UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q



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

For the Quarterly Period Ended June 30, ~~2017~~2018



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

For the transition period from _______________ to _______________

Commission File Number: 000-51719

LINN ENERGY, INC.

(Exact name of registrant as specified in its charter)



Delaware (State or other jurisdiction of incorporation or organization)	~~81-5366183~~83-1207960 (I.R.S. Employer Identification No.)
600 Travis Houston, Texas (Address of principal executive offices)	77002 (Zip Code)
(281) 840-4000 (Registrant’s telephone number, including area code)

Linn Energy, Inc. (Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x¨ No ¨x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes x No ¨

As of July 31, ~~2017,~~2018, there were ~~88,511,309~~78,449,265 shares of Class A common stock, par value $0.001 per share, outstanding.

TABLE OF CONTENTS



		Page

	Glossary of Terms	ii

	Part I – Financial Information
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	3
	Condensed Consolidated ~~Statements~~Statement of Equity	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3835
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	6158
Item 4.	Controls and Procedures	6359

	Part II – Other Information
Item 1.	Legal Proceedings	6461
Item 1A.	Risk Factors	6461
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6463
Item 3.	Defaults Upon Senior Securities	6563
Item 4.	Mine Safety Disclosures	6563
Item 5.	Other Information	6563
Item 6.	Exhibits	6664

	Signatures	6765

Table of Contents

GLOSSARY OF TERMS

As commonly used in the oil and natural gas industry and as used in this Quarterly Report on Form 10-Q, the following terms have the following meanings:

Bbl. One stock tank barrel or 42 United States gallons liquid volume.

~~Bcf.~~ ~~One billion cubic feet.~~

~~Bcfe.~~ ~~One billion cubic feet equivalent, determined using the ratio of six Mcf of natural gas to one Bbl of oil, condensate or natural gas liquids.~~

Btu. One British thermal unit, which is the heat required to raise the temperature of a one-pound mass of water from 58.5 degrees to 59.5 degrees Fahrenheit.

MBbls. One thousand barrels of oil or other liquid hydrocarbons.

MBbls/d. MBbls per day.

Mcf. One thousand cubic feet.

Mcfe. One thousand cubic feet equivalent, determined using the ratio of six Mcf of natural gas to one Bbl of oil, condensate or natural gas liquids.

MMBbls. One million barrels of oil or other liquid hydrocarbons.

MMBtu. One million British thermal units.

MMcf. One million cubic feet.

MMcf/d. MMcf per day.

MMcfe. One million cubic feet equivalent, determined using the ratio of six Mcf of natural gas to one Bbl of oil, condensate or natural gas liquids.

MMcfe/d. MMcfe per day.

MMMBtu. One billion British thermal units.

NGL. Natural gas liquids, which are the hydrocarbon liquids contained within natural gas.

Table of Contents

PART I – FINANCIAL INFORMATION


Item 1.	Financial Statements

LINN ENERGY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	Successor			Predecessor			June 30, 2018			December 31, 2017
	June 30, 2017			December 31, 2016			(in thousands, except share amounts)
(in thousands, except share and unit amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	16,903		$	694,857		$	301,365		$	464,508
Accounts receivable – trade, net	163,935			198,064			64,686			140,485
Derivative instruments	23,959			—			3,934			9,629
Restricted cash	98,616			1,602			43,387			56,445
Other current assets	71,836			105,310			46,659			79,771
Assets held for sale	236,421			—			22			106,963
Current assets of discontinued operations	235,643			701
Total current assets	847,313			1,000,534			460,053			857,801

Noncurrent assets:
Oil and natural gas properties (successful efforts method)	1,444,110			12,349,117			785,815			950,083
Less accumulated depletion and amortization	(37,572		)	(9,843,908		)	(59,870		)	(49,619		)
	1,406,538			2,505,209			725,945			900,464

Other property and equipment	441,483			618,262			566,861			480,729
Less accumulated depreciation	(12,739		)	(217,724		)	(44,412		)	(28,658		)
	428,744			400,538			522,449			452,071

Derivative instruments	12,759			—			1,254			469
Deferred income taxes	492,182			—			169,691			198,417
Equity method investments							473,269			464,926
Other noncurrent assets	13,980			13,984			5,264			6,975
Noncurrent assets of discontinued operations	—			740,326
	518,921			754,310			649,478			670,787
Total noncurrent assets	2,354,203			3,660,057			1,897,872			2,023,322
Total assets	$	3,201,516		$	4,660,591		$	2,357,925		$	2,881,123

LIABILITIES AND EQUITY (DEFICIT)
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	268,605		$	295,081		$	179,887		$	253,975
Share-based payment liability							111,792			—
Derivative instruments	486			82,508			5,536			10,103
Current portion of long-term debt, net	—			1,937,729
Other accrued liabilities	135,416			25,979			19,830			58,617
Liabilities held for sale	36,387			—			—			43,302
Current liabilities of discontinued operations	28,218			321
Total current liabilities	469,112			2,341,618			317,045			365,997

Noncurrent liabilities:
Derivative instruments	—			11,349			24			2,849
Long-term debt	183,430			—
Other noncurrent liabilities	264,025			360,405
Noncurrent liabilities of discontinued operations	—			39,202
Liabilities subject to compromise	—			4,305,005

Asset retirement obligations and other noncurrent liabilities							105,531			160,720
Total noncurrent liabilities							105,555			163,569

Table of Contents

LINN ENERGY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS - Continued

(Unaudited)

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



	June 30, 2018		December 31, 2017
	(in thousands, except share amounts)
Commitments and contingencies (Note 11)

Equity:
Preferred stock ($0.001 par value, 30,000,000 shares authorized; no shares issued at June 30, 2018, or December 31, 2017)	—		—
Class A common stock ($0.001 par value, 270,000,000 shares authorized; 78,749,510 shares and 83,582,176 shares issued at June 30, 2018, and December 31, 2017, respectively)	79		84
Additional paid-in capital	1,427,458		1,899,642
Retained earnings	507,788		432,860
Total common stockholders’ equity	1,935,325		2,332,586
Noncontrolling interests	—		18,971
Total equity	1,935,325		2,351,557
Total liabilities and equity	$	2,357,925	$	2,881,123

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

LINN ENERGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Successor			Predecessor			Successor
	Three Months Ended June 30, 2017			Three Months Ended June 30, 2016			Three Months Ended June 30,
(in thousands, except per share and per unit amounts)
							2018			2017
							(in thousands, except per share amounts)
Revenues and other:
Oil, natural gas and natural gas liquids sales	$	243,167		$	195,847		$	87,004		$	243,167
Gains (losses) on oil and natural gas derivatives	45,714			(183,794		)	(7,525		)	45,714
Marketing revenues	12,547			8,551			42,967			12,547
Other revenues	6,391			23,641			6,387			6,391
	307,819			44,245			128,833			307,819
Expenses:
Lease operating expenses	71,057			70,367			24,088			71,057
Transportation expenses	37,388			41,092			21,213			37,388
Marketing expenses	6,976			6,727			40,327			6,976
General and administrative expenses	34,458			52,169			92,395			34,458
Exploration costs	811			48			53			811
Depreciation, depletion and amortization	51,987			86,358			21,980			51,987
Taxes, other than income taxes	17,871			18,180			7,297			17,871
(Gains) losses on sale of assets and other, net	(306,969		)	2,517
Gains on sale of assets and other, net							(101,777		)	(306,878		)
	(86,421		)	277,458			105,576			(86,330		)
Other income and (expenses):
Interest expense, net of amounts capitalized	(7,551		)	(50,320		)	(584		)	(7,551		)
Earnings (losses) from equity method investments							(9,327		)	91
Other, net	(1,163		)	(1,226		)	538			(1,163		)
	(8,714		)	(51,546		)	(9,373		)	(8,623		)
Reorganization items, net	(3,377		)	485,798			(1,259		)	(3,377		)
Income from continuing operations before income taxes	382,149			201,039			12,625			382,149
Income tax expense (benefit)	158,770			(3,652		)
Income tax expense							5,722			158,770
Income from continuing operations	223,379			204,691			6,903			223,379
Income (loss) from discontinued operations, net of income taxes	(3,322		)	3,801
Loss from discontinued operations, net of income taxes							—			(3,322		)
Net income	$	220,057		$	208,492		6,903			220,057
Net income attributable to noncontrolling interests							1,799			—
Net income attributable to common stockholders							$	5,104		$	220,057

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) per share attributable to common stockholders:
Income from continuing operations per share – Basic							$	0.06		$	2.49
Income from continuing operations per share – Diluted							$	0.06		$	2.47

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
Loss from discontinued operations per share – Basic							$	—		$	(0.04	)
Loss from discontinued operations per share – Diluted							$	—		$	(0.04	)

Net income per share/unit – Basic	$	2.45		$	0.59
Net income per share/unit – Diluted	$	2.43		$	0.59
Net income per share – Basic							$	0.06		$	2.45
Net income per share – Diluted							$	0.06		$	2.43

Weighted average shares/units outstanding – Basic	89,849			352,789
Weighted average shares/units outstanding – Diluted	90,484			352,789
Weighted average shares outstanding – Basic							78,718			89,849
Weighted average shares outstanding – Diluted							79,277			90,484

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

LINN ENERGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - Continued

(Unaudited)


	Successor			Predecessor						Successor						Predecessor
	Four Months Ended June 30, 2017			Two Months Ended February 28, 2017			Six Months Ended June 30, 2016			Six Months Ended June 30, 2018			Four Months Ended June 30, 2017			Two Months Ended February 28, 2017
(in thousands, except per share and per unit amounts)
Revenues and other:
Oil, natural gas and natural gas liquids sales	$	323,492		$	188,885		$	380,288		$	223,880		$	323,492		$	188,885
Gains (losses) on oil and natural gas derivatives	33,755			92,691			(74,341		)	(22,555		)	33,755			92,691
Marketing revenues	15,461			6,636			17,612			89,234			15,461			6,636
Other revenues	8,419			9,915			51,947			12,281			8,419			9,915
	381,127			298,127			375,506			302,840			381,127			298,127
Expenses:
Lease operating expenses	95,687			49,665			153,613			71,972			95,687			49,665
Transportation expenses	51,111			25,972			83,623			40,307			51,111			25,972
Marketing expenses	9,515			4,820			14,560			82,082			9,515			4,820
General and administrative expenses	44,869			71,745			135,889			137,174			44,869			71,745
Exploration costs	866			93			2,741			1,255			866			93
Depreciation, depletion and amortization	71,901			47,155			175,467			50,445			71,901			47,155
Impairment of long-lived assets	—			—			123,316
Taxes, other than income taxes	24,948			14,877			35,541			15,749			24,948			14,877
(Gains) losses on sale of assets and other, net	(306,524		)	672			3,786			(207,852		)	(306,394		)	829
	(7,627		)	214,999			728,536			191,132			(7,497		)	215,156
Other income and (expenses):
Interest expense, net of amounts capitalized	(11,751		)	(16,725		)	(134,193		)	(988		)	(11,751		)	(16,725		)
Earnings from equity method investments										16,018			130			157
Other, net	(1,551		)	(149		)	(1,158		)	369			(1,551		)	(149		)
	(13,302		)	(16,874		)	(135,351		)	15,399			(13,172		)	(16,717		)
Reorganization items, net	(5,942		)	2,331,189			485,798			(3,210		)	(5,942		)	2,331,189
Income (loss) from continuing operations before income taxes	369,510			2,397,443			(2,583		)
Income from continuing operations before income taxes										123,897			369,510			2,397,443
Income tax expense (benefit)	153,455			(166		)	6,594			45,896			153,455			(166		)
Income (loss) from continuing operations	216,055			2,397,609			(9,177		)
Income from continuing operations										78,001			216,055			2,397,609
Loss from discontinued operations, net of income taxes	(3,254		)	(548		)	(1,130,077		)	—			(3,254		)	(548		)
Net income (loss)	$	212,801		$	2,397,061		$	(1,139,254	)
Net income										78,001			212,801			2,397,061
Net income attributable to noncontrolling interests										3,073			—			—
Net income attributable to common stockholders/unitholders										$	74,928		$	212,801		$	2,397,061

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	)
Income (loss) per share/unit attributable to common stockholders/unitholders:
Income from continuing operations per share/unit – Basic										$	0.95		$	2.41		$	6.80
Income from continuing operations per share/unit – Diluted										$	0.93		$	2.40		$	6.80

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

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	)
Net income per share/unit – Basic										$	0.95		$	2.37		$	6.79
Net income per share/unit – Diluted										$	0.93		$	2.36		$	6.79

Weighted average shares/units outstanding – Basic	89,849			352,792			352,511			78,817			89,849			352,792
Weighted average shares/units outstanding – Diluted	90,065			352,792			352,511			79,764			90,065			352,792

The accompanying notes are an integral part of these condensed consolidated financial statements.

~~Table of Contents~~

LINN ENERGY, INC.

CONDENSED CONSOLIDATED STATEMENT OF EQUITY~~(PREDECESSOR)~~

(Unaudited)

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)
—
$ —
$ —
$ —

~~CONDENSED CONSOLIDATED STATEMENT OF EQUITY~~ ~~(SUCCESSOR)~~

~~(Unaudited)~~


	Class A Common Stock			Additional Paid-in Capital				Retained Earnings			Total Stockholders’ Equity			Class A Common Stock					Additional Paid-in Capital			Retained Earnings		Total Common Stockholders’ Equity			Noncontrolling Interests			Total Equity
	Shares	Amount					Shares							Amount
	(in thousands)													(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
December 31, 2017														83,582		$	84		$	1,899,642		$	432,860	$	2,332,586		$	18,971		$	2,351,557
Net income		—		—				212,801			212,801					—			—			74,928		74,928			3,073			78,001
Issuances of successor Class A common stock	12	—		—				—			—			811		—			—			—		—			—			—
Repurchases of successor Class A common stock	—	—		(230		)		—			(230		)	(8,429	)	(8		)	(394,407		)	—		(394,415		)	—			(394,415		)
Settlement of equity classified RSUs																—			(58,162		)	—		(58,162		)	—			(58,162		)
Share-based compensation expenses		—		9,454				—			9,454					—			25,132			—		25,132			—			25,132
Equity awards modified to liabilities																—			(70,550		)	—		(70,550		)	—			(70,550		)
Allocation of noncontrolling interest upon vesting of subsidiary units																—			(21,233		)	—		(21,233		)	21,233			—
Distributions to noncontrolling interests																—			—			—		—			(8,367		)	(8,367		)
Subsidiary equity transactions																—			646			—		646			(646		)	—
Other		—		(189		)		—			(189		)			—			12,129			—		12,129			—			12,129
June 30, 2017 (Successor)	89,242	$	89	$	2,043,927			$	212,801		$	2,256,817
Dissolution of noncontrolling interests														2,786		3			34,261			—		34,264			(34,264		)	—
June 30, 2018														78,750		$	79		$	1,427,458		$	507,788	$	1,935,325		$	—		$	1,935,325

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

LINN ENERGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Successor			Predecessor						Successor						Predecessor
	Four Months Ended June 30, 2017			Two Months Ended February 28, 2017			Six Months Ended June 30, 2016			Six Months Ended June 30, 2018			Four Months Ended June 30, 2017			Two Months Ended February 28, 2017
(in thousands)
Cash flow from operating activities:
Net income (loss)	$	212,801		$	2,397,061		$	(1,139,254	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Net income										$	78,001		$	212,801		$	2,397,061
Adjustments to reconcile net income to net cash provided by operating activities:
Loss from discontinued operations	3,254			548			1,130,077			—			3,254			548
Depreciation, depletion and amortization	71,901			47,155			175,467			50,445			71,901			47,155
Impairment of long-lived assets	—			—			123,316
Deferred income taxes	131,055			(166		)	3,850			46,031			131,055			(166		)
Noncash (gains) losses on oil and natural gas derivatives	(25,826		)	(104,263		)	931,251
(Gains) losses on oil and natural gas derivatives										22,555			(33,755		)	(92,691		)
Cash settlements on derivatives										(25,037		)	7,929			(11,572		)
Share-based compensation expenses	19,599			50,255			18,553			66,374			19,599			50,255
Amortization and write-off of deferred financing fees	82			1,338			9,227			824			82			1,338
(Gains) losses on sale of assets and other, net	(293,811		)	1,069			3,929			(224,091		)	(293,800		)	1,069
Reorganization items, net	—			(2,359,364		)	(498,954		)	—			—			(2,359,364		)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable – trade, net	27,212			(7,216		)	(12,046		)	76,465			27,212			(7,216		)
(Increase) decrease in other assets	(1,245		)	402			(19,039		)	35,828			(9,146		)	528
Increase in restricted cash	—			(80,164		)	—
Increase (decrease) in accounts payable and accrued expenses	(49,984		)	20,949			47,062			(52,538		)	(89,755		)	20,949
Increase in other liabilities	22,421			2,801			26,150
Net cash provided by (used in) operating activities – continuing operations	117,459			(29,595		)	799,589
Increase (decrease) in other liabilities										(22,955		)	22,421			2,801
Net cash provided by operating activities – continuing operations										51,902			69,798			50,695
Net cash provided by operating activities – discontinued operations	13,966			8,781			1,612			—			13,966			8,781
Net cash provided by (used in) operating activities	131,425			(20,814		)	801,201
Net cash provided by operating activities										51,902			83,764			59,476

Cash flow from investing activities:
Development of oil and natural gas properties	(61,534		)	(50,597		)	(80,909		)	(45,938		)	(61,534		)	(50,597		)
Purchases of other property and equipment	(27,287		)	(7,409		)	(13,655		)	(87,377		)	(27,287		)	(7,409		)
Proceeds from sale of properties and equipment and other	641,219			(166		)	(2,713		)	369,489			697,829			(166		)
Net cash provided by (used in) investing activities – continuing operations	552,398			(58,172		)	(97,277		)	236,174			609,008			(58,172		)
Net cash provided by (used in) investing activities – discontinued operations	(1,645		)	(584		)	26,166
Net cash used in investing activities – discontinued operations										—			(1,645		)	(584		)
Net cash provided by (used in) investing activities	550,753			(58,756		)	(71,111		)	236,174			607,363			(58,756		)

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LINN ENERGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued

(Unaudited)


	Successor			Predecessor						Successor						Predecessor
	Four Months Ended June 30, 2017			Two Months Ended February 28, 2017			Six Months Ended June 30, 2016			Six Months Ended June 30, 2018			Four Months Ended June 30, 2017			Two Months Ended February 28, 2017
(in thousands)
Cash flow from financing activities:
Proceeds from rights offerings, net	—			514,069			—			—			—			514,069
Repurchases of shares										(393,647		)	—			—
Proceeds from borrowings	160,000			—			978,500			—			160,000			—
Repayments of debt	(876,570		)	(1,038,986		)	(913,210		)	—			(876,570		)	(1,038,986		)
Debt issuance costs paid	(2,973		)	—			(623		)
Payment to holders of claims under the second lien notes	—			(30,000		)	—
Payment to holders of claims under the Predecessor’s second lien notes										—			—			(30,000		)
Distributions to noncontrolling interests										(12,174		)	(2,973		)	—
Cash settlements of equity classified RSUs										(58,162		)	—			—
Other	(87		)	(6,015		)	(20,687		)	(294		)	(87		)	(6,015		)
Net cash provided by (used in) financing activities – continuing operations	(719,630		)	(560,932		)	43,980
Net cash used in financing activities – continuing operations										(464,277		)	(719,630		)	(560,932		)
Net cash used in financing activities – discontinued operations	—			—			(1,593		)	—			—			—
Net cash provided by (used in) financing activities	(719,630		)	(560,932		)	42,387
Net cash used in financing activities										(464,277		)	(719,630		)	(560,932		)

Net increase (decrease) in cash and cash equivalents	(37,452		)	(640,502		)	772,477
Cash and cash equivalents:
Net decrease in cash, cash equivalents and restricted cash										(176,201		)	(28,503		)	(560,212		)
Cash, cash equivalents and restricted cash:
Beginning	54,355			694,857			2,168			520,953			144,022			704,234
Ending	16,903			54,355			774,645			$	344,752		$	115,519		$	144,022
Less cash and cash equivalents of discontinued operations at end of period	—			—			(15,008		)
Ending – continuing operations	$	16,903		$	54,355		$	759,637

The accompanying notes are an integral part of these condensed consolidated financial statements.

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LINN ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 – Basis of Presentation

When referring to Linn Energy, Inc. ~~(formerly known as Linn Energy, LLC)~~ (“Successor,” “LINN Energy” or the “Company”), the intent is to refer to LINN Energy, a ~~newly formed~~ Delaware corporation formed in February 2017, and its then consolidated subsidiaries as a whole or on an individual basis, depending on the context in which the statements are made. During the reporting period Linn Energy, Inc. iswas a successor issuer of Linn Energy, LLC pursuant to Rule 15d‑5 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Linn Energy, Inc. was not a successor of Linn Energy, LLC for purposes of Delaware corporate law. 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)~~in Note 2) 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.

As discussed under Holding Company Reorganization below in this Note 1, subsequent to the reporting period, on July 25, 2018, the Company completed a corporate reorganization pursuant to which LINN Energy merged with and into Linn Merger Sub #1, LLC (“Merger Sub”), a newly formed Delaware limited liability company and wholly owned subsidiary of New LINN Inc., a newly formed Delaware corporation (“New LINN”), with Merger Sub surviving such merger (the “Merger”). Immediately following the Merger, New LINN changed its name to “Linn Energy, Inc.” For purposes of Rule 15d-5 under the Exchange Act, New LINN is the successor registrant to LINN Energy.

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

Nature of Business

LINN Energy ~~is an independent oil and natural gas company that~~ was formed in February 2017, in connection with the reorganization of the Predecessor. The Predecessor was publicly traded from January 2006 to February 2017. As discussed further in Note 2, on May 11, 2016 (the “Petition Date”), Linn Energy, LLC, certain of its 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 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.

~~The~~Prior to the Spin-off (as defined below), the Company’s upstream properties ~~are currently~~were located in ~~seven~~six operating regions in the United States (“U.S.”)~~, in the Rockies,~~: the Hugoton Basin, East Texas, North Louisiana, Michigan/Illinois, the ~~Mid-Continent, east Texas~~Rockies and ~~north Louisiana~~the Mid-Continent. The Company’s midstream business consisted of the Chisholm Trail gas plant system (“~~TexLa”~~Chisholm Trail”) which is comprised of the newly constructed cryogenic natural gas processing facility, a refrigeration plant, and a network of gathering pipelines located in the Merge/SCOOP/STACK play. The Company also owns a 50% equity interest in Roan Resources LLC (“Roan”), which is focused on the accelerated development of the Merge/SCOOP/STACK play in Oklahoma. During 2018, the Company divested all of its properties located in the previous Permian Basin ~~Michigan/Illinois and south Texas. In July~~operating region. During 2017, the Company divested all of its properties located in ~~California.~~the previous California and South Texas operating regions.

Holding Company Reorganization

On July 25, 2018, in accordance with Section 251(g) of the Delaware General Corporation Law, LINN Energy merged with and into Merger Sub, a newly formed Delaware limited liability company and wholly owned subsidiary of New LINN, with Merger Sub surviving the Merger. The Merger was completed pursuant to the terms of an Agreement and Plan of Merger by and among LINN Energy, New LINN and Merger Sub, dated July 25, 2018 (the “Merger Agreement”).

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LINN ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued

(Unaudited)

Pursuant to the Merger Agreement, at the effective time of the Merger, all outstanding shares of Class A common stock of LINN Energy were automatically converted into identical shares of Class A common stock of New LINN on a one-for-one basis, and LINN Energy’s existing stockholders became stockholders of New LINN in the same amounts and percentages as they were in LINN Energy immediately prior to the Merger.

Spin-Off Transactions

In April 2018, the Company announced its intention to separate its then wholly owned subsidiary, Riviera Resources, LLC (together with its corporate successor, “Riviera”) from LINN Energy. To effect the separation, Linn Energy, Inc. and certain of its direct and indirect subsidiaries undertook an internal reorganization (including the conversion of Riviera from a limited liability company to a corporation), following which Riviera Resources, Inc. holds, directly or through its subsidiaries, substantially all of the assets of LINN Energy, other than LINN Energy’s 50% equity interest in Roan. Following the internal reorganization, Linn Energy, Inc. distributed all of the outstanding shares of common stock of Riviera to LINN Energy stockholders on a pro rata basis (the “Spin-off”). Following the Spin-off, Riviera Resources, Inc. is an independent reporting company quoted for trading on the OTC Market under the ticker “RVRA.” LINN Energy did not retain any ownership interest in Riviera and will remain a reporting company quoted for trading on the OTCQB Market under the symbol “LNGG.” The Spin-off was completed on August 7, 2018.

Principles of Consolidation and Reporting

The information reported herein reflects all normal recurring adjustments that are, in the opinion of management, necessary for the fair presentation of the results for the interim periods. Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted under Securities and Exchange Commission ~~(“SEC”)~~ rules and regulations; as such, this report should be read in conjunction with the financial statements and notes in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2017. The results reported in these unaudited condensed consolidated financial statements should not necessarily be taken as indicative of results that may be expected for the entire year.

The condensed consolidated financial statements include the accounts of the Company and its ~~wholly owned~~pre-Spin-off subsidiaries. All significant intercompany transactions and balances have been eliminated upon consolidation. Noncontrolling interests represented ownership in the net assets of the Company’s previous consolidated subsidiary, Linn Energy Holdco LLC (“Holdco”), not attributable to LINN Energy, and were presented as a component of equity. Changes in the Company’s ownership interests in Holdco that did not result in deconsolidation were recognized in equity. Effective April 10, 2018, all outstanding Class A‑2 units in Holdco (“Holdco Class A-2 units”) were converted into Class A common stock in LINN Energy in accordance with the terms of Holdco’s Limited Liability Company Operating Agreement (the “Holdco LLC Agreement”) and the noncontrolling interest was dissolved. See Note 13 for additional information about noncontrolling interests. Investments in noncontrolled entities over which the Company exercises significant influence are accounted for under the equity method. Redeemable noncontrolling interests on the condensed consolidated balance sheet as of June 30, 2017, relate to the noncontrolling Class B unitholders of the Company’s subsidiary, Linn Energy Holdco LLC (“Holdco”). See Note ~~12 and Note 17~~6 for additional ~~information.~~information about equity method investments.

The condensed consolidated financial statements for previous periods include certain reclassifications that were made to conform to current presentation. ~~In addition, the Company has classified the assets and liabilities of its California properties, as~~

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~~LINN ENERGY, INC.~~

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

~~(Unaudited)~~

~~well as the results of operations and cash flows of its California properties and Berry, as discontinued operations on its condensed consolidated financial statements.~~ Such reclassifications have no impact on previously reported net income (loss)~~, stockholders’/unitholders’ equity (deficit)~~ or stockholders equity. As a result of the adoption of ASU 2016-18 and the inclusion of restricted cash ~~flows.~~in the statements of cash flows, previously reported net cash provided by operating activities and cash provided by investing activities have been updated to conform to current presentation. See ~~Note 4~~recently adopted accounting standards below for additional information.

Bankruptcy Accounting

The condensed consolidated financial statements have been prepared as if the Company will continue as 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 December 31, 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.

Upon emergence from bankruptcy on February 28, 2017, the Company adopted fresh start accounting which resulted in the Company becoming a new entity for financial reporting purposes. As a result of the ~~application~~adoption of fresh start accounting and the effects of the implementation of the ~~plan of reorganization,~~Plan, the Company’s condensed consolidated financial statements ~~on or after~~subsequent to February 28, 2017, are not comparable ~~with the~~to its condensed consolidated financial statements prior to ~~that date.~~February 28, 2017. References to “Successor” relate to the financial position and results of operations of the reorganized Company subsequent to

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LINN ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued

(Unaudited)

February 28, 2017. References to “Predecessor” relate to the financial position of the Company prior to, and results of operations through and including, February 28, 2017. The Company’s condensed consolidated financial statements and related footnotes are presented with a black line division, which delineates the lack of comparability between amounts presented after February 28, 2017, and amounts presented on or prior to February 28, 2017. See Note 32 for additional information.

Use of Estimates

The preparation of the accompanying condensed consolidated financial statements in conformity with GAAP requires management of the Company to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amount of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. The estimates that are particularly significant to the financial statements include estimates of the Company’s reserves of oil, natural gas and natural gas liquids (“NGL”), future cash flows from oil and natural gas properties, depreciation, depletion and amortization, asset retirement obligations, certain revenues and operating expenses, and fair values of commodity ~~derivatives and fair values of assets acquired and liabilities assumed.~~derivatives. In addition, as part of fresh start accounting, the Company made estimates and assumptions related to its reorganization value, liabilities subject to compromise, the fair value of assets and liabilities recorded as a result of the adoption of fresh start accounting and income taxes.

As fair value is a market-based measurement, it is determined based on the assumptions that market participants would use. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. Such estimates and assumptions are adjusted when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ from these estimates. Any changes in estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods.

Recently ~~Issued~~Adopted Accounting Standards

In November 2016, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) that is intended to address diversity in the classification and presentation of changes in restricted cash on the statement of cash flows. This ASU will be applied retrospectively as of the date of adoption and is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years (early adoption permitted). The Company ~~is currently evaluating the impact of the adoption of~~adopted this ASU on ~~its financial statements and related disclosures.~~January 1, 2018, on a retrospective basis. The adoption of this ASU ~~is expected to result~~resulted in the inclusion of restricted cash in the beginning and ending balances of cash on the statements of cash flows and disclosure reconciling cash and cash equivalents presented on the balance sheets to cash, cash equivalents and restricted cash on the statement of cash flows (see Note 17).

In May 2014, the FASB issued an ASU that is intended to improve and converge the financial reporting requirements for revenue from contracts with customers (“ASC 606”). The Company adopted this ASU on January 1, 2018, using the modified retrospective transition method. Accordingly, the comparative information for the six months ended June 30, 2017, has not been adjusted and continues to be reported under the previous revenue standard. The adoption of this ASU impacted the Company’s gross revenues and expenses as reported on its condensed consolidated statements of ~~cash flows.~~operations (see below), and resulted in increased disclosures regarding the Company’s disaggregation of revenue (see Note 3).

Under ASC 606, the Company recognizes revenues based on a determination of when control of its commodities is transferred and whether it is acting as a principal or agent in certain transactions. All facts and circumstances of an arrangement are considered and judgment is often required in making this determination. For its natural gas contracts, the Company generally records its sales at the wellhead or inlet of the plant as revenues net of transportation, gathering and processing expenses if the processor is the customer and there is no redelivery of commodities to the Company. Conversely, the Company generally records its sales at the tailgate of the plant on a gross basis along with the associated transportation, gathering and processing expenses if the processor is a service provider and there is redelivery of commodities to the Company.

In addition, the Company recognizes revenues for commodities received as noncash consideration in exchange for services provided by its midstream operations and revenues and associated cost of product for the subsequent sale of those same commodities. This recognition results in an increase to revenues and expenses with no material impact on net income.

910

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LINN ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued

(Unaudited)

~~In March 2016,~~The items discussed above impacted the ~~FASB issued an ASU that is intended to simplify several aspects~~Company’s reported “oil, natural gas and natural gas liquids sales,” “marketing revenues,” “other revenues,” “transportation expenses,” “marketing expenses” and “interest expense.” The impact of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. The Company adopted this ASU on January 1, 2017. The adoption ~~of this ASU had no impact~~ on the Company’s historical financial statements or related disclosures. Upon adoption and subsequently this ASU will result in excess tax benefits, which were previously recorded in equity on the balance sheets and classifiedcurrent period results is as financing activities on the statements of cash flows, being recorded in the statements of operations and classified as operating activities on the statements of cash flows. Additionally, the Company elected to begin accounting for forfeitures as they occur.follows:



	Three Months Ended June 30, 2018
	Under ASC 606		Under Prior Rule		Increase/ (Decrease)
	(in thousands)
Revenues:
Natural gas sales	$	53,662	$	53,285	$	377
Oil sales	10,919		10,919		—
NGL sales	22,423		22,280		143
Total oil, natural gas and NGL sales	87,004		86,484		520
Marketing revenues	42,967		25,406		17,561
Other revenues	6,387		6,003		384
	136,358		117,893		18,465
Expenses:
Transportation expenses	21,213		20,693		520
Marketing expenses	40,327		22,766		17,561
Interest expense	584		420		164
Net income	$	6,903	$	6,683	$	220



	Six Months Ended June 30, 2018
	Under ASC 606		Under Prior Rule		Increase/ (Decrease)
	(in thousands)
Revenues:
Natural gas sales	$	116,990	$	117,794	$	(804	)
Oil sales	56,615		56,615		—
NGL sales	50,275		50,222		53
Total oil, natural gas and NGL sales	223,880		224,631		(751		)
Marketing revenues	89,234		53,521		35,713
Other revenues	12,281		11,676		605
	325,395		289,828		35,567
Expenses:
Transportation expenses	40,307		41,058		(751		)
Marketing expenses	82,082		46,369		35,713
Interest expense	988		824		164
Net income	$	78,001	$	77,560	$	441

New Accounting Standards Issued But Not Yet Adopted

In February 2016, the FASB issued an ASU that is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet. This ASU ~~will be applied retrospectively as of the date of adoption and~~ is effective for fiscal years beginning after

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LINN ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued

(Unaudited)

December 15, 2018, and interim periods within those years (early adoption permitted). The Company is currently evaluating the impact of the adoption of this ASU on its financial statements and related disclosures. The Company expects the adoption of this ASU to impact its balance ~~sheets~~sheet resulting from an increase in both assets and liabilities related to the Company’s leasing activities.

In May 2014, the FASB issued an ASU that is intended to improve and converge the financial reporting requirements for revenue from contracts with customers. This ASU is effective for fiscal years beginning after December 15, 2017, and interim periods within those years (early adoption permitted for fiscal years beginning after December 15, 2016, including interim periods within that year). The Company does not plan to early adopt this ASU. The Company is currently evaluating the impact of the adoption of this ASU on its financial statements and related disclosures. The Company expects to use the cumulative-effect transition method, has completed an initial review of its contracts and is developing accounting policies to address the provisions of the ASU, but has not finalized any estimates of the potential impacts.

Note 2 – Emergence From Voluntary Reorganization Under Chapter 11 and Fresh Start Accounting

On the Petition Date, 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 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 Court.

On December 13, 2016, LAC and Berry filed the Amended Joint Chapter 11 Plan of Reorganization of Linn Acquisition Company, LLC and Berry Petroleum Company, LLC (the “Berry Plan” and together with the Plan, the “Plans”). LAC and Berry subsequently filed amended versions of the Berry Plan with the Bankruptcy Court.

On January 27, 2017, the Bankruptcy Court 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

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~~LINN ENERGY, INC.~~

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

~~(Unaudited)~~

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 equity interests in LAC and the Predecessor were canceled and (iii) LAC and the Predecessor commenced liquidation, which is expected to be completed following the resolution of the respective companies’ outstanding claims.

The holders of claims under the 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 $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 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 about the Successor Credit Facility, see Note 6.

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 rights to purchase shares of Class A common stock in the rights offerings, as described below; and (iii) $30 million in cash. The holders of the Company’s 6.50% senior notes 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 “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 the Unsecured Notes and the indentures governing such obligations were canceled.

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 the Effective Date.

All units of the Predecessor that were issued and outstanding immediately prior to the Effective Date were extinguished without recovery. On the Effective Date, the Successor issued in the aggregate 89,229,892 shares of Class A common stock. No cash was raised from the issuance of the Class A common stock on account of claims held by the Predecessor’s creditors.

The Successor entered into a registration rights agreement with certain parties, pursuant to which the Company agreed to, among other things, file a registration statement with the SEC within 60 days of the Effective Date covering the offer and resale of “Registrable Securities” (as defined therein).

By operation of the Plan and the 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 the rights offerings procedures filed in the Chapter 11 cases and approved by the Bankruptcy Court, the LINN Debtors offered eligible creditors the right to purchase Class A common stock upon emergence from the Chapter 11 cases for an aggregate purchase price of $530 million.

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~~LINN ENERGY, INC.~~

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

~~(Unaudited)~~

Under the Backstop Commitment Agreement, certain Backstop Parties agreed to purchase their pro rata share of the shares that were not duly subscribed to pursuant to the 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 $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 Backstop Commitment Agreement were met, and the LINN Debtors completed the rights offerings and the related issuances of Class A common stock.

~~Liabilities Subject to Compromise~~

The Predecessor’s condensed consolidated balance sheet as of December 31, 2016, includes amounts classified as “liabilities subject to compromise,” which represent prepetition liabilities that were allowed, or that the Company estimated would be allowed, as claims in its Chapter 11 cases. The following table summarizes the components of liabilities subject to compromise included on the condensed consolidated balance sheet:

Predecessor
December 31, 2016
(in thousands)

Accounts payable and accrued expenses $ 137,692
Accrued interest payable 144,184
Debt 4,023,129
Liabilities subject to compromise $ 4,305,005

Reorganization Items, Net

The Company incurred significant costs and recognized significant gains associated with the reorganization. Reorganization items represent costs and income directly associated with the Chapter 11 proceedings since the Petition Date, and also include adjustments to reflect the carrying value of certain liabilities subject to compromise at their estimated allowed claim amounts, as such adjustments were determined. The following ~~tables summarize~~table summarizes the components of reorganization items included on the condensed consolidated statements of operations:


	Successor			Predecessor			Successor
	Three Months Ended June 30, 2017			Three Months Ended June 30, 2016			Three Months Ended June 30,
(in thousands)
							2018			2017
							(in thousands)

Legal and other professional advisory fees	$	(3,446	)	$	(13,451	)	$	(1,255	)	$	(3,446	)
Unamortized deferred financing fees, discounts and premiums	—			(52,045		)
Gain related to interest payable on Predecessor’s Second Lien Notes	—			551,000
Other	69			294			(4		)	69
Reorganization items, net	$	(3,377	)	$	485,798		$	(1,259	)	$	(3,377	)

Table of Contents

LINN ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued

(Unaudited)


	Successor			Predecessor						Successor						Predecessor
	Four Months Ended June 30, 2017			Two Months Ended February 28, 2017			Six Months Ended June 30, 2016			Six Months Ended June 30, 2018			Four Months Ended June 30, 2017			Two Months Ended February 28, 2017
(in thousands)
Gain on settlement of liabilities subject to compromise	$	—		$	3,724,750		$	—		$	—		$	—		$	3,724,750
Recognition of an additional claim for the Predecessor’s Second Lien Notes settlement	—			(1,000,000		)	—
Recognition of an additional claim for the Predecessor’s second lien notes settlement										—			—			(1,000,000		)
Fresh start valuation adjustments	—			(591,525		)	—			—			—			(591,525		)
Income tax benefit related to implementation of the Plan	—			264,889			—			—			—			264,889
Legal and other professional advisory fees	(6,016		)	(46,961		)	(13,451		)
Unamortized deferred financing fees, discounts and premiums	—			—			(52,045		)
Gain related to interest payable on Predecessor’s Second Lien Notes	—			—			551,000
Legal and other professional fees										(3,207		)	(6,016		)	(46,961		)
Terminated contracts	—			(6,915		)	—			—			—			(6,915		)
Other	74			(13,049		)	294			(3		)	74			(13,049		)
Reorganization items, net	$	(5,942	)	$	2,331,189		$	485,798		$	(3,210	)	$	(5,942	)	$	2,331,189

~~Note 3 –~~ Fresh Start Accounting

Upon the Company’s emergence from Chapter 11 bankruptcy, it adopted fresh start accounting in accordance with the provisions of Accounting Standards Codification 852 “Reorganizations” (“ASC ~~852~~852”), which resulted in the Company becoming a new entity for financial reporting purposes. In accordance with ASC 852, the Company was required to adopt fresh start accounting upon its emergence from Chapter 11 because (i) the holders of existing voting ownership interests of the Predecessor received less than 50% of the voting shares of the Successor and (ii) the reorganization value of the Company’s assets immediately prior to confirmation of the Plan was less than the total of all post-petition liabilities and allowed claims.

Upon adoption of fresh start accounting, the reorganization value derived from the enterprise value as disclosed in the Plan was allocated to the Company’s assets and liabilities based on their fair values (except for deferred income taxes) in accordance with ASC 805 “Business ~~Combinations” (“ASC 805”).~~Combinations.” The amount of deferred income taxes recorded was determined in accordance with ASC 740 “Income ~~Taxes” (“ASC 740”).~~Taxes.” The Effective Date fair values of the Company’s assets and liabilities differed materially from their recorded values as reflected on the historical balance sheet. The effects of the Plan and the application of fresh start accounting were reflected on the condensed consolidated balance sheet as of February 28, 2017, and the related adjustments thereto were recorded on the condensed consolidated statement of operations for the two months ended February 28, 2017.

Note 3 – Revenues

Revenue from Contracts with Customers

The Company recognized sales of oil, natural gas and NGL when it satisfied a ~~result~~performance obligation by transferring control of the ~~adoption of fresh start accounting and~~product to a customer, in an amount that reflected the ~~effects of the implementation of the Plan, the Company’s condensed consolidated financial statements subsequent~~consideration to February 28, 2017, are not comparable to its condensed consolidated financial statements prior to February 28, 2017. References to “Successor” relate to the financial position and results of operations of the reorganized Company as of and subsequent to February 28, 2017. References to “Predecessor” relate to the financial position ofwhich the Company ~~prior~~expected to be entitled in exchange for the product.

Natural Gas and ~~results of operations through and including, February 28, 2017.~~NGL Sales

The Company’s ~~condensed consolidated financial statements and related footnotes are presented with~~natural gas production was primarily sold under market-sensitive contracts that were typically priced at a ~~black line division, which delineates~~differential to the ~~lack of comparability between amounts presented after February 28, 2017, and amounts presented on or prior~~published natural gas index price for the producing area due to ~~February 28, 2017. The Company’s financial results for future periods following~~ the ~~application of fresh start accounting will be different from historical trends~~natural gas quality and the ~~differences may be material.~~proximity to major consuming markets.

For its natural gas contracts, the Company generally recorded its wet gas sales at the wellhead or inlet of the plant as revenues net of transportation, gathering and processing expenses, and its residual natural gas and NGL sales at the tailgate of the plant on a gross basis along with the associated transportation, gathering and processing expenses. All facts and circumstances of an arrangement were considered and judgment was often required in making this determination.

Table of Contents

LINN ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued

(Unaudited)

~~Reorganization Value~~Oil Sales

~~Under ASC 852, the Successor determined~~The Company’s oil production was primarily sold under market-sensitive contracts that were typically priced at a ~~value to be assigned~~differential to the equity of the emerging entity as of the date of adoption of fresh start accounting. The Plan confirmed by the Bankruptcy Court estimated an enterprise value of $2.35 billion. The Plan enterprise value was prepared using an asset based methodology, as discussed further below. The enterprise value was then adjusted to determine the equity value of the Successor of approximately $2.03 billion. Adjustments to determine the equity value are presented below (in thousands):

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

The subsequently determined tax attributes 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. The Class B units are incentive interest awards that were granted on the Effective Date by Holdco to certain members of its management (see Note 12), and the associated fair value was recorded as a liability of approximately $7 million in “other accrued liabilities” and temporary equity of approximately $29 million in “redeemable noncontrolling interests” on the condensed consolidated balance sheet at February 28, 2017.

The Company's principal assets are its oil and natural gas properties. The fair values of oil and natural gas properties were estimated using valuation techniques consistent with the income approach, converting future cash flows to a single discounted amount. Significant inputs used to determine the fair values of properties include estimates of: (i) reserves; (ii) future operating and development costs; (iii) future commodity prices; and (iv) a market-based weighted average cost of capital rate. These inputs require significant judgments and estimates by the Company’s management at the time of the valuation and are the most sensitive and subject to change. The underlying commodity prices embedded in the Company’s estimated cash flows are the product of a process that begins with New York Mercantile Exchange (“NYMEX”) ~~forward curve pricing, adjusted~~price or at purchaser posted prices for the producing area. For its oil contracts, the Company generally recorded its sales based on the net amount received.

Production Imbalances

The Company used the sales method to account for natural gas production imbalances. If the Company’s sales volumes for a well exceeded the Company’s proportionate share of production from the well, a liability was recognized to the extent that the Company’s share of estimated ~~location and quality differentials, as~~remaining recoverable reserves from the well ~~as other factors that~~was insufficient to satisfy this imbalance. No receivables were recorded for those wells on which the Company ~~management believes will impact realizable prices.~~had taken less than its proportionate share of production.

~~See below under “Fresh Start Adjustments” for additional information regarding assumptions used~~Marketing Revenues

The Company engaged in the ~~valuation~~purchase, gathering and transportation of third-party natural gas and subsequently marketed such natural gas to independent purchasers under separate arrangements. As such, the ~~Company's various other significant assets~~Company separately reported third-party marketing revenues and ~~liabilities.~~marketing expenses.

~~Condensed Consolidated Balance Sheet~~Disaggregation of Revenue

The ~~adjustments included in~~following tables present the ~~following fresh start condensed consolidated balance sheet reflect the effects of the transactions contemplated~~Company’s disaggregated revenues by ~~the Plan~~source and executed by the Company on the Effective Date (reflected in the column “Reorganization Adjustments”) as well as fair value and other required accounting adjustments resulting from the adoption of fresh start accounting (reflected in the column “Fresh Start Adjustments”). The explanatory notes provide additional information with regard to the adjustments recorded, the methods used to determine the fair values and significant assumptions.geographic area:



	Three Months Ended June 30, 2018
	Natural Gas		Oil		NGL			Oil, Natural Gas and NGL Sales		Marketing Revenues		Other Revenues		Total
	(in thousands)

Hugoton Basin	$	17,401	$	238	$	16,875		$	34,514	$	22,421	$	6,303	$	63,238
Mid-Continent	7,622		4,880		3,307			15,809		—		25		15,834
East Texas	12,661		1,091		1,013			14,765		467		3		15,235
Permian Basin	256		546		(488		)	314		—		16		330
Rockies	2,146		1,885		1,201			5,232		—		1		5,233
North Louisiana	6,040		1,480		503			8,023		13		2		8,038
Michigan/Illinois	7,536		799		12			8,347		—		37		8,384
Chisholm Trail	—		—		—			—		20,066		—		20,066
Total	$	53,662	$	10,919	$	22,423		$	87,004	$	42,967	$	6,387	$	136,358

Table of Contents

LINN ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued

(Unaudited)

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



	Six Months Ended June 30, 2018
	Natural Gas		Oil		NGL		Oil, Natural Gas and NGL Sales		Marketing Revenues		Other Revenues			Total
	(in thousands)

Hugoton Basin	$	39,764	$	2,970	$	36,389	$	79,123	$	46,501	$	12,134		$	137,758
Mid-Continent	15,555		16,747		6,361		38,663		—		39			38,702
East Texas	27,437		2,431		2,319		32,187		503		8			32,698
Permian Basin	2,282		20,654		2,557		25,493		—		32			25,525
Rockies	5,526		9,255		2,559		17,340		—		(1		)	17,339
North Louisiana	12,418		3,049		67		15,534		272		3			15,809
Michigan/Illinois	14,008		1,509		23		15,540		—		66			15,606
Chisholm Trail	—		—		—		—		41,958		—			41,958
Total	$	116,990	$	56,615	$	50,275	$	223,880	$	89,234	$	12,281		$	325,395

Contract Balances

Under the Company’s product sales contracts, its customers were invoiced once the Company’s performance obligations had been satisfied, at which point payment was unconditional. Accordingly, the Company’s product sales contracts did not give rise to material contract assets or contract liabilities.

The Company had trade accounts receivable related to revenue from contracts with customers of approximately $56 million and $117 million as of June 30, 2018, and December 31, 2017, respectively.

Performance Obligations

The majority of the Company’s sales were short-term in nature with a contract term of one year or less. For those contracts, the Company utilized the practical expedient in ASC 606-10-50-14 exempting the Company from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation was part of a contract that had an original expected duration of one year or less.

For the Company’s product sales that had a contract term greater than one year, the Company utilized the practical expedient in ASC 606-10-50-14(A) which states the Company was not required to disclose the transaction price allocated to remaining performance obligations if the variable consideration was allocated entirely to a wholly unsatisfied performance obligation. Under these sales contracts, each unit of product generally represented a separate performance obligation; therefore future volumes were wholly unsatisfied and disclosure of the transaction price allocated to remaining performance obligations was not required.

Note 4 – Divestitures and Discontinued Operations

Divestitures – 2018

On April 10, 2018, the Company completed the sale of its conventional properties located in New Mexico. Cash proceeds received from the sale of these properties were approximately $15 million and the Company recognized a net gain of approximately $11 million.

Table of Contents

LINN ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued

(Unaudited)

On April 4, 2018, the Company completed the sale of its interest in properties located in the Altamont Bluebell Field in Utah (the “Altamont Bluebell Assets Sale”). Cash proceeds received from the sale of these properties were approximately $132 million, net of costs to sell of approximately $2 million, and the Company recognized a net gain of approximately $83 million.

As of February 28, 2017
Predecessor
Reorganization Adjustments ⁽¹⁾
Fresh Start Adjustments Successor
Stockholders’/unitholders’ equity (deficit):
Predecessor units issued and outstanding 5,386,812
(5,386,812 )
⁽¹⁴⁾
—
—
Predecessor accumulated deficit (7,680,027 ) 2,884,740
⁽¹⁵⁾
4,795,287
⁽²⁴⁾
—
Successor Class A common stock —
89
⁽¹⁴⁾
—
89
Successor additional paid-in capital —
7,421,704
⁽¹⁴⁾
(5,386,812 )
⁽²⁴⁾
2,034,892
Successor retained earnings —
—
—
—
Total stockholders’/unitholders’ equity (deficit) (2,293,215 ) 4,919,721
(591,525 ) 2,034,981
Total liabilities and equity (deficit) $ 4,724,608
$ (350,590 ) $ (646,011 ) $ 3,728,007
On March 29, 2018, the Company completed the sale of its interest in conventional properties located in west Texas. Cash proceeds received from the sale of these properties were approximately $107 million, net of costs to sell of approximately $2 million, and the Company recognized a net gain of approximately $55 million.

~~Reorganization Adjustments:~~On February 28, 2018, the Company completed the sale of its Oklahoma waterflood and Texas Panhandle properties (the “Oklahoma and Texas Assets Sale”). Cash proceeds received from the sale of these properties were approximately $112 million (including a deposit of approximately $12 million received in 2017), net of costs to sell of approximately $1 million, and the Company recognized a net gain of approximately $46 million.

Represent amounts recorded as of the Effective Date for the implementation of the Plan, including, among other items, settlement of the Predecessor’s liabilities subject to compromise, repayment of certain of the Predecessor’s debt, cancellation of the Predecessor’s equity, issuances of the Successor’s Class A common stock, proceeds received from the Successor’s rights offerings and issuance of the Successor’s debt.


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

The divestitures discussed above are not presented as discontinued operations because they do not represent a strategic shift that will have a major effect on the Company’s operations and financial results. The gains on these divestitures are included in “(gains) losses on sale of assets and other, net” on the condensed consolidated statements of operations and were part of the upstream segment.

The assets and liabilities associated with the Oklahoma and Texas Assets Sale were classified as “held for sale” on the condensed consolidated balance sheet at December 31, 2017. At December 31, 2017, the Company’s condensed consolidated balance sheet included current assets of approximately $107 million included in “assets held for sale” and current liabilities of approximately $43 million included in “liabilities held for sale” related to this transaction.

The following table presents carrying amounts of the assets and liabilities of the Company’s properties classified as held for sale on the condensed consolidated balance sheet:

(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 )



	December 31, 2017
	(in thousands)
Assets:
Oil and natural gas properties	$	92,245
Other property and equipment	12,983
Other	1,735
Total assets held for sale	$	106,963
Liabilities:
Asset retirement obligations	$	42,001
Other	1,301
Total liabilities held for sale	$	43,302


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.~~

Other assets primarily include inventories and other liabilities primarily include accounts payable.

Divestitures – 2017

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.

Table of Contents

LINN ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued

(Unaudited)


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.

~~Table~~The gains on these divestitures are included in “(gains) losses on sale of ~~Contents~~

~~LINN ENERGY, INC.~~

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

~~(Unaudited)~~


~~14)~~	~~Net increase in capital accounts reflects:~~

(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

~~See Note 11 for additional information~~assets and other, net” on the ~~issuances~~condensed consolidated statements of ~~the Successor’s equity.~~


~~15)~~	~~Net decrease in accumulated deficit reflects:~~

(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

~~Fresh Start Adjustments:~~


~~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.~~

~~Table of Contents~~

~~LINN ENERGY, INC.~~

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

~~(Unaudited)~~


~~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:

Successor Predecessor
Fair Value Historical Book Value
(in thousands)
Natural gas plants and pipelines $ 342,924
$ 426,914
Office equipment and furniture 39,211
106,059
Buildings and leasehold improvements 32,817
66,023
Vehicles 16,980
30,760
Land 7,747
3,727
Drilling and other equipment 4,254
8,103
443,933
641,586
Less accumulated depreciation —
(230,952 )
$ 443,933
$ 410,634

In estimating the fair value of other property and equipment, the Company used a combination of cost and market approaches. A cost approach was used to value the Company’s natural gas plants and pipelines and other operating assets, based on current replacement costs of the assets less depreciation based on the estimated economic useful lives of the assets and age of the assets. A market approach was used to value the Company’s vehicles and land, using recent transactions of similar assets to determine the fair value from a market participant perspective.

~~20)~~

Reflects the recognition of intangible assets for the noncurrent portion of favorable leases, as well as increases in equity method investments and carbon credit allowances. Assets and liabilities for out-of-market contracts were valued based on market terms as of February 28, 2017, and will be amortized over the remaining life of the respective lease. The Company’s equity method investments were valued based on a market approach using a market EBITDA multiple. Carbon credit allowances were valued using a market approach based on trading prices for carbon credits on February 28, 2017.


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


~~22)~~	~~Reflects an increase of the current portion of asset retirement obligations.~~


~~23)~~	Primarily reflects a decrease of approximately $49 million for asset retirement obligations and approximately $5 million for deferred rent, partially offset by an increase of approximately $1 million for carbon emissions liabilities. The fair value

~~Table of Contents~~

~~LINN ENERGY, INC.~~

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

~~(Unaudited)~~

of asset retirement obligations were estimated using valuation techniques that convert future cash flows to a single discounted amount. Significant inputs to the valuation include estimates of: (i) plug and abandon costs per well based on existing regulatory requirements; (ii) remaining life per well; (iii) future inflation factors; and (iv) a credit-adjusted risk-free interest rate. Carbon emissions liabilities were valued using a market approach based on trading prices for carbon credits on February 28, 2017.


~~24)~~	~~Reflects the cumulative impact of the fresh start accounting adjustments discussed above and the elimination of the Predecessor’s accumulated deficit.~~

~~Note 4 – Discontinued Operations, Other Divestitures and Joint Venture~~operations.

Discontinued Operations

~~On July 31,~~During 2017, the Company completed the sale of its interest in properties located in the San Joaquin Basin ~~in California to Berry Petroleum Company, LLC (the “San Joaquin Basin Sale”)~~ and ~~received cash proceeds of approximately $257 million.~~

~~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.

California. 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 California properties were included in the upstream segment.

On December 3, 2016, LINN Energy filed an amended plan of reorganization that excluded Berry (see Note 2). 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 following ~~table presents carrying amounts of the assets and liabilities~~tables present summarized financial results of the Company’s California properties classified as discontinued operations on the condensed consolidated ~~balance sheets:~~

Successor Predecessor
June 30, 2017 December 31, 2016
(in thousands)
Assets:
Oil and natural gas properties $ 213,442
$ 728,190
Other property and equipment 11,339
11,402
Other 10,862
1,435
Total assets of discontinued operations $ 235,643
$ 741,027
Liabilities:
Asset retirement obligations $ 26,774
$ 38,042
Other 1,444
1,481
Total liabilities of discontinued operations $ 28,218
$ 39,523

All balances of discontinued operations on the condensed consolidated balance sheets relate to the Company’s California properties, as Berry was deconsolidated effective December 3, 2016. At June 30, 2017, the carrying values of the California properties were reduced to fair value less costs to sell, resulting in an impairment charge of approximately $13 million for the three months and four months ended June 30, 2017. The impairment charge is included in “income (loss) from discontinued

~~Table of Contents~~

~~LINN ENERGY, INC.~~

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

~~(Unaudited)~~

operations, net of income taxes” on the condensed consolidated statements of operations. Other assets primarily include restricted cash and inventories, and other liabilities primarily include carbon emissions liabilities. All assets and liabilities related to the California properties were classified as current on the condensed consolidated balance sheet as of June 30, 2017.

~~The following tables present summarized financial results of the Company’s California properties and Berry classified as discontinued operations on the condensed consolidated~~ statements of operations:


	Successor			Predecessor			Successor						Predecessor
	Three Months Ended June 30, 2017			Three Months Ended June 30, 2016			Three Months Ended June 30, 2017			Four Months Ended June 30, 2017			Two Months Ended February 28, 2017
(in thousands)
Revenues and other	$	20,511		$	129,245		$	20,511		$	27,636		$	14,891
Expenses	25,935			156,176			25,935			30,344			13,758
Other income and (expenses)	(2,074		)	(18,190		)	(2,074		)	(2,791		)	(1,681		)
Reorganization items, net	—			49,086
Income (loss) from discontinued operations before income taxes	(7,498		)	3,965
Income tax expense (benefit)	(4,176		)	164
Income (loss) from discontinued operations, net of income taxes	$	(3,322	)	$	3,801
Loss from discontinued operations before income taxes							(7,498		)	(5,499		)	(548		)
Income tax benefit							(4,176		)	(2,245		)	—
Loss from discontinued operations, net of income taxes							$	(3,322	)	$	(3,254	)	$	(548	)

Successor Predecessor
Four Months Ended June 30, 2017 Two Months Ended February 28, 2017 Six Months Ended June 30, 2016
(in thousands)
Revenues and other $ 27,636
$ 14,891
$ 235,949
Expenses 30,344
13,758
1,375,480
Other income and (expenses) (2,791 ) (1,681 ) (39,470 )
Reorganization items, net —
—
49,086
Loss from discontinued operations before income taxes (5,499 ) (548 ) (1,129,915 )
Income tax expense (benefit) (2,245 ) —
162
Loss from discontinued operations, net of income taxes $ (3,254 ) $ (548 ) $ (1,130,077 )

~~Results of operations of Berry are only included in the three months and six months ended June 30, 2016, as Berry was deconsolidated effective December 3, 2016.~~ Other income and (expenses) include an allocation of interest expense for the California properties of approximately $2 million for each of the three months ended June 30, 2017, and June 30, 2016, and approximately $3 million, $2 million and $3 million for the four months ended June 30, 2017, the two months ended February 28, 2017, and the six months ended June 30, 2016, respectively, which represents interest on debt that was required to be repaid as a result of the sales.

Berry Transition Services and Separation Agreement

On the Effective Date, Berry entered into a Transition Services and Separation Agreement (the “TSSA”) with LINN Energy and certain of its subsidiaries to facilitate the separation of Berry’s operations from LINN Energy’s operations. Pursuant to the TSSA, LINN Energy continued to provide, or caused to be provided, certain administrative, management, operating, and other services and support to Berry during a transitional period following the Effective Date (the “Transition Services”).

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~~LINN ENERGY, INC.~~

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

~~(Unaudited)~~

Under the TSSA, Berry reimbursed LINN Energy for any and all reasonable, third-party out-of-pocket costs and expenses, without markup, actually incurred by LINN Energy, to the extent documented, in connection with providing the Transition Services. Additionally, Berry paid to LINN Energy a management fee of $6 million per month, prorated for partial months, during the period from the Effective Date through the last day of the second full calendar month after the Effective Date (the “Transition Period”) and paid $2.7 million per month, prorated for partial months, from the first day following the Transition Period through the last day of the second full calendar month thereafter (the “Accounting Period”). During the Accounting Period, the scope of the Transition Services was reduced to specified accounting and administrative functions. The Transition Period ended April 30, 2017, and the Accounting Period ended June 30, 2017.

~~Other Divestitures~~

~~On May 9, 2017, the Company completed the sale of undeveloped acreage located in Ward County, Texas and received cash proceeds of approximately $4 million.~~

The three divestitures discussed above are not presented as discontinued operations because they do not represent a strategic shift that will have a major effect on the Company’s operations and financial results. The gains on these divestitures are included in “gains (losses) on sale of assets and other, net” on the condensed consolidated statements of operations.

~~Divestitures – Subsequent Events~~

On August 1, 2017, and July 31, 2017, the Company completed the sales of its interest in certain properties located in south Texas (the “South Texas Assets Sales”) related to definitive purchase and sale agreements entered into in June 2017 and received cash proceeds of approximately $9 million and approximately $23 million, respectively.

On July 28, 2017, the Company completed the sale of undeveloped acreage located in Lea and Eddy counties in New Mexico (the “Permian Acreage Sale”) related to a definitive purchase and sale agreement entered into in June 2017 and received cash proceeds of approximately $21 million.

~~Joint Venture – Pending~~

On June 27, 2017, the Company, through certain of its 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 newly formed company, Roan Resources LLC (“Roan”), focused on the 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 equity interest in Roan. The transaction is anticipated to close in the third quarter of 2017, subject to closing conditions. There can be no assurance that all of the conditions to closing will be satisfied.

~~Assets and Liabilities Held For Sale~~

The assets and liabilities associated with the South Texas Assets Sales and the Permian Acreage Sale, as well as the properties to be contributed in the pending Roan joint venture, are classified as “held for sale” on the condensed consolidated balance sheet. At June 30, 2017, the Company’s condensed consolidated balance sheet included current assets of approximately $236 million included in “assets held for sale” and current liabilities of approximately $36 million included in “liabilities held for sale” related to these transactions.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued

(Unaudited)

~~The following table presents carrying amounts of the assets and liabilities of the Company’s properties classified as held for sale on the condensed consolidated balance sheet:~~

Successor
June 30, 2017
(in thousands)

Assets:
Oil and natural gas properties $ 224,918
Other property and equipment 11,070
Other 433
Total assets held for sale $ 236,421
Liabilities:
Asset retirement obligations $ 21,210
Other 15,177
Total liabilities held for sale $ 36,387

~~Other assets primarily include inventories and other liabilities primarily include accounts payable.~~

Note 5 – Oil and Natural Gas Properties

Oil and Natural Gas Capitalized Costs

As a result of the application of fresh start accounting, the Company recorded its oil and natural gas properties at fair value as of the Effective Date. The fair values of oil and natural gas properties are estimated using valuation techniques consistent with the income approach, converting future cash flows to a single discounted amount. Significant inputs used to determine the fair values of proved and unproved properties include estimates of: (i) reserves; (ii) future operating and development costs; (iii) future commodity prices; and (iv) a market-based weighted average cost of capital rate. These inputs require significant judgments and estimates by the Company’s management at the time of the valuation and are the most sensitive and subject to change. The fair value was estimated using inputs characteristic of a Level 3 fair value measurement. Aggregate capitalized costs related to oil, natural gas and NGL production activities with applicable accumulated depletion and amortization are presented below:


	Successor			Predecessor			June 30, 2018			December 31, 2017
	June 30, 2017			December 31, 2016			(in thousands)
(in thousands)

Proved properties	$	1,443,916		$	11,350,257		$	739,656		$	904,390
Unproved properties	194			998,860			46,159			45,693
	1,444,110			12,349,117			785,815			950,083
Less accumulated depletion and amortization	(37,572		)	(9,843,908		)	(59,870		)	(49,619		)
	$	1,406,538		$	2,505,209		$	725,945		$	900,464

~~Impairment~~

Note 6 – Equity Method Investments

On August 31, 2017, the Company, through certain of ~~Proved Properties~~its subsidiaries, completed the transaction in which LINN Energy and Citizen Energy II, LLC (“Citizen”) each contributed certain upstream assets located in Oklahoma to a newly formed company, Roan (the contribution, the “Roan Contribution”), focused on the accelerated development of the Merge/SCOOP/STACK play. In exchange for their respective contributions, LINN Energy and Citizen each received a 50% equity interest in Roan.

The Company ~~evaluates~~uses the ~~impairment~~equity method of accounting for its investment in Roan. The Company’s equity earnings (losses) consists of its share of Roan’s earnings or losses and the amortization of the difference between the Company’s investment in Roan and Roan’s underlying net assets attributable to certain assets. At both June 30, 2018, and December 31, 2017, the Company owned 50% of Roan’s outstanding units.

At June 30, 2018, the carrying amount of the Company’s investment in Roan of approximately $466 million was less than the Company’s ownership interest in Roan’s underlying net assets by approximately $355 million. The difference is attributable to proved and unproved oil and natural gas properties and is amortized over the lives of the related assets. Such amortization is included in the equity earnings (losses) from the Company’s investment in Roan. At December 31, 2017, the carrying amount of the Company’s investment in Roan of approximately $458 million was less than the Company’s ownership interest in Roan’s underlying net assets by approximately $346 million.

Impairment testing on ~~a field-by-field basis whenever~~the Company’s investment in Roan is performed when events or ~~changes in~~ circumstances ~~indicate that~~warrant such testing and considers whether there is an inability to recover the carrying value ~~may not be recoverable. The carrying values~~ of ~~proved properties are reduced~~the investment that is other than temporary. No impairments occurred with respect to ~~fair value when~~ the ~~expected undiscounted future cash flows~~Company’s investment in Roan for the six months ended June 30, 2018.

Following is summarized statements of ~~proved and risk-adjusted probable and possible reserves are less than net book value.~~operations information for Roan.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued

(Unaudited)

~~Based on the analysis described above, for the six months ended June 30, 2016, the Company recorded an impairment charge~~Summarized Roan Resources LLC Statements of approximately $123 million associated with proved oil and natural gas properties in the Mid-Continent region due to a decline in commodity prices, changes in expected capital development and a decline in the Company’s estimates of proved reserves. The carrying values of the impaired proved properties were reduced to fair value, estimated using inputs characteristic of a Level 3 fair value measurement. The impairment charges are included in “impairment of long-lived assets” on the condensed consolidated statement of operations. The Company recorded no impairment charges for the six months ended June 30, 2017, or the three months ended June 30, 2016.Operations Information



	Three Months Ended June 30, 2018			Six Months Ended June 30, 2018
	(in thousands)

Revenues and other	$	44,789		$	145,873
Expenses	72,754			130,663
Other income and (expenses)	(1,087		)	(2,886		)
Net income (loss)	$	(29,052	)	$	12,324

Note 67 – Debt

~~The following summarizes the Company’s outstanding debt:~~

Successor Predecessor
June 30, 2017 December 31, 2016
(in thousands, except percentages)
Successor revolving loan ⁽¹⁾
$ 183,430
$ —
Predecessor credit facility ⁽²⁾
—
1,654,745
Predecessor term loan ⁽²⁾
—
284,241
6.50% senior notes due May 2019 —
562,234
6.25% senior notes due November 2019 —
581,402
8.625% senior notes due April 2020 —
718,596
12.00% senior secured second lien notes due December 2020 —
1,000,000
7.75% senior notes due February 2021 —
779,474
6.50% senior notes due September 2021 —
381,423
Net unamortized deferred financing fees —
(1,257 )
Total debt, net 183,430
5,960,858
Less current portion, net ⁽³⁾
—
(1,937,729 )
Less liabilities subject to compromise ⁽⁴⁾
—
(4,023,129 )
Long-term debt $ 183,430
$ —


⁽¹⁾	~~Variable interest rate of 4.59%at June 30, 2017.~~


⁽²⁾	~~Variable interest rate of 5.50%at December 31, 2016.~~


⁽³⁾	~~Due to covenant violations, the Predecessor’s credit facility and term loan were classified as current at December 31, 2016.~~


⁽⁴⁾	The Predecessor’s senior notes and Second Lien Notes were classified as liabilities subject to compromise at December 31, 2016. On the Effective Date, pursuant to the terms of the Plan, all outstanding amounts under these debt instruments were canceled.

~~Fair Value~~

The Company’s debt is recorded at the carrying amount on the condensed consolidated balance sheets. The carrying amounts of the credit facilities and term loans approximate fair value because the interest rates are variable and reflective of market rates. The Company used a market approach to determine the fair value of the Predecessor’s Second Lien Notes and senior notes using estimates based on prices quoted from third-party financial institutions, which is a Level 2 fair value measurement.

~~Table of Contents~~

~~LINN ENERGY, INC.~~

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

~~(Unaudited)~~

Predecessor
December 31, 2016
Carrying Value Fair Value
(in thousands)

Senior secured second lien notes $ 1,000,000
$ 863,750
Senior notes, net 3,023,129
1,179,224

~~Successor~~ Credit Facility

On ~~the Effective Date, pursuant to the terms of the Plan,~~August 4, 2017, the Company entered into ~~the Successor Credit Facility~~a credit agreement with its then subsidiary, Linn Energy Holdco II LLC (“Holdco II”), as borrower, ~~and Wells Fargo~~Royal Bank ~~National Association,~~of Canada, as administrative agent, and the lenders and agents party thereto, providing ~~for: 1)~~for a new senior secured reserve-based revolving loan facility (the “Credit Facility”) with $500 million in borrowing commitments and an initial borrowing base of ~~$1.4 billion and 2) a term loan in an original principal amount of $300~~$500 million.

On ~~May 31, 2017,~~April 30, 2018, the Company entered into an amendment to the ~~First Amendment and Consent to~~ Credit ~~Agreement, pursuant to~~Facility which, among other ~~modifications: 1) the term loan was paid in full and terminated using cash proceeds from the Jonah Assets Sale, and 2)~~things, modified the borrowing base ~~for the revolving loan was reduced~~and maximum borrowing commitment amount to ~~$1 billion with additional agreed upon reductions for the Company’s other announced sales.~~ $425 million.

As of June 30, ~~2017, total~~2018, there were no borrowings outstanding under the ~~Successor~~ Credit Facility ~~were approximately $183 million~~ and there was approximately ~~$774~~$378 million of ~~remaining~~ available borrowing capacity (which includes a $7$47 million reduction for outstanding letters of credit). The maturity date is ~~February 27, 2021.~~August 4, 2020. Pursuant to the Spin-off, Holdco II became a subsidiary of Riviera and as such, Riviera and its subsidiaries have assumed all obligations under the Credit Facility.

Redetermination of the 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 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 ofranging from 2.50% to 3.50% per annum or the alternate base rate (“ABR”) plus an applicable margin ofranging from 1.50% to 2.50% per ~~annum.~~annum, depending on utilization of the borrowing base. Interest is generally payable in arrears ~~monthly~~quarterly for loans bearing interest based at the ABR and at the end of the applicable interest period for loans bearing interest at the ~~LIBOR.~~LIBOR, or if such interest period is longer than three months, at the end of the three month intervals during such interest period. The Company is required to pay a commitment fee to the lenders under the ~~Successor~~ Credit Facility, which accrues at a rate per annum of 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 under the Successor Credit Facility at any time without a prepayment penalty, other than customary “breakage” costs with respect to LIBOR loans.~~

The obligations under the ~~Successor~~ Credit Facility are secured by mortgages covering approximately ~~95%~~85% of the total value of the proved reserves of the oil and natural gas properties of the Company and certain ~~equipment and facilities associated therewith,~~of its subsidiaries, along with liens on substantially all personal property of the Company and certain of its subsidiaries, and are guaranteed by the Company, ~~Linn Energy~~ Holdco ~~LLC~~ and certain of 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~~EBITDA ratio of 4.0 to 1.0, ~~beginning with the quarter ending September 30, 2017,~~ and ~~(iii)~~(ii) a minimum adjusted current ratio of 1.0 to ~~1.0 beginning with the quarter ending September 30, 2017.~~1.0.

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.~~paying

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LINN ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued

(Unaudited)

dividends or other distributions in respect of, or repurchasing or redeeming, the Company’s capital stock, making certain investments and transactions with affiliates.

The ~~Successor~~ Credit Facility contains ~~customary~~ events of default and remedies customary for credit facilities of this nature. Failure to comply with the 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.

~~Predecessor’s Credit Facility, Second Lien Notes and Senior Notes~~

On the Effective Date, pursuant to the terms of the Plan, all outstanding obligations under the Predecessor’s credit facility, Second Lien Notes and senior notes were canceled. See Note 2 for additional information.

~~Predecessor Covenant Violations~~

The Company’s filing of the Bankruptcy Petitions described in Note 2 constituted an event of default that accelerated the obligations under the Predecessor’s credit facility, Second Lien Notes and senior notes. For the two months ended February 28, 2017, contractual interest, which was not recorded, on the Second Lien Notes and senior notes was approximately $57 million. Under the Bankruptcy Code, the creditors under these debt agreements were stayed from taking any action against the Company as a result of an event of default.

Note 78 – Derivatives

Commodity Derivatives

Historically, the Company has hedged a portion of its forecasted production to reduce exposure to fluctuations in oil and natural gas prices and provide long-term cash flow predictability to manage its business. The current direct NGL hedging market is constrained in terms of price, volume, duration and number of counterparties, which limits the Company’s ability to effectively hedge its NGL production. The Company has also hedged its exposure to differentials in certain operating areas but does not currently hedge exposure to oil or natural gas differentials.

The Company has historically entered into commodity hedging transactions primarily in the form of swap contracts that are designed to provide a fixed price, collars and, from time to time, put options that are designed to provide a fixed price floor with the opportunity for upside. The Company enters into these transactions with respect to a portion of its projected production ~~or consumption~~ to provide an economic hedge of the risk related to the future commodity prices received or paid. The Company does not enter into derivative contracts for trading purposes. The Company did not designate any of its contracts as cash flow hedges; therefore, the changes in fair value of these instruments are recorded in current earnings. See Note 89 for fair value disclosures about oil and natural gas commodity derivatives.

The following table presents derivative positions for the periods indicated as of June 30, ~~2017:~~2018:


	July 1 – December 31, 2017		2018		2019		July 1 – December 31, 2018			2019
Natural gas positions:
Fixed price swaps (NYMEX Henry Hub):
Hedged volume (MMMBtu)	68,080		47,815		11,315		35,144			22,265
Average price ($/MMBtu)	$	3.17	$	3.01	$	2.97	$	3.02		$	2.89
Oil positions:
Fixed price swaps (NYMEX WTI):
Hedged volume (MBbls)	2,208		548		—		276			183
Average price ($/Bbl)	$	52.13	$	54.07	$	—	$	54.07		$	64.00
Collars (NYMEX WTI):
Hedged volume (MBbls)	—		1,825		1,825
Average floor price ($/Bbl)	$	—	$	50.00	$	50.00
Average ceiling price ($/Bbl)	$	—	$	55.50	$	55.50
Natural gas basis differential positions: ⁽¹⁾
PEPL basis swaps:
Hedged volume (MMMBtu)							7,360			14,600
Hedge differential							$	(0.67	)	$	(0.67	)
NGPL TXOK basis swaps:
Hedged volume (MMMBtu)							1,840			—
Hedge differential							$	(0.19	)	$	—


⁽¹⁾	Settled or to be settled, as applicable, on the indicated pricing index to hedge basis differential to the NYMEX Henry Hub natural gas price.

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LINN ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued

(Unaudited)

During the six months ended June 30, 2018, the Company entered into commodity derivative contracts consisting of natural gas basis swaps for March 2018 through December 2019, natural gas fixed price swaps for January 2019 through December 2019 and oil fixed price swaps for January 2019 through December 2019. During the four months ended June 30, 2017, the Company entered into commodity derivative contracts consisting of oil fixed price swaps for January 2018 through December 2018 and natural gas fixed price swaps for January 2018 through December 2019. The Company did not enter into any commodity derivative contracts during the two months ended February 28, ~~2017, or~~2017.

In April 2018, in connection with the ~~six months ended June 30, 2016.~~closing of the Altamont Bluebell Assets Sale, the Company canceled its oil collars for 2018 and 2019. The Company paid net cash settlements of approximately $20 million for the cancellations.

The natural gas derivatives are settled based on the closing price of NYMEX Henry Hub natural gas on the last trading day for the delivery month, which occurs on the third business day preceding the delivery month, or the relevant index prices of natural gas published in Inside FERC’s Gas Market Report on the first business day of the delivery month. The oil derivatives are settled based on the average closing price of NYMEX WTI crude oil for each day of the delivery month.

Balance Sheet Presentation

The Company’s commodity derivatives are presented on a net basis in “derivative instruments” on the condensed consolidated balance sheets. The following table summarizes the fair value of derivatives outstanding on a gross basis:


	Successor		Predecessor		June 30, 2018		December 31, 2017
	June 30, 2017		December 31, 2016		(in thousands)
(in thousands)
Assets:
Commodity derivatives	$	55,058	$	19,369	$	6,825	$	22,589
Liabilities:
Commodity derivatives	$	18,826	$	113,226	$	7,197	$	25,443

By using derivative instruments to economically hedge exposures to changes in commodity prices, the Company ~~exposes~~exposed itself to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes the Company, which creates credit risk. The Company’s counterparties are participants in the ~~Successor Credit Facility or were participants in the Predecessor~~ Credit Facility. The ~~Successor~~ Credit Facility iswas secured by certain of the Company’s and its then subsidiaries’ oil, natural gas and NGL reserves and personal property; therefore, the Company iswas not required to post any collateral. The Company ~~does~~did not receive collateral from its counterparties.

The maximum amount of loss due to credit risk that the Company would incur if its counterparties failed completely to perform according to the terms of the contracts, based on the gross fair value of financial instruments, was approximately ~~$55~~$7 million at June 30, ~~2017.~~2018. The Company ~~minimizes~~minimized the credit risk in derivative instruments by: (i) limiting its exposure to any single counterparty; (ii) entering into derivative instruments only with counterparties that meet the Company’s minimum credit quality standard, or have a guarantee from an affiliate that meets the Company’s minimum credit quality standard; and (iii) monitoring the creditworthiness of the Company’s counterparties on an ongoing basis. In accordance with the Company’s standard practice, its commodity derivatives ~~are~~were subject to counterparty netting under agreements governing such derivatives and therefore the risk of loss due to counterparty nonperformance iswas somewhat mitigated.

Gains and Losses on Derivatives

Gains and losses on derivatives were net losses of approximately $8 million and $23 million for the three months and six months ended June 30, 2018, respectively, and net gains of approximately $46 million and $34 million for the three months and four months ended June 30, 2017, respectively, and approximately $93 million for the two months ended February 28, 2017. ~~Losses on derivatives were approximately $184 million and $74 million for the three months and six months ended June 30, 2016, respectively.~~

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LINN ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued

(Unaudited)

Gains and losses on derivatives are reported on the condensed consolidated statements of operations in “gains (losses) on oil and natural gas derivatives.”

The Company paid net cash settlements of approximately $21 million and $25 million for the three months and six months ended June 30, 2018, respectively. The Company received net cash settlements of approximately $2 million and $8 million for the three months and four months ended June 30, 2017, respectively, and paid net cash settlements of approximately $12 million for the two months ended

~~Table of Contents~~

~~LINN ENERGY, INC.~~

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

~~(Unaudited)~~

February 28, 2017. ~~The Company received net cash settlements of approximately $522 million and $856 million for the three months and six months ended June 30, 2016, respectively.~~

Note 89 – Fair Value Measurements on a Recurring Basis

The Company ~~accounts~~accounted for its commodity derivatives at fair value (see Note 7)8) on a recurring basis. The Company ~~determines~~determined the fair value of its oil and natural gas derivatives utilizing pricing models that use a variety of techniques, including market quotes and pricing analysis. Inputs to the pricing models ~~include~~included publicly available prices and forward price curves generated from a compilation of data gathered from third parties. Company management ~~validates~~validated the data provided by third parties by understanding the pricing models used, obtaining market values from other pricing sources, analyzing pricing data in certain situations and confirming that those instruments trade in active markets. Assumed credit risk adjustments, based on published credit ratings and public bond yield spreads, ~~are~~were applied to the Company’s commodity derivatives.

Fair Value Hierarchy

In accordance with applicable accounting standards, the Company has categorized its financial instruments into a three-level fair value hierarchy based on the priority of inputs to the valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

The following presents the fair value hierarchy for assets and liabilities measured at fair value on a recurring basis:


	Successor
	June 30, 2017							June 30, 2018
	Level 2		Netting ⁽¹⁾			Total		Level 2		Netting ⁽¹⁾			Total
	(in thousands)							(in thousands)
Assets:
Commodity derivatives	$	55,058	$	(18,340	)	$	36,718	$	6,825	$	(1,637	)	$	5,188
Liabilities:
Commodity derivatives	$	18,826	$	(18,340	)	$	486	$	7,197	$	(1,637	)	$	5,560


	Predecessor
	December 31, 2016							December 31, 2017
	Level 2		Netting ⁽¹⁾			Total		Level 2		Netting ⁽¹⁾			Total
	(in thousands)							(in thousands)
Assets:
Commodity derivatives	$	19,369	$	(19,369	)	$	—	$	22,589	$	(12,491	)	$	10,098
Liabilities:
Commodity derivatives	$	113,226	$	(19,369	)	$	93,857	$	25,443	$	(12,491	)	$	12,952


⁽¹⁾	Represents counterparty netting under agreements governing such derivatives.

Note 910 – Asset Retirement Obligations

The Company ~~has~~had the obligation to plug and abandon oil and natural gas wells and related equipment at the end of production operations. Estimated asset retirement costs ~~are~~were recognized as liabilities with an increase to the carrying amounts of the

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LINN ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued

(Unaudited)

related long-lived assets when the obligation is incurred. The liabilities are included in “other accrued liabilities” and ~~“other~~“asset retirement obligations and other noncurrent liabilities” on the condensed consolidated balance sheets. Accretion expense is included in “depreciation, depletion and amortization” on the condensed consolidated statements of operations. The fair value of additions to the asset retirement obligations is estimated using valuation techniques that convert future cash flows to a single discounted amount. Significant

~~Table of Contents~~

~~LINN ENERGY, INC.~~

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

~~(Unaudited)~~

inputs to the valuation include estimates of: (i) plug and abandon costs per well based on existing regulatory requirements; (ii) remaining life per well; (iii) future inflation factors; and (iv) a credit-adjusted risk-free interest rate. These inputs require significant judgments and estimates by the Company’s management at the time of the valuation and are the most sensitive and subject to change.

In addition, there is insufficient information to reasonably determine the timing and/or method of settlement for purposes of estimating the fair value of the asset retirement obligation of certain of the Company’s Chisholm Trail assets, which became assets of Riviera in connection with the Spin-off. In such cases, asset retirement obligation cost is considered indeterminate because there is no data or information that can be derived from past practice, industry practice, management’s experience, or the asset’s estimated economic life. Indeterminate asset retirement obligation costs associated with Chisholm Trail will be recognized in the period in which sufficient information exists to reasonably estimate potential settlement dates and methods.

The following table presents a reconciliation of the Company’s asset retirement obligations (in thousands):

Asset retirement obligations at December 31, 2016 (Predecessor) $ 402,162
Liabilities added from drilling 146
Accretion expense 4,024
Settlements (618 )
Asset retirement obligations at February 28, 2017 (Predecessor) $ 405,714
Fresh start adjustment ⁽¹⁾
(48,317 )
Asset retirement obligations at February 28, 2017 (Successor) $ 357,397
Liabilities added from drilling 277
Liabilities associated with assets sold (43,507 )
Liabilities associated with assets held for sale (21,210 )
Liabilities associated with discontinued operations (26,774 )
Accretion expense 7,107
Settlements (3,172 )
Asset retirement obligations at June 30, 2017 (Successor) $ 270,118



Asset retirement obligations at December 31, 2017	$	164,553
Liabilities added from drilling	53
Liabilities associated with assets divested	(62,195		)
Current year accretion expense	4,081
Settlements	(1,859		)
Revisions of estimates	2,386
Asset retirement obligations at June 30, 2018	$	107,019


⁽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 1011 – 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.~~ However, the Company is, 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,~~Predecessor’s credit facility, filed a motion in the Bankruptcy Court seeking payment of 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,~~On November 13, 2017, ~~and the parties are awaiting a ruling from~~ the Bankruptcy Court ruled that the secured lenders are not entitled to payment of post-petition default interest. That ruling was appealed by Wells Fargo and on ~~this matter.~~March 29, 2018, the U.S. District Court for the Southern District of Texas affirmed the Bankruptcy Court’s ruling. On April 30, 2018, the Bankruptcy Court approved the substitution of UMB Bank, National Association (“UMB Bank”) as successor to Wells Fargo as administrative agent under the Predecessor’s credit facility. UMB Bank then immediately filed a notice of appeal to the United States Court of Appeals for the Fifth Circuit from the decision by the U.S. District Court for the Southern District of Texas, which affirmed the decision of the Bankruptcy Court. That appeal remains pending.

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LINN ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued

(Unaudited)

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, 2017, and the six months ended June 30, 2016,~~Except for in connection with its Chapter 11 proceedings, the Company made no significant payments to settle any legal, environmental or tax ~~proceedings.~~proceedings during the six months ended June 30, 2018, or June 30, 2017. 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.

Note 1112 – Equity ~~(Deficit)~~

~~Cancellation~~Shares Issued and Outstanding

As of ~~Units and Issuance of Class A Common Stock~~

~~In accordance with the Plan, on the Effective Date:~~

~~All units in the Predecessor that~~June 30, 2018, there were ~~issued and outstanding immediately prior to the Effective Date were extinguished without recovery;~~

~~17,678,889~~78,749,510 shares of Class A common stock issued and outstanding. An additional 922,696 unvested restricted stock units were ~~issued pro rata to holders of the Second Lien Notes with claims allowed~~outstanding under the ~~Plan;~~

~~26,724,396 shares of~~Company’s Omnibus Incentive Plan. Effective April 10, 2018, all outstanding Holdco Class A-2 units were converted into Class A common stock ~~were issued pro rata~~in accordance with the terms of the Holdco LLC Agreement. Pursuant to ~~holders~~such conversion, an aggregate of ~~Unsecured Notes with claims allowed under the Plan;~~

~~471,110~~2,785,681 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 to certain~~respective holders, of ~~claims arising under the Second Lien Notes and the Unsecured Notes (including, in each case, certain of the commitment parties party~~which 914,632 remained subject to the ~~Backstop Commitment Agreement).~~

~~With~~vesting provisions applicable to the ~~exception~~underlying Class A-2 units as of ~~shares of~~June 30, 2018. See Note 14 for additional information related to the restricted stock units and Holdco 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.~~A-2 units.

Share Repurchase Program

~~On June 1, 2017, the~~The Company’s Board of Directors ~~announced that it had~~previously authorized the repurchase of up to ~~$75~~$400 million of the Company’s outstanding shares of Class A common stock. ~~On June 28, 2017,~~The Company discontinued 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~~in July 2018.

During the six months ended June 30, 2018, the Company repurchased an aggregate of ~~$200 million of the Company’s outstanding~~1,557,180 shares of Class A common ~~stock.~~stock at an average price of $39.13 per share for a total cost of approximately $61 million. 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,~~2018, the Company ~~repurchased 833,763~~purchased 280,289 shares of Class A common stock at an average price of ~~$32.43~~$40.30 for a total cost of approximately $11 million. During 2017 and 2018, the Company purchased an aggregate of 7,527,661 shares of Class A common stock at an average price of $35.94 for a total cost of approximately $271 million under the share repurchase program.

Tender Offer

On December 14, 2017, the Company’s Board of Directors announced the intention to commence a tender offer to purchase at least $250 million of the Company’s Class A common stock. In January 2018, upon the terms and subject to the conditions described in the Offer to Purchase dated December 20, 2017, as amended, the Company repurchased an aggregate of 6,770,833 shares of Class A common stock at a fixed price of $48.00 per share for a total cost of approximately ~~$27 million.~~$325 million (excluding expenses of approximately $4 million related to the tender offer).

Dividends

The Company is not currently paying a cash dividend; however, the Board of Directors periodically reviews the Company’s liquidity position to evaluate whether or not to pay a cash dividend.

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LINN ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued

(Unaudited)

~~Dividends/Distributions~~Note 13 – Noncontrolling Interests

~~Under~~Noncontrolling interests represented ownership in the 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 Predecessor’s Board of Directors to provide for the proper conductnet assets of the ~~Predecessor’s business (including reserves for future capital expenditures, acquisitions and anticipated future credit needs) or~~Company’s then consolidated subsidiary, Holdco, not attributable to ~~fund distributions, if any, over~~LINN Energy. On the ~~next four quarters.~~Effective Date, Holdco granted incentive interest awards to certain members of its management in the form of Class B units (see Note 14). In ~~October 2015,~~accordance with the ~~Predecessor’s Board of Directors determined to suspend payment~~terms of the ~~Predecessor’s distribution. The Successor currently has no intention~~Holdco LLC Agreement, on July 31, 2017, all of ~~paying cash dividends and any future payment~~the Class B units were converted to Class A-2 units of ~~cash dividends would be subject to~~Holdco. At December 31, 2017, the ~~restrictions~~noncontrolling Class A-2 units represented approximately 0.88% of Holdco’s total outstanding units. Effective April 10, 2018, all outstanding Holdco Class A-2 units were converted into Class A common stock in accordance with the ~~Successor Credit Facility.~~terms of the Holdco LLC Agreement.

Note 1214 – Share-Based Compensation

~~The Company had no equity awards outstanding as~~A summary of ~~December 31, 2016. In accordance with~~share-based compensation expenses included on the ~~Plan, in February 2017,~~condensed consolidated statements of operations is presented below:



	Three Months Ended June 30,
	2018		2017
	(in thousands)

General and administrative expenses	$	58,188	$	15,422
Income tax benefit	$	4,315	$	3,128



	Successor				Predecessor
	Six Months Ended June 30, 2018		Four Months Ended June 30, 2017		Two Months Ended February 28, 2017
(in thousands)
General and administrative expenses	$	75,225	$	19,599	$	50,255
Income tax benefit	$	6,732	$	3,555	$	5,170

During 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 stockholders.

~~Restricted Stock Units~~

~~On the Effective Date,~~six months ended June 30, 2018, the Company granted to certain employees ~~2,478,606~~12,500 restricted stock units with an aggregate grant date fair value of approximately $519,000. The restricted stock units vest over three years.

As of June 30, 2018, 922,696 shares were issuable under the Omnibus Incentive Plan pursuant to outstanding restricted stock units and approximately 4.7 million additional shares were reserved for future issuance under the Plan. The Compensation Committee of the Board of Directors of the Company (the ~~“Emergence Awards”~~“Compensation Committee”)~~. The~~ generally has discretion regarding the timing, size and terms of future awards; however, the Omnibus Incentive Plan requires that 1) the portion of the Share Reserve that does not 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~~ and 2) 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 will be allocated 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~~As of April 30, 2018, all current participants in the ~~four months ended June 30, 2017,~~Omnibus Incentive Plan have agreed to waive any rights they may have to future awards under this provision in consideration for the ~~Company granted~~ability to ~~certain employees 1,255,345 restricted stock units from~~participate in the ~~Remaining Share Reserve.~~Liquidity Program described below or a similar future program. The Compensation Committee has indicated that it does not intend to grant any future awards under the Omnibus Incentive Plan.

Upon a participant’s termination of employment and/or service (as applicable), the 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 metrepurchased, measured 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~~the Company’s repurchase notice. During May 2018, the Company began exercising its right to repurchase vesting awards under the Omnibus Incentive Plan which modified all outstanding awards to liability classification. For the six months ended June 30, 2018, the Company has repurchased 271,314 restricted stock units for a total cost 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.~~approximately $11 million pursuant to its right to repurchase vesting awards. The Company has ~~made~~recognized a ~~policy decision~~liability of approximately $112 million related to ~~recognize compensation expense for service-based~~ awards ~~on a straight-line basis over the requisite service period for the entire award. Beginning~~required to be liability classified, included 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~~“share-based payment liability” on the condensed consolidated balance ~~sheet. The fair value~~sheet and recorded incremental share-based compensation expense of approximately $18 million related to modifying the awards to liability classification. At June 30, 2018, all outstanding share-based payment awards are liability classified.

In April 2018, the Company entered into agreements with each of the ~~Company’s~~then serving executive officers of the Company, under which the Company agreed, at the option of each officer, to repurchase certain of their vested restricted stock unit awards and outstanding Class A common stock. Pursuant to those agreements, on August 7, 2018, the Company repurchased an aggregate of 2,477,834 shares of Class A common stock for a total cost of approximately $102 million.

On August 2, 2018, the Board authorized the termination of the Linn Energy, Inc. 2017 Omnibus Incentive Plan following the settlement of all outstanding RSUs and restricted common stock. In addition, all remaining unvested restricted stock units ~~was determined based on~~of Linn Energy, Inc. vested upon the ~~fair value~~Spin-off, which participants have the option to require the Company to settle in cash.

In addition, in January 2018, the Compensation Committee approved a one-time liquidity program under which the Company agreed, at the option of the ~~Company’s~~participant, to 1) settle all or a portion of an eligible participant’s restricted stock units vesting on or before March 1, 2018 in cash and/or 2) repurchase all or a portion of any shares ~~on the date of grant and the fair value of the incentive interest awards in the form~~ of Class BA common stock held by an eligible participant as a result of a prior vesting of restricted stock units, ~~was determined based on~~in each case at an agreed upon price (the “Liquidity Program”). For the ~~estimated amount~~six months ended June 30, 2018, the Company settled 1,028,875 restricted stock units in cash and repurchased 120,829 shares of Class A common stock for a total cost of approximately $45 million pursuant to ~~settle~~ the ~~awards.~~Liquidity Program.

~~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

~~Table of Contents~~

~~LINN ENERGY, INC.~~

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

~~(Unaudited)~~

Note 1315 – Earnings Per Share/Unit

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

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

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



	Successor
	Three Months Ended June 30, 2018
	Income		Shares	Per Share
	(in thousands, except per share data)

Basic:
Net income attributable to common stockholders	$	5,104	78,718	$	0.06

Effect of Dilutive Securities:
Dilutive effect of restricted stock units			559
Dilutive effect of unvested Class A-2 units of Holdco	$	—	—

Diluted:
Net income attributable to common stockholders	$	5,104	79,277	$	0.06

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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 )



	Successor
	Three Months Ended June 30, 2017
	Income			Shares	Per Share
	(in thousands, except per share data)

Basic:
Income from continuing operations	$	223,379		89,849	$	2.49
Loss from discontinued operations, net of income taxes	(3,322		)	89,849	(0.04		)
Net income attributable to common stockholders	$	220,057		89,849	$	2.45

Effect of Dilutive Securities:
Dilutive effect of restricted stock units	$	—		635

Diluted:
Income from continuing operations	$	223,379		90,484	$	2.47
Loss from discontinued operations	(3,322		)	90,484	(0.04		)
Net income attributable to common stockholders	$	220,057		90,484	$	2.43



	Successor
	Six Months Ended June 30, 2018
	Income			Shares	Per Share
	(in thousands, except per share data)

Basic:
Net income attributable to common stockholders	$	74,928		78,817	$	0.95

Effect of Dilutive Securities:
Dilutive effect of restricted stock units	$	—		947
Dilutive effect of unvested Class A-2 units of Holdco	$	(1,140	)	—

Diluted:
Net income attributable to common stockholders	$	73,788		79,764	$	0.93

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LINN ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued

(Unaudited)



	Successor
	Four Months Ended June 30, 2017
	Income			Shares	Per Share
	(in thousands, except per share data)

Basic:
Income from continuing operations	$	216,055		89,849	$	2.41
Loss from discontinued operations, net of income taxes	(3,254		)	89,849	(0.04		)
Net income attributable to common stockholders	$	212,801		89,849	$	2.37

Effect of Dilutive Securities:
Dilutive effect of restricted stock units	$	—		216

Diluted:
Income from continuing operations	$	216,055		90,065	$	2.40
Loss from discontinued operations	(3,254		)	90,065	(0.04		)
Net income attributable to common stockholders	$	212,801		90,065	$	2.36



	Predecessor
	Two Months Ended February 28, 2017
	Income (Loss)			Units	Per Unit
	(in thousands, except per unit data)

Basic and Diluted:
Income from continuing operations	$	2,397,609		352,792	$	6.80
Loss from discontinued operations, net of income taxes	(548		)	352,792	(0.01		)
Net income attributable to common unitholders	$	2,397,061		352,792	$	6.79

The diluted earnings per share calculation excludes approximately 1,989 restricted stock units that were anti-dilutive for the six months ended June 30, 2018. No restricted stock units were anti-dilutive for the three months ended June 30, 2018. The diluted earnings per share calculation for the three months and four months ended June 30, 2017, exclude approximately 3,470,051 Class B units associated with management’s profits interests awards that were not yet 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 approximately 1 million unit options and warrants that were anti-dilutive for each of the three months and six months ended June 30, 2016.2017. There were no potential common units outstanding during the two months ended February 28, 2017.

Note 1416 – Income Taxes

~~Effective~~Amounts recognized as income taxes are included in “income tax expense (benefit),” as well as discontinued operations, on the consolidated statements of operations. The effective income tax rates were approximately 45% and 37% for the three months and six months ended June 30, 2018, respectively, approximately 42% for both the three months and four months ended June 30, 2017, and zero for the two months ended February 28, ~~2017, upon consummation~~2017. For the six months ended June 30, 2018, the Company’s federal and state statutory rate net of the ~~Plan,~~federal tax benefit was approximately 24%. The increase in the effective tax rate during 2018 is primarily due to non-deductible executive compensation.

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LINN ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued

(Unaudited)

The Successor ~~became~~was formed as a C ~~corporation subject to~~corporation. For federal and state income ~~taxes. Prior to~~tax purposes (with the ~~consummation~~exception of the ~~Plan,~~state of Texas), 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 ~~of the Company~~ were passed through to ~~its~~the Predecessor’s unitholders. Limited liability companies are subject to Texas margin tax. In addition, certain of the Predecessor’s subsidiaries were C corporations subject to federal and state income taxes. As such, with the exception of the state of Texas and certain subsidiaries, the Predecessor did not directly pay federal and state income taxes and recognition was not given to federal and state income taxes for the operations of the 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 as income taxes are included in “income tax expense (benefit),” as well as discontinued operations, on the condensed consolidated statements of operations.~~

~~Table of Contents~~

~~LINN ENERGY, INC.~~

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

~~(Unaudited)~~

Note 1517 – 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, 2018		December 31, 2017
	June 30, 2017		December 31, 2016		(in thousands)
(in thousands)
Prepaid expenses	$	58,095	$	70,116

Prepaids					$	14,209	$	46,238
Receivable from related party					25,982		23,163
Inventories	10,984		15,097		3,981		7,667
Deferred financing fees	—		16,809
Other	2,757		3,288		2,487		2,703
Other current assets	$	71,836	$	105,310	$	46,659	$	79,771

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


	Successor		Predecessor		June 30, 2018		December 31, 2017
	June 30, 2017		December 31, 2016		(in thousands)
(in thousands)

Accrued compensation	$	21,214	$	16,443	$	13,533	$	29,089
Share-based payment liability	18,517		—
Asset retirement obligations (current portion)	8,120		9,361		1,488		3,926
Deposits for pending divestitures	60,112		—
Deposits					3,170		15,349
Income taxes payable					23		7,496
Other	27,453		175		1,616		2,757
Other accrued liabilities	$	135,416	$	25,979	$	19,830	$	58,617

The following table provides a reconciliation of cash and cash equivalents on the condensed consolidated balance sheets to cash, cash equivalents and restricted cash on the condensed consolidated statement of cash flows:



	June 30, 2018		December 31, 2017
	(in thousands)

Cash and cash equivalents	$	301,365	$	464,508
Restricted cash	43,387		56,445
Cash, cash equivalents and restricted cash	$	344,752	$	520,953

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LINN ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued

(Unaudited)

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


	Successor		Predecessor				Successor				Predecessor
	Four Months Ended June 30, 2017		Two Months Ended February 28, 2017		Six Months Ended June 30, 2016		Six Months Ended June 30, 2018		Four Months Ended June 30, 2017		Two Months Ended February 28, 2017
(in thousands)
Cash payments for interest, net of amounts capitalized	$	14,436	$	17,651	$	92,192	$	—	$	14,436	$	17,651
Cash payments for income taxes	$	215	$	—	$	3,033	$	7,748	$	215	$	—
Cash payments for reorganization items, net	$	6,300	$	21,571	$	—	$	2,911	$	6,300	$	21,571

Noncash investing activities:
Accrued capital expenditures	$	34,547	$	22,191	$	20,124	$	21,968	$	34,547	$	22,191

For purposes of the condensed consolidated statements of cash flows, the Company considers all highly liquid short-term investments with original maturities of three months or less to be cash equivalents. At June 30, ~~2017,~~2018, “restricted cash” on the condensed consolidated balance sheet ~~consists~~consisted of approximately ~~$42~~$33 million that will be used to settle certain claims ~~and pay certain professional fees~~ in accordance with the Plan (which is the remainder of approximately $80 million transferred to restricted cash in February 2017 to fund such items) ~~and~~, approximately ~~$57~~$3 million related to deposits and approximately $7 million for ~~pending divestitures.~~other items. At December 31, ~~2016,~~2017, “restricted cash” on the condensed consolidated balance sheet ~~represents amounts restricted related to~~

~~Table of Contents~~

~~LINN ENERGY, INC.~~

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

~~(Unaudited)~~

~~utility services providers. In addition, restricted cash~~consisted of approximately $8$36 million is included in “other noncurrent assets” on the condensed consolidated balance sheet at December 31, 2016, and represents cash deposited by the Company into a separate account designated for asset retirement obligationsthat will be used to settle certain claims in accordance with ~~contractual agreements.~~

~~At December 31, 2016, net outstanding checks of~~the Plan, approximately $6$15 million ~~were reclassified~~related to deposits and included in “accounts payable and accrued expenses” on the condensed consolidated balance sheet. The change in net outstanding checks is presented as cash flows from financing activities and included in “other” on the condensed consolidated statements of cash flows.approximately $5 million for other items.

Note 1618 – Related Party Transactions

Roan Resources LLC

On August 31, 2017, the Company completed the Roan Contribution. In exchange for their respective contributions, LINN Energy and Citizen each received a 50% equity interest in Roan. See Note 6 for additional information. Also on such date, Roan entered into a Master Services Agreement (the “MSA”) with Linn Operating, LLC (“Linn Operating”), a subsidiary of LINN Energy, pursuant to which Linn Operating agreed to provide certain operating, administrative and other services in respect of the assets contributed to Roan during a transitional period.

Under the MSA, Roan agreed to reimburse Linn Operating for certain costs and expenses incurred by Linn Operating in connection with providing the services, and to pay to Linn Operating a service fee of $1.25 million per month, prorated for partial months. The MSA terminated according to its terms on April 30, 2018.

In addition, the Company’s pre-Spin-off subsidiary, Blue Mountain Midstream LLC (“Blue Mountain”), has an agreement in place with Roan for the purchase and processing of natural gas from certain of Roan’s properties. Blue Mountain became a subsidiary of Riviera on August 7, 2018 in connection with the Spin-off.

For the three months and six months ended June 30, 2018, the Company made natural gas purchases from Roan of approximately $15 million and $32 million, respectively, included in “marketing expenses” on the condensed consolidated statements of operations. In addition, for the three months and six months ended June 30, 2018, the Company recognized service fees of approximately $1 million and $5 million, respectively, under the MSA, as a reduction to general and administrative expenses. At June 30, 2018, the Company had approximately $26 million due from Roan, primarily associated with capital spending, included in “other current assets” and approximately $11 million due to Roan, associated with natural gas purchases, included in “accounts payable and accrued expenses” on the condensed consolidated balance sheet. At December 31, 2017, the Company had approximately $23 million due from Roan, primarily associated with capital spending,

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LINN ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued

(Unaudited)

included in “other current assets” and approximately $18 million due to Roan, primarily associated with joint interest billings and natural gas purchases, included in “accounts payable and accrued expenses” on the condensed consolidated balance sheet.

Berry Petroleum Company, LLC

Berry, a former subsidiary of the Predecessor, was deconsolidated effective December ~~3, 2016 (see Note 4).~~31, 2016. The employees of Linn Operating, Inc. (“LOI”), a subsidiary of the Predecessor, provided services and support to Berry in accordance with an agency agreement and power of attorney between Berry and LOI. Upon deconsolidation, transactions between the Predecessor and Berry were no longer eliminated in consolidation and were treated as related party transactions. These transactions include, but are not limited to, management fees paid to the Company by Berry. On the Effective Date, Berry emerged from bankruptcy as a stand-alone, unaffiliated entity.

For the two months ended February 28, 2017, ~~and the three months and the six months ended June 30, 2016,~~ Berry incurred management fees of approximately $6 million ~~$18 million and $41 million, respectively,~~ for services provided by LOI. The Predecessor also had accounts payable due to Berry of approximately $3 million included in “accounts payable and accrued expenses” on the condensed consolidated balance sheet at December 31, 2016. In addition, $25 million due to Berry was included in “liabilities subject to compromise” on the Predecessor’s condensed consolidated balance sheet at December 31, 2016.

LinnCo, LLC

LinnCo, which was an affiliate of the Predecessor, was formed on April 30, 2012. All of LinnCo’s common shares were held by the public. As of December 31, 2016, LinnCo had no significant assets or operations other than those related to its interest in the Predecessor and owned approximately 71% of the Predecessor’s then outstanding units. In accordance with the Plan, LinnCo will be dissolved following the resolution of all outstanding claims.

The Predecessor had agreed to provide to LinnCo, or to pay on LinnCo’s behalf, any financial, legal, accounting, tax advisory, financial advisory and engineering fees, and other administrative and out-of-pocket expenses incurred by LinnCo, along with any other expenses incurred in connection with any public offering of shares in LinnCo or incurred as a result of being a publicly traded entity. These expenses include costs associated with annual, quarterly and other reports to holders of LinnCo shares, tax return and Form 1099 preparation and distribution, NASDAQ listing fees, printing costs, independent auditor fees and expenses, legal counsel fees and expenses, limited liability company governance and compliance expenses and registrar and transfer agent fees. In addition, the Predecessor had agreed to indemnify LinnCo and its officers and directors for damages suffered or costs incurred (other than income taxes payable by LinnCo) in connection with carrying out LinnCo’s activities. All expenses and costs paid by the Predecessor on LinnCo’s behalf were expensed by the Predecessor.

For the two months ended February 28, 2017, LinnCo incurred total general and administrative expenses of approximately $287,000, including approximately $240,000 related to services provided by the Predecessor. All of the expenses incurred during the two months ended February 28, 2017, had been paid by the Predecessor on LinnCo’s behalf as of February 28, 2017.

~~For~~

Note 19 – Segments

During the ~~three months~~second quarter of 2018, the Company had two reporting segments: Upstream and ~~six months ended June 30, 2016, LinnCo incurred total general~~Chisholm Trail. The Upstream reporting segment was engaged in the exploration, development, production, and sale of oil, natural gas, and NGLs. The Chisholm Trail reporting segment is new for the second quarter of 2018 as a result of a change in the way our chief operating decision maker (“CODM”) assesses the Company’s results of operations following the hiring of a segment manager to lead the Chisholm Trail reporting segment and the commissioning of the cryogenic natural gas processing facility during the second quarter of 2018. The Chisholm Trail reporting segment consisted of the Chisholm Trail gas plant system, which is comprised of the newly constructed cryogenic natural gas processing facility, a refrigeration plant, and a network of gathering pipelines located in the Merge/SCOOP/STACK play. To assess the performance of the Company’s operating segments, the CODM analyzes field level cash flow. The Company defines field level cash flow as revenues less direct operating expenses. Other indirect income (expenses) include “general and administrative expenses, ~~reorganization expenses~~” “exploration costs,” “depreciation, depletion and ~~offering costs~~amortization,” “gains on sale of ~~approximately $2.5 million~~assets and ~~$4.2 million, respectively, including approximately $603,000~~other, net,” “other income and ~~$1.2 million, respectively, related to services provided~~(expenses)” and “reorganization items, net.” Prior period amounts are presented on a comparable basis. In addition, information regarding total assets by segment is not presented because it is not reviewed by the ~~LINN Energy. Of the expenses and costs incurred during the six months ended June 30, 2016, approximately $4.0 million had been paid by LINN Energy on LinnCo’s behalf as of June 30, 2016.~~CODM.

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LINN ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued

(Unaudited)

~~Note 17 – Redeemable Noncontrolling Interests~~The following tables present the Company’s financial information by reportable segment:

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



	Successor
	Three Months Ended June 30, 2018
	Upstream		Chisholm Trail			Not Allocated to Segments			Consolidated
	(in thousands)

Oil, natural gas and natural gas liquids sales	$	87,004	$	—		$	—		$	87,004
Marketing revenues	22,901		20,066			—			42,967
Other revenues	6,387		—			—			6,387
	116,292		20,066			—			136,358
Lease operating expenses	24,088		—			—			24,088
Transportation expenses	21,213		—			—			21,213
Marketing expenses	20,244		20,083			—			40,327
Taxes other than income taxes	6,737		285			275			7,297
Total direct operating expenses	72,282		20,368			275			92,925
Field level cash flow	$	44,010	$	(302	)	(275		)	43,433
Losses on oil and natural gas derivatives						(7,525		)	(7,525		)
Other indirect income (expenses)						(23,283		)	(23,283		)
Income from continuing operations before income taxes									$	12,625



	Successor
	Three Months Ended June 30, 2017
	Upstream		Chisholm Trail		Not Allocated to Segments			Consolidated
	(in thousands)

Oil, natural gas and natural gas liquids sales	$	243,167	$	—	$	—		$	243,167
Marketing revenues	10,793		1,754		—			12,547
Other revenues	6,391		—		—			6,391
	260,351		1,754		—			262,105
Lease operating expenses	71,057		—		—			71,057
Transportation expenses	37,388		—		—			37,388
Marketing expenses	6,156		820		—			6,976
Taxes other than income taxes	17,486		116		269			17,871
Total direct operating expenses	132,087		936		269			133,292
Field level cash flow	$	128,264	$	818	(269		)	128,813
Gains on oil and natural gas derivatives					45,714			45,714
Other indirect income (expenses)					207,622			207,622
Income from continuing operations before income taxes								$	382,149

Table of Contents

LINN ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued

(Unaudited)



	Successor
	Six Months Ended June 30, 2018
	Upstream		Chisholm Trail		Not Allocated to Segments			Consolidated
	(in thousands)

Oil, natural gas and natural gas liquids sales	$	223,880	$	—	$	—		$	223,880
Marketing revenues	47,276		41,958		—			89,234
Other revenues	12,281		—		—			12,281
	283,437		41,958		—			325,395
Lease operating expenses	71,972		—		—			71,972
Transportation expenses	40,307		—		—			40,307
Marketing expenses	41,380		40,702		—			82,082
Taxes other than income taxes	14,908		477		364			15,749
Total direct operating expenses	168,567		41,179		364			210,110
Field level cash flow	$	114,870	$	779	(364		)	115,285
Losses on oil and natural gas derivatives					(22,555		)	(22,555		)
Other indirect income (expenses)					31,167			31,167
Income from continuing operations before income taxes								$	123,897



	Successor
	Four Months Ended June 30, 2017
	Upstream		Chisholm Trail		Not Allocated to Segments			Consolidated
	(in thousands)

Oil, natural gas and natural gas liquids sales	$	323,492	$	—	$	—		$	323,492
Marketing revenues	13,273		2,188		—			15,461
Other revenues	8,419		—		—			8,419
	345,184		2,188		—			347,372
Lease operating expenses	95,687		—		—			95,687
Transportation expenses	51,111		—		—			51,111
Marketing expenses	8,513		1,002		—			9,515
Taxes other than income taxes	24,478		155		315			24,948
Total direct operating expenses	179,789		1,157		315			181,261
Field level cash flow	$	165,395	$	1,031	(315		)	166,111
Gains on oil and natural gas derivatives					33,755			33,755
Other indirect income (expenses)					169,644			169,644
Income from continuing operations before income taxes								$	369,510

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LINN ENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued

(Unaudited)



	Predecessor
	Two Months Ended February 28, 2017
	Upstream		Chisholm Trail		Not Allocated to Segments			Consolidated
	(in thousands)

Oil, natural gas and natural gas liquids sales	$	188,885	$	—	$	—		$	188,885
Marketing revenues	5,999		637		—			6,636
Other revenues	9,915		—		—			9,915
	204,799		637		—			205,436
Lease operating expenses	49,665		—		—			49,665
Transportation expenses	25,972		—		—			25,972
Marketing expenses	4,602		218		—			4,820
Taxes other than income taxes	14,773		78		26			14,877
Total direct operating expenses	95,012		296		26			95,334
Field level cash flow	$	109,787	$	341	(26		)	110,102
Gains on oil and natural gas derivatives					92,691			92,691
Other indirect income (expenses)					2,194,650			2,194,650
Income from continuing operations before income taxes								$	2,397,443


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, ~~2016.~~2017. 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 the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2017, and elsewhere in the Annual Report.

When referring to Linn Energy, Inc. ~~(formerly known as Linn Energy, LLC)~~ (“Successor,” “LINN Energy” or the “Company”), the intent is to refer to LINN Energy, a ~~newly formed~~ Delaware corporation formed in February 2017, and its then consolidated subsidiaries as a whole or on an individual basis, depending on the context in which the statements are made. During the reporting period, Linn Energy, Inc. iswas a successor issuer of Linn Energy, LLC pursuant to Rule 15d-5 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Linn Energy, Inc. was not a successor of Linn Energy, LLC for purposes of Delaware corporate law. 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.

As discussed under Holding Company Reorganization below, subsequent to the reporting period, on July 25, 2018, the Company completed a corporate reorganization pursuant to which LINN Energy merged with and into Linn Merger Sub #1, LLC (“Merger Sub”), a newly formed Delaware limited liability company and wholly owned subsidiary of New LINN Inc., a newly formed Delaware corporation (“New LINN”), with Merger Sub surviving such merger (the “Merger”). Immediately following the Merger, New LINN changed its name to “Linn Energy, Inc.” For purposes of Rule 15d-5 under the Exchange Act, New LINN is the successor registrant to LINN Energy.

The reference to “Berry” herein refers to Berry Petroleum Company, LLC, which was an indirect 100% wholly owned subsidiary of the Predecessor through February 28, 2017. Berry was deconsolidated effective December 3, ~~2016 (see below and Note 4).~~2016. The reference to “LinnCo” herein refers to LinnCo, LLC, which was an affiliate of 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 ~~is an independent oil and natural gas company that~~ was formed in 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 in Note 2, on May 11, 2016 (the “Petition Date”), Linn Energy, LLC, certain of its 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 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.~~date.

~~The~~Prior to the Spin-Off (as defined below), the Company’s upstream properties ~~are currently~~were located in ~~seven~~six operating regions in the United States (“U.S.”):

~~Rockies, which includes properties located in Wyoming (Washakie Basin), Utah (Uinta Basin) and North Dakota (Williston Basin);~~

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

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

~~TexLa, which includes properties~~Jayhawk natural gas processing plant, located in ~~east Texas and north Louisiana;~~

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

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

East Texas, which includes oil and natural gas properties producing primarily from the Cotton Valley and Bossier Sandstone;

North Louisiana, which includes oil and natural gas properties producing primarily from the Cotton Valley Sandstones;

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

Rockies, which includes non-operated properties located in the Dunkards Wash field in Utah; and

~~South Texas.~~Mid-Continent, which includes properties in the Northwest STACK in northwestern Oklahoma, the Arkoma STACK located in southeastern Oklahoma, and various other oil and natural gas producing properties throughout Oklahoma.

~~In July~~The Company’s midstream business consisted of the Chisholm Trail gas plant system (“Chisholm Trail”), which is comprised of the newly constructed cryogenic natural gas processing facility, a refrigeration plant, and a network of gathering pipelines located in the Merge/SCOOP/STACK play.

The Company also owns a 50% equity interest in Roan Resources LLC (“Roan”), which is focused on the accelerated development of the Merge/SCOOP/STACK play in Oklahoma. During 2018, the Company divested all of its properties located in the previous Permian Basin operating region.

During 2017, the Company divested all of its properties located in ~~California.~~the previous California and South Texas operating regions. See below and Note 4 for details of the Company’s divestitures.

The Company’s 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 diverse set of long-life producing assets.

For the three months ended June 30, ~~2017,~~2018, the Company’s results included the following:

oil, natural gas and NGL sales of approximately ~~$243~~$87 million compared to ~~$196~~$243 million for the three months ended June 30, ~~2016;~~2017;

average daily production of approximately ~~710~~312 MMcfe/d compared to ~~802~~710 MMcfe/d for the three months ended June 30, ~~2016;~~2017;

net income attributable to common stockholders of approximately ~~$220~~$5 million compared to ~~$208~~$220 million for the three months ended June 30, ~~2016;~~2017;

capital expenditures of approximately ~~$96~~$42 million compared to ~~$23~~$96 million for the three months ended June 30, ~~2016;~~2017; and

1410 wells drilled (all successful) compared to 3714 wells drilled (all successful) for the three months ended June 30, ~~2016.~~2017.

For the six months ended June 30, ~~2017,~~2018, the Company’s results included the following:

oil, natural gas and NGL sales of approximately $224 million compared to $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;~~respectively;

average daily production of approximately 356 MMcfe/d compared to 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;~~respectively;

net income attributable to common stockholders/unitholders of approximately $75 million compared to $213 million and $2.4 billion for the 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;~~respectively;

net cash provided by operating activities from continuing operations of $52 million compared to approximately ~~$117~~$70 million and ~~net cash used in operating activities of approximately $30~~$51 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;~~respectively;

capital expenditures of approximately $109 million compared to $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;~~respectively; and

4115 wells drilled (all successful) compared to 9641 wells drilled ~~(95~~(all successful) for the six months ended June 30, ~~2016.~~2017.

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 periods presented. Despite this separate presentation, there was continuity of the Company’s operations.

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

~~Chapter 11 Proceedings~~Holding Company Reorganization

On January 27, 2017, the Bankruptcy Court 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 effectiveJuly 25, 2018, in accordance with ~~their respective terms and~~Section 251(g) of the Delaware General Corporation Law, LINN Energy merged with 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”),~~into Merger Sub, a newly formed Delaware limited liability company and wholly owned subsidiary of New LINN, with Merger Sub surviving 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 andMerger. The Merger was completed pursuant to the terms of an Agreement and Plan ~~(i) LAC assigned all~~ of ~~its rights, title~~Merger by and ~~interest in~~among LINN Energy, New LINN and Merger Sub, dated July 25, 2018 (the “Merger Agreement”).

Pursuant to the ~~membership interests of Berry to Berry Petroleum Corporation, (ii) all~~Merger Agreement, at the effective time of the equity interests in LAC and the Predecessor were canceled and (iii) LAC and the Predecessor commenced liquidation, which is expected to be completed following the resolution of the respective companies’ outstanding claims.

The holders of claims under the 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 $1.7 billion Successor Credit Facility. As a result,Merger, all outstanding ~~obligations under the Predecessor Credit Facility were canceled.~~

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 rights to purchase shares of Class A common stock ~~in the rights offerings, as described below; and (iii) $30 million in cash. The holders~~ of the Company’s 6.50% senior notes 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 “Unsecured Notes”) received their pro rata share of (i) 26,724,396 shares of Class A common stock; and (ii) certain rights to purchaseLINN Energy were automatically converted into identical shares of Class A common stock of New LINN on a one-for-one basis, and LINN Energy’s existing stockholders became stockholders of New LINN in the ~~rights offerings,~~same amounts and percentages as ~~described below.~~ they were in LINN Energy immediately prior to the Merger.

Spin-Off Transactions

Divestitures

Below are the Company’s completed divestitures in 2018:

On April 10, 2018, the Company completed the sale of its conventional properties located in New Mexico (the “New Mexico Assets Sale”). Cash proceeds received from the sale of these properties were approximately $15 million and the Company recognized a net gain of approximately $11 million.

On March 29, 2018, the Company completed the sale of its interest in conventional properties located in west Texas (the “West Texas Assets Sale”). Cash proceeds received from the sale of these properties were approximately $107 million, net of costs to sell of approximately $2 million, and the Company recognized a net gain of approximately $55 million.

On February 28, 2018, the Company completed the sale of its Oklahoma waterflood and Texas Panhandle properties (the “Oklahoma and Texas Assets Sale”). Cash proceeds received from the sale of these properties were approximately $112 million (including a deposit of approximately $12 million received in 2017), net of costs to sell of approximately $1 million, and the Company recognized a net gain of approximately $46 million.

As a result ~~all outstanding obligations under~~of the ~~Second Lien Notes~~Company’s strategic exit from California during 2017 (completed by the San Joaquin Basin Sale and Los Angeles Basin Sale), the ~~Unsecured Notes~~Company classified the results of operations and cash flows of its California properties as discontinued operations on its condensed consolidated financial statements.

Construction of Cryogenic Plant

In July 2017, the ~~indentures governing such obligations were canceled.~~Company’s then subsidiary, Blue Mountain Midstream LLC (“Blue Mountain”) entered into a definitive agreement with BCCK Engineering, Inc. to construct a 225 MMcf/d cryogenic natural gas processing facility with a total capacity of 250 MMcf/d. The facility was successfully commissioned in the second quarter of 2018. Blue Mountain became a subsidiary of Riviera on August 7, 2018 in connection with the Spin-off.

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

The Successor entered into a registration rights agreement with certain parties, pursuant to which the Company agreed to, among other things, file a registration statement with the Securities and Exchange Commission within 60 days of the Effective Date covering the offer and resale of “Registrable Securities” (as defined therein).

~~Rights Offerings~~

~~Divestitures~~

~~Below are the Company’s divestitures in 2017:~~

The Company entered into two definitive purchase and sale agreements for the sales of its interest in certain properties located in south Texas. On August 1, 2017, and July 31, 2017, the Company completed the sales and received cash proceeds of approximately $9 million and approximately $23 million, respectively.

The Company entered into two definitive purchase and sale agreements for the sales of undeveloped acreage located in the 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 Company completed the sale of undeveloped acreage located in Ward County, Texas and received cash proceeds of approximately $4 million.

On July 31, 2017, the Company completed the sale of its interest in properties located in the San Joaquin Basin in California to Berry Petroleum Company, LLC (the “San Joaquin Basin Sale”) and received cash proceeds of approximately $257 million.

~~Table of Contents~~


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

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.

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 continues to market the previously announced non-core assets located in the Permian Basin, the Williston Basin and south Texas.~~

~~Joint Venture – Pending~~

~~Construction of Cryogenic Plant~~

In July 2017 the Company renamed its wholly owned subsidiary LINN Midstream, LLC to Blue Mountain Midstream LLC (“Blue Mountain”) and entered into a 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 existing natural gas gathering pipeline and approximately 60 MMcf/d of 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 second quarter of 2018.

~~2017 Oil and Natural Gas Capital Budget~~

For 2017, the Company estimates its total capital expenditures, excluding acquisitions, will be approximately $338 million, including approximately $229 million related to its oil and natural gas capital program and approximately $100 million related to its plant and pipeline capital. This estimate is under continuous review and subject to ongoing adjustments.

Financing Activities

~~Successor Credit Facility~~

On the Effective Date, pursuant to the terms of the Plan, the 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 reserve-based revolving loan with an initial borrowing base of $1.4 billion and 2) a term loan in an original principal amount of $300 million.

~~Table of Contents~~


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

On May 31, 2017, the Company entered into the First Amendment and Consent to Credit Agreement, pursuant to which among other modifications: 1) the 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 June 30, 2017, total borrowings outstanding under the Successor Credit Facility were approximately $183 million and there was approximately $774 million of remaining available borrowing capacity (which includes a $7 million reduction for outstanding letters of credit). The maturity date is February 27, 2021.

Redetermination of the 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 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 3.50% per annum or the alternate base rate (“ABR”) plus an applicable margin of 2.50% per annum. Interest is generally payable in arrears monthly for loans bearing interest based at the ABR and at the end of the applicable interest period for loans bearing interest at the LIBOR. The Company is required to pay a commitment fee to the lenders under the Successor Credit Facility, which accrues at a rate per annum of 0.50% on the average daily unused amount of the available revolving loan commitments of the lenders.

The obligations under the Successor Credit Facility are secured by mortgages covering approximately 95% of the 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 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

During the ~~Company’s outstanding shares of Class A common stock. In~~six months ended June ~~2017 and July 2017,~~30, 2018, the Company repurchased an aggregate of ~~841,303~~1,557,180 shares of Class A common stock at an average price of ~~$32.41~~$39.13 per share for a total cost of approximately ~~$27~~$61 million.

~~Listing on~~ In July 2018, the ~~OTCQB Market~~

~~On the Effective Date, the Predecessor’s units were canceled and ceased to trade on the OTC Markets Group Inc.’s Pink marketplace. In April 2017, the Successor’s~~Company purchased 280,289 shares of Class A common stock ~~was approved~~at an average price of $40.30 for ~~trading on~~a total cost of approximately $11 million. During 2017 and 2018, the ~~OTCQB market~~Company purchased an aggregate of 7,527,661 shares of Class A common stock at an average price of $35.94 for a total cost of approximately $271 million.

Tender Offer

On December 14, 2017, the Company’s Board of Directors announced the intention to commence a tender offer to purchase at least $250 million of the Company’s Class A common stock. In January 2018, upon the terms and subject to the conditions described in the Offer to Purchase dated December 20, 2017, as amended, the Company repurchased an aggregate of 6,770,833 shares of Class A common stock at a fixed price of $48.00 per share for a total cost of approximately $325 million (excluding expenses of approximately $4 million related to the tender offer).

Credit Facility

On April 30, 2018, the Company entered into an amendment to the Credit Facility which, among other things, modified the borrowing base and maximum borrowing commitment amount to $425 million. Pursuant to the Spin-off, the borrower under the ~~symbol “LNGG.”~~Credit Facility became a subsidiary of Riviera and as such, Riviera and its subsidiaries have assumed all obligations under the Credit Facility.

Commodity Derivatives

During the six months ended June 30, 2018, the Company entered into commodity derivative contracts consisting of natural gas basis swaps for March 2018 through December 2019, natural gas fixed price swaps for January 2019 through December 2019 and oil fixed price swaps for January 2019 through December 2019. In April 2018, in connection with the closing of the Altamont Bluebell Assets Sale, the Company canceled its oil collars for 2018 and 2019. The Company paid net cash settlements of approximately $20 million for the cancellations.

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

Results of Operations

Three Months Ended June 30, ~~2017,~~2018, Compared to Three Months Ended June 30, ~~2016~~2017


	Successor			Predecessor						Successor
	Three Months Ended June 30, 2017			Three Months Ended June 30, 2016			Variance			Three Months Ended June 30,
(in thousands)
										2018			2017			Variance
										(in thousands)
Revenues and other:
Natural gas sales	$	110,481		$	82,718		$	27,763		$	53,662		$	110,481		$	(56,819	)
Oil sales	89,237			81,499			7,738			10,919			89,237			(78,318		)
NGL sales	43,449			31,630			11,819			22,423			43,449			(21,026		)
Total oil, natural gas and NGL sales	243,167			195,847			47,320			87,004			243,167			(156,163		)
Gains (losses) on oil and natural gas derivatives	45,714			(183,794		)	229,508			(7,525		)	45,714			(53,239		)
Marketing and other revenues ⁽¹⁾	18,938			32,192			(13,254		)
Marketing and other revenues										49,354			18,938			30,416
	307,819			44,245			263,574			128,833			307,819			(178,986		)
Expenses:
Lease operating expenses	71,057			70,367			690			24,088			71,057			(46,969		)
Transportation expenses	37,388			41,092			(3,704		)	21,213			37,388			(16,175		)
Marketing expenses	6,976			6,727			249			40,327			6,976			33,351
General and administrative expenses ⁽²⁾	34,458			52,169			(17,711		)
General and administrative expenses ⁽¹⁾										92,395			34,458			57,937
Exploration costs	811			48			763			53			811			(758		)
Depreciation, depletion and amortization	51,987			86,358			(34,371		)	21,980			51,987			(30,007		)
Taxes, other than income taxes	17,871			18,180			(309		)	7,297			17,871			(10,574		)
(Gains) losses on sale of assets and other, net	(306,969		)	2,517			(309,486		)
Gains on sale of assets and other, net										(101,777		)	(306,878		)	205,101
	(86,421		)	277,458			(363,879		)	105,576			(86,330		)	191,906
Other income and (expenses)	(8,714		)	(51,546		)	42,832			(9,373		)	(8,623		)	(750		)
Reorganization items, net	(3,377		)	485,798			(489,175		)	(1,259		)	(3,377		)	2,118
Income from continuing operations before income taxes	382,149			201,039			181,110			12,625			382,149			(369,524		)
Income tax expense (benefit)	158,770			(3,652		)	162,422
Income tax expense										5,722			158,770			(153,048		)
Income from continuing operations	223,379			204,691			18,688			6,903			223,379			(216,476		)
Income (loss) from discontinued operations, net of income taxes	(3,322		)	3,801			(7,123		)
Loss from discontinued operations, net of income taxes										—			(3,322		)	3,322
Net income	$	220,057		$	208,492		$	11,565		6,903			220,057			(213,154		)
Net income attributable to noncontrolling interests										1,799			—			1,799
Net income attributable to common stockholders										$	5,104		$	220,057		$	(214,953	)


⁽¹⁾	Marketing and other revenues for the three months ended June 30, 2016, include approximately $18 million of management fee revenues recognized by the Company from Berry. Management fee revenues are included in “other revenues” on the condensed consolidated statement of operations.

⁽²⁾

General and administrative expenses for the three months ended June 30, ~~2017,~~2018, and June 30, ~~2016,~~2017, include approximately ~~$15~~$58 million and $5$15 million, respectively, of ~~noncash~~ share-based compensation expenses. In addition, general and administrative expenses for the three months ended June 30, ~~2016,~~2018, and June 30, 2017, include ~~expenses incurred by LINN Energy associated with the operations~~approximately $14 million and $502,000, respectively of ~~Berry. On February 28, 2017, LINN Energy and Berry emerged from Bankruptcy as stand-alone, unaffiliated entities.~~severance costs.

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


							Successor
	Successor		Predecessor				Three Months Ended June 30,
	Three Months Ended June 30, 2017		Three Months Ended June 30, 2016		Variance		2018		2017		Variance
Average daily production:
Natural gas (MMcf/d)	432		511		(15	)%	238		432		(45	)%
Oil (MBbls/d)	21.6		21.9		(1	)%	1.8		21.6		(92	)%
NGL (MBbls/d)	24.8		26.6		(7	)%	10.5		24.8		(58	)%
Total (MMcfe/d)	710		802		(11	)%	312		710		(56	)%

Weighted average prices: ⁽¹⁾
Average daily production – Equity method investments: ⁽¹⁾
Total (MMcfe/d)							109		—		100	%

Weighted average prices: ⁽²⁾
Natural gas (Mcf)	$	2.81	$	1.78	58	%	$	2.48	$	2.81	(12	)%
Oil (Bbl)	$	45.42	$	40.96	11	%	$	66.66	$	45.42	47	%
NGL (Bbl)	$	19.29	$	13.08	47	%	$	23.43	$	19.29	21	%

Average NYMEX prices:
Natural gas (MMBtu)	$	3.18	$	1.95	63	%	$	2.80	$	3.18	(12	)%
Oil (Bbl)	$	48.28	$	45.59	6	%	$	67.88	$	48.28	41	%

Costs per Mcfe of production:
Lease operating expenses	$	1.10	$	0.96	15	%	$	0.85	$	1.10	(23	)%
Transportation expenses	$	0.58	$	0.56	4	%	$	0.75	$	0.58	29	%
General and administrative expenses ⁽²⁾	$	0.53	$	0.71	(25	)%
General and administrative expenses ⁽³⁾							$	3.26	$	0.53	515	%
Depreciation, depletion and amortization	$	0.80	$	1.18	(32	)%	$	0.77	$	0.80	(3	)%
Taxes, other than income taxes	$	0.28	$	0.25	12	%	$	0.26	$	0.28	(8	)%

Average daily production – discontinued operations:
Total (MMcfe/d)	29		277				—		29		(100	)%


⁽¹⁾	Represents the Company’s 50% equity interest in Roan.


⁽²⁾	Does not include the effect of gains (losses) on derivatives.

⁽²⁾⁽³⁾

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

Revenues and Other

Oil, Natural Gas and NGL Sales

Oil, natural gas and NGL sales ~~increased~~decreased by approximately ~~$47~~$156 million or ~~24%~~64% to approximately $87 million for the three months ended June 30, 2018, from approximately $243 million for the three months ended June 30, 2017, ~~from approximately $196 million for the three months ended June 30, 2016,~~ due to ~~higher~~lower production volumes as a result of divestitures completed in 2017 and 2018. Lower natural gas ~~NGL and oil~~ prices ~~partially offset by lower production volumes.~~resulted in a decrease in revenues of approximately $7 million. Higher ~~natural gas,~~ NGL and oil prices resulted in an increase in revenues of approximately ~~$40 million, $14~~$4 million and $9$3 million, respectively. In addition, revenues increased by approximately $1 million due to the impact of the new accounting standard related to revenues from contracts with customers, adopted on January 1, 2018. As of January 1, 2017, revenue was recognized net of transportation expenses if the processor was the customer and there was no redelivery of commodities to the Company. See Note 1 for additional details of the revenue accounting standard.

Average daily production volumes decreased to approximately 312 MMcfe/d for the three months ended June 30, 2018, from 710 MMcfe/d for the three months ended June 30, ~~2017, from 802 MMcfe/d for the three months ended June 30, 2016.~~2017. Lower oil, natural gas ~~NGL~~ and ~~oil~~NGL production volumes resulted in a decrease in revenues of approximately ~~$13~~$82 million, $2$50 million and $1$25 million, respectively.

The following table sets forth average daily production by region:


							Successor
	Successor	Predecessor					Three Months Ended June 30,
	Three Months Ended June 30, 2017	Three Months Ended June 30, 2016	Variance				2018	2017	Variance
Average daily production (MMcfe/d):
Rockies	244	330	(86	)	(26	)%
Hugoton Basin	165	181	(16	)	(9	)%	136	164	(28	)	(18	)%
Mid-Continent	125	102	23		23	%	49	126	(77	)	(61	)%
TexLa	76	71	5		8	%
East Texas							51	53	(2	)	(3	)%
Rockies							22	244	(222	)	(91	)%
Michigan/Illinois							27	29	(2	)	(6	)%
North Louisiana							27	23	4		14	%
Permian Basin	46	58	(12	)	(21	)%	—	46	(46	)	(100	)%
Michigan/Illinois	29	31	(2	)	(6	)%
South Texas	25	29	(4	)	(13	)%	—	25	(25	)	(100	)%
	710	802	(92	)	(11	)%	312	710	(398	)	(56	)%
Equity method investments							109	—	109		100	%

The ~~increases~~increase in average daily production volumes in the North Louisiana region primarily reflect increased development capital spending in the region. The decrease in average daily production volumes in the Mid-Continent ~~and TexLa~~region primarily ~~reflect~~reflects lower production volumes as a result of the Roan Contribution on August 31, 2017, partially offset by increased development capital spending in the ~~regions.~~region. The decreases in average daily production volumes in the Hugoton Basin, Rockies, Permian Basin and South Texas regions primarily reflect lower production volumes as a result of divestitures completed during 2017 and 2018. See Note 4 for additional information of divestitures. In addition, the decreases in average daily production volumes in these and the remaining regions ~~primarily~~ reflect lower production volumes as a result of reduced development capital spending ~~throughout the Company’s various regions, as well as marginal well shut-ins,~~ driven by continued low commodity prices. ~~The decrease~~Equity method investments represents the Company’s 50% equity interest in ~~average daily production volumes in the Rockies region also reflects lower production volumes as a result of the Jonah Assets Sale on May 31, 2017.~~Roan.

Gains (Losses) on Oil and Natural Gas Derivatives

~~Gains~~Losses on oil and natural gas derivatives were approximately $8 million for the three months ended June 30, 2018, compared to gains of approximately $46 million for the three months ended June 30, 2017, ~~compared to losses of approximately $184 million for the three months ended June 30, 2016,~~ representing a variance of approximately ~~$230~~$54 million. Gains and losses on oil and natural gas derivatives were primarily due to changes in fair value of the derivative contracts. The fair value on unsettled derivative contracts changes as future commodity price expectations change compared to the contract prices on the derivatives. If the expected future commodity prices increase compared to the contract prices on the derivatives, losses are recognized; and if the expected future commodity prices decrease compared to the contract prices on the derivatives, gains are recognized.

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

The Company ~~determines~~determined the fair value of its oil and natural gas derivatives utilizing pricing models that use a variety of techniques, including market quotes and pricing analysis. See Item 3. “Quantitative and Qualitative Disclosures About Market Risk” and Note 7 and Note 8 for additional details about the Company’s commodity derivatives. For information about the Company’s pre-Spin-off credit risk related to derivative contracts, see “Counterparty Credit Risk” under “Liquidity and Capital Resources” below.

Marketing and Other Revenues

Marketing revenues represent third-party activities associated with company-owned gathering systems, plants and facilities. Other revenues primarily include ~~management fee~~helium sales revenue. Consolidated marketing and other revenues ~~recognized~~increased by approximately $30 million or 161% to approximately $49 million for the three months ended June 30, 2018, from approximately $19 million for the three months ended June 30, 2017. Marketing and other revenues of the upstream segment increased by approximately $12 million or 70% to approximately $29 million for the three months ended June 30, 2018, from approximately $17 million for the three months ended June 30, 2017. The increase was primarily due to higher revenues generated by the Jayhawk natural gas processing plant in Kansas, principally driven by a change in contract terms and the impact of the new accounting standard related to revenues from contracts with customers, adopted on January 1, 2018. As of January 1, 2018, the Company recognized revenues for commodities received as noncash consideration in exchange for services provided by its midstream operations and revenues and associated cost of product for the subsequent sale of those same commodities. This recognition resulted in an increase to revenues and expenses with no impact on net income. See Note 1 for additional details of the revenue accounting standard.

Expenses

Lease Operating Expenses

Transportation Expenses

Transportation expenses decreased by approximately $16 million or 43% to approximately $21 million for the three months ended June 30, 2018, from approximately $37 million for the three months ended June 30, 2017. The decrease was due to reduced costs as a result of lower production volumes primarily as a result of the divestitures completed in 2017 and 2018, partially offset by the impact of the new accounting standard related to revenues from contracts with customers, adopted on January 1, 2018. As of January 1, 2018, revenue is recognized net of transportation expenses if the processor is the customer and there is no redelivery of commodities to the Company. See Note 1 for additional details of the revenue accounting standard. Transportation expenses per Mcfe increased to $0.75 per Mcfe for the three months ended June 30, 2018, from $0.58 per Mcfe for the three months ended June 30, 2017.

Marketing Expenses

Marketing expenses represent third-party activities associated with company-owned gathering systems, plants and facilities. Consolidated marketing expenses increased by approximately $33 million to approximately $40 million for the three months ended June 30, 2018, from approximately $7 million for the three months ended June 30, 2017. Marketing expenses of the upstream segment increased by approximately $14 million to approximately $20 million for the three months ended June 30, 2018, from approximately $6 million for the three months ended June 30, 2017. The increase was primarily due to higher expenses associated with the Jayhawk natural gas processing plant in Kansas, principally driven by a change in contract terms and the impact of the new accounting standard related to revenues from contracts with customers, adopted on January 1, 2018. As of January 1, 2018, the Company recognized revenues for commodities received as noncash consideration in exchange for services provided by its midstream operations and revenues and associated cost of product for the subsequent sale of those same commodities. This recognition resulted in an increase to revenues and expenses with no impact on net income. See Note 1 for additional details of the revenue accounting standard.

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

and helium sales revenue. Marketing and other revenues decreased by approximately $13 million or 41% to approximately $19 million for the three months ended June 30, 2017, from approximately $32 million for the three months ended June 30, 2016. The decrease was primarily due to the management fee revenues from Berry included in the Predecessor period, partially offset by higher revenues generated by the Jayhawk natural gas processing plant in Kansas and higher helium sales revenue in the Hugoton Basin.

~~Expenses~~

~~Lease Operating Expenses~~

Lease operating expenses include expenses such as labor, field office, vehicle, supervision, maintenance, tools and supplies, and workover expenses. Lease operating expenses remained relatively consistent at approximately $71 million for the three months ended June 30, 2017, compared to approximately $70 million for the three months ended June 30, 2016. Lease operating expenses per Mcfe increased to $1.10 per Mcfe for the three months ended June 30, 2017, from $0.96 per Mcfe for the three months ended June 30, 2016.

~~Transportation Expenses~~

Transportation expenses decreased by approximately $4 million or 9% to approximately $37 million for the three months ended June 30, 2017, from approximately $41 million for the three months ended June 30, 2016. The decrease was primarily due to reduced costs as a result of lower production volumes and as a result of the properties sold in May 2017. Transportation expenses per Mcfe increased $0.58 per Mcfe for the three months ended June 30, 2017, from $0.56 per Mcfe for the three months ended June 30, 2016.

~~Marketing Expenses~~

Marketing expenses represent third-party activities associated with company-owned gathering systems, plants and facilities. Marketing expenses remained relatively consistent at approximately $7 million for each of the three months ended June 30, 2017, and June 30, 2016.

General and Administrative Expenses

General and administrative expenses are costs not directly associated with field operations and reflect the costs of employees including executive officers, related benefits, office leases and professional fees. ~~In addition, general and administrative expenses in the Predecessor period includes expenses incurred by LINN Energy associated with the operations of Berry.~~ General and administrative expenses ~~decreased~~increased by approximately ~~$18~~$58 million or ~~34%~~168% to approximately $92 million for the three months ended June 30, 2018, from approximately $34 million for the three months ended June 30, ~~2017,~~2017. The increase was primarily due to higher share-based compensation expenses, higher severance costs, and transition service fees received from ~~approximately $52 million~~Berry in the prior year, partially offset by lower salaries and benefits related expenses. General and administrative expenses per Mcfe increased to $3.26 per Mcfe for the three months ended June 30, 2016. The decrease was primarily due to lower salaries and benefits related expenses, the costs associated with the operations of Berry in the Predecessor period and lower various other administrative expenses including insurance and rent, partially offset by higher noncash share-based compensation expenses and higher professional services expenses. General and administrative expenses per Mcfe also decreased to2018, from $0.53 per Mcfe for the three months ended June 30, ~~2017, from $0.71 per Mcfe for the three months ended June 30, 2016.~~2017.

For the professional services expenses related to the Chapter 11 proceedings, ~~that were incurred since the Petition Date,~~ see “Reorganization Items, Net.”

Exploration Costs

Exploration costs ~~increased~~decreased by approximately ~~$763,000~~$758,000 to approximately $53,000 for the three months ended June 30, 2018, from approximately $811,000 for the three months ended June 30, ~~2017, from approximately $48,000 for the three months ended June 30, 2016.~~2017. The ~~increase~~decrease was primarily due to ~~higher~~lower seismic data expenses.

Depreciation, Depletion and Amortization

Depreciation, depletion and amortization decreased by approximately ~~$34~~$30 million or ~~40%~~58% to approximately $22 million for the three months ended June 30, 2018, from approximately $52 million for the three months ended June 30, ~~2017, from approximately $86 million for the three months ended June 30, 2016.~~2017. The decrease was primarily due to ~~lower rates as a result of the application of fresh start accounting, as well as~~ lower total production volumes. Depreciation, depletion and amortization per Mcfe ~~also~~ decreased to $0.77 per Mcfe for the three months ended June 30, 2018, from $0.80 per Mcfe for the three months ended June 30, ~~2017, from $1.18 per Mcfe for the three months ended June 30, 2016.~~

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

2017.

Taxes, Other Than Income Taxes


	Successor		Predecessor					Successor
	Three Months Ended June 30, 2017		Three Months Ended June 30, 2016		Variance			Three Months Ended June 30,
(in thousands)
								2018		2017		Variance
								(in thousands)

Severance taxes	$	10,669	$	10,208	$	461		$	2,861	$	10,669	$	(7,808	)
Ad valorem taxes	6,933		6,991		(58		)	4,161		6,933		(2,772		)
Other	269		981		(712		)	275		269		6
	$	17,871	$	18,180	$	(309	)	$	7,297	$	17,871	$	(10,574	)

~~Taxes, other than income taxes decreased by approximately $309,000 or 2% for the three months ended June 30, 2017, compared to the three months ended June 30, 2016.~~ Severance taxes, which are a function of revenues generated from production, ~~increased~~decreased primarily due to ~~higher commodity prices partially offset by~~ lower production volumes. Ad valorem taxes, which are based on the value of reserves and production equipment and vary by location, decreased primarily due to divestitures completed in 2017 and 2018 and lower estimated valuations on certain of the Company’s properties.

~~(Gains) Losses~~Gains on Sale of Assets and Other, Net

During the three months ended June 30, 2018, the Company recorded the following net gains on divestitures (see Note 4):

Net gain of approximately $11 million on the New Mexico Assets Sale; and

Net gain of approximately $83 million, including costs to sell of approximately $2 million, on the Altamont Bluebell Assets Sale.

During the three months ended June 30, 2017, the Company recorded the following net gains on divestitures (see Note 4):

Net gain of approximately $22 million on the Salt Creek Assets Sale; and

Net gain of approximately $279 million, including costs to sell of approximately $6 million, on the Jonah Assets Sale.

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

Other Income and (Expenses)


	Successor			Predecessor					Successor
	Three Months Ended June 30, 2017			Three Months Ended June 30, 2016			Variance		Three Months Ended June 30,
(in thousands)
									2018			2017			Variance
									(in thousands)

Interest expense, net of amounts capitalized	$	(7,551	)	$	(50,320	)	$	42,769	$	(584	)	$	(7,551	)	$	6,967
Earnings (losses) from equity method investments									(9,327		)	91			(9,418		)
Other, net	(1,163		)	(1,226		)	63		538			(1,163		)	1,701
	$	(8,714	)	$	(51,546	)	$	42,832	$	(9,373	)	$	(8,623	)	$	(750	)

~~Other income~~Interest expense decreased primarily due to no outstanding debt during 2018, and ~~(expenses) decreased by approximately $43 million or 83% for~~lower amortization of financing fees. For the three months ended June 30, ~~2017, compared~~2018, interest expense is primarily related to the three months ended June 30, 2016. Interest expense decreased primarily due to lower outstanding debt during the period. For the period from May 12, 2016 through June 30, 2016, contractual interest, which was not recorded, on the senior notes was approximately $31 million.amortization of financing fees. See “Debt” under “Liquidity and Capital Resources” below for additional details.

Equity method investments primarily include the Company’s 50% equity interest in Roan. The ~~Second Lien Notes were accounted for as a troubled debt restructuring which requires that interest payments on~~Company’s equity earnings consists of its share of Roan’s earnings and the ~~Second Lien Notes reduce the carrying value~~amortization of the ~~debt with no interest expense recognized. For~~difference between the ~~period from May 12, 2016 through June 30, 2016, contractual interest, which was not recorded, on the Second Lien Notes was approximately $16 million.~~Company’s investment in Roan and Roan’s underlying net assets attributable to certain assets. See Note 6 for additional information.

Reorganization Items, Net

The Company incurred significant costs and recognized significant gains associated with the reorganization. Reorganization items represent costs and income directly associated with the Chapter 11 proceedings since the Petition Date, and also include adjustments to reflect the carrying value of certain liabilities subject to compromise at their estimated allowed claim amounts, as such adjustments are determined. The following table summarizes the components of reorganization items included on the condensed consolidated statements of operations:



	Successor
	Three Months Ended June 30,
	2018			2017
	(in thousands)

Legal and other professional advisory fees	$	(1,255	)	$	(3,446	)
Other	(4		)	69
Reorganization items, net	$	(1,259	)	$	(3,377	)

Income Tax Expense

The Company recognized income tax expense of approximately $6 million and $159 million for the three months ended June 30, 2018, and June 30, 2017, respectively. The decrease is primarily due to a decrease in taxable earnings and a decrease in the federal statutory income tax rate.

Loss from Discontinued Operations, Net of Income Taxes

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 has classified the results of operations of its California properties as discontinued operations. Loss from discontinued operations, net of income taxes was approximately $3 million for the three months ended June 30, 2017. See Note 4 for additional information.

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

~~as such adjustments are determined. The following table summarizes the components of reorganization items included on the condensed consolidated statements of operations:~~Net Income Attributable to Common Stockholders

Successor Predecessor

Three Months Ended June 30,
2017

Three Months Ended June 30,
2016
(in thousands)
Legal and other professional advisory fees $ (3,446 ) $ (13,451 )
Unamortized deferred financing fees, discounts and premiums —
(52,045 )
Gain related to interest payable on Predecessor’s Second Lien Notes —
551,000
Other 69
294
Reorganization items, net $ (3,377 ) $ 485,798

~~Income Tax Expense (Benefit)~~

~~Effective February 28, 2017, upon the consummation of the Plan, the Successor became a C corporation. Prior~~Net income attributable 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 were passed throughcommon stockholders decreased by approximately $215 million to its unitholders. Limited liability companies are subject to Texas margin tax. In addition, certain of the Predecessor’s subsidiaries were C corporations subject to federal and state income taxes. The Company recognized income tax expense of approximately ~~$159 million and an income tax benefit of approximately $4~~$5 million for the three months ended June 30, ~~2017, and~~2018, from approximately $220 million the three months ended June 30, ~~2016, respectively.~~2017. The decrease was primarily due to lower gains on sales of assets, lower production revenue and losses compared to gains on commodity derivatives, partially offset by lower expenses during the three months ended June 30, 2018. See discussion above for explanations of variances.

~~Income (Loss) from Discontinued Operations, Net of Income Taxes~~Chisholm Trail Reporting Segment

~~As a result of the Company’s strategic exit from California (completed~~



	Successor
	Three Months Ended June 30,
	2018			2017		Variance
	(in thousands)

Marketing revenues	$	20,066		$	1,754	$	18,312

Marketing expenses	20,083			820		19,263
Severance taxes and ad valorem taxes	285			116		169
Total direct operating expenses	20,368			936		19,432
Field level cash flow ⁽¹⁾	$	(302	)	$	818	$	(1,120	)


⁽¹⁾	Refer to Note 19 for a reconciliation of field level cash flow to income from continuing operations before income taxes.

Marketing Revenues

Chisholm Trail’s marketing revenue increased by the San Joaquin Basin Sale and Los Angeles Basin Sale) and the deconsolidation of Berry, the Company has classified the results of operations of its California properties and Berry as discontinued operations. Loss from discontinued operations, net of income taxes was approximately $3$18 million ~~and income from discontinued operations was~~to approximately $4$20 million for the three months ended June 30, ~~2017, and June 30, 2016, respectively. See Note 4 for additional information.~~

~~Net Income~~

~~Net income increased by~~2018, from approximately ~~$12 million to approximately $220~~$2 million for the three months ended June 30, ~~2017,~~2017. The increase was primarily due to the new accounting standard related to revenues from contracts with customers, adopted on January 1, 2018, and higher throughput volumes sold. As of January 1, 2018, the Company recognizes revenues for commodities received as noncash consideration in exchange for services provided by its midstream operations and revenues and associated cost of product for the subsequent sale of those same commodities. This recognition results in an increase to revenues and expenses with no impact on net income. See Note 1 for additional details of the revenue accounting standard.

Marketing Expenses

Chisholm Trail’s marketing expenses increased by approximately ~~$208~~$19 million to approximately $20 million for the three months ended June 30, 2016. The increase was primarily due gains on sales of assets, gains compared to losses on commodity derivatives, lower expenses and higher production revenues partially offset by gains included in reorganization items during2018, from approximately $820,000 for the three months ended June 30, ~~2016, income tax expense compared~~2017. The increase was primarily due to ~~income tax benefit~~the new accounting standard related to revenues from contracts with customers, adopted on January 1, 2018, and ~~loss~~higher throughput volumes purchased. As of January 1, 2018, the Company recognizes revenues for commodities received as noncash consideration in exchange for services provided by its midstream operations and revenues and associated cost of product for the subsequent sale of those same commodities. This recognition results in an increase to revenues and expenses with no impact on ~~discontinued operations compared to~~net income. See ~~discussion above~~Note 1 for ~~explanations~~additional details of ~~variances.~~the revenue accounting standard.

Field Level Cash Flow

Chisholm Trail’s field level cash flow decreased by approximately $1 million to negative cash flow of approximately $302,000 for the three months ended June 30, 2018, from positive cash flow of approximately $818,000 for the three months ended June 30, 2017. The decrease was primarily due to widening pricing spreads between the Conway and Mont Belvieu market hubs.

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

Results of Operations

The following table reflects the Company’s results of operations for each of the Successor and Predecessor periods presented:


	Successor			Predecessor						Successor						Predecessor
	Four Months Ended June 30, 2017			Two Months Ended February 28, 2017			Six Months Ended June 30, 2016			Six Months Ended June 30, 2018			Four Months Ended June 30, 2017			Two Months Ended February 28, 2017
(in thousands)
Revenues and other:
Natural gas sales	$	148,551		$	99,561		$	178,743		$	116,990		$	148,551		$	99,561
Oil sales	119,475			58,560			146,522			56,615			119,475			58,560
NGL sales	55,466			30,764			55,023			50,275			55,466			30,764
Total oil, natural gas and NGL sales	323,492			188,885			380,288			223,880			323,492			188,885
Gains (losses) on oil and natural gas derivatives	33,755			92,691			(74,341		)	(22,555		)	33,755			92,691
Marketing and other revenues ⁽¹⁾	23,880			16,551			69,559			101,515			23,880			16,551
	381,127			298,127			375,506			302,840			381,127			298,127
Expenses:
Lease operating expenses	95,687			49,665			153,613			71,972			95,687			49,665
Transportation expenses	51,111			25,972			83,623			40,307			51,111			25,972
Marketing expenses	9,515			4,820			14,560			82,082			9,515			4,820
General and administrative expenses ⁽²⁾	44,869			71,745			135,889			137,174			44,869			71,745
Exploration costs	866			93			2,741			1,255			866			93
Depreciation, depletion and amortization	71,901			47,155			175,467			50,445			71,901			47,155
Impairment of long-lived assets	—			—			123,316
Taxes, other than income taxes	24,948			14,877			35,541			15,749			24,948			14,877
(Gains) losses on sale of assets and other, net	(306,524		)	672			3,786			(207,852		)	(306,394		)	829
	(7,627		)	214,999			728,536			191,132			(7,497		)	215,156
Other income and (expenses)	(13,302		)	(16,874		)	(135,351		)	15,399			(13,172		)	(16,717		)
Reorganization items, net	(5,942		)	2,331,189			485,798			(3,210		)	(5,942		)	2,331,189
Income (loss) from continuing operations before income taxes	369,510			2,397,443			(2,583		)
Income from continuing operations before income taxes										123,897			369,510			2,397,443
Income tax expense (benefit)	153,455			(166		)	6,594			45,896			153,455			(166		)
Income (loss) from continuing operations	216,055			2,397,609			(9,177		)
Income from continuing operations										78,001			216,055			2,397,609
Loss from discontinued operations, net of income taxes	(3,254		)	(548		)	(1,130,077		)	—			(3,254		)	(548		)
Net income (loss)	$	212,801		$	2,397,061		$	(1,139,254	)
Net income										78,001			212,801			2,397,061
Net income attributable to noncontrolling interests										3,073			—			—
Net income attributable to common stockholders/unitholders										$	74,928		$	212,801		$	2,397,061


⁽¹⁾	Marketing and other revenues for the two months ended February 28, 2017, ~~and the six months ended June 30, 2016,~~ include approximately $6 million ~~and $41 million, respectively,~~ of management fee revenues recognized by the Company from Berry. Management fee revenues are included in “other revenues” on the condensed consolidated ~~statements~~statement of operations.

⁽²⁾

General and administrative expenses for the six months ended June 30, 2018, the four months ended June 30, 2017, and the two months ended February 28, 2017, include approximately $75 million, $20 million and $50 million, respectively, of share-based compensation expenses. General and administrative expenses for the six months ended June 30, ~~2016,~~2018, the four months ended June 30, 2017, and the two months ended February 28, 2017, also include approximately ~~$20~~$18 million, ~~$50 million~~$596,000 and ~~$14 million,~~$787,000, respectively, of ~~noncash share-based compensation expenses.~~severance costs. In addition, general and administrative expenses for the two months ended February 28, 2017, ~~and the six months ended June 30, 2016,~~ include expenses incurred by LINN Energy associated with the operations of Berry. On February 28, 2017, LINN Energy and Berry emerged from ~~bankruptcy~~Bankruptcy as stand-alone, unaffiliated entities.

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


	Successor		Predecessor				Successor				Predecessor
	Four Months Ended June 30, 2017		Two Months Ended February 28, 2017		Six Months Ended June 30, 2016		Six Months Ended June 30, 2018		Four Months Ended June 30, 2017		Two Months Ended February 28, 2017
Average daily production:
Natural gas (MMcf/d)	448		495		523		252		448		495
Oil (MBbls/d)	21.4		20.2		22.9		5.1		21.4		20.2
NGL (MBbls/d)	24.3		21.4		25.4		12.3		24.3		21.4
Total (MMcfe/d)	722		745		813		356		722		745

Weighted average prices: ⁽¹⁾
Average daily production – Equity method investments: ⁽¹⁾
Total (MMcfe/d)							111		—		—

Weighted average prices: ⁽²⁾
Natural gas (Mcf)	$	2.72	$	3.41	$	1.88	$	2.57	$	2.72	$	3.41
Oil (Bbl)	$	45.79	$	49.16	$	35.18	$	61.07	$	45.79	$	49.16
NGL (Bbl)	$	18.68	$	24.37	$	11.89	$	22.56	$	18.68	$	24.37

Average NYMEX prices:
Natural gas (MMBtu)	$	3.05	$	3.66	$	2.02	$	2.90	$	3.05	$	3.66
Oil (Bbl)	$	48.63	$	53.04	$	39.52	$	65.37	$	48.63	$	53.04

Costs per Mcfe of production:
Lease operating expenses	$	1.09	$	1.13	$	1.04	$	1.12	$	1.09	$	1.13
Transportation expenses	$	0.58	$	0.59	$	0.57	$	0.62	$	0.58	$	0.59
General and administrative expenses ⁽²⁾	$	0.51	$	1.63	$	0.92
General and administrative expenses ⁽³⁾							$	2.13	$	0.51	$	1.63
Depreciation, depletion and amortization	$	0.82	$	1.07	$	1.19	$	0.78	$	0.82	$	1.07
Taxes, other than income taxes	$	0.28	$	0.34	$	0.24	$	0.24	$	0.28	$	0.34

Average daily production – discontinued operations:
Total (MMcfe/d)	29		30		283		—		29		30


⁽¹⁾	Represents the Company’s 50% equity interest in Roan.


⁽²⁾	Does not include the effect of gains (losses) on derivatives.

⁽²⁾⁽³⁾

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

Revenues and Other

Oil, Natural Gas and NGL Sales

Oil, natural gas and NGL sales ~~increased~~decreased by approximately ~~$132~~$288 million or ~~35%~~56% to approximately $224 million for the six months ended June 30, 2018, from approximately $323 million and $189 million for the four months ended June 30, 2017, and the two months ended February 28, 2017, respectively, ~~from approximately $380 million for the six months ended June 30, 2016,~~ due to ~~higher natural gas, oil~~lower production volumes as a result of divestitures completed in 2017 and ~~NGL prices,~~2018 partially offset by ~~lower production volumes.~~higher commodity prices. Higher ~~natural gas,~~ oil and NGL prices resulted in an increase in revenues of approximately ~~$91 million, $44~~$13 million and ~~$36~~$5 million, respectively. Lower natural gas prices resulted in a decrease in revenues of approximately $16 million. In addition, revenues decreased by approximately $1 million due to the impact of the new accounting standard related to revenues from contracts with customers, adopted on January 1, 2018. As of January 1, 2017, revenue was recognized net of transportation expenses if the processor was the customer and there was no redelivery of commodities to the Company. See Note 1 for additional details of the revenue accounting standard.

Average daily production volumes decreased to approximately 356 MMcfe/d for the six months ended June 30, 2018, from 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, from approximately 813 MMcfe/d for the six months ended June 30, 2016.~~respectively. Lower oil, natural gas ~~oil~~ and NGL production volumes resulted in a decrease in revenues of approximately ~~$21~~$135 million, ~~$13~~$113 million and $5$41 million, respectively.

The following table sets forth average daily production by region:


	Successor	Predecessor		Successor		Predecessor
	Four Months Ended June 30, 2017	Two Months Ended February 28, 2017	Six Months Ended June 30, 2016	Six Months Ended June 30, 2018	Four Months Ended June 30, 2017	Two Months Ended February 28, 2017
Average daily production (MMcfe/d):
Rockies	254	294	338
Hugoton Basin	166	159	185	146	165	158
Mid-Continent	125	109	99	53	126	110
TexLa	77	80	71
East Texas				53	53	52
Rockies				29	254	294
Michigan/Illinois				28	29	29
North Louisiana				27	24	28
Permian Basin	46	49	60	20	46	49
Michigan/Illinois	29	29	31
South Texas	25	25	29	—	25	25
	722	745	813	356	722	745
Equity method investments				111	—	—

The ~~increases~~decrease in average daily production volumes in the Mid-Continent ~~and TexLa~~region primarily ~~reflect~~reflects lower production volumes as a result of the Roan Contribution on August 31, 2017, partially offset by increased development capital spending in the ~~regions.~~region. The decreases in average daily production volumes in the Hugoton Basin, Rockies, Permian Basin and South Texas regions primarily reflect lower production volumes as a result of divestitures completed during 2017 and 2018. See Note 4 for additional information of divestitures. In addition, the decreases in average daily production volumes in these and the remaining regions ~~primarily~~ reflect lower production volumes as a result of reduced development capital spending ~~throughout the Company’s various regions, as well as marginal well shut-ins,~~ driven by continued low commodity prices. ~~The decrease~~Equity method investments represents the Company’s 50% equity interest in ~~average daily production volumes in the Rockies region also reflects lower production volumes as a result of the Jonah Assets Sale on May 31, 2017.~~Roan.

Gains (Losses) on Oil and Natural Gas Derivatives

~~Gains~~Losses on oil and natural gas derivatives were approximately $23 million for the six months ended June 30, 2018, compared to gains of approximately $34 million and $93 million for the four months ended June 30, 2017, and the two months ended February 28, 2017, respectively, ~~compared to losses on oil and natural gas derivatives of approximately $74 million for the six months ended June 30, 2016,~~ representing a variance of approximately ~~$201~~$150 million. Gains and losses on oil and natural gas derivatives were primarily due to changes in fair value of the derivative contracts. The fair value on unsettled derivative contracts changes as future commodity price expectations change compared to the contract prices on the derivatives. If the

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

expected future commodity prices increase compared to the contract prices on the derivatives, losses are recognized; and if the expected future commodity prices decrease compared to the contract prices on the derivatives, gains are recognized.

The Company ~~determines~~determined the fair value of its oil and natural gas derivatives utilizing pricing models that use a variety of techniques, including market quotes and pricing analysis. See Item 3. “Quantitative and Qualitative Disclosures About Market Risk” and Note 78 and Note 89 for additional details about the Company’s commodity derivatives. For information about the Company’s pre-Spin-off credit risk related to derivative contracts, see “Counterparty Credit Risk” under “Liquidity and Capital Resources” below.

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

Marketing and Other Revenues

Marketing revenues represent third-party activities associated with company-owned gathering systems, plants and facilities. Other revenues primarily include management fee revenues recognized by the Company from Berry (in the Predecessor ~~periods)~~period) and helium sales revenue. ~~Marketing~~Consolidated marketing and other revenues ~~decreased~~increased by approximately ~~$29~~$61 million or ~~42%~~151% to approximately $102 million for the six months ended June 30, 2018, from approximately $24 million and $17 million for the four months ended June 30, 2017, and the two months ended February 28, 2017, ~~respectively, from~~respectively. Marketing and other revenues of the upstream segment increased by approximately ~~$70~~$22 million or 58% to approximately $60 million for the six months ended June 30, ~~2016.~~2018, from approximately $22 million and $16 million for the four months ended June 30, 2017, and the two months ended February 28, 2017, respectively. The ~~decrease~~increase was primarily due to ~~the management fee revenues from Berry included in the Predecessor periods, partially offset by~~ higher revenues generated by the Jayhawk natural gas processing plant in Kansas, principally driven by a change in contract terms and ~~higher helium sales revenue~~the impact of the new accounting standard related to revenues from contracts with customers, adopted on January 1, 2018, partially offset by management fee revenues from Berry included in the ~~Hugoton Basin.~~Predecessor period. As of January 1, 2018, the Company recognized revenues for commodities received as noncash consideration in exchange for services provided by its midstream operations and revenues and associated cost of product for the subsequent sale of those same commodities. This recognition resulted in an increase to revenues and expenses with no impact on net income. See Note 1 for additional details of the revenue accounting standard.

Expenses

Lease Operating Expenses

Lease operating expenses include expenses such as labor, field office, vehicle, supervision, maintenance, tools and supplies, and workover expenses. Lease operating expenses decreased by approximately $8$74 million or 5%50% to approximately $72 million for the six months ended June 30, 2018, from approximately $96 million and $50 million for the four months ended June 30, 2017, and the two months ended February 28, 2017, ~~respectively, from approximately $154 million for the six months ended June 30, 2016.~~respectively. The decrease was primarily due to reduced labor costs for field operations as a result of cost savings ~~initiatives.~~initiatives and the divestitures completed in 2017 and 2018. Lease operating expenses per Mcfe ~~increased~~were $1.12 per Mcfe for the six months ended June 30, 2018, compared to $1.09 per Mcfe and $1.13 per Mcfe for the four months ended June 30, 2017, and the two months ended February 28, 2017, ~~respectively, compared to $1.04 per Mcfe for the six months ended June 30, 2016.~~respectively.

Transportation Expenses

Transportation expenses decreased by approximately $7$37 million or 8%48% to approximately $40 million for the six months ended June 30, 2018, from approximately $51 million and $26 million for the four months ended June 30, 2017, and the two months ended February 28, 2017, ~~respectively, from approximately $84 million for the six months ended June 30, 2016.~~respectively. The decrease was ~~primarily~~ due to reduced costs as a result of lower production volumes ~~and~~primarily as a result of the ~~properties sold~~divestitures completed in ~~May 2017.~~2017 and 2018 and due to the impact of the new accounting standard related to revenues from contracts with customers, adopted on January 1, 2018. As of January 1, 2018, revenue is recognized net of transportation expenses if the processor is the customer and there is no redelivery of commodities to the Company. See Note 1 for additional details of the revenue accounting standard. Transportation expenses per Mcfe increased to $0.62 per Mcfe for the six months ended June 30, 2018, from $0.58 per Mcfe and $0.59 per Mcfe for the four months ended June 30, 2017, and the two months ended February 28, 2017, ~~respectively, compared to $0.57 per Mcfe for the six months ended June 30, 2016.~~respectively.

Marketing Expenses

Marketing expenses represent third-party activities associated with company-owned gathering systems, plants and facilities. ~~Marketing~~Consolidated marketing expenses ~~remained relatively consistent at~~increased by approximately $67 million to approximately $82 million for the six months ended June 30, 2018, from approximately $10 million and $5 million for the four months ended June 30, 2017, and the two months ended February 28, 2017, ~~respectively, compared~~respectively. Marketing expenses of the upstream segment increased by approximately $28 million to approximately ~~$15~~$41 million for the six months ended June 30, ~~2016.~~2018, from approximately $8 million and $5 million for the four months ended June 30, 2017, and the two months ended February 28, 2017, respectively. The increase was primarily due to higher expenses associated with the Jayhawk natural gas processing plant in Kansas, principally driven by a change in

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

contract terms and the impact of the new accounting standard related to revenues from contracts with customers, adopted on January 1, 2018. As of January 1, 2018, the Company recognized revenues for commodities received as noncash consideration in exchange for services provided by its midstream operations and revenues and associated cost of product for the subsequent sale of those same commodities. This recognition resulted in an increase to revenues and expenses with no impact on net income. See Note 1 for additional details of the revenue accounting standard.

General and Administrative Expenses

General and administrative expenses are costs not directly associated with field operations and reflect the costs of employees including executive officers, related benefits, office leases and professional fees. In addition, general and administrative expenses in the Predecessor ~~periods include expenses~~period includes costs incurred by LINN Energy associated with the operations of Berry. General and administrative expenses ~~decreased~~increased by approximately ~~$19~~$20 million or ~~14%~~18% to approximately $137 million for the six months ended June 30, 2018, from approximately $45 million and $72 million for the four months ended June 30, 2017, and the two months ended February 28, 2017, ~~respectively,~~respectively. The increase was primarily due to higher severance costs, transition service fees received from ~~approximately $136 million~~Berry in the prior year and higher share-based compensation expenses, partially offset by lower salaries and benefits related expenses. General and administrative expenses per Mcfe increased to $2.13 per Mcfe for the six months ended June 30, 2016. The decrease was primarily due to lower salaries and benefits related expenses, the costs associated with the operations of Berry in the Predecessor periods, lower professional services expenses and lower various other administrative expenses including insurance and rent, partially offset by higher noncash share-based compensation expenses principally driven by the immediate vesting of certain awards on the Effective Date. General and administrative expenses per Mcfe were2018, from $0.51 per Mcfe and $1.63 per Mcfe for the four months ended June 30, 2017, and the two months ended February 28, 2017, ~~respectively, compared to $0.92 per Mcfe for the six months ended June 30, 2016.~~respectively.

For professional services expenses related to the Chapter 11 proceedings, ~~that were incurred since the Petition Date,~~ see “Reorganization Items, Net.”

Exploration Costs

Exploration costs ~~decreased~~increased by approximately $2$296,000 to approximately $1 million tofor the six months ended June 30, 2018, from approximately $866,000 and $93,000 for the four months ended June 30, 2017, and the two months ended February 28, 2017, ~~respectively, from~~respectively. The increase was primarily due to higher seismic data expenses during the first quarter of 2018.

Depreciation, Depletion and Amortization

Depreciation, depletion and amortization decreased by approximately $3$69 million or 58% to approximately $50 million for the six months ended June 30, ~~2016.~~2018, from approximately $72 million and $47 million for the four months ended June 30, 2017, and the two months ended February 28, 2017, respectively. The decrease was primarily due to lower ~~seismic data expenses.~~rates as a result of the application of fresh start accounting, as well as lower total production volumes. Depreciation, depletion and amortization per Mcfe decreased to $0.78 per Mcfe for the six months ended June 30, 2018, from $0.82 per Mcfe and $1.07 per Mcfe for the four months ended June 30, 2017, and the two months ended February 28, 2017, respectively.

Taxes, Other Than Income Taxes



	Successor				Predecessor
	Six Months Ended June 30, 2018		Four Months Ended June 30, 2017		Two Months Ended February 28, 2017
(in thousands)
Severance taxes	$	7,267	$	14,532	$	9,107
Ad valorem taxes	8,118		10,101		5,744
Other	364		315		26
	$	15,749	$	24,948	$	14,877

Severance taxes, which are a function of revenues generated from production, decreased primarily due to lower production volumes. Ad valorem taxes, which are based on the value of reserves and production equipment and vary by location, decreased primarily due to divestitures completed in 2017 and 2018 and lower estimated valuations on certain of the Company’s properties.

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

~~Depreciation, Depletion and Amortization~~

Depreciation, depletion and amortization decreased by approximately $56 million or 32% to approximately $72 million and $47 million for the four months ended June 30, 2017, and the two months ended February 28, 2017, respectively, from approximately $175 million for the six months ended June 30, 2016. The decrease was primarily due to lower rates as a result of the application of fresh start accounting and impairments recorded in the first quarter of 2016, as well as lower total production volumes. Depreciation, depletion and amortization per Mcfe also decreased to $0.82 per Mcfe and $1.07 per Mcfe for the four months ended June 30, 2017, and the two months ended February 28, 2017, respectively, from $1.19 per Mcfe for the six months ended June 30, 2016.

~~Impairment of Long-Lived Assets~~

The Company recorded no impairment charges for the four months ended June 30, 2017, or the two months ended February 28, 2017. During the six months ended June 30, 2016, the Company recorded an impairment charge of approximately $123 million associated with proved oil and natural gas properties in the Mid-Continent region due to a decline in commodity prices, changes in expected capital development and a decline in the Company’s estimates of proved reserves.

~~Taxes, Other Than Income Taxes~~

Successor Predecessor
Four Months Ended June 30, 2017 Two Months Ended February 28, 2017 Six Months Ended June 30, 2016
(in thousands)
Severance taxes $ 14,532
$ 9,107
$ 17,157
Ad valorem taxes 10,101
5,744
17,381
Other 315
26
1,003
$ 24,948
$ 14,877
$ 35,541

Severance taxes, which are a function of revenues generated from production, increased primarily due to higher commodity prices partially offset by lower production volumes. Ad valorem taxes, which are based on the value of reserves and production equipment and vary by location, decreased primarily due to lower estimated valuations on certain of the Company’s properties.

(Gains) Losses on Sale of Assets and Other, Net

During the six months ended June 30, 2018, the Company recorded the following amounts related to divestitures (see Note 4):

Net gain of approximately $11 million on the New Mexico Assets Sale;

Net gain of approximately $83 million, including costs to sell of approximately $2 million, on the Altamont Bluebell Assets Sale;

Net gain of approximately $55 million, including costs to sell of approximately $2 million, on the West Texas Assets Sale; and

Net gain of approximately $46 million, including costs to sell of approximately $1 million, on the Oklahoma and Texas Assets Sale.

During the four months ended June 30, 2017, the Company recorded the following net gains on divestitures (see Note 4):

Net gain of approximately $22 million on the Salt Creek Assets Sale; and

Net gain of approximately $279 million, including costs to sell of approximately $6 million, on the Jonah Assets Sale.

Other Income and (Expenses)


	Successor			Predecessor						Successor						Predecessor
	Four Months Ended June 30, 2017			Two Months Ended February 28, 2017			Six Months Ended June 30, 2016			Six Months Ended June 30, 2018			Four Months Ended June 30, 2017			Two Months Ended February 28, 2017
(in thousands)
Interest expense, net of amounts capitalized	$	(11,751	)	$	(16,725	)	$	(134,193	)	$	(988	)	$	(11,751	)	$	(16,725	)
Earnings from equity method investments										16,018			130			157
Other, net	(1,551		)	(149		)	(1,158		)	369			(1,551		)	(149		)
	$	(13,302	)	$	(16,874	)	$	(135,351	)	$	15,399		$	(13,172	)	$	(16,717	)

Interest expense decreased primarily due to ~~the Company’s discontinuation of interest expense recognition on the senior notes for the two months ended February 28, 2017, as a result of the Chapter 11 proceedings, lower~~no outstanding debt during 2018, and lower amortization of ~~discounts and~~ financing fees. For the two months ended February 28, 2017, contractual interest, which was not recorded, on the Predecessor’s senior notes was approximately $37 million. For the six months ended June 30, 2018, interest expense is related primarily to amortization of financing fees. See “Debt” under “Liquidity and Capital Resources” below for additional details.

Equity method investments primarily include the Company’s 50% equity interest in Roan. The Company’s equity earnings consists of its share of Roan’s earnings and the ~~period from May 12, 2016~~amortization of the difference between the Company’s investment in Roan and Roan’s underlying net assets attributable to certain assets. See Note 6 for additional information.

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

through June 30, 2016, contractual interest, which was not recorded, on the senior notes was approximately $37 million and $31 million, respectively. See “Debt” under “Liquidity and Capital Resources” below for additional details.

The Second Lien Notes were accounted for as a troubled debt restructuring which requires that interest payments on the Second Lien Notes reduce the carrying value of the debt with no interest expense recognized. For the two months ended February 28, 2017, and the period from May 12, 2016 through June 30, 2016, unrecorded contractual interest on the Second Lien Notes was $20 million and approximately $16 million, respectively.

Reorganization Items, Net

The Company incurred significant costs and recognized significant gains associated with the reorganization. Reorganization items represent costs and income directly associated with the Chapter 11 proceedings since the Petition Date, and also include adjustments to reflect the carrying value of certain liabilities subject to compromise at their estimated allowed claim amounts, as such adjustments were determined. The following table summarizes the components of reorganization items included on the condensed consolidated statements of operations:


	Successor			Predecessor						Successor						Predecessor
	Four Months Ended June 30, 2017			Two Months Ended February 28, 2017			Six Months Ended June 30, 2016			Six Months Ended June 30, 2018			Four Months Ended June 30, 2017			Two Months Ended February 28, 2017
(in thousands)
Gain on settlement of liabilities subject to compromise	$	—		$	3,724,750		$	—		$	—		$	—		$	3,724,750
Recognition of an additional claim for the Predecessor’s Second Lien Notes settlement	—			(1,000,000		)	—
Recognition of an additional claim for the Predecessor’s second lien notes settlement										—			—			(1,000,000		)
Fresh start valuation adjustments	—			(591,525		)	—			—			—			(591,525		)
Income tax benefit related to implementation of the Plan	—			264,889			—			—			—			264,889
Legal and other professional advisory fees	(6,016		)	(46,961		)	(13,451		)
Unamortized deferred financing fees, discounts and premiums	—			—			(52,045		)
Gain related to interest payable on Predecessor’s Second Lien Notes	—			—			551,000
Legal and other professional fees										(3,207		)	(6,016		)	(46,961		)
Terminated contracts	—			(6,915		)	—			—			—			(6,915		)
Other	74			(13,049		)	294			(3		)	74			(13,049		)
Reorganization items, net	$	(5,942	)	$	2,331,189		$	485,798		$	(3,210	)	$	(5,942	)	$	2,331,189

Income Tax Expense (Benefit)

~~Effective February 28, 2017, upon the consummation of the Plan, the~~The Successor ~~became~~was formed as a C corporation. ~~Prior to~~For federal and state income tax purposes (with the ~~consummation~~exception of the ~~Plan,~~state of Texas), 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 were passed through to ~~its~~the Predecessor’s unitholders. Limited liability companies are subject to Texas margin tax. In addition, certain of the Predecessor’s subsidiaries were C corporations subject to federal and state income taxes. The Company recognized income tax expense of approximately $46 million for the six months ended June 30, 2018, compared to income tax expense of approximately $153 million and an income tax benefit of approximately $166,000 for the four months ended June 30, 2017, and the two months ended February 28, 2017, ~~respectively, compared~~respectively. The decrease is primarily due to a decrease in taxable earnings and a decrease in the federal statutory income tax ~~expense of approximately $7 million for the six months ended June 30, 2016.~~rate.

Loss from Discontinued Operations, Net of Income Taxes

As a result of the Company’s strategic exit from California (completed by the San Joaquin Basin Sale and Los Angeles Basin Sale) ~~and the deconsolidation of Berry,~~, the Company has classified the results of operations of its California properties ~~and Berry~~ as discontinued operations. Loss from discontinued operations, net of income taxes ~~decreased to~~was approximately $3 million and $548,000 for the four months ended June 30, 2017, and the two months ended February 28, 2017, ~~respectively, from~~respectively. See Note 4 for additional information.

Net Income Attributable to Common Stockholders/Unitholders

Net income attributable to common stockholders/unitholders decreased by approximately ~~$1.1~~$2.5 billion to approximately $75 million for the six months ended June 30, ~~2016.~~2018, from a net income of approximately $213 million and $2.4 billion for the four months ended June 30, 2017, and the two months ended February 28, 2017, respectively. The decrease was primarily due to gains included in reorganization items in the Predecessor period, lower production revenue, losses compared to gains on commodity derivatives and lower gains on sales of assets, partially offset by lower expenses. See ~~Note 4~~discussion above for ~~additional information.~~explanations of variances.

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

~~Net Income (Loss)~~Chisholm Trail Reporting Segment

~~Net~~



	Successor				Predecessor
	Six Months Ended June 30, 2018		Four Months Ended June 30, 2017		Two Months Ended February 28, 2017
(in thousands)
Marketing revenues	$	41,958	$	2,188	$	637

Marketing expenses	40,702		1,002		218
Severance taxes and ad valorem taxes	477		155		78
Total direct operating expenses	41,179		1,157		296
Field level cash flow ⁽¹⁾	$	779	$	1,031	$	341


⁽¹⁾	Refer to Note 19 for a reconciliation of field level cash flow to income from continuing operations before income taxes.

Marketing Revenues

Chisholm Trail’s marketing revenue increased by approximately ~~$3.7 billion~~$39 million to ~~net income of~~ approximately ~~$213~~$42 million for the six months ended June 30, 2018, from approximately $2 million and ~~$2.4 billion~~$637,000 for the four months ended June 30, 2017, and the two months ended February 28, 2017, ~~respectively,~~respectively. The increase was primarily due to the new accounting standard related to revenues from acontracts with customers, adopted on January 1, 2018, and higher throughput volumes sold. As of January 1, 2018, the Company recognizes revenues for commodities received as noncash consideration in exchange for services provided by its midstream operations and revenues and associated cost of product for the subsequent sale of those same commodities. This recognition results in an increase to revenues and expenses with no impact on net ~~loss of~~income.

Marketing Expenses

Chisholm Trail’s marketing expenses increased by approximately ~~$1.1 billion~~$39 million to approximately $41 million for the six months ended June 30, ~~2016.~~2018, from approximately $1 million and $218,000 for the four months ended June 30, 2017, and the two months ended February 28, 2017, respectively. The increase was primarily due to ~~higher gains included in reorganization items, lower losses~~the new accounting standard related to revenues from ~~discontinued operations, gains~~contracts with customers, adopted on ~~sales of assets, gains compared to losses on commodity derivatives, lower impairment charges, lower expenses~~January 1, 2018, and higher ~~production revenues. See discussion above~~throughput volumes sold. As of January 1, 2018, the Company recognizes revenues for ~~explanations~~commodities received as noncash consideration in exchange for services provided by its midstream operations and revenues and associated cost of ~~variances.~~product for the subsequent sale of those same commodities. This recognition results in an increase to revenues and expenses with no impact on net income.

Field Level Cash Flow

Chisholm Trail’s field level cash flow decreased by approximately $593,000 million to positive cash flow of approximately $779,000 for the six months ended June 30, 2018, from approximately $1 million and $341,000 for the four months ended June 30, 2017 and the two months ended February 28, 2017, respectively. The decrease was primarily due to widening pricing spreads between the Conway and Mont Belvieu market hubs.

Liquidity and Capital Resources

Since its emergence from Chapter 11 bankruptcy in February 2017, the Company’s sources of cash have primarily consisted of proceeds from its ~~2017~~divestitures of oil and natural gas properties ~~divestitures~~ and net cash provided by operating activities. As a result of divesting certain oil and natural gas properties during the six months ended June 30, 2018, the Company received ~~over $1 billion~~approximately $368 million in net cash ~~proceeds and repaid all~~proceeds. During 2018, the Company used its cash for repurchases of its ~~outstanding debt as of July 31, 2017. The Company has also used its cash~~Class A common stock and to fund capital expenditures, ~~principally~~primarily for ~~the development of its oil and natural gas properties, and~~ plant and pipeline construction. ~~The~~Prior to the Spin-off, a then subsidiary of the Company ~~expects~~distributed $40 million of cash to Linn Energy, Inc. to fund its administrative activities arising subsequent to the ~~remaining 2017 capital program~~Spin-off. In addition, Linn Energy, Inc. has entered into a transition services agreement with ~~excess cash from its divestitures and net cash provided by operating activities.~~

~~Prior~~Riviera, pursuant to ~~its emergence from bankruptcy,~~which Riviera has agreed to fund certain future obligations of Linn Energy, Inc. for a transitional period following the Company utilized funds from debt and equity offerings, borrowings under its credit facilities and net cash provided by operating activities for liquidity and capital resources, and the primary use was for the development of oil and natural gas properties, as well as for acquisitions.

~~See below for details regarding capital expenditures for the periods presented:~~

Successor Predecessor
Four Months Ended June 30, 2017 Two Months Ended February 28, 2017 Six Months Ended June 30, 2016
(in thousands)
Oil and natural gas $ 87,632
$ 39,409
$ 40,184
Plant and pipeline 22,724
4,990
7,729
Other 3,919
1,243
5,562
Capital expenditures, excluding acquisitions $ 114,275
$ 45,642
$ 53,475
Capital expenditures, excluding acquisitions – discontinued operations $ 1,790
$ 436
$ 12,806

~~The increase in capital expenditures was primarily due~~Spin-off, to oil and natural gas development activities in the Merge/SCOOP/STACK and plant and pipeline construction activities associated with the Chisholm Trail Cryogenic Gas Plant. For 2017, the Company estimates its total capital expenditures, excluding acquisitions, will be ~~approximately $229 million, including approximately $338 million related~~determined based upon certain future specified events but to ~~its oil and natural gas capital program and approximately $100 million related to its plant and pipeline capital. This estimate is under continuous review and subject to ongoing adjustments.~~end no later than December 31, 2018.

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

See below for details regarding capital expenditures for the periods presented:



	Successor				Predecessor
	Six Months Ended June 30, 2018		Four Months Ended June 30, 2017		Two Months Ended February 28, 2017
(in thousands)
Oil and natural gas	$	17,231	$	87,632	$	39,409
Plant and pipeline	91,125		22,724		4,990
Other	598		3,919		1,243
Capital expenditures, excluding acquisitions	$	108,954	$	114,275	$	45,642
Capital expenditures, excluding acquisitions – discontinued operations	$	—	$	1,790	$	436

The decrease in capital expenditures was primarily due to lower oil and natural gas development activities, partially offset by higher plant and pipeline construction activities associated with Chisholm Trail. Prior to the Spin-off, the Company estimated its total capital expenditures, excluding acquisitions, would be approximately $195 million, including approximately $75 million related to its oil and natural gas capital program and approximately $120 million related to Chisholm Trail. The Company does not anticipate any additional capital expenditures will accrue following the Spin-off.

Statements of Cash Flows

The following ~~provides~~is a comparative cash flow summary:


	Successor			Predecessor						Successor						Predecessor
	Four Months Ended June 30, 2017			Two Months Ended February 28, 2017			Six Months Ended June 30, 2016			Six Months Ended June 30, 2018			Four Months Ended June 30, 2017			Two Months Ended February 28, 2017
(in thousands)
Net cash:
Provided by (used in) operating activities	$	131,425		$	(20,814	)	$	801,201
Provided by operating activities										$	51,902		$	83,764		$	59,476
Provided by (used in) investing activities	550,753			(58,756		)	(71,111		)	236,174			607,363			(58,756		)
Provided by (used in) financing activities	(719,630		)	(560,932		)	42,387
Net increase (decrease) in cash and cash equivalents	$	(37,452	)	$	(640,502	)	$	772,477
Used in financing activities										(464,277		)	(719,630		)	(560,932		)
Net decrease in cash, cash equivalents and restricted cash										$	(176,201	)	$	(28,503	)	$	(560,212	)

Operating Activities

Cash provided by operating activities was approximately ~~$131~~$52 million for the six months ended June 30, 2018, compared to approximately $84 million and ~~cash used in operating activities was approximately $21~~$59 million for the four months ended ~~June 30,~~March 31, 2017, and the two months ended February 28, 2017, ~~respectively, compared to cash provided by operating activities of approximately $801 million for the six months ended June 30, 2016.~~respectively. The decrease was primarily due to lower ~~cash settlements on derivatives partially offset by higher~~ production related revenues principally due to ~~higher commodity prices. In addition, in February 2017, restricted cash increased by approximately $80 million in order to fund the settlement~~lower production volumes.

Table of ~~certain claims and pay certain professional fees in accordance with the Plan.~~Contents


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

Investing Activities

The following provides a comparative summary of cash flow from investing activities:


	Successor			Predecessor						Successor						Predecessor
	Four Months Ended June 30, 2017			Two Months Ended February 28, 2017			Six Months Ended June 30, 2016			Six Months Ended June 30, 2018			Four Months Ended June 30, 2017			Two Months Ended February 28, 2017
(in thousands)
Cash flow from investing activities:
Capital expenditures	$	(88,821	)	$	(58,006	)	$	(94,564	)	$	(133,315	)	$	(88,821	)	$	(58,006	)
Proceeds from sale of properties and equipment and other	641,219			(166		)	(2,713		)	369,489			697,829			(166		)
Net cash provided by (used in) investing activities – continuing operations	552,398			(58,172		)	(97,277		)	236,174			609,008			(58,172		)
Net cash provided by (used in) investing activities – discontinued operations	(1,645		)	(584		)	26,166
Net cash used in investing activities – discontinued operations										—			(1,645		)	(584		)
Net cash provided by (used in) investing activities	$	550,753		$	(58,756	)	$	(71,111	)	$	236,174		$	607,363		$	(58,756	)

The primary use of cash in investing activities is for the development of the Company’s oil and natural gas ~~properties.~~properties and construction of Chisholm Trail’s cryogenic natural gas processing facility. Capital expenditures ~~increased~~decreased primarily due to lower oil and natural gas capital spending, partially offset by higher spending on ~~development activities in the Company’s Mid-Continent, Rockies~~plant and ~~TexLa regions.~~pipeline construction related to Chisholm Trail. The Company made no material acquisitions of properties during the six months ended June 30, ~~2017,~~2018, or June 30, ~~2016.~~2017. The Company has classified the cash flows of its California properties ~~and Berry~~ as discontinued operations.

Proceeds from sale of properties and equipment and other for the six months ended June 30, 2018, include cash proceeds received of approximately $109 million from the West Texas Assets Sale, approximately $101 million (excluding a deposit of approximately $12 million received in 2017) from the Oklahoma and Texas Assets Sale, approximately $134 million related to the Altamont Bluebell Assets Sale approximately $15 million related to and the New Mexico Assets Sale. Proceeds from sale of properties and equipment and other for the four months ended June 30, 2017, include approximately $76 million in net cash proceeds received from the Salt Creek Assets Sale in June 2017 and approximately ~~$555~~$560 million in net cash proceeds received from the Jonah Assets Sale in May ~~2017. An additional $5~~2017 and deposits received of approximately $57 million ~~received from~~associated with divestitures completed during the ~~Jonah Assets Sale remains in escrow and is currently classified as restricted cash.~~third quarter of 2017. See Note 4 for additional details of divestitures.

Financing Activities

Cash used in financing activities was approximately $464 million for the six months ended June 30, 2018, compared to approximately $720 million and $561 million for the four months ended June 30, 2017, and the two months ended February 28, 2017, respectively. During the six months ended June 30, 2018, the primary use of cash in financing activities was for repurchases of the Company’s Class A common stock and settlement of restricted stock units (see Note 14). During the four months ended June 30, 2017, and the two months ended February 28, 2017, the primary use of cash in financing activities was for repayments of debt.

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

~~Financing Activities~~The following provides a comparative summary of proceeds from borrowings and repayments of debt:

Cash used in financing activities was approximately $720 million and $561 million for the four months ended June 30, 2017, and the two months ended February 28, 2017, respectively, compared to cash provided by financing activities of approximately $42 million for the six months ended June 30, 2016.



	Successor			Predecessor
	Four Months Ended June 30, 2017			Two Months Ended February 28, 2017
(in thousands)
Proceeds from borrowings:
Successor’s previous credit facility	$	160,000		$	—
	$	160,000		$	—
Repayments of debt:
Successor’s previous credit facility	$	(576,570	)	$	—
Successor term loan	(300,000		)	—
Predecessor’s credit facility	—			(1,038,986		)
	$	(876,570	)	$	(1,038,986	)

On February 28, 2017, the Company canceled its obligations under the ~~Predecessor Credit Facility~~Predecessor’s credit facility and entered into the ~~Successor Credit Facility (see Note 6),~~Successor’s previous credit facility, which was a net transaction and is reflected as such on the condensed consolidated statement of cash flows. During the six months ended June 30, 2016, the Company borrowed approximately $979 million under the Predecessor Credit Facility, including approximately $919 million in February 2016 which represented the remaining undrawn amount that was available. In addition, during the six months ended June 30, 2016, the Company repaid approximately $913 million under the Predecessor Credit Facility.

~~The following provides a comparative summary of proceeds from borrowings and repayments of debt:~~

Successor Predecessor
Four Months Ended June 30, 2017 Two Months Ended February 28, 2017 Six Months Ended June 30, 2016
(in thousands)
Proceeds from borrowings:
Successor Credit Facility $ 160,000
$ —
$ —
Predecessor Credit Facility —
—
978,500
$ 160,000
$ —
$ 978,500
Repayments of debt:
Successor Credit Facility $ (576,570 ) $ —
$ —
Successor Term Loan (300,000 ) —
—
Predecessor Credit Facility —
(1,038,986 ) (814,299 )
Predecessor Term Loan —
—
(98,911 )
$ (876,570 ) $ (1,038,986 ) $ (913,210 )

In addition, in February 2017, the Company made a $30 million payment to holders of claims under the ~~Second Lien Notes. The Company~~Predecessor’s second lien notes, and also issued 41,359,806 shares of Class A common stock to participants in the rights offerings extended by the Company to certain holders of claims arising under the ~~Second Lien Notes~~Predecessor’s second lien notes and ~~the Unsecured Notes~~senior notes for net proceeds of approximately $514 million.

Debt

There were no borrowings outstanding under the Credit Facility as of June 30, 2018, or December 31, 2017. As of June 30, 2018, there was approximately $378 million of available borrowing capacity (which includes a $47 million reduction for outstanding letters of credit). Pursuant to the Spin-off, the borrower under the Credit Facility became a subsidiary of Riviera and as such, Riviera and its subsidiaries have assumed all obligations under the Credit Facility.

For additional information related to the Company’s debt, see Note 7.

Share Repurchase Program

The Company’s Board of Directors previously authorized the repurchase of up to $400 million of the Company’s outstanding shares of Class A common stock. The Company discontinued the share repurchase program in July 2018. During the six months ended June 30, 2018, the Company repurchased an aggregate of 1,557,180 shares of Class A common stock at an average price of $39.13 per share for a total cost of approximately $61 million. 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.

Tender Offer

On December 14, 2017, the Company’s Board of Directors announced the intention to commence a tender offer to purchase at least $250 million of the Company’s Class A common stock. In January 2018, upon the terms and subject to the conditions described in the Offer to Purchase dated December 20, 2017, as amended, the Company repurchased an aggregate of 6,770,833 shares of Class A common stock at a fixed price of $48.00 per share for a total cost of approximately $325 million (excluding expenses of approximately $4 million related to the tender offer).

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

~~Debt~~

~~The following summarizes the Company’s outstanding debt:~~

Successor Predecessor
June 30, 2017 December 31, 2016
(in thousands, except percentages)
Successor revolving loan $ 183,430
$ —
Predecessor credit facility —
1,654,745
Predecessor term loan —
284,241
6.50% senior notes due May 2019 —
562,234
6.25% senior notes due November 2019 —
581,402
8.625% senior notes due April 2020 —
718,596
12.00% senior secured second lien notes due December 2020 —
1,000,000
7.75% senior notes due February 2021 —
779,474
6.50% senior notes due September 2021 —
381,423
Net unamortized deferred financing fees —
(1,257 )
Total debt, net 183,430
5,960,858
Less current portion, net ⁽¹⁾
—
(1,937,729 )
Less liabilities subject to compromise ⁽²⁾
—
(4,023,129 )
Long-term debt $ 183,430
$ —


⁽¹⁾	~~Due to covenant violations, the Predecessor’s credit facility and term loan were classified as current at December 31, 2016.~~


⁽²⁾	The Predecessor’s senior notes and Second Lien Notes were classified as liabilities subject to compromise at December 31, 2016. On the Effective Date, pursuant to the terms of the Plan, all outstanding amounts under these debt instruments were canceled.

As of July 31, 2017, there were no borrowings outstanding under the Successor Credit Facility. Pursuant to the terms of the Plan, on the Effective Date, all obligations under the Predecessor’s credit facility, Second Lien Notes and senior notes were canceled.

~~For additional information related to the Company’s outstanding debt, see Note 6.~~

~~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, 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.

Counterparty Credit Risk

The Company ~~accounts~~accounted for its commodity derivatives at fair value. The Company’s counterparties ~~are participants in the Successor Credit Facility or~~ were participants in the ~~Predecessor~~ Credit Facility. The ~~Successor~~ Credit Facility iswas secured by certain of the Company’s and its then subsidiaries’ oil, natural gas and NGL reserves and personal property; therefore, the Company iswas not required to post any collateral. The Company ~~does~~did not receive collateral from its counterparties. The Company ~~minimizes~~minimized the credit risk in derivative instruments by: (i) limiting its exposure to any single counterparty; (ii) entering into derivative instruments only with counterparties that ~~meet~~met the Company’s minimum credit quality standard, or ~~have~~had a guarantee from an affiliate that ~~meets~~met the Company’s minimum credit quality standard; and (iii) monitoring the creditworthiness of the Company’s counterparties on an ongoing basis. In accordance with the Company’s standard practice, its commodity derivatives ~~are~~were subject to counterparty netting under agreements governing such derivatives and therefore the risk of loss due to counterparty nonperformance iswas somewhat mitigated.

Dividends

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

~~Dividends/Distributions~~

~~Under~~The Company is not currently paying a cash dividend; however, the 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 Predecessor’s Board of Directors periodically reviews the Company’s liquidity position to ~~provide for the proper conduct of the Predecessor’s business (including reserves for future capital expenditures, acquisitions and anticipated future credit needs)~~evaluate whether or not 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 payingpay a cash ~~dividends and any future payment of cash dividends would be subject to the restrictions in the Successor Credit Facility.~~

~~Off-Balance Sheet Arrangements~~

~~The Company does not currently have any off-balance sheet arrangements.~~dividend.

Contingencies

See Part II. Item 1. “Legal Proceedings” for information regarding legal proceedings that the Company is party to and any contingencies related to these legal proceedings.

Off-Balance Sheet Arrangements

The Company historically entered into certain off-balance sheet arrangements and transactions, including operating lease arrangements and undrawn letters of credit. In addition, the Company historically entered into other contractual agreements in the normal course of business for processing and transportation as well as for other oil and natural gas activities. Other than the items discussed above, there are no other arrangements, transactions or other relationships with unconsolidated entities or other persons that are reasonably likely to materially affect the Company’s liquidity or capital resource positions.

Commitments and Contractual Obligations

The Company ~~has contractual~~had asset retirement obligations, ~~for long-term debt,~~capital commitments, operating leases and ~~other long-term~~commodity derivative liabilities that were summarized in the table of commitments and contractual obligations in ~~the March 31, 2017 Quarterly~~its Annual Report on Form ~~10-Q.~~10‑K for the year ended December 31, 2017. During the ~~three~~six months ended June 30, ~~2017,~~2018, the Company ~~made~~paid approximately ~~$650~~$30 million ~~in net repayments~~ of ~~borrowings outstanding under~~its capital commitments. As part of the ~~Successor Credit Facility. See Note 6 for additional information about the Successor Credit Facility. There have been no other significant changes to~~Spin-Off, Riviera assumed substantially all of the Company’s contractual obligations ~~since March 31, 2017.~~reported in the Company’s Annual Report on Form 10-K.

Critical Accounting Policies and Estimates

The discussion and analysis of the Company’s financial condition and results of operations is based on the condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires management of the Company to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors that are believed to be reasonable under the circumstances. Such estimates and assumptions are adjusted when facts and circumstances dictate. Actual results may differ from these estimates and assumptions used in the preparation of the financial statements.

Recently Issued Accounting Standards

For a discussion of recently issued accounting standards, see Note 1.

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

Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond the Company’s control. These statements may include discussions about the Company’s:

equity investment in Roan;

ability to realize the anticipated benefits of the Spin-off;

the potential negative effects of the Spin-off;

business strategy;

acquisition and disposition strategy;

financial strategy;

~~new capital structure and the adoption of fresh start accounting;~~

uncertainty of the Company’s ability to improve its financial results and profitability following emergence from bankruptcy and other risks and uncertainties related to the Company’s emergence from bankruptcy;

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

~~inability to maintain relationships with suppliers, customers, employees and other third parties following emergence from bankruptcy;~~

failure to satisfy the Company’s short- or long-term liquidity needs, including its inability to generate sufficient cash flow from operations or to obtain adequate financing to fund its capital expenditures and meet working capital needs following emergence from bankruptcy;

~~large or multiple customer defaults on contractual obligations, including defaults resulting from actual or potential insolvencies;~~

~~ability to comply with covenants under the Successor Credit Facility;~~

effects of legal proceedings;

drilling locations;

oil, natural gas and NGL reserves;

realized oil, natural gas and NGL prices;

production volumes;

~~capital expenditures;~~

economic and competitive advantages;

credit and capital market conditions;

regulatory changes;

~~lease operating expenses, general and administrative expenses and development costs;~~

future operating ~~results, including results of acquired properties;~~results;

plans, objectives, expectations and intentions; and

taxes.

All of these types of statements, other than statements of historical fact included in this Quarterly Report on Form 10-Q, are forward-looking statements. These forward-looking statements may be found in Item 2. In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “could,” “should,” “expect,” “plan,” “project,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “pursue,” “target,” “continue,” the negative of such terms or other comparable terminology.

The forward-looking statements contained in this Quarterly Report on Form 10-Q are largely based on Company expectations, which reflect estimates and assumptions made by Company management. These estimates and assumptions reflect management’s best judgment based on currently known market conditions and other factors. Although the Company believes such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties beyond its control. In addition, management’s assumptions may prove to be inaccurate. The Company cautions that the forward-looking statements contained in this Quarterly Report on Form 10-Q are not guarantees of future performance, and it cannot assure any reader that such statements will be realized or the events will occur. Actual results may differ materially from those anticipated or implied in forward-looking statements due to factors set forth in Item 1A. “Risk Factors” in the Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2017, and elsewhere in the Annual Report. The forward-looking statements speak only as of the date made and, other than as required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.


Item 3.	Quantitative and Qualitative Disclosures About Market Risk

The Company’s primary market ~~risks are~~risk is attributable to fluctuations in commodity ~~prices and interest rates. These risks~~prices. This risk can affect the Company’s business, financial condition, operating results and cash flows. See below for quantitative and qualitative information about ~~these risks.~~this risk.

The following should be read in conjunction with the financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and in the Company’s ~~2016~~2017 Annual Report on Form 10-K. The reference to a “Note” herein refers to the accompanying Notes to Condensed Consolidated Financial Statements contained in Item 1. “Financial Statements.”

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Item 3. Quantitative and Qualitative Disclosures About Market Risk - Continued

Commodity Price Risk

The Company’s most significant market risk relates to prices of oil, natural gas and NGL. The Company expects commodity prices to remain volatile and unpredictable. As commodity prices decline or rise significantly, revenues and cash flows are likewise affected. In addition, future declines in commodity prices may result in noncash write-downs of the Company’s carrying amounts of its assets.

Historically, the Company has hedged a portion of its forecasted production to reduce exposure to fluctuations in oil and natural gas prices and provide long-term cash flow predictability to manage its business. The Company does not enter into derivative contracts for trading purposes. The appropriate level of production to be hedged is an ongoing consideration based on a variety of factors, including among other things, current and future expected commodity market prices, the Company’s overall risk profile, including leverage and size and scale considerations, as well as any requirements for or restrictions on levels of hedging contained in any credit facility or other debt instrument applicable at the time. In addition, when commodity prices are depressed and forward commodity price curves are flat or in backwardation, the Company may determine that the benefit of hedging its anticipated production at these levels is outweighed by its resultant inability to obtain higher revenues for its production if commodity prices recover during the duration of the contracts. As a result, the appropriate percentage of production volumes to be hedged may change over time.

At June 30, ~~2017,~~2018, the fair value of fixed price swaps ~~and collars~~ was a net ~~asset~~liability of approximately ~~$33~~$1 million. A 10% increase in the ~~index~~NYMEX WTI oil and NYMEX Henry Hub natural gas prices above the June 30, ~~2017,~~2018, prices would result in a net liability of approximately ~~$30~~$19 million, which represents a decrease in the fair value of approximately ~~$63~~$18 million; conversely, a 10% decrease in the ~~index~~NYMEX oil and Henry Hub natural gas prices below the June 30, ~~2017,~~2018, prices would result in a net asset of approximately ~~$95~~$17 million, which represents an increase in the fair value of approximately ~~$62~~$18 million.

At December 31, ~~2016,~~2017, the fair value of fixed price swaps and collars was a net liability of approximately ~~$85~~$2 million. A 10% increase in the ~~index~~NYMEX WTI oil and NYMEX Henry Hub natural gas prices above the December 31, ~~2016,~~2017, prices would result in a net liability of approximately ~~$183~~$45 million, which represents a decrease in the fair value of approximately ~~$98~~$43 million; conversely, a 10% decrease in the ~~index~~NYMEX oil and Henry Hub natural gas prices below the December 31, ~~2016,~~2017, prices would result in a net asset of approximately ~~$13~~$38 million, which represents an increase in the fair value of approximately ~~$98~~$40 million.

The Company ~~determines~~determined the fair value of its oil and natural gas derivatives utilizing pricing models that use a variety of techniques, including market quotes and pricing analysis. Inputs to the pricing models ~~include~~included publicly available prices and forward price curves generated from a compilation of data gathered from third parties. Company management ~~validates~~validated the data provided by third parties by understanding the pricing models used, obtaining market values from other pricing sources, analyzing pricing data in certain situations and confirming that those instruments trade in active markets.

The prices of oil, natural gas and NGL have been extremely volatile, and the Company expects this volatility to continue. Prices for these commodities may fluctuate widely in response to relatively minor changes in the supply of and demand for such commodities, market uncertainty, including regional conditions and a variety of additional factors that are beyond its control. Actual gains or losses recognized related to the Company’s derivative contracts depend exclusively on the price of the commodities on the specified settlement dates provided by the derivative contracts. Additionally, the Company cannot be assured that its counterparties will be able to perform under its derivative contracts. If a counterparty fails to perform and the derivative arrangement is terminated, the Company’s cash flows could be impacted.

~~Interest Rate Risk~~

At June 30, 2017, the Company had debt outstanding under the Successor Credit Facility of approximately $183 million which incurred interest at floating rates. A 1% increase in the respective market rates would result in an estimated $2 million increase in annual interest expense.

At December 31, 2016, the Company had debt outstanding under the Predecessor Credit Facility of approximately $1.9 billion which incurred interest at floating rates. A 1% increase in the respective market rates would result in an estimated $19 million increase in annual interest expense.

~~Table of Contents~~

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports under the ~~Securities~~ Exchange Act ~~of 1934, as amended (the “Exchange Act”)~~ is recorded, processed, summarized and reported within the time periods specified in the ~~SEC’s~~ rules and forms of the U.S. Securities and Exchange Commission, and that such information is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, and the Company’s Audit Committee of the Board of Directors, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control

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Item 4. Controls and Procedures - Continued

objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

The Company carried out an evaluation under the supervision and with the participation of its management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of its disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of June 30, ~~2017.~~2018.

Changes in the Company’s Internal Control Over Financial Reporting

The Company’s management is also responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. The Company’s internal controls were designed to provide reasonable assurance as to the reliability of its financial reporting and the preparation and presentation of the condensed consolidated financial statements for external purposes in accordance with accounting principles generally accepted in the United States.

Because of its inherent limitations, internal control over financial reporting may not detect or prevent misstatements. Projections of any evaluation of the effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

There were no changes in the Company’s internal control over financial reporting during the second quarter of ~~2017~~2018 that materially affected, or were reasonably likely to materially affect, the Company’s internal control over financial reporting.

~~Table of Contents~~

Part II – Other Information


Item 1.	Legal Proceedings

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,~~February 28, 2017, 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.


Item 1A.	Risk Factors

Our business has many risks. Factors that could materially adversely affect our business, financial condition, operating results or liquidity and the trading price of our shares are described in Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2016. As of the date of this report, these~~2017. The following risk factors update the Risk Factors included in the Annual Report. Except as set forth below, there have ~~not changed materially.~~been no material changes to the risks described in the Annual Report on Form 10-K. This information should be considered carefully, together with other information in this report and other reports and materials we file with the United States Securities and Exchange Commission.

Our financial information after the impact of the Spin-off may not be meaningful to investors.

The historical financial data included in this Quarterly Report on Form 10‑Q is not necessarily indicative of our future performance and does not necessarily reflect what our financial position and results of operations would have been had the Spin-Off been completed prior to the periods presented. For example, our historical consolidated and combined financial statements include pre-Spin-off assets that are now held by Riviera as an independent company. As a result of the Spin-off, our historical results of operations and period-to-period comparisons of those results and certain other financial data may not be meaningful or indicative of future results. The lack of comparable historical financial information may discourage investors from purchasing our common stock.

We have limited control over the operations of the Roan joint venture, which could adversely affect our business.

We have limited control over the operations of Roan. Following the Spin-off, our 50% equity interest in Roan constitutes our sole significant asset. Although we own a 50% equity interest in Roan and our manager nominees have veto rights over most actions of the Roan board of managers,we do not have sole control over its board of managers. Because of this limited control:

Roan may take actions contrary to our strategy or objectives;

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Item 1A. Risk Factors - Continued

we have limited ability to influence Roan’s financial performance or operating results;

we have limited ability to influence the day to day operations of Roan or its properties, including compliance with environmental, safety and other regulations; and

we are dependent on third parties for financial reporting matters upon which our financial statements are based.

Since Roan represents a significant investment of ours, adverse developments in Roan’s business could adversely affect our business.

We rely on Roan to provide us with the financial information that we use in accounting for our equity interest in Roan as well as information regarding Roan that we include in our public filings.

We account for our 50% equity interest in Roan using the equity method of accounting and, accordingly, in our financial statements we record our share of Roan’s net income or loss. Within the meaning of U.S. accounting rules, we rely on Roan to provide us with financial information prepared in accordance with generally accepted accounting principles, which we use in the application of the equity method. We also rely on Roan to provide us with certain information that we include in our public filings. In addition, we cannot change the way in which Roan reports its financial results or require Roan to change its internal controls over financial reporting. No assurance can be given that Roan will provide us with the information necessary to enable us to complete our public filings on a timely basis or at all. Furthermore, any material misstatements or omissions in the information Roan provides to us or publicly files could have a material adverse effect on our financial statements and filing status under federal securities laws.

All of Roan’s properties are located in theMerge/SCOOP/STACK play in Oklahoma, making us vulnerable to risks associated with operating in a single geographic area.

All of Roan’s properties are geographically concentrated in the Merge/SCOOP/STACK play in Oklahoma. Following the Spin-off, our 50% equity interest in Roan constitutes our sole significant asset. As a result of this concentration, we and Roan may be disproportionately exposed to the impact of regional supply and demand factors, delays or interruptions of production from wells in this area caused by governmental regulation, processing or transportation capacity constraints, market limitations, availability of equipment and personnel, water shortages or other drought related conditions or interruption of the processing or transportation of oil, natural gas or NGLs.

We may not realize the potential benefits from the Spin-off in the near term or at all.

We anticipate strategic and financial benefits as a result of the Spin-off. However, as only a relatively short period of time has passed since the Spin-off, no assurance can be given that the market will react favorably in the long-term to the Spin-off. Given the added costs associated with the completion of the Spin-off, our failure to realize the anticipated benefits of the Spin-off in the near term or at all could adversely affect our company.

Our company has overlapping directors with Roan and overlapping directors and officers with Riviera, which may lead to conflicting interests.

As a result of the Spin-off, all of the Company’s executive officers also serve as executive officers of Riviera, and there are overlapping directors between the Company, Riviera and Roan. Our executive officers and members of the Board of Directors have fiduciary duties to our stockholders. Likewise, any such persons who serve in similar capacities at Riviera or Roan or any other public or private company have fiduciary duties to that company’s stockholders. For example, there may be the potential for a conflict of interest when the Company, Riviera or Roan pursues acquisitions and other business opportunities that may be suitable for each of them. Therefore, such persons may have conflicts of interest or the appearance of conflicts of interest with respect to matters involving or affecting more than one of the companies to which they owe fiduciary duties. In addition, any potential conflict that qualifies as a “related party transaction” (as defined in Item 404 of Regulation S-K) is subject to review by an independent committee of the applicable issuer’s board of directors in accordance with its corporate governance guidelines. Any other potential conflicts that arise will be addressed on a case-by-case basis, keeping in mind the applicable fiduciary duties owed by the executive officers and directors of each issuer.

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Item 1A. Risk Factors - Continued

From time to time, we may enter into transactions with Riviera or Roan. There can be no assurance that the terms of any such transactions will be as favorable to the Company, Riviera or Roan as would be the case where there is no overlapping officer or director.

Our inter-company agreements were negotiated prior to the Spin-Off.

We entered into a number of inter-company agreements covering matters such as tax sharing and our responsibility for certain liabilities previously undertaken by us for certain of our businesses. In addition, we have entered into a transition services agreement with Riviera, pursuant to which Riviera agreed to provide the Company with certain finance, financial reporting, information technology, investor relations, legal, payroll, tax and other services, and to fund certain future obligations of the Company for a transitional period following the Spin-off. We believe that the terms of these inter-company agreements are commercially reasonable and fair to all parties under the circumstances; however, conflicts could arise in the interpretation or any extension or renegotiation of the foregoing agreements after the Spin-off.


Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

The Company’s Board of Directors ~~has~~previously authorized the repurchase of up to ~~$200~~$400 million of the Company’s outstanding shares of Class A common stock. ~~Purchases may be made from time to time~~The Company discontinued the share repurchase program in negotiated purchases or in the open market, including through Rule 10b5-1 prearranged stock trading plans designed to facilitate the repurchase of the Company's shares during times it would not otherwise be in the market due to self-imposed trading blackout periods or possible possession of material nonpublic information. The timing and amounts of any such repurchases of shares will be subject to market conditions and certain other factors, and will be in accordance with applicable securities laws and other legal requirements, including restrictions contained in the Company's then current credit facility. The repurchase plan does not obligate the Company to acquire any specific number of shares and may be discontinued at any time.

~~Table of Contents~~

~~Item 2. Unregistered Sales of Equity Securities and Use of Proceeds - Continued~~

July 2018.

The following sets forth information with respect to the Company’s repurchases of its shares of Class A common stock during the second quarter of ~~2017:~~2018:


Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs ⁽¹⁾		Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs ⁽¹⁾
					(in thousands)						(in thousands)

April 1 – 30	—	$	—	—	$	—	194,083	$	38.80	194,083	$	159,418
May 1 – 31	—	$	—	—	$	—	286,789	$	40.70	286,789	$	147,744
June 1 – 30	7,540	$	30.48	7,540	$	199,770	178,634	$	38.97	178,637	$	140,782
Total							659,506	$	39.68	659,509

⁽¹⁾

~~On June 1, 2017, the~~The Company’s Board of Directors ~~announced that it had~~previously authorized the repurchase of up to ~~$75~~$400 million of the Company’s outstanding shares of a Class A common stock. ~~On June 28, 2017,~~The Company discontinued 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 July 2018.


Item 3.	Defaults Upon Senior Securities

None


Item 4.	Mine Safety Disclosures

Not applicable


Item 5.	Other Information

None

~~Table of Contents~~

~~Item 6. Exhibits~~


Item 6.	Exhibits



Exhibit Number		Description

~~2.1~~	—	Purchase and Sale Agreement, dated April 30, 2017, by and between Linn Energy Holdings, LLC, Linn Operating, LLC and Jonah Energy LLC (incorporated by reference to Exhibit 2.1 to Current Report on Form 8-K filed on May 4, 2017)
~~2.2~~		—	Purchase and Sale Agreement, dated May 23, 2017, by and among Linn Energy Holdings, LLC, Linn Operating, LLC, Linn Midstream, LLC and Berry Petroleum Company, LLC (incorporated by reference to Exhibit 2.1 to Current Report on Form 8-K filed on May 30, 2017)
~~2.3*†~~		—	~~Purchase and Sale Agreement, dated May 25, 2017, by and between Linn Energy Holdings, LLC, Linn Operating, LLC and Denbury Onshore, LLC~~
~~2.4*†~~		—	~~First Amendment, dated June 30, 2017, to Purchase and Sale Agreement, dated May 25, 2017, by and between Linn Energy Holdings, LLC, Linn Operating, LLC and Denbury Onshore, LLC~~
~~2.5*†~~		—	~~Purchase and Sale Agreement, dated June 1, 2017, by and between Linn Energy Holdings, LLC, Linn Operating, LLC, Linn Midstream, LLC and Bridge Energy LLC~~
~~2.6*†~~		—	~~First Amendment, dated July 10, 2017, to Purchase and Sale Agreement, dated June 1, 2017, by and between Linn Energy Holdings, LLC, Linn Operating, LLC, Linn Midstream, LLC and Bridge Energy LLC~~
3.1		—	Amended and Restated Certificate of Incorporation of Linn Energy, Inc. (incorporated by reference to Exhibit 3.1 to Registration Statement on Form S-8 filed on February 28, 2017)
3.2	—	Certificate of Incorporation of New LINN Inc. (incorporated by reference to Exhibit 3.1 to Form 8-K filed on July 26, 2018)
3.3	—	Certificate of Amendment to Certificate of Incorporation of New LINN Inc. (incorporated by reference to Exhibit 3.3 to Form 8-K filed on July 26, 2018)
3.4	—	Bylaws of Linn Energy, Inc. (incorporated by reference to Exhibit 3.2 to Registration Statement on Form S-8 filed on February 28, 2017)
3.5*	—	Amended and Restated Bylaws of Linn Energy, Inc.
10.1*	—	~~First~~ Letter Agreement, dated April 18, 2018, between Mark E. Ellis and Linn Energy, Inc.
10.2*	—	Letter Agreement, dated April 18, 2018, between Thomas E. Emmons and Linn Energy, Inc.
10.3*	—	Letter Agreement, dated April 18, 2018, between Jamin B. McNeil and Linn Energy, Inc.
10.4*	—	Letter Agreement, dated April 18, 2018, between Arden L. Walker, Jr. and Linn Energy, Inc.
10.5*	—	Letter Agreement, dated April 18, 2018, between Candice J. Wells and Linn Energy, Inc.
10.6*	—	Letter Agreement, dated April 19, 2018, between David B. Rottino and Linn Energy, Inc.
10.7	—	Second Amendment, ~~and Consent~~dated as of April 30, 2018, to the Credit Agreement, dated as of ~~May 31, 2017, to Credit Agreement and Security Agreement dated as of February 28,~~August 4, 2017, among Linn Energy Holdco II LLC, as borrower, Linn Energy Holdco LLC, as parent, Linn Energy, Inc. as holdings, Royal Bank of Canada, as administrative agent, Citibank, N.A., ~~the subsidiary guarantors party thereto, Wells Fargo~~as syndication agent, Barclays Bank PLC, JPMorgan Chase Bank, N.A., Morgan Stanley Senior Funding, Inc. and PNC Bank National Association, as ~~administrative agent~~co-documentation agents, and the lenders party thereto
10.2*		—	~~Engineering and Construction Agreement, dated June 13, 2017, between Linn Midstream, LLC (now known as Blue Mountain Midstream LLC) and BCCK Engineering Incorporated~~
10.3*		—	~~Equipment Supply Agreement, dated June 13, 2017, between Linn Midstream, LLC (now known as Blue Mountain Midstream LLC) and BCCK Engineering Incorporated~~
10.4*		—	~~Contribution Agreement, dated~~ (incorporated by reference to Exhibit 10.1 to Form 8-K filed on June 27, ~~2017, by and among Linn Energy Holdings, LLC, Linn Operating, LLC, Citizen Energy II, LLC and Roan Resources LLC~~2018)
31.1*	—	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2*	—	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32.1*	—	Section 1350 Certification of Chief Executive Officer
32.2*	—	Section 1350 Certification of Chief Financial Officer
101.INS**	—	XBRL Instance Document
101.SCH**	—	XBRL Taxonomy Extension Schema Document
101.CAL**	—	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF**	—	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB**	—	XBRL Taxonomy Extension Label Linkbase Document
101.PRE**	—	XBRL Taxonomy Extension Presentation Linkbase Document


*	Filed herewith.


**	~~Furnished herewith.~~


†	Pursuant to Item 601(b)(2) of Regulation S-K, the schedules and exhibits to the PSA have not been filed herewith. The registrant agrees to furnish supplementally copies of any omitted schedules and exhibits to the Securities and Exchange Commission upon request.

~~Table of Contents~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	LINN ENERGY, INC.
	(Registrant)

Date: August ~~3, 2017~~8, 2018	/s/ Darren R. Schluter
	Darren R. Schluter
	Executive Vice President, Finance, Administration and ~~Controller~~ Chief Accounting Officer
	(Duly Authorized Officer and Principal Accounting Officer)


~~Date: August 3, 2017~~	~~/s/ David B. Rottino~~
	~~David B. Rottino~~
	~~Executive Vice President and Chief Financial Officer~~
	~~(Principal Financial Officer)~~

6765



	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)	—		$	—		$	—		$	—



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



(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	)



(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



(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



(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



	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



	Predecessor
	December 31, 2016
	Carrying Value		Fair Value
	(in thousands)

Senior secured second lien notes	$	1,000,000	$	863,750
Senior notes, net	3,023,129		1,179,224



Asset retirement obligations at December 31, 2016 (Predecessor)	$	402,162
Liabilities added from drilling	146
Accretion expense	4,024
Settlements	(618		)
Asset retirement obligations at February 28, 2017 (Predecessor)	$	405,714
Fresh start adjustment ⁽¹⁾	(48,317		)
Asset retirement obligations at February 28, 2017 (Successor)	$	357,397
Liabilities added from drilling	277
Liabilities associated with assets sold	(43,507		)
Liabilities associated with assets held for sale	(21,210		)
Liabilities associated with discontinued operations	(26,774		)
Accretion expense	7,107
Settlements	(3,172		)
Asset retirement obligations at June 30, 2017 (Successor)	$	270,118