GUARANTOR FINANCIAL STATEMENTS (Tables)

12 Months Ended

Dec. 31, 2013

CONDENSED CONSOLIDATING BALANCE SHEET

DECEMBER 31, 2013

(In thousands)


	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	246,294		$	84,290		$	640		$	—		$	331,224
Accounts receivable		74,887			97,128			—			(44	)		171,971
Fair value of hedging contracts		—			4,549			—			—			4,549
Current income tax receivable		7,366			—			—			—			7,366
Deferred taxes *		8,659			23,051			—			—			31,710
Inventory		3,440			283			—			—			3,723
Other current assets		1,874			—			—			—			1,874

Total current assets		342,520			209,301			640			(44	)		552,417
Oil and gas properties, full cost method:
Proved		1,309,527			6,494,590			—			—			7,804,117
Less: accumulated DD&A		(459,932	)		(5,448,828	)		—			—			(5,908,760	)

Net proved oil and gas properties		849,595			1,045,762			—			—			1,895,357
Unevaluated		325,113			388,643			10,583			—			724,339
Other property and equipment, net		26,178			—			—			—			26,178
Fair value of hedging contracts		—			1,378			—			—			1,378
Other assets, net		45,410			1,349			2,128			—			48,887
Investment in subsidiary		747,472			—			12,711			(760,183	)		—

Total assets	$	2,336,288		$	1,646,433		$	26,062			($760,227	)	$	3,248,556

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable to vendors	$	173,147		$	22,530		$	44			($44	)	$	195,677
Undistributed oil and gas proceeds		34,386			2,643			—			—			37,029
Accrued interest		9,022			—			—			—			9,022
Fair value of hedging contracts		—			7,753			—			—			7,753
Asset retirement obligations		—			67,161			—			—			67,161
Other current liabilities		53,682			838			—			—			54,520

Total current liabilities		270,237			100,925			44			(44	)		371,162
Long-term debt		1,027,084			—			—			—			1,027,084
Deferred taxes *		10,227			380,466			—			—			390,693
Asset retirement obligations		4,945			430,407			—			—			435,352
Fair value of hedging contracts		—			470			—			—			470
Other long-term liabilities		53,509			—			—			—			53,509

Total liabilities		1,366,002			912,268			44			(44	)		2,278,270

Commitments and contingencies Stockholders’ equity:
Common stock		488			—			—			—			488
Treasury stock		(860	)		—			—			—			(860	)
Additional paid-in capital		1,397,885			1,309,563			27,403			(1,336,966	)		1,397,885
Accumulated deficit		(425,165	)		(574,003	)		(52	)		574,055			(425,165	)
Accumulated other comprehensive loss		(2,062	)		(1,395	)		(1,333	)		2,728			(2,062	)

Total stockholders’ equity		970,286			734,165			26,018			(760,183	)		970,286

Total liabilities and stockholders’ equity	$	2,336,288		$	1,646,433		$	26,062			($760,227	)	$	3,248,556

*	Deferred income taxes have been allocated to Guarantor Subsidiary where related oil and gas properties reside.

CONDENSED CONSOLIDATING BALANCE SHEET

DECEMBER 31, 2012

(In thousands)


	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	228,398		$	51,128		$	—	$	—		$	279,526
Accounts receivable		59,213			108,075			—		—			167,288
Fair value of hedging contracts		—			39,655			—		—			39,655
Current income tax receivable		10,027			—			—		—			10,027
Deferred taxes *		5,947			9,567			—		—			15,514
Inventory		3,924			283			—		—			4,207
Other current assets		3,626			—			—		—			3,626

Total current assets		311,135			208,708			—		—			519,843
Oil and gas properties, full cost method:
Proved		1,004,808			6,239,658			—		—			7,244,466
Less: accumulated DD&A		(370,111	)		(5,140,055	)		—		—			(5,510,166	)

Net proved oil and gas properties		634,697			1,099,603			—		—			1,734,300
Unevaluated		254,757			193,038			—		—			447,795
Other property and equipment, net		22,115			—			—		—			22,115
Fair value of hedging contracts		—			9,199			—		—			9,199
Other assets, net		41,679			1,500			—		—			43,179
Investment in subsidiary		736,331			—			—		(736,331	)		—

Total assets	$	2,000,714		$	1,512,048		$	—		($736,331	)	$	2,776,431

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable to vendors	$	74,503		$	19,858		$	—	$	—		$	94,361
Undistributed oil and gas proceeds		21,841			1,573			—		—			23,414
Accrued interest		18,546			—			—		—			18,546
Fair value of hedging contracts		—			149			—		—			149
Asset retirement obligations		—			66,260			—		—			66,260
Other current liabilities		16,765			—			—		—			16,765

Total current liabilities		131,655			87,840			—		—			219,495
Long-term debt		914,126			—			—		—			914,126
Deferred taxes *		47,758			263,072			—		—			310,830
Asset retirement obligations		5,479			416,563			—		—			422,042
Fair value of hedging contracts		—			1,530			—		—			1,530
Other long-term liabilities		29,563			6,712			—		—			36,275

Total liabilities		1,128,581			775,717			—		—			1,904,298

Commitments and contingencies Stockholders’ equity:
Common stock		484			—			—		—			484
Treasury stock		(860	)		—			—		—			(860	)
Additional paid-in capital		1,386,475			1,496,510			—		(1,496,510	)		1,386,475
Accumulated deficit		(542,799	)		(789,012	)		—		789,012			(542,799	)
Accumulated other comprehensive income		28,833			28,833			—		(28,833	)		28,833

Total stockholders’ equity		872,133			736,331			—		(736,331	)		872,133

Total liabilities and stockholders’ equity	$	2,000,714		$	1,512,048		$	—		($736,331	)	$	2,776,431

*	Deferred income taxes have been allocated to Guarantor Subsidiary where related oil and gas properties reside.

Condensed Consolidating Statement of Income

CONDENSED CONSOLIDATING STATEMENT OF INCOME

YEAR ENDED DECEMBER 31, 2013

(In thousands)


	Parent			Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenue:
Oil production	$	30,475		$	684,629		$	—		$	—		$	715,104
Gas production		68,895			121,685			—			—			190,580
Natural gas liquids production		32,293			28,394			—			—			60,687
Other operational income		7,163			645			—			—			7,808

Total operating revenue		138,826			835,353			—			—			974,179

Operating expenses:
Lease operating expenses		14,680			186,473			—			—			201,153
Transportation, processing, and gathering expenses		28,322			13,850			—			—			42,172
Production taxes		6,229			8,800			—			—			15,029
Depreciation, depletion, amortization		93,579			256,995			—			—			350,574
Accretion expense		372			33,203			—			—			33,575
Salaries, general and administrative		59,473			5			46			—			59,524
Franchise tax settlement		12,590			—			—			—			12,590
Incentive compensation expense		15,340			—			—			—			15,340
Other operational expenses		38			113			—			—			151
Derivative expense, net		—			2,090			—			—			2,090

Total operating expenses		230,623			501,529			46			—			732,198

Income (loss) from operations		(91,797	)		333,824			(46	)		—			241,981

Other (income) expenses:
Interest expense		32,816			21			—			—			32,837
Interest income		(1,480	)		(195	)		(20	)		—			(1,695	)
Other income		(875	)		(1,924	)		—			—			(2,799	)
Loss on early extinguishment of debt		27,279			—			—			—			27,279
(Income) loss from investment in subsidiaries		(214,983	)		—			26			214,957			—

Total other (income) expenses		(157,243	)		(2,098	)		6			214,957			55,622

Income (loss) before taxes		65,446			335,922			(52	)		(214,957	)		186,359

Provision (benefit) for income taxes:
Current		(10,904	)		—			—			—			(10,904	)
Deferred		(41,284	)		120,913			—			—			79,629

Total income taxes		(52,188	)		120,913			—			—			68,725

Net income (loss)	$	117,634		$	215,009			($52	)		($214,957	)	$	117,634

Comprehensive income (loss)	$	86,739		$	215,009			($52	)		($214,957	)	$	86,739

CONDENSED CONSOLIDATING STATEMENT OF INCOME

YEAR ENDED DECEMBER 31, 2012

(In thousands)


	Parent			Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenue:
Oil production	$	26,149		$	735,155		$	—		$	—		$	761,304
Gas production		34,331			100,408			—			—			134,739
Natural gas liquids production		15,264			33,234			—			—			48,498
Other operational income		2,766			397			357			—			3,520
Derivative income, net		—			3,428			—			—			3,428

Total operating revenue		78,510			872,622			357			—			951,489

Operating expenses:
Lease operating expenses		19,914			195,105			(16	)		—			215,003
Transportation, processing and gathering expenses		12,049			9,733			—			—			21,782
Production taxes		3,330			6,685			—			—			10,015
Depreciation, depletion, amortization		63,022			281,152			191			—			344,365
Accretion expense		561			32,513			257			—			33,331
Salaries, general and administrative		54,641			7			—			—			54,648
Incentive compensation expense		8,113			—			—			—			8,113
Other operational expenses		173			94			—			—			267

Total operating expenses		161,803			525,289			432			—			687,524

Income (loss) from operations		(83,293	)		347,333			(75	)		—			263,965

Other (income) expenses:
Interest expense		30,446			(71	)		—			—			30,375
Interest income		(285	)		(315	)		—			—			(600	)
Other income		(144	)		(1,661	)		—			—			(1,805	)
Loss on early extinguishment of debt		1,972			—			—			—			1,972
(Income) loss from investment in subsidiaries		(223,555	)		75			—			223,480			—

Total other (income) expenses		(191,566	)		(1,972	)		—			223,480			29,942

Income (loss) before taxes		108,273			349,305			(75	)		(223,480	)		234,023

Provision (benefit) for income taxes:
Current		15,022			—			—			—			15,022
Deferred		(56,175	)		125,750			—			—			69,575

Total income taxes		(41,153	)		125,750			—			—			84,597

Net income (loss)	$	149,426		$	223,555			($75	)		($223,480	)	$	149,426

Comprehensive income (loss)	$	156,391		$	223,555			($75	)		($223,480	)	$	156,391

CONDENSED CONSOLIDATING STATEMENT OF INCOME

YEAR ENDED DECEMBER 31, 2011

(In thousands)


	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenue:
Oil production	$	5,675		$	658,283		$	—		$	—		$	663,958
Gas production		19,470			151,141			—			—			170,611
Natural gas liquids production		—			29,996			—			—			29,996
Other operational income		3,085			249			604			—			3,938
Derivative income, net		—			1,418			—			—			1,418

Total operating revenue		28,230			841,087			604			—			869,921

Operating expenses:
Lease operating expenses		6,632			169,018			231			—			175,881
Transportation, processing and gathering expenses		—			8,958			—			—			8,958
Production taxes		1,434			7,946			—			—			9,380
Depreciation, depletion, amortization		17,860			261,326			834			—			280,020
Accretion expense		15			30,385			364			—			30,764
Salaries, general and administrative		40,073			94			2			—			40,169
Incentive compensation expense		11,600			—			—			—			11,600
Other operational expenses		1,404			745			—			—			2,149

Total operating expenses		79,018			478,472			1,431			—			558,921

Income (loss) from operations		(50,788	)		362,615			(827	)		—			311,000

Other (income) expenses:
Interest expense		9,043			246			—			—			9,289
Interest income		(178	)		(242	)		—			—			(420	)
Other income		(52	)		(1,890	)		—			—			(1,942	)
Loss on early extinguishment of debt		607			—			—			—			607
(Income) loss from investment in subsidiary		(232,751	)		827			—			231,924			—

Total other (income) expenses		(223,331	)		(1,059	)		—			231,924			7,534

Income (loss) before taxes		172,543			363,674			(827	)		(231,924	)		303,466

Provision (benefit) for income taxes:
Current		(20,386	)		—			—			—			(20,386	)
Deferred		(1,403	)		130,923			—			—			129,520

Total income taxes		(21,789	)		130,923			—			—			109,134

Net income (loss)	$	194,332		$	232,751			($827	)		($231,924	)	$	194,332

Comprehensive income (loss)	$	230,404		$	232,751			($827	)		($231,924	)	$	230,404

Condensed Consolidating Statement of Cash Flows

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

YEAR ENDED DECEMBER 31, 2013

(In thousands)


	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	117,634		$	215,009			($52	)		($214,957	)	$	117,634
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization		93,579			256,995			—			—			350,574
Accretion expense		372			33,203			—			—			33,575
Deferred income tax provision (benefit)		(41,284	)		120,913			—			—			79,629
Settlement of asset retirement obligations		—			(83,854	)		—			—			(83,854	)
Non-cash stock compensation expense		10,347			—			—			—			10,347
Excess tax benefits		(156	)		—			—			—			(156	)
Non-cash derivative expense		—			2,239			—			—			2,239
Loss on early extinguishment of debt		27,279			—			—			—			27,279
Non-cash interest expense		16,219			—			—			—			16,219
Non-cash (income) loss from investment in subsidiaries		(214,983	)		—			26			214,957			—
Change in current income taxes		2,767			—			—			—			2,767
Change in intercompany receivables/payables		186,903			(186,947	)		44			—			—
(Increase) decrease in accounts receivable		(15,630	)		10,947			—			—			(4,683	)
Decrease in other current assets		1,752			—			—			—			1,752
Decrease in inventory		583			—			—			—			583
Increase (decrease) in accounts payable		(1,052	)		1,454			—			—			402
Increase in other current liabilities		40,543			1,908			—			—			42,451
Other		419			(2,972	)		—			—			(2,553	)

Net cash provided by operating activities		225,292			368,895			18			—			594,205

Cash flows from investing activities:
Investment in oil and gas properties		(273,474	)		(378,254	)		(11,571	)		—			(663,299	)
Proceeds from sale of oil and gas properties, net of expenses		6,300			42,521			—			—			48,821
Investment in fixed and other assets		(6,816	)		—			—			—			(6,816	)
Change in restricted funds		—			—			(1,742	)		—			(1,742	)
Investment in subsidiaries		(14,000	)		—			(13,404	)		27,404			—

Net cash used in investing activities		(287,990	)		(335,733	)		(26,717	)		27,404			(623,036	)

Cash flows from financing activities:
Proceeds from issuance of senior notes		489,250			—			—			—			489,250
Deferred financing costs		(9,065	)		—			—			—			(9,065	)
Redemption of senior notes		(396,014	)		—			—			—			(396,014	)
Excess tax benefits		156			—			—			—			156
Equity proceeds from parent		—			—			27,404			(27,404	)		—
Net payments for share-based compensation		(3,733	)		—			—			—			(3,733	)

Net cash provided by financing activities		80,594			—			27,404			(27,404	)		80,594

Effect of exchange rate changes on cash		—			—			(65	)		—			(65	)

Net change in cash and cash equivalents		17,896			33,162			640			—			51,698
Cash and cash equivalents, beginning of period		228,398			51,128			—			—			279,526

Cash and cash equivalents, end of period	$	246,294		$	84,290		$	640		$	—		$	331,224

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

YEAR ENDED DECEMBER 31, 2012

(In thousands)


	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	149,426		$	223,555			($75	)		($223,480	)	$	149,426
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization		63,022			281,152			191			—			344,365
Accretion expense		561			32,513			257			—			33,331
Deferred income tax provision (benefit)		(56,175	)		125,750			—			—			69,575
Settlement of asset retirement obligations		—			(65,567	)		—			—			(65,567	)
Non-cash stock compensation expense		8,699			—			—			—			8,699
Excess tax benefits		(949	)		—			—			—			(949	)
Non-cash derivative income		—			(509	)		—			—			(509	)
Loss on early extinguishment of debt		1,972			—			—			—			1,972
Non-cash interest expense		13,085			—			—			—			13,085
Non-cash (income) loss from investment in subsidiaries		(223,555	)		75			—			223,480			—
Change in current income taxes		10,618			—			—			—			10,618
Change in intercompany receivables/payables		275,819			(275,125	)		(694	)		—			—
(Increase) decrease in accounts receivable		(22,750	)		(33,345	)		224			—			(55,871	)
Increase in other current assets		(2,836	)		—			—			—			(2,836	)
Decrease in inventory		436			—			—			—			436
Increase (decrease) in accounts payable		5,348			(208	)		(39	)		—			5,101
Decrease in other current liabilities		(5,311	)		(5,115	)		—			—			(10,426	)
Other		10,960			(1,661	)		—			—			9,299

Net cash provided by (used in) operating activities		228,370			281,515			(136	)		—			509,749

Cash flows from investing activities:
Investment in oil and gas properties		(324,542	)		(231,313	)		—			—			(555,855	)
Proceeds from sale of oil and gas properties, net of expenses		403			—			—			—			403
Sale of fixed assets		134			—			—			—			134
Investment in fixed and other assets		(13,370	)		—			—			—			(13,370	)

Net cash used in investing activities		(337,375	)		(231,313	)		—			—			(568,688	)

Cash flows from financing activities:
Proceeds from bank borrowings		25,000			—			—			—			25,000
Repayment of bank borrowings		(70,000	)		—			—			—			(70,000	)
Proceeds from issuance of senior convertible notes		300,000			—			—			—			300,000
Deferred financing costs of senior convertible notes		(8,855	)		—			—			—			(8,855	)
Proceeds from sold warrants		40,170			—			—			—			40,170
Payments for purchased call options		(70,830	)		—			—			—			(70,830	)
Proceeds from issuance of senior notes		300,000			—			—			—			300,000
Deferred financing costs		(11,966	)		—			—			—			(11,966	)
Redemption of senior subordinated notes		(200,681	)		—			—			—			(200,681	)
Excess tax benefits		949			—			—			—			949
Net payments for share-based compensation		(3,773	)		—			—			—			(3,773	)

Net cash provided by financing activities		300,014			—			—			—			300,014

Net change in cash and cash equivalents		191,009			50,202			(136	)		—			241,075
Cash and cash equivalents, beginning of period		37,389			926			136			—			38,451

Cash and cash equivalents, end of period	$	228,398		$	51,128		$	—		$	—		$	279,526

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

YEAR ENDED DECEMBER 31, 2011

(In thousands)


	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	194,332		$	232,751			($827	)		($231,924	)	$	194,332
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization		17,860			261,326			834			—			280,020
Accretion expense		15			30,385			364			—			30,764
Deferred income tax provision (benefit)		(1,403	)		130,923			—			—			129,520
Settlement of asset retirement obligations		—			(63,391	)		—			—			(63,391	)
Non-cash stock compensation expense		5,905			—			—			—			5,905
Excess tax benefits		(1,493	)		—			—			—			(1,493	)
Non-cash derivative income		—			(2,216	)		—			—			(2,216	)
Loss on early extinguishment of debt		607			—			—			—			607
Non-cash interest expense		1,908			—			—			—			1,908
Other non-cash income		(1,602	)		—			—			—			(1,602	)
Non-cash income from investment in subsidiaries		(230,861	)		(1,063	)		—			231,924			—
Change in current income taxes		(19,451	)		—			—			—			(19,451	)
Change in intercompany receivables/payables		217,287			(217,724	)		437			—			—
Increase in accounts receivable		(11,022	)		(7,688	)		(890	)		—			(19,600	)
(Increase) decrease in other current assets		(80	)		14			—			—			(66	)
Decrease in inventory		1,605			14			—			—			1,619
Increase in accounts payable		2,658			3,341			40			—			6,039
Increase in other current liabilities		23,440			6,143			—			—			29,583
Other		(1,628	)		—			—			—			(1,628	)

Net cash provided by (used in) operating activities		198,077			372,815			(42	)		—			570,850

Cash flows from investing activities:
Investment in oil and gas properties		(309,026	)		(455,903	)		(4	)		—			(764,933	)
Proceeds from sale of oil and gas properties, net of expenses		5,575			82,355			—			—			87,930
Investment in fixed and other assets		(2,247	)		—			—			—			(2,247	)

Net cash used in investing activities		(305,698	)		(373,548	)		(4	)		—			(679,250	)

Cash flows from financing activities:
Proceeds from bank borrowings		75,000			—			—			—			75,000
Repayment of bank borrowings		(30,000	)		—			—			—			(30,000	)
Deferred financing costs		(4,017	)		—			—			—			(4,017	)
Excess tax benefits		1,493			—			—			—			1,493
Net payments for share-based compensation		(2,581	)		—			—			—			(2,581	)

Net cash provided by financing activities		39,895			—			—			—			39,895

Net change in cash and cash equivalents		(67,726	)		(733	)		(46	)		—			(68,505	)
Cash and cash equivalents, beginning of period		105,115			1,659			182			—			106,956

Cash and cash equivalents, end of period	$	37,389		$	926		$	136		$	—		$	38,451