
⁽¹⁾	As a result of the application of fresh start accounting, the Successor recorded its asset retirement obligations at fair value as of the Effective Date.

Note 10 – Commitments and Contingencies

On May 11, 2016, the Debtors filed Bankruptcy Petitions for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. The Debtors’ Chapter 11 cases were administered jointly under the caption In re Linn Energy, LLC, et al., Case No. 16‑60040. On January 27, 2017, the Bankruptcy Court entered the Confirmation Order. Consummation of the Plan was subject to certain conditions set forth in the Plan. On the Effective Date, all of the conditions were satisfied or waived and the Plan became effective and was implemented in accordance with its terms. The LINN Debtors Chapter 11 cases will remain pending until the final resolution of all outstanding claims.

The commencement of the Chapter 11 proceedings automatically stayed certain actions against the Company, including actions to collect prepetition liabilities or to exercise control over the property of the Company’s bankruptcy estates. For certain statewide class action royalty payment disputes, the Company filed notices advising that it had filed for bankruptcy protection and seeking a stay, which was granted. ~~In addition,~~However, the Company is, ~~involved in various other disputes arising~~and will continue to be until the final resolution of all claims, subject to certain contested matters and adversary proceedings stemming from the Chapter 11 proceedings.

In March 2017, Wells Fargo Bank, National Association (“Wells Fargo”), the administrative agent under the Predecessor Credit Facility, filed a motion in the ~~ordinary course~~Bankruptcy Court seeking payment of ~~business.~~ post-petition default interest of approximately $31 million. The Company has vigorously disputed that Wells Fargo is entitled to any default interest based on the plain language of the Plan and Confirmation Order. A hearing was held on April 27, 2017, and the parties are awaiting a ruling from the Bankruptcy Court on this matter.

The Company is not currently a party to any litigation or pending claims that it believes would have a material adverse effect on its overall business, financial position, results of operations or liquidity; however, cash flow could be significantly impacted in the reporting periods in which such matters are resolved.

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LINN ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued

(Unaudited)

During the six months ended June 30, ~~2016,~~2017, and the six months ended June 30, ~~2015,~~2016, the Company made no significant payments to settle any legal, environmental or tax proceedings. The Company regularly analyzes current information and accrues for probable liabilities on the disposition of certain matters as necessary. Liabilities for loss contingencies arising from claims, assessments, litigation or other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated.

~~The commencement~~

Note 11 – Equity (Deficit)

Cancellation of Units and Issuance of Class A Common Stock

In accordance with the Plan, on the Effective Date:

All units in the Predecessor that were issued and outstanding immediately prior to the Effective Date were extinguished without recovery;

17,678,889 shares of Class A common stock were issued pro rata to holders of the ~~Chapter 11 proceedings automatically stayed certain actions against~~Second Lien Notes with claims allowed under the Plan;

26,724,396 shares of Class A common stock were issued pro rata to holders of Unsecured Notes with claims allowed under the Plan;

471,110 shares of Class A common stock were issued to commitment parties under the Backstop Commitment Agreement in respect of premium due thereunder;

2,995,691 shares of Class A common stock were issued to commitment parties under the Backstop Commitment Agreement in connection with their backstop obligation thereunder; and

41,359,806 shares of Class A common stock were issued to participants in the rights offerings extended by the Company ~~including actions~~ to ~~collect prepetition liabilities or~~certain holders of claims arising under the Second Lien Notes and the Unsecured Notes (including, in each case, certain of the commitment parties party to ~~exercise control over~~ the ~~property~~Backstop Commitment Agreement).

With the exception of shares of Class A common stock issued to commitment parties pursuant to their obligations under the Backstop Commitment Agreement, shares of Class A common stock were issued under the Plan pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), under Section 1145 of the Bankruptcy Code. Shares of Class A common stock issued to commitment parties pursuant to their obligations under the Backstop Commitment Agreement were issued pursuant to an exemption from the registration requirements of the Securities Act provided by Section 4(a)(2) thereof.

As of the Effective Date, there were 89,229,892 shares of Class A common stock, par value $0.001 per share, issued and outstanding.

Share Repurchase Program

On June 1, 2017, the Company’s Board of Directors announced that it had authorized the repurchase of up to $75 million of the Company’s ~~bankruptcy estates. The Company intends to seek authority to pay all general claims~~outstanding shares of Class A common stock. On June 28, 2017, the Company’s Board of Directors announced that it had authorized an increase in the ~~ordinary course~~previously announced share repurchase program to up to a total of ~~business notwithstanding the commencement~~$200 million of the ~~Chapter 11 proceedings~~Company’s outstanding shares of Class A common stock. In June 2017, the Company repurchased 7,540 shares of Class A common stock at an average price of $30.48 per share for a total cost of approximately $230,000.

In addition, in July 2017, the Company repurchased 833,763 shares of Class A common stock at an average price of $32.43 per share for a ~~manner consistent with~~total cost of approximately $27 million.

Table of Contents

LINN ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued

(Unaudited)

Dividends/Distributions

Under the ~~Restructuring Support Agreement. The Plan in~~Predecessor’s limited liability company agreement, unitholders were entitled to receive a distribution of available cash, which included cash on hand plus borrowings less any reserves established by the ~~Chapter 11 proceedings, if confirmed, will~~Predecessor’s Board of Directors to provide for the ~~treatment~~proper conduct of ~~claims~~the Predecessor’s business (including reserves for future capital expenditures, acquisitions and anticipated future credit needs) or to fund distributions, if any, over the next four quarters. In October 2015, the Predecessor’s Board of Directors determined to suspend payment of the Predecessor’s distribution. The Successor currently has no intention of paying cash dividends and any future payment of cash dividends would be subject to the restrictions in the Successor Credit Facility.

Note 12 – Share-Based Compensation

The Company had no equity awards outstanding as of December 31, 2016. In accordance with the Plan, in February 2017, the Company implemented the Linn Energy, Inc. 2017 Omnibus Incentive Plan (the “Omnibus Incentive Plan”) pursuant to which employees and consultants of the Company and its affiliates are eligible to receive stock options, restricted stock, performance awards, other stock-based awards and other cash-based awards.

The Committee (as defined in the Omnibus Incentive Plan) has broad authority under the Omnibus Incentive Plan to, among other things: (i) select participants; (ii) determine the types of awards that participants receive and the number of shares that are subject to such awards; and (iii) establish the terms and conditions of awards, including the price (if any) to be paid for the shares or the award. As of the Effective Date, an aggregate of 6,444,381 shares of Class A common stock were reserved for issuance under the Omnibus Incentive Plan (the “Share Reserve”). Additional shares of Class A common stock may be issued in excess of the Share Reserve for the sole purpose of satisfying any conversion of Class B units or Class A‑2 units of Holdco, as applicable, into shares of Class A common stock pursuant to the Limited Liability Company Operating Agreement of Holdco (the “Holdco LLC Agreement”), and the conversion procedures set forth therein. If any stock option or other stock-based award granted under the Omnibus Incentive Plan expires, terminates or is canceled for any reason without having been exercised in full, the number of shares of Class A common stock underlying any unexercised award shall again be available for the purpose of awards under the Omnibus Incentive Plan. If any shares of restricted stock, performance awards or other stock-based awards denominated in shares of Class A common stock awarded under the Omnibus Incentive Plan are forfeited for any reason, the number of forfeited shares shall again be available for purposes of awards under the Omnibus Incentive Plan. Any award under the Omnibus Incentive Plan settled in cash shall not be counted against the maximum share limitation.

As is customary in incentive plans of this nature, each share limit and the number and kind of shares available under the Omnibus Incentive Plan and any outstanding awards, as well as the exercise or purchase prices of awards, and performance targets under certain types of performance-based awards, are subject to adjustment in the event of certain reorganizations, mergers, combinations, recapitalizations, stock splits, stock dividends or other similar events that change the number or kind of shares outstanding, and extraordinary dividends or distributions of property to the Company’s ~~bankruptcy estates, including prepetition liabilities~~stockholders.

Restricted Stock Units

On the Effective Date, the Company granted to certain employees 2,478,606 restricted stock units (the “Emergence Awards”). The portion of the Share Reserve that ~~have~~does not ~~otherwise been satisfied~~ constitute the Emergence Awards, plus any subsequent awards forfeited before vesting (the “Remaining Share Reserve”), will be fully granted within the 36-month period immediately following the Effective Date (with such 36-month anniversary, the “Final Allocation Date”). If a Change in Control (as defined in the Omnibus Incentive Plan) occurs before the Final Allocation Date, the Company will allocate the entire Remaining Share Reserve on a fully-vested basis to actively employed employees (pro-rata based upon each such employee’s relative awards) upon the consummation of the Change in Control. During the four months ended June 30, 2017, the Company granted to certain employees 1,255,345 restricted stock units from the Remaining Share Reserve.

Upon a participant’s termination of employment and/or ~~addressed during~~service (as applicable), the ~~Chapter 11 proceedings. See Note 2 for additional information.~~Company has the right (but not the obligation) to repurchase all or any portion of the shares of Class A common stock acquired pursuant to an award at a price equal to the fair market value (as determined under the Omnibus Incentive Plan) of the shares of Class A common stock to be repurchased, measured as of the date of the Company’s repurchase notice.

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LINN ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued

(Unaudited)

Holdco Incentive Interest Plan

On the Effective Date, Holdco granted incentive interest awards to certain members of its management in the form of 3,470,051 Class B units, which are intended to qualify as “profits interests” for U.S. income tax purposes. The Class B units vested 25% on the Effective Date and the remaining amount vest ratably over the following three years, subject to meeting a performance condition described in the agreements. Each Class B unit represents a non-voting equity interest in Holdco that entitles the holder to Holdco distributions, after an applicable hurdle amount is met, such that each Class B unit only participates in Holdco’s increase in value following the grant date. In accordance with the Holdco LLC Agreement, the requirements entitling Class B unitholders to Holdco distributions had not been met as of June 30, 2017. Class B units can be converted at any time by the holder to Class A-2 units of Holdco or Class A common stock of the Company in accordance with the terms of the Holdco LLC Agreement.

Accounting for Share-Based Compensation

The Company recognizes expense for share-based compensation over the requisite service period in an amount equal to the fair value of share-based awards granted. The fair value of share-based awards, excluding liability awards, is computed at the date of grant and is not remeasured. The fair value of liability awards is remeasured at each reporting date through the settlement date with the change in fair value recognized as compensation expense over that period. The Company has made a policy decision to recognize compensation expense for service-based awards on a straight-line basis over the requisite service period for the entire award. Beginning in 2017, the Company accounts for forfeitures as they occur.

The Company’s restricted stock units are equity-classified and its incentive interest awards in the form of Class B units are liability-classified on the condensed consolidated balance sheet. The fair value of the Company’s restricted stock units was determined based on the fair value of the Company’s shares on the date of grant and the fair value of the incentive interest awards in the form of Class B units was determined based on the estimated amount to settle the awards.

Share-Based Compensation Expenses

A summary of share-based compensation expenses included on the condensed consolidated statements of operations is presented below:



	Successor		Predecessor
	Three Months Ended June 30, 2017		Three Months Ended June 30, 2016
(in thousands)
General and administrative expenses	$	15,422	$	4,946
Lease operating expenses	—		1,182
Total share-based compensation expenses	$	15,422	$	6,128
Income tax benefit	$	3,128	$	2,264



	Successor		Predecessor
	Four Months Ended June 30, 2017		Two Months Ended February 28, 2017		Six Months Ended June 30, 2016
(in thousands)
General and administrative expenses	$	19,599	$	50,255	$	14,406
Lease operating expenses	—		—		4,147
Total share-based compensation expenses	$	19,599	$	50,255	$	18,553
Income tax benefit	$	3,555	$	5,170	$	6,855

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LINN ENERGY, ~~LLC (DEBTOR-IN-POSSESSION)~~INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued

(Unaudited)

Note 1113 – Earnings Per Share/Unit

Basic earnings per share/unit is computed by dividing net earnings attributable to stockholders/unitholders by the weighted average number of shares/units outstanding during ~~each~~the period. Diluted earnings per share/unit is computed by adjusting the average number of shares/units outstanding for the dilutive effect, if any, of ~~unit equivalents.~~potential common shares/units. The Company uses the treasury stock method to determine the dilutive ~~effect.~~effect of restricted stock units and the if-converted method to determine the dilutive effect of Class B units.

The following ~~table provides~~tables provide a reconciliation of the numerators and denominators of the basic and diluted per share/unit computations for net income (loss):

Three Months Ended
June 30,

Six Months Ended
June 30,
2016 2015 2016 2015
(in thousands, except per unit data)

Net income (loss) $ 208,492
$ (379,127 ) $ (1,139,254 ) $ (718,287 )
Allocated to participating securities (1,617 ) (1,662 ) —
(3,273 )
$ 206,875
$ (380,789 ) $ (1,139,254 ) $ (721,560 )

Basic net income (loss) per unit $ 0.59
$ (1.12 ) $ (3.23 ) $ (2.15 )
Diluted net income (loss) per unit $ 0.59
$ (1.12 ) $ (3.23 ) $ (2.15 )

Basic weighted average units outstanding 352,789
340,934
352,511
335,817
Dilutive effect of unit equivalents —
—
—
—
Diluted weighted average units outstanding 352,789
340,934
352,511
335,817



	Successor			Predecessor
	Three Months Ended June 30, 2017			Three Months Ended June 30, 2016
(in thousands, except per share/unit data)
Income from continuing operations	$	223,379		$	204,691
Allocated to participating securities	—			(1,617		)
	223,379			203,074
Income (loss) from discontinued operations, net of income taxes	(3,322		)	3,801
	$	220,057		$	206,875

Weighted average shares/units outstanding – Basic	89,849			352,789
Dilutive effect of restricted stock units	635			—
Weighted average shares/units outstanding – Diluted	90,484			352,789

Income from continuing operations per share/unit – Basic	$	2.49		$	0.58
Income from continuing operations per share/unit – Diluted	$	2.47		$	0.58

Income (loss) from discontinued operations per share/unit – Basic	$	(0.04	)	$	0.01
Income (loss) from discontinued operations per share/unit – Diluted	$	(0.04	)	$	0.01

Net income per share/unit – Basic	$	2.45		$	0.59
Net income per share/unit – Diluted	$	2.43		$	0.59

~~Basic~~

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LINN ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued

(Unaudited)



	Successor			Predecessor
	Four Months Ended June 30, 2017			Two Months Ended February 28, 2017			Six Months Ended June 30, 2016
(in thousands, except per share/unit data)
Income (loss) from continuing operations	$	216,055		$	2,397,609		$	(9,177	)
Allocated to participating securities	—			—			—
	216,055			2,397,609			(9,177		)
Loss from discontinued operations, net of income taxes	(3,254		)	(548		)	(1,130,077		)
	$	212,801		$	2,397,061		$	(1,139,254	)

Weighted average shares/units outstanding – Basic	89,849			352,792			352,511
Dilutive effect of restricted stock units	216			—			—
Weighted average shares/units outstanding – Diluted	90,065			352,792			352,511

Income (loss) from continuing operations per share/unit – Basic	$	2.41		$	6.80		$	(0.02	)
Income (loss) from continuing operations per share/unit – Diluted	$	2.40		$	6.80		$	(0.02	)

Loss from discontinued operations per share/unit – Basic	$	(0.04	)	$	(0.01	)	$	(3.21	)
Loss from discontinued operations per share/unit – Diluted	$	(0.04	)	$	(0.01	)	$	(3.21	)

Net income (loss) per share/unit – Basic	$	2.37		$	6.79		$	(3.23	)
Net income (loss) per share/unit – Diluted	$	2.36		$	6.79		$	(3.23	)

The 3,470,051 Class B units ~~outstanding~~associated with management’s profits interests awards were not considered to be dilutive as the applicable hurdle rate had not been met as of June 30, 2017, and, therefore, are excluded for the purpose of the diluted earnings per share calculation. The diluted earnings per unit calculation excludes ~~the effect of weighted average anti-dilutive unit equivalents related to~~ approximately 1 million unit options and warrants that were anti-dilutive for ~~both~~each of the three months and six months ended June 30, ~~2016, and approximately 5 million unit options and warrants for both~~2016. There were no potential common units outstanding during the ~~three months and six~~two months ended ~~June 30, 2015. All equivalent units were antidilutive for both the three months and six months ended June 30, 2016, and June 30, 2015.~~February 28, 2017.

Note 1214 – Income Taxes

~~The Company is~~Effective February 28, 2017, upon consummation of the Plan, the Successor became a C corporation subject to federal and state income taxes. Prior to the consummation of the Plan, the Predecessor was a limited liability company treated as a partnership for federal and state income tax purposes, with the exception of the state of Texas, in which income tax liabilities and/or benefits ~~are~~of the Company were passed through to its unitholders. Limited liability companies are subject to Texas margin tax. In addition, certain of the ~~Company’s~~Predecessor’s subsidiaries ~~are Subchapter C-corporations~~were C corporations subject to federal and state income taxes. As such, with the exception of the state of Texas and certain subsidiaries, the ~~Company is not a taxable entity, it does~~Predecessor did not directly pay federal and state income taxes and recognition ~~has~~was not ~~been~~ given to federal and state income taxes for the operations of the ~~Company.~~Predecessor.

The effective income tax rates were approximately 42% for each of the three months and four months ended June 30, 2017, and zero for the two months ended February 28, 2017. The deferred tax effects of the Company’s change to a C corporation are included in income from continuing operations for the two months ended February 28, 2017. Amounts recognized ~~for~~as income taxes are ~~reported~~included in “income tax expense (benefit),” as well as discontinued operations, on the condensed consolidated statements of operations.

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LINN ENERGY, ~~LLC (DEBTOR-IN-POSSESSION)~~INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued

(Unaudited)

Note 1315 – Supplemental Disclosures to the Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Cash Flows

“Other current assets” reported on the condensed consolidated balance sheets include the following:



	Successor		Predecessor
	June 30, 2017		December 31, 2016
(in thousands)
Prepaid expenses	$	58,095	$	70,116
Inventories	10,984		15,097
Deferred financing fees	—		16,809
Other	2,757		3,288
Other current assets	$	71,836	$	105,310

“Other accrued liabilities” reported on the condensed consolidated balance sheets include the following:



	Successor		Predecessor
	June 30, 2017		December 31, 2016
(in thousands)
Accrued compensation	$	21,214	$	16,443
Share-based payment liability	18,517		—
Asset retirement obligations (current portion)	8,120		9,361
Deposits for pending divestitures	60,112		—
Other	27,453		175
Other accrued liabilities	$	135,416	$	25,979

Supplemental disclosures to the condensed consolidated statements of cash flows are presented below:


	Six Months Ended June 30,				Successor		Predecessor
	2016		2015		Four Months Ended June 30, 2017		Two Months Ended February 28, 2017		Six Months Ended June 30, 2016
	(in thousands)

(in thousands)
Cash payments for interest, net of amounts capitalized	$	126,499	$	280,018	$	14,436	$	17,651	$	92,192
Cash payments for income taxes	$	3,033	$	601	$	215	$	—	$	3,033
Cash payments for reorganization items, net					$	6,300	$	21,571	$	—

Noncash investing activities:
Accrued capital expenditures	$	23,212	$	105,115	$	34,547	$	22,191	$	20,124

The Company did not pay any distributions to LinnCo during the three months or six months ended June 30, 2016. During the three months and six months ended June 30, 2015, the Company paid approximately $40 million and $80 million, respectively, in distributions to LinnCo attributable to LinnCo’s interest in LINN Energy.

~~Other~~

One of the Company’s directors is the President and Chief Executive Officer of Superior Energy Services, Inc. (“Superior”), which provides oilfield services to the Company. For the three months and six months ended June 30, 2016, the Company incurred expenditures of approximately $1 million and $3 million, respectively, and for the three months and six months ended June 30, 2015, the Company incurred expenditures of approximately $2 million and $5 million, respectively, related to services rendered by Superior and its subsidiaries.

~~Note 15 – Subsidiary Guarantors~~

Linn Energy, LLC’s senior notes due May 2019, senior notes due November 2019, senior notes due April 2020, Second Lien Notes, senior notes due February 2021 and senior notes due September 2021 are guaranteed by all of the Company’s material subsidiaries, other than Berry Petroleum Company, LLC, which is an indirect 100% wholly owned subsidiary of the Company.

The following condensed consolidating financial information presents the financial information of Linn Energy, LLC, the guarantor subsidiaries and the non-guarantor subsidiary in accordance with SEC Regulation S-X Rule 3‑10. The condensed consolidating financial information for the co-issuer, Linn Energy Finance Corp., is not presented as it has no assets, operations or cash flows. The financial information may not necessarily be indicative of the financial position or results of operations had the guarantor subsidiaries or non-guarantor subsidiary operated as independent entities. There are no restrictions on the Company’s ability to obtain cash dividends or other distributions of funds from the guarantor subsidiaries.

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LINN ENERGY, ~~LLC (DEBTOR-IN-POSSESSION)~~INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued

(Unaudited)

~~CONDENSED CONSOLIDATING BALANCE SHEETS~~Note 17 – Redeemable Noncontrolling Interests

Redeemable noncontrolling interests on the condensed consolidated balance sheet as of June 30, ~~2016~~

Linn Energy, LLC Guarantor Subsidiaries
Non-
Guarantor Subsidiary
Eliminations Consolidated
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 425,594
$ 334,043
$ 15,008
$ —
$ 774,645
Accounts receivable – trade, net —
151,293
51,304
—
202,597
Accounts receivable – affiliates 1,664,128
38,660
—
(1,702,788 ) —
Derivative instruments —
—
185
—
185
Other current assets 20,545
69,136
19,213
—
108,894
Total current assets 2,110,267
593,132
85,710
(1,702,788 ) 1,086,321

Noncurrent assets:
Oil and natural gas properties (successful efforts method) —
13,144,928
5,019,722
—
18,164,650
Less accumulated depletion and amortization —
(9,863,329 ) (2,719,219 ) 67,906
(12,514,642 )
—
3,281,599
2,300,503
67,906
5,650,008

Other property and equipment —
607,946
118,875
—
726,821
Less accumulated depreciation —
(205,621 ) (16,571 ) —
(222,192 )
—
402,325
102,304
—
504,629

Restricted cash —
7,410
197,418
—
204,828
Notes receivable – affiliates 161,100
—
—
(161,100 ) —
Investments in consolidated subsidiaries 2,434,999
—
—
(2,434,999 ) —
Other noncurrent assets —
13,912
17,548
(72 ) 31,388
2,596,099
21,322
214,966
(2,596,171 ) 236,216
Total noncurrent assets 2,596,099
3,705,246
2,617,773
(2,528,265 ) 6,390,853
Total assets $ 4,706,366
$ 4,298,378
$ 2,703,483
$ (4,231,053 ) $ 7,477,174

LIABILITIES AND UNITHOLDERS’ CAPITAL (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses $ 15
$ 263,673
$ 84,232
$ —
$ 347,920
Accounts payable – affiliates —
1,664,128
38,660
(1,702,788 ) —
Derivative instruments —
—
1,694
—
1,694
Current portion of long-term debt, net 1,937,450
—
874,959
—
2,812,409
Other accrued liabilities 478
44,404
2,810
—
47,692
Total current liabilities 1,937,943
1,972,205
1,002,355
(1,702,788 ) 3,209,715

Notes payable – affiliates —
161,100
—
(161,100 ) —
Other noncurrent liabilities —
407,722
180,522
(72 ) 588,172
Liabilities subject to compromise 4,167,313
49,419
852,426
—
5,069,158

Unitholders’ capital (deficit):
Units issued and outstanding 5,352,381
4,831,495
2,798,713
(7,621,189 ) 5,361,400
Accumulated deficit (6,751,271 ) (3,123,563 ) (2,130,533 ) 5,254,096
(6,751,271 )
(1,398,890 ) 1,707,932
668,180
(2,367,093 ) (1,389,871 )
Total liabilities and unitholders’ capital (deficit) $ 4,706,366
$ 4,298,378
$ 2,703,483
$ (4,231,053 ) $ 7,477,174
2017, relate to the noncontrolling Class B unitholders of Holdco. Class B units can be converted at any time by the holder to Class A-2 units of Holdco or Class A common stock of the Company in accordance with the terms of the Holdco LLC Agreement. As of June 30, 2017, the redeemable noncontrolling interests of approximately $28 million presented as temporary equity on the condensed consolidated balance sheet consists solely of the noncash share-based compensation related to the vested portion of the incentive interest awards in the form of Class B units issued to certain members of management (see Note 12). In accordance with the Holdco LLC Agreement, the requirements entitling Class B unitholders to Holdco distributions had not been met as of June 30, 2017, and, therefore, no allocation of net income (loss) was made to the redeemable noncontrolling interests for the four months ended June 30, 2017.

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~~LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued~~

~~(Unaudited)~~

~~CONDENSED CONSOLIDATING BALANCE SHEETS~~

~~December 31, 2015~~

Linn Energy, LLC Guarantor Subsidiaries
Non-
Guarantor Subsidiary
Eliminations Consolidated
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 1,073
$ 72
$ 1,023
$ —
$ 2,168
Accounts receivable – trade, net —
170,503
46,053
—
216,556
Accounts receivable – affiliates 2,920,082
8,621
—
(2,928,703 ) —
Derivative instruments —
1,207,012
13,218
—
1,220,230
Other current assets 25,090
49,606
20,897
—
95,593
Total current assets 2,946,245
1,435,814
81,191
(2,928,703 ) 1,534,547

Noncurrent assets:
Oil and natural gas properties (successful efforts method) —
13,110,094
5,011,061
—
18,121,155
Less accumulated depletion and amortization —
(9,557,283 ) (1,596,165 ) 55,956
(11,097,492 )
—
3,552,811
3,414,896
55,956
7,023,663

Other property and equipment —
597,216
111,495
—
708,711
Less accumulated depreciation —
(183,139 ) (12,522 ) —
(195,661 )
—
414,077
98,973
—
513,050

Derivative instruments —
566,401
—
—
566,401
Restricted cash —
7,004
250,359
—
257,363
Notes receivable – affiliates 175,100
—
—
(175,100 ) —
Investments in consolidated subsidiaries 3,940,444
—
—
(3,940,444 ) —
Other noncurrent assets —
17,178
16,057
(1 ) 33,234
4,115,544
590,583
266,416
(4,115,545 ) 856,998
Total noncurrent assets 4,115,544
4,557,471
3,780,285
(4,059,589 ) 8,393,711
Total assets $ 7,061,789
$ 5,993,285
$ 3,861,476
$ (6,988,292 ) $ 9,928,258

LIABILITIES AND UNITHOLDERS’ CAPITAL (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses $ 1,285
$ 336,962
$ 117,127
$ —
$ 455,374
Accounts payable – affiliates —
2,920,082
8,621
(2,928,703 ) —
Derivative instruments —
—
2,241
—
2,241
Current portion of long-term debt, net 2,841,518
—
873,175
—
3,714,693
Other accrued liabilities 49,861
52,997
16,735
—
119,593
Total current liabilities 2,892,664
3,310,041
1,017,899
(2,928,703 ) 4,291,901

Derivative instruments —
857
—
—
857
Long-term debt, net 4,447,308
—
845,368
—
5,292,676
Notes payable – affiliates —
175,100
—
(175,100 ) —
Other noncurrent liabilities —
399,676
212,050
(1 ) 611,725

Unitholders’ capital (deficit):
Units issued and outstanding 5,333,834
4,831,758
2,798,713
(7,621,189 ) 5,343,116
Accumulated deficit (5,612,017 ) (2,724,147 ) (1,012,554 ) 3,736,701
(5,612,017 )
(278,183 ) 2,107,611
1,786,159
(3,884,488 ) (268,901 )
Total liabilities and unitholders’ capital (deficit) $ 7,061,789
$ 5,993,285
$ 3,861,476
$ (6,988,292 ) $ 9,928,258

~~Table of Contents~~

~~LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued~~

~~(Unaudited)~~

~~CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS~~

~~For the Three Months Ended June 30, 2016~~

Linn Energy, LLC Guarantor Subsidiaries
Non-
Guarantor Subsidiary
Eliminations Consolidated
(in thousands)
Revenues and other:
Oil, natural gas and natural gas liquids sales $ —
$ 216,426
$ 99,831
$ —
$ 316,257
Gains (losses) on oil and natural gas derivatives —
(183,794 ) 1,026
—
(182,768 )
Marketing revenues —
8,551
5,969
—
14,520
Other revenues —
5,573
1,813
—
7,386
—
46,756
108,639
—
155,395
Expenses:
Lease operating expenses —
73,127
42,416
—
115,543
Transportation expenses —
41,092
10,945
—
52,037
Marketing expenses —
6,727
4,578
—
11,305
General and administrative expenses —
34,898
24,748
—
59,646
Exploration costs —
48
—
—
48
Depreciation, depletion and amortization —
104,718
41,186
(2,733 ) 143,171
Taxes, other than income taxes —
20,852
9,995
—
30,847
Losses on sale of assets and other, net —
2,517
425
—
2,942
—
283,979
134,293
(2,733 ) 415,539
Other income and (expenses):
Interest expense, net of amounts capitalized (52,118 ) 36
(16,352 ) —
(68,434 )
Interest expense – affiliates —
(2,969 ) —
2,969
—
Interest income – affiliates 2,969
—
—
(2,969 ) —
Equity in losses from consolidated subsidiaries (240,209 ) —
—
240,209
—
Other, net (1,237 ) 11
(76 ) —
(1,302 )
(290,595 ) (2,922 ) (16,428 ) 240,209
(69,736 )
Reorganization items, net 499,087
(13,289 ) 49,086
—
534,884
Income (loss) before income taxes 208,492
(253,434 ) 7,004
242,942
205,004
Income tax expense (benefit) —
(3,652 ) 164
—
(3,488 )
Net income (loss) $ 208,492
$ (249,782 ) $ 6,840
$ 242,942
$ 208,492

~~Table of Contents~~

~~LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued~~

~~(Unaudited)~~

~~CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS~~

~~For the Three Months Ended June 30, 2015~~

Linn Energy, LLC Guarantor Subsidiaries
Non-
Guarantor Subsidiary
Eliminations Consolidated
(in thousands)
Revenues and other:
Oil, natural gas and natural gas liquids sales $ —
$ 323,038
$ 173,381
$ —
$ 496,419
Losses on oil and natural gas derivatives —
(186,714 ) (4,474 ) —
(191,188 )
Marketing revenues —
3,285
7,448
—
10,733
Other revenues —
4,329
1,535
—
5,864
—
143,938
177,890
—
321,828
Expenses:
Lease operating expenses —
90,756
49,896
—
140,652
Transportation expenses —
42,817
12,978
—
55,795
Marketing expenses —
3,161
5,998
—
9,159
General and administrative expenses —
61,548
37,102
—
98,650
Exploration costs —
564
—
—
564
Depreciation, depletion and amortization —
150,739
63,052
1,941
215,732
Taxes, other than income taxes —
35,838
22,196
—
58,034
Gains on sale of assets and other, net —
(17,185 ) (811 ) —
(17,996 )
—
368,238
190,411
1,941
560,590
Other income and (expenses):
Interest expense, net of amounts capitalized (123,555 ) 145
(22,690 ) —
(146,100 )
Interest expense – affiliates —
(3,235 ) —
3,235
—
Interest income – affiliates 3,235
—
—
(3,235 ) —
Gain on extinguishment of debt 2,320
—
6,831
—
9,151
Equity in losses from consolidated subsidiaries (255,426 ) —
—
255,426
—
Other, net (5,701 ) 18
(463 ) —
(6,146 )
(379,127 ) (3,072 ) (16,322 ) 255,426
(143,095 )
Loss before income taxes (379,127 ) (227,372 ) (28,843 ) 253,485
(381,857 )
Income tax benefit —
(2,719 ) (11 ) —
(2,730 )
Net loss $ (379,127 ) $ (224,653 ) $ (28,832 ) $ 253,485
$ (379,127 )

~~Table of Contents~~

~~LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued~~

~~(Unaudited)~~

~~CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS~~

~~For the Six Months Ended June 30, 2016~~

Linn Energy, LLC Guarantor Subsidiaries
Non-
Guarantor Subsidiary
Eliminations Consolidated
(in thousands)
Revenues and other:
Oil, natural gas and natural gas liquids sales $ —
$ 416,275
$ 183,297
$ —
$ 599,572
Gains (losses) on oil and natural gas derivatives —
(74,341 ) 1,534
—
(72,807 )
Marketing revenues —
17,612
11,213
—
28,825
Other revenues —
10,711
3,861
—
14,572
—
370,257
199,905
—
570,162
Expenses:
Lease operating expenses —
160,679
92,509
—
253,188
Transportation expenses —
83,086
23,874
—
106,960
Marketing expenses —
14,560
9,033
—
23,593
General and administrative expenses —
96,255
49,920
—
146,175
Exploration costs —
2,741
—
—
2,741
Depreciation, depletion and amortization —
212,763
100,029
(5,563 ) 307,229
Impairment of long-lived assets —
129,703
1,030,588
(6,387 ) 1,153,904
Taxes, other than income taxes 2
40,604
24,308
—
64,914
Losses on sale of assets and other, net —
3,786
233
—
4,019
2
744,177
1,330,494
(11,950 ) 2,062,723
Other income and (expenses):
Interest expense, net of amounts capitalized (137,590 ) 241
(36,304 ) —
(173,653 )
Interest expense – affiliates —
(5,938 ) —
5,938
—
Interest income – affiliates 5,938
—
—
(5,938 ) —
Equity in losses from consolidated subsidiaries (1,505,445 ) —
—
1,505,445
—
Other, net (1,242 ) 84
(10 ) —
(1,168 )
(1,638,339 ) (5,613 ) (36,314 ) 1,505,445
(174,821 )
Reorganization items, net 499,087
(13,289 ) 49,086
—
534,884
Loss before income taxes (1,139,254 ) (392,822 ) (1,117,817 ) 1,517,395
(1,132,498 )
Income tax expense —
6,594
162
—
6,756
Net loss $ (1,139,254 ) $ (399,416 ) $ (1,117,979 ) $ 1,517,395
$ (1,139,254 )

~~Table of Contents~~

~~LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued~~

~~(Unaudited)~~

~~CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS~~

~~For the Six Months Ended June 30, 2015~~

Linn Energy, LLC Guarantor Subsidiaries
Non-
Guarantor Subsidiary
Eliminations Consolidated
(in thousands)
Revenues and other:
Oil, natural gas and natural gas liquids sales $ —
$ 617,021
$ 329,967
$ —
$ 946,988
Gains (losses) on oil and natural gas derivatives —
234,800
(1,207 ) —
233,593
Marketing revenues —
29,497
14,980
—
44,477
Other revenues —
9,886
3,431
—
13,317
—
891,204
347,171
—
1,238,375
Expenses:
Lease operating expenses —
196,588
117,085
—
313,673
Transportation expenses —
83,751
25,584
—
109,335
Marketing expenses —
26,357
11,643
—
38,000
General and administrative expenses —
119,329
58,289
—
177,618
Exploration costs —
960
—
—
960
Depreciation, depletion and amortization —
291,438
136,031
3,277
430,746
Impairment of long-lived assets —
325,417
272,000
(64,800 ) 532,617
Taxes, other than income taxes 2
66,549
45,528
—
112,079
Gains on sale of assets and other, net —
(24,999 ) (5,284 ) —
(30,283 )
2
1,085,390
660,876
(61,523 ) 1,684,745
Other income and (expenses):
Interest expense, net of amounts capitalized (246,941 ) 1,851
(44,111 ) —
(289,201 )
Interest expense – affiliates —
(5,617 ) —
5,617
—
Interest income – affiliates 5,617
—
—
(5,617 ) —
Gain on extinguishment of debt 8,955
—
6,831
—
15,786
Equity in losses from consolidated subsidiaries (478,237 ) —
—
478,237
—
Other, net (7,679 ) (47 ) (633 ) —
(8,359 )
(718,285 ) (3,813 ) (37,913 ) 478,237
(281,774 )
Loss before income taxes (718,287 ) (197,999 ) (351,618 ) 539,760
(728,144 )
Income tax benefit —
(9,796 ) (61 ) —
(9,857 )
Net loss $ (718,287 ) $ (188,203 ) $ (351,557 ) $ 539,760
$ (718,287 )

~~Table of Contents~~

~~LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued~~

~~(Unaudited)~~

~~CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS~~

~~For the Six Months Ended June 30, 2016~~

Linn Energy, LLC Guarantor Subsidiaries
Non-
Guarantor Subsidiary
Eliminations Consolidated
(in thousands)
Cash flow from operating activities:
Net loss $ (1,139,254 ) $ (399,416 ) $ (1,117,979 ) $ 1,517,395
$ (1,139,254 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation, depletion and amortization —
212,763
100,029
(5,563 ) 307,229
Impairment of long-lived assets —
129,703
1,030,588
(6,387 ) 1,153,904
Unit-based compensation expenses —
18,553
—
—
18,553
Amortization and write-off of deferred financing fees 9,227
—
602
—
9,829
(Gains) losses on sale of assets and other, net —
3,929
(642 ) —
3,287
Equity in losses from consolidated subsidiaries 1,505,445
—
—
(1,505,445 ) —
Deferred income taxes —
3,850
71
—
3,921
Reorganization items (498,954 ) —
(56,968 ) —
(555,922 )
Derivatives activities:
Total losses —
74,341
2,871
—
77,212
Cash settlements —
500,075
8,022
—
508,097
Cash settlements on canceled derivatives —
356,835
1,593
—
358,428
Changes in assets and liabilities:
(Increase) decrease in accounts receivable – trade, net —
17,993
(8,296 ) —
9,697
(Increase) decrease in accounts receivable – affiliates 437,406
(30,039 ) —
(407,367 ) —
Increase in other assets —
(19,039 ) (1,035 ) —
(20,074 )
Increase (decrease) in accounts payable and accrued expenses (36 ) 47,098
(4,362 ) —
42,700
Increase (decrease) in accounts payable and accrued expenses – affiliates —
(437,406 ) 30,039
407,367
—
Increase (decrease) in other liabilities 37,278
(11,128 ) (2,556 ) —
23,594
Net cash provided by (used in) operating activities 351,112
468,112
(18,023 ) —
801,201
Cash flow from investing activities:
Development of oil and natural gas properties —
(88,205 ) (12,360 ) —
(100,565 )
Purchases of other property and equipment —
(13,794 ) (7,599 ) —
(21,393 )
Decrease in restricted cash —
—
53,418
—
53,418
Change in notes receivable with affiliate 14,000
—
—
(14,000 ) —
Proceeds from sale of properties and equipment and other (4,010 ) 1,297
142
—
(2,571 )
Net cash provided by (used in) investing activities 9,990
(100,702 ) 33,601
(14,000 ) (71,111 )

~~Table of Contents~~

~~LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued~~

~~(Unaudited)~~

Linn Energy, LLC Guarantor Subsidiaries
Non-
Guarantor Subsidiary
Eliminations Consolidated
(in thousands)
Cash flow from financing activities:
Proceeds from borrowings 978,500
—
—
—
978,500
Repayments of debt (913,210 ) —
(1,593 ) —
(914,803 )
Financing fees and offering costs (623 ) —
—
—
(623 )
Change in notes payable with affiliate —
(14,000 ) —
14,000
—
Other (1,248 ) (19,439 ) —
—
(20,687 )
Net cash provided by (used in) financing activities 63,419
(33,439 ) (1,593 ) 14,000
42,387

Net increase in cash and cash equivalents 424,521
333,971
13,985
—
772,477
Cash and cash equivalents:
Beginning 1,073
72
1,023
—
2,168
Ending $ 425,594
$ 334,043
$ 15,008
$ —
$ 774,645

~~Table of Contents~~

~~LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued~~

~~(Unaudited)~~

~~CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS~~

~~For the Six Months Ended June 30, 2015~~

Linn Energy, LLC Guarantor Subsidiaries
Non-
Guarantor Subsidiary
Eliminations Consolidated
(in thousands)
Cash flow from operating activities:
Net loss $ (718,287 ) $ (188,203 ) $ (351,557 ) $ 539,760
$ (718,287 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation, depletion and amortization —
291,438
136,031
3,277
430,746
Impairment of long-lived assets —
325,417
272,000
(64,800 ) 532,617
Unit-based compensation expenses —
33,711
—
—
33,711
Gain on extinguishment of debt (8,955 ) —
(6,831 ) —
(15,786 )
Amortization and write-off of deferred financing fees 16,692
—
854
—
17,546
Gains on sale of assets and other, net —
(22,903 ) (2,991 ) —
(25,894 )
Equity in losses from consolidated subsidiaries 478,237
—
—
(478,237 ) —
Deferred income taxes —
(9,796 ) (61 ) —
(9,857 )
Derivatives activities:
Total gains —
(234,800 ) (1,853 ) —
(236,653 )
Cash settlements —
533,400
32,943
—
566,343
Changes in assets and liabilities:
Decrease in accounts receivable – trade, net —
154,697
15,281
—
169,978
(Increase) decrease in accounts receivable – affiliates 371,275
(15,425 ) —
(355,850 ) —
Decrease in other assets —
8
3,515
—
3,523
Decrease in accounts payable and accrued expenses —
(43,427 ) (4,047 ) —
(47,474 )
Increase (decrease) in accounts payable and accrued expenses – affiliates —
(371,275 ) 15,425
355,850
—
Decrease in other liabilities (3,597 ) (13,124 ) (10,310 ) —
(27,031 )
Net cash provided by operating activities 135,365
439,718
98,399
—
673,482
Cash flow from investing activities:
Development of oil and natural gas properties —
(413,271 ) (3,076 ) —
(416,347 )
Purchases of other property and equipment —
(26,305 ) (2,982 ) —
(29,287 )
Investment in affiliates 57,223
—
—
(57,223 ) —
Change in notes receivable with affiliate (30,400 ) —
—
30,400
—
Proceeds from sale of properties and equipment and other (2,168 ) 49,580
11,302
—
58,714
Net cash provided by (used in) investing activities 24,655
(389,996 ) 5,244
(26,823 ) (386,920 )

~~Table of Contents~~

~~LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued~~

~~(Unaudited)~~

Linn Energy, LLC Guarantor Subsidiaries
Non-
Guarantor Subsidiary
Eliminations Consolidated
(in thousands)
Cash flow from financing activities:
Proceeds from sale of units 233,427
—
—
—
233,427
Proceeds from borrowings 645,000
—
—
—
645,000
Repayments of debt (804,698 ) —
(45,353 ) —
(850,051 )
Distributions to unitholders (212,631 ) —
—
—
(212,631 )
Financing fees and offering costs (8,646 ) —
(3 ) —
(8,649 )
Change in notes payable with affiliate —
30,400
—
(30,400 ) —
Distributions to affiliate —
—
(57,223 ) 57,223
—
Excess tax benefit from unit-based compensation (9,467 ) —
—
—
(9,467 )
Other (3,008 ) (79,063 ) 14
—
(82,057 )
Net cash used in financing activities (160,023 ) (48,663 ) (102,565 ) 26,823
(284,428 )

Net increase (decrease) in cash and cash equivalents (3 ) 1,059
1,078
—
2,134
Cash and cash equivalents:
Beginning 38
185
1,586
—
1,809
Ending $ 35
$ 1,244
$ 2,664
$ —
$ 3,943


Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the financial statements and related notes included in this Quarterly Report on Form 10-Q and in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2015.~~2016. The following discussion contains forward-looking statements based on expectations, estimates and assumptions. Actual results may differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, market prices for oil, natural gas and NGL, production volumes, estimates of proved reserves, capital expenditures, economic and competitive conditions, credit and capital market conditions, regulatory changes and other uncertainties, as well as those factors set forth in “Cautionary Statement Regarding Forward-Looking Statements” below and in Item 1A. “Risk Factors” in ~~this Quarterly Report on Form 10-Q and in~~ the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2015,~~2016, and elsewhere in the Annual Report.

When referring to Linn Energy, ~~LLC~~Inc. (formerly known as Linn Energy, LLC) (“~~LINN~~Successor,” “LINN Energy” or the “Company”), the intent is to refer to LINN Energy, a newly formed Delaware corporation, and its consolidated subsidiaries as a whole or on an individual basis, depending on the context in which the statements are made. Linn Energy, Inc. is a successor issuer of Linn Energy, LLC pursuant to Rule 15d-5 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). When referring to the “Predecessor” in reference to the period prior to the emergence from bankruptcy, the intent is to refer to Linn Energy, LLC, the predecessor that will be dissolved following the effective date of the Plan (as defined below) and resolution of all outstanding claims, and its consolidated subsidiaries as a whole or on an individual basis, depending on the context in which the statements are made.

The reference to “Berry” herein refers to Berry Petroleum Company, LLC, which iswas an indirect 100% wholly owned subsidiary of ~~LINN Energy.~~the Predecessor through February 28, 2017. Berry was deconsolidated effective December 3, 2016 (see below and Note 4). The reference to “LinnCo” herein refers to LinnCo, LLC, ~~which is~~ an affiliate of ~~LINN Energy.~~the Predecessor.

The reference to a “Note” herein refers to the accompanying Notes to Condensed Consolidated Financial Statements contained in Item 1. “Financial Statements.”

Executive Overview

LINN ~~Energy’s mission is to acquire, develop and maximize cash flow from a growing portfolio of long-life oil and natural gas assets. LINN~~ Energy is an independent oil and natural gas company that ~~began operations~~was formed in ~~March 2003~~February 2017, in connection with the reorganization of the Predecessor. The Predecessor was publicly traded from January 2006 to February 2017. As discussed further below and ~~completed~~in Note 2, on May 11, 2016 (the “Petition Date”), Linn Energy, LLC, certain of its ~~initial public offering~~direct and indirect subsidiaries, and LinnCo (collectively, the “LINN Debtors”) and Berry (collectively with the LINN Debtors, the “Debtors”), filed voluntary petitions (“Bankruptcy Petitions”) for relief under Chapter 11 of the U.S. Bankruptcy Code (“Bankruptcy Code”) in ~~January 2006.~~ the U.S. Bankruptcy Court for the Southern District of Texas (“Bankruptcy Court”). The Debtors’ Chapter 11 cases were administered jointly under the caption In re Linn Energy, LLC, et al., Case No. 16‑60040. During the pendency of the Chapter 11 proceedings, the Debtors operated their businesses as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code. The Company emerged from bankruptcy effective February 28, 2017.

On December 3, 2016, LINN Energy filed an amended plan of reorganization that excluded Berry. As a result of its loss of control of Berry, LINN Energy concluded that it was appropriate to deconsolidate Berry effective on the aforementioned date and classified it as discontinued operations.

The Company’s properties are currently located in ~~eight~~seven operating regions in the United States (“U.S.”):

Rockies, which includes properties located in Wyoming ~~(Green River, Washakie and Powder River basins)~~(Washakie Basin), Utah (Uinta Basin), and North Dakota (Williston ~~Basin) and Colorado (Piceance~~ Basin);

Hugoton Basin, which includes properties located in Kansas, the Oklahoma Panhandle and the Shallow Texas Panhandle;

~~California, which includes properties located in the San Joaquin Valley and Los Angeles basins;~~

Mid-Continent, which includes Oklahoma properties located in the Anadarko and Arkoma basins, as well as waterfloods in the Central Oklahoma Platform;

TexLa, which includes properties located in east Texas and north Louisiana;

Permian Basin, which includes properties located in west Texas and southeast New Mexico;

~~Michigan/Illinois, which includes properties located in the Antrim Shale formation in north Michigan and oil properties in south Illinois; and~~

~~South Texas.~~

~~Results for the three months ended June 30, 2016, included the following:~~

~~oil, natural gas and NGL sales of approximately $316 million compared to $496 million for the three months ended June 30, 2015;~~

~~average daily production of approximately 1,079 MMcfe/d compared to 1,219 MMcfe/d for the three months ended June 30, 2015;~~

~~net income of approximately $208 million compared to net loss of $379 million for the three months ended June 30, 2015;~~

~~capital expenditures of approximately $29 million compared to $115 million for the three months ended June 30, 2015; and~~

~~39 wells drilled (all successful) compared to 148 wells drilled (all successful) for the three months ended June 30, 2015.~~

~~Results for the six months ended June 30, 2016, included the following:~~

~~oil, natural gas and NGL sales of approximately $600 million compared to $947 million for the six months ended June 30, 2015;~~

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~~Item 2.~~	~~Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued~~

~~average daily production of approximately 1,096 MMcfe/d compared to 1,210 MMcfe/d for the six months ended June 30, 2015;~~

~~net loss of approximately $1.1 billion compared to $718 million for the six months ended June 30, 2015;~~

~~net cash provided by operating activities of approximately $801 million compared to $673 million for the six months ended June 30, 2015;~~

~~capital expenditures of approximately $66 million compared to $312 million for the six months ended June 30, 2015; and~~

~~112 wells drilled (111 successful) compared to 344 wells drilled (all successful) for the six months ended June 30, 2015.~~

~~Chapter 11 Proceedings~~

On May 11, 2016 (the “Petition Date”), the Company and certain of its direct and indirect subsidiaries (collectively with the Company, the “LINN Debtors”), LinnCo and Berry (collectively with the LINN Debtors and LinnCo, the “Debtors”), filed voluntary petitions (“Bankruptcy Petitions”) for relief under Chapter 11 of the U.S. Bankruptcy Code (“Bankruptcy Code”) in the U.S. Bankruptcy Court for the Southern District of Texas (“Bankruptcy Court”). The Debtors’ Chapter 11 cases are being administered jointly under the caption In re Linn Energy, LLC., et al., Case No. 16‑60040.

The condensed consolidated financial statements have been prepared as if the Company is a going concern and reflect the application of Accounting Standards Codification 852 “Reorganizations” (“ASC 852”). ASC 852 requires that the financial statements, for periods subsequent to the Chapter 11 filing, distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Accordingly, certain expenses, gains and losses that are realized or incurred in the bankruptcy proceedings are recorded in “reorganization items, net” on the Company’s condensed consolidated statements of operations. In addition, prepetition unsecured and under-secured obligations that may be impacted by the bankruptcy reorganization process have been classified as “liabilities subject to compromise” on the Company’s condensed consolidated balance sheet at June 30, 2016. These liabilities are reported at the amounts expected to be allowed as claims by the Bankruptcy Court, although they may be settled for less.

The Debtors are operating their businesses as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code. The Bankruptcy Court has granted certain relief requested by the Debtors, allowing the Company to use its cash to fund the Chapter 11 proceedings, pursuant to an agreement with the first lien lenders, and giving the Company the authority to, among other things, continue to pay employee wages and benefits without interruption, to utilize its current cash management system and to make royalty payments. During the pendency of the Chapter 11 proceedings, all transactions outside the ordinary course of the Company’s business require prior approval of the Bankruptcy Court. For goods and services provided following the Petition Date, the Company intends to pay vendors in full under normal terms.

~~Restructuring Support Agreement~~

Prior to the Petition Date, on May 10, 2016, the Debtors entered into a restructuring support agreement (“Restructuring Support Agreement”) with certain holders (“Consenting Creditors”) collectively holding or controlling at least 66.67% by aggregate outstanding principal amounts under (i) the Company’s Sixth Amended and Restated Credit Agreement (“LINN Credit Facility”) and (ii) Berry’s Second Amended and Restated Credit Agreement (“Berry Credit Facility”).

The Restructuring Support Agreement sets forth, subject to certain conditions, the commitment of the Consenting Creditors to support a comprehensive restructuring of the Debtors’ long-term debt (“Restructuring Transactions”). The Restructuring Transactions will be effectuated through one or more plans of reorganization (“Plan”) to be filed in the Chapter 11 proceedings.

Certain principal terms of the Plan are outlined below. See Item 1A. “Risk Factors” for risks relating to Chapter 11 proceedings, including the risk that the Company may not be able to obtain confirmation of a Chapter 11 plan of reorganization.

Claims under the LINN Credit Facility will receive participation in a new company $2.2 billion reserve-based and term loan credit facility, as described further below (“New LINN Exit Facility”), and payment of the remainder of claims under the LINN Credit Facility (if any) in cash or, to the extent not viable, a later-agreed-upon alternative consideration.

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Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued

Michigan/Illinois, which includes properties located in the Antrim Shale formation in north Michigan and oil properties in south Illinois; and

South Texas.

In July 2017, the Company divested all of its properties located in California. See below and Note 4 for details of the Company’s divestitures.

The Company’s ~~12.00% senior secured second lien notes due December 2020 (“Second Lien Notes”) will be allowed as~~current focus is the upstream and midstream development of the Merge/SCOOP/STACK in Oklahoma. Additionally, the Company is pursuing emerging horizontal opportunities in the Mid-Continent, Rockies and TexLa regions while continuing to add value by efficiently operating and applying new technology to a ~~$2.0~~diverse set of long-life producing assets.

For the three months ended June 30, 2017, the Company’s results included the following:

oil, natural gas and NGL sales of approximately $243 million compared to $196 million for the three months ended June 30, 2016;

average daily production of approximately 710 MMcfe/d compared to 802 MMcfe/d for the three months ended June 30, 2016;

net income of approximately $220 million compared to $208 million for the three months ended June 30, 2016;

capital expenditures of approximately $96 million compared to $23 million for the three months ended June 30, 2016; and

14 wells drilled (all successful) compared to 37 wells drilled (all successful) for the three months ended June 30, 2016.

For the six months ended June 30, 2017, the Company’s results included the following:

oil, natural gas and NGL sales of approximately $323 million and $189 million for the four months ended June 30, 2017, and the two months ended February 28, 2017, respectively, compared to $380 million for the six months ended June 30, 2016;

average daily production of approximately 722 MMcfe/d and 745 MMcfe/d for the four months ended June 30, 2017, and the two months ended February 28, 2017, respectively, compared to 813 MMcfe/d for the six months ended June 30, 2016;

net income of approximately $213 million and $2.4 billion ~~unsecured claim consistent with~~for the ~~settlement agreement, dated April 4, 2016, entered~~four months ended June 30, 2017, and the two months ended February 28, 2017, respectively, compared to a net loss of approximately $1.1 billion for the six months ended June 30, 2016;

net cash provided by operating activities from continuing operations of approximately $117 million and net cash used in operating activities of approximately $30 million for the four months ended June 30, 2017, and the two months ended February 28, 2017, respectively, compared to net cash provided by operating activities of approximately $800 million for the six months ended June 30, 2016;

capital expenditures of approximately $114 million and $46 million for the four months ended June 30, 2017, and the two months ended February 28, 2017, respectively, compared to $53 million for the six months ended June 30, 2016; and

41 wells drilled (all successful) compared to 96 wells drilled (95 successful) for the six months ended June 30, 2016.

Predecessor and Successor Reporting

As a result of the application of fresh start accounting (see Note 3), the Company’s condensed consolidated financial statements and certain note presentations are separated into two distinct periods, the period before the Effective Date (labeled Predecessor) and the period after that date (labeled Successor), to indicate the application of a different basis of accounting between the ~~Company and certain holders~~periods presented. Despite this separate presentation, there was continuity of the ~~Second Lien Notes.~~

~~Unsecured claims against the LINN Debtors, including under the Second Lien Notes and the~~ Company’s ~~unsecured notes, will convert to equity in the reorganized Company or reorganized LinnCo (“New LINN Common Stock”) in to-be-determined allocations.~~

The Restructuring Support Agreement contemplates that Berry will separate from the LINN Debtors under the Plan. Claims under the Berry Credit Facility will receive participation in a new Berry exit facility, if any, and a to-be-determined allocation of equity in reorganized Berry (“New Berry Common Stock”).

Unsecured claims against Berry, including under Berry’s unsecured notes, will receive a to-be-determined allocation of New Berry Common Stock up to the full amount of Berry’s unencumbered collateral and/or collateral value in excess of amounts outstanding under the Berry Credit Facility.

Cash payments under the Plan may be funded by rights offerings or other new-money investments. The Restructuring Support Agreement contemplates that Berry may undertake a marketing process for the opportunity to sponsor its Plan.

~~All existing equity interests of the Company, LinnCo and Berry will be extinguished without recovery.~~

The New LINN Exit Facility will consist of (i) a term loan in the amount of $800 million (“New LINN Term Loan”) and (ii) a revolving loan in the initial amount of $1.4 billion (“New LINN Revolving Loan”). The New LINN Term Loan will mature on the earlier of June 30, 2021, or the day prior to the fourth anniversary of the closing date, with interest payable at LIBOR plus 7.50% and amortized principal payments payable quarterly, beginning March 31, 2017. The New LINN Revolving Loan will be composed of two tranches as follows: (a) a conforming tranche with an initial amount of $1.2 billion subject to the borrowing base (“Conforming Tranche”) and (b) a non-conforming tranche with an initial amount of $200 million (“Non-Conforming Tranche”). The Conforming Tranche will mature on the earlier of June 30, 2021, or the day prior to the fourth anniversary of the closing date, with an interest rate of LIBOR plus 3.50%. The Non-Conforming Tranche will mature on the earlier of December 31, 2020, or the day prior to the date that is three years and six months after the closing date, with an interest rate of LIBOR plus 5.50%. The New LINN Exit Facility is subject to a variety of other terms and conditions including conditions precedent to funding, financial covenants and various other covenants and representations and warranties.

The Plan will provide for the establishment of a customary management incentive plan at the Company and Berry under which no less than 10% of the New LINN Common Stock and New Berry Common Stock, respectively, will be reserved for grants made from time to time to the officers and other key employees of the respective reorganized entities. The Plan will provide for releases of specified claims held by the Debtors, the Consenting Creditors and certain other specified parties against one another and for customary exculpations and injunctions.

The Restructuring Support Agreement provides that the Consenting Creditors will support the use of the LINN Debtors’ and Berry’s cash collateral under specified terms and conditions, including adequate protection terms. The Restructuring Support Agreement obligates the Debtors and the Consenting Creditors to, among other things, support and not interfere with consummation of the Restructuring Transactions and, as to the Consenting Creditors, vote their claims in favor of the Plan. The Restructuring Support Agreement may be terminated upon the occurrence of certain events, including the failure to meet specified milestones relating to, among other requirements, the filing, confirmation and consummation of the Plan, and in the event of breaches by the parties of certain provisions of the Restructuring Support Agreement. The Restructuring Support Agreement is subject to termination if the effective date of the Plan has not occurred within 250 days of the Petition Date. There can be no assurance that the Restructuring Transactions will be consummated.

~~Magnitude of Potential Claims~~

On July 11, 2016, the Debtors filed with the Bankruptcy Court schedules and statements setting forth, among other things, the assets and liabilities of the Debtors, subject to the assumptions filed in connection therewith. The schedules and statements may be subject to further amendment or modification after filing. Holders of prepetition claims will be required to file proofs of claims by the applicable deadline for filing certain proofs of claims in the Debtors’ Chapter 11 cases. The court has not yet confirmed the claims deadlines. Differences between amounts scheduled by the Debtors and claims by creditors will be investigated and resolved in connection with the claims resolution process.operations.

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Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued

~~Effect~~Chapter 11 Proceedings

On the Petition Date, the Debtors filed Bankruptcy Petitions for relief under Chapter 11 of ~~Filing on Creditors and Unitholders~~

~~Subject to certain exceptions, under~~ the Bankruptcy Code in the ~~filing~~Bankruptcy Court. The Debtors’ Chapter 11 cases were administered jointly under the caption In re Linn Energy, LLC, et al., Case No. 16‑60040.

On December 3, 2016, the LINN Debtors filed the Amended Joint Chapter 11 Plan of Reorganization of Linn Energy, LLC and Its Debtor Affiliates Other Than Linn Acquisition Company, LLC (“LAC”) and Berry Petroleum Company, LLC (the “Plan”). The LINN Debtors subsequently filed amended versions of the Plan with the Bankruptcy ~~Petitions automatically enjoined, or stayed,~~Court.

On December 13, 2016, LAC and Berry filed the ~~continuation~~Amended Joint Chapter 11 Plan of ~~most judicial or administrative proceedings or filing~~Reorganization of ~~other actions against~~Linn Acquisition Company, LLC and Berry Petroleum Company, LLC (the “Berry Plan” and together with the ~~Debtors or their property to recover, collect or secure a claim arising prior to~~Plan, the ~~Petition Date. Absent an order~~“Plans”). LAC and Berry subsequently filed amended versions of the Berry Plan with the Bankruptcy Court.

On January 27, 2017, the Bankruptcy Court ~~substantially~~entered an order approving and confirming the Plans (the “Confirmation Order”). On February 28, 2017 (the “Effective Date”), the Debtors satisfied the conditions to effectiveness of the respective Plans, the Plans became effective in accordance with their respective terms and LINN Energy and Berry emerged from bankruptcy as stand-alone, unaffiliated entities.

Plan of Reorganization

In accordance with the Plan, on the Effective Date:

The Predecessor transferred all of its assets, including equity interests in its subsidiaries, other than LAC and Berry, to Linn Energy Holdco II LLC (“Holdco II”), a newly formed subsidiary of the Predecessor and the borrower under the Credit Agreement (as amended, the “Successor Credit Facility”) entered into in connection with the reorganization, in exchange for 100% of the equity of Holdco II and the issuance of interests in the Successor Credit Facility to certain of the Predecessor’s creditors in partial satisfaction of their claims (the “Contribution”). Immediately following the Contribution, the Predecessor transferred 100% of the equity interests in Holdco II to the Successor in exchange for approximately $530 million in cash and an amount of equity securities in the Successor not to exceed 49.90% of the outstanding equity interests of the Successor, which the Predecessor distributed to certain of its creditors in satisfaction of their claims. Contemporaneously with the reorganization transactions and pursuant to the Plan, (i) LAC assigned all of its rights, title and interest in the membership interests of Berry to Berry Petroleum Corporation, (ii) all of the ~~Debtors’ prepetition liabilities are subject~~equity interests in LAC and the Predecessor were canceled and (iii) LAC and the Predecessor commenced liquidation, which is expected to ~~settlement~~be completed following the resolution of the respective companies’ outstanding claims.

The holders of claims under the ~~Bankruptcy Code. Although~~Predecessor’s Sixth Amended and Restated Credit Agreement (“Predecessor Credit Facility”) received a full recovery, consisting of a cash paydown and their pro rata share of the ~~filing of Bankruptcy Petitions triggered defaults on the Debtors’ debt obligations, creditors are stayed from taking any actions against the Debtors as~~$1.7 billion Successor Credit Facility. As a result, all outstanding obligations under the Predecessor Credit Facility were canceled.

Holdco II, as borrower, entered into the Successor Credit Facility with the holders of ~~such defaults, subject~~claims under the Predecessor Credit Facility, as lenders, and Wells Fargo Bank, National Association, as administrative agent, providing for a new reserve-based revolving loan with up to $1.4 billion in borrowing commitments and a new term loan in an original principal amount of $300 million. For additional information, see “Financing Activities” below.

The holders of the Company’s 12.00% senior secured second lien notes due December 2020 (the “Second Lien Notes”) received their pro rata share of (i) 17,678,889 shares of Class A common stock; (ii) certain ~~limited exceptions permitted by~~rights to purchase shares of Class A common stock in the ~~Bankruptcy Code.~~rights offerings, as described below; and (iii) $30 million in cash. The ~~Company did not record interest expense on its Second Lien Notes or~~holders of the Company’s 6.50% senior notes ~~for~~due May 2019, 6.25% senior notes due November 2019, 8.625% senior notes due 2020, 7.75% senior notes due February 2021 and 6.50% senior notes due September 2021 (collectively, the ~~period from May 12, 2016, through June 30, 2016. For that period, contractual interest on~~“Unsecured Notes”) received their pro rata share of (i) 26,724,396 shares of Class A common stock; and (ii) certain rights to purchase shares of Class A common stock in the rights offerings, as described below. As a result, all outstanding obligations under the Second Lien Notes and ~~senior notes was approximately $54 million.~~

~~Under~~ the Bankruptcy Code, unless creditors agree otherwise, prepetition liabilities and postpetition liabilities must be satisfied in full before the holders of the Company’s existing common units representing limited liability company interests (“units”) are entitled to receive any settlement or retain any property under a plan of reorganization. The ultimate recovery to creditors and/or unitholders, if any, will not be determined until confirmation and implementation of a plan or plans of reorganization. No assurance can be given as to what values, if any, will be ascribed in the Chapter 11 proceedings to each of these constituencies or what types or amounts of settlements, if any, they will receive. A plan of reorganization could result in holders of the Debtors’ liabilities and/or units receiving no settlement on account of their interests and cancellation of their holdings. The Company believes that it is highly likely that its existing units will be canceled in the Chapter 11 proceedings and will be entitled to a limited recovery, if any. Any trading in the Company’s units during the pendency of the Chapter 11 proceedings is highly speculative and poses substantial risks to purchasers of the Company’s units.

~~Appointment of Creditors Committee~~

On May 23, 2016, the Bankruptcy Court appointed the official committee for unsecured creditors (the “Creditors Committee”). The Creditors Committee and its legal representatives have a right to be heard on all matters that come before the Bankruptcy Court with respect to the Debtors.

~~Rejection of Executory Contracts~~

Subject to certain exceptions, under the Bankruptcy Code, the Debtors may assume, assign or reject certain executory contracts and unexpired leases subject to the approval of the Bankruptcy Court and satisfaction of certain other conditions. Generally, the rejection of an executory contract or unexpired lease is treated as a prepetition breach of such executory contract or unexpired lease and, subject to certain exceptions, relieves the Debtors of performing their future obligations under such executory contract or unexpired lease but entitles the contract counterparty or lessor to a prepetition general unsecured claim for damages caused by such deemed breach. Counterparties to such rejected contracts or leases may assert unsecured claims in the Bankruptcy Court against the applicable Debtors’ estate for damages. Generally, the assumption of an executory contract or unexpired lease requires the Debtors to cure existing monetary defaults under such executory contract or unexpired lease and provide adequate assurance of future performance. Accordingly, any description of an executory contract or unexpired lease with any of the Debtors in this Quarterly Report on Form 10-Q, including where applicable a quantification of the Company’s obligations under any such executory contract or unexpired lease with the applicable Debtor, is qualified by any overriding rejection rights the Company has under the Bankruptcy Code. Further, nothing herein is or shall be deemed an admission with respect to any claim amounts or calculations arising from the rejection of any executory contract or unexpired leaseUnsecured Notes and the ~~Debtors expressly preserve all of their rights with respect thereto.~~

~~Process for Plan of Reorganization~~

In order to successfully exit bankruptcy, the Debtors will need to propose, and obtain confirmation by the Bankruptcy Court of, a Plan that satisfies the requirements of the Bankruptcy Code. A Plan would, among other things, resolve the Debtors’ prepetitionindentures governing such obligations ~~set forth the revised capital structure of the newly reorganized entity and provide for corporate governance subsequent to exit from bankruptcy.~~

The Debtors have an exclusive right to file a Plan within 120 days from the Petition Date, subject to an extension for cause. If the Debtors’ exclusive filing period lapses, any party in interest may file a Plan for any of the Debtors.

In addition to being voted on by holders of impaired claims and equity interests, a Plan must satisfy certain requirements of the Bankruptcy Code and must be approved, or confirmed, by the Bankruptcy Court in order to become effective. A Plan would be accepted by holders of claims against and equity interests in the Debtors if (i) at least one-half in number and two-thirds in dollar amount of claims actually voting in each class of claims impaired by the Plan have voted to accept the Plan and (ii) atwere canceled.

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Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued

~~least two-thirds~~The holders of general unsecured claims (other than claims relating to the Second Lien Notes and the Unsecured Notes) against the LINN Debtors (the “LINN Unsecured Claims”) received their pro rata share of cash from two cash distribution pools totaling $40 million, as divided between a $2.3 million cash distribution pool for the payment in full of allowed LINN Unsecured Claims in an amount equal to $2,500 or less (and larger claims for which the holders irrevocably agreed to reduce such claims to $2,500), and a $37.7 million cash distribution pool for pro rata distributions to all remaining allowed general LINN Unsecured Claims. As a result, all outstanding LINN Unsecured Claims were fully satisfied, settled, released and discharged as of ~~equity interests impaired by~~ the ~~Plan actually voting has voted~~Effective Date.

All units of the Predecessor that were issued and outstanding immediately prior to ~~accept~~ the ~~Plan.~~Effective Date were extinguished without recovery. On the Effective Date, the Successor issued in the aggregate 89,229,892 shares of Class A ~~class~~common stock. No cash was raised from the issuance of ~~claims or equity interests that does not receive or retain any property under~~ the ~~Plan~~Class A common stock on account of ~~such~~ claims ~~or interests is deemed~~held by the Predecessor’s creditors.

The Successor entered into a registration rights agreement with certain parties, pursuant to ~~have voted~~which the Company agreed to, ~~reject~~among other things, file a registration statement with the ~~Plan.~~

~~Under certain circumstances set forth in Section 1129(b)~~Securities and Exchange Commission within 60 days of the ~~Bankruptcy Code,~~Effective Date covering the ~~Bankruptcy Court may confirm a Plan even if such Plan has not been accepted by all impaired classes~~offer and resale of claims and equity interests. The precise requirements and evidentiary showing for confirming a Plan notwithstanding its rejection by one or more impaired classes of claims or equity interests depends upon a number of factors, including the status and seniority of the claims or equity interests in the rejecting class (i.e., unsecured or secured claims, subordinated or senior claims)“Registrable Securities” (as defined therein). ~~Generally, with respect to units, a Plan may be “crammed down” even if the unitholders receive no recovery if the proponent~~

By operation of the Plan ~~demonstrates that (1) no class junior to~~and the ~~units are receiving or retaining property under~~Confirmation Order, the terms of the Predecessor’s board of directors expired as of the Effective Date. The Successor formed a new board of directors, consisting of the Chief Executive Officer of the Predecessor, one director selected by the Successor and five directors selected by a six-person selection committee.

Rights Offerings

On October 25, 2016, the Company entered into a backstop commitment agreement (“Backstop Commitment Agreement”) with the parties thereto (collectively, the “Backstop Parties”). In accordance with the Plan, the Backstop Commitment Agreement and ~~(2) no class of claims or interests senior to~~ the ~~units are being paid more than in full.~~

~~The timing of filing a Plan by the Debtors will depend on the timing and outcome of numerous other ongoing matters~~rights offerings procedures filed in the Chapter 11 proceedings. Although the Debtors expect to file a Plan that provides for emergence from bankruptcy as a going concern, there can be no assurance at this time that the Debtors will be able to successfully develop, confirmcases and consummate one or more plans of reorganization or other alternative restructuring transactions, including a sale of all or substantially all of the Debtors’ assets, that satisfies the conditions of the Bankruptcy Code and is confirmedapproved by the Bankruptcy Court, ~~or that any such Plan will be implemented successfully.~~

~~As of August 4, 2016,~~ the LINN Debtors ~~have not yet filed a Plan.~~

~~For~~offered eligible creditors the ~~duration of the Company’s Chapter 11 proceedings, the Company’s operations and ability~~right to ~~develop and execute its business plan are subject to the risks and uncertainties associated with~~purchase Class A common stock upon emergence from the Chapter 11 ~~process as described in Item 1A. “Risk Factors.” As a result~~cases for an aggregate purchase price of ~~these risks and uncertainties,~~$530 million.

Under the ~~number~~Backstop Commitment Agreement, certain Backstop Parties agreed to purchase their pro rata share of the ~~Company’s units and unitholders, assets, liabilities, officers and/or directors could be significantly different following~~shares that were not duly subscribed to pursuant to the ~~outcome~~offerings at the discounted per share price set forth in the Backstop Commitment Agreement by parties other than Backstop Parties (the “Backstop Commitment”). Pursuant to the Backstop Commitment Agreement, the LINN Debtors agreed to pay the Backstop Parties on the Effective Date a commitment premium equal to 4.0% of the ~~Chapter 11 proceedings,~~$530 million committed amount (the “Backstop Commitment Premium”), of which 3.0% was paid in cash and 1.0% was paid in the form of Class A common stock at the discounted per share price set forth in the Backstop Commitment Agreement.

On the Effective Date, all conditions to the rights offerings and the ~~description~~Backstop Commitment Agreement were met, and the LINN Debtors completed the rights offerings and the related issuances of Class A common stock.

Divestitures

Below are the Company’s ~~operations, properties~~divestitures in 2017:

The Company entered into two definitive purchase and ~~capital plans included in this quarterly report may not accurately reflect its operations, properties and capital plans following~~sale agreements for the ~~Chapter 11 process.~~

~~Ability to Continue as a Going Concern~~

Continued low commodity prices have resulted in significantly lower levels of cash flow from operating activities and have limited the Company’s ability to access the capital markets. In addition, each of the Company’s Credit Facilities is subject to scheduled redeterminationssales of its ~~borrowing base, semi-annually~~interest in ~~April~~certain properties located in south Texas. On August 1, 2017, and ~~October, based primarily on reserve reports using lender commodity price expectations at such time.~~ July 31, 2017, the Company completed the sales and received cash proceeds of approximately $9 million and approximately $23 million, respectively.

The ~~lenders under~~Company entered into two definitive purchase and sale agreements for the ~~Credit Facilities agreed to defer the April 2016 borrowing base redeterminations to May 11, 2016. Continued low commodity prices, reductions~~sales of undeveloped acreage located in the ~~Company’s capital budget~~Permian Basin. On July 28, 2017, the Company completed the sale of undeveloped acreage located in Lea and Eddy counties in New Mexico and received cash proceeds of approximately $21 million. On May 9, 2017, the ~~resulting reserve write-downs, along with~~Company completed the ~~termination~~sale of undeveloped acreage located in Ward County, Texas and received cash proceeds of approximately $4 million.

On July 31, 2017, the ~~Company’s hedges, were expected to adversely impact upcoming redeterminations and have a significant negative impact on~~Company completed the ~~Company’s liquidity. The Company’s filing~~sale of ~~the Bankruptcy Petitions constituted an event of default that accelerated the Company’s obligations under~~ its ~~Credit Facilities, its Second Lien Notes and its senior notes.~~

The significant risks and uncertainties related to the Company’s liquidity and Chapter 11 proceedings described above raise substantial doubt about the Company’s ability to continue as a going concern. The condensed consolidated financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities and commitmentsinterest in properties located in the ~~normal course~~San Joaquin Basin in California to Berry Petroleum Company, LLC (the “San Joaquin Basin Sale”) and received cash proceeds of business. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of the going concern uncertainty. If the Company cannot continue as a going concern, adjustments to the carrying values and classification of its assets and liabilities and the reported amounts of income and expenses could be required and could be material.

In order to decrease the Company’s level of indebtedness and maintain the Company’s liquidity at levels sufficient to meet its commitments, the Company undertook a number of actions, including minimizing capital expenditures and further reducing its recurring operating expenses. Despite taking these actions, the Company did not have sufficient liquidity to satisfy its debt service obligations, meet other financial obligations and comply with its debt covenants. As a result, the Debtors filed Bankruptcy Petitions for relief under Chapter 11 of the Bankruptcy Code.approximately $257 million.

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Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued

~~Covenant Violations~~On July 21, 2017, the Company completed the sale of its interest in properties located in the Los Angeles Basin in California to Bridge Energy LLC (the “Los Angeles Basin Sale”) and received cash proceeds of approximately $94 million. The Company will receive an additional $7 million contingent payment if certain operational requirements are satisfied within one year.

On June 30, 2017, the Company completed the sale of its interest in properties located in the Salt Creek Field in Wyoming to Denbury Resources Inc. (the “Salt Creek Assets Sale”). Cash proceeds received from the sale of these properties were approximately $76 million and the Company recognized a net gain of approximately $22 million.

On May 31, 2017, the Company completed the sale of its interest in properties located in western Wyoming to Jonah Energy LLC (the “Jonah Assets Sale”). Cash proceeds received from the sale of these properties were approximately $560 million, net of costs to sell of approximately $6 million, and the Company recognized a net gain of approximately $279 million.

As a result of the Company’s strategic exit from California (completed by the San Joaquin Basin Sale and Los Angeles Basin Sale), the Company classified the assets and liabilities, results of operations and cash flows of its California properties as discontinued operations on its condensed consolidated financial statements.

The ~~Company’s filing of~~Company continues to market the ~~Bankruptcy Petitions constituted an event of default that accelerated~~previously announced non-core assets located in the ~~Company’s obligations under its Credit Facilities, its Second Lien Notes~~Permian Basin, the Williston Basin and ~~its senior notes. Additionally, other events of default, including cross-defaults, are present, including~~south Texas.

Joint Venture – Pending

On June 27, 2017, the ~~failure to make interest payments on the Company’s Second Lien Notes and~~Company, through certain of its ~~senior notes, as well as the receipt of~~wholly owned subsidiaries, entered into an agreement with Citizen Energy II, LLC (“Citizen”) in which LINN Energy and Citizen will each contribute certain upstream assets located in Oklahoma to a ~~going concern explanatory paragraph from the Company’s independent registered public accounting firm~~newly formed company, Roan Resources LLC (“Roan”), focused on the ~~Company’s consolidated financial statements~~accelerated development of the Merge/SCOOP/STACK play in the Mid-Continent region. In exchange for their respective contributions, LINN Energy and Citizen will equally split the ~~year ended December 31, 2015. Under~~equity interest in Roan. The transaction is anticipated to close in the ~~Bankruptcy Code,~~third quarter of 2017, subject to closing conditions. There can be no assurance that all of the ~~creditors under these debt agreements are stayed from taking any action against~~conditions to closing will be satisfied.

Construction of Cryogenic Plant

In July 2017 the Company asrenamed its wholly owned subsidiary LINN Midstream, LLC to Blue Mountain Midstream LLC (“Blue Mountain”) and entered into a ~~result~~definitive agreement with BCCK Engineering, Inc. (“BCCK”) to construct the Chisholm Trail Cryogenic Gas Plant. Blue Mountain’s assets include the Chisholm Trail midstream business (“Chisholm Trail”) located in Oklahoma. Chisholm Trail is located in the Merge/SCOOP/STACK play in the Mid-Continent region and has approximately 30 miles of ~~an event~~existing natural gas gathering pipeline and approximately 60 MMcf/d of ~~default. See Note 6 for additional details about~~current refrigeration capacity. Infrastructure expansions are underway to add 35 miles of low pressure gathering, increase compression throughput and construct a new cryogenic plant to improve liquids recoveries. Blue Mountain has entered into a definitive agreement with BCCK to construct a 225 MMcf/d cryogenic natural gas processing facility with a total capacity of 250 MMcf/d. Construction is underway and it is expected to be commissioned during the ~~Company’s debt.~~second quarter of 2018.

~~Credit Facilities~~2017 Oil and Natural Gas Capital Budget

~~The Company’s Credit Facilities contain a requirement~~For 2017, the Company estimates its total capital expenditures, excluding acquisitions, will be approximately $338 million, including approximately $229 million related to deliver audited consolidated financial statements without a going concern or like qualification or exception. Consequently, the filing of the Company’s 2015 Annual Report on Form 10-K which included such explanatory paragraph resulted in a defaultits oil and natural gas capital program and approximately $100 million related to its plant and pipeline capital. This estimate is under ~~the LINN Credit Facility as of the filing date, March 15, 2016,~~continuous review and subject to ~~a 30 day grace period.~~ongoing adjustments.

Financing Activities

Successor Credit Facility

On ~~April 12, 2016,~~ the Company entered into amendments to both the LINN Credit Facility and Berry Credit Facility. The amendments provided for, among other things, an agreement that (i) certain events (the “Specified Events”) would not become defaults or events of default until May 11, 2016, (ii) the borrowing bases would remain constant until May 11, 2016, unless reduced as a result of swap agreement terminations or collateral sales and (iii) the Company, the administrative agent and the lenders would negotiate in good faith the terms of a restructuring support agreement in furtherance of a restructuring of the capital structure of the Company and its subsidiaries. In addition, the amendment to the Berry Credit Facility provided Berry with access to previously restricted cash of $45 million in order to fund ordinary course operations.

~~Pursuant to the amendments, the Specified Events consisted of:~~

~~The receipt of a going concern qualification or explanatory statement in the auditors’ report on the Company’s consolidated financial statements for the year ended December 31, 2015;~~

~~The receipt of a going concern qualification or explanatory statement in the auditors’ report on Berry’s financial statements for the year ended December 31, 2015;~~

~~The failure of the Company or Berry to make certain interest payments on their unsecured notes;~~

~~Any cross-defaults that may arise on account of any of the foregoing, provided that no event of default is continuing under any document giving rise to such cross default; and~~

~~Any failure to provide notice of any of the events described above.~~

The Specified Events listed in the amendment to the Berry Credit Facility also included the failure to maintain the ratio of Adjusted EBITDAX to Interest Expense (as each term is defined in the Berry Credit Facility) (“Interest Coverage Ratio”).

As a condition to closing the amendments, in April 2016, (a) the Company made a $100 million permanent repayment of a portion of the borrowings outstanding under the LINN Credit Facility and (b) the Company and certain of its subsidiaries provided control agreements over certain deposit accounts.

~~Pursuant~~Effective Date, pursuant to the terms of the ~~amendment to~~Plan, the ~~LINN~~Company entered into the Successor Credit Facility with Holdco II as borrower and Wells Fargo Bank, National Association, as administrative agent, providing for: 1) a ~~result~~reserve-based revolving loan with an initial borrowing base of ~~the execution~~$1.4 billion and 2) a term loan in an original principal amount of ~~the Restructuring Support Agreement, in May 2016, the Company made a $350 million permanent repayment of a portion of the borrowings outstanding under the LINN Credit Facility.~~

The filing of the Bankruptcy Petitions constituted an event of default that accelerated the Company’s obligations under the Credit Facilities. However, under the Bankruptcy Code, the creditors under these debt agreements are stayed from taking any action against the Company as a result of the default.

~~Second Lien Notes~~

The indenture governing the Second Lien Notes (“Second Lien Indenture”) required the Company to deliver mortgages by February 18, 2016, subject to a 45 day grace period. The Company elected to exercise its right to the grace period, which resulted in the Company being in default under the Second Lien Indenture.$300 million.

Table of Contents


Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued

On ~~April 4, 2016,~~May 31, 2017, the Company entered into ~~a settlement agreement with certain holders of~~ the ~~Second Lien Notes~~First Amendment and ~~agreed~~Consent to ~~deliver, and make arrangements for recordation of, the mortgages. The Company has since delivered and made arrangements for recordation of the mortgages.~~

~~The settlement agreement required the parties~~Credit Agreement, pursuant to commence good faith negotiations with each other regarding the terms of a potential comprehensive and consensual restructuring, including a potential restructuring under a Chapter 11 plan of reorganization. The settlement agreement provided that in the event the parties were unable to reach agreement on the terms of a consensual restructuring on or before the commencement of such Chapter 11 proceedings (or such later date as mutually agreed to by the parties), the parties would support entry by the Bankruptcy Court of a settlement order that,which among other ~~things, (i) approves~~modifications: 1) the ~~issuance~~term loan was paid in full and terminated using cash proceeds from the Jonah Assets Sale, and 2) the borrowing base for the revolving loan was reduced to $1 billion. As of additional notes, in the principal amount of $1.0 billion plus certain accrued interest, on a proportionate basis to existing holders of the Second Lien Notes and (ii) releases the mortgages and other collateral upon the issuance of the additional notes (the “Settlement Order”).

~~The settlement agreement will terminate upon, among other events, entry by the Bankruptcy Court of a final, non-appealable order denying the Company’s motion seeking entry of the Settlement Order.~~

~~The Company failed to make an interest payment of approximately $68 million due~~ June ~~15, 2016, on the Second Lien Notes.~~

The filing of the Bankruptcy Petitions constituted an event of default that accelerated the Company’s obligations under the Second Lien Indenture. However, under the Bankruptcy Code, holders of the Second Lien Notes are stayed from taking any action against the Company as a result of the default.

~~Senior Notes~~

The Company deferred making interest payments totaling approximately $60 million due March 15, 2016, including approximately $30 million on LINN Energy’s 7.75% senior notes due February 2021, approximately $12 million on LINN Energy’s 6.50% senior notes due September 2021 and approximately $18 million on Berry’s 6.375% senior notes due September 2022, which resulted in the Company being in default under these senior notes. The indentures governing each of the applicable series of notes provided the Company a 30, ~~day grace period to make the interest payments.~~

On April 14, 2016, within the 30 day interest payment grace period provided for in the indentures governing the notes, the Company and Berry made interest payments of approximately $60 million in satisfaction of their respective obligations.

The Company failed to make an interest payment of approximately $31 million due April 15, 2016, on LINN Energy’s 8.625% senior notes due April 2020, interest payments due May 1, 2016, of approximately $18 million on LINN Energy’s 6.25% senior notes due November 2019 and approximately $9 million on Berry’s 6.75% senior notes due November 2020, and an interest payment of approximately $18 million due May 15, 2016, on LINN Energy’s 6.50% senior notes due May 2019.

The filing of the Bankruptcy Petitions constituted an event of default that accelerated the Company’s obligations under the indentures governing the senior notes. However, under the Bankruptcy Code, holders of the senior notes are stayed from taking any action against the Company as a result of the default.

~~Commodity Derivatives~~

In April 2016 and May 2016, in connection with the Company’s restructuring efforts, LINN Energy canceled (prior to the contract settlement dates) all of its derivative contracts for net proceeds of approximately $1.2 billion. The net proceeds were used to make permanent repayments of a portion of the2017, total borrowings outstanding under the ~~LINN~~Successor Credit ~~Facility. Also, in May 2016, as~~Facility were approximately $183 million and there was approximately $774 million of remaining available borrowing capacity (which includes a ~~result~~$7 million reduction for outstanding letters of credit). The maturity date is February 27, 2021.

Redetermination of the ~~Chapter 11 proceedings, Berry’s counterparties canceled (prior~~borrowing base under the Successor Credit Facility, based primarily on reserve reports using lender commodity price expectations at such time, occurs semi-annually, in April and October. The next scheduled borrowing base redetermination is to occur on October 1, 2017. At the ~~contract settlement dates) all~~Company’s election, interest on borrowings under the Successor Credit Facility is determined by reference to either the London Interbank Offered Rate (“LIBOR”) plus an applicable margin of ~~Berry’s derivative contracts (with~~3.50% per annum or the ~~exception~~alternate base rate (“ABR”) plus an applicable margin of ~~a contract consisting of 1,840 MMMBtu of natural gas basis swaps~~2.50% per annum. Interest is generally payable in arrears monthly for ~~2016) for net proceeds of approximately $2 million. The net proceeds were used to make permanent repayments of a portion~~loans bearing interest based at the ABR and at the end of the ~~borrowings outstanding under~~applicable interest period for loans bearing interest at the ~~Berry Credit Facility. In July 2016, Berry’s remaining derivative contract was canceled by the counterparty.~~

~~Table of Contents~~


~~Item 2.~~	~~Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued~~

~~Offer to Exchange LINN Energy Units for LinnCo Shares~~

In March 2016, LinnCo filed a Registration Statement on Form S-4 related to an offer to exchange each outstanding unit representing limited liability company interests of LINN Energy for one common share representing limited liability company interests of LinnCo. The initial offer expired on April 25, 2016, and on April 26, 2016, LinnCo commenced a subsequent offering period that expired on August 1, 2016. Through June 30, 2016, 115,702,524 LINN Energy units were exchanged for an equal number of LinnCo shares. As a result of the exchanges of LINN Energy units for LinnCo shares, LinnCo’s ownership of LINN Energy’s outstanding units increased from approximately 36% at March 31, 2016, to approximately 69% at June 30, 2016.

~~2016 Oil and Natural Gas Capital Budget~~

For 2016, the Company estimates its total capital expenditures, excluding acquisitions, will be approximately $235 million, including approximately $160 million related to its oil and natural gas capital program and approximately $60 million related to its plant and pipeline capital. The 2016 budget contemplates continued low commodity prices and is under continuous review and subject to ongoing adjustments.LIBOR. The Company ~~expects~~is required to fund its capital expenditures primarily from net cash provided by operating activities; however, there is uncertainty regarding the Company’s liquidity as discussed above. In addition, at this level of capital spending, the Company expects its total reserves to decline.

~~Financing Activities~~

~~See above for~~pay a description of the amendments to the Credit Facilities entered into in April 2016. During the six months ended June 30, 2016, the Company borrowed approximately $979 million under the LINN Credit Facility and made repayments of approximately $1.8 billion of a portion of the borrowings outstanding under the Credit Facilities and term loan. The repayments include approximately $841 million in commodity derivative settlements paid by the counterpartiescommitment fee to the lenders under the ~~LINN~~Successor Credit ~~Facility. As~~Facility, which accrues at a rate per annum of ~~June 30, 2016, total~~0.50% on the average daily unused amount of the available revolving loan commitments of the lenders.

Holdco II has the right to prepay any borrowings ~~outstanding (including outstanding letters of credit)~~ under the ~~LINN~~Successor Credit Facility ~~and Berry~~at any time without a prepayment penalty, other than customary “breakage” costs with respect to LIBOR loans.

The obligations under the Successor Credit Facility ~~were~~are secured by mortgages covering approximately ~~$1.9 billion and $898 million, respectively, with no remaining availability for either.~~

~~Delisting from Stock Exchange~~

~~As a result~~95% of the ~~Company’s failure~~total value of the proved reserves of the oil and natural gas properties of the Company, and certain equipment and facilities associated therewith, along with liens on substantially all personal property of the Company and are guaranteed by the Company, Linn Energy Holdco LLC and Holdco II’s subsidiaries, subject to customary exceptions. Under the Successor Credit Facility, the Company is required to maintain certain financial covenants including the maintenance of (i) a reserve coverage ratio of at least 1.1 to 1.0, tested on (a) the date of each scheduled borrowing base redetermination and (b) the date of each additional borrowing base redetermination done in conjunction with an asset sale, (ii) a maximum total net debt to last twelve months EBITDAX ratio of 4.0 to 1.0 beginning with the quarter ending September 30, 2017, and (iii) a minimum current ratio of 1.0 to 1.0 beginning with the quarter ending September 30, 2017.

The Successor Credit Facility also contains customary affirmative and negative covenants, including as to compliance with laws (including environmental laws, ERISA and anti-corruption laws), maintenance of required insurance, delivery of quarterly and annual financial statements, oil and natural gas engineering reports and budgets, maintenance and operation of property (including oil and natural gas properties), restrictions on the incurrence of liens and indebtedness, mergers, consolidations and sales of assets, transactions with affiliates and other customary covenants.

The Successor Credit Facility contains customary events of default and remedies for credit facilities of this nature. Failure to comply with the ~~NASDAQ Global Select Market (“NASDAQ”) continued listing requirements, on May 24, 2016,~~financial and other covenants in the Successor Credit Facility would allow the lenders, subject to customary cure rights, to require immediate payment of all amounts outstanding under the Successor Credit Facility.

Share Repurchase Program

On June 1, 2017, the Company’s Board of Directors announced that it had authorized the repurchase of up to $75 million of the Company’s outstanding shares of Class A common stock. On June 28, 2017, the Company’s Board of Directors announced that it had authorized an increase in the previously announced share repurchase program to up to a total of $200 million of the Company’s outstanding shares of Class A common stock. In June 2017 and July 2017, the Company repurchased an aggregate of 841,303 shares of Class A common stock at an average price of $32.41 per share for a total cost of approximately $27 million.

Listing on the OTCQB Market

On the Effective Date, the Predecessor’s units ~~began trading over the counter~~were canceled and ceased to trade on the OTC Markets Group Inc.’s Pink ~~marketplace~~marketplace. In April 2017, the Successor’s Class A common stock was approved for trading on the OTCQB market under the ~~trading~~ symbol ~~“LINEQ.~~“LNGG.”

4443

Table of Contents


Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued

Results of Operations

Three Months Ended June 30, ~~2016,~~2017, Compared to Three Months Ended June 30, ~~2015~~2016


	Three Months Ended June 30,									Successor			Predecessor
	2016			2015			Variance			Three Months Ended June 30, 2017			Three Months Ended June 30, 2016			Variance
	(in thousands)
(in thousands)
Revenues and other:
Natural gas sales	$	95,380		$	149,908		$	(54,528	)	$	110,481		$	82,718		$	27,763
Oil sales	182,902			310,454			(127,552		)	89,237			81,499			7,738
NGL sales	37,975			36,057			1,918			43,449			31,630			11,819
Total oil, natural gas and NGL sales	316,257			496,419			(180,162		)	243,167			195,847			47,320
Losses on oil and natural gas derivatives	(182,768		)	(191,188		)	8,420
Gains (losses) on oil and natural gas derivatives										45,714			(183,794		)	229,508
Marketing and other revenues(1)	21,906			16,597			5,309			18,938			32,192			(13,254		)
	155,395			321,828			(166,433		)	307,819			44,245			263,574
Expenses:
Lease operating expenses	115,543			140,652			(25,109		)	71,057			70,367			690
Transportation expenses	52,037			55,795			(3,758		)	37,388			41,092			(3,704		)
Marketing expenses	11,305			9,159			2,146			6,976			6,727			249
General and administrative expenses ⁽¹⁾⁽²⁾	59,646			98,650			(39,004		)	34,458			52,169			(17,711		)
Exploration costs	48			564			(516		)	811			48			763
Depreciation, depletion and amortization	143,171			215,732			(72,561		)	51,987			86,358			(34,371		)
Taxes, other than income taxes	30,847			58,034			(27,187		)	17,871			18,180			(309		)
(Gains) losses on sale of assets and other, net	2,942			(17,996		)	20,938			(306,969		)	2,517			(309,486		)
	415,539			560,590			(145,051		)	(86,421		)	277,458			(363,879		)
Other income and (expenses)	(69,736		)	(143,095		)	73,359			(8,714		)	(51,546		)	42,832
Reorganization items, net	534,884			—			534,884			(3,377		)	485,798			(489,175		)
Income (loss) before income taxes	205,004			(381,857		)	586,861
Income tax benefit	(3,488		)	(2,730		)	(758		)
Net income (loss)	$	208,492		$	(379,127	)	$	587,619
Income from continuing operations before income taxes										382,149			201,039			181,110
Income tax expense (benefit)										158,770			(3,652		)	162,422
Income from continuing operations										223,379			204,691			18,688
Income (loss) from discontinued operations, net of income taxes										(3,322		)	3,801			(7,123		)
Net income										$	220,057		$	208,492		$	11,565



Delaware (State or other jurisdiction of incorporation or organization)	~~65-1177591~~81-5366183 (I.R.S. Employer Identification No.)
600 Travis ~~Suite 5100~~ Houston, Texas (Address of principal executive offices)	77002 (Zip Code)
(281) 840-4000 (Registrant’s telephone number, including area code)



Large accelerated filerx	¨	Accelerated filer	¨
Non-accelerated filer	¨	(Do not check if a smaller reporting company)
		Smaller reporting company	x
		Emerging growth company	¨



		Page

	Glossary of Terms	ii

	Part I – Financial Information
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets ~~as of June 30, 2016, and December 31, 2015~~	1
	Condensed Consolidated Statements of Operations ~~for the three months and six months ended June 30, 2016, and June 30, 2015~~	2
	~~Condensed Consolidated Statement of Unitholders’ Deficit for the six months ended June 30, 2016~~	3
	Condensed Consolidated Statements of ~~Cash Flows for the six months ended June 30, 2016, and June 30, 2015~~Equity	45
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	58
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3738
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	6361
Item 4.	Controls and Procedures	6463

	Part II – Other Information
Item 1.	Legal Proceedings	6564
Item 1A.	Risk Factors	6564
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6964
Item 3.	Defaults Upon Senior Securities	6965
Item 4.	Mine Safety Disclosures	6965
Item 5.	Other Information	6965
Item 6.	Exhibits	7066

	Signatures	7167



	Successor		Predecessor
	June 30, 2017		December 31, 2016
(in thousands, except share and unit amounts)
Commitments and contingencies (Note 10)
Temporary equity:
Redeemable noncontrolling interests	28,132		—
Stockholders’/unitholders’ equity (deficit):
Predecessor units issued and outstanding (no units issued or outstanding at June 30, 2017; 352,792,474 units issued and outstanding at December 31, 2016)	—		5,386,885
Predecessor accumulated deficit	—		(7,783,873		)
Successor preferred stock ($0.001 par value, 30,000,000 shares authorized and no shares issued at June 30, 2017; no shares authorized or issued at December 31, 2016)	—		—
Successor Class A common stock ($0.001 par value, 270,000,000 shares authorized and 89,241,558 shares issued at June 30, 2017; no shares authorized or issued at December 31, 2016)	89		—
Successor additional paid-in capital	2,043,927		—
Successor retained earnings	212,801		—
Total stockholders’/unitholders’ equity (deficit)	2,256,817		(2,396,988		)
Total liabilities and equity (deficit)	$	3,201,516	$	4,660,591



	Units		Unitholders’ Capital			Accumulated Deficit			Total Unitholders’ Capital (Deficit)
	(in thousands)

December 31, 2016 (Predecessor)	352,792		$	5,386,885		$	(7,783,873	)	$	(2,396,988	)
Net income			—			2,397,061			2,397,061
Other			(73		)	—			(73		)
February 28, 2017 (Predecessor)	352,792		5,386,812			(5,386,812		)	—
Cancellation of predecessor equity	(352,792	)	(5,386,812		)	5,386,812			—
February 28, 2017 (Predecessor)	—		$	—		$	—		$	—



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	June 30, 2016			December 31, 2015			Successor			Predecessor
	(in thousands, except unit amounts)						June 30, 2017			December 31, 2016
(in thousands, except share and unit amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	774,645		$	2,168		$	16,903		$	694,857
Accounts receivable – trade, net	202,597			216,556			163,935			198,064
Derivative instruments	185			1,220,230			23,959			—
Restricted cash							98,616			1,602
Other current assets	108,894			95,593			71,836			105,310
Assets held for sale							236,421			—
Current assets of discontinued operations							235,643			701
Total current assets	1,086,321			1,534,547			847,313			1,000,534

Noncurrent assets:
Oil and natural gas properties (successful efforts method)	18,164,650			18,121,155			1,444,110			12,349,117
Less accumulated depletion and amortization	(12,514,642		)	(11,097,492		)	(37,572		)	(9,843,908		)
	5,650,008			7,023,663			1,406,538			2,505,209

Other property and equipment	726,821			708,711			441,483			618,262
Less accumulated depreciation	(222,192		)	(195,661		)	(12,739		)	(217,724		)
	504,629			513,050			428,744			400,538

Derivative instruments	—			566,401			12,759			—
Restricted cash	204,828			257,363
Deferred income taxes							492,182			—
Other noncurrent assets	31,388			33,234			13,980			13,984
Noncurrent assets of discontinued operations							—			740,326
	236,216			856,998			518,921			754,310
Total noncurrent assets	6,390,853			8,393,711			2,354,203			3,660,057
Total assets	$	7,477,174		$	9,928,258		$	3,201,516		$	4,660,591

LIABILITIES AND UNITHOLDERS’ DEFICIT
LIABILITIES AND EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses	$	347,920		$	455,374		$	268,605		$	295,081
Derivative instruments	1,694			2,241			486			82,508
Current portion of long-term debt, net	2,812,409			3,714,693			—			1,937,729
Other accrued liabilities	47,692			119,593			135,416			25,979
Liabilities held for sale							36,387			—
Current liabilities of discontinued operations							28,218			321
Total current liabilities	3,209,715			4,291,901			469,112			2,341,618

Derivative instruments	—			857			—			11,349
Long-term debt, net	—			5,292,676
Long-term debt							183,430			—
Other noncurrent liabilities	588,172			611,725			264,025			360,405
Noncurrent liabilities of discontinued operations							—			39,202
Liabilities subject to compromise	5,069,158			—			—			4,305,005

Commitments and contingencies (Note 10)

Unitholders’ deficit:
355,173,890 units and 355,017,428 units issued and outstanding at June 30, 2016, and December 31, 2015, respectively	5,361,400			5,343,116
Accumulated deficit	(6,751,271		)	(5,612,017		)
	(1,389,871		)	(268,901		)
Total liabilities and unitholders’ deficit	$	7,477,174		$	9,928,258



	Class A Common Stock			Additional Paid-in Capital			Retained Earnings		Total Stockholders’ Equity
	Shares	Amount		Additional Paid-in Capital			Retained Earnings		Total Stockholders’ Equity
	(in thousands)

Issuances of successor Class A common stock	89,230	$	89	$	2,021,142		$	—	$	2,021,231
Share-based compensation expenses		—		13,750			—		13,750
February 28, 2017 (Successor)	89,230	89		2,034,892			—		2,034,981
Net income		—		—			212,801		212,801
Issuances of successor Class A common stock	12	—		—			—		—
Repurchases of successor Class A common stock	—	—		(230		)	—		(230		)
Share-based compensation expenses		—		9,454			—		9,454
Other		—		(189		)	—		(189		)
June 30, 2017 (Successor)	89,242	$	89	$	2,043,927		$	212,801	$	2,256,817


			Predecessor
	June 30, 2016		December 31, 2016
	(in thousands)		(in thousands)

Accounts payable and accrued expenses	$	52,807	$	137,692
Accrued interest payable	159,422		144,184
Debt	4,856,929		4,023,129
Liabilities subject to compromise	$	5,069,158	$	4,305,005



Plan confirmed enterprise value	$	2,350,000
Fair value of debt	(900,000		)
Fair value of subsequently determined tax attributes	621,486
Fair value of vested Class B units	(36,505		)
Value of Successor’s stockholders’ equity	$	2,034,981



	As of February 28, 2017
	Predecessor			Reorganization Adjustments ⁽¹⁾				Fresh Start Adjustments				Successor
	(in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	734,166		$	(679,811	)	⁽²⁾	$	—			$	54,355
Accounts receivable – trade, net	212,099			—				(7,808		)	⁽¹⁶⁾	204,291
Derivative instruments	15,391			—				—				15,391
Restricted cash	1,602			80,164			⁽³⁾	—				81,766
Other current assets	106,426			(15,983		)	⁽⁴⁾	1,780			⁽¹⁷⁾	92,223
Total current assets	1,069,684			(615,630		)		(6,028		)		448,026

Noncurrent assets:
Oil and natural gas properties (successful efforts method)	13,269,035			—				(11,082,258		)	⁽¹⁸⁾	2,186,777
Less accumulated depletion and amortization	(10,044,240		)	—				10,044,240			⁽¹⁸⁾	—
	3,224,795			—				(1,038,018		)		2,186,777

Other property and equipment	641,586			—				(197,653		)	⁽¹⁹⁾	443,933
Less accumulated depreciation	(230,952		)	—				230,952			⁽¹⁹⁾	—
	410,634			—				33,299				443,933

Derivative instruments	4,492			—				—				4,492
Deferred income taxes	—			264,889			⁽⁵⁾	356,597			⁽⁵⁾	621,486
Other noncurrent assets	15,003			151			⁽⁶⁾	8,139			⁽²⁰⁾	23,293
	19,495			265,040				364,736				649,271
Total noncurrent assets	3,654,924			265,040				(639,983		)		3,279,981
Total assets	$	4,724,608		$	(350,590	)		$	(646,011	)		$	3,728,007

LIABILITIES AND EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses	$	324,585		$	41,266		⁽⁷⁾	$	(2,351	)	⁽²¹⁾	$	363,500
Derivative instruments	7,361			—				—				7,361
Current portion of long-term debt, net	1,937,822			(1,912,822		)	⁽⁸⁾	—				25,000
Other accrued liabilities	41,251			(1,026		)	⁽⁹⁾	1,104			⁽²²⁾	41,329
Total current liabilities	2,311,019			(1,872,582		)		(1,247		)		437,190

Derivative instruments	2,116			—				—				2,116
Long-term debt	—			875,000			⁽¹⁰⁾	—				875,000
Other noncurrent liabilities	402,776			(167		)	⁽¹¹⁾	(53,239		)	⁽²³⁾	349,370
Liabilities subject to compromise	4,301,912			(4,301,912		)	⁽¹²⁾	—				—

Temporary equity:
Redeemable noncontrolling interests	—			29,350			⁽¹³⁾	—				29,350


2)	Changes in cash and cash equivalents included the following:



(in thousands)
Borrowings under the Successor’s revolving loan	$	600,000
Borrowings under the Successor’s term loan	300,000
Proceeds from rights offerings	530,019
Removal of restriction on cash balance	1,602
Payment to holders of claims under the Predecessor Credit Facility	(1,947,357		)
Payment to holders of claims under the Second Lien Notes	(30,000		)
Payment of Berry’s ad valorem taxes	(23,366		)
Payment of the rights offerings backstop commitment premium	(15,900		)
Payment of professional fees	(13,043		)
Funding of the professional fees escrow account	(41,766		)
Funding of the general unsecured claims cash distribution pool	(40,000		)
Changes in cash and cash equivalents	$	(679,811	)


3)	Primarily reflects the transfer to restricted cash to fund the Predecessor’s professional fees escrow account and general unsecured claims cash distribution pool.


4)	Primarily reflects the write-off of the Predecessor’s deferred financing fees.


5)	Reflects deferred tax assets recorded as of the Effective Date as determined in accordance with ASC 740. The deferred tax assets were primarily the result of the conversion from a limited liability company to a C corporation and differences in the accounting basis and tax basis of the Company’s oil and natural gas properties as of the Effective Date.


6)	Reflects the capitalization of deferred financing fees related to the Successor’s revolving loan.


7)	Net increase in accounts payable and accrued expenses reflects:



(in thousands)
Recognition of payables for the professional fees escrow account	$	41,766
Recognition of payables for the general unsecured claims cash distribution pool	40,000
Payment of professional fees	(17,130		)
Payment of Berry’s ad valorem taxes	(23,366		)
Other	(4		)
Net increase in accounts payable and accrued expenses	$	41,266


8)	Reflects the settlement of the Predecessor Credit Facility through repayment of approximately $1.9 billion, net of the write-off of deferred financing fees and an increase of $25 million for the current portion of the Successor’s term loan.


9)	Reflects a decrease of approximately $8 million for the payment of accrued interest on the Predecessor Credit Facility partially offset by an increase of approximately $7 million related to noncash share-based compensation classified as a liability related to the incentive interest awards issued by Holdco to certain members of its management (see Note 12).


10)	Reflects borrowings of $900 million under the Successor Credit Facility, which includes a $600 million revolving loan and a $300 million term loan, net of $25 million for the current portion of the Successor’s term loan.


11)	Reflects a reduction in deferred tax liabilities as determined in accordance with ASC 740.


12)	Settlement of liabilities subject to compromise and the resulting net gain were determined as follows:



(in thousands)
Accounts payable and accrued expenses	$	134,599
Accrued interest payable	144,184
Debt	4,023,129
Total liabilities subject to compromise	4,301,912
Recognition of an additional claim for the Predecessor’s Second Lien Notes settlement	1,000,000
Funding of the general unsecured claims cash distribution pool	(40,000		)
Payment to holders of claims under the Second Lien Notes	(30,000		)
Issuance of Class A common stock to creditors	(1,507,162		)
Gain on settlement of liabilities subject to compromise	$	3,724,750


13)	Reflects redeemable noncontrolling interests classified as temporary equity related to the incentive interest awards issued by Holdco to certain members of its management. See Note 12 and Note 17 for additional information.



(in thousands)
Issuance of Class A common stock to creditors	$	1,507,162
Issuance of Class A common stock pursuant to the rights offerings	530,019
Payment of the rights offerings backstop commitment premium	(15,900		)
Payment of issuance costs	(50		)
Share-based compensation expenses	13,750
Cancellation of the Predecessor’s units issued and outstanding	5,386,812
Par value of Class A common stock	(89		)
Change in additional paid-in capital	7,421,704
Par value of Class A common stock	89
Predecessor’s units issued and outstanding	(5,386,812		)
Net increase in capital accounts	$	2,034,981



(in thousands)
Recognition of gain on settlement of liabilities subject to compromise	$	3,724,750
Recognition of an additional claim for the Predecessor’s Second Lien Notes settlement	(1,000,000		)
Recognition of professional fees	(37,680		)
Write-off of deferred financing fees	(16,728		)
Recognition of deferred income taxes	264,889
Total reorganization items, net	2,935,231
Share-based compensation expenses	(50,255		)
Other	(236		)
Net decrease in accumulated deficit	$	2,884,740


16)	Reflects a change in accounting policy from the entitlements method to the sales method for natural gas production imbalances.


17)	Reflects the recognition of intangible assets for the current portion of favorable leases, partially offset by decreases for well equipment inventory and the write-off of historical intangible assets.


18)	Reflects a decrease of oil and natural gas properties, based on the methodology discussed above, and the elimination of accumulated depletion and amortization. The following table summarizes the components of oil and natural gas properties as of the Effective Date:



	Successor		Predecessor
	Fair Value		Historical Book Value
(in thousands)
Proved properties	$	2,186,777	$	12,258,835
Unproved properties	—		1,010,200
	2,186,777		13,269,035
Less accumulated depletion and amortization	—		(10,044,240		)
	$	2,186,777	$	3,224,795


19)	Reflects a decrease of other property and equipment and the elimination of accumulated depreciation. The following table summarizes the components of other property and equipment as of the Effective Date:


21)	Primarily reflects the write-off of deferred rent partially offset by an increase in carbon emissions liabilities.