Harbinger Group Inc.
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SEC Filings

DEF 14A
HRG GROUP, INC. filed this Form DEF 14A on 11/15/1995
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<PAGE>
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 14. OIL AND GAS OPERATIONS (UNAUDITED)--(CONTINUED)
 
  Effective April 1, 1984, the Company changed from accrual to cash basis
revenue recognition for sales from its Bolivia properties in light of economic
and political conditions in Bolivia. On September 30, 1987, the Company wrote
off its remaining $17.2 million investment in its oil and gas properties in
Bolivia. However, based on the Bolivian oil and gas company's performance under
renegotiated contracts and improved operating conditions, Zapata returned to
the accrual method of accounting for its Bolivian oil and gas operations in
fiscal 1994. Additionally, in 1994 Zapata participated in drilling two
exploratory wells in its Bolivian operation. The standardized measure
information below excludes cash flow information relating to the Bolivian
properties prior to 1994.
 
  The net present value of future cash flows, computed as prescribed by SFAS
No. 69, should not be construed as the fair value of Zapata's oil and gas
operations. The computation is based on assumptions that in some cases may not
be realistic and estimates that are subject to substantial uncertainties. Since
the discounted cash flows are based on proved reserves as defined by the SEC,
they are subject to the same uncertainties and limitations inherent in the
reserve estimates, which include among others, no consideration of probable
reserves and stable hydrocarbon prices at year-end levels. Additionally, the
timing of future production and cash flows, given the current state of the U.S.
natural gas market, is subject to significant uncertainty. The use of a 10%
discount factor by all companies does not provide a basis for quantifying
differences in risk with respect to oil and gas operations among different
companies. The computations also ignore the impact future exploration and
development activities may have on profitability.
 
            STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
                          RELATING TO PROVED RESERVES
 

<TABLE>
<CAPTION>
                                                       UNITED
                                                       STATES  BOLIVIA  TOTAL
                                                      -------- ------- --------
                                                           (IN THOUSANDS)
<S>                                                   <C>      <C>     <C>
1994
  Estimated future cash flows Revenues from
   hydrocarbon sales................................. $ 51,380 $44,473 $ 95,853
    Production costs.................................   19,132  12,010   31,142
    Development costs................................    7,899     825    8,724
    Dismantlement and abandonment....................    7,924            7,924
                                                      -------- ------- --------
  Future net cash flows before income taxes..........   16,425  31,638   48,063
  Estimated income tax payments......................      941  10,165   11,106
                                                      -------- ------- --------
  Future net cash flows..............................   15,484  21,473   36,957
  10% discount.......................................    1,570  10,142   11,712
                                                      -------- ------- --------
  Standardized measure of discounted future net cash
   flows............................................. $ 13,914 $11,331 $ 25,245
                                                      ======== ======= ========
1993
  Estimated future cash flows
    Revenues from hydrocarbon sales.................. $104,889         $104,889
    Production costs.................................   28,399           28,399
    Development costs................................   14,960           14,960
                                                      --------         --------
  Future net cash flows before income taxes..........   61,530           61,530
  Estimated income tax payments......................   11,283           11,283
                                                      --------         --------
  Future net cash flows..............................   50,247           50,247
  10% discount.......................................   12,345           12,345
                                                      --------         --------
  Standardized measure of discounted future net cash
   flows............................................. $ 37,902         $ 37,902
                                                      ========         ========
</TABLE>

 
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