Condensed Consolidating Financial Statements

6 Months Ended

Jun. 30, 2014

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Condensed consolidating financial statements

As of June 30, 2014, the majority of EXCO’s subsidiaries were guarantors under the EXCO Resources Credit Agreement and the indenture governing the 2018 Notes and 2022 Notes. All of our non-guarantor subsidiaries were considered unrestricted subsidiaries under the indenture governing the 2018 Notes and 2022 Notes, with the exception of our equity investment in OPCO. As of and for the six months ended June 30, 2014, our equity method investment in OPCO represented $11.0 million of equity method investments and contributed $1.9 million of equity method losses.

Set forth below are condensed consolidating financial statements of EXCO, the guarantor subsidiaries and the non-guarantor subsidiaries. The 2018 Notes and 2022 Notes, which were issued by EXCO Resources, Inc., are jointly and severally guaranteed by some of our subsidiaries (referred to as Guarantor Subsidiaries). For purposes of this footnote, EXCO Resources, Inc. is referred to as Resources to distinguish it from the Guarantor Subsidiaries. Each of the Guarantor Subsidiaries is a 100% owned subsidiary of Resources and the guarantees are unconditional as they relate to the assets of the Guarantor Subsidiaries.

The following financial information presents consolidating financial statements, which include:


•	Resources;


•	the Guarantor Subsidiaries;


•	the Non-Guarantor Subsidiaries;


•	elimination entries necessary to consolidate Resources, the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries; and


•	EXCO on a consolidated basis.

Investments in subsidiaries are accounted for using the equity method of accounting for the disclosures within this footnote. The financial information for the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries is presented on a combined basis. The elimination entries primarily eliminate investments in subsidiaries and intercompany balances and transactions.

EXCO RESOURCES, INC.

CONDENSED CONSOLIDATING BALANCE SHEET

(Unaudited)

June 30, 2014



(in thousands)	Resources			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	59,757		$	(21,512	)	$	7,633		$	—		$	45,878
Restricted cash	—			15,221			—			—			15,221
Other current assets	11,484			180,137			5,873			—			197,494
Total current assets	71,241			173,846			13,506			—			258,593
Equity investments	—			—			56,514			—			56,514
Oil and natural gas properties (full cost accounting method):
Unproved oil and natural gas properties and development costs not being amortized	—			366,219			2,781			—			369,000
Proved developed and undeveloped oil and natural gas properties	332,418			3,282,905			121,665			—			3,736,988
Accumulated depletion	(330,571		)	(1,965,093		)	(21,310		)	—			(2,316,974		)
Oil and natural gas properties, net	1,847			1,684,031			103,136			—			1,789,014
Gathering, office, field and other equipment, net	2,410			27,599			21,379			—			51,388
Investments in and advances to affiliates, net	1,774,109			—			—			(1,774,109		)	—
Deferred financing costs, net	34,103			—			908			—			35,011
Derivative financial instruments	2,756			—			17			—			2,773
Goodwill	13,293			149,862			—			—			163,155
Other assets	3			27			—			—			30
Total assets	$	1,899,762		$	2,035,365		$	195,460		$	(1,774,109	)	$	2,356,478
Liabilities and shareholders' equity
Current liabilities	$	71,629		$	315,170		$	11,528		$	—		$	398,327
Long-term debt	1,425,855			—			85,792			—			1,511,647
Deferred income taxes	—			—			—			—			—
Other long-term liabilities	5,696			35,221			9,005			—			49,922
Payable to parent	—			2,076,680			32,466			(2,109,146		)	—
Total shareholders' equity	396,582			(391,706		)	56,669			335,037			396,582
Total liabilities and shareholders' equity	$	1,899,762		$	2,035,365		$	195,460		$	(1,774,109	)	$	2,356,478

EXCO RESOURCES, INC.

CONDENSED CONSOLIDATING BALANCE SHEET

December 31, 2013



(in thousands)	Resources			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	81,840		$	(35,892	)	$	4,535		$	—		$	50,483
Restricted cash	—			20,570			—			—			20,570
Other current assets	22,533			206,708			5,560			—			234,801
Total current assets	104,373			191,386			10,095			—			305,854
Equity investments	—			—			57,562			—			57,562
Oil and natural gas properties (full cost accounting method):
Unproved oil and natural gas properties and development costs not being amortized	6,758			415,290			3,259			—			425,307
Proved developed and undeveloped oil and natural gas properties	337,972			3,097,335			118,903			—			3,554,210
Accumulated depletion	(330,086		)	(1,840,332		)	(13,046		)	—			(2,183,464		)
Oil and natural gas properties, net	14,644			1,672,293			109,116			—			1,796,053
Gathering, office, field and other equipment, net	3,479			24,612			22,248			—			50,339
Investments in and advances to affiliates, net	1,834,197			—			—			(1,834,197		)	—
Deferred financing costs, net	27,771			—			1,036			—			28,807
Derivative financial instruments	6,829			—			—			—			6,829
Goodwill	13,293			149,862			—			—			163,155
Other assets	2			27			—			—			29
Total assets	$	2,004,588		$	2,038,180		$	200,057		$	(1,834,197	)	$	2,408,628
Liabilities and shareholders' equity
Current liabilities	$	76,174		$	264,485		$	8,511		$	—		$	349,170
Long-term debt	1,770,427			—			88,485			—			1,858,912
Deferred income taxes	—			—			—			—			—
Other long-term liabilities	10,082			33,831			8,728			—			52,641
Payable to parent	—			2,230,108			35,777			(2,265,885		)	—
Total shareholders' equity	147,905			(490,244		)	58,556			431,688			147,905
Total liabilities and shareholders' equity	$	2,004,588		$	2,038,180		$	200,057		$	(1,834,197	)	$	2,408,628

EXCO RESOURCES, INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(Unaudited)

For the three months ended June 30, 2014



(in thousands)	Resources			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Oil and natural gas	$	306		$	169,795	$	12,865		$	—		$	182,966
Costs and expenses:
Oil and natural gas production	76			18,196		4,919			—			23,191
Gathering and transportation	—			24,899		1,139			—			26,038
Depletion, depreciation and amortization	727			61,840		4,686			—			67,253
Accretion of discount on asset retirement obligations	4			522		169			—			695
General and administrative	962			17,949		593			—			19,504
Other operating items	(12		)	2,977		8			—			2,973
Total costs and expenses	1,757			126,383		11,514			—			139,654
Operating income (loss)	(1,451		)	43,412		1,351			—			43,312
Other income (expense):
Interest expense, net	(25,301		)	—		(667		)	—			(25,968		)
Loss on derivative financial instruments	(13,958		)	—		(760		)	—			(14,718		)
Other income	59			14		4			—			77
Equity loss	—			—		(410		)	—			(410		)
Net income from consolidated subsidiaries	42,944			—		—			(42,944		)	—
Total other income (expense)	3,744			14		(1,833		)	(42,944		)	(41,019		)
Income (loss) before income taxes	2,293			43,426		(482		)	(42,944		)	2,293
Income tax expense	—			—		—			—			—
Net income (loss)	$	2,293		$	43,426	$	(482	)	$	(42,944	)	$	2,293

EXCO RESOURCES, INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(Unaudited)

For the three months ended June 30, 2013



(in thousands)	Resources			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Oil and natural gas	$	74		$	137,318	$	12,940		$	—		$	150,332
Costs and expenses:
Oil and natural gas production	71			10,559		5,253			—			15,883
Gathering and transportation	—			22,500		908			—			23,408
Depletion, depreciation and amortization	1,192			42,761		3,435			—			47,388
Accretion of discount on asset retirement obligations	4			396		156			—			556
General and administrative	9,640			16,421		513			—			26,574
Other operating items	745			1,904		(9		)	—			2,640
Total costs and expenses	11,652			94,541		10,256			—			116,449
Operating income (loss)	(11,578		)	42,777		2,684			—			33,883
Other income (expense):
Interest expense, net	(14,298		)	—		(807		)	—			(15,105		)
Gain on derivative financial instruments	51,495			455		3,296			—			55,246
Other income	82			76		—			—			158
Equity income	—			—		11,416			—			11,416
Net income from consolidated subsidiaries	59,897			—		—			(59,897		)	—
Total other income	97,176			531		13,905			(59,897		)	51,715
Income before income taxes	85,598			43,308		16,589			(59,897		)	85,598
Income tax expense	—			—		—			—			—
Net income	$	85,598		$	43,308	$	16,589		$	(59,897	)	$	85,598

EXCO RESOURCES, INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(Unaudited)

For the six months ended June 30, 2014



(in thousands)	Resources			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Oil and natural gas	$	3,296		$	351,856		$	26,286		$	—		$	381,438
Costs and expenses:
Oil and natural gas production	375			39,617			9,595			—			49,587
Gathering and transportation	—			48,348			2,303			—			50,651
Depletion, depreciation and amortization	1,884			125,507			9,137			—			136,528
Accretion of discount on asset retirement obligations	9			1,032			335			—			1,376
General and administrative	727			34,795			1,320			—			36,842
Other operating items	(16		)	5,731			4			—			5,719
Total costs and expenses	2,979			255,030			22,694			—			280,703
Operating income	317			96,826			3,592			—			100,735
Other income (expense):
Interest expense, net	(44,796		)	—			(1,336		)	—			(46,132		)
Loss on derivative financial instruments	(54,637		)	—			(3,103		)	—			(57,740		)
Other income (loss)	152			(37		)	8			—			123
Equity income	—			—			701			—			701
Net income from consolidated subsidiaries	96,651			—			—			(96,651		)	—
Total other expense	(2,630		)	(37		)	(3,730		)	(96,651		)	(103,048		)
Income (loss) before income taxes	(2,313		)	96,789			(138		)	(96,651		)	(2,313		)
Income tax expense	—			—			—			—			—
Net income (loss)	$	(2,313	)	$	96,789		$	(138	)	$	(96,651	)	$	(2,313	)

EXCO RESOURCES, INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(Unaudited)

For the six months ended June 30, 2013



(in thousands)	Resources			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Oil and natural gas	$	8,120		$	261,792		$	18,643		$	—		$	288,555
Costs and expenses:
Oil and natural gas production	2,283			24,664			7,801			—			34,748
Gathering and transportation	—			46,507			1,377			—			47,884
Depletion, depreciation and amortization	3,799			80,289			4,608			—			88,696
Impairment of oil and natural gas properties	—			10,707			—			—			10,707
Accretion of discount on asset retirement obligations	54			945			247			—			1,246
General and administrative	10,293			33,384			881			—			44,558
Gain on divestitures and other operating items	(25,229		)	(157,000		)	(13		)	—			(182,242		)
Total costs and expenses	(8,800		)	39,496			14,901			—			45,597
Operating income	16,920			222,296			3,742			—			242,958
Other income (expense):
Interest expense, net	(34,175		)	—			(1,122		)	—			(35,297		)
Gain (loss) on derivative financial instruments	11,693			(235		)	274			—			11,732
Other income	129			115			2			—			246
Equity income	—			—			24,079			—			24,079
Net earnings from consolidated subsidiaries	249,151			—			—			(249,151		)	—
Total other income (expense)	226,798			(120		)	23,233			(249,151		)	760
Income before income taxes	243,718			222,176			26,975			(249,151		)	243,718
Income tax expense	—			—			—			—			—
Net income	$	243,718		$	222,176		$	26,975		$	(249,151	)	$	243,718

EXCO RESOURCES, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(Unaudited)

For the six months ended June 30, 2014



(in thousands)	Resources			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating Activities:
Net cash provided by (used in) operating activities	$	(54,003	)	$	310,651		$	11,474		$	—		$	268,122
Investing Activities:
Additions to oil and natural gas properties, gathering assets and equipment and property acquisitions	(1,639		)	(193,606		)	(2,522		)	—			(197,767		)
Proceeds from disposition of property and equipment	68,242			8,017			7			—			76,266
Restricted cash	—			5,349			—			—			5,349
Net changes in advances to joint ventures	—			(10,540		)	—			—			(10,540		)
Equity method investments	—			1,749			—			—			1,749
Distributions received from Compass	3,311			—			—			(3,311		)	—
Advances/investments with affiliates	107,240			(107,240		)	—			—			—
Net cash provided by (used in) investing activities	177,154			(296,271		)	(2,515		)	(3,311		)	(124,943		)
Financing Activities:
Repayments under credit agreements	(879,874		)	—			(2,550		)	—			(882,424		)
Proceeds received from 2022 Notes	500,000			—			—			—			500,000
Proceeds from issuance of common stock, net	271,772			—			—			—			271,772
Payment of common stock dividends	(27,066		)	—			—			—			(27,066		)
Compass cash distribution	—			—			(3,311		)	3,311			—
Deferred financing costs and other	(10,066		)	—			—			—			(10,066		)
Net cash provided by (used in) financing activities	(145,234		)	—			(5,861		)	3,311			(147,784		)
Net increase (decrease) in cash	(22,083		)	14,380			3,098			—			(4,605		)
Cash at beginning of period	81,840			(35,892		)	4,535			—			50,483
Cash at end of period	$	59,757		$	(21,512	)	$	7,633		$	—		$	45,878

EXCO RESOURCES, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(Unaudited)

For the six months ended June 30, 2013



(in thousands)	Resources			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating Activities:
Net cash provided by (used in) operating activities	$	(3,892	)	$	168,302		$	6,822		$	—		$	171,232
Investing Activities:
Additions to oil and natural gas properties, gathering assets and equipment and property acquisitions	(8,907		)	(120,434		)	(36,412		)	—			(165,753		)
Restricted cash	—			27,543			—			—			27,543
Equity method investments	—			(104		)	—			—			(104		)
Proceeds from disposition of property and equipment	244,499			368,591			—			—			613,090
Distributions received from Compass	1,275			—			—			(1,275		)	—
Net changes in advances to joint ventures	—			8,276			—			—			8,276
Advances/investments with affiliates	462,020			(462,020		)	—			—			—
Net cash provided by (used in) investing activities	698,887			(178,148		)	(36,412		)	(1,275		)	483,052
Financing Activities:
Borrowings under credit agreements	10,000			—			36,757			—			46,757
Repayments under credit agreements	(643,266		)	—			(1,275		)	—			(644,541		)
Proceeds from issuance of common stock	42			—			—			—			42
Payment of common stock dividends	(21,479		)	—			—			—			(21,479		)
Compass cash distribution	—			—			(1,275		)	1,275			—
Deferred financing costs and other	(32		)	—			(233		)	—			(265		)
Net cash provided by (used in) financing activities	(654,735		)	—			33,974			1,275			(619,486		)
Net increase (decrease) in cash	40,260			(9,846		)	4,384			—			34,798
Cash at beginning of period	65,791			(20,147		)	—			—			45,644
Cash at end of period	$	106,051		$	(29,993	)	$	4,384		$	—		$	80,442