LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)

CONDENSED CONSOLIDATED STATEMENT OF UNITHOLDERS’ ~~CAPITAL~~DEFICIT

(Unaudited)

Units Unitholders’ Capital Accumulated Deficit
Treasury Units
(at Cost)
Total Unitholders’ Capital
(in thousands)

December 31, 2014 331,975
$ 5,395,811
$ (852,206 ) $ —
$ 4,543,605
Sale of units, net of offering costs of $8,762 19,622
224,665
—
—
224,665
Issuance of units 3,644
—
—
—
—
Cancellation of units (191 ) (672 ) —
672
—
Purchase of units —
—
(672 ) (672 )
Distributions to unitholders (323,878 ) —
—
(323,878 )
Unit-based compensation expenses 47,918
—
—
47,918
Excess tax benefit from unit-based compensation and other (9,729 ) —
—
(9,729 )
Net loss —
(2,287,604 ) —
(2,287,604 )
September 30, 2015 355,050
$ 5,334,115
$ (3,139,810 ) $ —
$ 2,194,305



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

December 31, 2015	355,017	$	5,343,116		$	(5,612,017	)	$	(268,901	)
Issuance of units	125	—			—			—
Unit-based compensation expenses		24,514			—			24,514
Other		(353		)	—			(353		)
Net loss		—			(1,337,619		)	(1,337,619		)
September 30, 2016	355,142	$	5,367,277		$	(6,949,636	)	$	(1,582,359	)

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

~~Table of Contents~~

LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2016			2015
	(in thousands)						(in thousands)
Cash flow from operating activities:
Net loss	$	(2,287,604	)	$	(297,307	)	$	(1,337,619	)	$	(2,287,604	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation, depletion and amortization	637,964			832,523			449,677			637,964
Impairment of long-lived assets	2,787,697			603,250			1,195,632			2,787,697
Unit-based compensation expenses	47,918			43,692			24,514			47,918
Gain on extinguishment of debt	(213,527		)	—			—			(213,527		)
Amortization and write-off of deferred financing fees	23,798			29,236			12,514			23,798
Gains on sale of assets and other, net	(193,768		)	(33,135		)
(Gains) losses on sale of assets and other, net							4,660			(193,768		)
Deferred income taxes	(8,263		)	2,619			902			(8,263		)
Reorganization items, net							(462,965		)	—
Derivatives activities:
Total (gains) losses	(785,520		)	198,579			77,138			(785,520		)
Cash settlements	858,368			(12,507		)	508,082			858,368
Cash settlements on canceled derivatives							358,536			—
Changes in assets and liabilities:
(Increase) decrease in accounts receivable – trade, net	207,062			(56,014		)	(3,750		)	207,062
Decrease in other assets	2,683			3,284
(Increase) decrease in other assets							(20,286		)	2,683
Increase (decrease) in accounts payable and accrued expenses	(36,626		)	112,235			55,172			(36,626		)
Increase (decrease) in other liabilities	(5,413		)	9,355			22,985			(5,413		)
Net cash provided by operating activities	1,034,769			1,435,810			885,192			1,034,769

Cash flow from investing activities:
Acquisition of oil and natural gas properties and joint-venture funding	—			(2,601,932		)
Development of oil and natural gas properties	(503,206		)	(1,176,478		)	(142,396		)	(503,206		)
Purchases of other property and equipment	(51,529		)	(50,138		)	(36,936		)	(51,529		)
Decrease in restricted cash							53,418			—
Proceeds from sale of properties and equipment and other	364,195			(7,485		)	(3,149		)	364,195
Net cash used in investing activities	(190,540		)	(3,836,033		)	(129,063		)	(190,540		)

Cash flow from financing activities:
Proceeds from sale of units	233,427			—			—			233,427
Proceeds from borrowings	1,405,000			5,300,024			978,500			1,405,000
Repayments of debt	(1,701,909		)	(2,156,124		)	(914,911		)	(1,701,909		)
Distributions to unitholders	(323,878		)	(721,235		)	—			(323,878		)
Financing fees and offering costs	(8,774		)	(68,614		)	(692		)	(8,774		)
Excess tax benefit from unit-based compensation	(9,467		)	4,031			—			(9,467		)
Other	(95,631		)	49,131			(20,687		)	(95,631		)
Net cash provided by (used in) financing activities	(501,232		)	2,407,213			42,210			(501,232		)

Net increase in cash and cash equivalents	342,997			6,990			798,339			342,997
Cash and cash equivalents:
Beginning	1,809			52,171			2,168			1,809
Ending	$	344,806		$	59,161		$	800,507		$	344,806

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

~~Table of Contents~~

LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 – Basis of Presentation

Nature of Business

Linn Energy, LLC (“LINN Energy” or the “Company”) is an independent oil and natural gas company. LINN Energy’s mission is to acquire, develop and maximize cash flow from a growing portfolio of long-life oil and natural gas assets. The Company’s properties are located in eight operating regions in the United States (“U.S.”), in the Rockies, the Hugoton Basin, California, the Mid-Continent, east Texas and north Louisiana (“TexLa”), the Permian Basin, ~~TexLa, South Texas~~Michigan/Illinois and ~~Michigan/Illinois.~~south Texas.

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, ~~2014.~~2015. 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 subsidiaries. All significant intercompany transactions and balances have been eliminated upon consolidation. Investments in noncontrolled entities over which the Company exercises significant influence are accounted for under the equity method.

The reference to “Berry” herein refers to Berry Petroleum Company, LLC, which is an indirect 100% wholly owned subsidiary of LINN Energy. The reference to “LinnCo” herein refers to LinnCo, LLC, which is an affiliate of LINN Energy.

The condensed consolidated financial statements for previous periods include certain reclassifications that were made to conform to current presentation. Such reclassifications have no impact on previously reported net income (loss), unitholders’ ~~capital~~deficit or cash flows.

Bankruptcy Accounting

As discussed further in Note 2, on May 11, 2016 (the “Petition Date”), the Company, certain of the Company’s direct and indirect subsidiaries, and LinnCo (collectively with the Company, 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”). During the pendency of the Chapter 11 proceedings, the Debtors will operate 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 condensed consolidated financial statements have been prepared as if the Company is a going concern and reflect the application of Accounting Standards Codification 852 “Reorganizations” (“ASC 852”). ASC 852 requires that the financial statements, for periods subsequent to the Chapter 11 filing, distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Accordingly, certain expenses, gains and losses that are realized or incurred in the bankruptcy proceedings are recorded in “reorganization items, net” on the Company’s condensed consolidated statements of operations. In addition, prepetition unsecured and under-secured obligations that may be impacted by the bankruptcy reorganization process have been classified as “liabilities subject to compromise” on the Company’s condensed consolidated balance sheet at September 30, 2016. These liabilities are reported at the amounts expected to be allowed as claims by the Bankruptcy Court, although they may be settled for less.

The accompanying condensed consolidated financial statements do not purport to reflect or provide for the consequences of the Chapter 11 proceedings. In particular, the condensed consolidated financial statements do not purport to show: (i) the realizable

Table of Contents

LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued

(Unaudited)

value of assets on a liquidation basis or their availability to satisfy liabilities; (ii) the amount of prepetition liabilities that may be allowed for claims or contingencies, or the status and priority thereof; (iii) the effect on unitholders’ deficit accounts of any changes that may be made to the Company’s capitalization; or (iv) the effect on operations of any changes that may be made to the Company’s business. While operating as debtor-in-possession under Chapter 11 of the Bankruptcy Code, the Company may sell or otherwise dispose of or liquidate assets or settle liabilities in amounts other than those reflected on its condensed consolidated financial statements, subject to the approval of the Bankruptcy Court or otherwise as permitted in the ordinary course of business. Further, a plan of reorganization could materially change the amounts and classifications on the Company’s historical condensed consolidated financial statements.

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, fair values of commodity derivatives and fair values of assets acquired and liabilities assumed. 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 Accounting Standards

In ~~April 2015,~~March 2016, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) that is intended to simplify several aspects 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. Components of this ASU will be applied either prospectively, retrospectively or under a modified retrospective basis (as applicable for the respective provision) as of the date of adoption and is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company is currently evaluating the impact of the adoption of this ASU on its consolidated financial statements and related disclosures.

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 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 consolidated financial statements and related disclosures.

In November 2015, the FASB issued an ASU that is intended to simplify the presentation of deferred taxes by requiring that all deferred taxes be classified as noncurrent, presented as a single noncurrent amount for each tax-paying component of an entity. The ASU is effective for fiscal years beginning after December 15, 2016; however, the Company early adopted it on January 1, 2016, on a retrospective basis. The adoption of this ASU resulted in the reclassification of previously-classified net current deferred taxes of approximately $22 million from “other current assets,” as well as previously-classified net noncurrent deferred tax liabilities of approximately $11 million from “other noncurrent liabilities,” to “other noncurrent assets” resulting in net noncurrent deferred taxes of approximately $11 million on the Company’s consolidated balance sheet at December 31, 2015. There was no impact to the consolidated statements of operations.

In April 2015, the FASB issued an ASU that is intended to simplify the presentation of debt issuance costs by requiring that debt issuance costs related to a recognized debt liability be presented inon the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. This ASU will be applied retrospectively as of the date of adoption and is effective for fiscal years beginning after December 15, 2015, and interim periods within those years (early adoption permitted). Adoption of this ASU is expected

Table of Contents

LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued

(Unaudited)

~~to result~~carrying amount of that debt liability, consistent with debt discounts. The Company adopted this ASU on January 1, 2016, on a retrospective basis. The adoption of this ASU resulted in ~~a decrease to~~the reclassification of approximately $37 million of unamortized deferred financing fees (which excludes deferred financing fees associated with the Company’s ~~assets and liabilities~~Credit Facilities, as defined in ~~its~~Note 6, which were not reclassified) from an asset to a direct deduction from the carrying amount of the associated debt liability on the consolidated balance ~~sheets, with~~sheet at December 31, 2015. There was no impact to the consolidated statements of operations.

In August 2014, the FASB issued an ASU that provides guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. This ASU is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter (early adoption permitted). The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements or related disclosures.

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 will be applied either retrospectively or as a cumulative-effect adjustment as of the date of adoption and 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 is currently evaluating the impact, if any, of the adoption of this ASU on its consolidated financial statements and related disclosures.

Note 2 – ~~Divestiture, Acquisitions, Exchange of Properties~~Chapter 11 Proceedings, Ability to Continue as a Going Concern and ~~Joint-Venture Funding~~Covenant Violations

~~Divestiture – 2015~~Chapter 11 Proceedings

On ~~August 31, 2015,~~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 are being administered jointly under the caption In re Linn Energy, LLC., et al., Case No. 16‑60040.

The Debtors are operating their businesses as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code. The Bankruptcy Court has granted certain relief requested by the Debtors, allowing the Company ~~through certain of~~to use its wholly owned subsidiaries, completed the sale of its remaining position in Howard County in the Permian Basin. Cash proceeds received from the sale of these properties were approximately $276 million, net of costs to sell of approximately $1 million, and the Company recognized a net gain of approximately $174 million. The gain is included in “gains on sale of assets and other, net” on the condensed consolidated statements of operations. The Company used the net proceeds from the sale to repay a portion of the outstanding indebtedness under the LINN Credit Facility, which included debt initially incurredcash to fund the ~~repurchase of a portion of its senior notes during 2015 (see Note 6).~~

~~Acquisitions – 2014~~

~~On September~~Chapter 11 ~~2014,~~proceedings, pursuant to an agreement with the first lien lenders, and giving the Company ~~completed~~ the ~~acquisition of certain oil~~authority to, among other things, continue to pay employee wages and ~~natural gas properties located in the Hugoton Basin from Pioneer Natural Resources Company (“Pioneer”~~benefits without interruption, to utilize its current cash management system and ~~the acquisition, the “Pioneer Assets Acquisition”) for total consideration of approximately $328 million, which was initially financed with borrowings under the LINN Credit Facility.~~

On August 29, 2014, the Company completed the acquisition of certain oil and natural gas properties located in five operating regions in the U.S. from subsidiaries of Devon Energy Corporation (“Devon” and the acquisition, the “Devon Assets Acquisition”) for total consideration of approximately $2.1 billion, which was initially financed with proceeds from a bridge loan and borrowings under a short-period term loan.

to make royalty payments. During the ~~third quarter~~pendency of ~~2014,~~ the ~~Company used~~Chapter 11 proceedings, all transactions outside the net proceeds from the issuance of its 6.50% senior notes due May 2019 and 6.50% senior notes due September 2021 to repay the bridge loan in full, and during the fourth quarter of 2014, the Company used the net proceeds from the sales of its Granite Wash properties as well as certain of its Wolfberry properties to repay the short-period term loan in full.

The revenues and expenses related to the Devon Assets Acquisition are included on the Company’s condensed consolidated statements of operations as of August 29, 2014. The following unaudited pro forma financial information presents a summaryordinary course of the Company’s ~~condensed combined results~~business require prior approval of ~~operations for~~ the ~~three months~~Bankruptcy Court. For goods and ~~nine months ended September 30, 2014, assuming~~services provided following the ~~Devon Assets Acquisition had been completed as of January 1, 2014, including adjustments~~Petition Date, the Company intends to ~~reflect the values assigned~~pay vendors in full under normal terms.

Bank RSA

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

The ~~pro forma financial information has been prepared for informational purposes only and does not purport~~Bank RSA sets forth, subject to ~~represent what~~certain conditions, the ~~actual results of operations would have been had the transaction been completed as~~commitment of the ~~date assumed, nor is this information necessarily indicative~~Consenting Bank Creditors to support a comprehensive restructuring of ~~future consolidated results~~the Debtors’ long-term debt. The restructuring transactions contemplated by the Bank RSA will be effectuated through one or more plans of ~~operations.~~ reorganization (“Plan”) filed in the Chapter 11 proceedings.

The ~~pro forma financial information does~~Bank RSA provides that the Consenting Bank Creditors will support the use of the LINN Debtors’ and Berry’s cash collateral under specified terms and conditions, including adequate protection terms. The Bank RSA obligates the Debtors and the Consenting Bank Creditors to, among other things, support and not ~~give effect~~interfere with consummation of the restructuring transactions contemplated by the Bank RSA and, as to the ~~costs~~Consenting Bank Creditors, vote their claims in favor of ~~any integration activities or benefits that~~the Plan. The Bank RSA may ~~result from~~be terminated upon the ~~realization~~occurrence of ~~future cost savings from operating efficiencies, or any~~certain events, including the failure to meet specified milestones relating to, among other ~~synergies that may result from~~requirements, the ~~transaction.~~filing, confirmation and consummation of the Plan, and in the event of certain breaches by the parties under the Bank RSA. The Bank RSA is subject to termination if the effective date of the Plan has not

Table of Contents

LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued

(Unaudited)

occurred within 250 days of the Petition Date. There can be no assurance that the restructuring transactions contemplated by the Bank RSA will be consummated.

Restructuring Support Agreement

On October 7, 2016, the LINN Debtors entered into a restructuring support agreement (“Original LINN RSA”) with (i) certain holders of the Company’s 12.00% senior secured second lien notes due December 2020 (such notes, the “Second Lien Notes,” and such holders, the “Consenting Second Lien Noteholders”) and (ii) certain holders of the Company’s unsecured notes (such notes, the “Unsecured Notes,” and such holders of the Unsecured Notes, the “Consenting Unsecured Noteholders,” and together such Consenting Unsecured Noteholders with the Consenting Second Lien Noteholders, the “Consenting Noteholders”).

On October 21, 2016, the LINN Debtors entered into the First Amended and Restated Restructuring Support Agreement (“LINN RSA”) with (i) certain Consenting Second Lien Noteholders, (ii) certain Consenting Unsecured Noteholders and (iii) certain lenders (the “Consenting LINN Lenders,” and together with the Consenting Noteholders, the “Consenting LINN Creditors”) under the LINN Credit Facility. The LINN RSA amends and restates the Original LINN RSA and replaces the Bank RSA with respect to the terms of the restructuring of the LINN Debtors. The Bank RSA remains in full force and effect with respect to the restructuring of Berry and Linn Acquisition Company, LLC.

The LINN RSA sets forth, subject to certain conditions, the commitment of the LINN Debtors and the Consenting LINN Creditors to support a comprehensive restructuring of the LINN Debtors’ long-term debt (the “Restructuring”). The LINN RSA obligates the LINN Debtors and the Consenting LINN Creditors to, among other things, support and not interfere with consummation of the Restructuring and, as to the Consenting LINN Creditors, vote their claims in favor of the Plan. The LINN RSA may be terminated upon the occurrence of certain events, including the failure to meet specified milestones relating to the filing, confirmation and consummation of the Plan, and in the event of certain breaches by the parties under the LINN RSA. The LINN RSA is subject to termination if the effective date of the Plan has not occurred by March 1, 2017. There can be no assurance that the Restructuring will be consummated.

Magnitude of Potential Claims

On July 11, 2016, the Debtors filed with the Bankruptcy Court schedules and statements setting forth, among other things, the assets and liabilities of the Debtors, subject to the assumptions filed in connection therewith. The schedules and statements may be subject to further amendment or modification after filing. Holders of prepetition claims are required to file proofs of claims by the applicable deadline for filing certain proofs of claims in the Debtors’ Chapter 11 cases, which was September 16, 2016, for general claims and is November 7, 2016, for governmental claims. Differences between amounts scheduled by the Debtors and claims by creditors will be investigated and resolved in connection with the claims resolution process.

Liabilities Subject to Compromise

The Company’s condensed consolidated balance sheet includes amounts classified as “liabilities subject to compromise,” which represent prepetition liabilities that have been allowed, or that the Company anticipates will be allowed, as claims in its Chapter 11 cases. The amounts represent the Company’s current estimate of known or potential obligations to be resolved in connection with the Chapter 11 proceedings. The differences between the liabilities the Company has estimated and the claims filed, or to be filed, will be investigated and resolved in connection with the claims resolution process. The Company will continue to evaluate these liabilities throughout the Chapter 11 process and adjust amounts as necessary. Such adjustments may be material.

Table of Contents

LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued

(Unaudited)

The following table summarizes the components of liabilities subject to compromise included on the condensed consolidated balance sheet:

Three Months Ended
September 30, 2014

Nine Months Ended
September 30, 2014
(in thousands, except per unit amounts)

Total revenues and other $ 1,509,498
$ 3,117,792
Total operating expenses $ (1,330,384 ) $ (2,846,361 )
Net income (loss) $ 1,480
$ (251,192 )

Net income (loss) per unit:
Basic $ —
$ (0.78 )
Diluted $ —
$ (0.78 )



	September 30, 2016
	(in thousands)

Accounts payable and accrued expenses	$	156,708
Accrued interest payable	159,422
Debt	4,856,929
Liabilities subject to compromise	$	5,173,059

Reorganization Items, Net

The ~~pro forma condensed combined~~Company has incurred and is expected to continue to incur significant costs associated with the reorganization. These costs, which are expensed as incurred, are expected to significantly affect the Company’s results of ~~operations includes adjustments to:~~

~~Reflect the results of the Devon Assets Acquisition.~~

~~Reflect incremental depreciation, depletion~~operations. Reorganization items represent costs and ~~amortization expense, using the unit-of-production method related to oil and natural gas properties acquired and an estimated useful life of 10 years for other property and equipment.~~

~~Reflect incremental accretion expense related to asset retirement obligations on oil and natural gas properties acquired.~~

~~Reflect an increase in interest expense related to incremental debt of $2.3 billion incurred to fund the purchase price.~~

~~Reflect incremental amortization of deferred financing fees~~income directly associated with ~~debt incurred~~the Chapter 11 proceedings since the Petition Date, and also include adjustments to ~~fund the purchase price.~~

~~Exclude transaction costs related to the Devon Assets Acquisition included in the historical statements of operations as they~~ reflect ~~nonrecurring charges not expected to have a continuing impact on the combined results.~~

~~Exchange of Properties – 2014~~

On August 15, 2014, the Company, through two of its wholly owned subsidiaries, completed the trade of a portion of its Permian Basin properties to Exxon Mobil Corporation and its affiliates, including its wholly owned subsidiary XTO Energy Inc., in exchange for properties in the Hugoton Basin. The noncash exchange was accounted for at fair value and the Company recognized a net gain of approximately $45 million, including costs to sell of approximately $3 million. The gain is equal to the difference between the carrying value ~~and~~of certain liabilities subject to compromise at their estimated allowed claim amounts, as such adjustments are determined.

The following table summarizes the ~~fair value~~components of ~~the assets exchanged less costs to sell, and is~~reorganization items included ~~in “gains on sale of assets and other, net”~~ on the condensed consolidated statements of ~~operations. The fair value measurements were based on inputs that are not observable and therefore represent Level 3 inputs~~operations:



	Three Months Ended September 30, 2016			Nine Months Ended September 30, 2016
	(in thousands)

Legal and other professional advisory fees	$	(25,604	)	$	(46,114	)
Unamortized deferred financing fees, discounts and premiums	—			(41,122		)
Gain related to interest payable on the 12.00% senior secured second lien notes due December 2020 ⁽¹⁾	—			551,000
Terminated contracts	(92,957		)	(47,848		)
Other	2,285			2,692
Reorganization items, net	$	(116,276	)	$	418,608


⁽¹⁾	Represents a noncash gain on the write-off of postpetition contractual interest through maturity, recorded to reflect the carrying value of the liability subject to compromise at its estimated allowed claim amount.

Rejection of Executory Contracts

Subject to certain exceptions, under the ~~fair value hierarchy.~~Bankruptcy Code, the Debtors may assume, assign or reject certain executory contracts and unexpired leases subject to the approval of the Bankruptcy Court and satisfaction of certain other conditions. Generally, the rejection of an executory contract or unexpired lease is treated as a prepetition breach of such executory contract or unexpired lease and, subject to certain exceptions, relieves the Debtors of performing their future obligations under such executory contract or unexpired lease but entitles the contract counterparty or lessor to a prepetition general unsecured claim for damages caused by such deemed breach. Counterparties to such rejected contracts or leases may assert unsecured claims in the Bankruptcy Court against the applicable Debtors’ estate for damages. Generally, the assumption of an executory contract or unexpired lease requires the Debtors to cure existing monetary defaults under such executory contract or unexpired lease and provide adequate assurance of future performance. Accordingly, any description of an executory contract or unexpired lease with any of the Debtors in this Quarterly Report on Form 10-Q, including where applicable a quantification of the Company’s obligations under any such executory contract or unexpired lease with the applicable Debtor, is qualified by any overriding

~~Joint-Venture Funding~~

Table of Contents

LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – ~~2014~~Continued

~~During the first quarter of 2014,~~(Unaudited)

rejection rights the Company has under the Bankruptcy Code. Further, nothing herein is or shall be deemed an admission with respect to any claim amounts or calculations arising from the rejection of any executory contract or unexpired lease and the Debtors expressly preserve all of their rights with respect thereto.

Effect of Filing on Creditors and Unitholders

Subject to certain exceptions, under the Bankruptcy Code, the filing of Bankruptcy Petitions automatically enjoined, or stayed, the continuation of most judicial or administrative proceedings or filing of other actions against the Debtors or their property to recover, collect or secure a claim arising prior to the Petition Date. Absent an order of the Bankruptcy Court, substantially all of the Debtors’ prepetition liabilities are subject to settlement under the Bankruptcy Code. Although the filing of Bankruptcy Petitions triggered defaults on the Debtors’ debt obligations, creditors are stayed from taking any actions against the Debtors as a result of such defaults, subject to certain limited exceptions permitted by the Bankruptcy Code. The Company did not record interest expense on its Second Lien Notes or senior notes for the three months ended September 30, 2016, or for the period from May 12, 2016, through September 30, 2016. For those periods, unrecorded contractual interest was approximately $100 million and $154 million, respectively.

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

Process for Plan of Reorganization

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

In addition to being voted on by holders of impaired claims and equity interests, a Plan must satisfy certain requirements of the Bankruptcy Code and must be approved, or confirmed, by the Bankruptcy Court in order to become effective. A Plan would be accepted by holders of claims against and equity interests in the Debtors if (i) at least one-half in number and two-thirds in dollar amount of claims actually voting in each class of claims impaired by the Plan have voted to accept the Plan and (ii) at least two-thirds in amount of equity interests impaired by the Plan actually voting has voted to accept the Plan. A class of claims or equity interests that does not receive or retain any property under the Plan on account of such claims or interests is deemed to have voted to reject the Plan.

Under certain circumstances set forth in Section 1129(b) of the Bankruptcy Code, the Bankruptcy Court may confirm a Plan even if such Plan has not been accepted by all impaired classes of claims and equity interests. The precise requirements and evidentiary showing for confirming a Plan notwithstanding its rejection by one or more impaired classes of claims or equity interests depends upon a number of factors, including the status and seniority of the claims or equity interests in the rejecting class (i.e., unsecured or secured claims, subordinated or senior claims). Generally, with respect to units, a Plan may be “crammed down” even if the unitholders receive no recovery if the proponent of the Plan demonstrates that (1) no class junior to the units are receiving or retaining property under the Plan and (2) no class of claims or interests senior to the units are being paid ~~approximately $25 million, including interest,~~more than in full.

On October 21, 2016, the Debtors filed a proposed Plan with the Bankruptcy Court.

Ability to ~~complete~~Continue as a Going Concern

Continued low commodity prices have resulted in significantly lower levels of cash flow from operating activities and have limited the ~~total funding commitment~~Company’s ability to access the capital markets. In addition, each of ~~$400 million~~the Company’s Credit Facilities is subject to scheduled redeterminations of its borrowing base, semi-annually, based primarily on reserve reports using lender commodity

Table of Contents

LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued

(Unaudited)

price expectations at such time. The lenders under the Credit Facilities agreed to defer the April 2016 borrowing base redeterminations to May 11, 2016. Continued low commodity prices, reductions in the Company’s capital budget and the resulting reserve write-downs, along with the termination of the Company’s hedges, were expected to adversely impact upcoming redeterminations and have a significant negative impact on the Company’s liquidity. The Company’s filing of the Bankruptcy Petitions constituted an event of default that accelerated the Company’s obligations under its Credit Facilities, its Second Lien Notes and its senior notes.

The significant risks and uncertainties related to the ~~joint-venture agreement it~~Company’s liquidity and Chapter 11 proceedings described above raise substantial doubt about the Company’s ability to continue as a going concern. The condensed consolidated financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities and commitments in the normal course of business. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of the going concern uncertainty. If the Company cannot continue as a going concern, adjustments to the carrying values and classification of its assets and liabilities and the reported amounts of income and expenses could be required and could be material.

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

Covenant Violations

The Company’s filing of the Bankruptcy Petitions constituted an event of default that accelerated the Company’s obligations under its Credit Facilities, its Second Lien Notes and its senior notes. Additionally, other events of default, including cross-defaults, are present, including the failure to make interest payments on the Company’s Second Lien Notes and senior notes, as well as the receipt of a going concern explanatory paragraph from the Company’s independent registered public accounting firm on the Company’s consolidated financial statements for the year ended December 31, 2015. Under the Bankruptcy Code, the creditors under these debt agreements are stayed from taking any action against the Company as a result of an event of default. See Note 6 for additional details about the Company’s debt.

Credit Facilities

The Company’s Credit Facilities contain a requirement to deliver audited consolidated financial statements without a going concern or like qualification or exception. Consequently, the filing of the Company’s 2015 Annual Report on Form 10-K which included such explanatory paragraph resulted in a default under the LINN Credit Facility as of the filing date, March 15, 2016, subject to a 30 day grace period.

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

As a condition to closing the amendments, in April ~~2012.~~2016, (a) the Company made a $100 million permanent repayment of a portion of the borrowings outstanding under the LINN Credit Facility and (b) the Company and certain of its subsidiaries provided control agreements over certain deposit accounts.

Pursuant to the terms of the amendment to the LINN Credit Facility and as a result of the execution of the Bank RSA, in May 2016, the Company made a $350 million permanent repayment of a portion of the borrowings outstanding under the LINN Credit Facility.

Table of Contents

LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued

(Unaudited)

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

Second Lien Notes

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

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

The settlement agreement required the parties to commence good faith negotiations with each other regarding the terms of a potential comprehensive and consensual restructuring, including a potential restructuring under a Chapter 11 plan of reorganization. The settlement agreement provided that in the event the parties were unable to reach agreement on the terms of a consensual restructuring on or before the commencement of such Chapter 11 proceedings (or such later date as mutually agreed to by the parties), the parties would support entry by the Bankruptcy Court of a settlement order that, among other things, (i) approves the issuance of additional notes, in the principal amount of $1.0 billion plus certain accrued interest, on a proportionate basis to existing holders of the Second Lien Notes and (ii) releases the mortgages and other collateral upon the issuance of the additional notes (the “Settlement Order”).

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

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

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

Senior Notes

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

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

The Company failed to make interest payments due on its senior notes subsequent to April 14, 2016.

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

Table of Contents

LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued

(Unaudited)

Note 3 – Unitholders’ ~~Capital~~Deficit

Delisting from Stock Exchange

As a result of the Company’s failure to comply with the NASDAQ Global Select Market (“NASDAQ”) continued listing requirements, on May 24, 2016, the Company’s units began trading over the counter on the OTC Markets Group Inc.’s Pink marketplace under the trading symbol “LINEQ.”

At-the-Market Offering Program

The Company’s Board of Directors ~~has~~had authorized the sale of up to $500 million of units under an at-the-market offering ~~program. Sales~~program, with sales of units, if any, ~~will~~to be made under an equity distribution agreement. No sales were made under the equity distribution agreement ~~by means of ordinary brokers’ transactions, through~~during the facilities of the NASDAQ Global Select Market, any other national securities exchange or facility thereof, a trading facility of a national securities association or an alternate trading system, to or through a market maker or directly on or through an electronic communication network, a “dark pool” or any similar market venue, at market prices, in block transactions, or as

~~Table of Contents~~

~~LINN ENERGY, LLC~~

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

~~(Unaudited)~~

otherwise agreed with a sales agent. The Company expects to use the net proceeds from any sale of units for general corporate purposes, which may include, among other things, capital expenditures, acquisitions and the repayment of debt.

nine months ended September 30, 2016. During the nine months ended September 30, 2015, the Company, under its equity distribution agreement, sold 3,621,983 units representing limited liability company interests at an average ~~unit~~ price of $12.37 per unit for net proceeds of approximately $44 million (net of approximately $448,000 in commissions). In connection with the issuance and sale of these units, the Company also incurred professional services expenses of approximately $459,000. The Company used the net proceeds for general corporate purposes, including the open market repurchases of a portion of its senior notes (see Note 6). ~~At September 30, 2015, units totaling approximately $455 million in aggregate offering price remained available to be sold under the agreement.~~

~~Public Offering of Units~~

In May 2015, the Company sold 16,000,000 units representing limited liability company interests in an underwritten public offering at $11.79 per unit ($11.32 per unit, net of underwriting discount) for net proceeds of approximately $181 million (after underwriting discount and offering costs of approximately $8 million). The Company used the net proceeds from the sale of these units to repay a portion of the outstanding indebtedness under the LINN Credit Facility, which included debt initially incurred to fund the open market repurchases of a portion of its senior notes during 2015 (see Note 6).

~~Forfeiture of Units in Exchange for Cash~~

In August 2015, in accordance with terms of the separation agreement between the Company and Kolja Rockov dated August 31, 2015, Mr. Rockov agreed to forfeit 191,446 units issued to him under the Company’s equity compensation plan (see Note 5) in exchange for payment of approximately $672,000. These units will remain available for issuance under the Company’s equity compensation plan.

Distributions

Under the Company’s limited liability company agreement, unitholders are entitled to receive a distribution of available cash, which includes cash on hand plus borrowings less any reserves established by the Company’s Board of Directors to provide for the proper conduct of the Company’s business (including reserves for future capital expenditures, including drilling, acquisitions and anticipated future credit needs) or to fund distributions, if any, over the next four quarters. ~~Distributions paid by the Company are presented on the condensed consolidated statement of unitholders’ capital and the condensed consolidated statements of cash flows.~~ Monthly distributions were paid by the Company through September 2015. In October 2015, the Company’s Board of Directors determined to suspend payment of the Company’s distribution. The Company’s Board of Directors will continue to evaluate the Company’s ability to reinstate the ~~distribution.~~distribution; however, as a result of the Chapter 11 proceedings, the Company cannot pay any distributions without the prior approval of the Bankruptcy Court. Distributions paid by the Company during 2015 are presented on the condensed consolidated statement of cash flows.

Note 4 – Oil and Natural Gas Properties

Oil and Natural Gas Capitalized Costs

Aggregate capitalized costs related to oil, natural gas and NGL production activities with applicable accumulated depletion and amortization are presented below:


	September 30, 2015			December 31, 2014			September 30, 2016			December 31, 2015
	(in thousands)						(in thousands)
Proved properties:
Leasehold acquisition	$	13,296,925		$	13,362,642		$	13,371,861		$	13,361,171
Development	2,909,071			2,830,841			3,043,225			2,976,643
Unproved properties	1,855,995			1,875,417			1,778,170			1,783,341
	18,061,991			18,068,900			18,193,256			18,121,155
Less accumulated depletion and amortization	(7,953,397		)	(4,867,682		)	(12,676,972		)	(11,097,492		)
	$	10,108,594		$	13,201,218		$	5,516,284		$	7,023,663

813

Table of Contents

LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued

(Unaudited)

Impairment of Proved Properties

The Company evaluates the impairment of its proved oil and natural gas properties on a field-by-field basis whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The carrying values of proved properties are reduced to fair value when the expected undiscounted future cash flows of proved and risk-adjusted probable and possible reserves are less than net book value. The fair values of proved properties are measured 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 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.

Based on the analysis described above, the Company recorded the following noncash impairment charges (before and after tax) associated with proved oil and natural gas properties:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014		2016		2015		2016		2015
	(in thousands)								(in thousands)

California region									$	—	$	330,311	$	984,288	$	537,511
Mid-Continent region									18,586		366,865		148,289		372,568
Rockies region	$	1,182,337	$	—	$	1,182,337	$	—	23,142		1,182,337		49,819		1,182,337
California region	330,311		—		537,511		—
TexLa region	375,567		—		408,667		—		—		375,567		—		408,667
Mid-Continent region	366,865		—		372,568		—
Shallow Texas Panhandle Brown Dolomite formation	—		—		277,914		—
Hugoton Basin region									—		—		—		277,914
South Texas region	—		—		8,700		—		—		—		—		8,700
Permian Basin region	—		603,250		—		603,250
	$	2,255,080	$	603,250	$	2,787,697	$	603,250	$	41,728	$	2,255,080	$	1,182,396	$	2,787,697

~~Table of Contents~~

~~LINN ENERGY, LLC~~

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

~~(Unaudited)~~

~~CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS~~

~~For the Nine Months Ended September 30, 2014~~

Linn Energy, LLC Guarantor Subsidiaries
Non-
Guarantor Subsidiary

Non-
Guarantor VIE
Eliminations Consolidated
(in thousands)
Cash flow from operating activities:
Net income (loss) $ (297,307 ) $ (215,007 ) $ 273,871
$ (5,620 ) $ (53,244 ) $ (297,307 )
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation, depletion and amortization —
595,212
226,109
11,202
—
832,523
Impairment of long-lived assets —
603,250
—
—
—
603,250
Unit-based compensation expenses —
43,692
—
—
—
43,692
Amortization and write-off of deferred financing fees 31,564
—
(5,174 ) 2,846
—
29,236
(Gains) losses on sale of assets and other, net —
(81,492 ) 48,357
—
—
(33,135 )
Equity in earnings from consolidated subsidiaries (53,244 ) —
—
—
53,244
—
Deferred income taxes —
2,542
77
—
—
2,619
Derivatives activities:
Total (gains) losses —
221,472
(22,893 ) —
—
198,579
Cash settlements —
5,623
(18,130 ) —
—
(12,507 )
Changes in assets and liabilities:
Increase in accounts receivable – trade, net —
(1,343 ) (10,611 ) (44,060 ) —
(56,014 )
Decrease in accounts receivable – affiliates 469,499
16,950
—
—
(486,449 ) —
(Increase) decrease in other assets 312
(10,723 ) 4,551
9,144
—
3,284
Increase (decrease) in accounts payable and accrued expenses 18
107,673
(10,619 ) 15,163
—
112,235
Decrease in accounts payable and accrued expenses – affiliates —
(468,896 ) (5,722 ) (11,831 ) 486,449
—
Increase (decrease) in other liabilities 63,806
(18,053 ) (36,626 ) 228
—
9,355
Net cash provided by (used in) operating activities 214,648
800,900
443,190
(22,928 ) —
1,435,810

~~Table of Contents~~

~~LINN ENERGY, LLC~~

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

~~(Unaudited)~~

Linn Energy, LLC Guarantor Subsidiaries
Non-
Guarantor Subsidiary

Non-
Guarantor VIE
Eliminations Consolidated
(in thousands)
Cash flow from investing activities:
Acquisition of oil and natural gas properties and joint-venture funding —
(76,627 ) (3,912 ) (2,521,393 ) —
(2,601,932 )
Development of oil and natural gas properties —
(750,450 ) (426,028 ) —
—
(1,176,478 )
Purchases of other property and equipment —
(41,822 ) (8,316 ) —
—
(50,138 )
Investment in affiliates (167,721 ) —
—
—
167,721
—
Change in notes receivable with affiliate (35,300 ) —
—
—
35,300
—
Advance to related party (1,285,000 ) (1,285,000 ) —
—
2,570,000
—
Proceeds from sale of properties and equipment and other (13,188 ) 5,447
256
—
—
(7,485 )
Net cash used in investing activities (1,501,209 ) (2,148,452 ) (438,000 ) (2,521,393 ) 2,773,021
(3,836,033 )

Cash flow from financing activities:
Proceeds from borrowings 4,000,024
—
—
1,300,000
—
5,300,024
Repayments of debt (1,950,000 ) —
(206,124 ) —
—
(2,156,124 )
Distributions to unitholders (721,235 ) —
—
—
—
(721,235 )
Financing fees and offering costs (57,968 ) —
(10,646 ) —
—
(68,614 )
Change in notes payable with affiliate —
35,300
—
—
(35,300 ) —
Advance from related party —
1,285,000
—
1,285,000
(2,570,000 ) —
Capital contributions – affiliates —
—
167,721
—
(167,721 ) —
Excess tax benefit from unit-based compensation 4,031
—
—
—
—
4,031
Other 11,705
38,032
(606 ) —
—
49,131
Net cash provided by (used in) financing activities 1,286,557
1,358,332
(49,655 ) 2,585,000
(2,773,021 ) 2,407,213

Net increase (decrease) in cash and cash equivalents (4 ) 10,780
(44,465 ) 40,679
—
6,990
Cash and cash equivalents:
Beginning 52
1,078
51,041
—
—
52,171
Ending $ 48
$ 11,858
$ 6,576
$ 40,679
$ —
$ 59,161

~~Table of Contents~~


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

The following discussion and analysis should be read in conjunction with the financial statements and related notes included in this Quarterly Report on Form 10-Q and in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. The following discussion contains forward-looking statements ~~that reflect the Company’s future plans,~~based on expectations, estimates ~~beliefs~~ and ~~expected performance. The forward-looking statements are dependent upon events, risks and uncertainties that~~assumptions. Actual results may ~~be outside the Company’s control. The Company’s actual results could~~ differ materially from those discussed in ~~these~~the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, market prices for oil, natural gas and NGL, production volumes, estimates of proved reserves, capital expenditures, economic and competitive conditions, credit and capital market conditions, regulatory changes and other uncertainties, as well as those factors set forth in “Cautionary Statement Regarding Forward-Looking Statements” below and in Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q and in the Annual Report on Form 10-K for the year ended December 31, 2014, and elsewhere in the Annual Report. In light of these risks, uncertainties and assumptions, the forward-looking events discussed may not occur.

~~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, ~~2014.~~ 2015, and elsewhere in the Annual Report.

When referring to Linn Energy, LLC (“LINN Energy” or the “Company”), the intent is to refer to LINN Energy and its consolidated subsidiaries as a whole or on an individual basis, depending on the context in which the statements are made. The reference to “Berry” herein refers to Berry Petroleum Company, LLC, which is an indirect 100% wholly owned subsidiary of LINN Energy. The reference to “LinnCo” herein refers to LinnCo, LLC, which is an affiliate of LINN Energy.

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

Executive Overview

LINN Energy’s mission is to acquire, develop and maximize cash flow from a growing portfolio of long-life oil and natural gas assets. LINN Energy is an independent oil and natural gas company that began operations in March 2003 and completed its initial public offering in January 2006. The Company’s properties are located in eight operating regions in the United States (“U.S.”):

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

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

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

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

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

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

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

~~South Texas; and~~

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

South Texas.

Results for the three months ended September 30, ~~2015,~~2016, included the following:

oil, natural gas and NGL sales of approximately ~~$427~~$360 million compared to ~~$937~~$427 million for the ~~third quarter of 2014;~~three months ended September 30, 2015;

average daily production of approximately ~~1,198~~1,075 MMcfe/d compared to ~~1,245~~1,198 MMcfe/d for the ~~third quarter of 2014;~~three months ended September 30, 2015;

net loss of approximately $198 million compared to $1.6 billion for the three months ended September 30, 2015;

capital expenditures of approximately $49 million compared to $4$113 million for the ~~third quarter of 2014;~~three months ended September 30, 2015; and

~~capital expenditures, excluding acquisitions, of approximately $113 million~~46 wells drilled (all successful) compared to ~~$369 million for the third quarter of 2014; and~~

41 wells drilled (38 successful) ~~compared to 210 wells drilled (all successful)~~ for the ~~third quarter of 2014.~~three months ended September 30, 2015.

Results for the nine months ended September 30, ~~2015,~~2016, included the following:

oil, natural gas and NGL sales of approximately ~~$1.4 billion compared to $2.8 billion for the nine months ended September 30, 2014;~~

~~average daily production of approximately 1,206 MMcfe/d compared to 1,160 MMcfe/d for the nine months ended September 30, 2014;~~

~~net loss of approximately $2.3 billion compared to $297~~$960 million ~~for the nine months ended September 30, 2014;~~

~~net cash provided by operating activities of approximately $1.0 billion~~ compared to $1.4 billion for the nine months ended September 30, ~~2014;~~2015;

~~capital expenditures, excluding acquisitions, of approximately $424 million compared to $1.2 billion for the nine months ended September 30, 2014; and~~

3337

Table of Contents


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

average daily production of approximately 1,089 MMcfe/d compared to 1,206 MMcfe/d for the nine months ended September 30, 2015;

net loss of approximately $1.3 billion compared to $2.3 billion for the nine months ended September 30, 2015;

net cash provided by operating activities of approximately $885 million compared to $1.0 billion for the nine months ended September 30, 2015;

capital expenditures of approximately $115 million compared to $424 million for the nine months ended September 30, 2015; and

158 wells drilled (157 successful) compared to 311 wells drilled (308 ~~successful) compared to 678 wells drilled (677~~ successful) for the nine months ended September 30, ~~2014.~~2015.

~~Reduction and Suspension of Distribution~~Chapter 11 Proceedings

~~In January 2015,~~On May 11, 2016 (the “Petition Date”), the Company, reduced its distribution to $1.25 per unit, from the previous level of $2.90 per unit, on an annualized basis. Monthly distributions were paid by the Company through September 2015. In October 2015, following the recommendation from management, the Company’s Board of Directors determined to suspend paymentcertain of the Company’s ~~distribution~~direct and ~~reserve any excess cash.~~indirect subsidiaries, and LinnCo (collectively with the Company, 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 are being administered jointly under the caption In re Linn Energy, LLC., et al., Case No. 16‑60040.

The condensed consolidated financial statements have been prepared as if the Company is a going concern and reflect the application of Accounting Standards Codification 852 “Reorganizations” (“ASC 852”). ASC 852 requires that the financial statements, for periods subsequent to the Chapter 11 filing, distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Accordingly, certain expenses, gains and losses that are realized or incurred in the bankruptcy proceedings are recorded in “reorganization items, net” on the Company’s ~~Board~~condensed consolidated statements of ~~Directors~~operations. In addition, prepetition unsecured and ~~management believe this suspension~~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 September 30, 2016. These liabilities are reported at the amounts expected to be inallowed as claims by the best long-term interest of all Company stakeholders. The Company’s Board of Directors will continue to evaluate the Company’s ability to reinstate the distribution. For additional information, see “Distribution Practices” below.

~~Reduction of 2015 Oil and Natural Gas Capital Budget~~Bankruptcy Court, although they may be settled for less.

The Company’s 2015 budget includes a 65% reduction in total capital expenditures to approximately $550 million, from approximately $1.6 billion spent in 2014, and includes approximately $470 million related to its oil and natural gas capital program. The 2015 budget contemplates significantly lower commodity pricesDebtors are operating their businesses as ~~compared to 2014, and~~“debtors-in-possession” under the ~~reduction~~jurisdiction of the ~~capital budget was intended to solidify~~Bankruptcy Court and in accordance with the ~~Company’s financial position.~~

~~Alliance with GSO Capital Partners~~

The Company signed definitive agreements dated June 30, 2015, with affiliates of private capital investor GSO Capital Partners LP (“GSO”), the credit platform of The Blackstone Group L.P., to fund oil and natural gas development (“DrillCo”). Funds managed by GSO and its affiliates have agreed to commit up to $500 million with 5-year availability to fund drilling programs on locations provided by LINN Energy. Subject to adjustments depending on asset characteristics and return expectationsapplicable provisions of the ~~selected drilling plan, GSO will fund 100% of~~Bankruptcy Code. The Bankruptcy Court has granted certain relief requested by the costs associated with new wells drilled under the DrillCo agreement and is expected to receive an 85% working interest in these wells until it achieves a 15% internal rate of return on annual groupings of wells, while LINN Energy is expected to receive a 15% carried working interest during this period. Upon reaching the internal rate of return target, GSO’s interest will be reduced to 5%, while LINN Energy’s interest will increase to 95%.

~~Alliance with Quantum Energy Partners~~

The Company signed definitive agreements dated June 30, 2015, with affiliates of private capital investor Quantum Energy Partners (“Quantum”) to fund selected future oil and natural gas acquisitions and the development of those acquired assets (“AcqCo”). See the Company’s Current Report on Form 8-K filed on July 7, 2015, for additional details regarding these agreements.

~~Divestiture – 2015~~

~~On August 31, 2015,~~Debtors, allowing the Company ~~through certain of~~to use its wholly owned subsidiaries, completed the sale of its remaining position in Howard County in the Permian Basin (the “Howard County Assets Sale”). Cash proceeds received from the sale of these properties were approximately $276 million. The Company used the net proceeds from the sale to repay a portion of the outstanding indebtedness under the LINN Credit Facility, which included debt initially incurredcash to fund the ~~repurchase~~Chapter 11 proceedings, pursuant to an agreement with the first lien lenders, and giving the Company the authority to, among other things, continue to pay employee wages and benefits without interruption, to utilize its current cash management system and to make royalty payments. During the pendency of ~~a portion of its senior notes during 2015 (see Note 6).~~

~~Financing Activities~~

~~In October 2015, LINN Energy and Berry Petroleum Company, LLC (“Berry”) each entered into an amendment to its credit facility. See Note 6 for additional details.~~

~~The spring 2015 semi-annual borrowing base redetermination~~the Chapter 11 proceedings, all transactions outside the ordinary course of the Company’s business require prior approval of the Bankruptcy Court. For goods and services provided following the Petition Date, the Company intends to pay vendors in full under normal terms.

Bank RSA

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

The Bank RSA sets forth, subject to certain conditions, the commitment of the Consenting Bank Creditors to support a comprehensive restructuring of the Debtors’ long-term debt. The restructuring transactions contemplated by the Bank RSA will be effectuated through one or more plans of reorganization (“Plan”) filed in ~~Note 6, was completed in May 2015,~~the Chapter 11 proceedings.

The Bank RSA provides that the Consenting Bank Creditors will support the use of the LINN Debtors’ and Berry’s cash collateral under specified terms and conditions, including adequate protection terms. The Bank RSA obligates the Debtors and the Consenting Bank Creditors to, among other things, support and not interfere with consummation of the restructuring transactions contemplated by the Bank RSA and, as ~~a result~~to the Consenting Bank Creditors, vote their claims in favor of ~~lower commodity prices,~~ the ~~borrowing base~~Plan. The Bank RSA may be terminated upon the occurrence of certain events, including the failure to meet specified milestones relating to, among other requirements, the filing, confirmation and consummation of the Plan, and in the event of certain breaches by the parties under the ~~LINN Credit Facility decreased from $4.5 billion~~Bank RSA. The Bank RSA is subject to ~~$4.05 billion and~~termination if the ~~borrowing base under~~effective date of the Berry Credit Facility decreased from $1.4 billion to $1.2 billion. The fall 2015 semi-annual redetermination was completed in October 2015 and the borrowing base under the LINN Credit Facility was reaffirmed at $4.05 billion; however, the borrowing base will automatically decrease to $3.6 billionPlan has not

3438

Table of Contents


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

~~on January 1, 2016, subject to any additional reductions for additional junior lien debt issued since this redetermination, if~~occurred within 250 days of the ~~following conditions are not met on or before December 31, 2015: (i)~~Petition Date. There can be no assurance that the ~~issuance~~restructuring transactions contemplated by the ~~Company of at least $250 million of additional junior lien debt; (ii) repayment and extinguishment~~Bank RSA will be consummated.

Restructuring Support Agreement

On October 7, 2016, the LINN Debtors entered into a restructuring support agreement (“Original LINN RSA”) with (i) certain holders of the ~~Berry Credit Facility;~~Company’s 12.00% senior secured second lien notes due December 2020 (such notes, the “Second Lien Notes,” and such holders, the “Consenting Second Lien Noteholders”) and (ii) certain holders of the Company’s unsecured notes (such notes, the “Unsecured Notes,” and such holders of the Unsecured Notes, the “Consenting Unsecured Noteholders,” and together such Consenting Unsecured Noteholders with the Consenting Second Lien Noteholders, the “Consenting Noteholders”).

On October 21, 2016, the LINN Debtors entered into the First Amended and Restated Restructuring Support Agreement (“LINN RSA”) with (i) certain Consenting Second Lien Noteholders, (ii) certain Consenting Unsecured Noteholders and (iii) certain lenders (the “Consenting LINN Lenders,” and together with the ~~guarantee by Berry of~~Consenting Noteholders, the “Consenting LINN ~~Credit Facility or the merger or consolidation of Berry with a guarantor~~Creditors”) under the LINN Credit Facility. ~~Notwithstanding this, borrowing availability~~The LINN RSA amends and restates the Original LINN RSA and replaces the Bank RSA with respect to the terms of the restructuring of the LINN Debtors. The Bank RSA remains in full force and effect with respect to the restructuring of Berry and Linn Acquisition Company, LLC.

The LINN RSA sets forth, subject to certain conditions, the commitment of the LINN Debtors and the Consenting LINN Creditors to support a comprehensive restructuring of the LINN Debtors’ long-term debt (the “Restructuring”). On October 21, 2016, the Debtors filed a proposed Plan with the Bankruptcy Court. See “Process for Plan of Reorganization” below for certain principal terms of the proposed Plan.

The LINN RSA obligates the LINN Debtors and the Consenting LINN Creditors to, among other things, support and not interfere with consummation of the Restructuring and, as to the Consenting LINN Creditors, vote their claims in favor of the Plan. The LINN RSA may be terminated upon the occurrence of certain events, including the failure to meet specified milestones relating to the filing, confirmation and consummation of the Plan, and in the event of certain breaches by the parties under the LINN ~~Credit Facility will be limited~~RSA. The LINN RSA is subject to ~~$3.6 billion (which amount includes~~termination if the ~~outstanding $500 million term loan) until the earlier of a) January 1, 2016 or b) the~~effective date of the ~~actions described in~~Plan has not occurred by March 1, 2017. There can be no assurance that the ~~prior sentence. The borrowing base under the Berry Credit Facility decreased from $1.2 billion to $900 million.~~Restructuring will be consummated.

Continued low commodity prices, reductions in the Company’s capital budget and the resulting reserve write-downs, along with the maturity schedule of the Company’s hedges, may impact future redeterminations.Backstop Commitment Agreement

In connection with the ~~reduction in Berry’s borrowing base in~~proposed Plan, on October ~~2015, Berry repaid $300 million of borrowings outstanding under~~25, 2016, the ~~Berry Credit Facility. In connection~~Company entered into a backstop commitment agreement (“Backstop Commitment Agreement”) with the ~~reduction in Berry’s borrowing base in May 2015, LINN Energy borrowed $250 million~~parties thereto (collectively, the “Backstop Parties”), pursuant to which the Backstop Parties, which are also Consenting Noteholders under the LINN ~~Credit Facility, which it contributed~~RSA, have agreed to ~~Berry~~backstop a $530 million new money investment in the LINN Debtors pursuant to ~~post as restricted cash with Berry’s lenders. As directed by LINN Energy,~~ the ~~$250 million was deposited on Berry’s behalf~~rights offerings to be conducted in ~~a security account~~accordance with the ~~administrative agent subject to a security control agreement. Berry’s ability to withdraw funds from this account is subject to a concurrent reduction of~~Plan.

In accordance with the ~~borrowing base under~~Plan, the ~~Berry Credit Facility or lender’s consent in connection with a redetermination of such borrowing base. The $250 million may be used to satisfy obligations under~~Backstop Commitment Agreement and the ~~Berry Credit Facility or, subject to restrictions~~rights offerings procedures filed in the ~~indentures governing Berry’s senior notes, may be returned to~~Chapter 11 cases, the LINN ~~Energy in the future.~~

During the nine months ended September 30, 2015, the Company, under its equity distribution agreement, sold 3,621,983 units representing limited liability company interests at an average unit price of $12.37 for net proceeds of approximately $44 million (net of approximately $448,000 in commissions). The Company used the net proceeds for general corporate purposes,Debtors will offer eligible creditors, including the ~~open market repurchases of a portion of its senior notes (see Note 6). At September 30, 2015, units totaling approximately $455 million in aggregate offering price remained available~~Backstop Parties, the right to ~~be sold under the agreement.~~

~~In May 2015, the Company sold 16,000,000 units representing~~purchase new common stock or limited liability company interests in an underwritten public offering at $11.79 per unit ($11.32 per unit, net of underwriting discount) for net proceeds of approximately $181 million (after underwriting discount and offering costs of approximately $8 million). Thethe reorganized Company ~~used the net proceeds~~(“New Common Stock”) upon emergence from the ~~sale~~Chapter 11 cases for an aggregate purchase price of ~~these units to repay a portion~~$530 million. The rights offerings will consist of the ~~outstanding indebtedness under~~following offerings:

Holders of Unsecured Notes as of the ~~LINN Credit Facility, which included debt initially incurred~~record date set therefor shall be granted rights entitling each such holder to ~~fund the open market repurchases of a portion of its senior notes during 2015 (see Note 6).~~

During the nine months ended September 30, 2015, the Company repurchased, through privately negotiated transactions and on the open market, approximately $783 million of its outstanding senior notes. See Note 6 for additional details.

~~Commodity Derivatives~~

During the nine months ended September 30, 2015, the Company entered into commodity derivative contracts consisting of natural gas basis swaps for May 2015 through December 2017 to hedge exposure to differentials in certain producing areas, and oil swaps for April 2015 through December 2015. In addition, the Company entered into natural gas basis swaps for May 2015 through December 2016 to hedge exposuresubscribe to the ~~differential~~rights offering in ~~California, where it consumes natural gas~~an amount up to its pro rata share of New Common Stock (the “Unsecured Rights Offering,” and such New Common Stock offered for purchase thereunder, the “Unsecured Rights Offering Shares”), which Unsecured Rights Offering Shares, collectively, will reflect an aggregate purchase price of $319,004,408 at the per share price set forth in the Backstop Commitment Agreement.

Holders of Second Lien Notes as of the record date set therefor shall be granted rights entitling each such holder to subscribe to the rights offering in an amount up to its ~~heavy oil development operations.~~pro rata share of New Common Stock (the “Secured Rights Offering,” and such New Common Stock offered for purchase thereunder, the “Secured Rights Offering Shares”), which Secured Rights Offering Shares, collectively, will reflect an aggregate purchase price of $210,995,592 at the per share price set forth in the Backstop Commitment Agreement.

Under the Backstop Commitment Agreement, certain Backstop Parties have agreed to purchase their pro rata share of the Unsecured Rights Offering Shares and the Secured Rights Offering Shares, as applicable, that are not duly subscribed to

3539

Table of Contents


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

~~Results~~pursuant to the Unsecured Rights Offering or the Secured Rights Offering, as applicable, at the discounted per share price set forth in the Backstop Commitment by parties other than Backstop Parties (the “Backstop Commitment”).

Subject to Bankruptcy Court approval, the LINN Debtors will pay the Backstop Parties on the Plan effective date a commitment premium equal to 4.0% of ~~Operations~~the $530 million committed amount (the “Backstop Commitment Premium”), of which 3.0% will be paid in cash and 1.0% will be paid in the form of New Common Stock at the discounted per share price set forth in the Backstop Commitment Agreement. The Backstop Commitment Premium shall be fully earned and nonrefundable as of the date of the Bankruptcy Court order approving the LINN Debtors’ entry into the Backstop Commitment Agreement. All amounts payable to the Backstop Parties in their capacities as such for the Backstop Commitment Premium shall be paid pro rata based on the amount of their respective Backstop Commitments on the effective date (as compared to the aggregate Backstop Commitment of all Backstop Parties).

~~Three Months Ended~~The rights to purchase New Common Stock in the rights offerings, any shares issued upon exercise thereof, and all shares issued to the Backstop Parties in respect of their Backstop Commitments pursuant to the Backstop Commitment Premium, will be issued in reliance upon the exemption from the registration requirements of the securities laws pursuant to Section 1145 of the Bankruptcy Code. All shares issued to the Backstop Parties pursuant to the Backstop Commitment Agreement in respect of their Backstop Commitment will be issued in reliance upon the exemption from registration under the Securities Act of 1933, as amended (the “Securities Act”), provided by Section 4(a)(2) thereof and/or Regulation D thereunder. As a condition to the closing of the transactions contemplated by the Backstop Commitment Agreement, the Company will enter into a registration rights agreement with the certain Backstop Parties entitling such Backstop Parties to request that the Company register their securities for sale under the Securities Act at various times.

The Backstop Parties’ commitments to backstop the rights offerings, and the other transactions contemplated by the Backstop Commitment Agreement, are conditioned upon the satisfaction of all conditions to the effectiveness of the Plan and other applicable conditions precedent set forth in the Backstop Commitment Agreement. The issuances of New Common Stock pursuant to the rights offerings and the Backstop Commitment Agreement are conditioned upon, among other things, confirmation of the Plan by the Bankruptcy Court, and the Plan’s effectiveness upon the Company’s emergence from its Chapter 11 cases.

Magnitude of Potential Claims

On July 11, 2016, the Debtors filed with the Bankruptcy Court schedules and statements setting forth, among other things, the assets and liabilities of the Debtors, subject to the assumptions filed in connection therewith. The schedules and statements may be subject to further amendment or modification after filing. Holders of prepetition claims are required to file proofs of claims by the applicable deadline for filing certain proofs of claims in the Debtors’ Chapter 11 cases, which was September ~~30, 2015, Compared~~16, 2016, for general claims and is November 7, 2016, for governmental claims. Differences between amounts scheduled by the Debtors and claims by creditors will be investigated and resolved in connection with the claims resolution process.

Rejection of Executory Contracts

Subject to ~~Three Months Ended September 30, 2014~~certain exceptions, under the Bankruptcy Code, the Debtors may assume, assign or reject certain executory contracts and unexpired leases subject to the approval of the Bankruptcy Court and satisfaction of certain other conditions. Generally, the rejection of an executory contract or unexpired lease is treated as a prepetition breach of such executory contract or unexpired lease and, subject to certain exceptions, relieves the Debtors of performing their future obligations under such executory contract or unexpired lease but entitles the contract counterparty or lessor to a prepetition general unsecured claim for damages caused by such deemed breach. Counterparties to such rejected contracts or leases may assert unsecured claims in the Bankruptcy Court against the applicable Debtors’ estate for damages. Generally, the assumption of an executory contract or unexpired lease requires the Debtors to cure existing monetary defaults under such executory contract or unexpired lease and provide adequate assurance of future performance. Accordingly, any description of an executory contract or unexpired lease with any of the Debtors in this Quarterly Report on Form 10-Q, including where applicable a quantification of the Company’s obligations under any such executory contract or unexpired lease with the applicable Debtor, is qualified by any overriding rejection rights the Company has under the Bankruptcy Code. Further, nothing herein is or shall be deemed an admission with respect to any claim amounts or calculations arising from the rejection of any executory contract or unexpired lease and the Debtors expressly preserve all of their rights with respect thereto.

Three Months Ended
September 30,
2015 2014 Variance
(in thousands)
Revenues and other:
Natural gas sales $ 156,641
$ 221,374
$ (64,733 )
Oil sales 241,467
614,407
(372,940 )
NGL sales 29,137
101,677
(72,540 )
Total oil, natural gas and NGL sales 427,245
937,458
(510,213 )
Gains on oil and natural gas derivatives 549,029
451,702
97,327
Marketing and other revenues 22,030
45,955
(23,925 )
998,304
1,435,115
(436,811 )
Expenses:
Lease operating expenses 154,086
191,630
(37,544 )
Transportation expenses 54,915
53,412
1,503
Marketing expenses 9,359
31,574
(22,215 )
General and administrative expenses ⁽¹⁾
60,113
75,384
(15,271 )
Exploration costs 3,072
7,850
(4,778 )
Depreciation, depletion and amortization 207,218
290,287
(83,069 )
Impairment of long-lived assets 2,255,080
603,250
1,651,830
Taxes, other than income taxes 46,238
66,770
(20,532 )
Gains on sale of assets and other, net (166,980 ) (35,803 ) (131,177 )
2,623,101
1,284,354
1,338,747
Other income and (expenses) 57,657
(155,894 ) 213,551
Loss before income taxes (1,567,140 ) (5,133 ) (1,562,007 )
Income tax expense (benefit) 2,177
(1,033 ) 3,210
Net loss $ (1,569,317 ) $ (4,100 ) $ (1,565,217 )


⁽¹⁾	General and administrative expenses for the three months ended September 30, 2015, and September 30, 2014, include approximately $13 million and $9 million, respectively, of noncash unit-based compensation expenses.

3640

Table of Contents


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

Effect of Filing on Creditors and Unitholders

Process for Plan of Reorganization

On October 21, 2016, the Debtors filed a proposed Plan with the Bankruptcy Court. Certain principal terms of the proposed Plan, as filed on October 21, 2016, with respect to the LINN Debtors include:

One or more new legal entities, in a to-be-determined form, will be formed to directly or indirectly hold all of the assets of the LINN Debtors. Following the Restructuring, the LINN Debtors will be standalone companies, separate from Berry.

The holders of claims under the LINN Credit Facility will receive their pro rata share of $1.7 billion reserve-based revolving and term loan credit facilities, as described further below (the “New LINN Exit Facility”), and a cash paydown in an amount that has yet to be determined.

Table of Contents


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

The Second Lien Notes will be allowed in the aggregate as a $2.0 billion unsecured claim (plus accrued and unpaid interest and reasonable and documented fees and expenses), and the holders of the Second Lien Notes will receive their pro rata share of (i) a to-be-determined percentage of New Common Stock; (ii) certain rights to purchase shares of New Common Stock in the rights offering, as described above; and (iii) $30 million in cash to the extent such holders vote their Second Lien Notes claims to accept the Plan.

The holders of the Company’s Unsecured Notes will receive their pro rata share of (i) a to-be-determined percentage of New Common Stock; and (ii) certain rights to purchase shares of New Common Stock in the rights offering.

The holders of unsecured claims against the Company other than the Unsecured Notes will receive their pro rata share of (i) a to-be-determined percentage of New Common Stock; and (ii) certain rights to purchase shares of New Common Stock, at the same price per share as in the rights offerings, to be issued separate from the rights offerings. Such holders of unsecured claims less than a to-be-determined amount are expected to have the right to elect to receive, in lieu of New Common Stock and rights to purchase shares of New Common Stock, cash in an amount equal to a to-be-determined percentage of such holder’s allowed unsecured claim.

Cash recoveries will be funded with the proceeds of $530 million from the rights offerings of New Common Stock, which will be fully committed to be backstopped by certain of the Consenting Noteholders, as described above.

The board of directors shall consist of seven directors, who shall include: (i) the chief executive officer of the Company, (ii) one director selected by the Company and (iii) five directors selected by a selection committee.

All existing equity interests of the Company will be extinguished without recovery.

The Plan contemplates a New LINN Exit Facility consisting of (i) a term loan in the amount of $300 million (the “New LINN Term Loan”) and (ii) a revolving loan in the initial amount of $1.4 billion (the “New LINN Revolving Loan”). The New LINN Term Loan will mature on the earlier of June 30, 2021, or the day prior to the fourth anniversary of the date of emergence from bankruptcy (the “Closing Date”), with interest payable at LIBOR plus 7.50% and amortized principal payments payable quarterly, beginning March 31, 2017. The New LINN Revolving Loan will be composed of two tranches as follows: (a) a conforming tranche with an initial amount of $1.4 billion subject to the borrowing base (the “Conforming Tranche”), and (b) a non-conforming tranche with an initial amount of $0 (the “Non-Conforming Tranche”). The Conforming Tranche will mature on the earlier of (i) June 30, 2021, or (ii) the day prior to the fourth anniversary of the Closing Date, with an interest rate of LIBOR plus 3.50%. The Non-Conforming Tranche will mature on the earlier of (i) December 31, 2020, or (ii) the day prior to the date that is three years and six months after the Closing Date, with an interest rate of LIBOR plus 5.50%. The New LINN Exit Facility will contain a variety of other terms and conditions including annual year-end borrowing base redeterminations beginning April 1, 2018, conditions precedent to funding, financial and other covenants, and certain representations and warranties.

The Plan also provides for the establishment of a customary employee incentive plan at the reorganized Company under which a pool of equity having a value equal to (i) 8% of the equity value of the reorganized LINN Debtors as of the Plan effective date (the “Company Group Emergence Value”) as follows: (A) 2.5% of the Company Group Emergence Value in the form of restricted stock units to be issued at emergence; (B) 1.5% of the Company Group Emergence Value in the form of profits interests that will vest based on time and performance; and (C) the remaining 4% of the Company Group Emergence Value in a form of equity-based awards as determined by the board of directors of the reorganized Company; and (ii) an additional 2.0% of the Company Group Emergence Value, which will be issued at emergence in the form of profits interests that vest once the equity value of the reorganized LINN Debtors (as equitably adjusted for subsequent contributions and distributions) is equal to 1.5 times the Company Group Emergence Value.

Certain principal terms of the proposed Plan, as filed on October 21, 2016, with respect to Berry include:

The holders of claims under the Berry Credit Facility will receive a full recovery consisting of one or more of the following: (i) a to-be-determined exit financing facility; (ii) a to-be-determined cash paydown; (iii) a to-be-determined percentage of new common stock or limited liability company interests (“New Berry Common Stock”) in the reorganized Berry or its successor in interest (“New Berry”) up to the value of the collateral securing the Berry Credit Facility claims; and (iv) proceeds of any asset sales solely to the extent such assets are the collateral securing the Berry Credit Facility claims.

Table of Contents


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

The holders of Berry unsecured notes (the “Berry Unsecured Notes”) will receive one or more of the following: (i) New Berry Common Stock; (ii) rights to purchase New Berry Common Stock or other security in New Berry; and (iii) proceeds of any asset sales, after accounting for proceeds required to satisfy the Berry Credit Facility claims.

The holders of unsecured claims against Berry other than the Berry Unsecured Notes will receive one or more of the following: (i) New Berry Common Stock; (ii) rights to purchase New Berry Common Stock or other security in New Berry; and (iii) proceeds of any asset sales, after accounting for proceeds required to satisfy the Berry Credit Facility claims.

Berry will settle all intercompany claims against the LINN Debtors pursuant to a settlement to be approved as part of the Plan, which settlement provides that Berry will have a $25 million general unsecured claim against the Company.

The governance terms of New Berry, as well as the terms of any employee incentive plan, are to be determined. New Berry will be a standalone company, separate from the Company and the LINN Debtors.

All existing equity interests of Berry and Linn Acquisition Company, LLC will be extinguished without recovery.

There can be no assurance at this time that the Debtors will be able to successfully confirm and consummate the Plan.

For the duration of the Company’s Chapter 11 proceedings, the Company’s operations and ability to develop and execute its business plan are subject to the risks and uncertainties associated with the Chapter 11 process as described in Item 1A. “Risk Factors.” As a result of these risks and uncertainties, the number of the Company’s units and unitholders, assets, liabilities, officers and/or directors could be significantly different following the outcome of the Chapter 11 proceedings, and the description of the Company’s operations, properties and capital plans included in this quarterly report may not accurately reflect its operations, properties and capital plans following the Chapter 11 process.

Ability to Continue as a Going Concern

Continued low commodity prices have resulted in significantly lower levels of cash flow from operating activities and have limited the Company’s ability to access the capital markets. In addition, each of the Company’s Credit Facilities is subject to scheduled redeterminations of its borrowing base, semi-annually, based primarily on reserve reports using lender commodity price expectations at such time. The lenders under the Credit Facilities agreed to defer the April 2016 borrowing base redeterminations to May 11, 2016. Continued low commodity prices, reductions in the Company’s capital budget and the resulting reserve write-downs, along with the termination of the Company’s hedges, were expected to adversely impact upcoming redeterminations and have a significant negative impact on the Company’s liquidity. The Company’s filing of the Bankruptcy Petitions constituted an event of default that accelerated the Company’s obligations under its Credit Facilities, its Second Lien Notes and its senior notes.

The significant risks and uncertainties related to the Company’s liquidity and Chapter 11 proceedings described above raise substantial doubt about the Company’s ability to continue as a going concern. The condensed consolidated financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities and commitments in the normal course of business. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of the going concern uncertainty. If the Company cannot continue as a going concern, adjustments to the carrying values and classification of its assets and liabilities and the reported amounts of income and expenses could be required and could be material.

Covenant Violations

Table of Contents


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

defaults, are present, including the failure to make interest payments on the Company’s Second Lien Notes and senior notes, as well as the receipt of a going concern explanatory paragraph from the Company’s independent registered public accounting firm on the Company’s consolidated financial statements for the year ended December 31, 2015. Under the Bankruptcy Code, the creditors under these debt agreements are stayed from taking any action against the Company as a result of an event of default. See Note 6 for additional details about the Company’s debt.

Credit Facilities

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

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

Second Lien Notes

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

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

Table of Contents


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

Senior Notes

The Company failed to make interest payments due on its senior notes subsequent to April 14, 2016.

Commodity Derivatives

In October 2016, the Company entered into commodity derivative contracts consisting of oil swaps for November 2016 through December 2017 and natural gas swaps for January 2017 through December 2018. Including these new hedges, as of October 31, 2016, the Company had oil swaps of 610 MBbls at an average price of $50.91 per Bbl for the remainder of 2016 and 2,373 MBbls at an average price of $51.74 per Bbl for 2017, and natural gas swaps of 22,265 MMMBtus at an average price of $3.05 per MMBtu for the remainder of 2016, 113,150 MMMBtus at an average price of $3.14 per MMBtu for 2017 and 14,600 MMMBtus at an average price of $3.01 per MMBtu for 2018.

In September 2016, the Company entered into commodity derivative contracts consisting of natural gas swaps for October 2016 through December 2017 and oil swaps for January 2017 through December 2017.

In April 2016 and May 2016, in connection with the Company’s restructuring efforts, LINN Energy canceled (prior to the contract settlement dates) all of its then-outstanding derivative contracts for net proceeds of approximately $1.2 billion. The net proceeds were used to make permanent repayments of a portion of the borrowings outstanding under the LINN Credit Facility. Also, in May 2016 and July 2016, as a result of the Chapter 11 proceedings, Berry’s counterparties canceled (prior to the contract settlement dates) all of Berry’s then-outstanding derivative contracts for net proceeds of approximately $2 million. The net proceeds were used to make permanent repayments of a portion of the borrowings outstanding under the Berry Credit Facility.

Offer to Exchange LINN Energy Units for LinnCo Shares

In March 2016, LinnCo filed a Registration Statement on Form S-4 related to an offer to exchange each outstanding unit representing limited liability company interests of LINN Energy for one common share representing limited liability company interests of LinnCo. The initial offer expired on April 25, 2016, and on April 26, 2016, LinnCo commenced a subsequent offering period that expired on August 1, 2016. During the exchange period, 123,100,715 LINN Energy units were exchanged for an equal number of LinnCo shares. As a result of the exchanges of LINN Energy units for LinnCo shares, LinnCo’s ownership of LINN Energy’s outstanding units increased from approximately 37% at December 31, 2015, to approximately 71% at September 30, 2016.

2016 Oil and Natural Gas Capital Budget

For 2016, the Company estimates its total capital expenditures, excluding acquisitions, will be approximately $235 million, including approximately $160 million related to its oil and natural gas capital program and approximately $60 million related to its plant and pipeline capital. The 2016 budget contemplates continued low commodity prices and is under continuous review

Table of Contents


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

and subject to ongoing adjustments. The Company expects to fund its capital expenditures primarily from net cash provided by operating activities; however, there is uncertainty regarding the Company’s liquidity as discussed above. In addition, at this level of capital spending, the Company expects its total reserves to decline.

Financing Activities

See above for a description of the amendments to the Credit Facilities entered into in April 2016. During the nine months ended September 30, 2016, the Company borrowed approximately $979 million under the LINN Credit Facility and made repayments of approximately $1.8 billion of a portion of the borrowings outstanding under the Credit Facilities and term loan. The repayments include approximately $841 million in commodity derivative settlements paid by the counterparties to the lenders under the LINN Credit Facility. As of September 30, 2016, total borrowings outstanding (including outstanding letters of credit) under the LINN Credit Facility and the Berry Credit Facility were approximately $1.9 billion and $898 million, respectively, with no remaining availability for either.

Delisting from Stock Exchange

Table of Contents


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

Results of Operations

Three Months Ended September 30, 2016, Compared to Three Months Ended September 30, 2015

Three Months Ended
September 30,
2015 2014 Variance
Average daily production:
Natural gas (MMcf/d) 644
600
7 %
Oil (MBbls/d) 63.1
74.0
(15 )%
NGL (MBbls/d) 29.2
33.5
(13 )%
Total (MMcfe/d) 1,198
1,245
(4 )%

Weighted average prices: ⁽¹⁾

Natural gas (Mcf) $ 2.64
$ 4.01
(34 )%
Oil (Bbl) $ 41.58
$ 90.31
(54 )%
NGL (Bbl) $ 10.84
$ 33.01
(67 )%

Average NYMEX prices:
Natural gas (MMBtu) $ 2.77
$ 4.06
(32 )%
Oil (Bbl) $ 46.43
$ 97.17
(52 )%

Costs per Mcfe of production:
Lease operating expenses $ 1.40
$ 1.67
(16 )%
Transportation expenses $ 0.50
$ 0.47
6 %
General and administrative expenses ⁽²⁾
$ 0.55
$ 0.66
(17 )%
Depreciation, depletion and amortization $ 1.88
$ 2.54
(26 )%
Taxes, other than income taxes $ 0.42
$ 0.58
(28 )%



	Three Months Ended September 30,
	2016			2015			Variance
	(in thousands)
Revenues and other:
Natural gas sales	$	141,193		$	156,641		$	(15,448	)
Oil sales	179,796			241,467			(61,671		)
NGL sales	39,154			29,137			10,017
Total oil, natural gas and NGL sales	360,143			427,245			(67,102		)
Gains on oil and natural gas derivatives	274			549,029			(548,755		)
Marketing and other revenues	25,248			22,030			3,218
	385,665			998,304			(612,639		)
Expenses:
Lease operating expenses	117,470			154,086			(36,616		)
Transportation expenses	49,630			54,915			(5,285		)
Marketing expenses	12,191			9,359			2,832
General and administrative expenses ⁽¹⁾	50,202			60,113			(9,911		)
Exploration costs	4			3,072			(3,068		)
Depreciation, depletion and amortization	142,448			207,218			(64,770		)
Impairment of long-lived assets	41,728			2,255,080			(2,213,352		)
Taxes, other than income taxes	15,383			46,238			(30,855		)
(Gains) losses on sale of assets and other, net	1,940			(166,980		)	168,920
	430,996			2,623,101			(2,192,105		)
Other income and (expenses)	(40,374		)	57,657			(98,031		)
Reorganization items, net	(116,276		)	—			(116,276		)
Loss before income taxes	(201,981		)	(1,567,140		)	1,365,159
Income tax expense (benefit)	(3,616		)	2,177			(5,793		)
Net loss	$	(198,365	)	$	(1,569,317	)	$	1,370,952


⁽¹⁾	General and administrative expenses for the three months ended September 30, 2016, and September 30, 2015, include approximately $5 million and $13 million, respectively, of noncash unit-based compensation expenses.

Table of Contents


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



	Three Months Ended September 30,
	2016		2015		Variance
Average daily production:
Natural gas (MMcf/d)	597		644		(7	)%
Oil (MBbls/d)	49.6		63.1		(21	)%
NGL (MBbls/d)	30.0		29.2		3	%
Total (MMcfe/d)	1,075		1,198		(10	)%

Weighted average prices: ⁽¹⁾
Natural gas (Mcf)	$	2.57	$	2.64	(3	)%
Oil (Bbl)	$	39.37	$	41.58	(5	)%
NGL (Bbl)	$	14.17	$	10.84	31	%

Average NYMEX prices:
Natural gas (MMBtu)	$	2.81	$	2.77	1	%
Oil (Bbl)	$	44.94	$	46.43	(3	)%

Costs per Mcfe of production:
Lease operating expenses	$	1.19	$	1.40	(15	)%
Transportation expenses	$	0.50	$	0.50	—
General and administrative expenses ⁽²⁾	$	0.51	$	0.55	(7	)%
Depreciation, depletion and amortization	$	1.44	$	1.88	(23	)%
Taxes, other than income taxes	$	0.16	$	0.42	(62	)%


⁽¹⁾	Does not include the effect of gains (losses) on derivatives.


⁽²⁾	General and administrative expenses for the three months ended September 30, ~~2015,~~2016, and September 30, ~~2014,~~2015, include approximately ~~$13~~$5 million and $9$13 million, respectively, of noncash unit-based compensation expenses.

3748

Table of Contents


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 decreased by approximately ~~$510~~$67 million or ~~54%~~16% to approximately $360 million for the three months ended September 30, 2016, from approximately $427 million for the three months ended September 30, 2015, ~~from approximately $937 million for the three months ended September 30, 2014,~~ due to lower oil and natural gas ~~and NGL~~ prices and lower production ~~volumes.~~volumes, partially offset by higher NGL prices. Lower oil and natural gas ~~and NGL~~ prices resulted in a decrease in revenues of approximately ~~$283 million, $81~~$10 million and ~~$59~~$4 million, respectively. Higher NGL prices resulted in an increase in revenues of approximately $9 million.

Average daily production volumes decreased to approximately 1,075 MMcfe/d for the three months ended September 30, 2016, from 1,198 MMcfe/d for the three months ended September 30, ~~2015, from 1,245 MMcfe/d for the three months ended September 30, 2014.~~2015. Lower oil and ~~NGL~~natural gas production volumes resulted in a decrease in revenues of approximately ~~$90~~$52 million and ~~$13~~$11 million, respectively. Higher ~~natural gas~~NGL production volumes resulted in an increase in revenues of approximately ~~$16~~$1 million.

The following table sets forth average daily production by region:


	Three Months Ended September 30,						Three Months Ended September 30,
	2015	2014	Variance				2016	2015	Variance
Average daily production (MMcfe/d):
Rockies	429	333	96		29	%	396	429	(33	)	(8	)%
Hugoton Basin	254	201	53		27	%	236	254	(18	)	(7	)%
California	183	172	11		6	%	148	183	(35	)	(19	)%
Mid-Continent	105	289	(184	)	(64	)%	102	105	(3	)	(2	)%
TexLa							80	87	(7	)	(8	)%
Permian Basin	77	154	(77	)	(50	)%	54	77	(23	)	(30	)%
TexLa	87	51	36		71	%
Michigan/Illinois							30	31	(1	)	(2	)%
South Texas	32	12	20		158	%	29	32	(3	)	(9	)%
Michigan/Illinois	31	33	(2	)	(8	)%
	1,198	1,245	(47	)	(4	)%	1,075	1,198	(123	)	(10	)%

During the nine months ended September 30, 2015, the Company had commodity derivative contracts for approximately 80% of both its natural gas and oil production. During the nine months ended September 30, 2014, the Company had commodity derivative contracts for approximately 92% of its natural gas production and 93% of its oil production. The Company does not hedge the portion of natural gas production used to economically offset natural gas consumption related to its heavy oil development operations in California.

The Company determines 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 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. Marketing and other revenues increased by approximately $3 million or 15% to approximately $25 million for the three months ended September 30, 2016, from approximately $22 million for the three months ended September 30, 2015. The increase was primarily due to higher revenues generated by the Jayhawk natural gas processing plant in Kansas and higher helium sales revenue in the Hugoton Basin, partially offset by lower electricity sales revenues generated by the Company’s California cogeneration facilities.

Expenses

Lease Operating Expenses

Transportation Expenses

Transportation expenses decreased by approximately $5 million or 10% to approximately $50 million for the three months ended September 30, 2016, from approximately $55 million for the three months ended September 30, 2015. The decrease was primarily due to reduced costs as a result of certain contracts terminated in the Chapter 11 proceedings and lower production volumes, partially offset by higher costs from nonoperated properties in the Rockies region. Transportation expenses per Mcfe remained consistent at $0.50 per Mcfe for both the three months ended September 30, 2016, and September 30, 2015.

Marketing Expenses

Marketing expenses represent third-party activities associated with company-owned gathering systems, plants and facilities. Marketing expenses increased by approximately $3 million or 30% to approximately $12 million for the three months ended September 30, 2016, from approximately $9 million for the three months ended September 30, 2015. The increase was primarily due to higher expenses associated with the Jayhawk natural gas processing plant in Kansas.

General and Administrative Expenses

Professional services expenses of approximately $26 million for the three months ended September 30, 2016, related to the Chapter 11 proceedings that were incurred since the Petition Date, have been recorded in “reorganization items, net” on the condensed consolidated statement of operations.

Exploration Costs

Exploration costs decreased by approximately $3 million to approximately $4,000 for the three months ended September 30, 2016, from approximately $3 million for the three months ended September 30, 2015. The decrease was primarily due to lower seismic data expenses and lower leasehold impairment expenses on unproved properties.

Table of Contents


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 $65 million or 31% to approximately $142 million for the three months ended September 30, 2016, from approximately $207 million for the three months ended September 30, 2015. The decrease was primarily due to lower rates as a result of the impairments recorded in the prior year and the first quarter of 2016, as well as lower total production volumes. Depreciation, depletion and amortization per Mcfe also decreased to $1.44 per Mcfe for the three months ended September 30, 2016, from $1.88 per Mcfe for the three months ended September 30, 2015.

Impairment of Long-Lived Assets

The Company recorded the following noncash impairment charges (before and after tax) associated with proved oil and natural gas properties:



	Three Months Ended September 30,
	2016		2015
	(in thousands)

Rockies region	$	23,142	$	1,182,337
Mid-Continent region	18,586		366,865
TexLa region	—		375,567
California region	—		330,311
	$	41,728	$	2,255,080

The impairment charges for both the three months ended September 30, 2016 and September 30, 2015, were due to a decline in commodity prices.

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

During the three months ended September 30, 2015, the Company recorded a net gain of approximately $174 million, including costs to sell of approximately $1 million, on the sale of its remaining position in Howard County in the Permian Basin (the “Howard County Assets Sale”).

Taxes, Other Than Income Taxes



	Three Months Ended September 30,
	2016			2015		Variance
	(in thousands)

Severance taxes	$	14,544		$	14,621	$	(77	)
Ad valorem taxes	(2,479		)	26,027		(28,506		)
California carbon allowances	3,261			5,548		(2,287		)
Other	57			42		15
	$	15,383		$	46,238	$	(30,855	)

Taxes, other than income taxes decreased by approximately $31 million or 67% for the three months ended September 30, 2016, compared to the three months ended September 30, 2015. Severance taxes, which are a function of revenues generated from production, decreased primarily due to lower oil and natural gas prices and lower production volumes, partially offset by reduced incentives on certain wells in the Rockies region for the three months ended September 30, 2016, compared to the same period in 2015. 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. California carbon allowances decreased primarily due to lower anticipated emissions compliance obligations as a result of reduced capital spending levels and a decrease in steam injection volumes.

Table of Contents


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

Other Income and (Expenses)



	Three Months Ended September 30,
	2016			2015			Variance
	(in thousands)

Interest expense, net of amounts capitalized	$	(40,105	)	$	(138,383	)	$	98,278
Gain on extinguishment of debt	—			197,741			(197,741		)
Other, net	(269		)	(1,701		)	1,432
	$	(40,374	)	$	57,657		$	(98,031	)

Other income and (expenses) decreased by approximately $98 million for the three months ended September 30, 2016, compared to the three months ended September 30, 2015. Interest expense decreased primarily due to the Company’s discontinuation of interest expense recognition on the senior notes as a result of the Chapter 11 proceedings, lower outstanding debt during the period principally as a result of the senior notes repurchased and exchanged during 2015, and lower amortization of discounts and financing fees. For the three months ended September 30, 2016, contractual interest, which was not recorded, on the senior notes was approximately $70 million. For the three months ended September 30, 2015, the Company recorded a gain on extinguishment of debt of approximately $198 million as a result of the repurchases of a portion of its senior notes. Other expenses decreased primarily due to lower write-offs of deferred financing fees related to the Credit Facilities and lower bank fees. See “Debt” under “Liquidity and Capital Resources” below for additional details.

The $1.0 billion in aggregate principal amount of Second Lien Notes issued in November 2015 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 three months ended September 30, 2016, unrecorded contractual interest on the Second Lien Notes was approximately $30 million.

Reorganization Items, Net

The Company has incurred and is expected to continue to incur significant costs associated with the reorganization. These costs, which are expensed as incurred, are expected to significantly affect the Company’s results of operations. 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 statement of operations:



	Three Months Ended September 30, 2016
	(in thousands)

Legal and other professional advisory fees	$	(25,604	)
Terminated contracts	(92,957		)
Other	2,285
Reorganization items, net	$	(116,276	)

Income Tax Expense (Benefit)

The Company is a limited liability company treated as a partnership for federal and state income tax purposes, with the exception of the state of Texas, in which income tax liabilities and/or benefits are passed through to its unitholders. Limited

Table of Contents


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

liability companies are subject to Texas margin tax. In addition, certain of the Company’s subsidiaries are Subchapter C-corporations subject to federal and state income taxes. The Company recognized an income tax benefit of approximately $4 million for the three months ended September 30, 2016, compared to income tax expense of approximately $2 million for the three months ended September 30, 2015. The income tax benefit is primarily due to lower income from the Company’s taxable subsidiaries during the three months ended September 30, 2016, compared to the same period in 2015.

Net Loss

Net loss decreased by approximately $1.4 billion or 87% to approximately $198 million for the three months ended September 30, 2016, from approximately $1.6 billion for the three months ended September 30, 2015. The decrease was primarily due to lower impairment charges, partially offset by lower gains on oil and natural gas derivatives and lower production revenues. See discussion above for explanations of variances.

Table of Contents


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

Results of Operations

Nine Months Ended September 30, 2016, Compared to Nine Months Ended September 30, 2015



	Nine Months Ended September 30,
	2016			2015			Variance
	(in thousands)
Revenues and other:
Natural gas sales	$	346,970		$	478,645		$	(131,675	)
Oil sales	507,159			787,158			(279,999		)
NGL sales	105,586			108,430			(2,844		)
Total oil, natural gas and NGL sales	959,715			1,374,233			(414,518		)
Gains (losses) on oil and natural gas derivatives	(72,533		)	782,622			(855,155		)
Marketing and other revenues	68,645			79,824			(11,179		)
	955,827			2,236,679			(1,280,852		)
Expenses:
Lease operating expenses	370,658			467,759			(97,101		)
Transportation expenses	156,590			164,250			(7,660		)
Marketing expenses	35,784			47,359			(11,575		)
General and administrative expenses ⁽¹⁾	196,377			237,731			(41,354		)
Exploration costs	2,745			4,032			(1,287		)
Depreciation, depletion and amortization	449,677			637,964			(188,287		)
Impairment of long-lived assets	1,195,632			2,787,697			(1,592,065		)
Taxes, other than income taxes	80,297			158,317			(78,020		)
(Gains) losses on sale of assets and other, net	5,959			(197,263		)	203,222
	2,493,719			4,307,846			(1,814,127		)
Other income and (expenses)	(215,195		)	(224,117		)	8,922
Reorganization items, net	418,608			—			418,608
Loss before income taxes	(1,334,479		)	(2,295,284		)	960,805
Income tax expense (benefit)	3,140			(7,680		)	10,820
Net loss	$	(1,337,619	)	$	(2,287,604	)	$	949,985


⁽¹⁾	General and administrative expenses for the nine months ended September 30, 2016, and September 30, 2015, include approximately $19 million and $41 million, respectively, of noncash unit-based compensation expenses.

Table of Contents


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



	Nine Months Ended September 30,
	2016		2015		Variance
Average daily production:
Natural gas (MMcf/d)	600		654		(8	)%
Oil (MBbls/d)	51.9		63.6		(18	)%
NGL (MBbls/d)	29.6		28.5		4	%
Total (MMcfe/d)	1,089		1,206		(10	)%

Weighted average prices: ⁽¹⁾
Natural gas (Mcf)	$	2.11	$	2.68	(21	)%
Oil (Bbl)	$	35.66	$	45.36	(21	)%
NGL (Bbl)	$	13.03	$	13.94	(7	)%

Average NYMEX prices:
Natural gas (MMBtu)	$	2.29	$	2.80	(18	)%
Oil (Bbl)	$	41.33	$	51.00	(19	)%

Costs per Mcfe of production:
Lease operating expenses	$	1.24	$	1.42	(13	)%
Transportation expenses	$	0.52	$	0.50	4	%
General and administrative expenses ⁽²⁾	$	0.66	$	0.72	(8	)%
Depreciation, depletion and amortization	$	1.51	$	1.94	(22	)%
Taxes, other than income taxes	$	0.27	$	0.48	(44	)%


⁽¹⁾	Does not include the effect of gains (losses) on derivatives.


⁽²⁾	General and administrative expenses for the nine months ended September 30, 2016, and September 30, 2015, include approximately $19 million and $41 million, respectively, of noncash unit-based compensation expenses.

Table of Contents


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 decreased by approximately $415 million or 30% to approximately $960 million for the nine months ended September 30, 2016, from approximately $1.4 billion for the nine months ended September 30, 2015, due to lower oil, natural gas and NGL prices and lower production volumes. Lower oil, natural gas and NGL prices resulted in a decrease in revenues of approximately $138 million, $94 million and $8 million, respectively.

Average daily production volumes decreased to approximately 1,089 MMcfe/d for the nine months ended September 30, 2016, from 1,206 MMcfe/d for the nine months ended September 30, 2015. Lower oil and natural gas production volumes resulted in a decrease in revenues of approximately $142 million and $38 million, respectively. Higher NGL production volumes resulted in an increase in revenues of approximately $5 million.

The following table sets forth average daily production by region:



	Nine Months Ended September 30,
	2016	2015	Variance
Average daily production (MMcfe/d):
Rockies	394	433	(39	)	(9	)%
Hugoton Basin	239	252	(13	)	(5	)%
California	158	187	(29	)	(15	)%
Mid-Continent	100	102	(2	)	(2	)%
TexLa	80	82	(2	)	(2	)%
Permian Basin	58	85	(27	)	(32	)%
Michigan/Illinois	31	31	—		(2	)%
South Texas	29	34	(5	)	(15	)%
	1,089	1,206	(117	)	(10	)%

The decreases in average daily production volumes primarily reflect lower production volumes as a result of reduced development capital spending throughout the Company’s various operating regions, as well as marginal well shut-ins, driven by continued low commodity prices. The decrease in average daily production volumes in California also reflects operational challenges in the Company’s Diatomite development program, where the Company is pursuing various remedies to address wells performance and has temporarily curtailed capital spending in this program. The decrease in average daily production volumes in the Permian Basin region also reflects lower production volumes as a result of the Howard County assets sale on August 31, 2015.

Gains (Losses) on Oil and Natural Gas Derivatives

Losses on oil and natural gas derivatives were approximately $73 million for the nine months ended September 30, 2016, compared to gains of approximately $783 million for the nine months ended September 30, 2015, representing a variance of approximately $856 million. Losses on oil and natural gas derivatives were primarily due to changes in fair value of the derivative contracts, and the comparison from period to period was impacted by the declining maturity schedule of the Company’s hedges. 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.

See above under “Executive Overview” for details about the Company’s commodity derivatives cancellations in 2016.

Table of Contents


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. Marketing and other revenues decreased by approximately ~~$40~~$11 million or ~~34%~~14% to approximately $69 million for the nine months ended September 30, 2016, from approximately $80 million for the nine months ended September 30, ~~2015, from approximately $120 million for the nine months ended September 30, 2014.~~2015. The decrease was primarily due to lower revenues generated by the Jayhawk natural gas processing plant in Kansas, principally driven by a change in contract terms, and lower electricity sales revenues generated by the Company’s California cogeneration facilities, ~~and the impact of properties sold during the fourth quarter of 2014,~~ partially offset by 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 decreased by approximately ~~$103~~$97 million or ~~18%~~21% to approximately $371 million for the nine months ended September 30, 2016, from approximately $468 million for the nine months ended September 30, ~~2015, from approximately $571 million for the nine months ended September 30, 2014.~~2015. The decrease was primarily due to cost savings initiatives and lower ~~costs~~workover activities, as ~~a result of the properties sold during the fourth quarter of 2014,~~well as a decrease in steam costs caused by lower prices for natural gas used in steam generation and ~~cost savings initiatives, partially offset by costs associated with properties acquired during the third quarter of 2014.~~a decrease in steam injection volumes. Lease operating expenses per Mcfe also decreased to $1.24 per Mcfe for the nine months ended September 30, 2016, from $1.42 per Mcfe for the nine months ended September 30, ~~2015, from $1.80 per Mcfe~~2015.

Transportation Expenses

Transportation expenses decreased by approximately $7 million or 5% to approximately $157 million for the nine months ended September 30, ~~2014.~~

~~Transportation Expenses~~

~~Transportation expenses increased by approximately $20 million or 14% to~~2016, from approximately $164 million for the nine months ended September 30, ~~2015,~~2015. The decrease was primarily due to reduced costs as a result of certain contracts terminated in the Chapter 11 proceedings and lower production volumes, partially offset by higher costs from ~~approximately $144 million~~nonoperated properties in the Rockies region. Transportation expenses per Mcfe increased to $0.52 per Mcfe for the nine months ended September 30, 2014. The increase was primarily due to costs associated with properties acquired during the third quarter of 2014 partially offset by lower costs as a result of the properties sold during the fourth quarter of 2014. Transportation expenses per Mcfe also increased to2016, from $0.50 per Mcfe for the nine months ended September 30, ~~2015, from $0.45 per Mcfe for the nine months ended September 30, 2014.~~2015.

Marketing Expenses

Marketing expenses represent third-party activities associated with company-owned gathering systems, plants and facilities. Marketing expenses decreased by approximately ~~$29~~$11 million or ~~38%~~24% to approximately $36 million for the nine months ended September 30, 2016, from approximately $47 million for the nine months ended September 30, ~~2015, from approximately $76 million for the nine months ended September 30, 2014.~~2015. The decrease was primarily due to lower expenses associated with the Jayhawk natural gas processing plant in Kansas, principally driven by a change in contract terms, and lower electricity generation expenses incurred by the Company’s California cogeneration facilities.

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. General and administrative expenses ~~increased~~decreased by approximately ~~$16~~$42 million or 7%17% to approximately $196 million for the nine months ended September 30, 2016, from approximately $238 million for the nine months ended September 30, ~~2015, from approximately $222 million~~2015. The decrease was primarily due to lower salaries and benefits related expenses, lower acquisition expenses, lower professional services expenses and lower various other administrative expenses. General and administrative expenses for the nine months ended September 30, ~~2014. The increase~~2015, was ~~primarily due to higher~~impacted by advisory fees related to ~~the~~ alliance agreements ~~and higher salaries and benefits related expenses, principally driven by severance costs, partially offset by lower acquisition expenses.~~entered into with certain private capital investors. General and administrative expenses per Mcfe also ~~increased~~decreased to $0.66 per Mcfe for the nine months ended September 30, 2016, from $0.72 per Mcfe for the nine months ended September 30, ~~2015, from $0.70 per Mcfe~~2015.

Professional services expenses of approximately $46 million for the nine months ended September 30, ~~2014.~~2016, related to the Chapter 11 proceedings that were incurred since the Petition Date, have been recorded in “reorganization items, net” on the condensed consolidated statement of operations.

4657

Table of Contents


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

Exploration Costs

Exploration costs decreased by approximately $6$1 million or ~~62%~~32% to approximately $3 million for the nine months ended September 30, 2016, from approximately $4 million for the nine months ended September 30, ~~2015, from approximately $10 million for the nine months ended September 30, 2014.~~2015. The decrease was primarily due to lower leasehold impairment expenses on unproved ~~properties partially offset by higher seismic data expenses.~~properties.

Depreciation, Depletion and Amortization

Depreciation, depletion and amortization decreased by approximately ~~$195~~$188 million or ~~23%~~30% to approximately $450 million for the nine months ended September 30, 2016, from approximately $638 million for the nine months ended September 30, ~~2015, from approximately $833 million for the nine months ended September 30, 2014.~~2015. The decrease was primarily due to ~~the divestitures of properties in 2014 with higher rates compared to the rates of properties acquired in 2014, as well as~~ lower rates as a result of the impairments recorded in the prior year and the first quarter of ~~2015, partially offset by higher~~2016, as well as lower total production volumes. Depreciation, depletion and amortization per Mcfe also decreased to $1.51 per Mcfe for the nine months ended September 30, 2016, from $1.94 per Mcfe for the nine months ended September 30, ~~2015, from $2.63 per Mcfe for the nine months ended September 30, 2014.~~2015.

Impairment of Long-Lived Assets

The Company recorded the following noncash impairment charges (before and after tax) associated with proved and unproved oil and natural gas properties:


	Nine Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2016		2015
	(in thousands)				(in thousands)

California region					$	984,288	$	537,511
Mid-Continent region					148,289		372,568
Rockies region	$	1,182,337	$	—	49,819		1,182,337
California region	537,511		—
Hugoton Basin					—		277,914
TexLa region	408,667		—		—		408,667
Mid-Continent region	372,568		—
Shallow Texas Panhandle Brown Dolomite formation	277,914		—
South Texas region	8,700		—		—		8,700
Permian Basin region	—		603,250
	$	2,787,697	$	603,250
Proved oil and natural gas properties					1,182,396		2,787,697
California region unproved oil and natural gas properties					13,236		—
Impairment of long-lived assets					$	1,195,632	$	2,787,697

~~Financing Activities~~

Cash used in financing activities for the nine months ended September 30, 2015, was approximately $501 million, compared to cash provided by financing activities of approximately $2.4 billion for the nine months ended September 30, 2014. The decrease in financing cash flow needs was primarily attributable to decreased capital expenditures and acquisition activity during the nine months ended September 30, 2015, as compared to the nine months ended September 30, 2014. The following provides a comparative summary of proceeds from borrowings and repayments of debt:

Nine Months Ended
September 30,
2015 2014
(in thousands)
Proceeds from borrowings:
LINN Credit Facility $ 1,405,000
$ 1,900,000
Senior notes —
1,100,024
Bridge loan and term loan —
2,300,000
$ 1,405,000
$ 5,300,024
Repayments of debt:
LINN Credit Facility $ (1,145,000 ) $ (950,000 )
Senior notes (556,909 ) (206,124 )
Bridge loan —
(1,000,000 )
$ (1,701,909 ) $ (2,156,124 )

~~In addition, in May 2015, LINN Energy borrowed $250 million under the LINN Credit Facility, which it contributed to Berry to post as restricted cash with Berry’s lenders (see Note 6).~~

Debt

The following summarizes the Company’s outstanding debt:

September 30,
2015
December 31, 2014
(in thousands, except percentages)

LINN credit facility $ 2,305,000
$ 1,795,000
Berry credit facility 1,173,175
1,173,175
Term loan 500,000
500,000
6.50% senior notes due May 2019 1,159,215
1,200,000
6.25% senior notes due November 2019 1,483,928
1,800,000
8.625% senior notes due April 2020 1,123,483
1,300,000
6.75% Berry senior notes due November 2020 261,100
299,970
7.75% senior notes due February 2021 963,774
1,000,000
6.50% senior notes due September 2021 502,010
650,000
6.375% Berry senior notes due September 2022 572,700
599,163
Net unamortized discounts and premiums (16,109 ) (21,499 )
Total debt, net $ 10,028,276
$ 10,295,809

~~6.50% senior notes due May 2019 – $41 million;~~

~~6.25% senior notes due November 2019 – $316 million;~~

~~8.625% senior notes due April 2020 – $177 million;~~

~~Table of Contents~~



	September 30, 2016			December 31, 2015
	(in thousands, except percentages)

LINN credit facility	$	1,654,745		$	2,215,000
Berry credit facility	891,259			873,175
Term loan	284,241			500,000
6.50% senior notes due May 2019	562,234			562,234
6.25% senior notes due November 2019	581,402			581,402
8.625% senior notes due April 2020	718,596			718,596
6.75% Berry senior notes due November 2020	261,100			261,100
12.00% senior secured second lien notes due December 2020 ⁽¹⁾	1,000,000			1,000,000
Interest payable on senior secured second lien notes due December 2020 ⁽¹⁾	—			608,333
7.75% senior notes due February 2021	779,474			779,474
6.50% senior notes due September 2021	381,423			381,423
6.375% Berry senior notes due September 2022	572,700			572,700
Net unamortized discounts and premiums ⁽²⁾	—			(8,694		)
Net unamortized deferred financing fees ⁽²⁾	(1,397		)	(37,374		)
Total debt, net	7,685,777			9,007,369
Less current portion, net ⁽³⁾	(2,828,848		)	(3,714,693		)
Less liabilities subject to compromise ⁽⁴⁾	(4,856,929		)	—
Long-term debt, net	$	—		$	5,292,676

~~Item 2.~~

⁽¹⁾

~~Management’s Discussion and Analysis~~The issuance of ~~Financial Condition and Results~~the Second Lien Notes was accounted for as a troubled debt restructuring, which requires that interest payments on the Second Lien Notes reduce the carrying value of ~~Operations - Continued~~the debt with no interest expense recognized. During the nine months ended September 30, 2016, $551 million was written off to reorganization items in connection with the filing of the Bankruptcy Petitions. The remaining amount of approximately $57 million was classified as liabilities subject to compromise at September 30, 2016.


⁽²⁾	Approximately $41 million in net discounts, premiums and deferred financing fees were written off to reorganization items in connection with the filing of the Bankruptcy Petitions.


⁽³⁾	Due to existing and anticipated covenant violations, the Company’s Credit Facilities and term loan were classified as current at September 30, 2016, and December 31, 2015. The current portion as of December 31, 2015, also includes approximately $128 million of interest payable on the Second Lien Notes due within one year.


⁽⁴⁾	The Company’s senior notes and Second Lien Notes were classified as liabilities subject to compromise at September 30, 2016.

~~6.75% Berry senior notes due November 2020 – $39 million;~~

~~7.75% senior notes due February 2021 – $36 million;~~

~~6.50% senior notes due September 2021 – $148 million; and~~

~~6.375% Berry senior notes due September 2022 – $26 million.~~

AtAs of September 30, ~~2015,~~2016, there was ~~approximately $1.2 billion of~~no remaining available borrowing capacity under the ~~LINN~~ Credit ~~Facility but less than $1 million available under the Berry Credit Facility.~~Facilities. For additional information related to the Company’s outstanding debt, see Note 6. The Company plans to file Berry’s stand-alone financial statements with the Securities and Exchange Commission at a later date.

~~Financial Covenants~~

The Credit Facilities, as amended in October 2015, contain requirements and financial covenants, among others, to maintain: 1) a ratio of EBITDA to Interest Expense (as each term is defined in the LINN Credit Facility) and Adjusted EBITDAX to Interest Expense (as each term is defined in the Berry Credit Facility) (“Interest Coverage Ratio”) for the preceding four quarters of greater than 2.5 to 1.0 currently, 2.0 to 1.0 from December 31, 2015 through December 31, 2016, 2.25 to 1.0 from March 31, 2017 through June 30, 2017 and returning to 2.5 to 1.0 thereafter, and 2) a ratio of adjusted current assets to adjusted current liabilities (as described in the LINN Credit Facility) and Current Assets to Current Liabilities (as each term is defined in the Berry Credit Facility) (“Current Ratio”) as of the last day of any fiscal quarter of greater than 1.0 to 1.0. The Interest Coverage Ratio is intended as a measure of the Company’s ability to make interest payments on its outstanding indebtedness and the Current Ratio is intended as a measure of the Company’s solvency. The Company is required to demonstrate compliance with each of these ratios on a quarterly basis. The following represents the calculations of the Interest Coverage Ratio and the Current Ratio as presented to the lenders under the Credit Facilities:

At or for the Quarter Ended
December 31, 2014 March 31, 2015
June 30,
2015
September 30,
2015 Twelve Months Ended September 30, 2015
LINN Credit Facility:
Interest Coverage Ratio 2.7
2.9
3.0
3.4
3.0
Current Ratio 2.6
3.0
2.9
2.8
2.8
Berry Credit Facility:
Interest Coverage Ratio 6.5
1.7
2.6
2.2
3.3
Current Ratio ⁽¹⁾
0.6
0.6
0.5
2.0
2.0
Current Ratio (consolidated) ⁽¹⁾
2.9
3.2
2.9
2.6
2.6


⁽¹⁾	~~The Berry Credit Facility allows Berry to demonstrate its compliance with the Current Ratio financial covenant on a consolidated basis with LINN Energy for up to three quarters of each calendar year.~~

The Company has included disclosure of the Interest Coverage Ratio for the twelve months ended September 30, 2015, and the Current Ratio as of September 30, 2015, to demonstrate its compliance for the quarter ended September 30, 2015, as well as the Interest Coverage Ratio for each of the preceding four quarters on an individual basis (rather than on a last twelve months basis) and the Current Ratio as of the end of each of the preceding four quarters to provide investors with trend information about the Company’s ongoing compliance with these financial covenants. If the Company fails to demonstrate compliance with either or both of the Interest Coverage Ratio or the Current Ratio as of the end of the quarter and such failure continues beyond applicable cure periods, an event of default would occur and the Company would be unable to make additional borrowings and outstanding indebtedness may be accelerated. The Company depends, in part, on its Credit Facilities for future capital needs. In addition, the Company has drawn on the LINN Credit Facility to fund or partially fund cash distribution payments. Absent such borrowings, the Company would have at times experienced a shortfall in cash available to pay the declared cash distribution amount. For additional information, see “Distribution Practices” below.

~~The Company is in compliance with all financial and other covenants of its Credit Facilities and senior notes.~~

~~Table of Contents~~


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

Counterparty Credit Risk

The Company accounts for its commodity derivatives at fair value. The Company’s counterparties are current participants or affiliates of participants in its Credit ~~Facilities or were participants or affiliates of participants in its~~Facilities. The Credit Facilities ~~at the time it originally entered into the derivatives. The LINN Credit Facility is~~are secured by ~~LINN Energy’s oil, natural gas and NGL reserves and~~ the ~~Berry Credit Facility is secured by Berry’s~~Company’s oil, natural gas and NGL reserves; therefore, the Company is not required to post any collateral. The Company does not receive collateral from its counterparties. While the Company is in bankruptcy, the Bankruptcy Court’s hedging order governs the provision of collateral securing any commodity derivatives. The Company minimizes 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

Table of Contents


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

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 subject to counterparty netting under agreements governing such derivatives and therefore the risk of loss due to counterparty nonperformance is somewhat mitigated.

~~At-the-Market Offering Program~~

The Company’s Board of Directors has authorized the sale of up to $500 million of units under an at-the-market offering program. Sales of units, if any, will be made under an equity distribution agreement by means of ordinary brokers’ transactions, through the facilities of the NASDAQ Global Select Market, any other national securities exchange or facility thereof, a trading facility of a national securities association or an alternate trading system, to or through a market maker or directly on or through an electronic communication network, a “dark pool” or any similar market venue, at market prices, in block transactions, or as otherwise agreed with a sales agent. The Company expects to use the net proceeds from any sale of units for general corporate purposes, which may include, among other things, capital expenditures, acquisitions and the repayment of debt.

During the nine months ended September 30, 2015, the Company, under its equity distribution agreement, sold 3,621,983 units representing limited liability company interests at an average unit price of $12.37 for net proceeds of approximately $44 million (net of approximately $448,000 in commissions). In connection with the issuance and sale of these units, the Company also incurred professional services expenses of approximately $459,000. The Company used the net proceeds for general corporate purposes, including the open market repurchases of a portion of its senior notes (see Note 6). At September 30, 2015, units totaling approximately $455 million in aggregate offering price remained available to be sold under the agreement.

~~Public Offering of Units~~

~~Table of Contents~~


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

Distributions

Date Paid
Distributions
Per Unit

Total
Distributions
(in millions)

September 2015 $ 0.1042
$ 37
August 2015 $ 0.1042
$ 37
July 2015 $ 0.1042
$ 37
June 2015 $ 0.1042
$ 37
May 2015 $ 0.1042
$ 35
April 2015 $ 0.1042
$ 35
March 2015 $ 0.1042
$ 35
February 2015 $ 0.1042
$ 35
January 2015 $ 0.1042
$ 35

In October 2015, the Company’s Board of Directors determined to suspend payment of the Company’s distribution. ~~For additional information, see “Distribution Practices” below.~~

Off-Balance Sheet Arrangements

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

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.

Commitments and Contractual Obligations

The Company has contractual obligations for long-term debt, operating leases and other long-term liabilities that were summarized in the table of contractual obligations in the ~~2014~~2015 Annual Report on Form 10-K. ~~With~~During the ~~exception~~nine months ended September 30, 2016, the Company made approximately $758 million in net repayments of a portion of the ~~repurchases~~borrowings outstanding under the Credit Facilities. The Company’s filing of ~~approximately $783 million~~the Bankruptcy Petitions constituted an event of ~~its outstanding senior notes, there have been no significant changes to~~default that accelerated the Company’s ~~contractual~~ obligations ~~since December 31, 2014.~~under the Credit Facilities, the Second Lien Notes and the senior notes. See Note 6 for additional information about the Company’s debt instruments.

~~Distribution Practices~~

The Company’s Board of Directors determines the appropriate level of distributions on a periodic basis in accordance with the provisions of the Company’s limited liability company agreement. Management considers the timing and size of planned capital expenditures and long-term views about expected results in determining the amount of its distributions. Capital spending and resulting production and net cash provided by operating activities do not typically occur evenly throughout the year due to a variety of factors which are difficult to predict, including rig availability, weather, well performance, the timing of completions and the commodity price environment. Consistent with practices common to publicly traded partnerships, the Company’s Board of Directors historically has not varied the distribution it declares from period to period based on uneven net cash provided by operating activities.

~~Table of Contents~~


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

The Company’s Board of Directors reviews historical financial results and forecasts for future periods, including oil and natural gas development activities and the impact of significant acquisitions or dispositions, as well as considers the level of the Company’s indebtedness and its liquidity position in making a determination to increase, decrease or maintain the current level of distribution. If shortfalls are sustained over time and forecasts demonstrate expectations for continued future shortfalls, or the Company’s Board of Directors determines that it is necessary to reserve cash for the future conduct of business, it may determine to reduce, suspend or discontinue paying distributions. For example, in October 2015, following the recommendation from management, the Company’s Board of Directors determined to suspend payment of the Company’s distribution and reserve any excess cash that would otherwise be available for distribution. The Board of Directors will continue to evaluate the Company’s ability to reinstate the distribution using the considerations discussed above.

For 2015, the Company’s Board of Directors approved an oil and natural gas capital budget of approximately $470 million. At this level of capital investment, the Company forecasts a modest decline in production during 2015 while it focuses only on projects that generate an acceptable rate of return in the current low commodity price environment, and plans to balance cash flow and spending. As a result, for 2015, the Company intends to fund interest expense, its total oil and natural gas development costs and distributions to unitholders paid through September 2015 from net cash provided by operating activities, and will present “excess (shortfall) of net cash provided by operating activities after distributions to unitholders and discretionary adjustments considered by the Board of Directors” after deducting total oil and natural gas development costs. Previously, the Company intended to fund interest expense, a portion of its oil and natural gas development costs and distributions to unitholders from net cash provided by operating activities and presented “excess (shortfall) of net cash provided by operating activities after distributions to unitholders and discretionary adjustments considered by the Board of Directors” after deducting only a portion of oil and natural gas development costs.

The Company funds acquisitions and premiums paid for derivatives, if any, primarily with proceeds from debt or equity offerings, borrowings under the LINN Credit Facility or other external sources of funding. Although it is the Company’s practice to acquire or modify derivative instruments with external sources of funding, any cash settlements on derivatives are reported as net cash provided by operating activities and may be used to fund distributions.

~~Table of Contents~~


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

See below for details regarding the discretionary adjustments considered by the Company’s Board of Directors in assessing the appropriate distribution amount for each period, as well as the extent to which sources of funding have been sufficient for the periods presented:

Three Months Ended
September 30,

Nine Months Ended
September 30,
2015 2014 2015 2014
(in thousands)

Net cash provided by operating activities $ 361,287
$ 520,175
$ 1,034,769
$ 1,435,810
Distributions to unitholders (111,247 ) (240,652 ) (323,878 ) (721,235 )
Excess of net cash provided by operating activities after distributions to unitholders 250,040
279,523
710,891
714,575
Discretionary adjustments considered by the Board of Directors:
Discretionary reductions for a portion of oil and natural gas development costs ⁽¹⁾
NM*
(213,252 ) NM*
(606,120 )
Development of oil and natural gas properties ⁽²⁾
(91,439 ) NM*
(373,842 ) NM*
Cash recoveries of bankruptcy claim ⁽³⁾
—
—
(2,877 ) (2,913 )
Cash received (paid) for acquisitions or divestitures – revenues less operating expenses ⁽⁴⁾
—
79,555
(2,712 ) 79,555
Provision for legal matters ⁽⁵⁾
—
—
(1,000 ) 1,598
Changes in operating assets and liabilities and other, net ⁽⁶⁾
(47,265 ) (57,443 ) (184,937 ) (69,249 )
Excess of net cash provided by operating activities after distributions to unitholders and discretionary adjustments considered by the Board of Directors, including a portion of oil and natural gas development costs ⁽⁷⁾
NM*
$ 88,383
NM*
$ 117,446
Excess of net cash provided by operating activities after distributions to unitholders and discretionary adjustments considered by the Board of Directors, including total development of oil and natural gas properties ⁽⁷⁾
$ 111,336
NM*
$ 145,523
NM*


^*	~~Not meaningful due to the 2015 change in presentation.~~

⁽¹⁾

Represent discretionary reductions for a portion of oil and natural gas development costs, an estimated component of total development costs. The Board of Directors establishes the discretionary reductions with the objective of replacing proved developed producing reserves, current production and cash flow, taking into consideration the Company’s overall commodity mix. Management evaluates all of these objectives as part of the decision-making process to determine the discretionary reductions for a portion of oil and natural gas development costs for the year, although every objective may not be met in each year. Furthermore, there may be certain years in which commodity prices and other economic conditions do not merit capital spending at a level sufficient to accomplish any of these objectives. The 2014 amounts were established by the Board of Directors at the end of the previous year, allocated across four quarters, and were intended to fully offset declines in production and proved developed producing reserves during the year as compared to the prior year.

The portion of oil and natural gas development costs includes estimated drilling and development costs associated with projects to convert a portion of non-producing reserves to producing status. However, the amounts do not include the historical cost of acquired properties as those amounts have already been spent in prior periods, were financed primarily with external sources of funding and do not affect the Company’s ability to pay distributions in the current period. The Company’s existing reserves, inventory of drilling locations and production levels will decline over time as a result of development and production activities. Consequently, if the Company were to limit its total capital expenditures to this portion of oil and natural gas development costs and not acquire new reserves, total reserves would decrease over time, resulting in an inability to maintain production at current levels, which could adversely affect the Company’s ability to pay a distribution, if and when resumed. However, the Company’s current total reserves do not include reserve additions that may result from converting existing probable and possible resources to additional proved reserves, potential additional discoveries or technological advancements on the Company’s existing acreage position.

~~Table of Contents~~


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

⁽²⁾

Represents total capital expenditures for the development of oil and natural gas properties as presented on an accrual basis. For 2015, the Company intends to fund its total oil and natural gas capital program, in addition to interest expense and distributions to unitholders, from net cash provided by operating activities; however, in October 2015, the Company’s Board of Directors approved the suspension of the Company’s distribution. Previously, the Company intended to fund only a portion of its oil and natural gas capital program, in addition to interest expense and distributions to unitholders, from net cash provided by operating activities.


⁽³⁾	~~Represent the recoveries of a bankruptcy claim against Lehman Brothers which was not a transaction occurring in the ordinary course of the Company’s business.~~

⁽⁴⁾

Represents adjustments to the purchase price of acquisitions and divestitures, based on the Company’s contractual right to revenues less operating expenses for periods from the effective date of a transaction to the closing date of a transaction. When the Company is the buyer, it is legally entitled to revenues less operating expenses generated during this period, and the Company’s Board of Directors has historically made a discretionary adjustment to include this cash in the amount available for distribution. Conversely, when the Company is the seller, the Company’s Board of Directors has historically made a discretionary adjustment to reduce this cash from the amount available for distribution during the period. Beginning with the quarter ended June 30, 2015, the Board decided to no longer make this discretionary adjustment.


⁽⁵⁾	~~Represents reserves and settlements related to legal matters.~~

⁽⁶⁾

Represents primarily working capital adjustments. These adjustments may or may not impact cash provided by (used in) operating activities during the respective period, but are included as discretionary adjustments considered by the Company’s Board of Directors as the Board historically has not varied the distribution it declares period to period based on uneven cash flows. The Company’s Board of Directors, when determining the appropriate level of cash distributions, excluded the impact of the timing of cash receipts and payments; as such, this adjustment is necessary to show the historical amounts considered by the Company’s Board of Directors in assessing the appropriate distribution amount for each period.

⁽⁷⁾

Represents the excess (shortfall) of net operating cash flow after distributions to unitholders and discretionary adjustments. Any excess was retained by the Company for future operations, future capital expenditures, future debt service or other future obligations. Any shortfall was funded with cash on hand and/or borrowings under the LINN Credit Facility. In a period where no distribution is paid, the Company will retain all excess of net operating cash flow for future operations, future capital expenditures, future debt service or other future obligations.

Any cash generated by Berry is currently being used by Berry to fund its activities. To the extent that Berry generates cash in excess of its needs and determines to distribute such amounts to LINN Energy, the indentures governing Berry’s senior notes limit the amount it may distribute to LINN Energy to the amount available under a “restricted payments basket,” and Berry may not distribute any such amounts unless it is permitted by the indentures to incur additional debt pursuant to the consolidated coverage ratio test set forth in the Berry indentures. Berry’s restricted payments basket was approximately $563 million at September 30, 2015, and may be increased in accordance with the terms of the Berry indentures by, among other things, 50% of Berry’s future net income, reductions in its indebtedness and restricted investments, and future capital contributions.

~~A summary of the significant sources and uses of funding for the respective periods is presented below:~~

~~Table of Contents~~


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

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 of Notes to Condensed Consolidated Financial Statements.~~1.

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:

business strategy;

acquisition strategy;

financial strategy;

Table of Contents


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

risks associated with the Chapter 11 process, including the Company’s inability to develop, confirm and consummate a plan under Chapter 11 or an alternative restructuring transaction;

inability to maintain relationships with suppliers, customers, employees and other third parties as a result of the Chapter 11 filing;

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 and its ability to continue as a going concern;

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

effects of legal proceedings;

ability to resume payment of distributions in the future or maintain or grow them after such resumption;

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; and

plans, objectives, expectations and ~~intentions; and~~

integration of acquired businesses and operations and commencement of activities in the Company’s strategic alliances with GSO and Quantum, which may take longer than anticipated, may be more costly than anticipated as a result of unexpected factors or events and may have an unanticipated adverse effect on the Company’s business.intentions.

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 this Quarterly

~~Table of Contents~~


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

Report on Form 10-Q and in the Annual Report on Form 10-K for the year ended December 31, ~~2014,~~2015, 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.

The forward-looking statements related to the Plan involve known and unknown risks, uncertainties, assumptions and other factors that may cause the Company’s actual results, performance or achievements to be materially different from any results, performance or achievements expressed or implied by other forward-looking statements contained in this Quarterly Report on Form 10-Q, including but not limited to potential adverse effects related to the following: delisting of the Company’s units on NASDAQ; reorganization and related effects on the Company’s outstanding debt and outstanding units; potential effects of the industry downturn on the Company’s business, financial condition and results of operations; potential limitations on the Company’s ability to maintain contracts and other critical business relationships; requirements for adequate liquidity to fund the Company’s operations in the future, including obtaining sufficient financing on acceptable terms; and other matters related to the reorganization and the Company’s indebtedness, including any defaults related thereto.


Item 3.	Quantitative and Qualitative Disclosures About Market Risk

The Company’s primary ~~objective of the following information is~~market risks are attributable to ~~provide forward-looking quantitative and qualitative information about potential exposure to market risks. The term “market risk” refers to the risk of loss arising from adverse changes~~fluctuations in commodity prices and interest rates. The disclosures are not meant to be precise indicators of expected future losses, but rather indicators of reasonably possible losses. This forward-looking information provides indicators of how the Company views and manages its ongoing market risk exposures. All ofThese risks can affect the Company’s ~~market risk sensitive instruments were entered into~~business, financial condition, operating results and cash flows. See below for ~~purposes other than trading.~~quantitative and qualitative information about these risks.

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 ~~2014~~2015 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.”

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 ~~an important part~~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 ~~business strategy,~~assets.

Historically, the Company ~~seeks to hedge~~has hedged a ~~significant~~ portion of its forecasted production to reduce exposure to fluctuations in ~~the prices of~~ oil and natural gas prices and provide long-term cash flow predictability to manage its business, service debt, and if and when resumed, pay distributions. 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 also hedges its exposure to natural gas differentials in certain operating areas but does not currently hedge exposure to oil differentials. By removing a portion of the price volatility associated with future production, the Company expects to mitigate, but not eliminate, the potential effects of variability in net cash provided by operating activities due to fluctuations in commodity prices.

~~The~~ appropriate level of production to be hedged is an ongoing consideration ~~and is~~ based on a variety of factors, including among other things, current and future expected commodity market prices ~~cost and availability of put option contracts, the level of acquisition activity~~ and the Company’s overall risk profile, including leverage and size and scale considerations. 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.

The Company maintains a substantial portion of its hedges in the form of swap contracts. From time to time, the Company has chosen to purchase put option contracts primarily in connection with acquisition activity to hedge volumes in excess of those already hedged with swap contracts. In addition, as part of the 2013 acquisition of Berry Petroleum Company, now Berry Petroleum Company, LLC (“Berry”), the Company assumed certain derivative contracts that Berry had entered into prior to the acquisition date, including swap contracts, collars and three-way collars. The Company does not enter into derivative contracts for trading purposes. ~~There have been no significant changes~~

In September 2016, the Company entered into commodity derivative contracts consisting of natural gas swaps for October 2016 through December 2017 and oil swaps for January 2017 through December 2017.

In April 2016 and May 2016, in connection with the Company’s restructuring efforts, LINN Energy canceled (prior to the ~~Company’s objectives, general strategies or instruments~~contract settlement dates) all of its then-outstanding derivative contracts for net proceeds of approximately $1.2 billion. The net proceeds were used to ~~manage~~make permanent repayments of a portion of the ~~Company’s commodity price risk exposures from~~borrowings outstanding under the ~~year ended December 31, 2014.~~

~~In certain historical periods, the Company paid an incremental premium to increase the fixed price floors on existing put options because the Company typically hedges multiple years~~LINN Credit Facility. Also, in ~~advance~~May 2016 and ~~in some cases commodity prices had increased significantly beyond the initial hedge prices. As~~July 2016, as a result ~~the Company determined that the existing put option strike prices did not provide reasonable downside protection in the context~~ of the ~~current market.~~Chapter 11 proceedings, Berry’s counterparties canceled (prior to the contract settlement dates) all of Berry’s then-outstanding derivative contracts for net proceeds of approximately $2 million. The net proceeds were used to make permanent repayments of a portion of the borrowings outstanding under the Berry Credit Facility.

At September 30, 2016, the fair value of fixed price swaps was a net liability of approximately $992,000. A 10% increase in the index oil and natural gas prices above the September 30, 2016, prices would result in a net liability of approximately $37 million, which represents a decrease in the fair value of approximately $36 million; conversely, a 10% decrease in the index oil and natural gas prices below the September 30, 2016, prices would result in a net asset of approximately $35 million, which represents an increase in the fair value of approximately $36 million.

At December 31, 2015, the fair value of fixed price swaps and put option contracts ~~and three-way collars~~ was a net asset of approximately $1.7 billion. A 10% increase in the index oil and natural gas prices above the ~~September 30,~~December 31, 2015, prices would result in a net asset of approximately $1.5 billion, which represents a decrease in the fair value of approximately ~~$250~~$190 million; conversely, a 10% decrease in the index oil and natural gas prices below the December 31, 2015, prices would result in a net asset of approximately $1.9 billion, which represents an increase in the fair value of approximately $190 million.

The Company determines 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 publicly available prices and forward price curves generated from a compilation of data gathered from third parties. Company management validates 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 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.

5966

Table of Contents

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

conversely, a 10% decrease in the index oil and natural gas prices below the September 30, 2015, prices would result in a net asset of approximately $2.0 billion, which represents an increase in the fair value of approximately $249 million.

At December 31, 2014, the fair value of fixed price swaps, put option contracts and three-way collars was a net asset of approximately $1.8 billion. A 10% increase in the index oil and natural gas prices above the December 31, 2014, prices would result in a net asset of approximately $1.4 billion, which represents a decrease in the fair value of approximately $423 million; conversely, a 10% decrease in the index oil and natural gas prices below the December 31, 2014, prices would result in a net asset of approximately $2.2 billion, which represents an increase in the fair value of approximately $421 million.

The Company determines 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 publicly available prices and forward price curves generated from a compilation of data gathered from third parties. Company management validates 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 and a variety of additional factors that are beyond its control. Actual gains or losses recognized related to the Company’s derivative contracts will likely differ from those estimated at September 30, 2015, and December 31, 2014, and will depend exclusively on the price of the commodities on the specified settlement dates provided by the derivative contracts.

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 and ability to pay distributions could be impacted.

Interest Rate Risk

At September 30, ~~2015,~~2016, the Company had ~~long-term~~ debt outstanding under its credit facilities and term loan of approximately ~~$4.0~~$2.8 billion which incurred interest at floating rates (see Note 6). A 1% increase in the ~~LIBOR~~respective market rates would result in an estimated ~~$40~~$28 million increase in annual interest expense.

At December 31, ~~2014,~~2015, the Company had ~~long-term~~ debt outstanding under its credit facilities and term loan of approximately ~~$3.5~~$3.6 billion which incurred interest at floating rates. A 1% increase in the ~~LIBOR~~respective market rates would result in an estimated ~~$35~~$36 million increase in annual interest expense.

~~Counterparty Credit Risk~~

The Company accounts for its commodity derivatives at fair value on a recurring basis (see Note 8). The fair value of these derivative financial instruments includes the impact of assumed credit risk adjustments, which are based on the Company’s and counterparties’ published credit ratings, public bond yield spreads and credit default swap spreads, as applicable.

At September 30, 2015, the average public bond yield spread utilized to estimate the impact of the Company’s credit risk on derivative liabilities was approximately 2.11%. A 1% increase in the average public bond yield spread would result in an estimated $18,000 increase in net income for the nine months ended September 30, 2015. At September 30, 2015, the credit default swap spreads utilized to estimate the impact of counterparties’ credit risk on derivative assets ranged between 0% and 3.03%. A 1% increase in each of the counterparties’ credit default swap spreads would result in an estimated $17 million decrease in net income for the nine months ended September 30, 2015.

At December 31, 2014, the average public bond yield spread utilized to estimate the impact of the Company’s credit risk on derivative liabilities was approximately 1.85%. A 1% increase in the average public bond yield spread would result in an estimated $18,000 increase in net income for the year ended December 31, 2014. At December 31, 2014, the credit default swap spreads utilized to estimate the impact of counterparties’ credit risk on derivative assets ranged between 0% and 2.15%. A

~~Table of Contents~~

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

~~1% increase in each of the counterparties’ credit default swap spreads would result in an estimated $20 million decrease in net income for the year ended December 31, 2014.~~

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, 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 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 September 30, ~~2015.~~2016.

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 third quarter of ~~2015~~2016 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

For certain statewide class action royalty payment disputes, ~~where a reserve has not yet been established,~~ the Company ~~has denied~~filed notices advising that it ~~has any liability on the claims~~had filed for bankruptcy protection and ~~has raised arguments and defenses that, if accepted by the courts, will result in no loss to the Company.~~seeking a stay, which was granted. In addition, the Company is involved in various other disputes arising in the ordinary course of business. 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.

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. The Company intends to seek authority to pay all general claims in the ordinary course of business notwithstanding the commencement of the Chapter 11 proceedings in a manner consistent with the LINN RSA and Bank RSA. The Plan in the Chapter 11 proceedings, if confirmed, will provide for the treatment of claims against the Company’s bankruptcy estates, including prepetition liabilities that have not otherwise been satisfied or addressed during the Chapter 11 proceedings. See above under Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Chapter 11 Proceedings” for information about the Company’s entry into the LINN RSA and Bank RSA.


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 units are described in Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2014, and in our Quarterly Report on Form 10-Q for the quarter ended June 30,~~ 2015. Except as set forth below, as of the date of this report, these risk factors have not changed materially. 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 Board~~Any plan of ~~Directors has the ability to reserve any or all of our cash on hand at the end of a quarter for purposes other than distribution to unitholders, including reduction of indebtedness.~~

~~Although~~reorganization that we may ~~have generated sufficient net cash provided~~implement will be based in large part upon assumptions and analyses developed by ~~operating activities during any particular quarter,~~us. If these assumptions and analyses prove to be incorrect, our ~~Board~~plan may be unsuccessful in its execution.

On October 21, 2016, we filed a proposed Plan with the Bankruptcy Court. Any plan of ~~Directors has~~reorganization that we may implement could affect both our capital structure and the ability under our limited liability company agreement to establish a cash reserve, which could encompass all of the cash otherwise available for distribution, to provide for the proper conduct of our business in both the shortownership, structure and long term. To provide for the proper conduct of our business, the Board of Directors can determine to reserve cash to reduce indebtedness, among other things. For example, in October 2015, our Board of Directors approved a suspension of our distribution. Our decision to reserve all of our cash on hand for such allowed purposes and not distribute it may significantly impact our unitholders, as well as our business and operations. The market value of our units may remain depressed or further decrease unless and until we resume a distribution. In addition, further refinancing or restructuring of our debt may require us to accept covenants that further restrict our ability to reinstate distributions. External perceptions of the healthoperation of our business and will reflect assumptions and analyses based on our ~~liquidity may also~~management’s experience and perception of historical trends, current conditions and expected future developments, as well as other factors that we consider appropriate under the circumstances. Whether actual future results and developments will be ~~impacted, which could further limit~~consistent with management’s expectations and assumptions depends on a number of factors, including but not limited to (i) our ability to ~~access~~change substantially our capital ~~markets, cause~~structure; (ii) our ~~vendors~~ability to ~~tighten~~obtain adequate liquidity and financing sources; (iii) our ~~credit terms and cause a strain~~ability to maintain customers’ confidence in our ~~relationship~~viability as a continuing entity and to attract and retain sufficient business from them; (iv) our ability to retain key employees; and (v) the overall strength and stability of general economic conditions of the financial and oil and natural gas industries, both in the U.S. and in global markets. The failure of any of these factors could materially adversely affect the successful reorganization of our business.

In addition, any plan of reorganization will rely upon financial projections, including with ~~landowners~~respect to revenues, EBITDA, capital expenditures, debt service and ~~other business partners.~~

Ifcash flow. Financial forecasts are necessarily speculative, and it is likely that one or more of the assumptions and estimates that are the basis of these financial forecasts will not be accurate. In our case, the forecasts will be even more speculative than normal, because they may involve fundamental changes in the nature of our capital structure. Accordingly, we ~~are unable to generate enough cash flow~~expect that our actual financial condition and results of operations will differ, perhaps materially, from ~~operations to service our indebtedness~~what we have anticipated. Consequently, there can be no assurance that the results or ~~are unable to use future borrowings to refinance our indebtedness or fund other capital needs,~~developments contemplated by any plan of reorganization we may implement will occur or, even if they do occur, that they will have the anticipated effects on us and our subsidiaries or our business or operations. The failure of any such results or developments to ~~undertake alternative financing plans, which may have onerous terms or may be unavailable.~~materialize as anticipated could materially adversely affect the successful execution of any plan of reorganization.

We cannot assure you that our business will generate sufficient cash flow from operations to service our outstanding indebtedness, or that future borrowings will be available to us in an amount sufficient to enable us to pay our indebtedness or to fund our other capital needs. If we dohave substantial liquidity needs and may not ~~generate sufficient cash flow from operations to satisfy our debt obligations, we may have to undertake alternative financing plans, such as:~~

~~refinancing or restructuring all or a portion of our debt;~~

~~obtaining alternative financing;~~

~~selling assets;~~

~~reducing or delaying capital investments;~~

~~seeking to raise additional capital; or~~

~~revising or delaying our strategic plans.~~

~~However, we cannot assure you that we would~~ be able to ~~implement alternative financing plans, if necessary, on commercially reasonable terms or at all, or that undertaking alternative financing plans, if necessary, would allow us~~obtain sufficient liquidity to ~~meet~~confirm a plan of reorganization and exit bankruptcy.

Although we have lowered our ~~debt obligations~~capital budget and ~~capital requirements or that these actions would be permitted under~~reduced the ~~terms~~scale of our ~~various debt instruments.~~

~~Our inability to generate sufficient cash flow to satisfy our debt obligations or to obtain alternative financing could materially and adversely affect~~operations significantly, our business ~~financial condition, results of~~remains capital intensive. In addition to the cash requirements necessary to fund ongoing operations, ~~cash flows~~we have incurred significant professional fees and ~~prospects. Any failure~~other costs in connection with our Chapter 11 proceedings and expect that we will continue to ~~make scheduled payments of interest and principal on our outstanding indebtedness would likely result in a reduction of our credit~~incur significant

6268

Table of Contents

Item 1A. Risk Factors - Continued

~~rating, which could harm~~professional fees and costs throughout the Chapter 11 proceedings. There are no assurances that our ~~ability~~current liquidity is sufficient to ~~incur~~allow us to satisfy our obligations related to the Chapter 11 proceedings, allow us to proceed with the confirmation of a Chapter 11 plan of reorganization and allow us to emerge from bankruptcy. We can provide no assurance that we will be able to secure additional ~~indebtedness on acceptable terms.Further, if for any reason we are unable~~interim financing or exit financing sufficient to meet our ~~debt service~~liquidity needs.

In connection with a plan of reorganization, we may, for federal and ~~repayment obligations, we would be in default under the terms~~state income tax purposes, trigger an actual or deemed sale of ~~the agreements governing our debt, which would allow our creditors at that time to declare~~ all ~~outstanding indebtedness to be due and payable (which would in turn trigger cross-acceleration~~ or cross-default rights between the relevant agreements), the lenders under our Credit Facilities, as defined in Note 6, could terminate their commitments to loan money, and the lenders could foreclose against our assets securing their borrowings and we could be forced into bankruptcy or liquidation. In addition, the lenders under our Credit Facilities could compel us to apply alla portion of our available cash to repay our borrowings or they could prevent us from making payments on our senior notes. If the amounts outstanding under our Credit Facilities or any of our other indebtedness were to be accelerated, we cannot assure you that our assets would be sufficient to repay in full the money owed to the lenders or to our other debt holders.

We are currently dependent on our Credit Facilities for liquidity. Any further reduction of the borrowing bases under our Credit Facilities could reduce or eliminate our ability to borrow under the Credit Facilities andproperties which may ~~require us to repay indebtedness under our Credit Facilities earlier than anticipated, which would adversely impact our liquidity.~~

Subject to amounts reserved in the discretion of our Board of Directors to provide for the proper conduct of our business, our limited liability company agreement provides that we make distributions to our unitholders of available cash. Therefore, we have not historically accumulated cash to preserve liquidity and have been dependent on the capital markets and our Credit Facilities for liquidity. Due to low commodity prices and other factors, the capital markets have been constrained. Although our Board of Directors approved a suspension of our distribution, if these constraints continue, we will continue to be primarily reliant on our Credit Facilities, and to the extent available, the excess of net cash provided by operating activities, for liquidity.

At September 30, 2015, there was approximately $1.2 billion of available borrowing capacity under the LINN Credit Facility but less than $1 million available under the Berry Credit Facility, each as defined in Note 6. Each of our Credit Facilities is subject to scheduled redeterminations, semi-annually in April and October, of its borrowing base, based primarily on reserve reports using lender commodity price expectations at such time. As a result of lower commodity prices, in May 2015, the borrowing base under the LINN Credit Facility decreased from $4.5 billion to $4.05 billion and the borrowing base under the Berry Credit Facility decreased from $1.4 billion to $1.2 billion. In October 2015, the borrowing base under the LINN Credit Facility was reaffirmed at $4.05 billion, subject to certain conditions related to the Berry Consolidation, as defined in Note 6, and the borrowing base under the Berry Credit Facility decreased from $1.2 billion to $900 million. Continued low commodity prices, reductions in our capital budget and the resulting reserve write-downs, along with the maturity schedule of our hedges, may impact future redeterminations.

To the extent our borrowing bases are reduced to or below the amount of borrowings outstanding, we would be unable to continue to borrow and any excess borrowings may become due within a short time span. We may not have the financial resources to make mandatory prepayments~~and our liquidity would be significantly impacted.~~

Unitholders are required to pay taxes on their share of our taxable income, including their share of ordinary income and capital gain upon dispositions of properties by us or cancellation of debt, even if they do not receive any cash distributions from us. A unitholder’s share of our taxable income, gain, loss and deduction, or specific items thereof, may be substantially different than the unitholder’s interest in our economic profits.

Our unitholders are required to pay federal income taxes and, in some cases, state and local income taxes on their share of our taxable income, whether or not they receive any cash distributions from us. Our unitholders may not receive cash distributions from us equal to their share of our taxable income or even equal to the actual tax liability that results from their share of our taxable income.

For example, our previously announced repurchases of approximately $783 million of our outstanding senior notes at prices lower than face amount have resulted, and any similar transactions in the future will result in ~~the cancellation~~unfavorable tax consequences.

In connection with a plan of ~~debt income that will be allocated to our unitholders. Some or all of our unitholders~~reorganization, we may, ~~be allocated substantial amounts of such taxable income,~~for federal and state income tax liabilities arising therefrom may exceed cash distributions. The ultimate effect to each unitholder would depend on the unitholder's individual tax position with respect to the units; however, taxable income allocations from us, including cancelationpurposes, trigger an actual or deemed sale of ~~debt income, increase a unitholder’s tax basis in their units.~~

~~Table of Contents~~

~~Item 1A. Risk Factors - Continued~~

~~In addition, we may sell~~all or a portion of our properties and use the proceeds to ~~pay down debt or acquire other properties rather than distributing the proceeds to our unitholders, and some or all of our~~satisfy debt. Our unitholders may be allocated substantial taxable income or loss with respect to ~~that sale. A unitholder’s share of~~such a sale, and our taxable income upon a disposition of property by us may be ordinary income or capital gain or some combination thereof. Even where we dispose of properties that are capital assets, what otherwise would be capital gains may be recharacterized as ordinary income in order to “recapture” ordinary deductions that were previously allocated to that unitholder related to the same property.

~~A unitholder’s~~unitholders’ share of our taxable income and gain (or specific items thereof) from such sale may be substantially greater than, or our tax losses and deductions (or specific items thereof) from such sale may be substantially less than, ~~the unitholder’s~~our unitholders’ interest in our economic ~~profits. This may occur, for example, in~~profits because of allocations under section 704(c) of the ~~case of a unitholder who purchases units at a time when~~Internal Revenue Code.

We are subject to the ~~value~~risks and uncertainties associated with Chapter 11 proceedings.

For the duration of our ~~units or of one or more of~~Chapter 11 proceedings, our properties is relatively low or a unitholder who acquires units directly from us in exchange for property whose fair market value exceeds its tax basis at the time of the exchange. Cash distributions from us decrease a unitholder’s tax basis in its units, and the amount, if any, of excess distributions over a unitholder’s tax basis in its units will, in effect, become taxable income to the unitholder, above and beyond the unitholder’s share of our taxable income and gain (or specific items thereof).

~~Restrictive covenants in the indentures governing our senior notes and in the LINN Credit Facility could limit our growth~~operations and our ability to ~~finance~~develop and execute our ~~operations, fund~~business plan, as well as our ~~capital needs, respond~~continuation as a going concern, are subject to ~~changing conditions~~the risks and ~~engage~~uncertainties associated with bankruptcy. These risks include the following:

our ability to develop, confirm and consummate a Plan or alternative restructuring transaction;

our ability to obtain court approval with respect to motions filed in Chapter 11 proceedings from time to time;

our ability to maintain our relationships with our suppliers, service providers, customers, employees and other third parties;

our ability to maintain contracts that are critical to our operations;

our ability to execute our business ~~activities~~plan;

the ability of third parties to seek and obtain court approval to terminate contracts and other agreements with us;

the ability of third parties to seek and obtain court approval to terminate or shorten the exclusivity period for us to propose and confirm a Plan, to appoint a Chapter 11 trustee, or to convert the Chapter 11 proceedings to a Chapter 7 proceeding; and

the actions and decisions of our creditors and other third parties who have interests in our Chapter 11 proceedings that may be inconsistent with our plans.

These risks and uncertainties could affect our business and operations in various ways. For example, negative events associated with our ~~best interests.~~

~~The indentures governing~~Chapter 11 proceedings could adversely affect our ~~senior notes impose significant operating~~relationships with our suppliers, service providers, customers, employees, and other third parties, which in turn could adversely affect our operations and financial ~~restrictions on us. These restrictions limit our ability and that~~condition. Also, we need the prior approval of ~~our restricted subsidiaries to, among other things:~~

~~make distributions to our unitholders or make other restricted payments;~~

~~incur or guarantee additional indebtedness;~~

~~create or incur liens;~~

~~engage in mergers or consolidations or sell or otherwise dispose of all or substantially all of our assets;~~

~~make certain dispositions and transfers of assets;~~

~~engage in~~the Bankruptcy Court for transactions ~~with affiliates;~~

~~make investments; and~~

~~refinance certain indebtedness.~~

~~In addition,~~outside the ~~LINN Credit Facility contains a number of significant covenants that, among other things, restrict our ability to:~~

~~dispose of assets;~~

~~incur or guarantee additional indebtedness;~~

~~make distributions to our unitholders;~~

~~create liens on our assets;~~

~~make investments or acquisitions;~~

~~repurchase, redeem or retire our capital stock or senior notes;~~

~~merge or consolidate, or transfer all or substantially all of our assets and the assets of our subsidiaries;~~

~~engage in specified transactions with subsidiaries and affiliates; and~~

~~pursue other corporate activities.~~

~~We may be prevented from taking advantage~~ordinary course of business, opportunities that arise because of the limitations imposed on us by the restrictive covenants under the indentures governing our senior notes and under the LINN Credit Facility. The restrictions contained in those indentures and the LINN Credit Facility could:

which may limit our ability to respond timely to certain events or take advantage of certain opportunities. Because of the risks and uncertainties associated with our Chapter 11 proceedings, we cannot accurately predict or quantify the ultimate impact of events that will occur during our Chapter 11 proceedings that may be inconsistent with our plans.

Operating under Bankruptcy Court protection for a long period of time may harm our business.

Our future results are dependent upon the successful confirmation and implementation of a plan of reorganization. A long period of operations under Bankruptcy Court protection could have a material adverse effect on our business, financial condition, results of operations and liquidity. So long as the Chapter 11 proceedings continue, our senior management will be required to spend a significant amount of time and effort dealing with the reorganization instead of focusing exclusively on our business operations. A prolonged period of operating under Bankruptcy Court protection also may make it more difficult to retain management and other key personnel necessary for ~~or react to, market conditions, to meet capital needs or otherwise to restrict~~the success and growth of our ~~activities or business plan;~~business. In addition, the longer the Chapter 11 proceedings continue, the more likely it is that our customers and

~~adversely affect~~ suppliers will lose confidence in our ability to ~~finance~~reorganize our ~~operations, enter into acquisitions or~~business successfully and will seek to ~~engage in~~establish alternative commercial relationships.

Furthermore, so long as the Chapter 11 proceedings continue, we will be required to incur substantial costs for professional fees and other ~~business activities that would be in our interest.~~expenses associated with the administration of the Chapter 11 proceedings. The Chapter 11 proceedings may also

Also, the LINN Credit Facility requires us to maintain compliance with specified financial ratios and satisfy certain financial condition tests. Our ability to comply with these ratios and financial condition tests may be affected by events beyond our

6469

Table of Contents

Item 1A. Risk Factors - Continued

~~control~~require us to seek debtor-in-possession financing to fund operations. If we are unable to obtain such financing on favorable terms or at all, our chances of successfully reorganizing our business may be seriously jeopardized, the likelihood that we instead will be required to liquidate our assets may be enhanced, and, as a result, any securities in us could become further devalued or become worthless.

Furthermore, we cannot predict the ultimate amount of all settlement terms for the liabilities that will be subject to a plan of reorganization. Even once a plan of reorganization is approved and implemented, our operating results may be adversely affected by the possible reluctance of prospective lenders and other counterparties to do business with a company that recently emerged from Chapter 11 proceedings.

The LINN RSA and Bank RSA provide that our common units representing limited liability company interests (“units”) will be canceled in our Chapter 11 proceedings.

We have a significant amount of indebtedness that is senior to our existing units in our capital structure. The LINN RSA and Bank RSA provide that our existing equity will be canceled in our Chapter 11 proceedings and will be entitled to a limited recovery, if any. Any trading in our units during the pendency of the Chapter 11 proceedings is highly speculative and poses substantial risks to purchasers of our units.

We may not be able to obtain confirmation of a Chapter 11 plan of reorganization.

To emerge successfully from Bankruptcy Court protection as a viable entity, we must meet certain statutory requirements with respect to adequacy of disclosure with respect to the Plan, solicit and obtain the requisite acceptances of such a plan and fulfill other statutory conditions for confirmation of such a plan, which have not occurred to date. The confirmation process is subject to numerous, unanticipated potential delays, including a delay in the Bankruptcy Court’s commencement of the confirmation hearing regarding our Plan.

Prior to the Chapter 11 filing, we entered into the Bank RSA with certain of our creditors, and on October 21, 2016, we entered into the LINN RSA, which is intended to replace the Bank RSA with respect to the terms of the Restructuring of the LINN Debtors. The restructuring transactions contemplated by the LINN RSA and Bank RSA will be effectuated through a Plan. However, we may not receive the requisite acceptances of constituencies in the Chapter 11 proceedings to confirm our Plan. Even if the requisite acceptances of a Plan are received, the Bankruptcy Court may not confirm such a plan. The precise requirements and evidentiary showing for confirming a plan, notwithstanding its rejection by one or more impaired classes of claims or equity interests, depends upon a number of factors including, without limitation, the status and seniority of the claims or equity interests in the rejecting class (i.e., unsecured claims or secured claims, subordinated or senior claims).

If a Chapter 11 plan of reorganization is not confirmed by the Bankruptcy Court, it is unclear whether we would be able to reorganize our business and what, if anything, holders of claims against us would ultimately receive with respect to their claims.

The LINN RSA and Bank RSA are subject to significant conditions and milestones that may be difficult for us to satisfy.

There are certain material conditions we must satisfy under the LINN RSA and Bank RSA, including the timely satisfaction of milestones in the anticipated Chapter 11 proceedings, such as confirmation of a Plan and effectiveness of a Plan. Our ability to timely complete such milestones is subject to risks and uncertainties that may be beyond our control.

If either the LINN RSA or Bank RSA is terminated, or if both agreements are terminated, our ability to confirm and consummate the Plan could be materially and adversely affected.

The LINN RSA and Bank RSA contain a number of termination events, upon the occurrence of which certain parties to the LINN RSA and Bank RSA, as applicable, may terminate the agreement. If the LINN RSA and Bank RSA are terminated, each of the parties thereto, as applicable, will be released from their obligations in accordance with the terms of the applicable agreement. Such termination may result in the loss of support for the Plan by the parties to the LINN RSA or Bank RSA, as applicable, which could adversely affect our ability to confirm and consummate the Plan. If the Plan is not consummated, there can be no assurance that any new Plan would be as favorable to holders of claims as the current Plan.

Table of Contents

Item 1A. Risk Factors - Continued

Our long-term liquidity requirements and the adequacy of our capital resources are difficult to predict at this time.

We face uncertainty regarding the adequacy of our liquidity and capital resources and have extremely limited, if any, access to additional financing. In addition to the cash requirements necessary to fund ongoing operations, we have incurred significant professional fees and other costs in connection with our Chapter 11 proceedings and expect that we will continue to incur significant professional fees and costs throughout our Chapter 11 proceedings. We cannot assure you that cash on hand and cash flow from operations will be sufficient to continue to fund our operations and allow us to satisfy our obligations related to the Chapter 11 proceedings until we are able to emerge from our Chapter 11 proceedings.

Our liquidity, including our ability to meet our ongoing operational obligations, is dependent upon, among other things: (i) our ability to comply with the terms and conditions of any cash collateral order that may be entered by the Bankruptcy Court in connection with the Chapter 11 proceedings, (ii) our ability to maintain adequate cash on hand, (iii) our ability to generate cash flow from operations, (iv) our ability to develop, confirm and consummate a Chapter 11 plan or other alternative restructuring transaction, and (v) the cost, duration and outcome of the Chapter 11 proceedings.

As a result of the Chapter 11 proceedings, our financial results may be volatile and may not reflect historical trends.

During the Chapter 11 proceedings, we expect our financial results to continue to be volatile as restructuring activities and expenses, contract terminations and rejections, and claims assessments significantly impact our consolidated financial statements. As a result, our historical financial performance is likely not indicative of our financial performance after the date of the bankruptcy filing. In addition, if we emerge from Chapter 11, the amounts reported in subsequent consolidated financial statements may materially change relative to historical consolidated financial statements, including as a result of revisions to our operating plans pursuant to a plan of reorganization. We also may be required to adopt fresh start accounting, in which case our assets and liabilities will be recorded at fair value as of the fresh start reporting date, which may differ materially from the recorded values of assets and liabilities on our consolidated balance sheets. Our financial results after the application of fresh start accounting also may be different from historical trends.

We may be subject to claims that will not be discharged in the Chapter 11 proceedings, which could have a material adverse effect on our financial condition and results of operations.

The Bankruptcy Code provides that the confirmation of a plan of reorganization discharges a debtor from substantially all debts arising prior to confirmation. With few exceptions, all claims that arose prior to May 12, 2016, or before confirmation of the plan of reorganization (i) would be subject to compromise and/or treatment under the plan of reorganization and/or (ii) would be discharged in accordance with the terms of the Plan. Any claims not ultimately discharged through the Plan could be asserted against the reorganized entities and may have an adverse effect on our financial condition and results of operations on a post-reorganization basis.

We may experience increased levels of employee attrition as a result of the Chapter 11 proceedings.

As a result of the Chapter 11 proceedings, we may experience increased levels of employee attrition, and our employees likely will face considerable distraction and uncertainty. A loss of key personnel or material erosion of employee morale could adversely affect our business and results of operations. Our ability to engage, motivate and retain key employees or take other measures intended to motivate and incent key employees to remain with us through the pendency of the Chapter 11 proceedings is limited by restrictions on implementation of incentive programs under the Bankruptcy Code. The loss of services of members of our senior management team could impair our ability to execute our strategy and implement operational initiatives, which would be likely to have a material adverse effect on our business, financial condition and results of operations.

In certain instances, a Chapter 11 case may be converted to a case under Chapter 7 of the Bankruptcy Code.

There can be no assurance as to whether we will successfully reorganize and emerge from the Chapter 11 proceedings or, if we do successfully reorganize, as to when we would emerge from the Chapter 11 proceedings.

If the Bankruptcy Court finds that it would be in the best interest of creditors and/or the Debtors, the Bankruptcy Court may convert our anticipated Chapter 11 bankruptcy case to a case under Chapter 7 of the Bankruptcy Code. In such event, a Chapter 7 trustee would be appointed or elected to liquidate the Debtors’ assets for distribution in accordance with the priorities

Table of Contents

Item 1A. Risk Factors - Continued

established by the Bankruptcy Code. The Debtors believe that liquidation under Chapter 7 would result in significantly smaller distributions being made to the Debtors’ creditors than those provided for in a Chapter 11 plan because of (i) the likelihood that the assets would have to be sold or otherwise disposed of in a disorderly fashion over a short period of time rather than reorganizing or selling in a controlled manner the Debtors’ businesses as a going concern, (ii) additional administrative expenses involved in the appointment of a Chapter 7 trustee, and (iii) additional expenses and claims, some of which would be entitled to priority, that would be generated during the liquidation and from the rejection of leases and other executory contracts in connection with a cessation of operations.

We may be unable to hedge anticipated production volumes on attractive terms or at all, which would subject us to further potential commodity price uncertainty and could adversely affect our net cash provided by operating activities, financial condition and results of operations.

Our anticipated production volumes remain mostly unhedged. Based on current expectations for continued low future commodity prices, reduced hedging market liquidity and potential reduced counterparty willingness to enter into new hedges with us, we may be unable to ~~meet these ratios~~hedge anticipated production volumes on attractive terms or at all, which would subject us to further potential commodity price uncertainty and could adversely affect our net cash provided by operating activities, financial condition ~~tests. These financial ratio restrictions~~ and ~~financial condition tests~~results of operations.

Our units are no longer listed on a national securities exchange and are quoted only in over-the-counter markets, which carries substantial risks and could ~~limit~~ continue to negatively impact our unit price, volatility and liquidity.

As a result of our failure to comply with the NASDAQ Global Select Market (“NASDAQ”) continued listing requirements, on May 24, 2016, our units began trading over the counter on the OTC Markets Group Inc.’s Pink marketplace under the trading symbol “LINEQ.”

Our delisting from the NASDAQ and commencement of trading on the OTC Pink Sheets marketplace has resulted and may continue to result in a reduction in some or all of the following, each of which could have a material adverse effect on our unitholders:

the liquidity of our units;

the market price of our units;

our ability to obtain ~~future financings, make needed capital expenditures, withstand a continued downturn~~financing for the continuation of our operations;

the number of institutional and other investors that will consider investing in our ~~business or a downturn in~~ units;

the ~~economy in general or otherwise conduct necessary corporate activities. Further declines in oil, natural gas and NGL prices, or a prolonged period~~number of ~~oil, natural gas and NGL prices at current levels, could eventually result~~market makers in our ~~failing to meet one or more~~units;

the availability of information concerning the financial covenants under the indentures governing our senior notes or the LINN Credit Facility, which could require us to refinance or amend such obligations resulting in the payment of consent fees or higher interest rates, or require us to raise additional capital at an inopportune time or on terms not favorable to us.

A breach of any of these covenants or our inability to comply with the required financial ratios or financial condition tests could result in a default under our senior notes or the LINN Credit Facility. A default under the LINN Credit Facility or the indentures governing our senior notes, if not cured or waived, could result in acceleration of all indebtedness outstanding thereunder. The accelerated debt would become immediately duetrading prices and payable, which would in turn trigger cross-acceleration and cross-default rights under our other debt. If that should occur, we may be unable to pay all such debt or to borrow sufficient funds to refinance it. Even if new financing were then available, it may not be on terms that are acceptable to us. In addition, if an event of default under the LINN Credit Facility occurred, the lenders could foreclose on the collateral and compel us to apply allvolume of our ~~available cash~~units; and

the number of broker-dealers willing to ~~repay~~execute trades in our borrowings or they could prevent us from making payments on our senior notes. If the amounts outstanding under the LINN Credit Facility, the senior notes or any of our other indebtedness were to be accelerated, our assets may not be sufficient to repay in full the money owed to the lenders or to our other debt holders.units.

Moreover, any new indebtedness we incur may impose financial restrictions and other covenants on us that may be more restrictive than the LINN Credit Facility or the indentures governing our senior notes.


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

Issuer Purchases of Equity Securities

The Company’s Board of Directors ~~has~~had authorized the repurchase of up to $250 million of the Company’s outstanding units from time to time on the open market or in negotiated purchases. The timing and amounts of any such repurchases are at the discretion of management, subject to market conditions and other factors, and in accordance with applicable securities laws and other legal requirements. The repurchase plan does not obligate the Company to acquire any specific number of units and may be discontinued at any time. The Company did not repurchase any units during the nine months ended September 30, ~~2015,~~2016, and as of September 30, ~~2015,~~2016, the ~~entire amount remained available for unit repurchase~~Company does not intend to make any purchases under the program.


Item 3.	Defaults Upon Senior Securities

~~None~~See Part I. Item 1. Note 2 to the Company’s condensed consolidated financial statements entitled “Chapter 11 Proceedings, Ability to Continue as a Going Concern and Covenant Violations” which is incorporated in this item by reference.


Item 4.	Mine Safety Disclosures

Not applicable


Item 5.	Other Information

None

~~Table of Contents~~


Item 6.	Exhibits



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

600 Travis, Suite 5100 Houston, Texas 77002 (Former address of principal executive offices)


	September 30, 2015			December 31, 2014			September 30, 2016			December 31, 2015
	(in thousands, except unit amounts)						(in thousands, except unit amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	344,806		$	1,809		$	800,507		$	2,168
Accounts receivable – trade, net	271,156			471,684			213,108			216,556
Derivative instruments	1,132,164			1,077,142			1,447			1,220,230
Other current assets	112,222			155,955			121,092			95,593
Total current assets	1,860,348			1,706,590			1,136,154			1,534,547

Noncurrent assets:
Oil and natural gas properties (successful efforts method)	18,061,991			18,068,900			18,193,256			18,121,155
Less accumulated depletion and amortization	(7,953,397		)	(4,867,682		)	(12,676,972		)	(11,097,492		)
	10,108,594			13,201,218			5,516,284			7,023,663

Other property and equipment	713,783			669,149			742,264			708,711
Less accumulated depreciation	(187,383		)	(144,282		)	(232,245		)	(195,661		)
	526,400			524,867			510,019			513,050

Derivative instruments	721,733			848,097			—			566,401
Restricted cash	257,043			6,225			205,204			257,363
Other noncurrent assets	104,351			136,512			35,287			33,234
	1,083,127			990,834			240,491			856,998
Total noncurrent assets	11,718,121			14,716,919			6,266,794			8,393,711
Total assets	$	13,578,469		$	16,423,509		$	7,402,948		$	9,928,258

LIABILITIES AND UNITHOLDERS’ CAPITAL
LIABILITIES AND UNITHOLDERS’ DEFICIT
Current liabilities:
Accounts payable and accrued expenses	$	568,349		$	814,809		$	363,003		$	455,374
Derivative instruments	1,462			—			1,776			2,241
Current portion of long-term debt, net							2,828,848			3,714,693
Other accrued liabilities	182,178			167,736			46,299			119,593
Total current liabilities	751,989			982,545			3,239,926			4,291,901

Noncurrent liabilities:
Credit facilities	3,478,175			2,968,175
Term loan	500,000			500,000
Senior notes, net	6,050,101			6,827,634
Derivative instruments	743			684			1,199			857
Long-term debt, net							—			5,292,676
Other noncurrent liabilities	603,156			600,866			571,123			611,725
Total noncurrent liabilities	10,632,175			10,897,359
Liabilities subject to compromise							5,173,059			—

Commitments and contingencies (Note 10)

Unitholders’ capital:
355,050,314 units and 331,974,913 units issued and outstanding at September 30, 2015, and December 31, 2014, respectively	5,334,115			5,395,811
Unitholders’ deficit:
355,142,363 units and 355,017,428 units issued and outstanding at September 30, 2016, and December 31, 2015, respectively							5,367,277			5,343,116
Accumulated deficit	(3,139,810		)	(852,206		)	(6,949,636		)	(5,612,017		)
	2,194,305			4,543,605			(1,582,359		)	(268,901		)
Total liabilities and unitholders’ capital	$	13,578,469		$	16,423,509
Total liabilities and unitholders’ deficit							$	7,402,948		$	9,928,258



	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
	(in thousands)

General and administrative expenses	$	13,040	$	9,445	$	40,717	$	37,164
Lease operating expenses	1,167		1,664		7,201		6,528
Total unit-based compensation expenses	$	14,207	$	11,109	$	47,918	$	43,692
Income tax benefit	$	5,250	$	4,105	$	17,706	$	16,144



	Three Months Ended September 30,				Nine Months Ended September 30,
	2016		2015		2016		2015
	(in thousands)

General and administrative expenses	$	4,832	$	13,040	$	19,238	$	40,717
Lease operating expenses	1,129		1,167		5,276		7,201
Total unit-based compensation expenses	$	5,961	$	14,207	$	24,514	$	47,918
Income tax benefit	$	2,203	$	5,250	$	9,058	$	17,706



	September 30, 2015				December 31, 2014
	Carrying Value		Fair Value		Carrying Value		Fair Value
	(in thousands)

Credit facilities	$	3,478,175	$	3,478,175	$	2,968,175	$	2,968,175
Term loan	500,000		500,000		500,000		500,000
Senior notes, net	6,050,101		1,610,642		6,827,634		5,703,649
Total debt, net	$	10,028,276	$	5,588,817	$	10,295,809	$	9,171,824



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



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



		Page

	Glossary of Terms	ii

	Part I – Financial Information
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of September 30, ~~2015,~~2016, and December 31, ~~2014~~2015	1
	Condensed Consolidated Statements of Operations for the three months and nine months ended September 30, ~~2015,~~2016, and September 30, ~~2014~~2015	2
	Condensed Consolidated Statement of Unitholders’ ~~Capital~~Deficit for the nine months ended September 30, ~~2015~~2016	3
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, ~~2015,~~2016, and September 30, ~~2014~~2015	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3337
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5966
Item 4.	Controls and Procedures	6167

	Part II – Other Information
Item 1.	Legal Proceedings	6268
Item 1A.	Risk Factors	6268
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6572
Item 3.	Defaults Upon Senior Securities	6572
Item 4.	Mine Safety Disclosures	6572
Item 5.	Other Information	6573
Item 6.	Exhibits	6674

	Signatures	6776



	Three Months Ended September 30, 2014			Nine Months Ended September 30, 2014
	(in thousands, except per unit amounts)

Total revenues and other	$	1,509,498		$	3,117,792
Total operating expenses	$	(1,330,384	)	$	(2,846,361	)
Net income (loss)	$	1,480		$	(251,192	)

Net income (loss) per unit:
Basic	$	—		$	(0.78	)
Diluted	$	—		$	(0.78	)


⁽¹⁾	Variable interest rates of ~~2.39%~~5.25% and ~~1.92%~~2.66% at September 30, ~~2015,~~2016, and December 31, ~~2014,~~2015, respectively.


⁽²⁾	Variable interest rates of ~~2.71%~~5.25% and ~~2.67%~~3.17% at September 30, ~~2015,~~2016, and December 31, ~~2014,~~2015, respectively.


,⁽⁵⁾	Due to existing and anticipated covenant violations, the Company’s Credit Facilities and term loan were classified as current at September 30, 2016, and December 31, ~~2014, respectively.~~2015. The current portion as of December 31, 2015, also includes approximately $128 million of interest payable on the Second Lien Notes due within one year.



	October 1 - December 31, 2016		2017
Natural gas positions:
Fixed price swaps (NYMEX Henry Hub):
Hedged volume (MMMBtu)	33,580		83,950
Average price ($/MMBtu)	$	3.05	$	3.08
Oil positions:
Fixed price swaps (NYMEX WTI):
Hedged volume (MBbls)	—		730
Average price ($/Bbl)	$	—	$	50.98



	October 1 - December 31, 2015			2016			2017			2018
Natural gas positions:
Fixed price swaps (NYMEX Henry Hub):
Hedged volume (MMMBtu)	29,753			121,841			120,122			36,500
Average price ($/MMBtu)	$	5.19		$	4.20		$	4.26		$	5.00
Put options (NYMEX Henry Hub):
Hedged volume (MMMBtu)	18,111			76,269			66,886			—
Average price ($/MMBtu)	$	5.00		$	5.00		$	4.88		$	—
Oil positions:
Fixed price swaps (NYMEX WTI): ⁽¹⁾
Hedged volume (MBbls)	3,890			11,465			4,755			—
Average price ($/Bbl)	$	87.22		$	90.56		$	89.02		$	—
Three-way collars (NYMEX WTI):
Hedged volume (MBbls)	276			—			—			—
Short put ($/Bbl)	$	70.00		$	—		$	—		$	—
Long put ($/Bbl)	$	90.00		$	—		$	—		$	—
Short call ($/Bbl)	$	101.62		$	—		$	—		$	—
Put options (NYMEX WTI):
Hedged volume (MBbls)	864			3,271			384			—
Average price ($/Bbl)	$	90.00		$	90.00		$	90.00		$	—
Natural gas basis differential positions: ⁽²⁾
Panhandle basis swaps: ⁽³⁾
Hedged volume (MMMBtu)	21,970			59,954			59,138			16,425
Hedged differential ($/MMBtu)	$	(0.33	)	$	(0.32	)	$	(0.33	)	$	(0.33	)
NWPL Rockies basis swaps: ⁽³⁾
Hedged volume (MMMBtu)	14,479			65,794			38,880			10,804
Hedged differential ($/MMBtu)	$	(0.23	)	$	(0.24	)	$	(0.19	)	$	(0.19	)
MichCon basis swaps: ⁽³⁾
Hedged volume (MMMBtu)	2,355			7,768			7,437			2,044
Hedged differential ($/MMBtu)	$	0.06		$	0.05		$	0.05		$	0.05
Houston Ship Channel basis swaps: ⁽³⁾
Hedged volume (MMMBtu)	7,443			34,364			36,730			986
Hedged differential ($/MMBtu)	$	(0.03	)	$	(0.02	)	$	(0.02	)	$	(0.08	)
Permian basis swaps: ⁽³⁾
Hedged volume (MMMBtu)	1,279			4,219			4,819			1,314
Hedged differential ($/MMBtu)	$	(0.21	)	$	(0.20	)	$	(0.20	)	$	(0.20	)
SoCal basis swaps: ⁽⁴⁾
Hedged volume (MMMBtu)	8,280			32,940			—			—
Hedged differential ($/MMBtu)	$	(0.03	)	$	(0.03	)	$	—		$	—


⁽²⁾	~~Settle on the respective pricing index to hedge basis differential to the NYMEX Henry Hub natural gas price.~~


⁽³⁾	For positions which hedge exposure to differentials in producing areas, the Company receives the NYMEX Henry Hub natural gas price plus the respective spread and pays the specified index price. Cash settlements are made on a net basis.


⁽¹⁾	Consists of gains and (losses) on derivatives ~~used~~entered into in March 2015 to hedge exposure to differentials in consuming ~~areas, which were entered into in March 2015.~~areas.


	September 30, 2015							September 30, 2016
	Level 2		Netting ⁽¹⁾			Total		Level 2		Netting ⁽¹⁾			Total
	(in thousands)							(in thousands)
Assets:
Commodity derivatives	$	1,887,082	$	(33,185	)	$	1,853,897	$	6,451	$	(5,004	)	$	1,447
Liabilities:
Commodity derivatives	$	35,390	$	(33,185	)	$	2,205	$	7,979	$	(5,004	)	$	2,975


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


Asset retirement obligations at December 31, 2014	$	497,570
Asset retirement obligations at December 31, 2015				$	523,541
Liabilities added from drilling	2,857			449
Liabilities associated with assets sold	(2,594		)
Current year accretion expense	22,290			23,199
Settlements	(3,749		)	(7,862		)
Revision of estimates	2,022			356
Asset retirement obligations at September 30, 2015	$	518,396
Asset retirement obligations at September 30, 2016				$	539,683


	Linn Energy, LLC			Guarantor Subsidiaries			Non- Guarantor Subsidiary			Eliminations			Consolidated			Linn Energy, LLC			Guarantor Subsidiaries			Non- Guarantor Subsidiary			Eliminations			Consolidated
	(in thousands)															(in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	32		$	61,969		$	282,805		$	—		$	344,806		$	311,180		$	459,680		$	29,647		$	—		$	800,507
Accounts receivable – trade, net	—			215,626			55,530			—			271,156			—			165,650			47,458			—			213,108
Accounts receivable – affiliates	3,265,327			6,329			—			(3,271,656		)	—			1,785,051			35,567			—			(1,820,618		)	—
Derivative instruments	—			1,105,635			26,529			—			1,132,164			—			1,447			—			—			1,447
Other current assets	—			68,813			43,420			(11		)	112,222			18,677			82,864			19,551			—			121,092
Total current assets	3,265,359			1,458,372			408,284			(3,271,667		)	1,860,348			2,114,908			745,208			96,656			(1,820,618		)	1,136,154

Noncurrent assets:
Oil and natural gas properties (successful efforts method)	—			13,061,758			5,000,233			—			18,061,991			—			13,171,180			5,022,076			—			18,193,256
Less accumulated depletion and amortization	—			(6,517,088		)	(1,493,749		)	57,440			(7,953,397		)	—			(9,992,670		)	(2,755,015		)	70,713			(12,676,972		)
	—			6,544,670			3,506,484			57,440			10,108,594			—			3,178,510			2,267,061			70,713			5,516,284

Other property and equipment	—			584,892			128,891			—			713,783			—			621,947			120,317			—			742,264
Less accumulated depreciation	—			(171,095		)	(16,288		)	—			(187,383		)	—			(213,586		)	(18,659		)	—			(232,245		)
	—			413,797			112,603			—			526,400			—			408,361			101,658			—			510,019

Derivative instruments	—			721,397			336			—			721,733
Restricted cash	—			6,798			250,245			—			257,043			—			7,580			197,624			—			205,204
Notes receivable – affiliates	181,400			—			—			(181,400		)	—			137,400			—			—			(137,400		)	—
Investments in consolidated subsidiaries	6,779,570			—			—			(6,779,570		)	—			2,263,182			—			—			(2,263,182		)	—
Other noncurrent assets, net	88,217			5,387			10,747			—			104,351
Other noncurrent assets																—			17,102			18,257			(72		)	35,287
	7,049,187			733,582			261,328			(6,960,970		)	1,083,127			2,400,582			24,682			215,881			(2,400,654		)	240,491
Total noncurrent assets	7,049,187			7,692,049			3,880,415			(6,903,530		)	11,718,121			2,400,582			3,611,553			2,584,600			(2,329,941		)	6,266,794
Total assets	$	10,314,546		$	9,150,421		$	4,288,699		$	(10,175,197	)	$	13,578,469		$	4,515,490		$	4,356,761		$	2,681,256		$	(4,150,559	)	$	7,402,948

LIABILITIES AND UNITHOLDERS’ CAPITAL
LIABILITIES AND UNITHOLDERS’ CAPITAL (DEFICIT)																LIABILITIES AND UNITHOLDERS’ CAPITAL (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses	$	776		$	391,449		$	176,124		$	—		$	568,349		$	—		$	293,729		$	69,274		$	—		$	363,003
Accounts payable – affiliates	—			3,265,327			6,329			(3,271,656		)	—			—			1,785,051			35,567			(1,820,618		)	—
Derivative instruments	—			—			1,462			—			1,462			—			82			1,694			—			1,776
Current portion of long-term debt, net																1,937,589			—			891,259			—			2,828,848
Other accrued liabilities	116,969			52,513			12,707			(11		)	182,178			374			43,426			2,499			—			46,299
Total current liabilities	117,745			3,709,289			196,622			(3,271,667		)	751,989			1,937,963			2,122,288			1,000,293			(1,820,618		)	3,239,926

Noncurrent liabilities:
Credit facilities	2,305,000			—			1,173,175			—			3,478,175
Term loan	500,000			—			—			—			500,000
Senior notes, net	5,204,297			—			845,804			—			6,050,101
Derivative instruments																—			1,199			—			—			1,199
Notes payable – affiliates	—			181,400			—			(181,400		)	—			—			137,400			—			(137,400		)	—
Derivative instruments	—			320			423			—			743
Other noncurrent liabilities	—			402,225			200,931			—			603,156			—			396,772			174,423			(72		)	571,123
Total noncurrent liabilities	8,009,297			583,945			2,220,333			(181,400		)	10,632,175
Liabilities subject to compromise																4,168,822			67,439			936,798			—			5,173,059

Unitholders’ capital:
Unitholders’ capital (deficit):
Units issued and outstanding	5,327,314			4,831,078			2,757,836			(7,582,113		)	5,334,115			5,358,341			4,831,412			2,798,713			(7,621,189		)	5,367,277
Accumulated income (deficit)	(3,139,810		)	26,109			(886,092		)	859,983			(3,139,810		)
Accumulated deficit																(6,949,636		)	(3,199,749		)	(2,228,971		)	5,428,720			(6,949,636		)
	2,187,504			4,857,187			1,871,744			(6,722,130		)	2,194,305			(1,591,295		)	1,631,663			569,742			(2,192,469		)	(1,582,359		)
Total liabilities and unitholders’ capital	$	10,314,546		$	9,150,421		$	4,288,699		$	(10,175,197	)	$	13,578,469
Total liabilities and unitholders’ capital (deficit)																$	4,515,490		$	4,356,761		$	2,681,256		$	(4,150,559	)	$	7,402,948


⁽¹⁾	~~Does not include the effect of gains (losses) on derivatives.~~



	At or for the Quarter Ended
	December 31, 2014	March 31, 2015	June 30, 2015	September 30, 2015	Twelve Months Ended September 30, 2015
LINN Credit Facility:
Interest Coverage Ratio	2.7	2.9	3.0	3.4	3.0
Current Ratio	2.6	3.0	2.9	2.8	2.8
Berry Credit Facility:
Interest Coverage Ratio	6.5	1.7	2.6	2.2	3.3
Current Ratio ⁽¹⁾	0.6	0.6	0.5	2.0	2.0
Current Ratio (consolidated) ⁽¹⁾	2.9	3.2	2.9	2.6	2.6



Date Paid	Distributions Per Unit		Total Distributions
			(in millions)

September 2015	$	0.1042	$	37
August 2015	$	0.1042	$	37
July 2015	$	0.1042	$	37
June 2015	$	0.1042	$	37
May 2015	$	0.1042	$	35
April 2015	$	0.1042	$	35
March 2015	$	0.1042	$	35
February 2015	$	0.1042	$	35
January 2015	$	0.1042	$	35



	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
	(in thousands)

Net cash provided by operating activities	$	361,287		$	520,175		$	1,034,769		$	1,435,810
Distributions to unitholders	(111,247		)	(240,652		)	(323,878		)	(721,235		)
Excess of net cash provided by operating activities after distributions to unitholders	250,040			279,523			710,891			714,575
Plus (less):
Net cash provided by (used in) financing activities (excluding distributions to unitholders)	(105,557		)	2,702,683			(177,354		)	3,128,448
Acquisition of oil and natural gas properties and joint-venture funding	—			(2,576,041		)	—			(2,601,932		)
Development of oil and natural gas properties	(86,859		)	(370,861		)	(503,206		)	(1,176,478		)
Purchases of other property and equipment	(22,242		)	(18,727		)	(51,529		)	(50,138		)
Proceeds from sale of properties and equipment and other	305,481			4,245			364,195			(7,485		)
Net increase in cash and cash equivalents	$	340,863		$	20,822		$	342,997		$	6,990



Exhibit Number		Description

~~2.1~~	—	Purchase and Sale Agreement by and between Linn Energy Holdings, LLC and Linn Operating, Inc., as seller, and Rock Oil Holdings LLC, as buyer, executed on July 2, 2015 (incorporated herein by reference to Exhibit 2.1 to Quarterly Report on Form 10-Q filed on July 30, 2015)
3.1	—	Certificate of Formation of Linn Energy Holdings, LLC (now Linn Energy, LLC) (incorporated herein by reference to Exhibit 3.1 to Registration Statement on Form ~~S-1~~S‑1 (File No. 333‑125501) filed on June 3, 2005)
3.2	—	Certificate of Amendment to Certificate of Formation of Linn Energy Holdings, LLC (now Linn Energy, LLC) (incorporated herein by reference to Exhibit 3.2 to Registration Statement on Form S‑1 (File No. 333-125501) filed on June 3, 2005)
3.3	—	Third Amended and Restated Limited Liability Company Agreement of Linn Energy, LLC dated September 3, 2010 (incorporated herein by reference to Exhibit 3.1 to Current Report on Form 8-K filed on September 7, 2010)
3.4	—	Amendment No. 1, dated April 23, 2013, to Third Amended and Restated LLC Agreement of Linn Energy, LLC, dated September 3, 2010 (incorporated herein by reference to Exhibit 3.1 to Quarterly Report on Form 10-Q filed on April 25, 2013)
10.1*10.1	—	~~Separation Agreement by and between~~First Amendment to Linn ~~Operating, Inc. and Kolja Rockov, effective~~Energy, LLC Severance Plan, dated as of July 22, 2016 (incorporated herein by reference to Exhibit 10.6 to Quarterly Report on Form 10-Q filed on August ~~31, 2015~~4, 2016)
10.2	—	~~Seventh~~First Amendment to ~~Sixth Amended~~Restructuring Support Agreement, dated as of September 8, 2016, by and ~~Restated Credit~~among the Debtors and the supporting parties thereto (incorporated herein by reference to Exhibit 10.1 to Current Report on Form 8-K filed on September 9, 2016)
10.3	—	Second Amendment to Restructuring Support Agreement, dated as of September 23, 2016, by and among the Debtors and the supporting parties thereto (incorporated herein by reference to Exhibit 10.1 to Current Report on Form 8-K filed on September 26, 2016)
10.4	—	Third Amendment to Restructuring Support Agreement, dated as of October ~~21, 2015,~~7, 2016, by and among the Debtors and the supporting parties thereto (incorporated herein by reference to Exhibit 10.3 to Current Report on Form 8-K filed on October 11, 2016)
10.5	—	Fourth Amendment to Restructuring Support Agreement, dated as of October 14, 2016, by and among the Debtors and the supporting parties thereto (incorporated herein by reference to Exhibit 10.2 to Current Report on Form 8-K filed on October 18, 2016)
10.6	—	First Amendment to Settlement Agreement, dated as of July 12, 2016 (incorporated herein by reference to Exhibit 10.1 to Current Report on Form 8-K filed on July 18, 2016)
10.7	—	Second Amendment to Settlement Agreement, dated as of September 8, 2016 (incorporated herein by reference to Exhibit 10.2 to Current Report on Form 8-K filed on September 9, 2016)
10.8	—	Third Amendment to Settlement Agreement, dated as of September 23, 2016 (incorporated herein by reference to Exhibit 10.2 to Current Report on Form 8-K filed on September 26, 2016)
10.9	—	Fourth Amendment to Settlement Agreement, dated as of October 7, 2016 (incorporated herein by reference to Exhibit 10.4 to Current Report on Form 8-K filed on October 11, 2016)
10.10	—	Restructuring Support Agreement, dated as of October 7, 2016, by and among the Linn ~~Energy, LLC, as borrower,~~Debtors and the ~~guarantors named therein, Wells Fargo Bank, National Association, as administrative agent, and each of the lenders party~~supporting parties thereto (incorporated herein by reference to Exhibit 10.1 to Current Report on Form 8-K filed on October ~~22, 2015)~~11, 2016)
~~10.3~~10.11	—	~~Eleventh~~First Amendment ~~and Borrowing Base~~to Restructuring Support Agreement, dated as of October ~~21, 2015,~~14, 2016, by and among ~~Berry Petroleum~~the Linn Debtors and the supporting parties thereto (incorporated herein by reference to Exhibit 10.1 to Current Report on Form 8-K filed on October 18, 2016)
10.12	—	Backstop Commitment Letter, dated as of October 7, 2016, by and among the Company ~~LLC, as borrower, Wells Fargo Bank, National Association, as administrative agent,~~ and ~~each of the lenders party~~backstop parties thereto (incorporated herein by reference to Exhibit 10.2 to Current Report on Form 8-K filed on October ~~22, 2015)~~11, 2016)
10.13	—	First Amended and Restated Restructuring Support Agreement, dated as of October 21, 2016, by and among the Linn Debtors and the supporting parties thereto (incorporated herein by reference to Exhibit 10.1 to Current Report on Form 8-K filed on October 27, 2016)



Exhibit Number		Description

10.14	—	Backstop Commitment Agreement, dated as of October 25, 2016, by and among the Company and the parties thereto (incorporated herein by reference to Exhibit 10.2 to Current Report on Form 8-K filed on October 27, 2016)
31.1*	—	Section 302 Certification of Mark E. Ellis, Chairman, President and Chief Executive Officer of Linn Energy, LLC
31.2*	—	Section 302 Certification of David B. Rottino, Executive Vice President and Chief Financial Officer of Linn Energy, LLC
32.1*	—	Section 906 Certification of Mark E. Ellis, Chairman, President and Chief Executive Officer of Linn Energy, LLC
32.2*	—	Section 906 Certification of David B. Rottino, Executive Vice President and Chief Financial Officer of Linn Energy, LLC
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



	LINN ENERGY, LLC
	(Registrant)

Date: November ~~5, 2015~~3, 2016	/s/ Darren R. Schluter
	Darren R. Schluter
	Vice President and Controller
	(Duly Authorized Officer and Principal Accounting Officer)


Date: November ~~5, 2015~~3, 2016	/s/ David B. Rottino
	David B. Rottino
	Executive Vice President and Chief Financial Officer
	(Principal Financial Officer)