EXCO Slashes '16 Capital Spending, Borrowing Base Lowered

Upstream energy player EXCO Resources Inc. XCO has taken a huge step to reduce its projected 2016 capital spending significantly from the prior-year level. Moreover, the borrowing base of the company has been lowered by the lenders. Low oil prices for a prolonged period of time led to all the events.

The company has decided to spend $85 million during this year, down 69% from $277 million allotted during 2015. On top of that, EXCO Resources intends to defer a considerable portion of its drilling inventory till there is a recovery in oil and natural gas prices. Investors should know that the company is preparing to drill 7 gross wells and finish 15 gross wells this year. EXCO Resources' operations will be primarily focused on Haynesville and Bossier shales in North Louisiana and East Texas.  

Additionally, the company's lenders have lowered the borrowing base to $325 million from the prior base of $375 million following a process of regular semi-annual redetermination.  

Weak commodity prices for a length of time have not been favorable for the oil and gas exploration and production companies as the players haven't been able to sell the commodities at attractive prices. As a result, they are not getting any incentive to invest in business. Hence, the announcement of capital budget reduction and lowering of the borrowing base are not unexpected events.  

Dallas, TX-based EXCO Resources primarily involves in exploration, development and production of oil and natural gas in resources like Texas, North Louisiana and Appalachia.

EXCO Resources currently carries a Zacks Rank #3 (Hold), implying that it will perform in line with the broader U.S. equity market over the next one to three months.

Some better-ranked players in the energy sector include Antero Resources Corporation AR, Vanguard Natural Resources LLC VNR and Linn Energy LLC LINE. Antero Resources and Vanguard Natural sport a Zacks Rank #1 (Strong Buy), while Linn Energy carries a Zacks Rank #2 (Buy).

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