Guarantor Financial Statements (Tables)

9 Months Ended

Sep. 30, 2012

Condensed Consolidating Balance Sheet

CONDENSED CONSOLIDATING BALANCE SHEET

SEPTEMBER 30, 2012

(In thousands of dollars)

	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiary		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	155,089		$	21,097		$	—	$	—		$	176,186
Accounts receivable		45,692			289,989			—		(208,431	)		127,250
Fair value of hedging contracts		—			34,010			—		—			34,010
Current income tax receivable		24,066			—			—		—			24,066
Deferred taxes *		2,465			9,815			—		—			12,280
Inventory		4,223			283			—		—			4,506
Other current assets		3,246			—			—		—			3,246
Total current assets		234,781			355,194			—		(208,431	)		381,544
Oil and gas properties, full cost method:
Proved		890,616			6,148,834			—		—			7,039,450
Less: accumulated DD&A		(353,857	)		(5,073,811	)		—		—			(5,427,668	)
Net proved oil and gas properties		536,759			1,075,023			—		—			1,611,782
Unevaluated		287,645			166,994			—		—			454,639
Other property and equipment, net		13,399			—			—		—			13,399
Fair value of hedging contracts		—			18,155			—		—			18,155
Other assets, net		33,843			1,315			—		—			35,158
Investment in subsidiary		902,154			—			—		(902,154	)		—
Total assets	$	2,008,581		$	1,616,681		$	—	($	1,110,585	)	$	2,514,677
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable to vendors	$	286,752		$	21,041		$	—	($	208,431	)	$	99,362
Undistributed oil and gas proceeds		22,822			1,455			—		—			24,277
Accrued interest		9,774			—			—		—			9,774
Fair value of hedging contracts		—			1,077			—		—			1,077
Asset retirement obligations		—			59,366			—		—			59,366
Other current liabilities		10,030			1,375			—		—			11,405
Total current liabilities		329,378			84,314			—		(208,431	)		205,261
Long-term debt		811,024			—			—		—			811,024
Deferred taxes *		20,373			277,727			—		—			298,100
Asset retirement obligations		7,515			343,508			—		—			351,023
Fair value of hedging contracts		—			2,266			—		—			2,266
Other long-term liabilities		14,132			6,712			—		—			20,844
Total liabilities		1,182,422			714,527			—		(208,431	)		1,688,518
Commitments and contingencies
Stockholders’ equity:
Common stock		484			—			—		—			484
Treasury stock		(860	)		—			—		—			(860	)
Additional paid-in capital		1,383,741			1,724,232			—		(1,724,232	)		1,383,741
Accumulated earnings (deficit)		(587,045	)		(851,917	)		—		851,917			(587,045	)
Accumulated other comprehensive income (loss)		29,839			29,839			—		(29,839	)		29,839
Total stockholders’ equity		826,159			902,154			—		(902,154	)		826,159
Total liabilities and stockholders’ equity	$	2,008,581		$	1,616,681		$	—	($	1,110,585	)	$	2,514,677

* Deferred income taxes have been allocated to the guarantor subsidiary where related oil and gas properties reside.

CONDENSED CONSOLIDATING BALANCE SHEET

DECEMBER 31, 2011

(In thousands of dollars)

	Parent			Guarantor Subsidiary			Non- Guarantor Subsidiary			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	37,389		$	926		$	136		$	—		$	38,451
Accounts receivable		36,463			81,452			1,353			(1,129	)		118,139
Fair value of hedging contracts		—			25,177			—			—			25,177
Current income tax receivable		19,946			—			—			—			19,946
Deferred taxes *		8,269			17,803			—			—			26,072
Inventory		4,360			283			—			—			4,643
Other current assets		791			—			—			—			791
Total current assets		107,218			125,641			1,489			(1,129	)		233,219
Oil and gas properties, full cost method:
Proved		696,975			5,946,141			5,052			—			6,648,168
Less: accumulated DD&A		(309,421	)		(4,862,949	)		(2,359	)		—			(5,174,729	)
Net proved oil and gas properties		387,554			1,083,192			2,693			—			1,473,439
Unevaluated		246,269			155,340			—			—			401,609
Other property and equipment, net		11,172			—			—			—			11,172
Fair value of hedging contracts		—			22,543			—			—			22,543
Other assets, net		20,873			2,896			—			—			23,769
Investment in subsidiary		733,533			(273	)		—			(733,260	)		—
Total assets	$	1,506,619		$	1,389,339		$	4,182		($	734,389	)	$	2,165,751
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable to vendors	$	78,170		$	25,866		$	39		($	1,129	)	$	102,946
Undistributed oil and gas proceeds		26,036			1,292			—			—			27,328
Accrued interest		14,059			—			—			—			14,059
Fair value of hedging contracts		—			11,122			—			—			11,122
Asset retirement obligations		—			62,676			—			—			62,676
Other current liabilities		22,974			5,396			—			—			28,370
Total current liabilities		141,239			106,352			39			(1,129	)		246,501
Long-term debt		620,000			—			—			—			620,000
Deferred taxes *		56,970			190,865			—			—			247,835
Asset retirement obligations		7,626			351,061			4,416			—			363,103
Fair value of hedging contracts		—			815			—			—			815
Other long-term liabilities		12,955			6,713			—			—			19,668
Total liabilities		838,790			655,806			4,455			(1,129	)		1,497,922
Commitments and contingencies
Stockholders’ equity:
Common stock		481			—			—			—			481
Treasury stock		(860	)		—			—			—			(860	)
Additional paid-in capital		1,338,565			1,724,232			1,639			(1,725,871	)		1,338,565
Accumulated earnings (deficit)		(692,225	)		(1,012,567	)		(1,912	)		1,014,479			(692,225	)
Accumulated other comprehensive income (loss)		21,868			21,868			—			(21,868	)		21,868
Total stockholders’ equity		667,829			733,533			(273	)		(733,260	)		667,829
Total liabilities and stockholders’ equity	$	1,506,619		$	1,389,339		$	4,182		($	734,389	)	$	2,165,751

* Deferred income taxes have been allocated to the guarantor subsidiary where related oil and gas properties reside.

Condensed Consolidating Statement of Operations

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2012

(In thousands of dollars)

	Parent			Guarantor Subsidiary			Non- Guarantor Subsidiary			Eliminations			Consolidated
Operating revenue:
Oil production	$	7,682		$	173,124		$	—		$	—		$	180,806
Gas production		9,197			24,806			—			—			34,003
Natural gas liquids production		5,436			6,474			—			—			11,910
Other operational income		568			(1	)		111			—			678
Total operating revenue		22,883			204,403			111			—			227,397
Operating expenses:
Lease operating expenses		5,886			55,107			2			—			60,995
Transportation, processing and gathering expenses		4,163			2,599			—			—			6,762
Other operational expenses		61			21			—			—			82
Production taxes		684			1,158			—			—			1,842
Depreciation, depletion, amortization		19,336			69,939			(1	)		—			89,274
Accretion expense		138			8,181			86			—			8,405
Salaries, general and administrative		13,672			1			—			—			13,673
Incentive compensation expense		67			—			—			—			67
Derivative expense, net		—			1,812			—			—			1,812
Total operating expenses		44,007			138,818			87			—			182,912
Income (loss) from operations		(21,124	)		65,585			24			—			44,485
Other (income) expenses:
Interest expense		7,671			21			—			—			7,692
Interest income		(112	)		(5	)		—			—			(117	)
Other income		(98	)		(345	)		—			—			(443	)
(Income) loss from investment in subsidiaries		(42,200	)		(24	)		—			42,224			—
Total other (income) expenses		(34,739	)		(353	)		—			42,224			7,132
Income (loss) before taxes		13,615			65,938			24			(42,224	)		37,353
Provision (benefit) for income taxes:
Current		595			—			—			—			595
Deferred		(10,639	)		23,738			—			—			13,099
Total income taxes		(10,044	)		23,738			—			—			13,694
Net income (loss)	$	23,659		$	42,200		$	24		($	42,224	)	$	23,659
Comprehensive income (loss)	($	9,507	)	$	42,200		$	24		($	42,224	)	($	9,507	)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2011

(In thousands of dollars)

	Parent			Guarantor Subsidiary			Non- Guarantor Subsidiary			Eliminations			Consolidated
Operating revenue:
Oil production	$	1,248		$	156,188		$	—		$	—		$	157,436
Gas production		6,772			35,999			—			—			42,771
Natural gas liquids production		—			9,060			—			—			9,060
Other operational income		1,050			94			101			—			1,245
Derivative income, net		—			4,082			—			—			4,082
Total operating revenue		9,070			205,423			101			—			214,594
Operating expenses:
Lease operating expenses		1,716			44,682			193			—			46,591
Transportation, processing and gathering expenses		—			2,763			—			—			2,763
Other operational expenses		622			32			—			—			654
Production taxes		422			2,070			—			—			2,492
Depreciation, depletion, amortization		5,615			58,630			217			—			64,462
Accretion expense		3			7,605			92			—			7,700
Salaries, general and administrative		7,193			(43	)		1			—			7,151
Incentive compensation expense		2,087			—			—			—			2,087
Total operating expenses		17,658			115,739			503			—			133,900
Income (loss) from operations		(8,588	)		89,684			(402	)		—			80,694
Other (income) expenses:
Interest expense		1,305			74			—			—			1,379
Interest income		(23	)		—			—			—			(23	)
Other income		(6	)		(366	)		—			—			(372	)
Other expense		308			—			—			—			308
(Income) loss from investment in subsidiaries		(60,498	)		401			—			60,097			—
Total other (income) expenses		(58,914	)		109			—			60,097			1,292
Income (loss) before taxes		50,326			89,575			(402	)		(60,097	)		79,402
Provision (benefit) for income taxes:
Current		(12,681	)		—			—			—			(12,681	)
Deferred		11,186			29,076			—			—			40,262
Total income taxes		(1,495	)		29,076			—			—			27,581
Net income (loss)	$	51,821		$	60,499		($	402	)	($	60,097	)	$	51,821
Comprehensive income (loss)	$	127,828		$	60,499		($	402	)	($	60,097	)	$	127,828

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 2012

(In thousands of dollars)

	Parent			Guarantor Subsidiary			Non- Guarantor Subsidiary			Eliminations			Consolidated
Operating revenue:
Oil production	$	20,729		$	544,016		$	—		$	—		$	564,745
Gas production		20,693			70,313			—			—			91,006
Natural gas liquids production		11,010			24,218			—			—			35,228
Other operational income		2,024			139			357			—			2,520
Derivative income, net		—			3,119			—			—			3,119
Total operating revenue		54,456			641,805			357			—			696,618
Operating expenses:
Lease operating expenses		17,108			139,937			(15	)		—			157,030
Transportation, processing and gathering expenses		8,361			7,550			—			—			15,911
Other operational expenses		150			45			—			—			195
Production taxes		2,354			5,224			—			—			7,578
Depreciation, depletion, amortization		45,884			214,908			190			—			260,982
Accretion expense		423			24,246			257			—			24,926
Salaries, general and administrative		40,516			5			—			—			40,521
Incentive compensation expense		3,907			—			—			—			3,907
Total operating expenses		118,703			391,915			432			—			511,050
Income (loss) from operations		(64,247	)		249,890			(75	)		—			185,568
Other (income) expenses:
Interest expense		21,189			(82	)		—			—			21,107
Interest income		(216	)		(11	)		—			—			(227	)
Other income		(121	)		(1,108	)		—			—			(1,229	)
(Income) loss from investment in subsidiaries		(160,650	)		75			—			160,575			—
Total other (income) expenses		(139,798	)		(1,126	)		—			160,575			19,651
Income (loss) before taxes		75,551			251,016			(75	)		(160,575	)		165,917
Provision (benefit) for income taxes:
Current		1,164			—			—			—			1,164
Deferred		(30,793	)		90,366			—			—			59,573
Total income taxes		(29,629	)		90,366			—			—			60,737
Net income (loss)	$	105,180		$	160,650		($	75	)	($	160,575	)	$	105,180
Comprehensive income (loss)	$	113,151		$	160,650		($	75	)	($	160,575	)	$	113,151

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 2011

(In thousands of dollars)

	Parent			Guarantor Subsidiary			Non- Guarantor Subsidiary			Eliminations			Consolidated
Operating revenue:
Oil production	$	2,766		$	482,022		$	—		$	—		$	484,788
Gas production		12,355			119,460			—			—			131,815
Natural gas liquids production		—			25,290			—			—			25,290
Other operational income		2,359			179			456			—			2,994
Derivative income, net		—			3,300			—			—			3,300
Total operating revenue		17,480			630,251			456			—			648,187
Operating expenses:
Lease operating expenses		2,462			127,831			193			—			130,486
Transportation, processing and gathering expenses		—			7,311			—			—			7,311
Other operational expenses		715			734			3			—			1,452
Production taxes		814			6,014			—			—			6,828
Depreciation, depletion, amortization		11,533			192,566			678			—			204,777
Accretion expense		11			22,849			274			—			23,134
Salaries, general and administrative		29,486			7			1			—			29,494
Incentive compensation expense		7,104			—			—			—			7,104
Total operating expenses		52,125			357,312			1,149			—			410,586
Income (loss) from operations		(34,645	)		272,939			(693	)		—			237,601
Other (income) expenses:
Interest expense		6,315			155			—			—			6,470
Interest income		(164	)		(6	)		—			—			(170	)
Other income		(19	)		(1,480	)		—			—			(1,499	)
Loss on early extinguishment of debt		607			—			—			—			607
Other expense		500			1			—			—			501
(Income) loss from investment in subsidiaries		(177,442	)		692			—			176,750			—
Total other (income) expenses		(170,203	)		(638	)		—			176,750			5,909
Income (loss) before taxes		135,558			273,577			(693	)		(176,750	)		231,692
Provision (benefit) for income taxes:
Current		(12,690	)		(2,353	)		—			—			(15,043	)
Deferred		(561	)		98,487			—			—			97,926
Total income taxes		(13,251	)		96,134			—			—			82,883
Net income (loss)	$	148,809		$	177,443		($	693	)	($	176,750	)	$	148,809
Comprehensive income (loss)	$	228,454		$	177,443		($	693	)	($	176,750	)	$	228,454

Condensed Consolidating Statement of Cash Flows

	Parent			Guarantor Subsidiary			Non- Guarantor Subsidiary			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	105,180		$	160,650		($	75	)	($	160,575	)	$	105,180
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization		45,884			214,908			190			—			260,982
Accretion expense		423			24,246			257			—			24,926
Deferred income tax provision (benefit)		(30,793	)		90,366			—			—			59,573
Settlement of asset retirement obligations		—			(47,211	)		—			—			(47,211	)
Non-cash stock compensation expense		6,800			—			—			—			6,800
Excess tax benefits		(882	)		—			—			—			(882	)
Non-cash derivative income		—			(584	)		—			—			(584	)
Non-cash interest expense		9,068			—			—			—			9,068
Other non-cash expense		16			—			—			—			16
Change in current income taxes		(3,240	)		—			—			—			(3,240	)
Change in intercompany receivables/payables		207,166			(206,669	)		(497	)		—			—
(Increase) decrease in accounts receivable		(9,229	)		(6,631	)		28			—			(15,832	)
Increase in other current assets		(2,456	)		—			—			—			(2,456	)
Decrease in inventory		136			—			—			—			136
Increase (decrease) in accounts payable		5,733			422			(39	)		—			6,116
Decrease in other current liabilities		(20,441	)		(3,860	)		—			—			(24,301	)
Other		(163,921	)		(1,032	)		—			160,575			(4,378	)
Net cash provided by (used in) operating activities		149,444			224,605			(136	)		—			373,913
Cash flows from investing activities:
Investment in oil and gas properties		(240,877	)		(204,434	)		—			—			(445,311	)
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		(3,998	)		—			—			—			(3,998	)
Net cash used in investing activities		(244,338	)		(204,434	)					—			(448,772	)
Cash flows from financing activities:
Proceeds from bank borrowings		25,000			—			—			—			25,000
Repayments of bank borrowings		(70,000	)		—			—			—			(70,000	)
Proceeds from issuance of senior convertible notes		300,000			—			—			—			300,000
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	)
Excess tax benefits		882			—			—			—			882
Net payments for share based compensation		(3,773	)		—			—			—			(3,773	)
Net cash provided by financing activities		212,594			—			—			—			212,594
Net change in cash and cash equivalents		117,700			20,171			(136	)		—			137,735
Cash and cash equivalents, beginning of period		37,389			926			136			—			38,451
Cash and cash equivalents, end of period	$	155,089		$	21,097		$	—		$	—		$	176,186

	Parent			Guarantor Subsidiary			Non- Guarantor Subsidiary			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	148,809		$	177,443		($	693	)	($	176,750	)	$	148,809
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization		11,533			192,566			678			—			204,777
Accretion expense		11			22,849			274			—			23,134
Deferred income tax provision (benefit)		(561	)		98,487			—			—			97,926
Settlement of asset retirement obligations		—			(52,543	)		—			—			(52,543	)
Non-cash stock compensation expense		4,492			—			—			—			4,492
Excess tax benefits		(1,490	)		—			—			—			(1,490	)
Non-cash derivative income		—			(4,337	)		—			—			(4,337	)
Loss on early extinguishment of debt		607			—			—			—			607
Non-cash (income) loss from investment in subsidiaries		(175,962	)		(788	)		—			176,750			—
Non-cash interest expense		1,412			—			—			—			1,412
Other non-cash (income) expense		(1,362	)		—			—			—			(1,362	)
Change in current income taxes		(19,357	)		(2,353	)		—			—			(21,710	)
Change in intercompany receivables/payables		233,904			(233,577	)		(327	)		—			—
(Increase) decrease in accounts receivable		(16,878	)		(242	)		3			—			(17,117	)
(Increase) decrease in other current assets		(200	)		15			—			—			(185	)
Decrease in inventory		1,592			14			—			—			1,606
Increase (decrease) in accounts payable		2,709			(30	)		—			—			2,679
Increase in other current liabilities		1,124			2,480			—			—			3,604
Other		(1,889	)		—			—			—			(1,889	)
Net cash provided by (used in) operating activities		188,494			199,984			(65	)		—			388,413
Cash flows from investing activities:
Investment in oil and gas properties		(227,862	)		(202,845	)		(4	)		—			(430,711	)
Proceeds from sale of oil and gas properties, net of expenses		5,575			2,117			—			—			7,692
Investment in fixed and other assets		(1,788	)		—			—			—			(1,788	)
Net cash used in investing activities		(224,075	)		(200,728	)		(4	)		—			(424,807	)
Cash flows from financing activities:
Deferred financing costs		(4,017	)		—			—			—			(4,017	)
Excess tax benefits		1,490			—			—			—			1,490
Net payments for share based compensation		(2,581	)		—			—			—			(2,581	)
Net cash used in financing activities		(5,108	)		—			—			—			(5,108	)
Net change in cash and cash equivalents		(40,689	)		(744	)		(69	)		—			(41,502	)
Cash and cash equivalents, beginning of period		105,115			1,659			182			—			106,956
Cash and cash equivalents, end of period	$	64,426		$	915		$	113		$	—		$	65,454