Supplemental Information Relating to Oil and Natural Gas Producing Activities (Unaudited)

The following supplemental information relating to the EXCO/HGI JV’s oil and natural gas producing activities for the period from inception to September 30, 2013 is presented in accordance with ASC 932, Extractive Activities, Oil and Gas.

Presented below are costs incurred in oil and natural gas property acquisition, exploration and development activities:



(in millions, except per unit amounts)	Amount
Period from inception to September 30, 2013:
Proved property acquisition costs	$	569.5
Unproved property acquisition costs	53.9
Total property acquisition costs	623.4
Development	11.8
Exploration costs	—
Lease acquisitions and other	—
Capitalized asset retirement costs	0.1
Depreciation, depletion and amortization per Boe	$	10.30
Depreciation, depletion and amortization per Mcfe	$	1.72

The EXCO/HGI JV retains an independent engineering firm to provide annual year-end estimates of its future net recoverable oil and natural gas reserves. The estimated proved net recoverable reserves the EXCO/HGI JV shows below include only those quantities that it expects to be commercially recoverable at prices and costs in effect at the balance sheet dates under existing regulatory practices and with conventional equipment and operating methods. Proved Developed Reserves represent only those reserves that the EXCO/HGI JV may recover through existing wells. Proved Undeveloped Reserves include those reserves that the EXCO/HGI JV may recover from new wells on undrilled acreage or from existing wells on which it must make a relatively major expenditure for recompletion or secondary recovery operations. All of the EXCO/HGI JV’s reserves are located onshore in the continental United States of America.

Discounted future cash flow estimates like those shown below are not intended to represent estimates of the fair value of the EXCO/HGI JV’s oil and natural gas properties. Estimates of fair value should also consider unproved reserves, anticipated future oil and natural gas prices, interest rates, changes in development and production costs and risks associated with future production. Because of these and other considerations, any estimate of fair value is subjective and imprecise.



	Oil (Mbbls)		Natural Gas (Mmcf)		Natural Gas Liquids (Mbbls)		Natural Gas Equivalent (Mmcfe)
Inception	3,747		268,447		6,113		327,607
Purchase of reserves in place (1)	193		63,145		1,240		71,743
Discoveries and extensions (2)	188		4,416		753		10,062
Revisions of previous estimates:
Changes in price	(125	)	13,116		(135	)	11,556
Other factors (3)	(296	)	(12,136	)	(1,941	)	(25,558	)
Sales of reserves in place	—		—		—		—
Production	(283	)	(14,570	)	(300	)	(18,068	)
September 30, 2013	3,424		322,418		5,730		377,342


(1)	Purchases of reserves in place include the initial contribution of conventional assets from EXCO as of February 14, 2013, and the acquisition of shallow Cotton Valley assets from an affiliate of BG Group as of March 5, 2013.


(2)	New discoveries and extensions were a result of the EXCO/HGI JV’s development in the Permian basin.

(3)

Revisions of previous estimates due to other factors were primarily due to downward adjustments in the Permian basin of 18.1 Bcfe as a result of recent performance and modifications to the EXCO/HGI JV’s development plans which extended the development beyond a five-year horizon. In addition, revisions of previous estimates due to other factors in the East Texas/North Louisiana region were 7.5 Bcfe primarily due to recent performance.

Estimated Quantities of Proved Developed and Undeveloped Reserves



	Oil (Mbbls)	Natural Gas (Mmcf)	Natural Gas Liquids (Mbbls)	Mmcfe
Proved developed:
September 30, 2013	3,107	317,748	4,799	365,185
Proved undeveloped:
September 30, 2013	317	4,670	931	12,157

Standardized measure of discounted future net cash flows

The EXCO/HGI JV has summarized the Standardized Measure related to its proved oil, natural gas, and NGL reserves. The EXCO/HGI JV has based the following summary on a valuation of Proved Reserves using discounted cash flows based on prices as prescribed by the SEC, costs and economic conditions and a 10% discount rate. The additions to Proved Reserves from the purchase of reserves in place, and new discoveries and extensions could vary significantly from year to year; additionally, the impact of changes to reflect current prices and costs of reserves proved in prior years could also be significant. Accordingly, the information presented below should not be viewed as an estimate of the fair value of the EXCO/HGI JV’s oil and natural gas properties, nor should the information be considered to be indicative of any trends.



	Amount
September 30, 2013
Future cash inflows	$	1,638.5
Future production costs	923.7
Future development costs	156.0
Future income taxes	39.3
Future net cash flows	519.5
Discount of future net cash flows at 10% per annum	217.2
Standardized measure of discounted future net cash flows	$	302.3

The reference prices at September 30, 2013 used in the above table, were $95.04 per Bbl of oil, $3.60 per Mmbtu of natural gas, and $38.64 per Bbl for NGLs. In each case, the prices were adjusted for historical differentials. These prices reflect the SEC rules requiring the use of simple average of the first day of the month price for the previous 12 month period for natural gas at Henry Hub, West Texas Intermediate crude oil at Cushing, Oklahoma, and the realized prices for NGLs.

The following are the principal sources of change in the Standardized Measure:



	Amount
Period from inception to September 30, 2013:
Sales and transfers of oil and natural gas produced	$	(46.2	)
Net changes in prices and production costs	39.2
Extensions and discoveries, net of future development and production costs	8.1
Development costs during the period	7.4
Changes in estimated future development costs	20.2
Revisions of previous quantity estimates	(50.2		)
Sales of reserves in place	—
Purchase of reserves in place	300.6
Accretion of discount before income taxes	16.1
Changes in timing and other	27.9
Net change in income taxes	(20.8		)
Net change	$	302.3

Costs not subject to amortization

The following table summarizes the categories of costs comprising the amount of unproved properties not subject to amortization by the period in which such costs were incurred. There are no individually significant properties or significant development projects included in costs not being amortized. The majority of the evaluation activities are expected to be completed within one to four years.



	Amount
Period from inception to September 30, 2013:
Property acquisition costs	$	35.7
Exploration and development	—
Capitalized interest	0.8
Total	$	36.5