Summary

The items in the following summary are described in more detail later in this prospectus. This summary provides a brief overview of the key aspects of this offering and does not contain all of the information you should consider. Therefore, you should also read the more detailed information set forth in this prospectus, including the financial statements and related notes, before investing in our common stock. Unless the context requires otherwise, references in this prospectus to "EXCO," "we," "us," and "our" are to EXCO Resources, Inc., its consolidated subsidiaries, and our parent, EXCO Holdings Inc., which will merge with and into EXCO Resources immediately prior to this offering.

All reserve and other non-financial operating data described as being presented on a pro forma basis excludes data relating to our former Canadian subsidiary, Addison Energy Inc., or Addison, that we sold in February 2005, but includes data relating to ONEOK Energy Resources Company and ONEOK Energy Resources Holdings, L.L.C., collectively ONEOK Energy, acquired in September 2005 by TXOK Acquisition, Inc., or TXOK, which will become our wholly-owned subsidiary immediately following this offering. For a description of these and other significant events involving EXCO, see "—Our history." We have provided definitions for some of the oil and natural gas industry terms used in this prospectus in the "Glossary of selected oil and natural gas terms" beginning on page 173.

Our company

We are an independent oil and natural gas company engaged in the acquisition, development and exploitation of onshore North American oil and natural gas properties. We expect to continue to grow by leveraging our management team's experience, exploiting our multi-year inventory of development drilling locations and exploitation projects, and selectively pursuing acquisitions that meet our strategic and financial objectives. Our management team first purchased a significant ownership interest in us in December 1997, and since then we have achieved substantial growth in reserves and production. Since the beginning of 1998, we have increased our Proved Reserves from 4.7 Bcfe to 684.1 Bcfe on a pro forma basis, and our average daily production increased from less than 1 Mmcfe per day in 1997 to 118.9 Mmcfe per day in September 2005, on a pro forma basis. The related pre-tax PV-10 of our pro forma Proved Reserves was $3.1 billion as of September 30, 2005.

Our operations are focused in key North American oil and natural gas areas including Appalachia, East Texas, Mid-Continent, Permian, and the Rockies. Our assets are characterized by long reserve lives, a multi-year inventory of development drilling and exploitation projects, high drilling success rates, and a high natural gas concentration. For the month ended September 30, 2005, on a pro forma basis we produced 118.9 Mmcfe per day of oil and natural gas, which implies a Reserve Life of 15.8 years. As of September 30, 2005, on a pro forma basis, we have identified approximately 1,600 drilling locations and over 500 exploitation projects. From January 1, 2002 to September 30, 2005, we have drilled and completed 218 wells and experienced a 96% drilling success rate. As of September 30, 2005, 90% of our pro forma Proved Reserves were natural gas and 82% were Proved Developed Reserves.

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Our management team has led both public and private oil and natural gas companies over the past 20 years. The average industry experience of our management team is over 26 years. Since the beginning of 1998, on a pro forma basis, we have completed 136 acquisitions totaling 941.2 Bcfe of Proved Reserves, calculated as of the effective date of purchase, for approximately $1.4 billion. Included in these amounts are the January 2004 acquisition of North Coast Energy, Inc., or North Coast, for $225.1 million and the September 2005 acquisition of ONEOK Energy by TXOK for $634.8 million after contractual adjustments. The North Coast acquisition added 171.1 Bcfe of Proved Reserves, as estimated as of September 30, 2003, and established a new core operating area for us in the Appalachian Basin, which positioned us to benefit from the attractive qualities of the basin and to capitalize on consolidation opportunities in the area. The acquisition of ONEOK Energy will add 223.3 Bcfe of Proved Reserves, as estimated as of July 31, 2005, and will strengthen our position in the East Texas and Mid-Continent areas. Both acquisitions significantly increase our pro forma multi-year inventory of development drilling locations and exploitation projects.

Summary of geographic areas of operation

The following tables and descriptions set forth summary information attributable to our principal geographic areas of operation. The operating information contained in the tables below is presented as of September 30, 2005 on a pro forma basis:

(1)

The total Proved Reserves and PV-10 as used in this table were prepared by our internal engineers. Lee Keeling and Associates, Inc., an independent petroleum engineering firm in Tulsa, Oklahoma, audited properties representing approximately 80% of our Proved Reserves. The Proved Reserves and PV-10 for each area were determined by our internal engineers.

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(2)

PV-10, or the present value of estimated future net revenues, is an estimate of future net revenues from a property at the date indicated, without giving effect to commodity price risk management activities, after deducting production and ad valorem taxes, future capital costs, abandonment costs and operating expenses, but before deducting federal income taxes. The future net revenues have been discounted at an annual rate of 10% to determine their "present value." The present value is shown to indicate the effect of time on the value of the net revenue stream and should not be construed as being the fair market value of the properties. Estimates have been made using constant oil, natural gas and NGL prices and operating costs at the date indicated. The prices used to calculate the PV-10 in this table were the September 30, 2005 NYMEX spot prices of $13.92 per Mmbtu for natural gas and $66.24 per Bbl for oil, in each case adjusted for historical differentials between NYMEX and local prices. Market prices for oil and natural gas are volatile. See "Risk factors—Risks relating to our business." We believe that PV-10 before income taxes, while not a financial measure in accordance with generally accepted account principles, is an important financial measure used by investors and independent oil and natural gas producers for evaluating the relative significance of oil and natural gas properties and acquisitions because the tax characteristics of comparable companies can differ materially. The total Standardized Measure for our Proved Reserves as of September 30, 2005 was $2,101.1 million. The Standardized Measure represents the PV-10 after giving effect to income taxes, and is calculated in accordance with Statement of Financial Accounting Standards No. 69, "Disclosures About Oil and Gas Producing Activities," or SFAS 69. The amount of estimated future abandonment costs, the PV-10 of these costs and the Standardized Measure were determined by us. The following table provides a reconciliation of our PV-10 to our Standardized Measure as of September 30, 2005 on a pro forma basis:

(3)

For information as of September 30, 2005 for ONEOK Energy, see "Business—Summary of geographic areas of operation."

(4)

Identified drilling locations represent total gross drilling locations identified and scheduled by our management as an estimation of our multi-year drilling activities on existing acreage. Of the total locations shown in the table, 699 are classified as proved. Our actual drilling activities may change depending on the availability of capital, regulatory approvals, seasonal restrictions, oil and natural gas prices, costs, drilling results and other factors. See "Risk factors—Risks relating to our business."

(5)

Identified exploitation projects represent total gross exploitation projects, such as workovers, recompletions, and other non-drilling activities, identified and scheduled by our management as an estimation of our multi-year exploitation projects on existing acreage. Of the total exploitation projects shown in the table, 314 are classified as proved. Our actual exploitation projects may change depending on the availability of capital, regulatory approvals, seasonal restrictions, oil and natural gas prices, costs, and other factors. See "Risk factors—Risks relating to our business."

(6)

Includes 33,360, 28,485, and 42,747 net acres with leases expiring in 2006, 2007 and 2008, respectively.

Appalachia.     Appalachia is our largest operating area on the basis of reserves and production. These operations primarily include development drilling on our existing acreage, as well as the acquisition of properties with established production and growth opportunities. Our activities are conducted primarily in five general project areas located in Pennsylvania, West Virginia and Ohio. All references to our Appalachia operations are to the operations and assets of our wholly-owned subsidiary, North Coast.

East Texas.     We expect our East Texas area to provide the most significant contribution to our 2005 and 2006 growth in Proved Reserves and production. Our exploitation and development drilling in the area will be substantially enhanced with the ONEOK Energy acquisition. Our activities are conducted primarily in four principal fields in the Cotton Valley Sand trend.

Mid-Continent.     Our Mid-Continent area is primarily comprised of properties being acquired in the ONEOK Energy acquisition located in the Anadarko Shelf and Anadarko Basin of Oklahoma. Our operations are focused on exploitation, development drilling and acquisitions. We drill shallow wells as well as deeper wells that target more prolific formations. Our activities are conducted primarily in three principal fields.

Permian.     Our Permian area is comprised primarily of natural gas properties in two principal fields in West Texas. Our operations center on conventional natural gas drilling and workovers to exploit the higher potential of this area.

Rockies.     In our Rockies area, we are focused on the Wattenberg Field in the DJ Basin of northeastern Colorado. Our activities in this area primarily include development drilling and exploitation enhanced by the application of improved fracturing technology.

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Our business strategy

We plan to achieve reserve, production, and cash flow growth by executing our strategy as highlighted below:

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Exploit our multi-year, development inventory
We have a multi-year inventory of development drilling locations and exploitation projects. This inventory consists of step-out drilling, infill drilling, workovers, and recompletions. We have identified over 2,000 drilling locations and exploitation projects across our properties. From January 1, 2002 to September 30, 2005, we have drilled and completed 218 wells and achieved a 96% drilling success rate.



•

Seek acquisitions that meet our strategic and financial objectives
We maintain a disciplined acquisition process to seek and acquire properties that have established production histories and value enhancement potential through development drilling and exploitation projects. Our January 2004 acquisition of North Coast in the Appalachian Basin and the acquisition of ONEOK Energy in the East Texas and the Mid-Continent areas are examples of this strategy.



•

Actively manage our portfolio and associated costs
We regularly review our properties to identify cost savings opportunities and divestiture candidates. We actively seek to dispose of properties with higher operating costs and properties that are not within our core geographic operating areas. We also seek to opportunistically divest properties in areas in which acquisitions and investment economics no longer meet our objectives, most notably evidenced by the sale of our Canadian operations for net cash proceeds of $443.3 million in February 2005.



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Maintain financial flexibility
We employ the use of debt along with a comprehensive commodity price risk management program to support our acquisition strategy. This approach enhances our ability to execute our business plan over the entire commodity price cycle, protect our returns on investment, and manage our capital structure.

Our strengths

We have a number of strengths that we believe will help us successfully execute our strategy.

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Experienced management team with significant employee ownership
Our management team has led both public and private oil and natural gas companies over the past 20 years and has an average of over 26 years of industry experience in acquiring, developing, and exploiting oil and natural gas properties. Our management team has substantially grown our reserves and production. Importantly, our management team and employees will own approximately     % of our fully-diluted capital stock after this offering, which aligns their objectives with those of our shareholders.

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•

High quality asset base in attractive regions
We own and plan to maintain a geographically diversified reserve base. On a pro forma basis, our principal operations are in the Appalachia, East Texas, Mid-Continent, Permian, and Rockies areas. Our properties are generally characterized by:



•

long reserve lives;



•

a multi-year inventory of development drilling and exploitation projects;



•

high drilling success rates; and



•

a high natural gas concentration.



•

Operational control
We operate a significant portion of our properties, which permits us to manage our operating costs and better control capital expenditures as well as the timing of development and exploitation activities. As of September 30, 2005, on a pro forma basis we operated 88% of our properties based on our Proved Reserves.

Our challenges and risks

The implementation of our business strategy, maintenance of our strengths, and our future operating results and financial condition are subject to a number of challenges, risks and uncertainties. These challenges and risks include the following:

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Oil and natural gas prices are volatile, and a decline in oil and natural gas prices could significantly affect our financial condition, access to capital, cash flows and results of operations. In addition, as of September 30, 2005, 90% of our pro forma Proved Reserves were natural gas. We are particularly exposed to volatility in natural gas prices.



•

Our commodity price risk management program, which is designed to reduce the volatility of our expected cash flow, may cause us to forego additional future profits or result in our making cash payments to settle our positions.



•

We face significant risks associated with our acquisition activities, including difficulties integrating operations, potential disruptions of operations, the potential failure to identify all risks associated with an acquisition, the potential failure to correctly evaluate reserve data or the exploitation potential of properties, and the need to incur significant expenditures to identify and acquire properties.



•

We also face challenges to our ability to make acquisitions, such as the number and attractiveness of properties available for sale, competition for properties, access to capital and prevailing oil and natural gas prices.



•

We face significant risks associated with our development drilling and exploitation activities, including the potential unavailability of capital at attractive or acceptable costs, the possibility that we will not encounter commercially productive oil or natural gas reservoirs, the potential need to incur significant costs to drill and complete wells, and the possibility that drilling operations may be curtailed, delayed or canceled as a result of unexpected drilling conditions, pressure or irregularities in formations, equipment failures or accidents, weather conditions and shortages, delays in the delivery of equipment or other factors.

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•

Reserve estimates depend on many assumptions that may turn out to be inaccurate. Any significant inaccuracies in these reserve estimates or underlying assumptions could materially affect the quantities and value of our reserves.

You should carefully consider these challenges and risks as well as all of the information contained in this prospectus prior to investing in the common stock. In particular, we urge you to carefully review the information under "Risk factors" beginning on page 14 of this prospectus so that you understand the risks associated with an investment in our company and our common stock.

Our history

Going private transaction.     On July 29, 2003, EXCO Resources, Inc. consummated a going private transaction pursuant to which it became a wholly-owned subsidiary of EXCO Holdings. Prior to July 29, 2003, EXCO Resources had registered equity securities that were publicly traded on the NASDAQ National Market. Prior to the going private transaction, EXCO Holdings had no assets, liabilities or operations other than those nominal to its formation. Accordingly, EXCO Resources was deemed the predecessor entity to EXCO Holdings through July 28, 2003.

North Coast acquisition.     On January 27, 2004, we acquired North Coast for a purchase price of $225.1 million. The North Coast acquisition established a new core operating area for us in the Appalachian Basin, which positioned us to benefit from the attractive qualities of the basin and to capitalize on consolidation opportunities in the area.

Sale of Addison.     On February 10, 2005, we sold Addison, our former wholly-owned subsidiary through which all of our Canadian operations were conducted, for an aggregate purchase price of Cdn. $551.3 million ($443.3 million).

ONEOK Energy acquisition.     On September 27, 2005, our affiliate, TXOK, completed the acquisition of ONEOK Energy, or the ONEOK Energy acquisition, for an aggregate purchase price of approximately $642.9 million ($634.8 million after contractual adjustments). ONEOK Energy had Proved Reserves, estimated as of July 31, 2005, of approximately 223.3 Bcfe primarily located in the East Texas and Mid-Continent areas. We have a $20.0 million equity investment in TXOK, which constitutes all of the outstanding common stock and 10% of the voting rights of TXOK. Immediately following this offering, we intend to redeem all of the outstanding 15% Series A Convertible Preferred Stock of TXOK, or the TXOK preferred stock, which represents 90% of the voting rights of TXOK. The redemption price for the TXOK preferred stock will be (a) cash in the amount of $150.0 million plus accrued and unpaid dividends at a rate of 15% and (b) that number of shares of common stock of EXCO Resources, cash, or any combination thereof, at the election of the TXOK preferred stock holder, necessary to produce an overall 23% annualized rate of return on the stated value of the TXOK preferred stock as of the date of redemption. Once the TXOK preferred stock is redeemed, TXOK will become our wholly-owned subsidiary.

TXOK funded the ONEOK Energy acquisition with (i) $20.0 million in private debt financing, which has since been repaid; (ii) the issuance of $150.0 million of the TXOK preferred stock to BP EXCO Holdings LP, an entity controlled by Mr. Boone Pickens, one of our directors; (iii) approximately $308.8 million of borrowings under the revolving credit facility of TXOK, or the TXOK credit facility; and (iv) $200.0 million of borrowings under the second lien term loan

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facility of TXOK, or the TXOK term loan. See "Interim financing arrangements" for a description of these financing arrangements.

Equity Buyout.     On October 3, 2005, EXCO Holdings II, Inc., or Holdings II, an entity formed by our management, purchased 100% of the outstanding equity securities of EXCO Holdings for an aggregate price of approximately $699.3 million, resulting in a change of control and a new basis of accounting. To fund this purchase, Holdings II incurred $350.0 million in indebtedness under an interim bank loan, including $0.7 million for working capital, and raised $183.1 million of equity financing. Current management and other stockholders of EXCO Holdings, who had an option to take cash or equity in Holdings II, exchanged EXCO Holdings capital stock for $166.9 million of Holdings II common stock. Immediately following the completion of these transactions, Holdings II merged with and into EXCO Holdings. See "Related party transactions—Equity Buyout" for a discussion of the agreements we entered into in connection with these transactions.

Merger of EXCO Holdings into EXCO Resources.     Immediately prior to the consummation of this offering, EXCO Holdings will merge with and into EXCO Resources.

General.     EXCO Resources is a Texas corporation incorporated in October 1955. We expect our shares of common stock to be listed on the New York Stock Exchange under the symbol "XCO". Our principal executive office is located at 12377 Merit Drive, Suite 1700, Dallas, Texas 75251. Our telephone number is (214) 368-2084.

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(1)

Cash flow used in operating activities for the nine months ended September 30, 2005 includes $67.6 million related to the termination of commodity price risk management contracts and $50.1 million for income taxes related to the sale of Addison.

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(2)

Earnings before interest, taxes, depreciation, depletion and amortization, or "EBITDA," represents net income adjusted to exclude interest expense, income taxes, depreciation, depletion and amortization. "Adjusted EBITDA" represents EBITDA adjusted to exclude the cumulative effect of change in accounting principle, impairment of marketable securities, income from derivative ineffectiveness and terminated hedges, accretion of discount on asset retirement obligations, non-cash changes in the fair value of derivative financial instruments, commodity price risk management contracts termination expense, non-cash stock based compensation expense, investment advisory fees and income from discontinued operations as a result of the sale of Addison in February 2005. We have presented Adjusted EBITDA because it is the financial measure that is used in covenant calculations required under our credit agreement and compliance with the liquidity and debt incurrence covenants included in this agreement is considered material to us. See "Management's discussion and analysis of financial condition and results of operation—Our liquidity, capital resources and capital commitments—Credit agreement." In addition, it will be necessary for us to incur additional indebtedness under our credit agreement to fully fund the use of proceeds of this offering. See "Use of proceeds." Our computations of EBITDA and Adjusted EBITDA may differ from computations of similarly titled measures of other companies due to differences in the inclusion or exclusion of items in our computations as compared to those of others. EBITDA and Adjusted EBITDA are measures that are not prescribed by generally accepted accounting principles, or GAAP. EBITDA and Adjusted EBITDA specifically exclude changes in working capital, capital expenditures and other items that are set forth on a cash flow statement presentation of a company's operating, investing and financing activities. As such, we encourage investors not to use these measures as substitutes for the determination of net income, net cash provided by operating activities or other similar GAAP measures. The following table sets forth a reconciliation of net income (loss) to EBITDA and Adjusted EBITDA and Adjusted EBITDA to net cash provided by (used in) operating activities:

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Summary operating data

The following table summarizes our historical oil, natural gas and natural gas liquids production, net of royalties, for the periods indicated. The pro forma amounts include the effect of ONEOK Energy, as if their operations were acquired on January 1, 2004.

(1)

Historical continuing operations reflect our historical information, excluding information related to Addison due to the classification of such information as discontinued operations as a result of the sale of Addison in February 2005.

(2)

Pro forma amounts reflect the historical accounting treatment by ONEOK Energy of derivative contracts as hedges.

(3)

Included in the commodity price risk management activities for the nine months ended September 30, 2005 are payments of $52.6 million to the counterparties of certain of our commodity price risk management contracts to terminate these contracts.

(4)

Pro forma average sales prices include the effects of hedging related to ONEOK Energy's derivative contracts. Excluding the effects of hedge settlements, the pro forma average sales prices for the year ended December 31, 2004 of oil, natural gas and total production are $39.55 per Bbl, $5.97 per Mcf and $6.05 per Mcfe. Excluding the effects of hedge settlements, the pro forma average sales prices for the nine months ended September 30, 2005 of oil, natural gas and total production are $53.05 per Bbl, $7.10 per Mcf and $7.30 per Mcfe.

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Corporate structure

The following figures depict our corporate structure prior to this offering and after this offering.

Corporate structure prior to this offering

Corporate structure after this offering

(1)

Holdings II acquired EXCO Holdings on October 3, 2005. Immediately thereafter, Holdings II merged into EXCO Holdings, with EXCO Holdings as the surviving entity. Immediately prior to this offering, EXCO Holdings will merge with and into EXCO Resources, with EXCO Resources as the surviving entity and the successor for financial reporting purposes.

(2)

Prior to this offering, EXCO Holdings owns a 10% voting interest in TXOK. An entity controlled by one of our directors owns the TXOK preferred stock, which represents the remaining 90% voting interest. Immediately following this offering, we intend to redeem the TXOK preferred stock and TXOK will become our wholly-owned subsidiary.

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Risk factors

An investment in our common stock offered by this prospectus involves a substantial risk of loss. You should carefully consider these risk factors, together with all of the other information included in this prospectus, before you decide to purchase shares of our common stock. We believe the risks and uncertainties described below are the most significant we face. The occurrence of any of the following risks could harm our business. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our operations.

Risks relating to our business

Fluctuations in oil and natural gas prices, which have been volatile at times, may adversely affect our revenues as well as our ability to maintain or increase our borrowing capacity, repay current or future indebtedness and obtain additional capital on attractive terms.

Our future financial condition, access to capital, cash flow and results of operations depend upon the prices we receive for our oil and natural gas. We are particularly dependent on prices for natural gas. As of September 30, 2005, 90% of our pro forma Proved Reserves were natural gas. Historically, oil and natural gas prices have been volatile and are subject to fluctuations in response to changes in supply and demand, market uncertainty and a variety of additional factors that are beyond our control. Factors that affect the prices we receive for our oil and natural gas include:

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the level of domestic production;



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the availability of imported oil and natural gas;



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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;



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



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



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the cost and availability of other competitive fuels;



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fluctuating and seasonal demand for oil and natural gas;



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conservation and the extent of governmental price controls and regulation of production;



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weather;



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foreign and domestic government relations; and



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overall economic conditions.

Our revenues and our ability to maintain or increase our borrowing capacity, to repay current or future indebtedness and to obtain additional capital on attractive terms, all of which can affect the value of our common stock and our ability to pay dividends on our common stock, depends substantially upon oil and natural gas prices.

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Our commodity price risk management program may cause us to forego additional future profits or result in our making cash payments.

To reduce our exposure to changes in the prices of oil and natural gas, we have entered into and may in the future enter into commodity price risk management arrangements for a portion of our oil and natural gas production. The agreements that we have entered into generally have the effect of providing us with a fixed price for a portion of our expected future oil and natural gas production over a fixed period of time. Commodity price risk management arrangements expose us to the risk of financial loss and may limit our ability to benefit from increases in oil and natural gas prices in some circumstances, including the following:

•

the counterparty to the commodity price risk management contract may default on its contractual obligations to us;



•

there may be a change in the expected differential between the underlying price in the commodity price risk management agreement and actual prices received; or



•

market prices may exceed the prices which we are contracted to receive, resulting in our need to make significant cash payments.

Our commodity price risk management activities could have the effect of reducing our revenues and the value of our common stock, and making it more difficult for us to pay dividends on our common stock. During the year ended December 31, 2004 and for the nine months ended September 30, 2005, we made cash settlement payments on our commodity price risk management contracts totaling $26.1 million and $62.8 million, respectively. As of September 30, 2005, a $1 increase in the average commodity price per Mcfe would have resulted in an increase in cash settlement payments for the nine months ended September 30, 2005 of approximately $10.6 million. As of December 31, 2004 and September 30, 2005, the net unrealized loss on our commodity price risk management contracts was $54.2 million and $156.5 million, respectively. Since December 31, 2004, we have terminated several of our commodity price risk management contracts upon the payment of $67.6 million to our counterparties, of which $15.0 million was related to the sale of Addison and $52.6 million was related to our U.S. production. Concurrent with the ONEOK Energy acquisition, additional commodity price risk management contracts were entered into to cover an additional portion of the estimated future production. See "Significant transactions—ONEOK Energy acquisition". We may continue to incur significant unrealized losses in the future from our commodity price risk management activities to the extent market prices continue to increase and our derivatives contracts remain in place. See "Management's discussion and analysis of financial condition and results of operation—Our liquidity, capital resources and capital commitments—Commodity price risk management activities."

We will face risks associated with the ONEOK Energy acquisition relating to difficulties in integrating operations, potential disruptions of operations, and related negative impact on earnings.

The ONEOK Energy acquisition will represent a significant increase in our reserves and production. The ONEOK Energy acquisition will be larger than any acquisition that we have completed to date. The Proved Reserves in the ONEOK Energy acquisition represent approximately 33% of our pro forma Proved Reserves as of September 30, 2005. In addition, on a pro forma basis, we will be adding 1,041 gross (445.1 net) wells to our consolidated portfolio

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of wells, including approximately 514 gross operated wells, which will materially increase the number of wells we currently operate. All of these factors could present significant integration challenges for us. In addition to the other general acquisition risks described elsewhere in this section, the magnitude of the ONEOK Energy acquisition could strain our managerial, financial, accounting, technical, operational and administrative resources, disrupt our ongoing business, distract management, divert resources and make it difficult to maintain our current business standards as well as our internal controls and procedures. In addition, since we will acquire only one field office in connection with the ONEOK Energy acquisition, we may be unable to open field or other offices on terms acceptable to us required to accommodate the employees we hired in connection with the ONEOK Energy acquisition. We may not be successful in overcoming these risks or any other problems encountered in connection with the ONEOK Energy acquisition, all of which could negatively impact our results of operations and our ability to generate cash needed to service our debt and fund our capital program and other working capital requirements.

We may be unable to acquire or develop additional reserves, which would reduce our revenues and access to capital.

Our success depends upon our ability to find, develop or acquire additional oil and natural gas reserves that are profitable to produce. Factors that may hinder our ability to acquire additional oil and natural gas reserves include competition, access to capital, prevailing oil and natural gas prices and the number and attractiveness of properties for sale. If we are unable to conduct successful development activities or acquire properties containing Proved Reserves, our total Proved Reserves will generally decline as a result of production. Also, our production will generally decline. In addition, if our reserves and production decline, then the amount we are able to borrow under our credit agreement will also decline. We may be unable to locate additional reserves, drill economically productive wells or acquire properties containing Proved Reserves.

We may not identify all risks associated with the acquisition of oil and natural gas properties, which may result in unexpected liabilities and costs to us.

Generally, it is not feasible for us to review in detail every individual property involved in an acquisition. Our business strategy focuses on acquisitions of producing oil and natural gas properties. Any future acquisitions will require an assessment of recoverable reserves, title, future oil and natural gas prices, operating costs, potential environmental hazards, potential tax and ERISA liabilities, and other liabilities and other similar factors. Ordinarily, our review efforts are focused on the higher-valued properties. For example, in both the North Coast and ONEOK Energy acquisitions we did not review title or production data, or physically inspect, every well we acquired. Even a detailed review of properties and records may not reveal existing or potential problems, nor will it permit us to become sufficiently familiar with the properties to assess fully their deficiencies and capabilities. We do not inspect every well that we acquire. Potential problems, such as deficiencies in the mechanical integrity of equipment or environmental conditions that may require significant remedial expenditures, are not necessarily observable even when we inspect a well. Any unidentified problems could result in material liabilities and costs that negatively impact our financial condition and results of operations.

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Even if we are able to identify problems with an acquisition, the seller may be unwilling or unable to provide effective contractual protection or indemnity against all or part of these problems. Even if a seller agrees to provide indemnity, the indemnity may not be fully enforceable and may be limited by floors and caps on such indemnity. The indemnifications we received in the North Coast and ONEOK Energy acquisitions are subject to floors and caps and do not cover all these types of risks. In addition, the entity from which we acquired North Coast is a foreign entity. As a result, we may face difficulties or incur additional expenses in enforcing a judgment obtained in a U.S. court against such entity for any breach of its obligations to provide indemnity to us.

We may be unable to obtain additional financing to implement our growth strategy.

The growth of our business will require substantial capital on a continuing basis. Because of our issuance of the senior notes and the pledge of substantially all of our assets as collateral under our credit facility, it may be difficult for us in the foreseeable future to obtain debt financing on an unsecured basis or to obtain additional secured financing other than purchase money indebtedness. If we are unable to obtain additional capital on satisfactory terms and conditions, we may lose opportunities to acquire oil and natural gas properties and businesses and, therefore, unable to implement our growth strategy.

We may not be successful in managing our growth, which could adversely affect our operations and net revenues.

The pursuit of additional acquisitions is a key part of our strategy. We face challenges in growing our managerial, financial, accounting, technical, operational and administrative resources to keep up with the pace of the growth of our business and our significant corporate transactions such as the Equity Buyout and this offering. For example, our rapid growth and significant transactions over the past two years have strained, and could continue to strain, our financial, tax and accounting staff. The North Coast and ONEOK Energy acquisitions substantially increased the size and scope of our business from an operational, personnel, financial reporting and accounting perspective. Our growth could disrupt our ongoing business, distract management, divert resources and make it difficult to maintain our current business standards as well as internal controls and procedures. Failure to manage our growth successfully could adversely affect our operations and net revenues through increased operating costs and revenues that do not meet our expectations, as well as adversely affect our ability to satisfy our disclosure and other obligations. We may also be unable to successfully integrate acquired oil and natural gas properties into our operations or achieve desired profitability.

If we are unable to successfully address the material weakness in our internal controls, or any other control deficiencies, our ability to report our financial results on a timely and accurate basis and to comply with disclosure and other requirements may be adversely affected.

We are not currently required to comply with Section 404 of the Sarbanes-Oxley Act of 2002, and are therefore not required to make an assessment of the effectiveness of our internal controls over financial reporting for that purpose. However, in connection with the 2004 audit of the financial statements of EXCO Resources and EXCO Holdings, we identified a material weakness in our processes, procedures and controls related to the preparation of our quarterly and annual tax provisions. A material weakness is defined as a significant deficiency, or a combination of significant deficiencies, that results in more than a remote likelihood that a

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material misstatement of the annual or interim financial statements will not be prevented or detected. Our independent registered public accounting firm informed members of our senior management and the audit committee of our board of directors that our processes, procedures and controls related to the preparation and review of quarterly and annual tax provisions were not adequate to ensure that the deferred tax provision and the classification of deferred tax balances were prepared in accordance with generally accepted accounting principles. This control deficiency resulted in year end audit adjustments to the tax provision and deferred tax balance. The errors resulted in an increase in the deferred tax liability accounts, an increase in the federal income tax provision and a decrease in the deferred state income tax provision, although they did not affect the reported results of operations or disclosures in any prior interim or annual period. The control deficiency, however, could have resulted in a misstatement in the aforementioned tax accounts that would result in a material misstatement to the annual or interim financial statements that would not be prevented or detected. Accordingly, management concluded that this deficiency in internal control over financial reporting was a material weakness.

In 2005 and through the date of this prospectus, we have implemented additional controls including more stringent reviews of the quarterly tax provision, hired additional finance and accounting personnel and expanded the scope of work of the outside consulting firm that we use to review our quarterly tax provision. However, in a recent evaluation carried out under the supervision and with the participation of our senior management, our Chief Executive Officer and Chief Financial Officer, who is also our Chief Accounting Officer, concluded that our disclosure controls and procedures continued to be ineffective as of September 30, 2005 as a result of the material weakness identified as of December 31, 2004.

In connection with the preparation of our quarterly report on Form 10-Q for the third quarter ended September 30, 2005, we reconsidered our position with respect to technical correction notices from the IRS related to the tax provision made on an extraordinary dividend received from our former wholly-owned Canadian subsidiary. Accordingly, we restated our financial statements for the quarter ended June 30, 2005 and September 30, 2005, to reflect the tax benefit in the earlier quarter and to classify the benefit as a component of continuing rather than discontinued operations in the September 30, 2005 quarter. We also reclassified a Canadian tax benefit resulting from a tax rate change in the three and six month periods ended June 30, 2004 and the nine months ended September 30, 2004 from discontinued to continuing operations. In view of these restatements, we continue to evaluate the effectiveness of our processes, procedures and controls, with continued emphasis on accounting for income taxes.

In connection with their audit as of December 31, 2004, our independent registered public accounting firm made recommendations to our management concerning adding additional accounting staff and implementing an internal audit function. Deficiencies in these areas may have contributed to accounting adjustments made in our financial statements and could, in the future, contribute to accounting adjustments. Accordingly, we have hired a new controller, added other finance and accounting personnel and are finalizing the implementation of an internal audit function to be conducted, under our supervision, by an outside consulting firm.

We will continue to monitor the effectiveness of these and other processes, procedures and controls and will make any further changes management determines appropriate, including to effect compliance with Section 404 of the Sarbanes-Oxley Act of 2002 when we are required to

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make an assessment of internal controls under Section 404 for fiscal 2006. The steps we have taken and will take in the future may not remediate the material weakness. In addition, we may identify additional material weaknesses or other deficiencies in our internal controls in the future.

Any material weaknesses or other deficiencies in our control systems may affect our ability to comply with, Securities and Exchange Commission, or SEC, reporting requirements and NYSE listing standards or cause our financial statements to contain material misstatements, which could negatively affect the market price and trading liquidity of our common stock, cause investors to lose confidence in our reported financial information, as well as subject us to civil or criminal investigations and penalties.

There are inherent limitations in all control systems, and misstatements due to error or fraud may occur and not be detected.

While EXCO Resources, as a voluntary filer with the Securities and Exchange Commission, has taken actions designed to address compliance with the internal control, disclosure control and other requirements of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated by the SEC implementing these requirements, there are inherent limitations in its ability to control all circumstances. Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our internal controls and disclosure controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. In addition, the design of a control system must reflect the fact that there are resource constraints and the benefit of controls must be relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, in our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple errors or mistakes. Further, controls can be circumvented by individual acts of some persons, by collusion of two or more persons, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, a control may be inadequate because of changes in conditions, such as growth of the company or increased transaction volume, or the degree of compliance with the policies or procedures may deteriorate. Because of inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

We may encounter obstacles to marketing our oil and natural gas, which could adversely impact our revenues.

Our ability to market our oil and natural gas production will depend upon the availability and capacity of natural gas gathering systems, pipelines and other transportation facilities. We are primarily dependent upon third parties to transport our products. Transportation space on the gathering systems and pipelines we utilize is occasionally limited or unavailable due to repairs or improvements to facilities or due to space being utilized by other companies that have priority transportation agreements. We have experienced production curtailments in the Appalachian Basin during 2004 and 2005 resulting from capacity restraints and short term shutdowns of certain pipelines for maintenance purposes. Our access to transportation options

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can also be affected by U.S. federal and state regulation of oil and natural gas production and transportation, general economic conditions and changes in supply and demand. These factors and the availability of markets are beyond our control. If market factors dramatically change, the impact on our revenues could be substantial and could adversely affect our ability to produce and market oil and natural gas, the value of our common stock and our ability to pay dividends on our company stock.

There are risks associated with our drilling activity that could impact the results of our operations.

Our drilling involves numerous risks, including the risk that we will not encounter commercially productive oil or natural gas reservoirs. We must incur significant expenditures to identify and acquire properties and to drill and complete wells. Additionally, seismic technology does not allow us to know conclusively prior to drilling a well that oil or natural gas is present or economically producible. The costs of drilling and completing wells are often uncertain, and drilling operations may be curtailed, delayed or canceled as a result of a variety of factors, including unexpected drilling conditions, pressure or irregularities in formations, equipment failures or accidents, weather conditions and shortages or delays in the delivery of equipment. We have experienced some delays in contracting for drilling rigs and increasing costs to drill wells. All of these risks could adversely affect our results of operations and financial condition.

We may not correctly evaluate reserve data or the exploitation potential of properties as we engage in our acquisition, development, and exploitation activities.

Our future success will depend on the success of our acquisition, development, and exploitation activities. Our decisions to purchase, develop or otherwise exploit properties or prospects will depend in part on the evaluation of data obtained from production reports and engineering studies, geophysical and geological analyses and seismic and other information, the results of which are often inconclusive and subject to various interpretations. Our estimates regarding the increase in our reserves and production resulting from the ONEOK Energy acquisition may prove to be incorrect, which could significantly reduce our ability to generate cash needed to service our debt and fund our capital program and other working capital requirements.

We cannot control the development of the properties we own but do not operate, which may adversely affect our production, revenues and results of operations.

As of September 30, 2005, on a pro forma basis, third parties operate wells that represent approximately 12% of our Proved Reserves. As a result, the success and timing of our drilling and development activities on those properties depend upon a number of factors outside of our control, including:

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the timing and amount of capital expenditures;



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the operators' expertise and financial resources;



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the approval of other participants in drilling wells; and



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the selection of suitable technology.

If drilling and development activities are not conducted on these properties or are not conducted on a timely basis, we may be unable to increase our production or offset normal

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production declines, which may adversely affect our production, revenues and results of operations.

Our estimates of oil, natural gas and NGL reserves involve inherent uncertainty, which could materially affect the quantity and value of our reported reserves and our financial condition.

Numerous uncertainties are inherent in estimating quantities of proved oil, natural gas and NGL reserves, including many factors beyond our control. This prospectus contains estimates of our proved oil, natural gas and NGL reserves and the PV-10 of our proved oil, natural gas and NGL reserves. These estimates are based upon reports of our own engineers and our independent petroleum engineers. These reports rely upon various assumptions, including assumptions required by the SEC as to constant oil, natural gas and NGL prices, drilling and operating expenses, capital expenditures, taxes and availability of funds. These estimates should not be construed as the current market value of our estimated Proved Reserves. The process of estimating oil, natural gas and NGL reserves is complex, requiring significant decisions and assumptions in the evaluation of available geological, engineering and economic data for each reservoir. As a result, the estimates are inherently imprecise evaluations of reserve quantities and future net revenue. Our actual future production, revenues, taxes, development expenditures, operating expenses and quantities of recoverable oil, natural gas and NGL reserves may vary substantially from those we have assumed in the estimates. Any significant variance in our assumptions could materially affect the quantity and value of reserves, the amount of PV-10 described in this prospectus, and our financial condition. In addition, our reserves or PV-10 may be revised downward or upward, based upon production history, results of future exploitation and development activities, prevailing oil and natural gas prices and other factors. A material decline in prices paid for our production can adversely impact the estimated volumes of our reserves. Similarly, a decline in market prices for oil or natural gas may adversely affect our PV-10. Any of these negative effects on our reserves or PV-10 may decrease the value of our common stock.

We are exposed to operating hazards and uninsured risks that could adversely impact our results of operations and cash flow.

Our operations are subject to the risks inherent in the oil and natural gas industry, including the risks of:

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fires, explosions and blowouts;



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pipe failures;



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abnormally pressured formations; and



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environmental accidents such as oil spills, gas leaks, ruptures or discharges of toxic gases, brine or well fluids into the environment (including groundwater contamination).

We have in the past experienced some of these events during our drilling operations. These events may result in substantial losses to us from:

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injury or loss of life;



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severe damage to or destruction of property, natural resources and equipment;



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pollution or other environmental damage;

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environmental clean-up responsibilities;



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regulatory investigation;



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penalties and suspension of operations; or



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attorney's fees and other expenses incurred in the prosecution or defense of litigation.

As is customary in our industry, we maintain insurance against some, but not all, of these risks. Our insurance may not be adequate to cover these losses or liabilities. Furthermore, insurance coverage may not continue to be available at commercially acceptable premium levels or at all. Due to cost considerations, from time to time we have declined to obtain coverage for certain drilling activities and have therefore been restricted from conducting these types of drilling activities during the period we were uninsured. We do not carry business interruption insurance. Losses and liabilities arising from uninsured or under-insured events could require us to make large unbudgeted cash expenditures that could adversely impact our results of operations and cash flow.

We may experience production curtailments, which could adversely impact our revenues.

Some of the producing wells that we own an interest in have, from time to time, experienced reduced or terminated production. These curtailments may result from mechanical failures, contract terms, pipeline and processing plant interruptions, market conditions and weather conditions. These curtailments may last from a few days to many months and can decrease our revenues, the value of our common stock, and our ability to pay dividends on our common stock.

Our business exposes us to liability and extensive regulation on environmental matters, which could result in substantial expenditures.

Our operations are subject to numerous U.S. federal, state and local laws and regulations relating to the protection of the environment, including those governing the discharge of materials into the water and air, the generation, management and disposal of hazardous substances and wastes and the clean-up of contaminated sites. We could incur material costs, including clean-up costs, fines and civil and criminal sanctions and third-party claims for property damage and personal injury as a result of violations of, or liabilities under, environmental laws and regulations. Such laws and regulations not only expose us to liability for our own activities, but may also expose us to liability for the conduct of others or for actions by us that were in compliance with all applicable laws at the time those actions were taken. In addition, we could incur substantial expenditures complying with environmental laws and regulations, including future environmental laws and regulations which may be more stringent.

Our business substantially depends on Douglas H. Miller, our CEO.

We are substantially dependent upon the skills of Mr. Douglas H. Miller. Mr. Miller has extensive experience in acquiring, financing and restructuring oil and natural gas companies. We do not have an employment agreement with Mr. Miller or maintain key man insurance. The loss of the services of Mr. Miller could hinder our ability to successfully implement our business strategy.

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We may have write-downs of our asset values, which could negatively affect our results of operations and net worth.

Depending upon oil and natural gas prices in the future, we may be required to write-down the value of our oil and natural gas properties if the present value of the after-tax future cash flows from our oil and natural gas properties falls below the net book value of these properties. We have in the past experienced ceiling test writedowns with respect to our oil and natural gas properties. Future non-cash ceiling test write-downs would negatively affect our results of operations and net worth.

We also test goodwill for impairment annually or when circumstances indicate that an impairment may exist. If the book value of our reporting units, as defined, exceeds the fair value of those reporting units, an impairment charge will occur, which would negatively impact our net worth.

We may experience a financial loss if any of our significant customers fail to pay us for our oil or natural gas.

Our ability to collect the proceeds from the sale of oil and natural gas from our customers depends on the payment ability of our customer base, which includes several significant customers. If any one or more of our significant customers fails to pay us for any reason, we could experience a material loss. In addition, in recent years, a number of energy marketing and trading companies have discontinued their marketing and trading operations, which has significantly reduced the number of potential purchasers for our oil and natural gas production. This reduction in potential customers has reduced market liquidity and, in some cases, has made it difficult for us to identify creditworthy customers. We also sell a portion of our natural gas directly to end users. We may experience a material loss as a result of the failure of our customers to pay us for prior purchases of our oil or natural gas.

Competition in our industry is intense and we may be unable to compete in acquiring properties, contracting for drilling equipment and hiring experienced personnel.