Exco Shares Plunge After Gloomy Outlook

A bleak outlook Friday from Exco Resources Inc. means more losses for big investors who tried to bolster the ailing oil-and-gas producer last year with a new, high-profile chairman.

Exco shares lost more than half their value on Friday, after the Dallas company said it hired advisers and formed a special committee to explore alternatives, including seeking bankruptcy protection, as persistently low oil and gas prices have hurt its business.

Private-equity investor Wilbur Ross, Canadian insurance magnate Prem Watsa and Los Angeles investment firm Oaktree Capital Group LLC became Exco's top three shareholders when the stock was much higher. Together, through vehicles they control, those investors owned roughly 43% of Exco's shares at year-end, according to securities filings.

The company had appeared to be bouncing back under the guidance of turnaround specialist C. John Wilder, who was installed as chairman in September. After bottoming around 50 cents in August, Exco's shares had more than doubled through Thursday's close as the company was able to reduce its debt and slash spending.

Early Friday, though, Exco made clear the progress hasn't been enough. It said the special committee would study various options, including swapping debt for stock, selling assets and restructuring, either in or out of court. "No assurance can be given as to the outcome or timing of this process," the company said.

Mr. Ross recruited Mr. Wilder to join Exco. Mr. Wilder had earlier led a revival at Texas power provider TXU Corp. before selling it in 2007 to a group of Wall Street firms in the largest-ever and ultimately doomed leveraged buyout. Laden with buyout debt and stung by low natural gas prices, the company, now called Energy Future Holdings Corp., filed for bankruptcy protection in 2014.

Mr. Wilder, who received a severance package worth roughly $300 million from TXU, has more on the line at Exco than his reputation as the energy sector's Mr. Fix-it. As part of the deal to make him the Dallas company's chairman, his Bluescape Resources Co. agreed to buy $23.5 million of Exco stock, making him the company's fourth largest shareholder, securities filings show.

Mr. Ross and Oaktree, along with a few other big investors and Exco founder Douglas Miller, had unsuccessfully tried to take Exco private in 2010 near the height the shale-drilling boom, offering $20.50 a share, or about $4.4 billion.

On Friday, Exco shares closed down 59% at 72 cents. Short interest in Exco grew by 3.5 million shares Friday, said Ihor Dusaniwsky, managing partner at short-sale tracker S3 Partners LLC, as investors barreled into bets that the stock will fall further.

Write to Ryan Dezember at ryan.dezember@wsj.com

(END) Dow Jones Newswires

May 13, 2016 16:45 ET (20:45 GMT)

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