(17) CONDENSED CONSOLIDATING FINANCIAL INFORMATION

The Company is providing condensed consolidating financial information for SEECO, SEPCO and SES, its subsidiaries that are currently guarantors of the Company’s registered public debt, and for its other subsidiaries that are not guarantors of such debt. These wholly owned subsidiary guarantors have jointly and severally, fully and unconditionally guaranteed the Company’s 7.35% Senior Notes, 7.125% Senior Notes and 4.10% Senior Notes. The subsidiary guarantees (i) rank equally in right of payment with all of the existing and future senior debt of the subsidiary guarantors; (ii) rank senior to all of the existing and future subordinated debt of the subsidiary guarantors; (iii) are effectively subordinated to any future secured obligations of the subsidiary guarantors to the extent of the value of the assets securing such obligations; and (iv) are structurally subordinated to all debt and other obligations of the subsidiaries of the guarantors.

The Company has not presented separate financial and narrative information for each of the subsidiary guarantors because it believes that such financial and narrative information would not provide any additional information that would be material in evaluating the sufficiency of the guarantees. The following condensed consolidating financial information summarizes the results of operations, financial position and cash flows for the Company’s guarantor and non-guarantor subsidiaries.


CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(Unaudited)

	Parent		Guarantors		Non-Guarantors		Eliminations		Consolidated
	(in thousands)
Three months ended March 31, 2013:
Operating revenues	$	–	$	690,144	$	121,369	$	(77,864)	$	733,649
Operating costs and expenses:
Gas purchases – midstream services		–		180,164		–		(208)		179,956
Operating expenses		–		110,541		31,322		(77,639)		64,224
General and administrative expenses		–		31,866		5,366		(17)		37,215
Depreciation, depletion and amortization		–		167,522		11,945		–		179,467
Impairment of natural gas and oil properties		–		–		–		–		–
Taxes, other than income taxes		–		17,715		3,112		–		20,827
Total operating costs and expenses		–		507,808		51,745		(77,864)		481,689
Operating income		–		182,336		69,624		–		251,960
Other loss, net		–		(376)		(157)		–		(533)
Commodity derivative loss		–		(29,794)		–		–		(29,794)
Equity in earnings of subsidiaries		127,515		–		–		(127,515)		–
Interest expense		–		6,938		2,083		–		9,021
Income before income taxes		127,515		145,228		67,384		(127,515)		212,612
Provision for income taxes		–		58,046		27,051		–		85,097
Net income		127,515		87,182		40,333		(127,515)		127,515
Comprehensive income (loss)	$	33,318	$	(6,253)	$	39,304	$	(33,051)	$	33,318


Three months ended March 31, 2012:
Operating revenues	$	–	$	612,811	$	113,125	$	(71,101)	$	654,835
Operating costs and expenses:
Gas purchases – midstream services		–		146,903		–		(227)		146,676
Operating expenses		–		103,056		27,981		(70,079)		60,958
General and administrative expenses		–		41,708		7,913		(795)		48,826
Depreciation, depletion and amortization		–		182,837		10,790		–		193,627
Taxes, other than income taxes		–		16,998		3,424		–		20,422
Total operating costs and expenses		–		491,502		50,108		(71,101)		470,509
Operating income		–		121,309		63,017		–		184,326
Other loss, net		–		(174)		(26)		–		(200)
Commodity derivative gain		–		1,634		–		–		1,634
Equity in earnings of subsidiaries		107,704		–		–		(107,704)		–
Interest expense		–		3,755		3,583		–		7,338
Income (loss) before income taxes		107,704		119,014		59,408		(107,704)		178,422
Provision for income taxes		–		46,892		23,826		–		70,718
Net income (loss)		107,704		72,122		35,582		(107,704)		107,704
Comprehensive income (loss)	$	107,958	$	137,957	$	36,063	$	(107,704)	$	174,274


CONDENSED CONSOLIDATING BALANCE SHEETS
(Unaudited)

	Parent		Guarantors		Non- Guarantors		Eliminations		Consolidated
	(in thousands)
March 31, 2013:

ASSETS

Cash and cash equivalents	$	17,379	$	–	$	129	$	–	$	17,508
Restricted cash		7,108		–		–		–		7,108
Accounts receivable		2,720		367,636		16,968		–		387,324
Inventories		–		29,117		1,291		–		30,408
Other current assets		14,611		153,233		6,615		–		174,459
Total current assets		41,818		549,986		25,003		–		616,807

Intercompany receivables		2,277,188		94		26,325		(2,303,607)		–

Property and equipment		225,056		11,979,897		1,356,785		–		13,561,738
Less: Accumulated depreciation, depletion and amortization		(88,806)		(7,090,914)		(200,510)		–		(7,380,230)
		136,250		4,888,983		1,156,275		–		6,181,508

Investments in subsidiaries (equity method)		2,344,562		–		–		(2,344,562)		–

Other assets		35,898		68,058		14,520		–		118,476

Total assets	$	4,835,716	$	5,507,121	$	1,222,123	$	(4,648,169)	$	6,916,791

LIABILITIES AND EQUITY

Accounts payable	$	99,746	$	434,903	$	81,486	$	–	$	616,135
Other current liabilities		3,759		109,036		2,544		–		115,339
Total current liabilities		103,505		543,939		84,030		–		731,474

Intercompany payables		–		2,254,521		49,086		(2,303,607)		–

Long-term debt		1,703,403		–		–		–		1,703,403
Deferred income taxes		(116,029)		874,991		372,350		–		1,131,312
Other liabilities		63,029		191,521		14,244		–		268,794
Total liabilities		1,753,908		3,864,972		519,710		(2,303,607)		3,834,983
Commitments and contingencies
Total equity		3,081,808		1,642,149		702,413		(2,344,562)		3,081,808

Total liabilities and equity	$	4,835,716	$	5,507,121	$	1,222,123	$	(4,648,169)	$	6,916,791


CONDENSED CONSOLIDATING BALANCE SHEETS
(Unaudited)

	Parent		Guarantors		Non- Guarantors		Eliminations		Consolidated
	(in thousands)
December 31, 2012:

ASSETS

Cash and cash equivalents	$	47,491	$	5,988	$	104	$	–	$	53,583
Restricted Cash		8,542		–		–		–		8,542
Accounts receivable		2,677		353,607		21,354		–		377,638
Inventories		2		26,975		1,164		–		28,141
Other current assets		7,461		321,396		12,151		–		341,008
Total current assets		66,173		707,966		34,773		–		808,912

Intercompany receivables		2,259,713		42		27,077		(2,286,832)		–

Property and equipment		220,837		11,491,222		1,316,380		–		13,028,439
Less: Accumulated depreciation, depletion and amortization		(82,178)		(6,923,106)		(186,179)		–		(7,191,463)
		138,659		4,568,116		1,130,201		–		5,836,976

Investments in subsidiaries (equity method)		2,309,947		–		–		(2,309,947)		–

Other assets		35,136		42,247		14,256		–		91,639

Total assets	$	4,809,628	$	5,318,371	$	1,206,307	$	(4,596,779)	$	6,737,527

LIABILITIES AND EQUITY

Accounts payable	$	140,367	$	375,604	$	41,009	$	–	$	556,980
Other current liabilities		3,758		205,623		1,410		–		210,791
Total current liabilities		144,125		581,227		42,419		–		767,771

Intercompany payables		–		2,108,360		178,472		(2,286,832)		–

Long-term debt		1,668,273		–		–		–		1,668,273
Deferred income taxes		(116,207)		820,279		345,066		–		1,049,138
Other liabilities		77,565		124,505		14,403		–		216,473
Total liabilities		1,773,756		3,634,371		580,360		(2,286,832)		3,701,655
Commitments and contingencies
Total equity		3,035,872		1,684,000		625,947		(2,309,947)		3,035,872

Total liabilities and equity	$	4,809,628	$	5,318,371	$	1,206,307	$	(4,596,779)	$	6,737,527


CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(Unaudited)

	Parent		Guarantors		Non-Guarantors		Eliminations		Consolidated
	(in thousands)

Three months ended March 31, 2013:
Net cash provided by (used in) operating activities	$	(55,189)	$	289,060	$	138,267	$	–	$	372,138
Investing activities:
Capital investments		(17,873)		(453,651)		(12,110)		–		(483,634)
Transfers from restricted cash		1,434		–		–		–		1,434
Other		6,607		(5,762)		193		–		1,038
Net cash provided by (used in) investing activities		(9,832)		(459,413)		(11,917)		–		(481,162)
Financing activities:
Intercompany activities		(38,036)		164,365		(126,329)		–		–
Payments on current portion of long-term debt		–		–		–		–		–
Payments on revolving long-term debt		(369,700)		–		–		–		(369,700)
Borrowing under revolving long-term debt		404,800		–		–		–		404,800
Proceeds from issuance of long-term debt		–		–		–		–		–
Other Items		37,845		–		–		–		37,845
Net cash provided by (used in) financing activities		34,909		164,365		(126,329)		–		72,945
Effect of exchange rate changes on cash		–		–		4		–		4
Increase (decrease) in cash and cash equivalents		(30,112)		(5,988)		25		–		(36,075)
Cash and cash equivalents at beginning of year		47,491		5,988		104		–		53,583
Cash and cash equivalents at end of period	$	17,379	$	–	$	129	$	–	$	17,508


Three months ended March 31, 2012:
Net cash provided by (used in) operating activities	$	(66,501)	$	428,743	$	82,421	$	–	$	444,663
Investing activities:
Capital investments		(15,673)		(502,036)		(39,922)		–		(557,631)
Proceeds from sale of property and equipment		–		651		–		–		651
Other		4,085		(9,440)		7,125		–		1,770
Net cash used in investing activities		(11,588)		(510,825)		(32,797)		–		(555,210)
Financing activities:								–
Intercompany activities		(32,324)		82,571		(50,247)		–		–
Payments on revolving long-term debt		(1,271,300)		–		–		–		(1,271,300)
Borrowings under revolving long-term debt		599,800		–		–		–		599,800
Proceeds from issuance of long-term debt		998,780		–		–		–		998,780
Other items		(26,163)		–		–		–		(26,163)
Net cash provided by (used in) financing activities		268,793		82,571		(50,247)		–		301,117
Effect of exchange rate changes on cash		–		–		(30)		–		(30)
Increase (decrease) in cash and cash equivalents		190,704		489		(653)		–		190,540
Cash and cash equivalents at beginning of year		14,711		–		916		–		15,627
Cash and cash equivalents at end of period	$	205,415	$	489	$	263	$	–	$	206,167