted in its entirety and replaced with the following:

“The Drilling Parties shall each present to the Reserve Engineer, with a simultaneous copy to the other Drilling Party, a single written statement of its position on the Disputed Matter, together with a copy of this Agreement and any supporting material that such Drilling Party desires to furnish, no later than 10 Business Days after submission of the Dispute Notice to the Reserve Engineer.”

(c) The Parties acknowledge and agree that the fifth sentence of Section 6.9(b) of the PA shall be deleted in its entirety and replaced with the following:

“Within 30 days following the earlier to occur of (i) submission of such written statements to the Reserve Engineer and (ii) expiration of the 10 Business Day period to submit such written statements to the Reserve Engineer, applying the principles set forth in this Section 6.9(b) and this Agreement (including the criteria set forth in Exhibit H ), the Reserve Engineer shall make its own determination of the Disputed Matter.”

9. Transfer of Offer Wells . The Parties acknowledge and agree that the last sentence of Section 6.7(a) of the PA shall be amended to add “, First Year Retained Well Offer” following “EXCO Offer” therein.

10. Offer Final Settlement . The Parties acknowledge and agree that Section 6.7 of the PA shall be amended by adding the following provisions as Sections 6.7(d) through 6.7(h):

(d) “Subject to the following sentence, the KKR Parties shall have the benefit from and the obligation for, including with regard to revenues and costs and expenses, the Transferred Offer Wells (defined below) prior to the Transfer Effective Date; and EXCO shall have the benefit from and the obligation for, including with regard to revenues and costs and expenses, (i) the Transferred Offer Wells from and after the Transfer Effective Date and (ii) the revenue received and costs and expenses paid that are included in the finally determined Working Capital; provided that clause (ii) shall not be construed to limit the KKR Parties’ right to receive adjustments to the Fair Market Value in accordance with Section 6.7(g) . For the avoidance of doubt, the revenues received by the KKR Parties or EXCO and costs and expenses paid by the KKR Parties or EXCO pursuant to the preceding sentence shall be without duplication of the finally determined Working Capital (which shall be governed by Section 6.7(g) ). If, following determination of the Agreed Final Offer Statement (defined below), in each case with respect to the Transferred Offer Wells, (A) any Party receives revenues belonging to the other, then such Party shall pay such amount within 10 Business Days of receipt over to the proper Party, (B) any Party pays any monies for expenses that are the obligation of the other Party, then such other Party shall, within 10 Business Days after receipt of the applicable invoice and proof of payment of such invoice, reimburse the Party that paid such expenses, (C) a Party receives an invoice of an expense or obligation that is owed by the other Party, such Party receiving the invoice shall promptly forward such invoice to the Party obligated to pay the same, or (D) an invoice or other evidence of an obligation is received by a Party that is partially an obligation of both EXCO and the KKR Parties, then the Parties shall consult with each other, and each shall promptly pay its portion of such obligation to the obligee.

(e) On or before 90 days after the date on which the KKR Parties Transfer all of the KKR Parties’ right, title and interest in and to the Offer Wells (subject to the KKR Right to Retain, if exercised) with respect to which the KKR Parties accepted or were deemed to have accepted a Subject Offer (as defined below) relating thereto (such interest in and to such Offer Wells, the “ Transferred Offer Wells ”), EXCO shall prepare and deliver to the KKR Parties, a final offer statement setting forth the final EXCO Offer, First Year Retained Well Offer or Retained Well Offer, as applicable, in each case with respect to the Transferred Offer Wells (such Offer, the “ Subject Offer ”) as of the last day of the Quarter immediately prior to the date of such Subject Offer that sets forth the actual value of the Working Capital for such Transferred Offer Wells (including all finally determined revenues and expenses) included in such Subject Offer (the “ Final Offer Statement ”). The Final Offer Statement shall become final and binding upon the Parties on the date (the “ Final Offer Settlement Date ”) that is 30 days following the KKR Parties’ receipt of such Final Offer Statement unless the KKR Parties deliver a written exception report containing any changes the KKR Parties propose to be made to the Final Offer Statement prior to such Final Offer Settlement Date (a “ Settlement Dispute Notice ”). Any changes not included in the Settlement Dispute Notice with respect to the Working Capital shall be deemed waived, and EXCO’s determinations with respect to all such elements of the Final Offer Statement that are not addressed in the Settlement Dispute Notice shall prevail; provided that nothing herein shall be construed to limit the rights of the KKR Parties under Section 6.7(c) . If the KKR Parties deliver a Settlement Dispute Notice, as soon as reasonably practicable, but in no event later than 15 days after EXCO receives the Settlement Dispute Notice, the Parties will meet and undertake to agree on the amounts included in the Final Offer Statement.

(f) If the Parties fail to agree on the Final Offer Statement within 15 days after EXCO’s receipt of a Settlement Dispute Notice, then the matters that remain in dispute (and only such matters) may be submitted to Ernst and Young LLC or such other accounting firm as may be mutually agreed by the Parties (such accounting firm, the “ Accounting Arbitrator ”), together with the Settlement Dispute Notice, the Final Offer Statement, this Agreement and any other documentation the Parties desire to submit. The Parties shall instruct the Accounting Arbitrator that, within 20 Business Days after receiving the Parties’ respective submissions, the Accounting Arbitrator shall render a decision choosing either EXCO’s position or the KKR Parties’ position with respect to each matter addressed in any Settlement Dispute Notice, whichever is most accurate based on the terms of this Agreement and the materials described above. Any decision rendered by the Accounting Arbitrator pursuant hereto shall be final, conclusive and binding on the Parties and will be enforceable against each of the Parties in any court of competent jurisdiction. The costs of such Accounting Arbitrator shall be borne one-half by EXCO and one-half by the KKR Parties. The Final Offer Statement determined by the Accounting Arbitrator pursuant to this Section 6.7(f) shall be final and binding on the Parties. The Accounting Arbitrator shall be authorized to resolve only the specific disputed aspects of the Final Offer Statement submitted by the Parties as provided above and may not award damages, interest or penalties to any Party with respect to any matter.

(g) Once the Final Offer Statement has been agreed (or deemed agreed) by the Parties pursuant to Section 6.7(e) or determined by the Accounting Arbitrator pursuant to Section 6.7(f) (such agreed or finally determined Final Offer Statement, the “ Agreed Final Offer Statement ”), then within five Business Days of such agreement (or deemed agreement) or final determination, as applicable, EXCO or the KKR Parties shall pay the amounts required, if any, under this Section 6.7(g) . Notwithstanding anything herein to the contrary, the Parties shall calculate separate adjustments under this Section 6.7(g) for (i) the collective grouping of Committed Wells included as Transferred Offer Wells and (ii) each individual Uncertainty Well included as a Transferred Offer Well.

(i)

If the Fair Market Value of the Transferred Offer Wells (A) in the EXCO Offer or First Year Retained Well Offer, as applicable, equaled or exceeded the Drilling Capital Return Amount and (B) in the Agreed Final Offer Statement for such EXCO Offer or First Year Retained Well Offer, as applicable, equaled or exceeded the Drilling Capital Return Amount, then (I) if the Fair Market Value in the Agreed Final Offer Statement is greater than the Fair Market Value in the EXCO Offer or First Year Retained Well Offer, as applicable, EXCO shall pay to each KKR Party an amount equal to 66.6667% of its Proportionate Share of such difference and (II) if the Fair Market Value in the Agreed Final Offer Statement is less than the Fair Market Value in the EXCO Offer or First Year Retained Well Offer, as applicable, each KKR Party shall pay to EXCO an amount equal to 66.6667% of its Proportionate Share of such difference.

(ii)

(1)

to have EXCO retain the Transferred Wells included in such EXCO Offer or First Year Retained Well Offer, as applicable, and each KKR Party shall pay to EXCO an amount equal to its Proportionate Share of the amounts received by the KKR Parties in such EXCO Offer or First Year Retained Well Offer for such Transferred Offer Wells in excess of the Fair Market Value in the Agreed Final Offer Statement; or

(2)

to receive re-assignment of the Transferred Wells included in such EXCO Offer or First Year Retained Well Offer, as applicable (the “ KKR Right to Unwind ”); provided that if the KKR Parties elect to exercise the KKR Right to Unwind, then EXCO may elect within 10 Business Days to retain the KKR Parties’ interest in such Transferred Offer Wells. If EXCO elects to retain the KKR Parties’ interest, then each KKR Party shall retain the Drilling Capital Return Amount for such Transferred Offer Wells and shall pay to EXCO an amount equal to its Proportionate Share of the amounts received by the KKR Parties in such EXCO Offer or First Year Retained Well Offer for such Transferred Offer Wells in excess of the Drilling Capital Return Amount.

(iii)

If the Fair Market Value of the Transferred Offer Wells in the EXCO Offer or First Year Retained Well Offer was below the Drilling Capital Return Amount, but EXCO elected (in its sole discretion) to exercise its right to purchase such Transferred Offer Wells for the Drilling Capital Return Amount in accordance with Section 6.4 , then EXCO shall pay to each KKR Party 66.6667% of the positive difference, if any, between (A) the Fair Market Value set forth in the Agreed Final Offer Statement and (B) the Drilling Capital Return Amount. For the avoidance of doubt, no payment will be required by the KKR Parties under this clause (iii) in the event the Fair Market Value in the Agreed Final Offer Statement is less than the Fair Market Value in the EXCO Offer or First Year Retained Well Offer, as applicable.

(iv)

If the Fair Market Value of the Transferred Offer Wells in the EXCO Offer or First Year Retained Well Offer was below the Drilling Capital Return Amount and the KKR Parties accepted (in their sole discretion) EXCO’s offer, then (A) if the Fair Market Value in the Agreed Final Offer Statement is greater than the Fair Market Value in the EXCO Offer or First Year Retained Well Offer, as applicable, EXCO shall pay to each KKR Party the positive difference between (I) the Fair Market Value in the Agreed Final Offer Statement and (II) the Fair Market Value in the EXCO Offer or First Year Retained Well Offer, as applicable; provided that EXCO shall only be required to pay to each KKR Party 66.6667% of such difference in excess of the Drilling Capital Return Amount; and (B) if the Fair Market Value in the Agreed Final Offer Statement is less than the Fair Market Value in the EXCO Offer or First Year Retained Well Offer, as applicable, each KKR Party shall pay its Proportionate Share of the difference between (I) the Fair Market Value in the Agreed Final Offer Statement and (II) the Fair Market Value in the EXCO Offer or First Year Retained Well Offer, as applicable.

(v)

If the Fair Market Value of the Transferred Offer Wells in a Retained Well Offer is different than the Fair Market Value set forth in the Agreed Final Offer Statement, then (A) if the Fair Market Value in the Agreed Final Offer Statement is greater than the Fair Market Value in the Retained Well Offer, EXCO shall pay to each KKR Party an amount equal to its Proportionate Share of such difference and (B) if the Fair Market Value in the Agreed Final Offer Statement is less than the Fair Market Value in the Retained Well Offer, each KKR Party shall pay to EXCO an amount equal to its Proportionate Share of such difference.

(h) With respect to the Transferred Offer Wells in any EXCO Offer or First Year Retained Offer, if the KKR Parties are entitled to and do elect to exercise the KKR Right to Unwind and EXCO does not elect to retain the KKR Parties’ interest in accordance with Section 6.7(g) , then within 15 Business Days following such election, EXCO shall Transfer to each KKR Party, by conveyance with a special warranty by, through and under EXCO and its Affiliates in substantially the form attached hereto as Exhibit P , the KKR Share of EXCO’s right, title and interest in and to such Transferred Offer Wells, effective as of the Transfer Effective Date. Contemporaneously with the delivery of such conveyance, each KKR Party shall pay to EXCO an amount equal to its Proportionate Share of (i) the amount received by the KKR Parties in such EXCO Offer or First Year Retained Well Offer for such Transferred Offer Wells, less (ii) the positive difference between (A) the KKR Share of all proceeds attributable to such Transferred Offer Wells attributable to the period from and after the Transfer Effective Date that have not been paid to the KKR Parties and (B) the KKR Share of expenses for such Transferred Offer Wells incurred from and after the Transfer Effective Date not yet paid by the KKR Parties.”

11. Incorporation by Reference . The Parties agree that the provisions of Section 12.1 of the PA, Section 14.2 of the PA, Section 14.3 of the PA, Section 14.4 of the PA, Section 14.5 of the PA, Section 14.6 of the PA, Section 14.10 of the PA, Section 14.20 of the PA and Section 14.22 of the PA are incorporated herein mutatis mutandis .

12. Miscellaneous . All other terms and conditions of the PA not modified by this document shall remain in full force and effect. This document may be executed in multiple counterparts, each of which shall be combined to constitute an original document.

[signature page follows]

The Parties hereby agree to amend the PA effective as of the Effective Date, as described above.

EXCO OPERATING COMPANY, LP

By: EXCO Partners OLP GP, LLC, its general partner

By: /s/ Richard Burnett

Name: Richard Burnett

Title: CFO

ADMIRAL A HOLDING L.P.

By: Admiral A Holding GP LLC, its general partner

By: /s/ David Rockecharlie

Name: David Rockecharlie

Title: Vice President

TE ADMIRAL A HOLDING L.P.

By: TE Admiral A Holding GP LLC, its general partner

By: /s/ David Rockecharlie

Name: David Rockecharlie

Title: Vice President

COLT ADMIRAL A HOLDING L.P.

By: Colt Admiral A Holding GP LLC, its general partner

By: /s/ David Rockecharlie

Name: David Rockecharlie

Title: Vice President



With copies to:	RPM Energy Management LLC 600 Travis Street, Suite 7225 Houston, Texas 77002 Attention: Land Department Email: admiral_notices@rpm-energy.com	Kirkland & Ellis LLP 600 Travis Street, Suite 2400 Houston, TX 77002 Attention: Anthony Speier, P.C. Facsimile: (713) 835-3601

Exhibit 31.1

CERTIFICATION

I, Harold L. Hickey, the Principal Executive Officer of EXCO Resources, Inc., certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of EXCO Resources, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date:	July 27, 2015	/s/ Harold L. Hickey
		Harold L. Hickey
		Chief Executive Officer and President

Exhibit 31.2

CERTIFICATION

I, Richard A. Burnett, the Principal Financial Officer of EXCO Resources, Inc., certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of EXCO Resources, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date:	July 27, 2015	/s/ Richard A. Burnett
		Richard A. Burnett
		Vice President, Chief Financial Officer and Chief Accounting Officer

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), each of the undersigned officers of EXCO Resources, Inc. (the “Company”) in their capacity as Principal Executive Officer and Principal Financial Officer, respectively, does hereby certify, to such officer’s knowledge, that:

The Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (the “Form 10-Q”) of the Company fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for, the periods presented in the Form 10-Q.



Date:	July 27, 2015	/s/ Harold L. Hickey
		Harold L. Hickey
		Chief Executive Officer and President

		/s/ Richard A. Burnett
		Richard A. Burnett
		Vice President, Chief Financial Officer and Chief Accounting Officer

The foregoing certification is being furnished as an exhibit to the Form 10-Q pursuant to Item 601(b)(32) of Regulation S-K and Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and, accordingly, is not being filed as part of the Form 10-Q for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.