Condensed consolidating financial statements | Condensed consolidating financial statements As of December 31, 2015 , the majority of EXCO’s subsidiaries were guarantors under the EXCO Resources Credit Agreement, the indentures governing the 2018 Notes and 2022 Notes and the agreements governing the Second Lien Term Loans. All of our non-guarantor subsidiaries were considered unrestricted subsidiaries under the Second Lien Term Loans and the indentures governing the 2018 Notes and 2022 Notes, with the exception of our equity investment in OPCO. Set forth below are condensed consolidating financial statements of EXCO, the guarantor subsidiaries and the non-guarantor subsidiaries. The 2018 Notes, 2022 Notes and the Second Lien Term Loans, which were issued by EXCO Resources, Inc., are jointly and severally guaranteed by substantially all of our subsidiaries (referred to as Guarantor Subsidiaries). For purposes of this footnote, EXCO Resources, Inc. is referred to as Resources to distinguish it from the Guarantor Subsidiaries. Each of the Guarantor Subsidiaries is a 100% owned subsidiary of Resources and the guarantees are unconditional as they relate to the assets of the Guarantor Subsidiaries. The following financial information presents consolidating financial statements, which include: • Resources; • the Guarantor Subsidiaries; • the Non-Guarantor Subsidiaries; • elimination entries necessary to consolidate Resources, the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries; and • EXCO on a consolidated basis. Investments in subsidiaries are accounted for using the equity method of accounting for the disclosures within this footnote. The financial information for the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries is presented on a combined basis. The elimination entries primarily eliminate investments in subsidiaries and intercompany balances and transactions. EXCO RESOURCES, INC. CONDENSED CONSOLIDATING BALANCE SHEET December 31, 2015 (in thousands) Resources Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated Assets Current assets: Cash and cash equivalents $ 34,296 $ (22,049 ) $ — $ — $ 12,247 Restricted cash 2,100 19,120 — — 21,220 Other current assets 51,133 65,201 — — 116,334 Total current assets 87,529 62,272 — — 149,801 Equity investments — — 40,797 — 40,797 Oil and natural gas properties (full cost accounting method): Unproved oil and natural gas properties and development costs not being amortized — 115,377 — — 115,377 Proved developed and undeveloped oil and natural gas properties 330,775 2,739,655 — — 3,070,430 Accumulated depletion (330,775 ) (2,296,988 ) — — (2,627,763 ) Oil and natural gas properties, net — 558,044 — — 558,044 Other property and equipment, net 749 27,063 — — 27,812 Investments in and advances to affiliates, net 616,940 — — (616,940 ) — Deferred financing costs, net 8,408 — — — 8,408 Derivative financial instruments 6,109 — — — 6,109 Goodwill 13,293 149,862 — — 163,155 Total assets $ 733,028 $ 797,241 $ 40,797 $ (616,940 ) $ 954,126 Liabilities and shareholders' equity Current liabilities $ 74,472 $ 178,447 $ — $ — $ 252,919 Long-term debt 1,320,279 — — — 1,320,279 Other long-term liabilities 600 42,651 — — 43,251 Payable to parent — 2,276,594 — (2,276,594 ) — Total shareholders' equity (662,323 ) (1,700,451 ) 40,797 1,659,654 (662,323 ) Total liabilities and shareholders' equity $ 733,028 $ 797,241 $ 40,797 $ (616,940 ) $ 954,126 EXCO RESOURCES, INC. CONDENSED CONSOLIDATING BALANCE SHEET December 31, 2014 (in thousands) Resources Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated Assets Current assets: Cash and cash equivalents $ 86,837 $ (40,532 ) $ — $ — $ 46,305 Restricted cash — 23,970 — — 23,970 Other current assets 110,145 150,346 — — 260,491 Total current assets 196,982 133,784 — — 330,766 Equity investments — — 55,985 — 55,985 Oil and natural gas properties (full cost accounting method): Unproved oil and natural gas properties and development costs not being amortized — 276,025 — — 276,025 Proved developed and undeveloped oil and natural gas properties 335,838 3,516,235 — — 3,852,073 Accumulated depletion (330,771 ) (2,083,690 ) — — (2,414,461 ) Oil and natural gas properties, net 5,067 1,708,570 — — 1,713,637 Other property and equipment, net 1,269 23,375 — — 24,644 Investments in and advances to affiliates, net 1,746,931 — — (1,746,931 ) — Deferred financing costs, net 14,617 — — — 14,617 Derivative financial instruments 2,138 — — — 2,138 Goodwill 13,293 149,862 — — 163,155 Total assets $ 1,980,297 $ 2,015,591 $ 55,985 $ (1,746,931 ) $ 2,304,942 Liabilities and shareholders' equity Current liabilities $ 39,506 $ 289,930 $ — $ — $ 329,436 Long-term debt 1,430,516 — — — 1,430,516 Other long-term liabilities 271 34,715 — — 34,986 Payable to parent — 2,058,683 — (2,058,683 ) — Total shareholders' equity 510,004 (367,737 ) 55,985 311,752 510,004 Total liabilities and shareholders' equity $ 1,980,297 $ 2,015,591 $ 55,985 $ (1,746,931 ) $ 2,304,942 EXCO RESOURCES, INC. CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS For the year ended December 31, 2015 (in thousands) Resources Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated Revenues: Oil and natural gas $ 4 $ 328,327 $ — $ — $ 328,331 Costs and expenses: Oil and natural gas production 37 76,496 — — 76,533 Gathering and transportation — 99,321 — — 99,321 Depletion, depreciation and amortization 943 214,483 — — 215,426 Impairment of oil and natural gas properties 9,316 1,206,054 — — 1,215,370 Accretion of discount on asset retirement obligations 4 2,273 — — 2,277 General and administrative (4,313 ) 63,131 — — 58,818 Other operating items 1,646 (1,185 ) — — 461 Total costs and expenses 7,633 1,660,573 — — 1,668,206 Operating loss (7,629 ) (1,332,246 ) — — (1,339,875 ) Other income (expense): Interest expense, net (106,082 ) — — — (106,082 ) Gain on derivative financial instruments 75,869 — — — 75,869 Gain on restructuring and extinguishment of debt 193,276 — — — 193,276 Other income 87 35 — — 122 Equity loss — — (15,691 ) — (15,691 ) Net loss from consolidated subsidiaries (1,347,902 ) — — 1,347,902 — Total other income (expense) (1,184,752 ) 35 (15,691 ) 1,347,902 147,494 Loss before income taxes (1,192,381 ) (1,332,211 ) (15,691 ) 1,347,902 (1,192,381 ) Income tax expense — — — — — Net loss $ (1,192,381 ) $ (1,332,211 ) $ (15,691 ) $ 1,347,902 $ (1,192,381 ) EXCO RESOURCES, INC. CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS For the year ended December 31, 2014 (in thousands) Resources Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated Revenues: Oil and natural gas $ 3,649 $ 614,889 $ 41,731 $ — $ 660,269 Costs and expenses: Oil and natural gas production 394 77,334 16,598 — 94,326 Gathering and transportation — 97,784 3,790 — 101,574 Depletion, depreciation and amortization 3,174 244,761 15,634 — 263,569 Impairment of oil and natural gas properties — — — — — Accretion of discount on asset retirement obligations 16 2,107 567 — 2,690 General and administrative (3,342 ) 66,686 2,576 — 65,920 Other operating items (134 ) 5,459 (10 ) — 5,315 Total costs and expenses 108 494,131 39,155 — 533,394 Operating income 3,541 120,758 2,576 — 126,875 Other income (expense): Interest expense, net (92,049 ) — (2,235 ) — (94,284 ) Gain on derivative financial instruments 87,565 — 100 — 87,665 Other income 226 — 15 — 241 Equity income — — 172 — 172 Net earnings from consolidated subsidiaries 121,386 — — (121,386 ) — Total other income (expense) 117,128 — (1,948 ) (121,386 ) (6,206 ) Income before income taxes 120,669 120,758 628 (121,386 ) 120,669 Income tax expense — — — — — Net income $ 120,669 $ 120,758 $ 628 $ (121,386 ) $ 120,669 EXCO RESOURCES, INC. CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS For the year ended December 31, 2013 (in thousands) Resources Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated Revenues: Oil and natural gas $ 9,136 $ 582,158 $ 43,015 $ — $ 634,309 Costs and expenses: Oil and natural gas production 2,440 63,716 17,092 — 83,248 Gathering and transportation — 97,166 3,479 — 100,645 Depletion, depreciation and amortization 5,917 225,499 14,359 — 245,775 Impairment of oil and natural gas properties — 108,546 — — 108,546 Accretion of discount on asset retirement obligations 63 1,881 570 — 2,514 General and administrative 23,125 66,558 2,195 — 91,878 Gain on divestitures and other operating items (25,950 ) (151,549 ) (19 ) — (177,518 ) Total costs and expenses 5,595 411,817 37,676 — 455,088 Operating income (loss) 3,541 170,341 5,339 — 179,221 Other income (expense): Interest expense, net (99,815 ) — (2,774 ) — (102,589 ) Gain (loss) on derivative financial instruments 1,439 (177 ) (1,582 ) — (320 ) Other income (loss) (1,068 ) 229 11 — (828 ) Equity loss — — (53,280 ) — (53,280 ) Net earnings from consolidated subsidiaries 118,107 — — (118,107 ) — Total other income (expense) 18,663 52 (57,625 ) (118,107 ) (157,017 ) Income (loss) before income taxes 22,204 170,393 (52,286 ) (118,107 ) 22,204 Income tax expense — — — — — Net income (loss) $ 22,204 $ 170,393 $ (52,286 ) $ (118,107 ) $ 22,204 EXCO RESOURCES, INC. CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS For the year ended December 31, 2015 (in thousands) Resources Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated Operating Activities: Net cash provided by operating activities $ 34,532 $ 99,495 $ — $ — $ 134,027 Investing Activities: Additions to oil and natural gas properties, gathering assets and equipment and property acquisitions (2,601 ) (322,597 ) — — (325,198 ) Proceeds from disposition of property and equipment 686 6,711 — — 7,397 Restricted cash — 4,850 — — 4,850 Net changes in advances to joint ventures — 10,663 — — 10,663 Equity investments and other — 1,455 — — 1,455 Advances/investments with affiliates (217,906 ) 217,906 — — — Net cash used in investing activities (219,821 ) (81,012 ) — — (300,833 ) Financing Activities: Borrowings under credit agreements 165,000 — — — 165,000 Repayments under credit agreements (300,000 ) — — — (300,000 ) Proceeds received from issuance of Fairfax Term Loan 300,000 — — — 300,000 Repurchases of 2018 Notes (12,008 ) — — — (12,008 ) Payment on Exchange Term Loan (8,827 ) — — — (8,827 ) Proceeds from issuance of common shares, net 9,693 — — — 9,693 Payment of common share dividends (164 ) — — — (164 ) Deferred financing costs and other (20,946 ) — — — (20,946 ) Net cash provided by financing activities 132,748 — — — 132,748 Net increase (decrease) in cash (52,541 ) 18,483 — — (34,058 ) Cash at beginning of period 86,837 (40,532 ) — — 46,305 Cash at end of period $ 34,296 $ (22,049 ) $ — $ — $ 12,247 EXCO RESOURCES, INC. CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS For the year ended December 31, 2014 (in thousands) Resources Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated Operating Activities: Net cash provided by (used in) operating activities $ (84,067 ) $ 428,029 $ 18,131 $ — $ 362,093 Investing Activities: Additions to oil and natural gas properties, gathering assets and equipment and property acquisitions (2,531 ) (395,974 ) (4,061 ) — (402,566 ) Proceeds from disposition of property and equipment 99,612 95,594 (7,551 ) — 187,655 Restricted cash — (3,400 ) — — (3,400 ) Net changes in advances to joint ventures — (5,026 ) — — (5,026 ) Distributions from Compass 5,856 — — (5,856 ) — Equity investments and other — 1,749 — — 1,749 Advances/investments with affiliates 125,612 (125,612 ) — — — Net cash provided by (used in) investing activities 228,549 (432,669 ) (11,612 ) (5,856 ) (221,588 ) Financing Activities: Borrowings under credit agreements 100,000 — — — 100,000 Repayments under credit agreements (959,874 ) — (5,096 ) — (964,970 ) Proceeds received from issuance of 2022 Notes 500,000 — — — 500,000 Proceeds from issuance of common shares, net 271,773 — — — 271,773 Payment of common share dividends (41,060 ) — — — (41,060 ) Compass cash distribution — — (5,856 ) 5,856 — Deferred financing costs and other (10,324 ) — (102 ) — (10,426 ) Net cash used in financing activities (139,485 ) — (11,054 ) 5,856 (144,683 ) Net increase (decrease) in cash 4,997 (4,640 ) (4,535 ) — (4,178 ) Cash at beginning of period 81,840 (35,892 ) 4,535 — 50,483 Cash at end of period $ 86,837 $ (40,532 ) $ — $ — $ 46,305 EXCO RESOURCES, INC. CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS For the year ended December 31, 2013 (in thousands) Resources Guarantor Subsidiaries Non-guarantor subsidiaries Eliminations Consolidated Operating Activities: Net cash provided by (used in) operating activities $ (32,678 ) $ 365,770 $ 17,542 $ — $ 350,634 Investing Activities: Additions to oil and natural gas properties, gathering assets and equipment (15,767 ) (1,242,667 ) (38,818 ) — (1,297,252 ) Proceeds from disposition of property and equipment 244,500 505,128 — — 749,628 Restricted cash — 49,515 — — 49,515 Net changes in advances to joint ventures — 10,645 — — 10,645 Distributions from Compass 3,825 — — (3,825 ) — Equity investments and other (1,303 ) 236,289 — — 234,986 Advances/investments with affiliates (59,575 ) 59,575 — — — Net cash provided by (used in) investing activities 171,680 (381,515 ) (38,818 ) (3,825 ) (252,478 ) Financing Activities: Borrowings under the credit agreements 967,766 — 36,757 — 1,004,523 Repayments under the credit agreements (1,015,900 ) — (6,885 ) — (1,022,785 ) Proceeds from issuance of common shares, net 1,712 — — — 1,712 Payment of common share dividends (43,214 ) — — — (43,214 ) Compass cash distribution — — (3,825 ) 3,825 — Deferred financing costs and other (33,317 ) — (236 ) — (33,553 ) Net cash provided by (used in) financing activities (122,953 ) — 25,811 3,825 (93,317 ) Net increase (decrease) in cash 16,049 (15,745 ) 4,535 — 4,839 Cash at beginning of period 65,791 (20,147 ) — — 45,644 Cash at end of period $ 81,840 $ (35,892 ) $ 4,535 $ — $ 50,483 |