Boosted by funding from joint venture (JV) partner BG Group plc, EXCO Resources Inc. said last week it would increase its natural gas-directed onshore rig count by four to 17 in the first three months of 2010. Most of the drilling is to target East Texas and North Louisiana.

"We currently have 13 operated drilling rigs across our portfolio, and we anticipate that this will increase to 17 during the first quarter," EXCO said. However, the Dallas-based independent said the rig count is expected to remain flat for the rest of next year.

EXCO, which has set a $471.4 million capital budget for 2010, said its operations are to be fully funded with cash flow. The producer has allotted $165.3 million for exploration and development next year, while JV partner BG Group will provide $205.1 million. Drilling is to make up 54% of EXCO's total budget in 2010, the company said.

Included are plans to spend $255 million to drill wells in East Texas and North Louisiana across holdings in the Haynesville and Bossier shale plays. Plans are to drill and complete 115 operated and 23 nonoperated wells in the region. Of the $165.3 million that is net to EXCO, $78.9 million is be spent for drilling and completion costs, $50 million for lease acquisitions, $31.8 million for operations projects and $4.6 million for seismic data acquisition.

"Since closing the joint venture in August, we have acquired approximately 17,000 additional net acres," and BG Group has the right to acquire half of that acreage, said EXCO. The company also said it is continuing to negotiate to acquire a bigger leasehold.

Under their JV agreement, BG obtained a half-stake in EXCO's then-120,000 net acres in East Texas and North Louisiana and a stake in EXCO's midstream operations (see NGI, July 6).

"We are primarily drilling Haynesville Shale targets, and we plan to have 14 operated drilling rigs within the JV area throughout the year," said EXCO. "These rigs should allow us to drill and complete 108 gross operated wells, 95 of which are Haynesville Shale targets, seven of which are Bossier Shale targets, and six of which are planned Cotton Valley horizontals."

TGGT Holdings LLC, the midstream JV in East Texas/North Louisiana that is equally owned by EXCO and BG Group, separately in 2010 plans to spend about $101 million to install lateral lines, well flow lines, amine treating and dehydration equipment to expand operations, EXCO said.

Around $154 million is budgeted in the coming year for EXCO's Marcellus Shale leasehold. The budget includes $65 million to drill and complete 11 operated horizontal wells, four nonoperated wells, six vertical wells and six shallow wells, which EXCO said are being drilled primarily to hold deep acreage.

Another $29 million is to be spent in EXCO's Permian Division, where the company plans to drill and complete 76 wells in its Sugg Ranch Field.

In related news EXCO said it received $131.2 million from the sale of Ohio and northwestern Pennsylvania producing assets to EV Energy Partners LP and to partnerships managed by EnerVest Ltd. (see NGI, Oct. 5). The proceeds from the sale were used to repay a portion of EXCO's revolving credit facility.

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