Unless the context requires otherwise, references to "EXCO," "EXCO Resources," "Company," "we," "us," and "our" are to EXCO Resources, Inc. and its consolidated subsidiaries.

Forward-looking statements

This quarterly report contains forward-looking statements, as defined in
Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the 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 derivative financial instrument activities; 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," "budget" and other similar words to identify forward-looking statements. You should read statements that contain these words carefully because they discuss future expectations, contain projections of results of operations or of our financial condition and/or state other "forward-looking" information. We do not undertake any obligation to update or revise publicly any forward-looking statements, except as required by law. 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, including, but not limited to:

• fluctuations in prices of oil and natural gas;

• imports of foreign oil and natural gas, including liquefied natural gas;

• future capital requirements and availability of financing;

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

• estimates of reserves and economic assumptions;

• geological concentration of our reserves;

• risks associated with drilling and operating wells;

• exploratory risks, including our Haynesville/Bossier shale play in East Texas/North Louisiana and the Marcellus and Huron shale plays in Appalachia;

• risks associated with the operation of natural gas pipelines and gathering systems;

• 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;

• marketing of oil and natural gas;

• title to our properties;

• litigation;

• competition;

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

• environmental or other governmental regulations, including legislation to reduce emissions of greenhouse gases;

• 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;

• events similar to those of September 11, 2001;

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

• fluctuations in interest rates; and

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

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. You are cautioned not to place undue reliance on a forward-looking statement. When considering our forward-looking statements, keep in mind the risk factors and other cautionary statements in this quarterly report, and the risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2008.

Our revenues, operating results, financial condition and ability to borrow funds or obtain additional capital depend substantially on prevailing prices for oil and natural gas, the availability of capital from our revolving credit facilities and liquidity from capital markets. Declines in oil or natural gas prices may have a material adverse affect on our financial condition, liquidity, ability to obtain financing and operating results. Lower oil or natural gas prices also may reduce the amount of oil or natural gas that we can produce economically. A decline in oil or natural gas prices could have a material adverse effect on the estimated value and estimated quantities of our oil and natural gas reserves, our ability to fund our operations and our financial condition, cash flow, results of operations and access to capital. 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

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. Our principal operations are located in the East Texas/North Louisiana, Appalachia, Mid-Continent and Permian producing areas. In addition to our oil and natural gas producing operations, we hold a 50% equity interest in a joint venture which owns gathering systems and pipelines in East Texas and North Louisiana. Our assets in East Texas and North Louisiana, including our equity interest in midstream operations, are owned by our subsidiary, EXCO Operating Company, LP, and its subsidiaries, collectively, EXCO Operating.
Organizationally, EXCO Operating is an indirect wholly-owned subsidiary of EXCO Resources. EXCO Operating's debt is not guaranteed by EXCO Resources and EXCO Operating does not guarantee EXCO Resources' debt.

We currently have two credit agreements: one at EXCO Resources, or the EXCO Resources Credit Agreement, which currently has a borrowing base of $850.0 million and one at EXCO Operating, or the EXCO Operating Credit Agreement, which currently has a borrowing base of $850.0 million. We expect to continue to grow by leveraging our management and technical team's experience, developing our shale resource plays, exploiting our multi-year inventory of development drilling locations and exploitation projects and entering into beneficial joint development agreements. We employ the use of debt along with a comprehensive derivative financial instrument program to support our strategy. We also have an asset divestiture program to supplement our development programs and enhance concentration on core operating areas, particularly the Haynesville and Marcellus shale resource plays. These approaches enhance our ability to execute our business plan over the entire commodity price cycle, protect our returns on investments, and manage our capital structure.

Oil and natural gas prices have historically been volatile. On September 30, 2009, the spot market price for natural gas at Henry Hub was $3.30 per Mmbtu, a 53.7% decrease from September 30, 2008. The price of oil has also shown significant volatility, with a $70.43 per Bbl spot market price for oil at Cushing, Oklahoma at September 30, 2009, a 30.0% decrease from September 30, 2008. During the nine months ended September 30, 2009, our average realized prices (before the impact of derivative financial instruments) for oil and natural gas were $50.89 per Bbl and $3.88 per Mcf, respectively, compared with the nine months ended September 30, 2008 average realized prices of $111.66 per Bbl and $9.96 per Mcf, respectively. It is impossible to predict the duration or outcome of these price declines, their long-term impact on drilling and operating costs and their impacts, whether favorable or unfavorable, to our results of operations and liquidity.

Like other oil and natural gas production companies, we face the challenge of natural production declines. Oil and natural gas production from a given well naturally decreases over time. We attempt to overcome this natural decline by drilling to identify and develop additional reserves and adding additional reserves through acquisitions.

At the end of the first quarter of 2009, we revised our expected capital expenditure estimate to approximately $500.0 million in response to price declines which affected our vertical drilling economics. We do not budget for acquisitions as these transactions are opportunistic in nature. Presently, our focus is on drilling and leasing activities in our Haynesville shale area in East Texas/North Louisiana. We expect our capital expenditures for 2009 will be approximately $535 million. If the estimated purchase price adjustment for capital expenditures since the effective date of the transactions with BG Group, plc, or BG Group, is considered, our 2009 capital expenditures would be approximately $400 million. Our future growth will depend upon our ability to continue to identify and add oil and natural gas reserves in excess of production at a reasonable cost. We plan to maintain our focus on the costs of adding reserves through drilling and acquisitions as well as the costs necessary to produce such reserves.

In line with management's divestiture goals established in the fourth quarter of 2008, we have completed the sale of certain assets, including our joint venture transactions with BG Group, resulting in net cash proceeds of approximately $1.4 billion after customary closing and post closing adjustments during the nine months ended September 30, 2009. We have reached agreements to close asset sales in the fourth quarter of 2009 for total proceeds of approximately $685.0 million, subject to customary closing adjustments.

On August 11, 2009, we closed a sale of properties located in East Texas, or the East Texas Transaction, to an affiliate of Encore Acquisition Company, or Encore. Pursuant to the East Texas Transaction, we sold all of our interests in certain oil and natural gas properties located in our Overton Field and Gladewater area of East Texas. We received $156.7 million in cash at closing, including customary preliminary closing adjustments.

Also on August 11, 2009, we closed a sale of properties located in Texas and Oklahoma, or the Mid-Continent Transaction, with Encore. Pursuant to the Mid-Continent Transaction, we sold all of our interests in certain oil and gas properties located in our Mid-Continent operating area. We received $199.4 million in cash at closing, after customary preliminary closing adjustments.

The proceeds from the East Texas Transaction and the Mid-Continent Transaction were used to pay down a portion of our revolving credit agreements.

On August 14, 2009, we closed a sale and joint development transaction with BG Group for the sale of an undivided 50% of our interest in an area of mutual interest, or AMI, which included most of our oil and natural gas assets in East Texas and North Louisiana (excluding the Vernon Field, Gladewater area, Overton Field and Redland Field), or the BG Upstream Transaction. The transaction with BG Group includes agreements for the joint development and operation of our Haynesville shale and certain other related natural gas assets located in the AMI. We received $727.0 million in cash at closing, including customary preliminary closing adjustments. Pursuant to this transaction, BG Group will also fund $400.0 million of capital development attributable to our 50% interest, with BG Group paying 75% of our share of drilling and completion costs on the deep rights (Haynesville and Bossier shales) until the $400.0 million commitment is satisfied. Under the terms of the agreement, BG Group funding of the $400.0 million commitment will be earned solely through drilling of deep right wells as defined in the agreement. There is no obligation by us to repay any of the $400.0 million commitment to BG Group. The joint development transaction had an effective date of January 1, 2009.

The transactions with Encore and BG Group caused a significant alteration to our full cost pool and a gain of $362.3 million was recorded as a result of these transactions.

In addition, on August 14, 2009, we also closed a sale to an affiliate of BG Group of a 50% interest in a newly formed company, TGGT Holdings, LLC, or TGGT, which now holds most of our East Texas/North Louisiana midstream assets, or the BG Midstream Transaction. Our Vernon Field midstream assets were excluded from the BG Midstream Transaction. Pursuant to the contribution agreement, we contributed TGG Pipeline, Ltd., or TGG, which owns intrastate pipelines in East Texas and North

Louisiana, and Talco Midstream Assets, Ltd., or Talco, which owns gathering assets in East Texas and North Louisiana, to TGGT. BG Group contributed $269.2 million in cash to TGGT and we received a special distribution from TGGT of the same amount at closing. EXCO Operating now owns 50% of TGGT and the affiliate of BG Group owns 50% of TGGT. We adopted the equity method of accounting for our interest in TGGT upon formation. The BG Midstream Transaction resulted in recognition of a gain of $98.3 million.

The total aggregate cash proceeds of $996.2 million from the BG Upstream Transaction and the BG Midstream Transaction were used to repay EXCO Operating's $300.0 million senior unsecured term credit agreement, or the Term Credit Agreement, creation of an evergreen escrow funding account to develop the Haynesville operations, and a working capital contribution to TGGT, with the remainder applied to the outstanding balances under the EXCO Operating credit agreement.

On September 29, 2009 we reached an agreement with EV Energy Partners, L.P., along with certain institutional partnerships managed by EnerVest, Ltd., or EnerVest, to sell our Ohio and certain Northwestern Pennsylvania producing assets for $145.0 million, subject to customary purchase price adjustments. The sale is expected to close in November 2009 and is effective as of September 1, 2009.

On September 30, 2009 we reached an agreement with Sheridan Holding Company I, LLC to sell all of our remaining assets in Oklahoma for $540.0 million. The sale is expected to close in November 2009, after customary closing adjustments, and is effective as of October 1, 2009.

Critical accounting policies

We consider accounting policies related to our estimates of assets and liabilities acquired in acquisitions, Proved Reserves, accounting for derivatives, business combinations, share-based payments, accounting for oil and natural gas properties, goodwill, asset retirement obligations, accounting for income taxes, and our equity investment as critical accounting policies. The policies include significant estimates made by management using information available at the time the estimates are made. However, these estimates could change materially if different information or assumptions were used. These policies are summarized in Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2008, except for the policy related to our equity investment, which is addressed "Note 13. Equity investment" in our Notes to the Condensed Consolidated Financial Statements.

Recent accounting pronouncements

On June 30, 2009, the Financial Accounting Standards Board, or the FASB, issued Update No. 2009-01-Topic 105-Generally Accepted Accounting Principles-amendments based on-Statement of Financial Accounting Standards No. 168-The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, or ASU 2009-01. ASU 2009-01 establishes "The FASB Accounting Standards Codification," or Codification, which became the source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities. On the effective date ASU 2009-01 the Codification superseded all then-existing non-SEC accounting and reporting standards. All other nongrandfathered non-SEC accounting literature not included in the Codification will become nonauthoritative. ASU 2009-01 is effective for interim and annual periods ending after September 15, 2009.

On June 12, 2009, the FASB issued FASB Statement No. 167, "Amendments to FASB Interpretation No. 46(R)," or SFAS No. 167. SFAS No. 167 is a revision to FASB Interpretation No. 46(R), "Consolidation of Variable Interest Entities," and changes how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. The determination of whether a company is required to consolidate an entity is based on, among other things, an entity's purpose and design and a company's ability to direct the activities of the entity that most significantly impact the entity's economic performance. The statement will be effective for the first fiscal year beginning after November 15, 2009. As of September 30, 2009, we do not have any variable interest entities and as such, the final rule does not have an effect on our financial statements and disclosures.

On June 12, 2009, the FASB issued FASB Statement No. 166, "Accounting for Transfers of Financial Assets," or SFAS No. 166. SFAS No. 166 is a revision to FASB Statement No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," and will require more information about transfers of financial assets, including securitization transactions, and where companies have continuing exposure to the risks related to transferred financial assets. It eliminates the concept of a "qualifying special-purpose entity," changes the requirements for derecognizing financial assets, and requires additional disclosures. The statement will be effective for the first fiscal year beginning after November 15, 2009. We do not believe the adoption of this pronouncement will have a material impact on our financial statements.

On May 28, 2009, the FASB issued FASB Accounting Standards Codification, or ASC Subtopic 855-10 for Subsequent Events. ASC 855-10 establishes general standards of accounting for and disclosure of transactions and events that occur after the balance sheet date but before financial statements are issued or are available to be issued. It also requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date. ASC 855-10 is effective for interim and annual periods ending after June 15, 2009.

On April 9, 2009, the FASB issued FASB ASC paragraph 820-10-65-4 for Fair Value Measurements and Disclosures. ASC 820-10-65-4 provides additional guidance for estimating fair value when the volume and level of activity for the asset or liability have significantly decreased and provides guidance on identifying circumstances that indicate a transaction is not orderly. ASC 820-10-65-4 also requires disclosures on inputs and valuation techniques used to measure fair value, along with any changes in valuation techniques and related inputs, and to define the major category for debt and equity securities to be majority security types as described in paragraph FASB ASU Section 320-10-50 for the Scope Section of Subtopic 305-10 for Investments - Debt and Equity Securities. ASC 820-10-65-4 is effective for interim periods ending after June 15, 2009. See "-Note 9. Derivative financial instruments and fair value measurements" for the impact to our disclosures.

On April 9, 2009, the FASB issued FASB ASC Section 825-10-65 for Derivatives and Hedging. ASC 825-10-65 amended Statement of Financial Accounting Standards, or SFAS, No. 107, "Disclosures about Fair Value of Financial Instruments," to require disclosures about the fair value of financial instruments for interim reporting periods of publicly traded companies as well as annual financial statements. ASC 825-10-65 also amends APB Opinion No. 28, "Interim Financial Reporting" to require fair value disclosures in summarized financial information at interim reporting periods. ASC 825-10-65 was effective for interim periods ending after June 15, 2009. See "Note 9. Derivative financial instruments and fair value measurements" for the impact to our disclosures.

On April 1, 2009, the FASB issued FASB ASC Subtopic 805-20 for Business Combinations. ASC 805-20 amends and clarifies FASB SFAS No. 141 (revised 2007), "Business Combinations," to give guidance on initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination. This pronouncement was effective for assets or liabilities arising from contingencies in business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. We adopted ASC 805-20 on January 1, 2009.

In March 2008, the FASB issued FASB ASC Section 815-10-65 for Derivatives and Hedging. ASC 815-10-65 requires enhanced disclosure about the fair value of derivative instruments and their gains or losses in tabular format and information about credit-risk-related contingent features in derivative agreements, counterparty credit risk, and the company's strategies and objectives for using derivative instruments. ASC 815-10-65 is effective for financial statements issued for fiscal years beginning after November 15, 2008, and as such, was adopted by us on January 1, 2009. See "Note 9. Derivative financial instruments and fair value measurements" in the Notes to Condensed Consolidated Financial Statements included in this Form 10-Q for the impact to our disclosures.

On December 31, 2008, the SEC issued Release No. 33-8995, amending its oil and natural gas reporting requirements for oil and natural gas producing companies. The effective date of the new accounting and disclosure requirements is for annual reports filed for fiscal years ending on or after December 31, 2009. Companies are not permitted to comply at an earlier date. Among other things, Release No. 33-8995:

• Revises a number of definitions relating to oil and natural gas reserves to make them consistent with the Petroleum Resource Management System, which includes certain non-traditional resources in proved reserves;

• Permits the use of new technologies for determining oil and natural gas reserves;

• Requires the use of average prices for the trailing twelve-month period in the estimation of oil and natural gas reserve quantities and, for companies using the full cost method of accounting, in computing the ceiling limitation test, in place of a single day price as of the end of the fiscal year;

• Permits the disclosure in filings with the SEC of probable and possible reserves and sensitivity of our proved oil and natural gas reserves to changes in prices;

• Requires additional disclosures (outside of the financial statements) regarding the status of undeveloped reserves and changes in status of these from period to period; and

• Requires a discussion of the internal controls in place in the reserve estimation process and disclosure of the technical qualifications of the technical person having primary responsibility for preparing the reserve estimates.

We are currently evaluating the effect of adopting the final rule on our financial statements and oil and natural gas reserve estimates and disclosures.

Our results of operations

A summary of key financial data for the three and nine months ended September 30, 2009 and 2008 related to our results of operations is presented below:

                                                              Three months ended                                       Nine months ended              Year to date
                                                                September 30,               Quarter change               September 30,                   change
(dollars in thousands, except per unit prices)              2009             2008             2009-2008              2009             2008             2009-2008
Production:
Oil (Mbbls)                                                     355              590                   (235 )          1,367             1,643                 (276 )
Natural gas (Mmcf)                                           29,806           33,017                 (3,211 )         96,598            97,687               (1,089 )
Total production (Mmcfe) (1)                                 31,936           36,557                 (4,621 )        104,800           107,545               (2,745 )
Oil and natural gas revenues before derivative
financial instrument activities:
Oil                                                       $  22,678       $   68,456       $        (45,778 )     $   69,571       $   183,454       $     (113,883 )
Natural gas                                                 102,815          333,951               (231,136 )        374,382           972,532             (598,150 )

Total oil and natural gas                                 $ 125,493       $  402,407       $       (276,914 )     $  443,953       $ 1,155,986       $     (712,033 )

Midstream operations: (2)
Midstream revenues (before intersegment eliminations)     $  14,271       $   49,258       $        (34,987 )     $   76,478       $   105,915       $      (29,437 )
Midstream operating expenses (before intersegment
eliminations)                                                 9,983           41,410                (31,427 )         56,372            79,000              (22,628 )

Midstream operating profit (before intersegment
eliminations)                                                 4,288            7,848                 (3,560 )         20,106            26,915               (6,809 )
Intersegment eliminations                                    (4,324 )         (9,664 )                5,340          (20,356 )         (24,734 )              4,378

Midstream operating income (loss) (after intersegment
eliminations)                                             $     (36 )     $   (1,816 )     $          1,780       $     (250 )     $     2,181       $       (2,431 )

Oil and natural gas derivative financial instruments:
Cash settlements (payments) on derivative financial
instruments                                               $ 113,563       $  (70,019 )     $        183,582       $  354,131       $  (157,383 )     $      511,514
Non-cash change in fair value of derivative financial
instruments                                                 (99,045 )        970,332             (1,069,377 )       (149,246 )          53,849             (203,095 )

Total derivative financial instrument activities          $  14,518       $  900,313       $       (885,795 )     $  204,885       $  (103,534 )     $      308,419

Average sales price (before cash settlements of
derivative financial instruments):
Oil (per Bbl)                                             $   63.88       $   116.03       $         (52.15 )     $    50.89       $    111.66       $       (60.77 )
Natural gas (per Mcf)                                          3.45            10.11                  (6.66 )           3.88              9.96                (6.08 )
Natural gas equivalent (per Mcfe)                              3.93            11.01                  (7.08 )           4.24             10.75                (6.51 )
. . .