(16) 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 9 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 nine months ended September 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 September 30, 2013:
Operating revenues	$	–	$	823	$	131	$	(86)	$	868
Operating costs and expenses:
Gas purchases – midstream services		–		195		–		–		195
Operating expenses		–		140		36		(86)		90
General and administrative expenses		–		44		7		–		51
Depreciation, depletion and amortization		–		192		13		–		205
Taxes, other than income taxes		–		16		2		–		18
Total operating costs and expenses		–		587		58		(86)		559
Operating income		–		236		73		–		309
Gain on derivatives		–		10		2		–		12
Equity in earnings of subsidiaries		186		–		–		(186)		–
Interest expense		–		9		2		–		11
Income before income taxes		186		237		73		(186)		310
Provision for income taxes		–		91		33		–		124
Net income		186		146		40		(186)		186
Comprehensive income	$	139	$	98	$	41	$	(139)	$	139


CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(Unaudited)

	Parent		Former Guarantors		Other Subsidiaries		Eliminations		Consolidated
	(in millions)
Nine months ended September 30, 2013:
Operating revenues	$	–	$	2,331	$	379	$	(246)	$	2,464
Operating costs and expenses:
Gas purchases – midstream services		–		575		–		–		575
Operating expenses		–		376		107		(246)		237
General and administrative expenses		–		117		19		–		136
Depreciation, depletion and amortization		–		534		37		–		571
Taxes, other than income taxes		–		50		9		–		59
Total operating costs and expenses		–		1,652		172		(246)		1,578
Operating income		–		679		207		–		886
Gain on derivatives		–		74		1		–		75
Equity in earnings of subsidiaries		559		–		–		(559)		–
Interest expense		–		24		5		–		29
Income before income taxes		559		729		203		(559)		932
Provision for income taxes		–		291		82		–		373
Net income		559		438		121		(559)		559
Comprehensive income	$	458	$	337	$	120	$	(457)	$	458


CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(Unaudited)

	Parent		Former Guarantors		Other Subsidiaries			Eliminations			Consolidated
	(in millions)

Nine months ended September 30, 2013:
Net cash provided by (used in) operating activities	$	(33)	$	1,062		$	349		$	–		$	1,378
Investing activities:
Capital investments		(29)		(1,531)			(168)			–			(1,728)
Proceeds from sale of property and equipment		–		–			3			–			3
Transfers from restricted cash		9		–			–			–			9
Other		(1)		(2)			7			–			4
Net cash used in investing activities		(21)		(1,533)			(158)			–			(1,712)
Financing activities:
Intercompany activities		(275)		465			(190)			–			–
Payments on current portion of long-term debt		(1)		–			–			–			(1)
Payments on revolving long-term debt		(2,135)		–			–			–			(2,135)
Borrowings under revolving long-term debt		2,378		–			–			–			2,378
Other items		57		–			–			–			57
Net cash provided by (used in) financing activities		24		465			(190)			–			299
Increase (decrease) in cash and cash equivalents		(30)		(6)			1			–			(35)
Cash and cash equivalents at beginning of year		48		6			–			–			54
Cash and cash equivalents at end of period	$	18	$	–		$	1		$	–		$	19