Harbinger Group Inc.
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SEC Filings

10-Q
HRG GROUP, INC. filed this Form 10-Q on 08/09/2013
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The EXCO/HGI JV accounted for the acquisitions in accordance with ASC 805-10, Business Combinations. The following table presents a summary of the fair value of assets acquired and liabilities assumed as part of the acquisition:
 
EXCO's Contributed Assets
February 14, 2013
 
BG Cotton Valley Assets
March 5, 2013
 
EXCO/HGI JV
 
HGI's Proportionate Interest
 
EXCO/HGI JV
 
HGI's Proportionate Interest
Assets acquired:
 
 
 
 
 
 
 
Cash
$
0.1

 
$
0.1

 
$
—

 
$
—

Oil and natural gas properties
 
 
 
 
 
 
 
Unproved oil and natural gas properties
65.1

 
48.5

 
7.2

 
5.4

Proved developed and undeveloped oil and natural gas properties
632.2

 
471.0

 
131.2

 
97.7

Total oil and natural gas properties
697.3

 
519.5

 
138.4

 
103.1

Gas Gathering and other assets
32.7

 
24.5

 
—

 
—

Liabilities assumed:
 
 
 
 
 
 
 
Accounts payable and other current liabilities
(10.8
)
 
(8.0
)
 
—

 
—

Other liabilities
(24.8
)
 
(18.5
)
 
(7.5
)
 
(5.6
)
Total purchase price
$
694.5

 
$
517.6

 
$
130.9

 
$
97.5


The EXCO/HGI JV performed a valuation of the assets acquired and liabilities assumed at February 14 and March 5, 2013. A summary of the key inputs are as follows:
   
Oil and Natural Gas Properties - HGI's proportionate share of the fair value allocated to oil and natural gas properties was $519.5 and $103.1, for the EXCO/HGI JV and the BG Cotton Valley acquisitions, respectively. The fair value of oil and natural gas properties was determined based on a discounted cash flow model of the estimated reserves. The estimated quantities of reserves utilized assumptions based on the partnership's internal geological, engineering data and financial data. The EXCO/HGI JV utilized NYMEX forward strip prices to value the reserves for a period of five years and then held prices flat thereafter. The EXCO/HGI JV then applied various discount rates depending on the classification of reserves and other risk characteristics.

Gas Gathering Assets - HGI's proportionate share of the fair value allocated to gas gathering assets was $21.5. The fair value of these assets was determined based on a market approach using other recent transactions involving gathering and processing assets. The EBITDA multiple based on these market transactions was applied to the projected EBITDA of the gas gathering assets in order to calculate the fair value.

Asset Retirement Obligations - HGI's proportionate share of the fair value allocated to asset retirement obligations was $18.5 and $5.6, respectively. These asset retirement obligations represent the present value of the estimated amount to be incurred to plug, abandon and remediate proved producing properties at the end of their productive lives, in accordance with applicable state laws. The fair value was determined based on a discounted cash flow model, which included assumptions of the estimated current abandonment costs, discount rate, inflation rate, and timing associated with the incurrence of these costs. The asset retirement obligations are primarily included in "Other liabilities" in the Condensed Consolidated Balance Sheets.
FGL Acquisition Update
On April 6, 2011, the Company acquired all of the outstanding shares of capital stock of FGL and certain intercompany loan agreements between the seller, as lender, and FGL, as borrower, for cash consideration of $350.0 (including $5.0 re-characterized as an expense), which amount could be reduced by up to $50.0 post closing (as discussed further below).

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