Ross and Watsa to backstop $273 million Exco rights offering

NEW YORK Mon Nov 25, 2013 10:47pm GMT

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NEW YORK Nov 25 (Reuters) - Billionaire investors Wilbur Ross and Prem Watsa are backing a $273 million rights offering by oil and gas company Exco Resources Inc as it works to raise money to drill newly acquired assets.

The company announced the offering on Monday, four days after the resignation of former Chief Executive Doug Miller.

Under the terms of the offering, shareholders will receive the right to buy one new share for $5 for every four shares they own. Ross and Watsa's companies have agreed to buy the shares that Exco's other shareholders do not purchase.

Exco shares closed up 4.3 percent at $5.59. They closed at $5.15 on Nov. 20, the day before Miller announced his departure.

Ross, who owns 14 percent of Exco's shares, said in an interview he would not be committing more capital to Exco unless he believed in its prospects.

"I think it speaks for itself," he said.

In 2010 and 2011, Miller led a group of the company's investors in several attempts to take the company private for as much as $20.50 a share, or nearly $4.4 billion.

Since then, the shares of Dallas-based Exco have been battered by the company's high exposure to low-price natural gas reserves in fields that include the Haynesville shale in northern Louisiana.

In 2012, 93 percent of the company's proved reserves were gas, according to its annual filing with the U.S. Securities and Exchange Commission. Exco bought acreage in the Eagle Ford shale in south Texas from Chesapeake in July this year for $685 million to increase its exposure to more profitable crude oil.

Ross, who is also on Exco's Board of Directors, said the agreement to backstop the offering was not related to Miller's resignation.

"They are two separate events. One is a personnel matter and this is a capital matter ... We were obviously aware of Doug's departure at the time when we agreed to stand behind the half of the offering," he said.

He said the company's pressing issues are to find a new chief executive, complete the rights offering and prove the assets they own are viable.

"They have a lot of prospects," Ross said. "They have a lot of reserves. They have amassed, I believe, a large capital budget for drilling. A lot of what's needed is simply to prove up the reserves that they have."

On Thursday, Exco said it would spend $368 million next year, up sharply from the $273 million it planned to spend in 2013.

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