(17) CONDENSED CONSOLIDATING FINANCIAL INFORMATION

As of December 16, 2013, following the release of all guarantees under the 7.15%, 7.5%, 7.35%, 7.125%, and 4.10% Senior Notes and our former revolving credit facility upon entering into the new Credit Facility, all of our wholly-owned subsidiaries have been released of their guarantees. Prior to that date, the Company’s obligation under registered public debt and outstanding senior notes as listed in Note 10 were fully and unconditionally guaranteed, jointly and severally, by all of our wholly-owned subsidiaries, other than minor subsidiaries, on a senior unsecured basis, and the Company, as a parent company, had no independent assets or operations. The subsidiary guarantees (i) ranked equally in right of payment with all of the existing and future senior debt of the subsidiary guarantors; (ii) ranked senior to all of the existing and future subordinated debt of the subsidiary guarantors; (iii) were 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) were structurally subordinated to all debt and other obligations of the subsidiaries of the guarantors. In the case of each series of notes, if no default or event of default had occurred and was continuing, these guarantees would have been released (i) automatically upon any sale, exchange or transfer of all the Company’s interest in the guarantor; (ii) automatically upon the liquidation and dissolution of a guarantor; (iii) following delivery of notice to the trustee of the release of the guarantor of its obligation under the Company’s revolving credit facility; and (iv) upon legal or covenant defeasance or other satisfaction of the obligations under the notes. In addition, there were no significant restrictions on the ability of the Company or a guarantor to obtain funds from its subsidiaries by dividend or loan, and none of the assets of the Company or a guarantor represented restricted net assets pursuant to rule 4-08(e)(3) of Regulation S-X under the Securities Act of 1933, as amended.

The Company is providing condensed consolidating financial information for SEECO, SEPCO, and SES, its subsidiaries that were guarantors of the Company’s registered public debt and outstanding senior notes, and for its other subsidiaries that were not guarantors of such debt for the three and six months ended June 30, 2013, as applicable. The Company has not provided comparative financial statements for 2014 because all guarantees were released in 2013. The Company has not presented separate financial and narrative information for each of the former subsidiary guarantors because it believes that such financial and narrative financial 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 and cash flow for the Company’s former guarantors and other subsidiaries.


CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(Unaudited)

	Parent		Former Guarantors		Other Subsidiaries		Eliminations		Consolidated
	(in millions)
Three months ended June 30, 2013:
Operating revenues	$	–	$	818	$	127	$	(83)	$	862
Operating costs and expenses:
Gas purchases		–		200		–		–		200
Operating expenses		–		125		40		(83)		82
General and administrative expenses		–		41		7		–		48
Depreciation, depletion and amortization		–		175		12		–		187
Taxes, other than income taxes		–		17		3		–		20
Total operating costs and expenses		–		558		62		(83)		537
Operating income		–		260		65		–		325
Other income, net		–		–		1		–		1
Gain on derivatives		–		93		–		–		93
Equity in earnings of subsidiaries		246		–		–		(246)		–
Interest expense		–		7		2		–		9
Income (loss) before income taxes		246		346		64		(246)		410
Provision for income taxes		–		142		22		–		164
Net income		246		204		42		(246)		246
Comprehensive income (loss)	$	286	$	245	$	40	$	(285)	$	286


CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(Unaudited)

	Parent		Former Guarantors		Other Subsidiaries		Eliminations		Consolidated
	(in millions)
Six months ended June 30, 2013:
Operating revenues	$	–	$	1,508	$	248	$	(161)	$	1,595
Operating costs and expenses:
Gas purchases – midstream services		–		381		–		(1)		380
Operating expenses		–		234		72		(160)		146
General and administrative expenses		–		73		12		–		85
Depreciation, depletion and amortization		–		342		24		–		366
Taxes, other than income taxes		–		35		6		–		41
Total operating costs and expenses		–		1,065		114		(161)		1,018
Operating income (loss)		–		443		134		–		577
Gain on derivatives		–		64		–		–		64
Equity in earnings of subsidiaries		373		–		–		(373)		–
Interest expense		–		15		4		–		19
Income (loss) before income taxes		373		492		130		(373)		622
Provision for income taxes		–		200		49		–		249
Net income (loss)		373		292		81		(373)		373
Comprehensive income (loss)	$	320	$	239	$	79	$	(318)	$	320


CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(Unaudited)

	Parent		Former Guarantors		Other Subsidiaries		Eliminations		Consolidated
	(in millions)

Six months ended June 30, 2013:
Net cash provided by (used in) operating activities	$	(29)	$	651	$	256	$	–	$	878
Investing activities:
Capital investments		(13)		(1,084)		(79)		–		(1,176)
Transfers from restricted cash		9		–		–		–		9
Other		–		2		4		–		6
Net cash used in investing activities		(4)		(1,082)		(75)		–		(1,161)
Financing activities:
Intercompany activities		(244)		425		(181)		–		–
Payments on current portion of long-term debt		(1)		–		–		–		(1)
Payments on revolving long-term debt		(1,233)		–		–		–		(1,233)
Borrowings under revolving long-term debt		1,463		–		–		–		1,463
Other items		26		–		–		–		26
Net cash provided by (used in) financing activities		11		425		(181)		–		255
Decrease in cash and cash equivalents		(22)		(6)		–		–		(28)
Cash and cash equivalents at beginning of year		48		6		–		–		54
Cash and cash equivalents at end of period	$	26	$	–	$	–	$	–	$	26