15.

Condensed consolidating financial statements

As of March 31, 2012, the majority of EXCO's subsidiaries are guarantors under the EXCO Resources Credit Agreement and the indenture governing the 2018 Notes. All of our non-guarantor subsidiaries are considered unrestricted subsidiaries under the indenture governing the 2018 Notes, with the exception of our equity investment in OPCO. As of and for the three months ended March 31, 2012:

•

Our equity method investment in OPCO represented $2.1 million of equity method investments and contributed $0.4 million of equity method losses; and

•

Our interests in jointly held entities with BG Group, with the exception of OPCO, represented $293.0 million of equity method investments, or 8.4% of our total assets and contributed $7.5 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, 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 are wholly-owned subsidiaries of Resources and the guarantees are unconditional as it relates to the assets of the Guarantor Subsidiaries.

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

•

Resources;

•

the Guarantor Subsidiaries on a combined basis;

•

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. 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)

March 31, 2012


(in thousands)	Resources			Guarantor subsidiaries			Non-guarantor subsidiaries			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	51,649		$	(21,078	)	$	0		$	0		$	30,571
Restricted cash		0			164,042			0			0			164,042
Other current assets		182,984			225,253			0			0			408,237

Total current assets		234,633			368,217			0			0			602,850

Equity investments		0			0			295,064			0			295,064
Oil and natural gas properties (full cost accounting method):
Unproved oil and natural gas properties and development costs not being amortized		13,038			610,230			0			0			623,268
Proved developed and undeveloped oil and natural gas properties		478,001			2,842,976			0			0			3,320,977
Accumulated depletion		(318,373	)		(1,424,308	)		0			0			(1,742,681	)

Oil and natural gas properties, net		172,666			2,028,898			0			0			2,201,564

Gas gathering, office and field equipment, net		26,885			120,316			0			0			147,201
Investments in and advances to affiliates		534,146			0			0			(534,146	)		0
Deferred financing costs, net		28,101			0			0			0			28,101
Derivative financial instruments		5,690			4,383			0			0			10,073
Goodwill		38,100			180,156			0			0			218,256
Other assets		1			27			0			0			28

Total assets	$	1,040,222		$	2,701,997		$	295,064		$	(534,146	)	$	3,503,137


Liabilities and shareholders' equity
Current liabilities	$	31,343		$	220,996		$	0		$	0		$	252,339
Long-term debt		1,918,106			0			0			0			1,918,106
Deferred income taxes		0			0			0			0			0
Other liabilities		8,729			51,129			0			0			59,858
Payable to parent		(2,190,790	)		2,196,946			(6,156	)		0			0
Total shareholders' equity		1,272,834			232,926			301,220			(534,146	)		1,272,834

Total liabilities and shareholders' equity	$	1,040,222		$	2,701,997		$	295,064		$	(534,146	)	$	3,503,137

EXCO RESOURCES, INC.

CONDENSED CONSOLIDATING BALANCE SHEET

December 31, 2011


(in thousands)	Resources			Guarantor subsidiaries			Non-guarantor subsidiaries			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	78,664		$	(46,667	)	$	0		$	0		$	31,997
Restricted cash		0			155,925			0			0			155,925
Other current assets		177,709			312,377			0			0			490,086

Total current assets		256,373			421,635			0			0			678,008

Equity investments		0			0			302,833			0			302,833
Oil and natural gas properties (full cost accounting method):
Unproved oil and natural gas properties and development costs not being amortized		15,942			651,400			0			0			667,342
Proved developed and undeveloped oil and natural gas properties		464,898			2,927,248			0			0			3,392,146
Accumulated depletion		(327,218	)		(1,329,947	)		0			0			(1,657,165	)

Oil and natural gas properties, net		153,622			2,248,701			0			0			2,402,323

Gas gathering, office and field equipment, net		27,815			121,668			0			0			149,483
Investments in and advances to affiliates		869,387			0			0			(869,387	)		0
Deferred financing costs, net		29,622			0			0			0			29,622
Derivative financial instruments		5,998			5,036			0			0			11,034
Goodwill		38,100			180,156			0			0			218,256
Other assets		3			25			0			0			28

Total assets	$	1,380,920		$	2,977,221		$	302,833		$	(869,387	)	$	3,791,587


Liabilities and shareholders' equity
Current liabilities	$	39,395		$	248,004		$	0		$	0		$	287,399
Long-term debt		1,887,828			0			0			0			1,887,828
Deferred income taxes		0			0			0			0			0
Other liabilities		7,740			50,288			0			0			58,028
Payable to parent		(2,112,375	)		2,118,531			(6,156	)		0			0
Total shareholders' equity		1,558,332			560,398			308,989			(869,387	)		1,558,332

Total liabilities and shareholders' equity	$	1,380,920		$	2,977,221		$	302,833		$	(869,387	)	$	3,791,587

EXCO RESOURCES, INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(Unaudited)

For the three months ended March 31, 2012


(in thousands)	Resources			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations		Consolidated
Revenues:
Oil and natural gas	$	23,273		$	111,575		$	0		$	0	$	134,848

Costs and expenses:
Oil and natural gas production		5,125			24,864			0			0		29,989
Gathering and transportation		0			26,423			0			0		26,423
Depreciation, depletion and amortization		(6,892	)		96,474			0			0		89,582
Write-down of oil and natural gas properties		0			275,864			0			0		275,864
Accretion of discount on asset retirement obligations		126			821			0			0		947
General and administrative		3,775			17,730			0			0		21,505
Other operating items		42			1,583			0			0		1,625

Total costs and expenses		2,176			443,759			0			0		445,935

Operating income (loss)		21,097			(332,184	)		0			0		(311,087	)
Other income (expense):
Interest expense		(16,764	)		0			0			0		(16,764	)
Gain on derivative financial instruments		49,223			4,642			0			0		53,865
Other income (expense)		36			207			0			0		243
Equity method income		0			0			(7,906	)		0		(7,906	)
Equity in earnings of subsidiaries		(335,241	)		0			0			335,241		0

Total other income (expense)		(302,746	)		4,849			(7,906	)		335,241		29,438

Income (loss) before income taxes		(281,649	)		(327,335	)		(7,906	)		335,241		(281,649	)
Income tax expense		0			0			0			0		0

Net income (loss)	$	(281,649	)	$	(327,335	)	$	(7,906	)	$	335,241	$	(281,649	)

EXCO RESOURCES, INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(Unaudited)

For the three months ended March 31, 2011


(in thousands)	Resources			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Oil and natural gas	$	23,386		$	137,842		$	0		$	0		$	161,228

Costs and expenses:
Oil and natural gas production		4,287			20,357			0			0			24,644
Gathering and transportation		0			17,286			0			0			17,286
Depreciation, depletion and amortization		6,566			60,993			371			0			67,930
Accretion of discount on asset retirement obligations		101			756			0			0			857
General and administrative		4,716			18,707			0			0			23,423
Other operating items		2,616			553			(712	)		0			2,457

Total costs and expenses		18,286			118,652			(341	)		0			136,597

Operating income		5,100			19,190			341			0			24,631
Other income (expense):
Interest expense		(13,564	)		(1,252	)		0			0			(14,816	)
Gain (loss) on derivative financial instruments		3,601			(180	)		0			0			3,421
Other income		84			76			0			0			160
Equity method income		0			0			8,545			0			8,545
Equity in earnings of subsidiaries		26,720			0			0			(26,720	)		0

Total other income (expense)		16,841			(1,356	)		8,545			(26,720	)		(2,690	)

Net income (loss)	$	21,941		$	17,834		$	8,886		$	(26,720	)	$	21,941

EXCO RESOURCES, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(Unaudited)

For the three months ended March 31, 2012


(in thousands)	Resources			Guarantor Subsidiaries			Non-Guarantor Subsidiaries		Eliminations		Consolidated
Operating Activities:
Net cash provided by operating activities	$	40,676		$	104,447		$	0	$	0	$	145,123

Investing Activities:
Property acquisitions and additions to oil and natural gas properties, gathering systems and equipment		(10,120	)		(161,038	)		0		0		(171,158	)
Equity investments		0			(137	)		0		0		(137	)
Proceeds from disposition of property and equipment		0			981			0		0		981
Restricted cash		0			(8,117	)		0		0		(8,117	)
Net changes in advances (to) from Appalachia JV		0			10,543			0		0		10,543
Advances/investments with affiliates		(78,910	)		78,910			0		0		0

Net cash used in investing activities		(89,030	)		(78,858	)		0		0		(167,888	)

Financing Activities:
Borrowings under credit agreements		53,000			0			0		0		53,000
Repayments under credit agreements		(23,000	)		0			0		0		(23,000	)
Proceeds from issuance of common stock		2			0			0		0		2
Payment of common stock dividends		(8,663	)		0			0		0		(8,663	)

Net cash provided by financing activities		21,339			0			0		0		21,339

Net increase (decrease) in cash		(27,015	)		25,589			0		0		(1,426	)
Cash at the beginning of the period		78,664			(46,667	)		0		0		31,997

Cash at end of period	$	51,649		$	(21,078	)	$	0	$	0	$	30,571

EXCO RESOURCES, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(Unaudited)

For the three months ended March 31, 2011


(in thousands)	Resources			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Consolidated
Operating Activities:
Net cash provided by operating activities	$	18,448		$	59,468		$	1,157		$	0	$	79,073

Investing Activities:
Property acquisitions and additions to oil and natural gas properties, gathering systems and equipment		(17,463	)		(685,916	)		(3,064	)		0		(706,443	)
Restricted cash		0			11,125			0			0		11,125
Deposit on pending acquisitions		0			464,151			0			0		464,151
Equity investments		0			(162	)		0			0		(162	)
Return of investment in equity investments		0			125,000			0			0		125,000
Proceeds from disposition of property and equipment		39			259,064			0			0		259,103
Net changes in advances (to) from Appalachia JV		0			(5,063	)		0			0		(5,063	)
Other		0			(1,250	)		0			0		(1,250	)
Advances/investments with affiliates		233,700			(235,607	)		1,907			0		0

Net cash provided by (used in) investing activities		216,276			(68,658	)		(1,157	)		0		146,461

Financing Activities:
Borrowings under credit agreement		40,000			0			0			0		40,000
Repayments under credit agreement		(300,000	)		0			0			0		(300,000	)
Proceeds from issuance of common stock		7,312			0			0			0		7,312
Payment of common stock dividends		(8,547	)		0			0			0		(8,547	)

Net cash used in financing activities		(261,235	)		0			0			0		(261,235	)

Net decrease in cash		(26,511	)		(9,190	)		0			0		(35,701	)
Cash at the beginning of the period		76,763			(32,534	)		0			0		44,229

Cash at end of period	$	50,252		$	(41,724	)	$	0		$	0	$	8,528