Harbinger Group Inc.
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SEC Filings

10-Q
HRG GROUP, INC. filed this Form 10-Q on 08/09/2016
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Energy Segment
Presented below is a table that summarizes the results of operations of our Energy segment and compares the amount of change between the respective fiscal periods (in millions):
 
Fiscal Quarter
 
Fiscal Nine Months
 
2016
 
2015
 
Increase / (Decrease)
 
2016
 
2015
 
Increase / (Decrease)
Oil and natural gas
$
9.7

 
$
24.3

 
$
(14.6
)
 
$
36.0

 
$
84.6

 
$
(48.6
)
Oil and natural gas direct operating costs
9.1

 
22.3

 
(13.2
)
 
35.4

 
66.1

 
(30.7
)
Oil and natural gas operating margin
0.6

 
2.0

 
(1.4
)
 
0.6

 
18.5

 
(17.9
)
Selling, acquisition, operating and general expenses
5.0

 
13.5

 
(8.5
)
 
20.6

 
49.7

 
(29.1
)
Impairment of oil and natural gas properties
17.6

 
102.8

 
(85.2
)
 
93.2

 
439.4

 
(346.2
)
Operating loss - Energy segment
$
(22.0
)
 
$
(114.3
)
 
$
92.3

 
$
(113.2
)
 
$
(470.6
)
 
$
357.4

Oil and natural gas. Oil and natural gas revenues for the Fiscal 2016 Quarter decreased by $14.6 million, or 60.1%, to $9.7 million compared to $24.3 million for the Fiscal 2015 Quarter. Oil and natural gas revenues for the Fiscal 2016 Nine Months decreased $48.6 million, or 57.4%, to $36.0 million compared with $84.6 million for the Fiscal 2015 Nine Months. The decreases were primarily due to lower prices of oil, natural gas and natural gas liquids and natural production declines coupled with the effect of reduced revenues due to lower production volumes resulting from the Compass Asset Sale which closed on December 1, 2015.
Oil and natural gas direct operating costs. The Energy segment’s oil and natural gas direct operating costs and expenses for the Fiscal 2016 Quarter were $9.1 million, a decrease of $13.2 million from $22.3 million for the Fiscal 2015 Quarter. The Energy segment’s oil and natural gas direct operating costs and expenses for the Fiscal 2016 Nine Months were $35.4 million, a decrease of $30.7 million from $66.1 million from the Fiscal 2015 Nine Months. The decreases were mainly as a result of the Compass Asset Sale discussed above.
Components of direct operating costs and expenses for the Fiscal 2016 Quarter and Fiscal 2016 Nine Months, the Fiscal 2015 Quarter and the Fiscal 2015 Nine Months, are presented as follows (in millions):
 
Fiscal Quarter
 
Fiscal Nine Months
 
2016
 
2015
 
Increase / (Decrease)
 
2016
 
2015
 
Increase /(Decrease)
Oil and natural gas operating costs
$
6.4

 
$
14.6

 
$
(8.2
)
 
$
23.1

 
$
42.6

 
$
(19.5
)
Gathering and transportation costs
0.6

 
4.2

 
(3.6
)
 
5.0

 
12.8

 
(7.8
)
Production and ad valorem taxes
2.1

 
3.5

 
(1.4
)
 
7.3

 
10.7

 
(3.4
)
Total oil and natural gas direct operating costs
$
9.1

 
$
22.3

 
$
(13.2
)
 
$
35.4

 
$
66.1

 
$
(30.7
)
Selling, acquisition, operating and general expenses. The Energy segment’s selling, acquisition, operating and general expenses for the Fiscal 2016 Quarter were $5.0 million, a decrease of $8.5 million, or 63.0%, from $13.5 million for the Fiscal 2015 Quarter. The Energy segment’s selling, acquisition, operating and general expenses for the Fiscal 2016 Nine Months decreased $29.1 million, or 58.6%, to $20.6 million compared with $49.7 million for the Fiscal 2015 Nine Months. The decreases were primarily due to a decrease in depletion expense of $6.9 million and $23.1 million, for the Fiscal 2016 Quarter and Fiscal 2016 Nine Months, respectively, mainly as a result of the Compass Asset Sale and lower asset carrying value due to ceiling test impairments.
Impairment of oil and natural gas properties. The Energy segment recognized ceiling test impairments to its proved oil and natural gas properties of $17.6 million and $93.2 million for the Fiscal 2016 Quarter and Fiscal 2016 Nine Months, respectively. The impairments were due to the decline in oil and natural gas prices. The Energy segment recognized ceiling test impairments of $102.8 million and $439.4 million for the Fiscal 2015 Quarter and Fiscal 2015 Nine Months, respectively. The impairments were primarily due to differences in the oil and natural gas prices utilized in the purchase price allocation at the formation of Compass and the prices used in the ceiling test calculation, as well as the acquisition of EXCO Resources, Inc.’s (“EXCO”) remaining 25.5% interest in Compass during the Fiscal 2015 Nine Months. See Note 2, Basis of Presentation, Significant Accounting Policies and Recent Accounting Pronouncements to our Condensed Consolidated Financial Statements included in Part I - Item 1. Financial Statements for additional information regarding the ceiling test impairments.


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