UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2016March 31, 2017
OR
¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File Number: 000-51719
linnlogoa18.jpg
LINN ENERGY, LLCINC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
65-117759181-5366183
(I.R.S. Employer
Identification No.)
600 Travis
Houston, Texas
(Address of principal executive offices)
77002
(Zip Code)
(281) 840-4000
(Registrant’s telephone number, including area code)
600 Travis, Suite 5100
Houston, Texas 77002
(Former address of principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerx
¨Accelerated filer¨
Non-accelerated filer¨(Do not check if a smaller reporting company)
Smaller reporting companyx
Emerging growth company¨





If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes  x    No  ¨
As of October 31, 2016,April 30, 2017, there were 355,032,380 units89,233,922 shares of Class A common stock, par value $0.001 per share, outstanding.
 



TABLE OF CONTENTS
  Page
   
 
   
  
 
 
 
 
 
   
  
   
 

i

Table of Contents

GLOSSARY OF TERMS
As commonly used in the oil and natural gas industry and as used in this Quarterly Report on Form 10-Q, the following terms have the following meanings:
Bbl. One stock tank barrel or 42 United States gallons liquid volume.
Bcf. One billion cubic feet.
Bcfe. One billion cubic feet equivalent, determined using the ratio of six Mcf of natural gas to one Bbl of oil, condensate or natural gas liquids.
Btu. One British thermal unit, which is the heat required to raise the temperature of a one-pound mass of water from 58.5 degrees to 59.5 degrees Fahrenheit.
MBbls. One thousand barrels of oil or other liquid hydrocarbons.
MBbls/d. MBbls per day.
Mcf. One thousand cubic feet.
Mcfe. One thousand cubic feet equivalent, determined using the ratio of six Mcf of natural gas to one Bbl of oil, condensate or natural gas liquids.
MMBbls. One million barrels of oil or other liquid hydrocarbons.
MMBtu. One million British thermal units.
MMcf. One million cubic feet.
MMcf/d. MMcf per day.
MMcfe. One million cubic feet equivalent, determined using the ratio of six Mcf of natural gas to one Bbl of oil, condensate or natural gas liquids.
MMcfe/d. MMcfe per day.
MMMBtu. One billion British thermal units.
NGL. Natural gas liquids, which are the hydrocarbon liquids contained within natural gas.

ii

Table of Contents

PART I – FINANCIAL INFORMATION
Item 1.Financial Statements
LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30,
2016
 December 31,
2015
Successor  Predecessor
(in thousands,
except unit amounts)
March 31,
2017
  December 31,
2016
(in thousands, except share and unit amounts)    
ASSETS     
Current assets:       
Cash and cash equivalents$800,507
 $2,168
$1,072
  $694,857
Accounts receivable – trade, net213,108
 216,556
181,034
  198,064
Derivative instruments1,447
 1,220,230
2,406
  
Restricted cash81,766
  1,602
Other current assets121,092
 95,593
91,005
  106,011
Total current assets1,136,154
 1,534,547
357,283
  1,000,534
       
Noncurrent assets:       
Oil and natural gas properties (successful efforts method)18,193,256
 18,121,155
2,203,893
  13,232,959
Less accumulated depletion and amortization(12,676,972) (11,097,492)(15,351)  (9,999,560)
5,516,284
 7,023,663
2,188,542
  3,233,399
       
Other property and equipment742,264
 708,711
445,951
  636,487
Less accumulated depreciation(232,245) (195,661)(4,197)  (224,547)
510,019
 513,050
441,754
  411,940
       
Derivative instruments
 566,401
8,960
  
Restricted cash205,204
 257,363
Deferred income taxes624,704
  
Other noncurrent assets35,287
 33,234
23,352
  14,718
240,491
 856,998
657,016
  14,718
Total noncurrent assets6,266,794
 8,393,711
3,287,312
  3,660,057
Total assets$7,402,948
 $9,928,258
$3,644,595
  $4,660,591
       
LIABILITIES AND UNITHOLDERS’ DEFICIT   
LIABILITIES AND EQUITY (DEFICIT)    
Current liabilities:       
Accounts payable and accrued expenses$363,003
 $455,374
$334,160
  $295,077
Derivative instruments1,776
 2,241
18,701
  82,508
Current portion of long-term debt, net2,828,848
 3,714,693
28,125
  1,937,729
Other accrued liabilities46,299
 119,593
48,829
  26,304
Total current liabilities3,239,926
 4,291,901
429,815
  2,341,618
       
Derivative instruments1,199
 857

  11,349
Long-term debt, net
 5,292,676
Long-term debt805,625
  
Other noncurrent liabilities571,123
 611,725
350,981
  399,607
Liabilities subject to compromise5,173,059
 

  4,305,005
       
Commitments and contingencies (Note 10)

 



  

       
Unitholders’ deficit:   
355,142,363 units and 355,017,428 units issued and outstanding at September 30, 2016, and December 31, 2015, respectively5,367,277
 5,343,116
Accumulated deficit(6,949,636) (5,612,017)
(1,582,359) (268,901)
Total liabilities and unitholders’ deficit$7,402,948
 $9,928,258

1

Table of Contents
LINN ENERGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS - Continued
(Unaudited)


 Successor  Predecessor
 March 31,
2017
  December 31,
2016
(in thousands, except share and unit amounts)    
Temporary equity:    
Redeemable noncontrolling interests29,350
  
Stockholders’/unitholders’ equity (deficit):    
Predecessor units issued and outstanding (no units issued or outstanding at March 31, 2017; 352,792,474 units issued and outstanding at December 31, 2016)
  5,386,885
Predecessor accumulated deficit
  (7,783,873)
Successor preferred stock ($0.001 par value, 30,000,000 shares authorized and no shares issued at March 31, 2017; no shares authorized or issued at December 31, 2016)
  
Successor Class A common stock ($0.001 par value, 270,000,000 shares authorized and 89,233,922 shares issued at March 31, 2017; no shares authorized or issued at December 31, 2016)89
  
Successor additional paid-in capital2,035,991
  
Successor accumulated deficit(7,256)  
Total stockholders’/unitholders’ equity (deficit)2,028,824
  (2,396,988)
Total liabilities and equity (deficit)$3,644,595
  $4,660,591
The accompanying notes are an integral part of these condensed consolidated financial statements.

LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
Successor  Predecessor
2016 2015 2016 2015One Month Ended March 31, 2017  Two Months Ended February 28, 2017 Three Months Ended March 31, 2016
(in thousands, except per unit amounts)
(in thousands, except per share and per unit amounts)      
Revenues and other:             
Oil, natural gas and natural gas liquids sales$360,143
 $427,245
 $959,715
 $1,374,233
$87,445
  $203,766
 $199,849
Gains (losses) on oil and natural gas derivatives274
 549,029
 (72,533) 782,622
(11,959)  92,691
 109,453
Marketing revenues18,352
 15,723
 47,177
 60,200
2,914
  6,636
 9,061
Other revenues6,896
 6,307
 21,468
 19,624
2,033
  9,925
 28,336
385,665
 998,304
 955,827
 2,236,679
80,433
  313,018
 346,699
Expenses:             
Lease operating expenses117,470
 154,086
 370,658
 467,759
27,166
  53,224
 88,387
Transportation expenses49,630
 54,915
 156,590
 164,250
13,723
  25,972
 41,994
Marketing expenses12,191
 9,359
 35,784
 47,359
2,539
  4,820
 7,833
General and administrative expenses50,202
 60,113
 196,377
 237,731
10,411
  71,745
 83,720
Exploration costs4
 3,072
 2,745
 4,032
55
  93
 2,693
Depreciation, depletion and amortization142,448
 207,218
 449,677
 637,964
21,362
  56,484
 105,215
Impairment of long-lived assets41,728
 2,255,080
 1,195,632
 2,787,697

  
 123,316
Taxes, other than income taxes15,383
 46,238
 80,297
 158,317
7,502
  15,747
 19,754
(Gains) losses on sale of assets and other, net1,940
 (166,980) 5,959
 (197,263)
Losses on sale of assets and other, net445
  672
 1,269
430,996
 2,623,101
 2,493,719
 4,307,846
83,203
  228,757
 474,181
Other income and (expenses):             
Interest expense, net of amounts capitalized(40,105) (138,383) (213,758) (427,584)(4,917)  (18,406) (85,267)
Gain on extinguishment of debt
 197,741
 
 213,527
Other, net(269) (1,701) (1,437) (10,060)(388)  (149) 68
(40,374) 57,657
 (215,195) (224,117)(5,305)  (18,555) (85,199)
Reorganization items, net(116,276) 
 418,608
 
(2,565)  2,331,189
 
Loss before income taxes(201,981) (1,567,140) (1,334,479) (2,295,284)
Income (loss) from continuing operations before income taxes(10,640)  2,396,895
 (212,681)
Income tax expense (benefit)(3,616) 2,177
 3,140
 (7,680)(3,384)  (166) 10,246
Net loss$(198,365) $(1,569,317) $(1,337,619) $(2,287,604)
Income (loss) from continuing operations(7,256)  2,397,061
 (222,927)
Loss from discontinued operations, net of income taxes
  
 (1,124,819)
Net income (loss)$(7,256)  $2,397,061
 $(1,347,746)
             
Net loss per unit:       
Basic$(0.56) $(4.47) $(3.79) $(6.72)
Diluted$(0.56) $(4.47) $(3.79) $(6.72)
Weighted average units outstanding:       
Basic352,792
 350,695
 352,606
 340,831
Diluted352,792
 350,695
 352,606
 340,831
             
Distributions declared per unit$
 $0.313
 $
 $0.938
Basic and diluted income (loss) per share/unit – continuing operations$(0.08)  $6.79
 $(0.64)
Basic and diluted loss per share/unit – discontinued operations$
  $
 $(3.19)
Basic and diluted net income (loss) per share/unit$(0.08)  $6.79
 $(3.83)
Basic and diluted weighted average shares/units outstanding89,848
  352,792
 352,234
The accompanying notes are an integral part of these condensed consolidated financial statements.

LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)INC.
CONDENSED CONSOLIDATED STATEMENT OF UNITHOLDERS’ DEFICITEQUITY (PREDECESSOR)
(Unaudited)
 Units Unitholders’ Capital Accumulated Deficit Total Unitholders’ Deficit
 (in thousands)
        
December 31, 2015355,017
 $5,343,116
 $(5,612,017) $(268,901)
Issuance of units125
 
 
 
Unit-based compensation expenses  24,514
 
 24,514
Other  (353) 
 (353)
Net loss  
 (1,337,619) (1,337,619)
September 30, 2016355,142
 $5,367,277
 $(6,949,636) $(1,582,359)
 Units Unitholders’ Capital Accumulated Deficit Total Unitholders’ Capital (Deficit)
 (in thousands)
        
December 31, 2016 (Predecessor)
352,792
 $5,386,885
 $(7,783,873) $(2,396,988)
Net income  
 2,397,061
 2,397,061
Other  (73) 
 (73)
February 28, 2017 (Predecessor)
352,792
 5,386,812
 (5,386,812) 
Cancellation of predecessor equity(352,792) (5,386,812) 5,386,812
 
February 28, 2017 (Predecessor)

 $
 $
 $
CONDENSED CONSOLIDATED STATEMENT OF EQUITY (SUCCESSOR)
(Unaudited)
 Class A Common Stock Additional Paid-in Capital Accumulated Deficit Total Stockholders’ Equity
 Shares Amount   
 (in thousands)
          
Issuances of successor Class A common stock89,230
 $89
 $2,021,142
 $
 $2,021,231
Share-based compensation expenses  
 13,750
 
 13,750
February 28, 2017 (Successor)
89,230
 89
 2,034,892
 
 2,034,981
Net loss  
 
 (7,256) (7,256)
Issuances of successor Class A common stock4
 
 
 
 
Share-based compensation expenses  
 1,135
 
 1,135
Other  
 (36) 
 (36)
March 31, 2017 (Successor)
89,234
 $89
 $2,035,991
 $(7,256) $2,028,824
The accompanying notes are an integral part of these condensed consolidated financial statements.

4

Table of Contents
LINN ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)


 Successor  Predecessor
 One Month Ended March 31, 2017  Two Months Ended February 28, 2017 Three Months Ended March 31, 2016
(in thousands)      
Cash flow from operating activities:      
Net income (loss)$(7,256)  $2,397,061
 $(1,347,746)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:      
Loss from discontinued operations
  
 1,124,819
Depreciation, depletion and amortization21,362
  56,484
 105,215
Impairment of long-lived assets
  
 123,316
Deferred income taxes(3,384)  (166) 9,422
Noncash (gains) losses on oil and natural gas derivatives17,741
  (104,263) 225,258
Share-based compensation expenses4,177
  50,255
 12,425
Amortization and write-off of deferred financing fees3
  1,338
 4,676
Losses on sale of assets and other, net345
  1,069
 2,226
Reorganization items, net
  (2,359,364) 
Changes in assets and liabilities:      
(Increase) decrease in accounts receivable – trade, net26,614
  (7,216) (16,082)
(Increase) decrease in other assets(2,620)  402
 (8,225)
Increase in restricted cash
  (80,164) 
Increase (decrease) in accounts payable and accrued expenses(43,476)  20,949
 (630)
Increase in other liabilities4,187
  2,801
 35,713
Net cash provided by (used in) operating activities – continuing operations17,693
  (20,814) 270,387
Net cash provided by operating activities – discontinued operations
  
 20,641
Net cash provided by (used in) operating activities17,693
  (20,814) 291,028
       
Cash flow from investing activities:      
Development of oil and natural gas properties(20,244)  (50,739) (70,407)
Purchases of other property and equipment(2,466)  (7,851) (6,404)
Proceeds from sale of properties and equipment and other326
  (166) (280)
Net cash used in investing activities – continuing operations(22,384)  (58,756) (77,091)
Net cash used in investing activities – discontinued operations
  
 (14,330)
Net cash used in investing activities(22,384)  (58,756) (91,421)
       

5

Table of Contents
LINN ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
(Unaudited)

 Successor  Predecessor
 One Month Ended March 31, 2017  Two Months Ended February 28, 2017 Three Months Ended March 31, 2016
(in thousands)      
Cash flow from financing activities:      
Proceeds from rights offering, net
  514,069
 
Proceeds from borrowings30,000
  
 978,500
Repayments of debt(96,250)  (1,038,986) (100,000)
Payment to holders of claims under the second lien notes
  (30,000) 
Other17,658
  (6,015) (20,719)
Net cash provided by (used in) financing activities – continuing operations(48,592)  (560,932) 857,781
Net cash from financing activities – discontinued operations
  
 
Net cash provided by (used in) financing activities(48,592)  (560,932) 857,781
       
Net increase (decrease) in cash and cash equivalents(53,283)  (640,502) 1,057,388
Cash and cash equivalents:      
Beginning54,355
  694,857
 2,168
Ending1,072
  54,355
 1,059,556
Less cash and cash equivalents of discontinued operations at end of period
  
 (7,334)
Ending – continuing operations$1,072
  $54,355
 $1,052,222
The accompanying notes are an integral part of these condensed consolidated financial statements.

LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Nine Months Ended
September 30,
 2016 2015
 (in thousands)
Cash flow from operating activities:   
Net loss$(1,337,619) $(2,287,604)
Adjustments to reconcile net loss to net cash provided by operating activities:   
Depreciation, depletion and amortization449,677
 637,964
Impairment of long-lived assets1,195,632
 2,787,697
Unit-based compensation expenses24,514
 47,918
Gain on extinguishment of debt
 (213,527)
Amortization and write-off of deferred financing fees12,514
 23,798
(Gains) losses on sale of assets and other, net4,660
 (193,768)
Deferred income taxes902
 (8,263)
Reorganization items, net(462,965) 
Derivatives activities:   
Total (gains) losses77,138
 (785,520)
Cash settlements508,082
 858,368
Cash settlements on canceled derivatives358,536
 
Changes in assets and liabilities:   
(Increase) decrease in accounts receivable – trade, net(3,750) 207,062
(Increase) decrease in other assets(20,286) 2,683
Increase (decrease) in accounts payable and accrued expenses55,172
 (36,626)
Increase (decrease) in other liabilities22,985
 (5,413)
Net cash provided by operating activities885,192
 1,034,769
    
Cash flow from investing activities:   
Development of oil and natural gas properties(142,396) (503,206)
Purchases of other property and equipment(36,936) (51,529)
Decrease in restricted cash53,418
 
Proceeds from sale of properties and equipment and other(3,149) 364,195
Net cash used in investing activities(129,063) (190,540)
    
Cash flow from financing activities:   
Proceeds from sale of units
 233,427
Proceeds from borrowings978,500
 1,405,000
Repayments of debt(914,911) (1,701,909)
Distributions to unitholders
 (323,878)
Financing fees and offering costs(692) (8,774)
Excess tax benefit from unit-based compensation
 (9,467)
Other(20,687) (95,631)
Net cash provided by (used in) financing activities42,210
 (501,232)
    
Net increase in cash and cash equivalents798,339
 342,997
Cash and cash equivalents:   
Beginning2,168
 1,809
Ending$800,507
 $344,806
The accompanying notes are an integral part of these condensed consolidated financial statements.

LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 – Basis of Presentation
Nature of Business
When referring to Linn Energy, LLCInc. (formerly known as Linn Energy, LLC) (“LINNSuccessor,” “LINN Energy” or the “Company”), the intent is to refer to LINN Energy, a newly formed Delaware corporation, and its consolidated subsidiaries as a whole or on an individual basis, depending on the context in which the statements are made. Linn Energy, Inc. is a successor issuer of Linn Energy, LLC pursuant to Rule 15d‑5 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). When referring to the “Predecessor” in reference to the period prior to the emergence from bankruptcy, the intent is to refer to Linn Energy, LLC, the predecessor that will be dissolved following the effective date of the Plan (as defined below) and resolution of all outstanding claims, and its consolidated subsidiaries as a whole or on an individual basis, depending on the context in which the statements are made.
The reference to “Berry” herein refers to Berry Petroleum Company, LLC, which was an indirect 100% wholly owned subsidiary of the Predecessor through February 28, 2017. Berry was deconsolidated effective December 3, 2016 (see Note 4). The reference to “LinnCo” herein refers to LinnCo, LLC, which was an affiliate of the Predecessor.
Nature of Business
LINN Energy is an independent oil and natural gas company.company that was formed in February 2017, in connection with the reorganization of the Predecessor. The Predecessor was publicly traded from January 2006 to February 2017. As discussed further in Note 2, on May 11, 2016 (the “Petition Date”), Linn Energy, LLC, certain of its direct and indirect subsidiaries, and LinnCo (collectively, the “LINN Debtors”) and Berry (collectively with the LINN Energy’s mission is to acquire, developDebtors, the “Debtors”), filed voluntary petitions (“Bankruptcy Petitions”) for relief under Chapter 11 of the U.S. Bankruptcy Code (“Bankruptcy Code”) in the U.S. Bankruptcy Court for the Southern District of Texas (“Bankruptcy Court”). The Debtors’ Chapter 11 cases were administered jointly under the caption In re Linn Energy, LLC, et al., Case No. 16-60040. During the pendency of the Chapter 11 proceedings, the Debtors operated their businesses as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and maximize cash flowin accordance with the applicable provisions of the Bankruptcy Code. The Company emerged from a growing portfolio of long-life oil and natural gas assets. bankruptcy effective February 28, 2017.
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, California, Michigan/Illinois and 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, 2015.2016. 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 Redeemable noncontrolling interests on the condensed consolidated balance sheet as of March 31, 2017, relate to “Berry” herein refers to Berry Petroleum Company,the noncontrolling Class B unitholders of the Company’s subsidiary, Linn Energy Holdco 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.(“Holdco”). See Note 12 and Note 17 for additional information.
The condensed consolidated financial statements for previous periods include certain reclassifications that were made to conform to current presentation. In addition, the Company has classified the results of operations and cash flows of Berry as

7

Table of Contents
LINN ENERGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued
(Unaudited)

discontinued operations on its condensed consolidated statement of operations and condensed consolidated statement of cash flows for the three months ended March 31, 2016. Such reclassifications have no impact on previously reported net income (loss), unitholders’ 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 iswill continue as a going concern and reflect the application of Accounting Standards Codification 852 “Reorganizations” (“ASC 852”). ASC 852 requires that the financial statements, for periods subsequent to the Chapter 11 filing, distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Accordingly, certain expenses, gains and losses that are realized or incurred in the bankruptcy proceedings are recorded in “reorganization items, net” on the Company’s condensed consolidated statements of operations. In addition, prepetition unsecured and under-secured obligations that may be impacted by the bankruptcy reorganization process have been classified as “liabilities subject to compromise” on the Company’s condensed consolidated balance sheet at September 30,December 31, 2016. These liabilities are reported at the amounts expected to be allowed as claims by the Bankruptcy Court, although they may be settled for less.
The accompanying condensed consolidatedUpon emergence from bankruptcy on February 28, 2017, the Company adopted fresh start accounting which resulted in the Company becoming a new entity for financial statements do not purport to reflect or provide for the consequencesreporting purposes. As a result of the Chapter 11 proceedings. In particular,application of fresh start accounting and the effects of the implementation of the plan of reorganization, the condensed consolidated financial statements doon or after February 28, 2017, are not purport to show: (i)comparable with the realizable

5

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 subjectprior 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.that date. See Note 3 for additional information.
Use of Estimates
The preparation of the accompanying condensed consolidated financial statements in conformity with GAAP requires management of the Company to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amount of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. The estimates that are particularly significant to the financial statements include estimates of the Company’s reserves of oil, natural gas and natural gas liquids (“NGL”), future cash flows from oil and natural gas properties, depreciation, depletion and amortization, asset retirement obligations, certain revenues and operating expenses, fair values of commodity derivatives and fair values of assets acquired and liabilities assumed. In addition, as part of fresh start accounting, the Company made estimates and assumptions related to its reorganization value, liabilities subject to compromise, the fair value of assets and liabilities recorded as a result of the adoption of fresh start accounting and income taxes.
As fair value is a market-based measurement, it is determined based on the assumptions that market participants would use. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. Such estimates and assumptions are adjusted when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ from these estimates. Any changes in estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods.
Recently Issued Accounting Standards
In MarchNovember 2016, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) that is intended to address diversity in the classification and presentation of changes in restricted cash on the statement of cash flows. This ASU will be applied retrospectively as of the date of adoption and is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years (early adoption permitted). The Company is currently evaluating the impact of the adoption of this ASU on its financial statements and related disclosures. The adoption of this ASU is expected to result in the inclusion of restricted cash in the beginning and ending balances of cash on the statements of cash

8

Table of Contents
LINN ENERGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued
(Unaudited)

flows and disclosure reconciling cash and cash equivalents presented on the consolidated balance sheets to cash, cash equivalents and restricted cash on the consolidated statements of cash flows.
In March 2016, the FASB issued an 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 ofThe Company adopted 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.on January 1, 2017. The Company is currently evaluating the impact of the adoption of this ASU had no impact on its consolidatedthe Company’s historical financial statements andor related disclosures. In the future, this ASU will result in excess tax benefits, which were previously recorded in equity on the balance sheets and classified as financing activities on the statements of cash flows, being recorded to the statements of operations and classified as operating activities on the statements of cash flows. Additionally, the Company elected to begin accounting for forfeitures as they occur.
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 on the balance sheet as a direct deduction from the

6

Table of Contents
LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued
(Unaudited)

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 the reclassification of approximately $37 million of unamortized deferred financing fees (which excludes deferred financing fees associated with the Company’s Credit Facilities, as defined in 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 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 expectexpects the adoption of this ASU to have a material impact on its consolidated financial statements orbalance sheets resulting from an increase in both assets and liabilities related disclosures.to the Company’s leasing activities.
In May 2014, the FASB issued an ASU that is intended to improve and converge the financial reporting requirements for revenue from contracts with customers. This ASU 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 does not plan to early adopt this ASU. The Company is currently evaluating the impact if any, of the adoption of this ASU on its consolidated financial statements and related disclosures. The Company expects to use the cumulative-effect transition method, has completed an initial review of its contracts and is developing accounting policies to address the provisions of the ASU, but has not finalized any estimates of the potential impacts.
Note 2 – Emergence From Voluntary Reorganization Under Chapter 11 Proceedings, Ability to Continue as a Going Concern and Covenant Violations
Chapter 11 Proceedings
On the Petition Date, the Debtors filed Bankruptcy Petitions for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. The Debtors’ Chapter 11 cases are beingwere administered jointly under the caption In re Linn Energy, LLC.,LLC, et al., Case No. 16‑60040.
On December 3, 2016, the LINN Debtors filed the Amended Joint Chapter 11 Plan of Reorganization of Linn Energy, LLC and Its Debtor Affiliates Other Than Linn Acquisition Company, LLC (“LAC”) and Berry Petroleum Company, LLC (the “Plan”). The LINN Debtors are operating their businesses as “debtors-in-possession” undersubsequently filed amended versions of the jurisdictionPlan with the Bankruptcy Court.
On December 13, 2016, LAC and Berry filed the Amended Joint Chapter 11 Plan of Reorganization of Linn Acquisition Company, LLC and Berry Petroleum Company, LLC (the “Berry Plan” and together with the Plan, the “Plans”). LAC and Berry subsequently filed amended versions of the Berry Plan with the Bankruptcy Court.
On January 27, 2017, the Bankruptcy Court entered an order approving and confirming the Plans (the “Confirmation Order”). On February 28, 2017 (the “Effective Date”), the Debtors satisfied the conditions to effectiveness of the respective Plans, the Plans became effective in accordance with their respective terms and LINN Energy and Berry emerged from bankruptcy as stand-alone, unaffiliated entities.
Plan of Reorganization
In accordance with the applicable provisionsPlan, on the Effective Date:
The Predecessor transferred all of its assets, including equity interests in its subsidiaries, other than LAC and Berry, to Linn Energy Holdco II LLC (“Holdco II”), a newly formed subsidiary of the Bankruptcy Code. The Bankruptcy Court has granted certain relief requested byPredecessor and the Debtors, allowingborrower under the Company to use its cash to fund the Chapter 11 proceedings, pursuant to an agreementCredit Agreement (“Successor Credit Facility”) entered into in connection with the first lien lenders, and giving the Company the authority to, among other things, continue to pay employee wages and benefits without interruption, to utilize its current cash management system and to make royalty payments. During the pendency of the Chapter 11 proceedings, all transactions outside the ordinary course of the Company’s business require prior approval of the Bankruptcy Court. For goods and services provided following the Petition Date, the Company intends to pay vendorsreorganization, 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 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 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 to the Consenting Bank Creditors, vote their claims in favor of the 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 Bank RSA. The Bank RSA is subject to termination if the effective date of the Plan has notexchange for

79

Table of Contents
LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued
(Unaudited)

occurred within 250 days100% of the Petition Date. There canequity of Holdco II and the issuance of interests in the Successor Credit Facility to certain of the Predecessor’s creditors in partial satisfaction of their claims (the “Contribution”). Immediately following the Contribution, the Predecessor transferred 100% of the equity interests in Holdco II to the Successor in exchange for approximately $530 million in cash and an amount of equity securities in the Successor not to exceed 49.90% of the outstanding equity interests of the Successor (the “Disposition”), which the Predecessor distributed to certain of its creditors in satisfaction of their claims. Contemporaneously with the reorganization transactions and pursuant to the Plan, (i) LAC assigned all of its rights, title and interest in the membership interests of Berry to Berry Petroleum Corporation, (ii) all of the equity interests in LAC and the Predecessor were canceled and (iii) LAC and the Predecessor commenced liquidation, which is expected to be no assurance thatcompleted following the restructuring transactions contemplated byresolution of the Bank RSA will be consummated.respective companies’ outstanding claims.
Restructuring SupportThe holders of claims under the Predecessor’s Sixth Amended and Restated Credit Agreement (“Predecessor Credit Facility”) received a full recovery, consisting of a cash paydown and their pro rata share of the $1.7 billion Successor Credit Facility. As a result, all outstanding obligations under the Predecessor Credit Facility were canceled.
On October 7, 2016, the LINN DebtorsHoldco II, as borrower, entered into the Successor Credit Facility with the holders of claims under the Predecessor Credit Facility, as lenders, and Wells Fargo Bank, National Association, as administrative agent, providing for a restructuring support agreement (“Original LINN RSA”)new reserve-based revolving loan with (i) certainup to $1.4 billion in borrowing commitments and a new term loan in an original principal amount of $300 million. For additional information about the Successor Credit Facility, see Note 6.
The holders of the Company’s 12.00% senior secured second lien notes due December 2020 (such notes, the(the “Second Lien Notes,”Notes”) received their pro rata share of (i) 17,678,889 shares of Class A common stock; (ii) certain rights to purchase shares of Class A common stock in the rights offering, as described below; and such holders, the “Consenting Second Lien Noteholders”) and (ii) certain(iii) $30 million in cash. The holders of the Company’s unsecured6.50% senior notes (suchdue May 2019, 6.25% senior notes due November 2019, 8.625% senior notes due 2020, 7.75% senior notes due February 2021 and 6.50% senior notes due September 2021 (collectively, the “Unsecured Notes,”Notes”) received their pro rata share of (i) 26,724,396 shares of Class A common stock; and such holders(ii) certain rights to purchase shares of Class A common stock in the rights offering (as described below). As a result, all outstanding obligations under the Second Lien Notes and the Unsecured Notes and the “Consenting Unsecured Noteholders,” and togetherindentures governing such Consenting Unsecured Noteholders withobligations were canceled.
The holders of general unsecured claims (other than claims relating to the Consenting Second Lien Noteholders,Notes and the “Consenting Noteholders”).
On October 21, 2016,Unsecured Notes) against the LINN Debtors (the “LINN Unsecured Claims”) received their pro rata share of cash from two cash distribution pools totaling $40 million, as divided between a $2.3 million cash distribution pool for the payment in full of allowed LINN Unsecured Claims in an amount equal to $2,500 or less (and larger claims for which the holders irrevocably agreed to reduce such claims to $2,500), and a $37.7 million cash distribution pool for pro rata distributions to all remaining allowed general LINN Unsecured Claims. As a result, all outstanding LINN Unsecured Claims were fully satisfied, settled, released and discharged as of the Effective Date.
All units of the Predecessor that were issued and outstanding immediately prior to the Effective Date were extinguished without recovery. On the Effective Date, the Successor issued in the aggregate 89,229,892 shares of Class A common stock. No cash was raised from the issuance of the Class A common stock on account of claims held by the Predecessor’s creditors.
The Successor entered into a registration rights agreement with certain parties, pursuant to which the 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 togetherCompany agreed to, among other things, file a registration statement with the Consenting Noteholders,Securities and Exchange Commission within 60 days of the “Consenting LINN Creditors”) underEffective Date covering the LINN Credit Facility. The LINN RSA amendsoffer and restatesresale of “Registrable Securities” (as defined therein).
By operation of the Original LINN RSAPlan and replaces the Bank RSA with respect toConfirmation Order, the terms of the restructuringPredecessor’s board of directors expired as of the LINN Debtors.Effective Date. The Bank RSA remains in full force and effect with respect to the restructuringSuccessor formed a new board of Berry and Linn Acquisition Company, LLC.
The LINN RSA sets forth, subject to certain conditions, the commitmentdirectors, consisting of the LINN Debtors and the Consenting LINN Creditors to support a comprehensive restructuringChief Executive Officer 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 breachesPredecessor, one director selected by the parties under the Successor and five directors selected by a six-person selection committee.

10

Table of Contents
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.ENERGY, INC.
Magnitude of Potential ClaimsNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued
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.(Unaudited)

Liabilities Subject to Compromise
The Company’sPredecessor’s condensed consolidated balance sheet as of December 31, 2016, includes amounts classified as “liabilities subject to compromise,” which represent prepetition liabilities that have beenwere allowed, or that the Company anticipates willestimated would 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.

8

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:
Predecessor
September 30, 2016December 31, 2016
(in thousands)(in thousands)
  
Accounts payable and accrued expenses$156,708
$137,692
Accrued interest payable159,422
144,184
Debt4,856,929
4,023,129
Liabilities subject to compromise$5,173,059
$4,305,005
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 arewere determined.
The following table summarizes the components of reorganization items included on the condensed consolidated statements of operations:
Three Months Ended September 30, 2016 Nine Months Ended September 30, 2016Successor  Predecessor
(in thousands)One Month Ended March 31, 2017  Two Months Ended February 28, 2017
   
(in thousands)    
Gain on settlement of liabilities subject to compromise$
  $3,724,750
Recognition of an additional claim for the Predecessor’s Second Lien Notes settlement
  (1,000,000)
Fresh start valuation adjustments
  (591,525)
Income tax benefit related to implementation of the Plan
  264,889
Legal and other professional advisory fees$(25,604) $(46,114)(2,570)  (46,961)
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)
  (6,915)
Other2,285
 2,692
5
  (13,049)
Reorganization items, net$(116,276) $418,608
$(2,565)  $2,331,189
(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
Note 3 – Fresh Start Accounting
Upon the Company’s emergence from Chapter 11 bankruptcy, it adopted fresh start accounting in accordance with the provisions of Executory Contracts
SubjectASC 852 which resulted in the Company becoming a new entity for financial reporting purposes. In accordance with ASC 852, the Company was required to certain exceptions, underadopt fresh start accounting upon its emergence from Chapter 11 because (i) the Bankruptcy Code, the Debtors may assume, assign or reject certain executory contracts and unexpired leases subject to the approvalholders of existing voting ownership interests 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 anyPredecessor received less than 50% of the Debtors in this Quarterly Report on Form 10-Q, including where applicable a quantificationvoting shares of the Successor and (ii) the reorganization value of the Company’s obligations under any such executory contract or unexpired leaseassets immediately prior to confirmation of the Plan was less than the total of all post-petition liabilities and allowed claims.
Upon adoption of fresh start accounting, the reorganization value derived from the enterprise value as disclosed in the Plan was allocated to the Company’s assets and liabilities based on their fair values (except for deferred income taxes) in accordance with the applicable Debtor, is qualified by any overriding

911

Table of Contents
LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued
(Unaudited)

rejection rightsASC 805 “Business Combinations” (“ASC 805”). The amount of deferred income taxes recorded was determined in accordance with ASC 740 “Income Taxes” (“ASC 740”). The Effective Date fair values of the Company has underCompany’s assets and liabilities differed materially from their recorded values as reflected on the Bankruptcy Code. Further, nothing herein is or shall be deemed an admission with respect to any claim amounts or calculations arising fromhistorical balance sheet. The effects of the rejection of any executory contract or unexpired leasePlan and the Debtors expressly preserve allapplication of their rights with respect thereto.
Effectfresh start accounting were reflected in the condensed consolidated financial statements as of Filing on CreditorsFebruary 28, 2017, 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 defaultsrelated adjustments thereto were recorded on the Debtors’ debt obligations, creditors are stayed from taking any actions againststatement of operations for the Debtors astwo months ended February 28, 2017.
As a result of such defaults, subjectthe adoption of fresh start accounting and the effects of the implementation of the Plan, the Company’s condensed consolidated financial statements subsequent to certain limited exceptions permitted byFebruary 28, 2017, are not comparable to its condensed consolidated financial statements prior to February 28, 2017. References to “Successor” relate to the Bankruptcy Code. financial position and results of operations of the reorganized Company as of and subsequent to February 28, 2017. References to “Predecessor” relate to the financial position of the Company prior to, and results of operations through and including, February 28, 2017.
The Company did not record interest expenseCompany’s condensed consolidated financial statements and related footnotes are presented with a black line division, which delineates the lack of comparability between amounts presented after February 28, 2017, and amounts presented on its Second Lien Notes or senior notesprior to February 28, 2017. The Company’s financial results for future periods following the three months ended September 30, 2016, or forapplication of fresh start accounting will be different from historical trends and the period from May 12, 2016, through September 30, 2016. For those periods, unrecorded contractual interest was approximately $100 million and $154 million, respectively.differences may be material.
Reorganization Value
Under ASC 852, the Bankruptcy Code, unless creditors agree otherwise, prepetition liabilities and postpetition liabilities mustSuccessor determined a value to be satisfied in full beforeassigned to the holdersequity 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 givenemerging entity 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 accountdate of their interests and cancellationadoption of their holdings.
Process forfresh start accounting. The 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 orderestimated an enterprise value of $2.35 billion. The Plan enterprise value was prepared using an asset based methodology, as discussed further below. The enterprise value was then adjusted to become effective. A Plan would be accepted by holdersdetermine the equity value of claims againstthe Successor of approximately $2.03 billion. Adjustments to determine the equity value are presented below (in thousands):
Plan confirmed enterprise value$2,350,000
Fair value of debt(900,000)
Fair value of subsequently determined tax attributes621,486
Fair value of vested Class B units(36,505)
Value of Successor’s stockholders’ equity$2,034,981
The subsequently determined tax attributes were primarily the result of the conversion from a limited liability company to a C corporation and equity interestsdifferences in the Debtors if (i) at least one-half in numberaccounting basis 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 more than in full.
On October 21, 2016, the Debtors filed a proposed Plan with the Bankruptcy Court.
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, eachtax basis of the Company’s Credit Facilities isoil and natural gas properties as of the Effective Date. The Class B units are incentive interest awards that were granted on the Effective Date by Holdco to certain members of its management (see Note 12), and the associated fair value was recorded as a liability of approximately $7 million in “other accrued liabilities” and temporary equity of approximately $29 million in “redeemable noncontrolling interests” on the condensed consolidated balance sheet at February 28, 2017.
The Company's principal assets are its oil and natural gas properties. The fair values of oil and natural gas properties were estimated using valuation techniques consistent with the income approach, converting future cash flows to a single discounted amount. Significant inputs used to determine the fair values of properties include estimates of: (i) reserves; (ii) future operating and development costs; (iii) future commodity prices; and (iv) a market-based weighted average cost of capital rate. These inputs require significant judgments and estimates by the Company’s management at the time of the valuation and are the most sensitive and subject to scheduled redeterminationschange. The underlying commodity prices embedded in the Company’s estimated cash flows are the product of its borrowing base, semi-annually, based primarily on reserve reports using lender commoditya process that begins with New York Mercantile Exchange (“NYMEX”) forward curve pricing, adjusted for estimated location and quality differentials, as well as other factors that Company management believes will impact realizable prices.
See below under “Fresh Start Adjustments” for additional information regarding assumptions used in the valuation of the Company's various other significant assets and liabilities.

1012

Table of Contents
LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued
(Unaudited)

price expectations at such time. Condensed Consolidated Balance Sheet
The lenders under the Credit Facilities agreed to defer the April 2016 borrowing base redeterminations to May 11, 2016. Continued low commodity prices, reductionsadjustments included in the Company’s capital budget andfollowing fresh start condensed consolidated balance sheet reflect the resulting reserve write-downs, along with the terminationeffects of the Company’s hedges, were expected to adversely impact upcoming redeterminationstransactions contemplated by the Plan and have a significant negative impactexecuted by the Company 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 commitmentsEffective Date (reflected 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,column “Reorganization Adjustments”) as well as the receipt of a going concern explanatory paragraphfair value and other required accounting adjustments resulting from the Company’s independent registered publicadoption of fresh start accounting firm on(reflected in 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 forcolumn “Fresh Start Adjustments”). The explanatory notes provide 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 amendmentinformation with regard to the Berry Credit Facility provided Berry with accessadjustments recorded, the methods used to previously restricted cash of $45 million in order to fund ordinary course operations.
As a condition to closingdetermine 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 Facilityfair values 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.significant assumptions.

11
 As of February 28, 2017
 Predecessor 
Reorganization Adjustments (1)
  Fresh Start Adjustments  Successor
 (in thousands)
ASSETS         
Current assets:         
Cash and cash equivalents$734,166
 $(679,811)
(2) 
 $
  $54,355
Accounts receivable – trade, net212,099
 
  (7,808)
(16) 
 204,291
Derivative instruments15,391
 
  
  15,391
Restricted cash1,602
 80,164
(3) 
 
  81,766
Other current assets106,426
 (15,983)
(4) 
 1,780
(17) 
 92,223
Total current assets1,069,684
 (615,630)  (6,028)  448,026
          
Noncurrent assets:         
Oil and natural gas properties (successful efforts method)13,269,035
 
  (11,082,258)
(18) 
 2,186,777
Less accumulated depletion and amortization(10,044,240) 
  10,044,240
(18) 
 
 3,224,795
 
  (1,038,018)  2,186,777
          
Other property and equipment641,586
 
  (197,653)
(19) 
 443,933
Less accumulated depreciation(230,952) 
  230,952
(19) 
 
 410,634
 
  33,299
  443,933
          
Derivative instruments4,492
 
  
  4,492
Deferred income taxes
 264,889
(5) 
 356,597
(5) 
 621,486
Other noncurrent assets15,003
 151
(6) 
 8,139
(20) 
 23,293
 19,495
 265,040
  364,736
  649,271
Total noncurrent assets3,654,924
 265,040
  (639,983)  3,279,981
Total assets$4,724,608
 $(350,590)  $(646,011)  $3,728,007
          
LIABILITIES AND EQUITY (DEFICIT)        
Current liabilities:         
Accounts payable and accrued expenses$324,585
 $41,266
(7) 
 $(2,351)
(21) 
 $363,500
Derivative instruments7,361
 
  
  7,361
Current portion of long-term debt, net1,937,822
 (1,912,822)
(8) 
 
  25,000
Other accrued liabilities41,251
 (1,026)
(9) 
 1,104
(22) 
 41,329
Total current liabilities2,311,019
 (1,872,582)  (1,247)  437,190
          
Derivative instruments2,116
 
  
  2,116
Long-term debt
 875,000
(10) 
 
  875,000
Other noncurrent liabilities402,776
 (167)
(11) 
 (53,239)
(23) 
 349,370
Liabilities subject to compromise4,301,912
 (4,301,912)
(12) 
 
  

13

Table of Contents
LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued
(Unaudited)

The filing
 As of February 28, 2017
 Predecessor 
Reorganization Adjustments (1)
  Fresh Start Adjustments  Successor
          
Temporary equity:         
Redeemable noncontrolling interests
 29,350
(13) 
 
  29,350
Stockholders’/unitholders’ equity (deficit):         
Predecessor units issued and outstanding5,386,812
 (5,386,812)
(14) 
 
  
Predecessor accumulated deficit(7,680,027) 2,884,740
(15) 
 4,795,287
(24) 
 
Successor Class A common stock
 89
(14) 
 
  89
Successor additional paid-in capital
 7,421,704
(14) 
 (5,386,812)
(24) 
 2,034,892
Successor retained earnings
 
  
  
Total stockholders’/unitholders’ equity (deficit)(2,293,215) 4,919,721
  (591,525)  2,034,981
Total liabilities and equity (deficit)$4,724,608
 $(350,590)  $(646,011)  $3,728,007
Reorganization Adjustments:
1)Represent amounts recorded as of the Effective Date for the implementation of the Plan, including, among other items, settlement of the Predecessor’s liabilities subject to compromise, repayment of certain of the Predecessor’s debt, cancellation of the Predecessor’s equity, issuances of the Successor’s Class A common stock, proceeds received from the Successor’s rights offering and issuance of the Successor’s debt.
2)Changes in cash and cash equivalents included the following:
(in thousands) 
Borrowings under the Successor’s revolving loan$600,000
Borrowings under the Successor’s term loan300,000
Proceeds from rights offering530,019
Removal of restriction on cash balance1,602
Payment to holders of claims under the Predecessor Credit Facility(1,947,357)
Payment to holders of claims under the Second Lien Notes(30,000)
Payment of Berry’s ad valorem taxes(23,366)
Payment of the rights offering backstop commitment premium(15,900)
Payment of professional fees(13,043)
Funding of the professional fees escrow account(41,766)
Funding of the general unsecured claims cash distribution pool(40,000)
Changes in cash and cash equivalents$(679,811)
3)Primarily reflects the transfer to restricted cash to fund the Predecessor’s professional fees escrow account and general unsecured claims cash distribution pool.
4)Primarily reflects the write-off of the Predecessor’s deferred financing fees.
5)Reflects deferred tax assets recorded as of the Effective Date as determined in accordance with ASC 740. The deferred tax assets were primarily the result of the conversion from a limited liability company to a C corporation and differences in the accounting basis and tax basis of the Company’s oil and natural gas properties as of the Effective Date.

14

Table of Contents
LINN ENERGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued
(Unaudited)

6)Reflects the capitalization of deferred financing fees related to the Successor’s revolving loan.
7)Net increase in accounts payable and accrued expenses reflects:
(in thousands) 
Recognition of payables for the professional fees escrow account$41,766
Recognition of payables for the general unsecured claims cash distribution pool40,000
Payment of professional fees(17,130)
Payment of Berry’s ad valorem taxes(23,366)
Other(4)
Net increase in accounts payable and accrued expenses$41,266
8)Reflects the settlement of the Predecessor Credit Facility through repayment of approximately $1.9 billion, net of the write-off of deferred financing fees and an increase of $25 million for the current portion of the Successor’s term loan.
9)Reflects a decrease of approximately $8 million for the payment of accrued interest on the Predecessor Credit Facility partially offset by an increase of approximately $7 million related to noncash share-based compensation classified as a liability related to the incentive interest awards issued by Holdco to certain members of its management (see Note 12).
10)Reflects borrowings of $900 million under the Successor Credit Facility, which includes a $600 million revolving loan and a $300 million term loan, net of $25 million for the current portion of the Successor’s term loan.
11)Reflects a reduction in deferred tax liabilities as determined in accordance with ASC 740.
12)Settlement of liabilities subject to compromise and the resulting net gain were determined as follows:
(in thousands) 
Accounts payable and accrued expenses$134,599
Accrued interest payable144,184
Debt4,023,129
Total liabilities subject to compromise4,301,912
Recognition of an additional claim for the Predecessor’s Second Lien Notes settlement1,000,000
Funding of the general unsecured claims cash distribution pool(40,000)
Payment to holders of claims under the Second Lien Notes(30,000)
Issuance of Class A common stock to creditors(1,507,162)
Gain on settlement of liabilities subject to compromise$3,724,750

15

Table of Contents
LINN ENERGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued
(Unaudited)

13)Reflects redeemable noncontrolling interests classified as temporary equity related to the incentive interest awards issued by Holdco to certain members of its management. See Note 12 and Note 17 for additional information.
14)Net increase in capital accounts reflects:
(in thousands) 
Issuance of Class A common stock to creditors$1,507,162
Issuance of Class A common stock pursuant to the rights offering530,019
Payment of the rights offering backstop commitment premium(15,900)
Payment of issuance costs(50)
Share-based compensation expenses13,750
Cancellation of the Predecessor’s units issued and outstanding5,386,812
Par value of Class A common stock(89)
Change in additional paid-in capital7,421,704
Par value of Class A common stock89
Predecessor’s units issued and outstanding(5,386,812)
Net increase in capital accounts$2,034,981
See Note 11 for additional information on the issuances of the Bankruptcy Petitions constituted an eventSuccessor’s equity.
15)Net decrease in accumulated deficit reflects:
(in thousands) 
Recognition of gain on settlement of liabilities subject to compromise$3,724,750
Recognition of an additional claim for the Predecessor’s Second Lien Notes settlement(1,000,000)
Recognition of professional fees(37,680)
Write-off of deferred financing fees(16,728)
Recognition of deferred income taxes264,889
Total reorganization items, net2,935,231
Share-based compensation expenses(50,255)
Other(236)
Net decrease in accumulated deficit$2,884,740
Fresh Start Adjustments:
16)Reflects a change in accounting policy from the entitlements method to the sales method for natural gas production imbalances.
17)Reflects the recognition of intangible assets for the current portion of favorable leases, partially offset by decreases for well equipment inventory and the write-off of historical intangible assets.

16

Table of default that acceleratedContents
LINN ENERGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued
(Unaudited)

18)Reflects a decrease of oil and natural gas properties, based on the methodology discussed above, and the elimination of accumulated depletion and amortization. The following table summarizes the components of oil and natural gas properties as of the Effective Date:
 Successor  Predecessor
 Fair Value  Historical Book Value
(in thousands)    
Proved properties$2,186,777
  $12,258,835
Unproved properties
  1,010,200
 2,186,777
  13,269,035
Less accumulated depletion and amortization
  (10,044,240)
 $2,186,777
  $3,224,795
19)Reflects a decrease of other property and equipment and the elimination of accumulated depreciation. The following table summarizes the components of other property and equipment as of the Effective Date:
 Successor  Predecessor
 Fair Value  Historical Book Value
(in thousands)    
Natural gas plants and pipelines$342,924
  $426,914
Office equipment and furniture39,211
  106,059
Buildings and leasehold improvements32,817
  66,023
Vehicles16,980
  30,760
Land7,747
  3,727
Drilling and other equipment4,254
  8,103
 443,933
  641,586
Less accumulated depreciation
  (230,952)
 $443,933
  $410,634
In estimating the fair value of other property and equipment, the Company used a combination of cost and market approaches. A cost approach was used to value the Company’s obligations undernatural gas plants and pipelines and other operating assets, based on current replacement costs of the Credit Facilities. However, underassets less depreciation based on the Bankruptcy Code,estimated economic useful lives of the creditors under these debt agreements are stayedassets and age of the assets. A market approach was used to value the Company’s vehicles and land, using recent transactions of similar assets to determine the fair value from taking any action againsta market participant perspective.
20)Reflects the recognition of intangible assets for the noncurrent portion of favorable leases, as well as increases in equity method investments and carbon credit allowances. Assets and liabilities for out-of-market contracts were valued based on market terms as of February 28, 2017, and will be amortized over the remaining life of the respective lease. The Company’s equity method investments were valued based on a market approach using a market EBITDA multiple. Carbon credit allowances were valued using a market approach based on trading prices for carbon credits on February 28, 2017.
21)Primarily reflects the write-off of deferred rent partially offset by an increase in carbon emissions liabilities.
22)Reflects an increase of the current portion of asset retirement obligations.
23)Primarily reflects a decrease of approximately $49 million for asset retirement obligations and approximately $5 million for deferred rent, partially offset by an increase of approximately $1 million for carbon emissions liabilities. The fair value of asset retirement obligations were estimated using valuation techniques that convert future cash flows to a single

17

Table of Contents
LINN ENERGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued
(Unaudited)

discounted amount. Significant inputs to the Company asvaluation include estimates of: (i) plug and abandon costs per well based on existing regulatory requirements; (ii) remaining life per well; (iii) future inflation factors; and (iv) a credit-adjusted risk-free interest rate. Carbon emissions liabilities were valued using a market approach based on trading prices for carbon credits on February 28, 2017.
24)Reflects the cumulative impact of the fresh start accounting adjustments discussed above and the elimination of the Predecessor’s accumulated deficit.
Note 4 – Discontinued Operations
On December 3, 2016, LINN Energy filed an amended plan of reorganization that excluded Berry (see Note 2). As a result of its loss of control of Berry, LINN Energy concluded that it was appropriate to deconsolidate Berry effective on the default.
Second Lien Notesaforementioned date. The Company has classified the results of operations and cash flows of Berry as discontinued operations on its condensed consolidated financial statements for the three months ended March 31, 2016.
The indenture governingfollowing table presents summarized financial results of the Second Lien Notes (“Second Lien Indenture”) requiredCompany’s discontinued operations on 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.consolidated statements of operations:
 Predecessor
 Three Months Ended March 31, 2016
 (in thousands)
  
Revenues and other$91,266
Expenses1,196,201
Other income and (expenses)(19,886)
Loss from discontinued operations before income taxes(1,124,821)
Income tax benefit(2)
Loss from discontinued operations, net of income taxes$(1,124,819)
Transition Services and Separation Agreement
On April 4, 2016, the CompanyEffective Date, Berry entered into a settlement agreementTransition Services and Separation Agreement (the “TSSA”) with LINN Energy and certain holdersof its subsidiaries to facilitate the separation of Berry’s operations from LINN Energy’s operations. Pursuant to the TSSA, LINN Energy will continue to provide, or cause to be provided, certain administrative, management, operating, and other services and support to Berry during a transitional period following the Effective Date (the “Transition Services”).
Under the TSSA, Berry will reimburse LINN Energy for any and all reasonable, third-party out-of-pocket costs and expenses, without markup, actually incurred by LINN Energy, to the extent documented, in connection with providing the Transition Services. Additionally, Berry paid to LINN Energy a management fee of $6 million per month, prorated for partial months, during the period from the Effective Date through the last day of the Second Lien Notessecond full calendar month after the Effective Date (the “Transition Period”) and agreed to deliver, and make arrangementswill pay $2.7 million per month, prorated for recordationpartial months, from the first day following the Transition Period through the last day of the mortgages. The Company has since delivered and made arrangements for recordationsecond full calendar month thereafter (the “Accounting Period”). During the Accounting Period, the scope of the mortgages.
Transition Services will be reduced to specified accounting and administrative functions. 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 obligationsTransition Period under the Second Lien Indenture. However, underTSSA ended April 30, 2017, and 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 aAccounting Period ends June 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.2017.

1218

Table of Contents
LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued
(Unaudited)

Note 3 – Unitholders’ 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 had authorized the sale of up to $500 million of units under an at-the-market offering program, with sales of units, if any, to be made under an equity distribution agreement. No sales were made under the equity distribution agreement during the 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 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).
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. 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; 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 45 – Oil and Natural Gas Properties
Oil and Natural Gas Capitalized Costs
As a result of the application of fresh start accounting, the Company recorded its oil and natural gas properties at fair value as of the Effective Date. The fair values of oil and natural gas properties are estimated using valuation techniques consistent with the income approach, converting future cash flows to a single discounted amount. Significant inputs used to determine the fair values of proved and unproved properties include estimates of: (i) reserves; (ii) future operating and development costs; (iii) future commodity prices; and (iv) a market-based weighted average cost of capital rate. These inputs require significant judgments and estimates by the Company’s management at the time of the valuation and are the most sensitive and subject to change. The fair value was estimated using inputs characteristic of a Level 3 fair value measurement. Aggregate capitalized costs related to oil, natural gas and NGL production activities with applicable accumulated depletion and amortization are presented below:
 September 30,
2016
 December 31,
2015
 (in thousands)
Proved properties:   
Leasehold acquisition$13,371,861
 $13,361,171
Development3,043,225
 2,976,643
Unproved properties1,778,170
 1,783,341
 18,193,256
 18,121,155
Less accumulated depletion and amortization(12,676,972) (11,097,492)
 $5,516,284
 $7,023,663

13

Table of Contents
LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued
(Unaudited)

 Successor  Predecessor
 March 31, 2017  December 31, 2016
(in thousands)    
Proved properties$2,203,022
  $12,234,099
Unproved properties871
  998,860
 2,203,893
  13,232,959
Less accumulated depletion and amortization(15,351)  (9,999,560)
 $2,188,542
  $3,233,399
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, for the three months ended March 31, 2016, the Company recorded the followinga noncash impairment charges (before and after tax)charge of approximately $123 million associated with proved oil and natural gas properties:
 Three Months Ended
September 30,
 Nine Months Ended
September 30,
 2016 2015 2016 2015
 (in thousands)
        
California region$
 $330,311
 $984,288
 $537,511
Mid-Continent region18,586
 366,865
 148,289
 372,568
Rockies region23,142
 1,182,337
 49,819
 1,182,337
TexLa region
 375,567
 
 408,667
Hugoton Basin region
 
 
 277,914
South Texas region
 
 
 8,700
 $41,728
 $2,255,080
 $1,182,396
 $2,787,697
The impairment chargesproperties in 2016 werethe Mid-Continent region due to a decline in commodity prices, changes in expected capital development and a decline in the Company’s estimates of proved reserves. The impairment charges in 2015 were due to a decline in commodity prices and the Company’s estimates of proved reserves. The carrying values of the impaired proved properties were reduced to fair value, estimated using inputs characteristic of a Level 3 fair value measurement. The impairment charges are included in “impairment of long-lived assets” on the condensed consolidated statementsstatement of operations.
Impairment of Unproved Properties
The Company evaluates the impairment of its unproved oil and natural gas properties whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The carrying values of unproved properties are reduced to fair value based on management’s experience in similar situations and other factors such as the lease terms of the properties and the relative proportion of such properties on which proved reserves have been found in the past. For the nine months ended September 30, 2016, the Company recorded noncash impairment charges (before and after tax) of approximately $13 million associated with unproved oil and natural gas properties in California. The Company recorded no impairment charges for unproved properties for the threeone month ended March 31, 2017, or the two months ended September 30, 2016, or the nine months ended September 30, 2015.
The impairment charges in 2016 were due to a decline in commodity prices and changes in expected capital development. The carrying values of the impaired unproved properties were reduced to fair value, estimated using inputs characteristic of a Level 3 fair value measurement. The impairment charges are included in “impairment of long-lived assets” on the condensed consolidated statement of operations.February 28, 2017.
Divestiture 2015Pending
On August 31, 2015,May 2, 2017, the Company, through certain of its wholly owned subsidiaries, completed theentered into a definitive purchase and sale agreement to sell its interest in properties located in western Wyoming to Jonah Energy LLC for a contract price of its remaining position in Howard Countyapproximately $581.5 million, subject to closing adjustments. The sale is anticipated to close in the Permian Basin. Cash proceeds received fromsecond quarter of 2017, subject to closing conditions. There can be no assurance that all of the sale of these properties were approximatelyconditions to closing will be satisfied.

14

Table of Contents
LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued
(Unaudited)

$276 million, net of costs to sell of approximately $1 million, and the Company recognized a net gain of approximately $174 million for the three months ended September 30, 2015. The gain is included in “(gains) losses 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.
Note 5 – Unit-Based Compensation
The Company granted no unit-based awards during the nine months ended September 30, 2016. A summary of unit-based compensation expenses included on the condensed consolidated statements of operations is presented below:
 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 expenses1,129
 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
Cash-Based Performance Unit Awards
In January 2015, the Company granted 567,320 performance units (the maximum number of units available to be earned) to certain executive officers. The 2015 performance unit awards vest three years from the award date. The vesting of these units is determined based on the Company’s performance compared to the performance of a predetermined group of peer companies over a specified performance period, and the value of vested units is to be paid in cash. To date, no performance units have vested and no amounts have been paid to settle any such awards. Performance unit awards that are settled in cash are recorded as a liability with the changes in fair value recognized over the vesting period. Based on the performance criteria, there was no liability recorded for these performance unit awards at September 30, 2016.

1519

Table of Contents
LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued
(Unaudited)

Note 6 – Debt
The following summarizes the Company’s outstanding debt:
 
September 30,
2016
 December 31, 2015
 (in thousands, except percentages)
    
LINN credit facility (1)
$1,654,745
 $2,215,000
Berry credit facility (2)
891,259
 873,175
Term loan (2)
284,241
 500,000
6.50% senior notes due May 2019562,234
 562,234
6.25% senior notes due November 2019581,402
 581,402
8.625% senior notes due April 2020718,596
 718,596
6.75% Berry senior notes due November 2020261,100
 261,100
12.00% senior secured second lien notes due December 2020 (3)
1,000,000
 1,000,000
Interest payable on senior secured second lien notes due December 2020 (3)

 608,333
7.75% senior notes due February 2021779,474
 779,474
6.50% senior notes due September 2021381,423
 381,423
6.375% Berry senior notes due September 2022572,700
 572,700
Net unamortized discounts and premiums (4)

 (8,694)
Net unamortized deferred financing fees (4)
(1,397) (37,374)
Total debt, net7,685,777
 9,007,369
Less current portion, net (5)
(2,828,848) (3,714,693)
Less liabilities subject to compromise (6)
(4,856,929) 
Long-term debt, net$
 $5,292,676
 Successor  Predecessor
 March 31, 2017  December 31, 2016
(in thousands, except percentages)    
Successor revolving loan (1)
$540,000
  $
Successor term loan (2)
293,750
  
Predecessor credit facility (3)

  1,654,745
Predecessor term loan (3)

  284,241
6.50% senior notes due May 2019
  562,234
6.25% senior notes due November 2019
  581,402
8.625% senior notes due April 2020
  718,596
12.00% senior secured second lien notes due December 2020
  1,000,000
7.75% senior notes due February 2021
  779,474
6.50% senior notes due September 2021
  381,423
Net unamortized deferred financing fees
  (1,257)
Total debt, net833,750
  5,960,858
Less current portion, net (4)
(28,125)  (1,937,729)
Less liabilities subject to compromise (5)

  (4,023,129)
Long-term debt$805,625
  $
(1) 
Variable interest ratesrate of 5.25% and 2.66% 4.33%at September 30, 2016, and DecemberMarch 31, 2015, respectively.2017.
(2) 
Variable interest ratesrate of 5.25% and 3.17% 8.33%at September 30, 2016, and DecemberMarch 31, 2015, respectively.2017.
(3) 
The issuance
Variable interest rate of 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 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 5.50%at September 30,December 31, 2016.
(4) 
Approximately $41 millionAt March 31, 2017, the current portion of long-term debt reflects required payments on the Successor’s term loan in net discounts, premiumsthe next twelve months. Due to covenant violations, the Predecessor’s credit facility and deferred financing feesterm loan were written off to reorganization items in connection with the filing of the Bankruptcy Petitions.classified as current at December 31, 2016.
(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, 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.
(6)
The Company’sPredecessor’s senior notes and Second Lien Notes were classified as liabilities subject to compromise at September 30,December 31, 2016. On the Effective Date, pursuant to the terms of the Plan, all outstanding amounts under these debt instruments were canceled.
Fair Value
The Company’s debt is recorded at the carrying amount on the condensed consolidated balance sheets. The carrying amounts of the Company’s credit facilities and term loanloans approximate fair value because the interest rates are variable and reflective of market rates. The Company usesused a market approach to determine the fair value of its senior secured second lien notesthe Predecessor’s Second Lien Notes and senior notes using estimates based on prices quoted from third-party financial institutions, which is a Level 2 fair value measurement.
 Predecessor
 December 31, 2016
 Carrying Value Fair Value
 (in thousands)
    
Senior secured second lien notes$1,000,000
 $863,750
Senior notes, net3,023,129
 1,179,224

1620

Table of Contents
LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued
(Unaudited)

 September 30, 2016 December 31, 2015
 Carrying Value Fair Value Carrying Value Fair Value
 (in thousands)
        
Senior secured second lien notes$1,000,000
 $466,250
 $1,000,000
 $501,250
Senior notes, net3,856,929
 1,202,887
 3,812,676
 662,179
Credit Facilities
LINNSuccessor Credit Facility
The Company’s Sixth AmendedOn the Effective Date, pursuant to the terms of the Plan, the Company entered into the Successor Credit Facility with Holdco II as borrower and Restated Credit Agreement (“LINN Credit Facility”) provides for (1)Wells Fargo Bank, National Association, as administrative agent, providing for: 1) a senior secured revolving credit facilityloan with an initial borrowing base of $1.4 billion and (2)2) a senior secured term loan in aggregate subject to the then-effective borrowing base. The maturity date is April 2019, subject to a “springing maturity” based on the maturityan original principal amount of any outstanding LINN Energy junior lien debt. At September 30, 2016, the Company had approximately $1.7 billion in$300 million. As of March 31, 2017, total borrowings outstanding (includingunder the Successor Credit Facility were approximately $834 million, and there was approximately $853 million of remaining available borrowing capacity (which includes a $7 million reduction for outstanding letters of credit) under the revolving credit facility.
There are no scheduled borrowing base redeterminations until April 1, 2018. After such time and approximately $284 million under the term loan, and there was no remaining availability.
See Note 2 for details of the amendment to the LINN Credit Facility entered into on April 12, 2016.
Redeterminationuntil August 28, 2020, any scheduled redetermination of the borrowing base underresulting in a decrease of the LINN Credit Facility, based primarily on reserve reports using lender commodity price expectations at such time, occurs semi-annually. The lenders under the LINN Credit Facility agreed to defer the April 2016 borrowing base redeterminationwill cause the borrowing base to May 11, 2016.
The Company’s obligations under the LINN Credit Facility are secured by mortgages on certain of its material subsidiaries’ oilbe allocated into a conforming revolving loan tranche and natural gas properties and other personal property as well as a pledge of all ownership interestsnon-conforming revolving loan tranche that, in the Company’s direct and indirect material subsidiaries. The Company is required to maintain: 1) mortgages on properties representing at least 90% of the total value of oil and natural gas properties included on its most recent reserve report; 2) a minimum liquidity requirementaggregate, equal to the greater of $500 million and 15% of the then effective available borrowing base after giving effect to certain redemptions or repurchases of certain debt; and 3) an EBITDA to$1.4 billion. Interest Expense ratio of at least 2.0 to 1.0 currently, 2.25 to 1.0 from March 31, 2017 through June 30, 2017 and 2.5 to 1.0 thereafter. Additionally, the obligations under the LINN Credit Facility are guaranteed by all of the Company’s material subsidiaries, other than Berry, and are required to be guaranteed by any future material subsidiaries.
At the Company’s election, interest on borrowings under the LINN Credit Facilityrevolving loan is determined by reference to either the London Interbank Offered Rate (“LIBOR”) plus an applicable margin between 1.75% and 2.75%of (a) 3.50% per annum (depending onin the then-current levelcase of borrowings under the LINN Credit Facility) or the alternate base rate (“ABR”) plus an applicable margin between 0.75%conforming revolving loan tranche and 1.75%(b) 5.50% per annum (depending onin the then-current level of borrowings under the LINN Credit Facility). Interest is generally payable monthly for loans bearing interest based on the ABR and at the endcase of the applicable interest period for loans bearing interest atnon-conforming revolving loan tranche. The revolving loan is not subject to amortization. The conforming revolving loan tranche matures on February 27, 2021, and the LIBOR. The Company is required to pay a commitment fee to the lenders under the LINN Credit Facility, which accrues at a rate per annum of 0.50%non-conforming revolving loan tranche matures on the average daily unused amount of the maximum commitment amount of the lenders.August 28, 2020.
The term loan has a maturity date of April 2019, subject to a “springing maturity” based on the maturity of any outstanding LINN Energy junior lien debt, and incurs interest based on either theat a rate of LIBOR plus a margin of 2.75%7.50% per annum, oramortizes quarterly, and matures on February 27, 2021.
Holdco II has the ABR plusright to prepay any borrowings under the Successor Credit Facility at any time without a margin of 1.75% per annum, atprepayment penalty, other than customary “breakage” costs with respect to eurodollar loans.
The obligations under the Company’s election. Interest is generally payable monthly for loans bearing interest based on the ABR and at the endSuccessor Credit Facility are secured by mortgages covering approximately 95% of the applicable interest period for loans bearing interest attotal value of the LIBOR. The term loan may be repaid atproved reserves of the optionoil and natural gas properties of the Company, without premium or penalty,and certain equipment and facilities associated therewith, along with liens on substantially all personal property of the Company and are guaranteed by the Company, Linn Energy Holdco LLC and Holdco II’s subsidiaries, subject to breakage costs. Whilecustomary exceptions. Under the term loan is outstanding,Successor Credit Facility, the Company is required to maintain either: 1) mortgages on properties representingcertain financial covenants including the maintenance of (i) an asset coverage ratio of at least 80%1.1 to 1.0, tested on (a) the date of each scheduled borrowing base redetermination commencing with the first scheduled borrowing base redetermination and (b) the date of each additional borrowing base redetermination done in conjunction with an asset sale and (ii) a maximum total valuenet debt to last twelve months EBITDAX ratio of 6.75 to 1.0 for March 31, 2018 through December 31, 2018, 6.5 to 1.0 for March 31, 2019 through March 31, 2020, and 4.5 to 1.0 thereafter.
The Successor Credit Facility also contains customary affirmative and negative covenants, including as to compliance with laws (including environmental laws, ERISA and anti-corruption laws), maintenance of required insurance, delivery of quarterly and annual financial statements, oil and natural gas properties includedengineering reports and budgets, maintenance and operation of property (including oil and natural gas properties), restrictions on its most recent reserve report, or 2) a Term Loan Collateral Coverage Ratiothe incurrence of at least 2.5liens and indebtedness, mergers, consolidations and sales of assets, transactions with affiliates and other customary covenants.
The Successor Credit Facility contains customary events of default and remedies for credit facilities of this nature. Failure to 1.0. The Term Loan Collateral Coverage Ratio is defined ascomply with the ratiofinancial and other covenants in the Successor Credit Facility would allow the lenders, subject to customary cure rights, to require immediate payment of all amounts outstanding under the Successor Credit Facility.
Predecessor’s Credit Facility, Second Lien Notes and Senior Notes
On the Effective Date, pursuant to the terms of the present value of future cash flows from proved reserves fromPlan, all outstanding obligations under the currently mortgaged properties to the lesser of: (i) the then-effective borrowing basePredecessor’s credit facility, Second Lien Notes and (ii) thesenior notes were canceled. See Note 2 for additional information.

1721

Table of Contents
LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued
(Unaudited)

maximum commitment amount and the aggregate amount of the term loan outstanding. The other terms and conditions of the LINN Credit Facility, including the financial and other restrictive covenants set forth therein, are applicable to the term loan.
Berry Credit Facility
Berry’s Second Amended and Restated Credit Agreement (“Berry Credit Facility”) provides for a senior secured revolving credit facility, subject to the then-effective borrowing base. The maturity date is April 2019. At September 30, 2016, the Company had approximately $898 million in total borrowings outstanding (including outstanding letters of credit) under the Berry Credit Facility and there was no remaining availability.
See Note 2 for details of the amendment to the Berry Credit Facility entered into on April 12, 2016.
Redetermination of the borrowing base under the Berry Credit Facility, based primarily on reserve reports using lender commodity price expectations at such time, occurs semi-annually. The lenders under the Berry Credit Facility agreed to defer the April 2016 borrowing base redetermination to May 11, 2016.
Berry’s obligations under the Berry Credit Facility are secured by mortgages on its oil and natural gas properties and other personal property. Berry is required to maintain: 1) mortgages on properties representing at least 90% of the present value of oil and natural gas properties included on its most recent reserve report, and 2) an EBITDAX to Interest Expense ratio of at least 2.0 to 1.0 currently, 2.25 to 1.0 from March 31, 2017 through June 30, 2017 and 2.5 to 1.0 thereafter. In accordance with the amendment described in Note 2, the lenders had agreed that the failure to maintain the EBITDAX to Interest Expense ratio would not result in a default or event of default until May 11, 2016.
At Berry’s election, interest on borrowings under the Berry Credit Facility is determined by reference to either the LIBOR plus an applicable margin between 1.75% and 2.75% per annum (depending on the then-current level of borrowings under the Berry Credit Facility) or a Base Rate (as defined in the Berry Credit Facility) plus an applicable margin between 0.75% and 1.75% per annum (depending on the then-current level of borrowings under the Berry Credit Facility). Interest is generally payable monthly for loans bearing interest based on the Base Rate and at the end of the applicable interest period for loans bearing interest at the LIBOR. Berry is required to pay a commitment fee to the lenders under the Berry Credit Facility, which accrues at a rate per annum of 0.50% on the average daily unused amount of the maximum commitment amount of the lenders.
The Company refers to the LINN Credit Facility and the Berry Credit Facility, collectively, as the “Credit Facilities.”
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. The automatic stay under the Bankruptcy Code does not apply to letters of credit issued under the prepetition Credit Facilities and third parties may draw on their letters of credit if the terms of a particular letter of credit so provide. During the three months and nine months ended September 30, 2016, approximately $16 million and $20 million, respectively, in letters of credit draws were made from the Berry Credit Facility.
Senior Secured Second Lien Notes Due December 2020
On November 20, 2015, the Company issued $1.0 billion in aggregate principal amount of 12.00% senior secured second lien notes due December 2020 (“Second Lien Notes”) in exchange for approximately $2.0 billion in aggregate principal amount of certain of its outstanding senior notes. The exchanges were accounted for as a troubled debt restructuring (“TDR”). TDR accounting requires that interest payments on the Second Lien Notes reduce the carrying value of the debt with no interest expense recognized.
In connection with the issuance of the Second Lien Notes, the Company entered into a Registration Rights Agreement with each of the holders (collectively, the “Registration Rights Agreements”). Under the Registration Rights Agreements, the Company agreed to use its reasonable efforts to file with the SEC and cause to become effective a registration statement relating to an offer to issue new notes having terms substantially identical to the Second Lien Notes in exchange for outstanding Second Lien Notes within 370 days following the issuance of the Second Lien Notes. In certain circumstances, the Company may be required to file a shelf registration statement to cover resales of the Second Lien Notes. The Company will be obligated

18

Table of Contents
LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued
(Unaudited)

to file one or more registration statements as described above only if the restrictive legend on the Second Lien Notes has not been removed and the Second Lien Notes are not freely tradable pursuant to Rule 144 under the Securities Act of 1933, as amended, as of the 370th day following the issuance of the Second Lien Notes. If the Company fails to satisfy these obligations, the Company may be required to pay additional interest to holders of the Second Lien Notes under certain circumstances.
Repurchases of Senior Notes
The Company made no repurchases of its senior notes during the nine months ended September 30, 2016. During the nine months ended September 30, 2015, the Company repurchased on the open market approximately $783 million of its outstanding senior notes as follows:
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;
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.
In connection with the repurchases, the Company paid approximately $557 million in cash and recorded a gain on extinguishment of debt of approximately $214 million for the nine months ended September 30, 2015.
Notes Covenants
The Second Lien Indenture contains covenants that, among other things, may limit the Company’s ability and the ability of the Company’s restricted subsidiaries to: (i) declare or pay distributions on, purchase or redeem the Company’s units or purchase or redeem the Company’s or its restricted subsidiaries’ indebtedness secured by liens junior in priority to liens securing the Second Lien Notes, unsecured indebtedness or subordinated indebtedness; (ii) make investments; (iii) incur or guarantee additional indebtedness or issue certain types of equity securities; (iv) create certain liens; (v) sell assets; (vi) consolidate, merge or transfer all or substantially all of the Company’s assets; (vii) enter into agreements that restrict distributions or other payments from the Company’s restricted subsidiaries to the Company; (viii) engage in transactions with affiliates; and (ix) create unrestricted subsidiaries.
The Company’s senior notes contain covenants that, among other things, may limit its ability to: (i) pay distributions on, purchase or redeem the Company’s units or redeem its subordinated debt; (ii) make investments; (iii) incur or guarantee additional indebtedness or issue certain types of equity securities; (iv) create certain liens; (v) sell assets; (vi) consolidate, merge or transfer all or substantially all of the Company’s assets; (vii) enter into agreements that restrict distributions or other payments from the Company’s restricted subsidiaries to the Company; (viii) engage in transactions with affiliates; and (ix) create unrestricted subsidiaries.
Berry’s senior notes contain covenants that, among other things, may limit its ability to: (i) incur or guarantee additional indebtedness; (ii) pay distributions or dividends on Berry’s equity or redeem its subordinated debt; (iii) create certain liens; (iv) enter into agreements that restrict distributions or other payments from Berry’s restricted subsidiaries to Berry; (v) sell assets; (vi) engage in transactions with affiliates; and (vii) consolidate, merge or transfer all or substantially all of Berry’s assets.
In addition, any cash generated by Berry is currently being used by Berry to fund its activities.  Historically, to the extent that Berry generated cash in excess of its needs and determined to distribute such amounts to LINN Energy, the indentures governing Berry’s senior notes limited the amount it could distribute to LINN Energy to the amount available under a “restricted payments basket,” and Berry could 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.  During the pendency of the bankruptcy proceedings, Berry will not distribute cash to LINN Energy using the restricted payments basket.

19

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 Second Lien Indenture and the senior notes. However, under the Bankruptcy Code, holders of the Second Lien Notes and the senior notes are stayed from taking any action against the Company as a result of the default.
Predecessor Covenant Violations
The Company’s filing of the Bankruptcy Petitions described in Note 2 constituted an event of default that accelerated the Company’s obligations under its Credit Facilities, itsthe Predecessor’s credit facility, Second Lien Notes and its senior notes. Additionally, other events of default, including cross-defaults, are present, includingFor the failure to maketwo months ended February 28, 2017, contractual interest, paymentswhich was not recorded, 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.was approximately $57 million. Under the Bankruptcy Code, the creditors under these debt agreements arewere stayed from taking any action against the Company as a result of an event of default.
Note 7 – Derivatives
Commodity Derivatives
Historically, the Company has hedged a portion of its forecasted production to reduce exposure to fluctuations in oil and natural gas prices and provide long-term cash flow predictability to manage its business, service debt and, if and when resumed, pay distributions.business. The current direct NGL hedging market is constrained in terms of price, volume, duration and number of counterparties, which limits the Company’s ability to effectively hedge its NGL production. The Company has also hedged its exposure to natural gas differentials in certain operating areas but does not currently hedge exposure to oil or natural gas differentials.
The Company has historically entered into commodity hedging transactions primarily in the form of swap contracts that are designed to provide a fixed price, collars and, from time to time, put options that are designed to provide a fixed price floor with the opportunity for upside. The Company enters into these transactions with respect to a portion of its projected production or consumption to provide an economic hedge of the risk related to the future commodity prices received or paid. The Company does not enter into derivative contracts for trading purposes. The Company did not designate any of its contracts as cash flow hedges; therefore, the changes in fair value of these instruments are recorded in current earnings. See Note 8 for fair value disclosures about oil and natural gas commodity derivatives.
The following table presents derivative positions for the periodperiods indicated as of September 30, 2016:March 31, 2017:
October 1 - December 31, 2016 2017
April 1  December 31, 2017
 2018 2019
Natural gas positions:        
Fixed price swaps (NYMEX Henry Hub):        
Hedged volume (MMMBtu)33,580
 83,950
101,750
 47,815
 11,315
Average price ($/MMBtu)$3.05
 $3.08
$3.17
 $3.01
 $2.97
Oil positions:        
Fixed price swaps (NYMEX WTI):        
Hedged volume (MBbls)
 730
3,300
 
 
Average price ($/Bbl)$
 $50.98
$52.13
 $
 $
Collars (NYMEX WTI):     
Hedged volume (MBbls)
 1,825
 1,825
Average floor price ($/Bbl)$
 $50.00
 $50.00
Average ceiling price ($/Bbl)$
 $55.50
 $55.50
In accordance with a Bankruptcy Court order dated August 16, 2016,During the Company was authorized to enter into postpetition hedging arrangements. In September 2016,one month ended March 31, 2017, the Company entered into commodity derivative contracts consisting of natural gas swaps for October 2016January 2018 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-outstanding2019. The Company did not enter into any commodity derivative contracts for net proceeds of approximately $1.2 billion. The net proceeds were used to make permanent repayments of a portion ofduring the borrowings outstanding undertwo months ended February 28, 2017, or the LINN Credit Facility.three months ended March 31, 2016.

2022

Table of Contents
LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued
(Unaudited)

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.
Excluding settlements on canceled derivatives, the Company had no settlements on commodity derivatives for the three months ended September 30, 2016. Settled derivatives on natural gas production for the nine months ended September 30, 2016, included volumes of 77,734 MMMBtu at an average contract price of $4.50 per MMBtu. Settled derivatives on oil production for the nine months ended September 30, 2016, included volumes of 4,331 MBbls at an average contract price of $90.44 per Bbl. Settled derivatives on natural gas production for the three months and nine months ended September 30, 2015, included volumes of 47,864 MMMBtu and 142,031 MMMBtu, respectively, at an average contract price of $5.12 per MMBtu. Settled derivatives on oil production for the three months and nine months ended September 30, 2015, included volumes of 5,060 MBbls and 13,855 MBbls, respectively, at average contract prices of $87.53 per Bbl and $89.86 per Bbl.
The natural gas derivatives are settled based on the closing price of NYMEX Henry Hub natural gas on the last trading day for the delivery month, which occurs on the third business day preceding the delivery month, or the relevant index prices of natural gas published in Inside FERC’s Gas Market Report on the first business day of the delivery month. The oil derivatives are settled based on the average closing price of NYMEX WTI crude oil for each day of the delivery month.
Balance Sheet Presentation
The Company’s commodity derivatives are presented on a net basis in “derivative instruments” on the condensed consolidated balance sheets. The following table summarizes the fair value of derivatives outstanding on a gross basis:
September 30, 2016 
December 31,
2015
Successor  Predecessor
(in thousands)March 31, 2017  December 31, 2016
(in thousands)    
Assets:       
Commodity derivatives$6,451
 $1,812,375
$32,949
  $19,369
Liabilities:       
Commodity derivatives$7,979
 $28,842
$40,284
  $113,226
By using derivative instruments to economically hedge exposures to changes in commodity prices, the Company exposes itself to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes the Company, which creates credit risk. The Company’s counterparties were former participants or affiliates of participants in the Predecessor Credit Facility or are current participants or affiliates of participants in itsthe Successor Credit Facilities.Facility. The Successor Credit Facilities areFacility is secured by certain of the Company’s and its subsidiaries’ oil, natural gas and NGL reserves;reserves and personal property; 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 maximum amount of loss due to credit risk that the Company would incur if its counterparties failed completely to perform according to the terms of the contracts, based on the gross fair value of financial instruments, was approximately $6$33 million at September 30, 2016.March 31, 2017. 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 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.
Gains and Losses on Derivatives
Losses on derivatives were approximately $12 million for the one month ended March 31, 2017, and gains on derivatives were approximately $93 million and $109 million for the two months ended February 28, 2017, and the three months ended March 31, 2016, respectively, and are reported on the condensed consolidated statements of operations in “gains (losses) on oil and natural gas derivatives.”
For the one month ended March 31, 2017, the Company received net cash settlements of approximately $6 million and for the two months ended February 28, 2017, the Company paid net cash settlements of approximately $12 million. For the three months ended March 31, 2016, the Company received net cash settlements of approximately $335 million.

2123

Table of Contents
LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued
(Unaudited)

Gains (Losses) on Derivatives
A summary of gains and losses on derivatives included on the condensed consolidated statements of operations is presented below:
 Three Months Ended
September 30,
 Nine Months Ended
September 30,
 2016 2015 2016 2015
 (in thousands)
        
Gains (losses) on oil and natural gas derivatives$274
 $549,029
 $(72,533) $782,622
Lease operating expenses (1)
(200) (162) (4,605) 2,898
Total gains (losses) on oil and natural gas derivatives$74
 $548,867
 $(77,138) $785,520
(1)
Consists of gains and (losses) on derivatives entered into in March 2015 to hedge exposure to differentials in consuming areas.
For the three months and nine months ended September 30, 2016, the Company received net cash settlements of approximately $93,000 and $867 million, respectively. In addition, during the nine months ended September 30, 2016, approximately $841 million in settlements (primarily in connection with the April 2016 and May 2016 commodity derivative cancellations) were paid directly by the counterparties to the lenders under the LINN Credit Facility as repayments of a portion of the borrowings outstanding. For the three months and nine months ended September 30, 2015, the Company received net cash settlements of approximately $292 million and $858 million, respectively.
Note 8 – Fair Value Measurements on a Recurring Basis
The Company accounts for its commodity derivatives at fair value (see Note 7) on a recurring basis. 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. Assumed credit risk adjustments, based on published credit ratings and public bond yield spreads and credit default swap spreads, are applied to the Company’s commodity derivatives.
Fair Value Hierarchy
In accordance with applicable accounting standards, the Company has categorized its financial instruments into a three-level fair value hierarchy based on the priority of inputs to the valuation technique, into a three-level fair value hierarchy.technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).
The following presents the fair value hierarchy for assets and liabilities measured at fair value on a recurring basis:
 September 30, 2016
 Level 2 
Netting (1)
 Total
 (in thousands)
Assets:     
Commodity derivatives$6,451
 $(5,004) $1,447
Liabilities:     
Commodity derivatives$7,979
 $(5,004) $2,975

22

Table of Contents
LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued
(Unaudited)

 Successor
 March 31, 2017
 Level 2 
Netting (1)
 Total
 (in thousands)
Assets:     
Commodity derivatives$32,949
 $(21,583) $11,366
Liabilities:     
Commodity derivatives$40,284
 $(21,583) $18,701
Predecessor
December 31, 2015December 31, 2016
Level 2 
Netting (1)
 TotalLevel 2 
Netting (1)
 Total
(in thousands)(in thousands)
Assets:          
Commodity derivatives$1,812,375
 $(25,744) $1,786,631
$19,369
 $(19,369) $
Liabilities:          
Commodity derivatives$28,842
 $(25,744) $3,098
$113,226
 $(19,369) $93,857
(1) 
Represents counterparty netting under agreements governing such derivatives.
Note 9 – Asset Retirement Obligations
The Company has the obligation to plug and abandon oil and natural gas wells and related equipment at the end of production operations. Estimated asset retirement costs are recognized as liabilities with an increase to the carrying amounts of the related long-lived assets when the obligation is incurred. The liabilities are included in “other accrued liabilities” and “other noncurrent liabilities” on the condensed consolidated balance sheets. Accretion expense is included in “depreciation, depletion and amortization” on the condensed consolidated statements of operations. The fair value of additions to the asset retirement obligations is estimated using valuation techniques that convert future cash flows to a single discounted amount. Significant inputs to the valuation include estimates of: (i) plug and abandon costs per well based on existing regulatory requirements; (ii) remaining life per well; (iii) future inflation factors; and (iv) a credit-adjusted risk-free interest rate. These inputs require

24

Table of Contents
LINN ENERGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued
(Unaudited)

significant judgments and estimates by the Company’s management at the time of the valuation and are the most sensitive and subject to change.
The following table presents a reconciliation of the Company’s asset retirement obligations (in thousands):
Asset retirement obligations at December 31, 2015$523,541
Liabilities added from drilling449
Current year accretion expense23,199
Settlements(7,862)
Revision of estimates356
Asset retirement obligations at September 30, 2016$539,683
Asset retirement obligations at December 31, 2016 (Predecessor)$402,162
Liabilities added from drilling146
Accretion expense4,024
Settlements(618)
Asset retirement obligations at February 28, 2017 (Predecessor)$405,714
Fresh start adjustment (1)
(48,317)
Asset retirement obligations at February 28, 2017 (Successor)$357,397
Liabilities added from drilling33
Accretion expense1,814
Settlements(907)
Asset retirement obligations at March 31, 2017 (Successor)$358,337

(1)
As a result of the application of fresh start accounting, the Successor recorded its asset retirement obligations at fair value as of the Effective Date.
Note 10 – Commitments and Contingencies
On May 11, 2016, the Debtors filed Bankruptcy Petitions for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. The Debtors’ Chapter 11 cases were administered jointly under the caption In re Linn Energy, LLC, et al., Case No. 16‑60040. On January 27, 2017, the Bankruptcy Court entered the Confirmation Order. Consummation of the Plan was subject to certain conditions set forth in the Plan. On the Effective Date, all of the conditions were satisfied or waived and the Plan became effective and was implemented in accordance with its terms. The LINN Debtors Chapter 11 cases will remain pending until the final resolution of all outstanding claims.
The commencement of the Chapter 11 proceedings automatically stayed certain actions against the Company, including actions to collect prepetition liabilities or to exercise control over the property of the Company’s bankruptcy estates. For certain statewide class action royalty payment disputes, the Company filed notices advising that it had filed for bankruptcy protection and seeking a stay, which was granted. In addition,However, the Company is, involved in various other disputes arisingand will continue to be until the final resolution of all claims, subject to certain contested matters and adversary proceedings stemming from the Chapter 11 proceedings.
In March 2017, Wells Fargo Bank, National Association (“Wells Fargo”), the administrative agent under the Predecessor Credit Facility, filed a motion in the ordinary courseBankruptcy Court seeking payment of business. post-petition default interest of approximately $31 million. The Company has vigorously disputed that Wells Fargo is entitled to any default interest based on the plain language of the Plan and Confirmation Order. A hearing was held on April 27, 2017, and the parties are awaiting a ruling from the Bankruptcy Court on this matter.
The Company is not currently a party to any litigation or pending claims that it believes would have a material adverse effect on its overall business, financial position, results of operations or liquidity; however, cash flow could be significantly impacted in the reporting periods in which such matters are resolved.
During the nineone month ended March 31, 2017, the two months ended September 30,February 28, 2017, and the three months ended March 31, 2016, and September 30, 2015, the Company made no significant payments to settle any legal, environmental or tax proceedings. The Company regularly analyzes current information and accrues for probable liabilities on the disposition of certain matters as necessary.

25

LINN ENERGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued
(Unaudited)

Liabilities for loss contingencies arising from claims, assessments, litigation or other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated.
The commencement
Note 11 – Equity (Deficit)
Cancellation of Units and Issuance of Class A Common Stock
In accordance with the Plan, on the Effective Date:
All units in the Predecessor that were issued and outstanding immediately prior to the Effective Date were extinguished without recovery;
17,678,889 shares of Class A common stock were issued pro rata to holders of the Chapter 11 proceedings automatically stayed certain actions againstSecond Lien Notes with claims allowed under the Plan;
26,724,396 shares of Class A common stock were issued pro rata to holders of Unsecured Notes with claims allowed under the Plan;
471,110 shares of Class A common stock were issued to commitment parties under the Backstop Commitment Agreement in respect of premium due thereunder;
2,995,691 shares of Class A common stock were issued to commitment parties under the Backstop Commitment Agreement in connection with their backstop obligation thereunder; and
41,359,806 shares of Class A common stock were issued to participants in the rights offerings extended by the Company to certain holders of claims arising under the Second Lien Notes and the Unsecured Notes (including, in each case, certain of the commitment parties party to the Backstop Commitment Agreement).
As of the Effective Date, there were 89,229,892 shares of Class A common stock, par value $0.001 per share, issued and outstanding.
Dividends/Distributions
Under the Predecessor’s limited liability company agreement, unitholders were entitled to receive a distribution of available cash, which included cash on hand plus borrowings less any reserves established by the Predecessor’s Board of Directors to provide for the proper conduct of the Predecessor’s business (including reserves for future capital expenditures, including actions to collect prepetition liabilitiesdrilling, acquisitions and anticipated future credit needs) or to exercise controlfund distributions, if any, over the propertynext four quarters. In October 2015, the Predecessor’s Board of Directors determined to suspend payment of the Company’s bankruptcy estates. Predecessor’s distribution. The Successor currently has no intention of paying cash dividends and any future payment of cash dividends would be subject to the restrictions in the Successor Credit Facility.
Note 12 – Share-Based Compensation
The Company intendshad no equity awards outstanding as of December 31, 2016. In accordance with the Plan, in February 2017, the Company implemented the Linn Energy, Inc. 2017 Omnibus Incentive Plan (the “Omnibus Incentive Plan”) pursuant to seek authoritywhich employees and consultants of the Company and its affiliates are eligible to pay all general claimsreceive stock options, restricted stock, performance awards, other stock-based awards and other cash-based awards.
The Committee (as defined in the ordinary courseOmnibus Incentive Plan) has broad authority under the Omnibus Incentive Plan to, among other things: (i) select participants; (ii) determine the types of business notwithstandingawards that participants receive and the commencementnumber of shares that are subject to such awards; and (iii) establish the terms and conditions of awards, including the price (if any) to be paid for the shares or the award. As of the Chapter 11 proceedingsEffective Date, an aggregate of 6,444,381 shares of Class A common stock were reserved for issuance under the Omnibus Incentive Plan (the “Share Reserve”). Additional shares of Class A common stock may be issued in a manner consistent withexcess of the LINN RSA and Bank RSA. The Plan inShare Reserve for the Chapter 11 proceedings, ifsole purpose of satisfying any conversion of Class B units or Class A‑2 units of Holdco,

2326

LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued
(Unaudited)

confirmed, will provideas applicable, into shares of Class A common stock pursuant to the Limited Liability Company Operating Agreement of Holdco (the “Holdco LLC Agreement”), and the conversion procedures set forth therein. If any stock option or other stock-based award granted under the Omnibus Incentive Plan expires, terminates or is canceled for any reason without having been exercised in full, the number of shares of Class A common stock underlying any unexercised award shall again be available for the treatmentpurpose of claimsawards under the Omnibus Incentive Plan. If any shares of restricted stock, performance awards or other stock-based awards denominated in shares of Class A common stock awarded under the Omnibus Incentive Plan are forfeited for any reason, the number of forfeited shares shall again be available for purposes of awards under the Omnibus Incentive Plan. Any award under the Omnibus Incentive Plan settled in cash shall not be counted against the maximum share limitation.
As is customary in incentive plans of this nature, each share limit and the number and kind of shares available under the Omnibus Incentive Plan and any outstanding awards, as well as the exercise or purchase prices of awards, and performance targets under certain types of performance-based awards, are subject to adjustment in the event of certain reorganizations, mergers, combinations, recapitalizations, stock splits, stock dividends or other similar events that change the number or kind of shares outstanding, and extraordinary dividends or distributions of property to the Company’s bankruptcy estates, including prepetition liabilitiesstockholders.
Restricted Stock Units
On the Effective Date, the Company granted to certain employees 2,478,606 restricted stock units (the “Emergence Awards”). The portion of the Share Reserve that havedoes not otherwiseconstitute the Emergence Awards, plus any subsequent awards forfeited before vesting (the “Remaining Share Reserve”), will be fully granted within the 36-month period immediately following the Effective Date (with such 36-month anniversary, the “Final Allocation Date”). If a “Change in Control” (as defined in the Omnibus Incentive Plan) occurs before the Final Allocation Date, the Company will allocate the entire remaining Share Reserve on a fully-vested basis to actively employed employees (pro-rata based upon each such employee’s relative awards) upon the consummation of the Change in Control. In March 2017, the Company granted to certain employees 1,222,420 restricted stock units from the Remaining Share Reserve.
Upon a participant’s termination of employment and/or service (as applicable), the Company has the right (but not the obligation) to repurchase all or any portion of the shares of Class A common stock acquired pursuant to an award at a price equal to the fair market value (as determined under the Omnibus Incentive Plan) of the shares of Class A common stock to be repurchased, measured as of the date of the Company’s repurchase notice.
Holdco Incentive Interest Plan
On the Effective Date, Holdco granted incentive interest awards to certain members of its management in the form of 3,470,051 Class B units, which are intended to qualify as “profits interests” for U.S. income tax purposes. The Class B units vested 25% on the Effective Date and the remaining amount vest ratably over the following three years, subject to meeting a performance condition described in the agreements. Each Class B unit represents a non-voting equity interest in Holdco that entitles the holder to Holdco distributions, after an applicable hurdle amount is met, such that each Class B unit only participates in Holdco’s increase in value following the grant date. In accordance with the Holdco LLC Agreement, the requirements entitling Class B unitholders to Holdco distributions had not been satisfiedmet as of March 31, 2017. Class B units can be converted at any time by the holder to Class A-2 units of Holdco or addressed duringClass A common stock of the Chapter 11 proceedings. See Note 2Company in accordance with the terms of the Holdco LLC Agreement.
Accounting for additional information.Share-Based Compensation
The Company recognizes expense for share-based compensation over the requisite service period in an amount equal to the fair value of share-based awards granted. The fair value of share-based awards, excluding liability awards, is computed at the date of grant and is not remeasured. The fair value of liability awards is remeasured at each reporting date through the settlement date with the change in fair value recognized as compensation expense over that period. The Company has made a policy decision to recognize compensation expense for service-based awards on a straight-line basis over the requisite service period for the entire award. Beginning in 2017, the Company accounts for forfeitures as they occur.

27

LINN ENERGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued
(Unaudited)

The Company’s restricted stock units are equity-classified and its incentive interest awards in the form of Class B units are liability-classified on the condensed consolidated balance sheet. The fair value of the Company’s restricted stock units was determined based on the fair value of the Company’s shares on the date of grant and the fair value of the incentive interest awards in the form of Class B units was determined based on the estimated amount to be owed to settle the awards.
Share-Based Compensation Expenses
A summary of share-based compensation expenses included on the condensed consolidated statements of operations is presented below:
 Successor  Predecessor
 One Month Ended March 31, 2017  Two Months Ended February 28, 2017 Three Months Ended March 31, 2016
(in thousands)      
General and administrative expenses$4,177
  $50,255
 $9,460
Lease operating expenses
  
 2,965
Total share-based compensation expenses$4,177
  $50,255
 $12,425
Income tax benefit$427
  $5,170
 $4,591
Note 1113 – Earnings Per Share/Unit
Basic earnings per share/unit is computed by dividing net earnings attributable to stockholders/unitholders by the weighted average number of shares/units outstanding during eachthe period. Diluted earnings per share/unit is computed by adjusting the average number of shares/units outstanding for the dilutive effect, if any, of unit equivalents.potential common shares/units. The Company uses the treasury stock method to determine the dilutive effect.
The following table provides a reconciliation ofdiluted earnings per share/unit calculation excludes approximately 2 million restricted stock units and approximately 3 million Class B units that were anti-dilutive for the numeratorsone month ended March 31, 2017, and denominators of the basic and diluted per unit computations for net loss:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 2016 2015 2016 2015
 (in thousands, except per unit data)
        
Net loss$(198,365) $(1,569,317) $(1,337,619) $(2,287,604)
Allocated to participating securities
 
 
 (3,081)
 $(198,365) $(1,569,317) $(1,337,619) $(2,290,685)
        
Basic net loss per unit$(0.56) $(4.47) $(3.79) $(6.72)
Diluted net loss per unit$(0.56) $(4.47) $(3.79) $(6.72)
        
Basic weighted average units outstanding352,792
 350,695
 352,606
 340,831
Dilutive effect of unit equivalents
 
 
 
Diluted weighted average units outstanding352,792
 350,695
 352,606
 340,831
Basic units outstanding excludes the effect of weighted average anti-dilutive unit equivalents related to approximately 1 million unit options and warrants for both the three months and nine months ended September 30, 2016, and approximately 4 million and 5 million unit options and warrantsthat were anti-dilutive for the three months and nineended March 31, 2016. There were no potential common units outstanding during the two months ended September 30, 2015, respectively. All equivalent units were antidilutive for both the three months and nine months ended September 30, 2016, and September 30, 2015.February 28, 2017.
Note 1214 – Income Taxes
The Company isEffective February 28, 2017, upon consummation of the Plan, the Successor became a C corporation subject to federal and state income taxes. Prior to the consummation of the Plan, the Predecessor was a limited liability company treated as a partnership for federal and state income tax purposes, with the exception of the state of Texas, in which income tax liabilities and/or benefits areof the Company were passed through to its unitholders. Limited liability companies are subject to Texas margin tax. In addition, certain of the Company’sPredecessor’s subsidiaries are Subchapter C-corporationswere C corporations subject to federal and state income taxes. As such, with the exception of the state of Texas and certain subsidiaries, the Company is not a taxable entity, it doesPredecessor did not directly pay federal and state income taxes and recognition haswas not been given to federal and state income taxes for the operations of the Company.Predecessor.
The effective income tax rates were 31.81%, (0.01)% and (4.82)% for the one month ended March 31, 2017, the two months ended February 28, 2017, and the three months ended March 31, 2016, respectively. The deferred tax effects of the Company’s change to a C corporation are included in income from continuing operations for the two months ended February 28, 2017. Amounts recognized foras income taxes are reportedincluded in “income tax expense (benefit)” on the condensed consolidated statements of operations.

2428

LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued
(Unaudited)

Note 1315 – Supplemental Disclosures to the Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Cash Flows
“Other current assets” reported on the condensed consolidated balance sheets include the following:
 Successor  Predecessor
 March 31, 2017  December 31, 2016
(in thousands)    
Prepaid expenses$67,897
  $70,116
Inventories15,053
  15,798
Deferred financing fees
  16,809
Other8,055
  3,288
Other current assets$91,005
  $106,011
“Other accrued liabilities” reported on the condensed consolidated balance sheets include the following:
 Successor  Predecessor
 March 31, 2017  December 31, 2016
(in thousands)    
Accrued compensation$20,862
  $16,443
Share-based payment liability10,197
  ��
Asset retirement obligations (current portion)10,168
  9,686
Other7,602
  175
Other accrued liabilities$48,829
  $26,304
Supplemental disclosures to the condensed consolidated statements of cash flows are presented below:
Nine Months Ended
September 30,
Successor  Predecessor
2016 2015One Month Ended March 31, 2017  Two Months Ended February 28, 2017 Three Months Ended March 31, 2016
(in thousands)
   
(in thousands)      
Cash payments for interest, net of amounts capitalized$163,828
 $386,118
$1,458
  $17,651
 $23,731
Cash payments for income taxes$4,774
 $627
$
  $
 $1,228
Cash payments for reorganization items, net$8,866
 $
$1,286
  $21,571
 $
         
Noncash investing activities:         
Accrued capital expenditures$26,792
 $98,404
$18,670
  $22,191
 $25,818
For purposes of the condensed consolidated statements of cash flows, the Company considers all highly liquid short-term investments with original maturities of three months or less to be cash equivalents. At September 30, 2016, and DecemberMarch 31, 2015,2017, “restricted cash” on the condensed consolidated balance sheets includes approximately $197 millionsheet represents cash that will be used to settle certain claims and $250 million, respectively,pay certain professional fees in accordance with the Plan. At December 31, 2016, “restricted cash” on the condensed consolidated balance sheet represents amounts restricted related to the $250 million that LINN Energy borrowed under the LINN Credit Facility and contributed to Berry in May 2015 to post with Berry’s lenders in connection with the reduction in the Berry Credit Facility’s borrowing base, as well as associated interest income. Restrictedutility services providers. In addition, restricted cash also includesof approximately $8 million and $7 millionis included in “other noncurrent assets” on the condensed consolidated balance sheets at September 30, 2016,both March 31, 2017, and December 31, 2015, respectively,2016, and

29

Table of Contents
LINN ENERGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued
(Unaudited)

represents cash deposited by the Company into a separate account designated for asset retirement obligations in accordance with contractual agreements.
During the nine months ended September 30, 2016, approximately $841 million in commodity derivative settlements (primarily in connection with the April 2016At March 31, 2017, and May 2016 commodity derivative cancellations) were paid directly by the counterparties to the lenders under the LINN Credit Facility as repayments of a portion of the borrowings outstanding, and are reflected as noncash transactions by the Company. In addition, during the three months and nine months ended September 30, 2016, approximately $16 million and $20 million, respectively, in letters of credit draws were made from the Berry Credit Facility as requested by certain vendors owed prepetition amounts from the Company.
At December 31, 2015,2016, net outstanding checks of approximately $21$18 million and $6 million, respectively, were reclassified and included in “accounts payable and accrued expenses” on the condensed consolidated balance sheets. At September 30, 2016, no net outstanding checks were reclassified. Net outstanding checks are presented as cash flows from financing activities and included in “other” on the condensed consolidated statements of cash flows.
Note 1416 – Related Party Transactions
Berry Petroleum Company, LLC
Berry, a former subsidiary of the Predecessor, was deconsolidated effective December 3, 2016 (see Note 4). The employees of Linn Operating, Inc. (“LOI”), a subsidiary of the Predecessor, provided services and support to Berry in accordance with an agency agreement and power of attorney between Berry and LOI. Upon deconsolidation, transactions between the Predecessor and Berry were no longer eliminated in consolidation and were treated as related party transactions. These transactions include, but are not limited to, management fees paid to the Company by Berry. On the Effective Date, Berry emerged from bankruptcy as a stand-alone, unaffiliated entity.
For the two months ended February 28, 2017, and the three months ended March 31, 2016, Berry incurred management fees of approximately $6 million and $23 million, respectively, for services provided by LOI. The Predecessor also had accounts payable due to Berry of approximately $3 million included in “accounts payable and accrued expenses” on the condensed consolidated balance sheet at December 31, 2016. In addition, $25 million due to Berry was included in “liabilities subject to compromise” on the Predecessor’s condensed consolidated balance sheet at December 31, 2016.
LinnCo, LLC
LinnCo, an affiliate of LINN Energy,the Predecessor, was formed on April 30, 2012. LinnCo’s initial sole purpose was to own units in LINN Energy. In connection with the 2013 acquisition of Berry, LinnCo amended its limited liability company agreement to permit, among other things, the acquisition and subsequent contribution of assets to LINN Energy. All of LinnCo’s common shares arewere held by the public. As of September 30,December 31, 2016, LinnCo had no significant assets or operations other than those related to its interest in LINN Energythe Predecessor and owned approximately 71% of LINN Energy’sthe Predecessor’s then outstanding units. In accordance with the Plan, LinnCo will be dissolved following the resolution of all outstanding claims.
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

25

Table of Contents
LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued
(Unaudited)

ownership of LINN Energy’s outstanding units increased from approximately 37% at December 31, 2015, to approximately 71% at September 30, 2016.
LINN Energy hasPredecessor had agreed to provide to LinnCo, or to pay on LinnCo’s behalf, any financial, legal, accounting, tax advisory, financial advisory and engineering fees, and other administrative and out-of-pocket expenses incurred by LinnCo, along with any other expenses incurred in connection with any public offering of shares in LinnCo or incurred as a result of being a publicly traded entity. These expenses include costs associated with annual, quarterly and other reports to holders of LinnCo shares, tax return and Form 1099 preparation and distribution, NASDAQ listing fees, printing costs, independent auditor fees and expenses, legal counsel fees and expenses, limited liability company governance and compliance expenses and registrar and transfer agent fees. In addition, the Company hasPredecessor had agreed to indemnify LinnCo and its officers and directors for damages suffered or costs incurred (other than income taxes payable by LinnCo) in connection with carrying out LinnCo’s activities. All expenses and costs paid by LINN Energythe Predecessor on LinnCo’s behalf arewere expensed by LINN Energy.the Predecessor.
For the three months and ninetwo months ended September 30, 2016,February 28, 2017, LinnCo incurred total general and administrative expenses reorganization expenses and offering costs of approximately $1.0 million and $5.2 million, respectively,$287,000, including approximately $603,000 and $1.8 million, respectively,$240,000 related to services provided by LINN Energy. Ofthe Predecessor. All of the expenses and costs incurred during the ninetwo months ended September 30, 2016, approximately $5.1 millionFebruary 28, 2017, had been paid by LINN Energythe Predecessor on LinnCo’s behalf as of September 30, 2016.February 28, 2017.
For the three months and nine months ended September 30, 2015,March 31, 2016, LinnCo incurred total general and administrative expenses and certain offering costs of approximately $965,000 and $2.8$1.7 million, respectively, including approximately $491,000 and $1.5 million, respectively,$603,000 related to services provided by LINN Energy. All ofthe Predecessor. Of the expenses and costs incurred during the ninethree months ended September 30, 2015,March 31, 2016, approximately $918,000 had been paid by LINN Energythe Predecessor on LinnCo’s behalf as of September 30, 2015.
The Company did not pay any distributions to LinnCo during the three months or nine months ended September 30,March 31, 2016. During the three months and nine months ended September 30, 2015, the Company paid approximately $41 million and $121 million, respectively, in distributions to LinnCo attributable to LinnCo’s interest in LINN Energy.
Other
One of the Company’s directors is the President and Chief Executive Officer of Superior Energy Services, Inc. (“Superior”), which provides oilfield services to the Company. For the three months and nine months ended September 30, 2016, the Company incurred expenditures of approximately $1 million and $4 million, respectively, and for the three months and nine months ended September 30, 2015, the Company incurred expenditures of approximately $2 million and $7 million, respectively, related to services rendered by Superior and its subsidiaries.
Note 15 – Subsidiary Guarantors
Linn Energy, LLC’s senior notes due May 2019, senior notes due November 2019, senior notes due April 2020, Second Lien Notes, senior notes due February 2021 and senior notes due September 2021 are guaranteed by all of the Company’s material subsidiaries, other than Berry Petroleum Company, LLC, which is an indirect 100% wholly owned subsidiary of the Company.
The following condensed consolidating financial information presents the financial information of Linn Energy, LLC, the guarantor subsidiaries and the non-guarantor subsidiary in accordance with SEC Regulation S-X Rule 3‑10. The condensed consolidating financial information for the co-issuer, Linn Energy Finance Corp., is not presented as it has no assets, operations or cash flows. The financial information may not necessarily be indicative of the financial position or results of operations had the guarantor subsidiaries or non-guarantor subsidiary operated as independent entities. There are no restrictions on the Company’s ability to obtain cash dividends or other distributions of funds from the guarantor subsidiaries.

2630

Table of Contents
LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued
(Unaudited)

CONDENSED CONSOLIDATING BALANCE SHEETSNote 17 - Redeemable Noncontrolling Interests
September 30, 2016
 Linn Energy, LLC Guarantor Subsidiaries 
Non-
Guarantor Subsidiary
 Eliminations Consolidated
 (in thousands)
ASSETS       
Current assets:         
Cash and cash equivalents$311,180
 $459,680
 $29,647
 $
 $800,507
Accounts receivable – trade, net
 165,650
 47,458
 
 213,108
Accounts receivable – affiliates1,785,051
 35,567
 
 (1,820,618) 
Derivative instruments
 1,447
 
 
 1,447
Other current assets18,677
 82,864
 19,551
 
 121,092
Total current assets2,114,908
 745,208
 96,656
 (1,820,618) 1,136,154
          
Noncurrent assets:         
Oil and natural gas properties (successful efforts method)
 13,171,180
 5,022,076
 
 18,193,256
Less accumulated depletion and amortization
 (9,992,670) (2,755,015) 70,713
 (12,676,972)
 
 3,178,510
 2,267,061
 70,713
 5,516,284
          
Other property and equipment
 621,947
 120,317
 
 742,264
Less accumulated depreciation
 (213,586) (18,659) 
 (232,245)
 
 408,361
 101,658
 
 510,019
          
Restricted cash
 7,580
 197,624
 
 205,204
Notes receivable – affiliates137,400
 
 
 (137,400) 
Investments in consolidated subsidiaries2,263,182
 
 
 (2,263,182) 
Other noncurrent assets
 17,102
 18,257
 (72) 35,287
 2,400,582
 24,682
 215,881
 (2,400,654) 240,491
Total noncurrent assets2,400,582
 3,611,553
 2,584,600
 (2,329,941) 6,266,794
Total assets$4,515,490
 $4,356,761
 $2,681,256
 $(4,150,559) $7,402,948
          
LIABILITIES AND UNITHOLDERS’ CAPITAL (DEFICIT)      
Current liabilities:         
Accounts payable and accrued expenses$
 $293,729
 $69,274
 $
 $363,003
Accounts payable – affiliates
 1,785,051
 35,567
 (1,820,618) 
Derivative instruments
 82
 1,694
 
 1,776
Current portion of long-term debt, net1,937,589
 
 891,259
 
 2,828,848
Other accrued liabilities374
 43,426
 2,499
 
 46,299
Total current liabilities1,937,963
 2,122,288
 1,000,293
 (1,820,618) 3,239,926
          
Derivative instruments
 1,199
 
 
 1,199
Notes payable – affiliates
 137,400
 
 (137,400) 
Other noncurrent liabilities
 396,772
 174,423
 (72) 571,123
Liabilities subject to compromise4,168,822
 67,439
 936,798
 
 5,173,059
          
Unitholders’ capital (deficit):         
Units issued and outstanding5,358,341
 4,831,412
 2,798,713
 (7,621,189) 5,367,277
Accumulated deficit(6,949,636) (3,199,749) (2,228,971) 5,428,720
 (6,949,636)
 (1,591,295) 1,631,663
 569,742
 (2,192,469) (1,582,359)
Total liabilities and unitholders’ capital (deficit)$4,515,490
 $4,356,761
 $2,681,256
 $(4,150,559) $7,402,948

27

TableRedeemable noncontrolling interests on the condensed consolidated balance sheet as of Contents
LINN ENERGY,March 31, 2017, relate to the noncontrolling Class B unitholders of Holdco. Class B units can be converted at any time by the holder to Class A-2 units of Holdco or Class A common stock of the Company in accordance with the terms of the Holdco LLC (DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued
(Unaudited)

CONDENSED CONSOLIDATING BALANCE SHEETS
DecemberAgreement. As of March 31, 2015
 Linn Energy, LLC Guarantor Subsidiaries 
Non-
Guarantor Subsidiary
 Eliminations Consolidated
 (in thousands)
ASSETS       
Current assets:         
Cash and cash equivalents$1,073
 $72
 $1,023
 $
 $2,168
Accounts receivable – trade, net
 170,503
 46,053
 
 216,556
Accounts receivable – affiliates2,920,082
 8,621
 
 (2,928,703) 
Derivative instruments
 1,207,012
 13,218
 
 1,220,230
Other current assets25,090
 49,606
 20,897
 
 95,593
Total current assets2,946,245
 1,435,814
 81,191
 (2,928,703) 1,534,547
          
Noncurrent assets:         
Oil and natural gas properties (successful efforts method)
 13,110,094
 5,011,061
 
 18,121,155
Less accumulated depletion and amortization
 (9,557,283) (1,596,165) 55,956
 (11,097,492)
 
 3,552,811
 3,414,896
 55,956
 7,023,663
          
Other property and equipment
 597,216
 111,495
 
 708,711
Less accumulated depreciation
 (183,139) (12,522) 
 (195,661)
 
 414,077
 98,973
 
 513,050
          
Derivative instruments
 566,401
 
 
 566,401
Restricted cash
 7,004
 250,359
 
 257,363
Notes receivable – affiliates175,100
 
 
 (175,100) 
Investments in consolidated subsidiaries3,940,444
 
 
 (3,940,444) 
Other noncurrent assets
 17,178
 16,057
 (1) 33,234
 4,115,544
 590,583
 266,416
 (4,115,545) 856,998
Total noncurrent assets4,115,544
 4,557,471
 3,780,285
 (4,059,589) 8,393,711
Total assets$7,061,789
 $5,993,285
 $3,861,476
 $(6,988,292) $9,928,258
          
LIABILITIES AND UNITHOLDERS’ CAPITAL (DEFICIT)      
Current liabilities:         
Accounts payable and accrued expenses$1,285
 $336,962
 $117,127
 $
 $455,374
Accounts payable – affiliates
 2,920,082
 8,621
 (2,928,703) 
Derivative instruments
 
 2,241
 
 2,241
Current portion of long-term debt, net2,841,518
 
 873,175
 
 3,714,693
Other accrued liabilities49,861
 52,997
 16,735
 
 119,593
Total current liabilities2,892,664
 3,310,041
 1,017,899
 (2,928,703) 4,291,901
          
Derivative instruments
 857
 
 
 857
Long-term debt, net4,447,308
 
 845,368
 
 5,292,676
Notes payable – affiliates
 175,100
 
 (175,100) 
Other noncurrent liabilities
 399,676
 212,050
 (1) 611,725
          
Unitholders’ capital (deficit):         
Units issued and outstanding5,333,834
 4,831,758
 2,798,713
 (7,621,189) 5,343,116
Accumulated deficit(5,612,017) (2,724,147) (1,012,554) 3,736,701
 (5,612,017)
 (278,183) 2,107,611
 1,786,159
 (3,884,488) (268,901)
Total liabilities and unitholders’ capital (deficit)$7,061,789
 $5,993,285
 $3,861,476
 $(6,988,292) $9,928,258

28

Table2017, the redeemable noncontrolling interests of Contents
LINN ENERGY,approximately $29 million presented as temporary equity on the condensed consolidated balance sheet consists solely of the noncash share-based compensation related to the vested portion of such incentive interest awards in the form of Class B units issued to certain members of management (see Note 12). In accordance with the Holdco LLC (DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued
(Unaudited)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
ForAgreement, the Three Months Ended September 30, 2016
 Linn Energy, LLC Guarantor Subsidiaries 
Non-
Guarantor Subsidiary
 Eliminations Consolidated
 (in thousands)
Revenues and other:         
Oil, natural gas and natural gas liquids sales$
 $257,902
 $102,241
 $
 $360,143
Gains on oil and natural gas derivatives
 166
 108
 
 274
Marketing revenues
 9,249
 9,103
 
 18,352
Other revenues
 5,123
 1,773
 
 6,896
 
 272,440
 113,225
 
 385,665
Expenses:         
Lease operating expenses
 71,422
 46,048
 
 117,470
Transportation expenses
 40,986
 8,644
 
 49,630
Marketing expenses
 6,933
 5,258
 
 12,191
General and administrative expenses
 34,809
 15,393
 
 50,202
Exploration costs
 4
 
 
 4
Depreciation, depletion and amortization
 105,304
 39,951
 (2,807) 142,448
Impairment of long-lived assets
 41,728
 
 
 41,728
Taxes, other than income taxes2
 19,075
 (3,694) 
 15,383
(Gains) losses on sale of assets and other, net
 2,310
 (370) 
 1,940
 2
 322,571
 111,230
 (2,807) 430,996
Other income and (expenses):         
Interest expense, net of amounts capitalized(27,595) (95) (12,415) 
 (40,105)
Interest expense – affiliates
 (2,479) 
 2,479
 
Interest income – affiliates2,479
 
 
 (2,479) 
Equity in losses from consolidated subsidiaries(171,817) 
 
 171,817
 
Other, net(116) (84) (69) 
 (269)
 (197,049) (2,658) (12,484) 171,817
 (40,374)
Reorganization items, net(1,314) (27,047) (87,915) 
 (116,276)
Loss before income taxes(198,365) (79,836) (98,404) 174,624
 (201,981)
Income tax expense (benefit)
 (3,650) 34
 
 (3,616)
Net loss$(198,365) $(76,186) $(98,438) $174,624
 $(198,365)

29

Tablerequirements entitling Class B unitholders to Holdco distributions had not been met as of Contents
LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued
(Unaudited)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
ForMarch 31, 2017, and, therefore, no allocation of net income (loss) was made to the Three Months Ended September 30, 2015
 Linn Energy, LLC Guarantor Subsidiaries 
Non-
Guarantor Subsidiary
 Eliminations Consolidated
 (in thousands)
Revenues and other:         
Oil, natural gas and natural gas liquids sales$
 $286,993
 $140,252
 $
 $427,245
Gains on oil and natural gas derivatives
 521,365
 27,664
 
 549,029
Marketing revenues
 6,004
 9,719
 
 15,723
Other revenues
 4,635
 1,672
 
 6,307
 
 818,997
 179,307
 
 998,304
Expenses:         
Lease operating expenses
 86,745
 67,341
 
 154,086
Transportation expenses
 41,121
 13,794
 
 54,915
Marketing expenses
 3,633
 5,726
 
 9,359
General and administrative expenses
 38,549
 21,564
 
 60,113
Exploration costs
 3,072
 
 
 3,072
Depreciation, depletion and amortization
 142,211
 63,057
 1,950
 207,218
Impairment of long-lived assets
 1,744,449
 510,631
 
 2,255,080
Taxes, other than income taxes
 31,718
 14,520
 
 46,238
(Gains) losses on sale of assets and other, net
 (169,613) 2,633
 
 (166,980)
 
 1,921,885
 699,266
 1,950
 2,623,101
Other income and (expenses):         
Interest expense, net of amounts capitalized(117,096) 197
 (21,484) 
 (138,383)
Interest expense – affiliates
 (2,207) 
 2,207
 
Interest income – affiliates2,207
 
 
 (2,207) 
Gain on extinguishment of debt193,363
 
 4,378
 
 197,741
Equity in losses from consolidated subsidiaries(1,646,256) 
 
 1,646,256
 
Other, net(1,535) (76) (90) 
 (1,701)
 (1,569,317) (2,086) (17,196) 1,646,256
 57,657
Loss before income taxes(1,569,317) (1,104,974) (537,155) 1,644,306
 (1,567,140)
Income tax expense
 2,174
 3
 
 2,177
Net loss$(1,569,317) $(1,107,148) $(537,158) $1,644,306
 $(1,569,317)


30

Table of Contents
LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued
(Unaudited)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
Forredeemable noncontrolling interests for the Nine Months Ended September 30, 2016
 Linn Energy, LLC Guarantor Subsidiaries 
Non-
Guarantor Subsidiary
 Eliminations Consolidated
 (in thousands)
Revenues and other:         
Oil, natural gas and natural gas liquids sales$
 $674,177
 $285,538
 $
 $959,715
Gains (losses) on oil and natural gas derivatives
 (74,175) 1,642
 
 (72,533)
Marketing revenues
 26,861
 20,316
 
 47,177
Other revenues
 15,834
 5,634
 
 21,468
 
 642,697
 313,130
 
 955,827
Expenses:         
Lease operating expenses
 232,101
 138,557
 
 370,658
Transportation expenses
 124,072
 32,518
 
 156,590
Marketing expenses
 21,493
 14,291
 
 35,784
General and administrative expenses
 131,064
 65,313
 
 196,377
Exploration costs
 2,745
 
 
 2,745
Depreciation, depletion and amortization
 318,067
 139,980
 (8,370) 449,677
Impairment of long-lived assets
 171,431
 1,030,588
 (6,387) 1,195,632
Taxes, other than income taxes4
 59,679
 20,614
 
 80,297
(Gains) losses on sale of assets and other, net
 6,096
 (137) 
 5,959
 4
 1,066,748
 1,441,724
 (14,757) 2,493,719
Other income and (expenses):         
Interest expense, net of amounts capitalized(165,185) 146
 (48,719) 
 (213,758)
Interest expense – affiliates
 (8,417) 
 8,417
 
Interest income – affiliates8,417
 
 
 (8,417) 
Equity in losses from consolidated subsidiaries(1,677,262) 
 
 1,677,262
 
Other, net(1,358) 
 (79) 
 (1,437)
 (1,835,388) (8,271) (48,798) 1,677,262
 (215,195)
Reorganization items, net497,773
 (40,336) (38,829) 
 418,608
Loss before income taxes(1,337,619) (472,658) (1,216,221) 1,692,019
 (1,334,479)
Income tax expense
 2,944
 196
 
 3,140
Net loss$(1,337,619) $(475,602) $(1,216,417) $1,692,019
 $(1,337,619)

one month ended March 31,

Table of Contents
LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued
(Unaudited)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Nine Months Ended September 30, 2015
 Linn Energy, LLC Guarantor Subsidiaries 
Non-
Guarantor Subsidiary
 Eliminations Consolidated
 (in thousands)
Revenues and other:         
Oil, natural gas and natural gas liquids sales$
 $904,014
 $470,219
 $
 $1,374,233
Gains on oil and natural gas derivatives
 756,165
 26,457
 
 782,622
Marketing revenues
 35,501
 24,699
 
 60,200
Other revenues
 14,521
 5,103
 
 19,624
 
 1,710,201
 526,478
 
 2,236,679
Expenses:         
Lease operating expenses
 283,333
 184,426
 
 467,759
Transportation expenses
 124,872
 39,378
 
 164,250
Marketing expenses
 29,990
 17,369
 
 47,359
General and administrative expenses
 157,878
 79,853
 
 237,731
Exploration costs
 4,032
 
 
 4,032
Depreciation, depletion and amortization
 433,649
 199,088
 5,227
 637,964
Impairment of long-lived assets
 2,069,866
 782,631
 (64,800) 2,787,697
Taxes, other than income taxes2
 98,267
 60,048
 
 158,317
Gains on sale of assets and other, net
 (194,612) (2,651) 
 (197,263)
 2
 3,007,275
 1,360,142
 (59,573) 4,307,846
Other income and (expenses):         
Interest expense, net of amounts capitalized(364,037) 2,048
 (65,595) 
 (427,584)
Interest expense – affiliates
 (7,824) 
 7,824
 
Interest income – affiliates7,824
 
 
 (7,824) 
Gain on extinguishment of debt202,318
 
 11,209
 
 213,527
Equity in losses from consolidated subsidiaries(2,124,493) 
 
 2,124,493
 
Other, net(9,214) (123) (723) 
 (10,060)
 (2,287,602) (5,899) (55,109) 2,124,493
 (224,117)
Loss before income taxes(2,287,604) (1,302,973) (888,773) 2,184,066
 (2,295,284)
Income tax benefit
 (7,622) (58) 
 (7,680)
Net loss$(2,287,604) $(1,295,351) $(888,715) $2,184,066
 $(2,287,604)


32

Table of Contents
LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued
(Unaudited)

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2016
 Linn Energy, LLC Guarantor Subsidiaries 
Non-
Guarantor Subsidiary
 Eliminations Consolidated
 (in thousands)
Cash flow from operating activities:         
Net loss$(1,337,619) $(475,602) $(1,216,417) $1,692,019
 $(1,337,619)
Adjustments to reconcile net loss to net cash provided by operating activities:         
Depreciation, depletion and amortization
 318,067
 139,980
 (8,370) 449,677
Impairment of long-lived assets
 171,431
 1,030,588
 (6,387) 1,195,632
Unit-based compensation expenses
 24,514
 
 
 24,514
Amortization and write-off of deferred financing fees11,288
 
 1,226
 
 12,514
(Gains) losses on sale of assets and other, net
 5,534
 (874) 
 4,660
Equity in losses from consolidated subsidiaries1,677,262
 
 
 (1,677,262) 
Deferred income taxes
 831
 71
 
 902
Reorganization items(497,446) 11,615
 22,866
 
 (462,965)
Derivatives activities:         
Total losses
 74,175
 2,963
 
 77,138
Cash settlements
 500,075
 8,007
 
 508,082
Cash settlements on canceled derivatives
 356,835
 1,701
 
 358,536
Changes in assets and liabilities:         
Increase in accounts receivable – trade, net
 (911) (2,839) 
 (3,750)
(Increase) decrease in accounts receivable – affiliates323,348
 (26,946) 
 (296,402) 
Increase in other assets
 (17,111) (3,175) 
 (20,286)
Increase (decrease) in accounts payable and accrued expenses(36) 64,288
 (9,080) 
 55,172
Increase (decrease) in accounts payable and accrued expenses – affiliates
 (323,348) 26,946
 296,402
 
Increase (decrease) in other liabilities37,374
 (15,695) 1,306
 
 22,985
Net cash provided by operating activities214,171
 667,752
 3,269
 
 885,192
Cash flow from investing activities:         
Development of oil and natural gas properties
 (126,228) (16,168) 
 (142,396)
Purchases of other property and equipment
 (26,570) (10,366) 
 (36,936)
Decrease in restricted cash
 
 53,418
 
 53,418
Change in notes receivable with affiliate37,700
 
 
 (37,700) 
Proceeds from sale of properties and equipment and other(5,114) 1,793
 172
 
 (3,149)
Net cash provided by (used in) investing activities32,586
 (151,005) 27,056
 (37,700) (129,063)

33

Table of Contents
LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued
(Unaudited)

 Linn Energy, LLC Guarantor Subsidiaries 
Non-
Guarantor Subsidiary
 Eliminations Consolidated
 (in thousands)
Cash flow from financing activities:         
Proceeds from borrowings978,500
 
 
 
 978,500
Repayments of debt(913,210) 
 (1,701) 
 (914,911)
Financing fees and offering costs(692) 
 
 
 (692)
Change in notes payable with affiliate
 (37,700) 
 37,700
 
Other(1,248) (19,439) 
 
 (20,687)
Net cash provided by (used in) financing activities63,350
 (57,139) (1,701) 37,700
 42,210
          
Net increase in cash and cash equivalents310,107
 459,608
 28,624
 
 798,339
Cash and cash equivalents:         
Beginning1,073
 72
 1,023
 
 2,168
Ending$311,180
 $459,680
 $29,647
 $
 $800,507

34

Table of Contents
LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued
(Unaudited)

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2015
 Linn Energy, LLC Guarantor Subsidiaries 
Non-
Guarantor Subsidiary
 Eliminations Consolidated
 (in thousands)
Cash flow from operating activities:         
Net loss$(2,287,604) $(1,295,351) $(888,715) $2,184,066
 $(2,287,604)
Adjustments to reconcile net loss to net cash provided by operating activities:         
Depreciation, depletion and amortization
 433,649
 199,088
 5,227
 637,964
Impairment of long-lived assets
 2,069,866
 782,631
 (64,800) 2,787,697
Unit-based compensation expenses
 47,918
 
 
 47,918
Gain on extinguishment of debt(202,318) 
 (11,209) 
 (213,527)
Amortization and write-off of deferred financing fees22,677
 
 1,121
 
 23,798
Gains on sale of assets and other, net
 (192,247) (1,521) 
 (193,768)
Equity in losses from consolidated subsidiaries2,124,493
 
 
 (2,124,493) 
Deferred income taxes
 (8,205) (58) 
 (8,263)
Derivatives activities:         
Total gains
 (756,165) (29,355) 
 (785,520)
Cash settlements
 810,314
 48,054
 
 858,368
Changes in assets and liabilities:         
Decrease in accounts receivable – trade, net
 163,353
 43,709
 
 207,062
Decrease in accounts receivable – affiliates813,653
 6,876
 
 (820,529) 
Decrease in other assets
 1,164
 1,519
 
 2,683
Decrease in accounts payable and accrued expenses
 (28,331) (8,295) 
 (36,626)
Decrease in accounts payable and accrued expenses – affiliates
 (813,653) (6,876) 820,529
 
Increase (decrease) in other liabilities27,462
 (12,086) (20,789) 
 (5,413)
Net cash provided by operating activities498,363
 427,102
 109,304
 
 1,034,769
Cash flow from investing activities:         
Development of oil and natural gas properties
 (500,130) (3,076) 
 (503,206)
Purchases of other property and equipment
 (38,769) (12,760) 
 (51,529)
Investment in affiliates(91,455) 
 
 91,455
 
Change in notes receivable with affiliate(50,900) 
 
 50,900
 
Settlement of advance to affiliate
 
 129,217
 (129,217) 
Proceeds from sale of properties and equipment and other(2,826) 344,535
 22,486
 
 364,195
Net cash provided by (used in) investing activities(145,181) (194,364) 135,867
 13,138
 (190,540)
          

35

Table of Contents
LINN ENERGY, LLC (DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued
(Unaudited)

 Linn Energy, LLC Guarantor Subsidiaries 
Non-
Guarantor Subsidiary
 Eliminations Consolidated
 (in thousands)
Cash flow from financing activities:         
Proceeds from sale of units233,427
 
 
 
 233,427
Proceeds from borrowings1,405,000
 
 
 
 1,405,000
Repayments of debt(1,646,491) 
 (55,418) 
 (1,701,909)
Distributions to unitholders(323,878) 
 
 
 (323,878)
Financing fees and offering costs(8,771) 
 (3) 
 (8,774)
Change in notes payable with affiliate
 50,900
 
 (50,900) 
Settlement of advance from affiliate
 (129,217) 
 129,217
 
Capital contributions – affiliates
 
 91,455
 (91,455) 
Excess tax benefit from unit-based compensation(9,467) 
 
 
 (9,467)
Other(3,008) (92,637) 14
 
 (95,631)
Net cash provided by (used in) financing activities(353,188) (170,954) 36,048
 (13,138) (501,232)
          
Net increase (decrease) in cash and cash equivalents(6) 61,784
 281,219
 
 342,997
Cash and cash equivalents:         
Beginning38
 185
 1,586
 
 1,809
Ending$32
 $61,969
 $282,805
 $
 $344,806
2017.

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with the financial statements and related notes included in this Quarterly Report on Form 10-Q and in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.2016. The following discussion contains forward-looking statements based on expectations, estimates and assumptions. Actual results may differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, market prices for oil, natural gas and NGL, production volumes, estimates of proved reserves, capital expenditures, economic and competitive conditions, credit and capital market conditions, regulatory changes and other uncertainties, as well as those factors set forth in “Cautionary Statement Regarding Forward-Looking Statements” below and in Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q and in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015,2016, and elsewhere in the Annual Report.
When referring to Linn Energy, LLCInc. (formerly known as Linn Energy, LLC) (“LINNSuccessor,” “LINN Energy” or the “Company”), the intent is to refer to LINN Energy, a newly formed Delaware corporation, and its consolidated subsidiaries as a whole or on an individual basis, depending on the context in which the statements are made. Linn Energy, Inc. is a successor issuer of Linn Energy, LLC pursuant to Rule 15d-5 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). When referring to the “Predecessor” in reference to the period prior to the emergence from bankruptcy, the intent is to refer to Linn Energy, LLC, the predecessor that will be dissolved following the effective date of the Plan (as defined below) and resolution of all outstanding claims, and its consolidated subsidiaries as a whole or on an individual basis, depending on the context in which the statements are made.
The reference to “Berry” herein refers to Berry Petroleum Company, LLC, which iswas an indirect 100% wholly owned subsidiary of LINN Energy.the Predecessor through February 28, 2017. Berry was deconsolidated effective December 3, 2016 (see below and Note 4). The reference to “LinnCo” herein refers to LinnCo, LLC, which iswas an affiliate of LINN Energy.the Predecessor.
The reference to a “Note” herein refers to the accompanying Notes to Condensed Consolidated Financial Statements contained in Item 1. “Financial Statements.”
Executive Overview
LINN Energy’s mission is to acquire, develop and maximize cash flow from a growing portfolio of long-life oil and natural gas assets. LINN Energy is an independent oil and natural gas company that began operationswas formed in March 2003February 2017, in connection with the reorganization of the Predecessor. The Predecessor was publicly traded from January 2006 to February 2017. As discussed further below and completed 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;
Michigan/Illinois, which includes properties located in the Antrim Shale formation in north Michigan and oil properties in south Illinois; and
South Texas.
Results for the three months ended September 30, 2016, included the following:
oil, natural gas and NGL sales of approximately $360 million compared to $427 million for the three months ended September 30, 2015;
average daily production of approximately 1,075 MMcfe/d compared to 1,198 MMcfe/d for the 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 $113 million for the three months ended September 30, 2015; and
46 wells drilled (all successful) compared to 41 wells drilled (38 successful) for the three months ended September 30, 2015.
Results for the nine months ended September 30, 2016, included the following:
oil, natural gas and NGL sales of approximately $960 million compared to $1.4 billion for the nine months ended September 30, 2015;

37

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) for the nine months ended September 30, 2015.
Chapter 11 Proceedings
OnNote 2, on May 11, 2016 (the “Petition Date”), the Company,Linn Energy, LLC, certain of the Company’sits 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”). The Debtors’ Chapter 11 cases are beingwere administered jointly under the caption In re Linn Energy, LLC.,LLC, et al., Case No. 16‑60040.
The condensed consolidated financial statements have been prepared as if During the Company is a going concern and reflect the applicationpendency 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 withproceedings, 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 Debtors are operatingoperated 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 byCompany emerged from bankruptcy effective February 28, 2017.
On December 3, 2016, LINN Energy filed an amended plan of reorganization that excluded Berry. As a result of its loss of control of Berry, LINN Energy concluded that it was appropriate to deconsolidate Berry effective on the Debtors, allowingaforementioned date. The results of operations of Berry are reported as discontinued operations for the Company to use its cash to fund the Chapter 11 proceedings, pursuant to an agreement with the first lien lenders, and giving the Company the authority to, among other things, continue to pay employee wages and benefits without interruption, to utilize its current cash management system and to make royalty payments. During the pendency of the Chapter 11 proceedings, all transactions outside the ordinary course of the Company’s business require prior approval of the Bankruptcy Court. For goods and services provided following the Petition Date, the Company intends to pay vendors in full under normal terms.
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 Agreement (“LINN Credit Facility”) and (ii) Berry’s Second Amended and Restated Credit Agreement (“Berry Credit Facility”).three months ended March 31, 2016.
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”) filedCompany’s properties are located in eight operating regions in the Chapter 11 proceedings.United States (“U.S.”):
The Bank RSA provides thatRockies, which includes properties located in Wyoming (Green River, Washakie and Powder River basins), Utah (Uinta Basin) and North Dakota (Williston Basin);
Hugoton Basin, which includes properties located in Kansas, 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 DebtorsOklahoma Panhandle 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 to the Consenting Bank Creditors, vote their claims in favor of the 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, andShallow Texas Panhandle;
Mid-Continent, which includes Oklahoma properties located in the event of certain breaches byAnadarko and Arkoma basins, as well as waterfloods in the parties underCentral 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;
California, which includes properties located in the Bank RSA. The Bank RSA is subject to termination if the effective date of the Plan has notSan Joaquin Valley and Los Angeles basins;

3832

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

occurred within 250 daysMichigan/Illinois, which includes properties located in the Antrim Shale formation in north Michigan and oil properties in south Illinois; and
South Texas.
The Company’s current focus is the upstream and midstream development of the Petition Date. There can be no assuranceSCOOP / STACK / Merge in Oklahoma. Additionally, the Company is pursuing emerging horizontal opportunities in the Mid-Continent, Rockies and TexLa regions while continuing to add value by efficiently operating and applying new technology to a diverse set of long-life producing assets.
For the three months ended March 31, 2017, the Company’s results included the following:
oil, natural gas and NGL sales of approximately $87 million and $204 million for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, compared to $200 million for the three months ended March 31, 2016;
average daily production of approximately 788 MMcfe/d and 775 MMcfe/d for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, compared to 858 MMcfe/d for the three months ended March 31, 2016;
net loss of approximately $7 million and net income of approximately $2.4 billion for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, compared to net loss of approximately $1.3 billion for the three months ended March 31, 2016;
net cash provided by operating activities from continuing operations of approximately $18 million and net cash used in operating activities of approximately $21 million for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, compared to net cash provided by operating activities of approximately $270 million for the three months ended March 31, 2016;
capital expenditures of approximately $19 million and $46 million for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, compared to $28 million for the three months ended March 31, 2016; and
27 wells drilled (all successful) compared to 59 wells drilled (58 successful) for the three months ended March 31, 2016.
Predecessor and Successor Reporting
As a result of the application of fresh start accounting (see Note 3), the Company’s condensed consolidated financial statements and certain note presentations are separated into two distinct periods, the period before the Effective Date (labeled Predecessor) and the period after that date (labeled Successor), to indicate the restructuring transactions contemplated byapplication of different basis of accounting between the Bank RSA will be consummated.periods presented. Despite this separate presentation, there was continuity of the Company’s operations.
Restructuring Support AgreementChapter 11 Proceedings
On October 7,the Petition Date, the Debtors filed Bankruptcy Petitions for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. The Debtors’ Chapter 11 cases were administered jointly under the caption In re Linn Energy, LLC, et al., Case No. 16‑60040.
On December 3, 2016, the LINN Debtors entered into a restructuring support agreementfiled the Amended Joint Chapter 11 Plan of Reorganization of Linn Energy, LLC and Its Debtor Affiliates Other Than Linn Acquisition Company, LLC (“OriginalLAC”) and Berry Petroleum Company, LLC (the “Plan”). The LINN RSA”) with (i) certain holdersDebtors subsequently filed amended versions 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 NoteholdersPlan with the Consenting Second Lien Noteholders, the “Consenting Noteholders”).Bankruptcy Court.
On October 21,December 13, 2016, LAC and Berry filed the LINN Debtors entered into the First Amended Joint Chapter 11 Plan of Reorganization of Linn Acquisition Company, LLC and Restated Restructuring Support Agreement (“LINN RSA”) with (i) certain Consenting Second Lien Noteholders, (ii) certain Consenting Unsecured Noteholders and (iii) certain lendersBerry Petroleum Company, LLC (the “Consenting LINN Lenders,”“Berry Plan” and together with the Consenting Noteholders,Plan, the “Consenting LINN Creditors”“Plans”) under the LINN Credit Facility. The LINN RSA amends. LAC and restates the Original LINN RSA and replaces the Bank RSA with respect to the termsBerry subsequently filed amended versions 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
On January 27, 2017, the Bankruptcy Court entered an order approving and confirming the Plans (the “Confirmation Order”). On February 28, 2017 (the “Effective Date”), the Debtors satisfied the conditions to effectiveness of the proposed Plan.
The LINN RSA obligatesrespective Plans, 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.
Backstop Commitment Agreement
In connection with the proposed Plan, on October 25, 2016, the Company entered into a backstop commitment agreement (“Backstop Commitment Agreement”) with the parties thereto (collectively, the “Backstop Parties”), pursuant to which the Backstop Parties, which are also Consenting Noteholders under the LINN RSA, have agreed to backstop a $530 million new money investment in the LINN Debtors pursuant to the rights offerings to be conducted in accordance with the Plan.
In accordance with the Plan, the Backstop Commitment Agreement and the rights offerings procedures filed in the Chapter 11 cases, the LINN Debtors will offer eligible creditors, including the Backstop Parties, the right to purchase new common stock or limited liability company interests in the reorganized Company (“New Common Stock”) upon emergence from the Chapter 11 cases for an aggregate purchase price of $530 million. The rights offerings will consist of the following offerings:
Holders of Unsecured 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 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 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

3933

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

Plans became effective in accordance with their respective terms and LINN Energy and Berry emerged from bankruptcy as stand-alone, unaffiliated entities.
Plan of Reorganization
In accordance with the Plan, on the Effective Date:
The Predecessor transferred all of its assets, including equity interests in its subsidiaries, other than LAC and Berry, to Linn Energy Holdco II LLC (“Holdco II”), a newly formed subsidiary of the Predecessor and the borrower under the Credit Agreement (“Successor Credit Facility”) entered into in connection with the reorganization, in exchange for 100% of the equity of Holdco II and the issuance of interests in the Successor Credit Facility to certain of the Predecessor’s creditors in partial satisfaction of their claims (the “Contribution”). Immediately following the Contribution, the Predecessor transferred 100% of the equity interests in Holdco II to the Successor in exchange for approximately $530 million in cash and an amount of equity securities in the Successor not to exceed 49.90% of the outstanding equity interests of the Successor (the “Disposition”), which the Predecessor distributed to certain of its creditors in satisfaction of their claims. Contemporaneously with the reorganization transactions and pursuant to the Unsecured Rights Offering or the Secured Rights Offering, as applicable, at the discounted per share price set forthPlan, (i) LAC assigned all of its rights, title and interest in the Backstop Commitment by parties othermembership interests of Berry to Berry Petroleum Corporation, (ii) all of the equity interests in LAC and the Predecessor were canceled and (iii) LAC and the Predecessor commenced liquidation, which is expected to be completed following the resolution of the respective companies’ outstanding claims.
The holders of claims under the Predecessor’s Sixth Amended and Restated Credit Agreement (“Predecessor Credit Facility”) received a full recovery, consisting of a cash paydown and their pro rata share of the $1.7 billion Successor Credit Facility. As a result, all outstanding obligations under the Predecessor Credit Facility were canceled.
Holdco II, as borrower, entered into the Successor Credit Facility with the holders of claims under the Predecessor Credit Facility, as lenders, and Wells Fargo Bank, National Association, as administrative agent, providing for a new reserve-based revolving loan with up to $1.4 billion in borrowing commitments and a new term loan in an original principal amount of $300 million. For additional information, see “Financing Activities” below.
The holders of the Company’s 12.00% senior secured second lien notes due December 2020 (the “Second Lien Notes”) received their pro rata share of (i) 17,678,889 shares of Class A common stock; (ii) certain rights to purchase shares of Class A common stock in the rights offering, as described below; and (iii) $30 million in cash. The holders of the Company’s 6.50% senior notes due May 2019, 6.25% senior notes due November 2019, 8.625% senior notes due 2020, 7.75% senior notes due February 2021 and 6.50% senior notes due September 2021 (collectively, the “Unsecured Notes”) received their pro rata share of (i) 26,724,396 shares of Class A common stock; and (ii) certain rights to purchase shares of Class A common stock in the rights offering (as described below). As a result, all outstanding obligations under the Second Lien Notes and the Unsecured Notes and the indentures governing such obligations were canceled.
The holders of general unsecured claims (other than Backstop Parties (the “Backstop Commitment”).
Subjectclaims relating to Bankruptcy Court approval,the Second Lien Notes and the Unsecured Notes) against the LINN Debtors will pay(the “LINN Unsecured Claims”) received their pro rata share of cash from two cash distribution pools totaling $40 million, as divided between a $2.3 million cash distribution pool for the Backstop Parties on the Plan effective date a commitment premiumpayment in full of allowed LINN Unsecured Claims in an amount equal to 4.0% of$2,500 or less (and larger claims for which the $530holders irrevocably agreed to reduce such claims to $2,500), and a $37.7 million committed amount (the “Backstop Commitment Premium”), of which 3.0% will be paid in cash distribution pool for pro rata distributions to all remaining allowed general LINN Unsecured Claims. As a result, all outstanding LINN Unsecured Claims were fully satisfied, settled, released and 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 nonrefundabledischarged as of the dateEffective Date.
All units of the Bankruptcy Court order approving the LINN Debtors’ entry into the Backstop Commitment Agreement. All amounts payablePredecessor that were issued and outstanding immediately prior to the Backstop PartiesEffective Date were extinguished without recovery. On the Effective Date, the Successor issued 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 Commitment89,229,892 shares of all Backstop Parties).Class A common stock. No cash was raised from the issuance of the Class A common stock on account of claims held by the Predecessor’s creditors.
The 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 enterSuccessor entered into a registration rights agreement with the certain Backstop Parties entitling such Backstop Partiesparties, pursuant to request thatwhich the Company register their securities for sale under the Securities Act at various times.
The Backstop Parties’ commitmentsagreed 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, confirmationfile a registration statement with the Securities and Exchange Commission within 60 days of the Plan byEffective Date covering the Bankruptcy Court,offer and the Plan’s effectiveness upon the Company’s emergence from its Chapter 11 cases.
Magnituderesale 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.
Rejection of Executory Contracts
Subject to certain exceptions, under the Bankruptcy Code, the Debtors may assume, assign or reject certain executory contracts and unexpired leases subject to the approval of the Bankruptcy Court and satisfaction of certain other conditions. Generally, the rejection of an executory contract or unexpired lease is treated as a prepetition breach of such executory contract or unexpired lease and, subject to certain exceptions, relieves the Debtors of performing their future obligations under such executory contract or unexpired lease but entitles the contract counterparty or lessor to a prepetition general unsecured claim for damages caused by such deemed breach. Counterparties to such rejected contracts or leases may assert unsecured claims in the Bankruptcy Court against the applicable Debtors’ estate for damages. Generally, the assumption of an executory contract or unexpired lease requires the Debtors to cure existing monetary defaults under such executory contract or unexpired lease and provide adequate assurance of future performance. Accordingly, any description of an executory contract or unexpired lease with any of the Debtors in this Quarterly Report on Form 10-Q, including where applicable a quantification of the Company’s obligations under any such executory contract or unexpired lease with the applicable Debtor, is qualified by any overriding rejection rights the Company has under the Bankruptcy Code. Further, nothing herein is or shall be deemed an admission with respect to any claim amounts or calculations arising from the rejection of any executory contract or unexpired lease and the Debtors expressly preserve all of their rights with respect thereto.“Registrable Securities” (as defined therein).

4034

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

EffectBy operation of Filing on Creditorsthe Plan and Unitholdersthe Confirmation Order, the terms of the Predecessor’s board of directors expired as of the Effective Date. The Successor formed a new board of directors, consisting of the Chief Executive Officer of the Predecessor, one director selected by the Successor and five directors selected by a six-person selection committee.
SubjectDivestiture –Pending
On May 2, 2017, the Company, through certain of its wholly owned subsidiaries, entered into a definitive purchase and sale agreement to certain exceptions,sell its interest in properties located in western Wyoming to Jonah Energy LLC for a contract price of approximately $581.5 million, subject to closing adjustments. Proceeds from the sale are expected to be used to reduce outstanding borrowings under the Bankruptcy Code,Company’s revolving credit facility and term loan. The sale is anticipated to close in the filingsecond quarter 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 property2017, subject to recover, collect or secure a claim arising prior to the Petition Date. Absent an order of the Bankruptcy Court, substantiallyclosing conditions. There can be no assurance that all of the Debtors’ prepetition liabilities areconditions to closing will be satisfied. The Company continues to market the previously announced non-core assets in California, the Permian Basin, south Texas, Salt Creek and the Williston Basin.
2017 Oil and Natural Gas Capital Budget
For 2017, the Company estimates its total capital expenditures, excluding acquisitions, will be approximately $413 million, including approximately $300 million related to its oil and natural gas capital program and approximately $102 million related to its plant and pipeline capital. This estimate is under continuous review and subject to settlementongoing adjustments.
Financing Activities
Successor Credit Facility
On the Effective Date, pursuant to the terms of the Plan, the Company entered into the Successor Credit Facility with Holdco II as borrower and Wells Fargo Bank, National Association, as administrative agent, providing for: 1) a revolving loan with an initial borrowing base of $1.4 billion and 2) a term loan in an original principal amount of $300 million. As of March 31, 2017, total borrowings outstanding under the Bankruptcy Code. AlthoughSuccessor Credit Facility were approximately $834 million, and there was approximately $853 million of remaining available borrowing capacity (which includes a $7 million reduction for outstanding letters of credit).
There are no scheduled borrowing base redeterminations until April 1, 2018. After such time and until August 28, 2020, any scheduled redetermination of the filingborrowing base resulting in a decrease of Bankruptcy Petitions triggered defaultsthe borrowing base will cause the borrowing base to be allocated into a conforming revolving loan tranche and a non-conforming revolving loan tranche that, in the aggregate, equal $1.4 billion. Interest on borrowings under the Debtors’ debt obligations, creditors are stayed from taking any actions againstrevolving loan is determined by reference to the Debtors as a resultLondon Interbank Offered Rate (“LIBOR”) plus an applicable margin of such defaults,(a) 3.50% per annum in the case of the conforming revolving loan tranche and (b) 5.50% per annum in the case of the non-conforming revolving loan tranche. The revolving loan is not subject to certain limited exceptions permitted byamortization. The conforming revolving loan tranche matures on February 27, 2021, and the Bankruptcy Code. non-conforming revolving loan tranche matures on August 28, 2020.
The Company did not recordterm loan incurs interest expenseat a rate of LIBOR plus 7.50% per annum, amortizes quarterly, and matures on its Second Lien Notes or senior notes forFebruary 27, 2021.
Holdco II has 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 entitledright to receiveprepay any settlement or retain any property under a plan of reorganization. The ultimate recovery to creditors and/or unitholders, if any, will not be determined until confirmation and implementation of a plan or plans of reorganization. No assurance can be given as to what values, if any, will be ascribed in the Chapter 11 proceedings to each of these constituencies or what types or amounts of settlements, if any, they will receive. A plan of reorganization could result in holders of the Debtors’ liabilities and/or units receiving no settlement on account of their interests and cancellation of their holdings. The Company believes that it is highly likely that its existing units will be canceled in the Chapter 11 proceedings and will be entitled to a limited recovery, if any. Any trading in the Company’s units during the pendency of the Chapter 11 proceedings is highly speculative and poses substantial risks to purchasers of the Company’s units.
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 propertyborrowings 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 confirmSuccessor Credit Facility at any time without 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,prepayment penalty, other than customary “breakage” costs with respect to units, a Plan may be “crammed down” even ifeurodollar loans.
The obligations under the unitholders receive no recovery if the proponentSuccessor Credit Facility are secured by mortgages covering approximately 95% of the Plan demonstrates that (1) no class juniortotal value of the proved reserves of the oil and natural gas properties of the Company, and certain equipment and facilities associated therewith, along with liens on substantially all personal property of the Company and are guaranteed by the Company, Linn Energy Holdco LLC and Holdco II’s subsidiaries, subject to customary exceptions. Under the units are receiving or retaining property underSuccessor Credit Facility, the Plan and (2) no classCompany is required to maintain certain financial covenants including the maintenance of claims or interests senior(i) an asset coverage ratio of at least 1.1 to 1.0, tested on (a) the units are being paid more than in full.
On October 21, 2016, the Debtors filed a proposed Plandate of each scheduled borrowing base redetermination commencing with the Bankruptcy Court. Certain principal termsfirst scheduled borrowing base redetermination and (b) the date of the proposed Plan, as filed on October 21, 2016,each additional borrowing base redetermination done in conjunction with respectan asset sale and (ii) a maximum total net debt to the LINN Debtors include:
One or more new legal entities, in a to-be-determined form, will be formedlast twelve months EBITDAX ratio of 6.75 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 revolving1.0 for March 31, 2018 through December 31, 2018, 6.5 to 1.0 for March 31, 2019 through March 31, 2020, and term loan credit facilities, as described further below (the “New LINN Exit Facility”), and a cash paydown in an amount that has yet4.5 to be determined.1.0 thereafter.

4135

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 inSuccessor Credit Facility also contains customary affirmative and negative covenants, including as to compliance with laws (including environmental laws, ERISA and anti-corruption laws), maintenance of required insurance, delivery of quarterly and annual financial statements, oil and natural gas engineering reports and budgets, maintenance and operation of property (including oil and natural gas properties), restrictions on the aggregate as a $2.0 billion unsecured claim (plus accruedincurrence of liens and unpaid interestindebtedness, mergers, consolidations and reasonablesales of assets, transactions with affiliates 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.other customary covenants.
The holdersSuccessor Credit Facility contains customary events of the Company’s Unsecured Notes will receive their pro rata sharedefault and remedies for credit facilities of (i) a to-be-determined percentage of New Common Stock; and (ii) certain rightsthis nature. Failure 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 fundedcomply 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 BerrySuccessor Credit Facility will receive a full recovery consisting of one or more ofwould allow 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”) uplenders, subject 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.

42

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)customary cure rights, to purchase New Berry Common Stock or other security in New Berry; and (iii) proceedsrequire immediate payment 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.
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-

43

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
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 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.
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 LINNSuccessor Credit Facility.
The filing of the Bankruptcy Petitions constituted an event of default that accelerated the Company’s obligations under the Credit Facilities. However, under the Bankruptcy Code, the creditors under these debt agreements are stayed from taking any action against the Company as a result of the default.
Second Lien Notes
The indenture governing the Second Lien Notes (“Second Lien Indenture”) required the Company to deliver mortgages by February 18, 2016, subject to a 45 day grace period. The Company elected to exercise its right to the grace period, which resulted in the Company being in default under the Second Lien Indenture.
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 agreementListing 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.

44

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

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.
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

45

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 ExchangeOTCQB Market
As a result of cancellation of the Company’s failurePredecessor’s units on the Effective Date, the units ceased to comply with the NASDAQ Global Select Market (“NASDAQ”) continued listing requirements, on May 24, 2016, the Company’s units began trading over the countertrade on the OTC Markets Group Inc.’s Pink marketplacemarketplace. In April 2017, the Successor’s Class A common stock was approved for trading on the OTCQB market under the trading symbol “LINEQ.“LNGG.

4636

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, 2015The following table reflects the Company’s results of operations for each of the Successor and Predecessor periods presented:
Three Months Ended
September 30,
  Successor  Predecessor
2016 2015 VarianceOne Month Ended March 31, 2017  Two Months Ended February 28, 2017 Three Months Ended March 31, 2016
(in thousands)
(in thousands)      
Revenues and other:           
Natural gas sales$141,193
 $156,641
 $(15,448)$38,070
  $99,561
 $96,025
Oil sales179,796
 241,467
 (61,671)37,290
  73,323
 80,316
NGL sales39,154
 29,137
 10,017
12,085
  30,882
 23,508
Total oil, natural gas and NGL sales360,143
 427,245
 (67,102)87,445
  203,766
 199,849
Gains on oil and natural gas derivatives274
 549,029
 (548,755)
Gains (losses) on oil and natural gas derivatives(11,959)  92,691
 109,453
Marketing and other revenues(1)25,248
 22,030
 3,218
4,947
  16,561
 37,397
385,665
 998,304
 (612,639)80,433
  313,018
 346,699
Expenses:           
Lease operating expenses117,470
 154,086
 (36,616)27,166
  53,224
 88,387
Transportation expenses49,630
 54,915
 (5,285)13,723
  25,972
 41,994
Marketing expenses12,191
 9,359
 2,832
2,539
  4,820
 7,833
General and administrative expenses (1)(2)
50,202
 60,113
 (9,911)10,411
  71,745
 83,720
Exploration costs4
 3,072
 (3,068)55
  93
 2,693
Depreciation, depletion and amortization142,448
 207,218
 (64,770)21,362
  56,484
 105,215
Impairment of long-lived assets41,728
 2,255,080
 (2,213,352)
  
 123,316
Taxes, other than income taxes15,383
 46,238
 (30,855)7,502
  15,747
 19,754
(Gains) losses on sale of assets and other, net1,940
 (166,980) 168,920
Losses on sale of assets and other, net445
  672
 1,269
430,996
 2,623,101
 (2,192,105)83,203
  228,757
 474,181
Other income and (expenses)(40,374) 57,657
 (98,031)(5,305)  (18,555) (85,199)
Reorganization items, net(116,276) 
 (116,276)(2,565)  2,331,189
 
Loss before income taxes(201,981) (1,567,140) 1,365,159
Income (loss) from continuing operations before income tax(10,640)  2,396,895
 (212,681)
Income tax expense (benefit)(3,616) 2,177
 (5,793)(3,384)  (166) 10,246
Net loss$(198,365) $(1,569,317) $1,370,952
Income (loss) from continuing operations(7,256)  2,397,061
 (222,927)
Loss from discontinued operations, net of income taxes
  
 (1,124,819)
Net income (loss)$(7,256)  $2,397,061
 $(1,347,746)
(1) 
Marketing and other revenues for the two months ended February 28, 2017, and the three months ended March 31, 2016, include approximately $6 million and $23 million, respectively, of management fee revenues recognized by the Company from Berry. Management fee revenues are included in “other revenues” on the condensed consolidated statements of operations.
(2)
General and administrative expenses for the one month ended March 31, 2017, the two months ended February 28, 2017, and the three months ended September 30,March 31, 2016, and September 30, 2015, include approximately $5$4 million, $50 million and $13$9 million, respectively, of noncash unit-basedshare-based compensation expenses. In addition, general and administrative expenses for the two months ended February 28, 2017, and the three months ended March 31, 2016, include expenses incurred by LINN Energy associated with the operations of Berry. On February 28, 2017, LINN Energy and Berry emerged from bankruptcy as stand-alone, unaffiliated entities.

4737

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

Three Months Ended
September 30,
  Successor  Predecessor
2016 2015 VarianceOne Month Ended March 31, 2017  Two Months Ended February 28, 2017 Three Months Ended March 31, 2016
Average daily production:           
Natural gas (MMcf/d)597
 644
 (7)%496
  495
 535
Oil (MBbls/d)49.6
 63.1
 (21)%25.6
  25.1
 29.5
NGL (MBbls/d)30.0
 29.2
 3 %23.2
  21.4
 24.3
Total (MMcfe/d)1,075
 1,198
 (10)%788
  775
 858
           
Weighted average prices: (1)
           
Natural gas (Mcf)$2.57
 $2.64
 (3)%$2.48
  $3.41
 $1.97
Oil (Bbl)$39.37
 $41.58
 (5)%$47.07
  $49.50
 $29.91
NGL (Bbl)$14.17
 $10.84
 31 %$16.82
  $24.41
 $10.61
           
Average NYMEX prices:           
Natural gas (MMBtu)$2.81
 $2.77
 1 %$2.63
  $3.66
 $2.09
Oil (Bbl)$44.94
 $46.43
 (3)%$49.67
  $53.04
 $33.45
           
Costs per Mcfe of production:           
Lease operating expenses$1.19
 $1.40
 (15)%$1.11
  $1.16
 $1.13
Transportation expenses$0.50
 $0.50
 
$0.56
  $0.57
 $0.54
General and administrative expenses (2)
$0.51
 $0.55
 (7)%$0.43
  $1.57
 $1.07
Depreciation, depletion and amortization$1.44
 $1.88
 (23)%$0.87
  $1.24
 $1.35
Taxes, other than income taxes$0.16
 $0.42
 (62)%$0.31
  $0.34
 $0.25
      
Average daily production – discontinued operations:      
Total (MMcfe/d)
  
 255
(1) 
Does not include the effect of gains (losses) on derivatives.
(2) 
General and administrative expenses for the one month ended March 31, 2017, the two months ended February 28, 2017, and the three months ended September 30,March 31, 2016, and September 30, 2015, include approximately $5$4 million, $50 million and $13$9 million, respectively, of noncash unit-basedshare-based compensation expenses. In addition, general and administrative expenses for the two months ended February 28, 2017, and the three months ended March 31, 2016, include expenses incurred by LINN Energy associated with the operations of Berry. On February 28, 2017, LINN Energy and Berry emerged from bankruptcy as stand-alone, unaffiliated entities.


4838

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 decreasedincreased by approximately $67$91 million or 16%46% to approximately $360$87 million and $204 million for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, from approximately $200 million for the three months ended September 30,March 31, 2016, from approximately $427 million for the three months ended September 30, 2015, due to lowerhigher oil, and natural gas prices and lower production volumes,NGL prices, partially offset by higher NGL prices. Lowerlower production volumes. Higher oil, and natural gas prices resulted in a decrease in revenues of approximately $10 million and $4 million, respectively. Higher NGL prices resulted in an increase in revenues of approximately $9 million.$74 million, $61 million and $25 million, respectively.
Average daily production volumes decreased to approximately 1,075788 MMcfe/d and 775 MMcfe/d for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, from approximately 858 MMcfe/d for the three months ended September 30, 2016, from 1,198 MMcfe/d for the three months ended September 30, 2015.March 31, 2016. Lower oil, and natural gas and NGL production volumes resulted in a decrease in revenues of approximately $52$44 million, $20 million and $11$5 million, respectively. Higher NGL production volumes resulted in an increase in revenues of approximately $1 million.
The following table sets forth average daily production by region:
Three Months Ended
September 30,
    Successor  Predecessor
2016 2015 VarianceOne Month Ended March 31, 2017  Two Months Ended February 28, 2017 Three Months Ended March 31, 2016
Average daily production (MMcfe/d):             
Rockies396
 429
 (33) (8)%287
  294
 347
Hugoton Basin236
 254
 (18) (7)%169
  159
 188
California148
 183
 (35) (19)%
Mid-Continent102
 105
 (3) (2)%127
  109
 97
TexLa80
 87
 (7) (8)%77
  80
 72
Permian Basin54
 77
 (23) (30)%46
  49
 62
California29
  30
 34
Michigan/Illinois30
 31
 (1) (2)%29
  29
 30
South Texas29
 32
 (3) (9)%24
  25
 28
1,075
 1,198
 (123) (10)%788
  775
 858
The increases in average daily production volumes in the Mid-Continent and TexLa primarily reflect increased development capital spending in the regions. The decreases in average daily production volumes in the remaining regions 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
GainsLosses on oil and natural gas derivatives were approximately $274,000$12 million for the one month ended March 31, 2017, and $549gains on oil and natural gas derivatives were approximately $93 million and $109 million for the two months ended February 28, 2017, and the three months ended September 30,March 31, 2016, respectively. Gains and September 30, 2015, respectively, representing a decrease of approximately $549 million. Gainslosses on oil and natural gas derivatives were primarily due to changes in fair value of the derivative contracts. The fair value on unsettled derivative contracts changes as future commodity price expectations change compared to the contract prices on the derivatives. If the expected future commodity prices increase compared to the contract prices on the derivatives, losses are recognized; and if the expected future commodity prices decrease compared to the contract prices on the derivatives, gains are recognized.
See above under “Executive Overview” for details about the Company’s commodity derivatives cancellations in 2016.

49

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

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.

39

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. Other revenues primarily include management fee revenues recognized by the Company from Berry (in the Predecessor periods) and helium sales revenue. Marketing and other revenues increaseddecreased by approximately $3$15 million or 15%42% to approximately $25$5 million and $17 million for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, from approximately $37 million for the three months ended September 30, 2016, from approximately $22 million for the three months ended September 30, 2015.March 31, 2016. The increasedecrease was primarily due to higherthe inclusion of management fee revenues from Berry included in the Predecessor periods and lower revenues generated by the Jayhawk natural gas processing plant in Kansas, andpartially offset by higher helium sales revenue in the Hugoton Basin, partially offset by lower electricity sales revenues generated by the Company’s California cogeneration facilities.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 $37$8 million or 24%9% to approximately $117$27 million and $53 million for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, from approximately $88 million for the three months ended September 30, 2016, from approximately $154 million for the three months ended September 30, 2015.March 31, 2016. The decrease was primarily due to reduced labor costs for field operations as a result of cost savings initiatives and lower workover activities, as well as a decrease in steam costs caused by a decrease in steam injection volumes.initiatives. Lease operating expenses per Mcfe also decreasedwere $1.11 per Mcfe and $1.16 per Mcfe for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, compared to $1.19$1.13 per Mcfe for the three months ended September 30, 2016, from $1.40 per Mcfe for the three months ended September 30, 2015.March 31, 2016.
Transportation Expenses
Transportation expenses decreased by approximately $5$2 million or 10%5% to approximately $50$14 million and $26 million for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, from approximately $42 million for the three months ended September 30, 2016, from approximately $55 million for the three months ended September 30, 2015.March 31, 2016. 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.volumes. Transportation expenses per Mcfe remained consistent at $0.50increased to $0.56 per Mcfe and $0.57 per Mcfe for boththe one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, compared to $0.54 per Mcfe for the three months ended September 30, 2016, and September 30, 2015.March 31, 2016.
Marketing Expenses
Marketing expenses represent third-party activities associated with company-owned gathering systems, plants and facilities. Marketing expenses increased byremained relatively consistent at approximately $3 million or 30%and $5 million for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, compared to approximately $12$8 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.March 31, 2016.
General and Administrative Expenses
General and administrative expenses are costs not directly associated with field operations and reflect the costs of employees including executive officers, related benefits, office leases and professional fees. In addition, general and administrative expenses in the Predecessor periods include expenses incurred by LINN Energy associated with the operations of Berry. General and administrative expenses decreased by approximately $2 million or 2% to approximately $10 million or 16% toand $72 million for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, from approximately $50$84 million for the three months ended September 30, 2016, from approximately $60 million for the three months ended September 30, 2015.March 31, 2016. The decrease was primarily due to lower salaries and benefits related expenses, lower professional services expenses, the inclusion of costs associated with the operations of Berry in the Predecessor periods and lower acquisition expenses.various other administrative expenses including insurance and rent, partially offset by higher noncash share-based compensation expenses principally driven by the immediate vesting of certain awards on the Effective Date. General and administrative expenses per Mcfe also decreasedwere $0.43 per Mcfe and $1.57 per Mcfe for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, compared to $0.51$1.07 per Mcfe for the three months ended September 30, 2016, from $0.55 per Mcfe for the three months ended September 30, 2015.March 31, 2016.
ProfessionalFor 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” onand prior to the condensed consolidated statement of operations.Effective Date, see “Reorganization Items, Net.”
Exploration Costs
Exploration costs decreased by approximately $3 million to approximately $4,000$55,000 and $93,000 million for the threeone month ended March 31, 2017, and the two months ended September 30, 2016,February 28, 2017, respectively, from approximately $3 million for the three months ended September 30, 2015.March 31, 2016. The decrease was primarily due to lower seismic data expenses and lower leasehold impairment expenses on unproved properties.expenses.

5040

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$28 million or 31%26% to approximately $142$21 million and $56 million for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, from approximately $105 million for the three months ended September 30, 2016, from approximately $207 million for the three months ended September 30, 2015.March 31, 2016. The decrease was primarily due to lower rates as a result of the application of fresh start accounting and 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$0.87 per Mcfe and $1.24 per Mcfe for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, from $1.35 per Mcfe for the three months ended September 30, 2016, from $1.88 per Mcfe for the three months ended September 30, 2015.March 31, 2016.
Impairment of Long-Lived Assets
The Company recorded no impairment charges for the followingone month ended March 31, 2017, or the two months ended February 28, 2017. During the three months ended March 31, 2016, the Company recorded a noncash impairment charges (before and after tax)charge of approximately $123 million 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 region18,586
 366,865
TexLa region
 375,567
California region
 330,311
 $41,728
 $2,255,080
The impairment charges for bothproperties in the three months ended September 30, 2016 and September 30, 2015, wereMid-Continent region due to a decline in commodity prices.
(Gains) Losses on Sale of Assetsprices, changes in expected capital development 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 Countydecline in the Permian Basin (the “Howard County Assets Sale”).Company’s estimates of proved reserves.
Taxes, Other Than Income Taxes
Three Months Ended
September 30,
  Successor  Predecessor
2016 2015 VarianceOne Month Ended March 31, 2017  Two Months Ended February 28, 2017 Three Months Ended March 31, 2016
(in thousands)
     
(in thousands)      
Severance taxes$14,544
 $14,621
 $(77)$3,921
  $9,223
 $7,103
Ad valorem taxes(2,479) 26,027
 (28,506)3,482
  6,359
 12,340
California carbon allowances3,261
 5,548
 (2,287)
Other57
 42
 15
99
  165
 311
$15,383
 $46,238
 $(30,855)$7,502
  $15,747
 $19,754
Taxes, other than income taxes decreased by approximately $31 million or 67% for the three months ended September 30, 2016, compared to the three months ended September 30, 2015. Severance taxes, which are a function of revenues generated from production, decreasedincreased primarily due to lowerhigher oil, and natural gas prices and lower production volumes,NGL prices partially offset by reduced incentives on certain wells in the Rockies region for the three months ended September 30, 2016, compared to the same period in 2015.lower production volumes. Ad valorem taxes, which are based on the value of reserves and production equipment and vary by location, decreased primarily due to lower estimated valuations on certain of the Company’s properties. California carbon allowances
Other Income and (Expenses)
 Successor  Predecessor
 One Month Ended March 31, 2017  Two Months Ended February 28, 2017 Three Months Ended March 31, 2016
(in thousands)      
Interest expense, net of amounts capitalized$(4,917)  $(18,406) $(85,267)
Other, net(388)  (149) 68
 $(5,305)  $(18,555) $(85,199)
Interest expense decreased primarily due to lower anticipated emissions compliance obligationsthe Company’s discontinuation of interest expense recognition on the senior notes for the two months ended February 28, 2017, as a result of reduced capital spending levelsthe Chapter 11 proceedings, lower outstanding debt and a decrease in steam injection volumes.lower amortization of discounts and financing fees. For the two months ended February 28, 2017, contractual interest, which was not recorded, on the senior notes was approximately $37 million. See “Debt” under “Liquidity and Capital Resources” below for additional details.

5141

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 threetwo months ended September 30, 2016,February 28, 2017, unrecorded contractual interest on the Second Lien Notes was approximately $30$20 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 arewere determined.
The following table summarizes the components of reorganization items included on the condensed consolidated statementstatements of operations:
Three Months Ended September 30, 2016Successor  Predecessor
(in thousands)One Month Ended March 31, 2017  Two Months Ended February 28, 2017
 
(in thousands)    
Gain on settlement of liabilities subject to compromise$
  $3,724,750
Recognition of an additional claim for the Predecessor’s Second Lien Notes settlement
  (1,000,000)
Fresh start valuation adjustments
  (591,525)
Income tax benefit related to implementation of the Plan
  264,889
Legal and other professional advisory fees$(25,604)(2,570)  (46,961)
Terminated contracts(92,957)
  (6,915)
Other2,285
5
  (13,049)
Reorganization items, net$(116,276)$(2,565)  $2,331,189
Income Tax Expense (Benefit)
The Company isEffective February 28, 2017, upon the consummation of the Plan, the Successor became a C corporation. Prior to the consummation of the Plan, the Predecessor was a limited liability company treated as a partnership for federal and state income tax purposes, with the exception of the state of Texas, in which income tax liabilities and/or benefits arewere passed through to its unitholders. Limited

52

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’sPredecessor’s subsidiaries are Subchapter C-corporationswere C corporations subject to federal and state income taxes. The Company recognized an income tax benefit of approximately $4$3 million and $166,000 for the threeone month ended March 31, 2017, and the two months ended September 30, 2016,February 28, 2017, respectively, compared to income tax expense of approximately $2$10 million for the three months ended September 30, 2015. The income tax benefit is primarily due to lower incomeMarch 31, 2016.
Loss from the Company’s taxable subsidiaries duringDiscontinued Operations, Net of Income Taxes
Berry was deconsolidated effective December 3, 2016, and its results of operations are reported as discontinued operations for the three months ended September 30, 2016, compared toMarch 31, 2016. Loss from discontinued operations, net of income taxes was approximately $1.1 billion for the same period in 2015.three months ended March 31, 2016.
Net LossIncome (Loss)
Net loss decreased by approximately $1.4$3.7 billion or 87% to net loss of approximately $198$7 million and net income of approximately $2.4 billion for the threeone month ended March 31, 2017, and the two months ended September 30, 2016,February 28, 2017, respectively, from net loss of approximately $1.6$1.3 billion for the three months ended September 30, 2015.March 31, 2016. The decrease was primarily due to gains included in reorganization items, lower impairment charges partially offset by lower gains on oil and natural gas derivatives and lowerhigher production revenues. See discussion above for explanations of variances.

5342

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 sales507,159
 787,158
 (279,999)
NGL sales105,586
 108,430
 (2,844)
Total oil, natural gas and NGL sales959,715
 1,374,233
 (414,518)
Gains (losses) on oil and natural gas derivatives(72,533) 782,622
 (855,155)
Marketing and other revenues68,645
 79,824
 (11,179)
 955,827
 2,236,679
 (1,280,852)
Expenses:     
Lease operating expenses370,658
 467,759
 (97,101)
Transportation expenses156,590
 164,250
 (7,660)
Marketing expenses35,784
 47,359
 (11,575)
General and administrative expenses (1)
196,377
 237,731
 (41,354)
Exploration costs2,745
 4,032
 (1,287)
Depreciation, depletion and amortization449,677
 637,964
 (188,287)
Impairment of long-lived assets1,195,632
 2,787,697
 (1,592,065)
Taxes, other than income taxes80,297
 158,317
 (78,020)
(Gains) losses on sale of assets and other, net5,959
 (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, net418,608
 
 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.

54

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.

55

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):       
Rockies394
 433
 (39) (9)%
Hugoton Basin239
 252
 (13) (5)%
California158
 187
 (29) (15)%
Mid-Continent100
 102
 (2) (2)%
TexLa80
 82
 (2) (2)%
Permian Basin58
 85
 (27) (32)%
Michigan/Illinois31
 31
 
 (2)%
South Texas29
 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.

56

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

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 decreased by approximately $11 million or 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. 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, 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 $97 million or 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. The decrease was primarily due to cost savings initiatives and lower workover activities, as well as a decrease in steam costs caused by lower prices for natural gas used in steam generation and 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.
Transportation Expenses
Transportation expenses decreased by approximately $7 million or 5% to approximately $157 million for the nine months ended September 30, 2016, from approximately $164 million for the nine 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 increased to $0.52 per Mcfe for the nine months ended September 30, 2016, from $0.50 per Mcfe for the nine months ended September 30, 2015.
Marketing Expenses
Marketing expenses represent third-party activities associated with company-owned gathering systems, plants and facilities. Marketing expenses decreased by approximately $11 million or 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. 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 decreased by approximately $42 million or 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. 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, 2015, was impacted by advisory fees related to alliance agreements entered into with certain private capital investors. General and administrative expenses per Mcfe also 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.
Professional services expenses of approximately $46 million for the nine 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.

57

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 $1 million or 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. The decrease was primarily due to lower leasehold impairment expenses on unproved properties.
Depreciation, Depletion and Amortization
Depreciation, depletion and amortization decreased by approximately $188 million or 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. 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 $1.51 per Mcfe for the nine months ended September 30, 2016, from $1.94 per Mcfe for the nine 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 and unproved oil and natural gas properties:
 Nine Months Ended
September 30,
 2016 2015
 (in thousands)
    
California region$984,288
 $537,511
Mid-Continent region148,289
 372,568
Rockies region49,819
 1,182,337
Hugoton Basin
 277,914
TexLa region
 408,667
South Texas region
 8,700
Proved oil and natural gas properties1,182,396
 2,787,697
California region unproved oil and natural gas properties13,236
 
Impairment of long-lived assets$1,195,632
 $2,787,697
The impairment charges in 2016 were due to a decline in commodity prices, changes in expected capital development and a decline in the Company’s estimates of proved reserves. The impairment charges in 2015 were due to a decline in commodity prices and the Company’s estimates of proved reserves.
(Gains) Losses on Sale of Assets and Other, Net
During the nine 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 Howard County Assets Sale.
Taxes, Other Than Income Taxes
 Nine Months Ended
September 30,
  
 2016 2015 Variance
 (in thousands)
      
Severance taxes$32,872
 $49,187
 $(16,315)
Ad valorem taxes36,140
 91,923
 (55,783)
California carbon allowances10,138
 17,247
 (7,109)
Other1,147
 (40) 1,187
 $80,297
 $158,317
 $(78,020)

58

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

Taxes, other than income taxes decreased by approximately $78 million or 49% for the nine months ended September 30, 2016, compared to the nine months ended September 30, 2015. Severance taxes, which are a function of revenues generated from production, decreased primarily due to lower oil, natural gas and NGL prices and lower production volumes. Ad valorem taxes, which are based on the value of reserves and production equipment and vary by location, decreased primarily due to lower estimated valuations on certain of the Company’s properties. 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.
Other Income and (Expenses)
 Nine Months Ended
September 30,
  
 2016 2015 Variance
 (in thousands)
      
Interest expense, net of amounts capitalized$(213,758) $(427,584) $213,826
Gain on extinguishment of debt
 213,527
 (213,527)
Other, net(1,437) (10,060) 8,623
 $(215,195) $(224,117) $8,922
Other income and (expenses) decreased by approximately $9 million for the nine months ended September 30, 2016, compared to the nine months ended September 30, 2015. Interest expense decreased primarily due to the Company’s discontinuation of interest expense recognition on the senior notes for the period from May 12, 2016 through September 30, 2016, 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 period from May 12, 2016, through September 30, 2016, contractual interest, which was not recorded, on the senior notes was approximately $108 million. For the nine months ended September 30, 2015, the Company recorded a gain on extinguishment of debt of approximately $214 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 period from May 12, 2016, through September 30, 2016, unrecorded contractual interest on the Second Lien Notes was approximately $46 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.

59

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

The following table summarizes the components of reorganization items included on the condensed consolidated statement of operations:
 Nine Months Ended September 30, 2016
 (in thousands)
  
Legal and other professional advisory fees$(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(47,848)
Other2,692
Reorganization items, net$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.
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 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 income tax expense of approximately $3 million for the nine months ended September 30, 2016, compared to an income tax benefit of approximately $8 million for the nine months ended September 30, 2015. The increased income tax expense is primarily due to additional expense recognized related to unit-based compensation in 2016 for which there was no windfall benefit offset as in 2015.
Net Loss
Net loss decreased by approximately $950 million or 42% to approximately $1.3 billion for the nine months ended September 30, 2016, from approximately $2.3 billion for the nine months ended September 30, 2015. The decrease was primarily due to lower impairment charges, the gain related to the Second Lien Notes and lower expenses, including interest, partially offset by losses compared to gains on oil and natural gas derivatives for the comparative period as well as lower production revenues. See discussion above for explanations of variances.
LiquidityFinancing Activities
Successor Credit Facility
On the Effective Date, pursuant to the terms of the Plan, the Company entered into the Successor Credit Facility with Holdco II as borrower and Capital ResourcesWells Fargo Bank, National Association, as administrative agent, providing for: 1) a revolving loan with an initial borrowing base of $1.4 billion and 2) a term loan in an original principal amount of $300 million. As of March 31, 2017, total borrowings outstanding under the Successor Credit Facility were approximately $834 million, and there was approximately $853 million of remaining available borrowing capacity (which includes a $7 million reduction for outstanding letters of credit).
There are no scheduled borrowing base redeterminations until April 1, 2018. After such time and until August 28, 2020, any scheduled redetermination of the borrowing base resulting in a decrease of the borrowing base will cause the borrowing base to be allocated into a conforming revolving loan tranche and a non-conforming revolving loan tranche that, in the aggregate, equal $1.4 billion. Interest on borrowings under the revolving loan is determined by reference to the London Interbank Offered Rate (“LIBOR”) plus an applicable margin of (a) 3.50% per annum in the case of the conforming revolving loan tranche and (b) 5.50% per annum in the case of the non-conforming revolving loan tranche. The revolving loan is not subject to amortization. The conforming revolving loan tranche matures on February 27, 2021, and the non-conforming revolving loan tranche matures on August 28, 2020.
The significant risksterm loan incurs interest at a rate of LIBOR plus 7.50% per annum, amortizes quarterly, and uncertainties relatedmatures on February 27, 2021.
Holdco II has the right to prepay any borrowings under the Company’s liquidity and Chapter 11 proceedings described under “Executive Overview” raise substantial doubt about the Company’s abilitySuccessor Credit Facility at any time without a prepayment penalty, other than customary “breakage” costs with respect to continue as a going concern.eurodollar loans.
The Company’s filingobligations under the Successor Credit Facility are secured by mortgages covering approximately 95% of the Bankruptcy Petitions constituted an eventtotal value of default that accelerated the Company’s obligations under itsproved reserves of the oil and natural gas properties of the Company, and certain equipment and facilities associated therewith, along with liens on substantially all personal property of the Company and are guaranteed by the Company, Linn Energy Holdco LLC and Holdco II’s subsidiaries, subject to customary exceptions. Under the Successor Credit Facilities, its Second Lien Notes and its senior notes. Additionally, other events of default, including cross-defaults, are present,Facility, the Company is required to maintain certain financial covenants including the failuremaintenance of (i) an asset coverage ratio of at least 1.1 to make interest payments1.0, tested on (a) the Company’s Second Lien Notesdate of each scheduled borrowing base redetermination commencing with the first scheduled borrowing base redetermination and senior notes, as well as(b) the receiptdate of each additional borrowing base redetermination done in conjunction with an asset sale and (ii) a going concern explanatory paragraph from the Company’s independent registered public accounting firm on the Company’s consolidated financial statementsmaximum total net debt to last twelve months EBITDAX ratio of 6.75 to 1.0 for the year endedMarch 31, 2018 through 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 above under “Executive Overview – Chapter 11 Proceedings”2018, 6.5 to 1.0 for a description of theseMarch 31, 2019 through March 31, 2020, and other developments.
In order4.5 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 debt1.0 thereafter.

6035

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

service obligations, meet otherThe Successor Credit Facility also contains customary affirmative and negative covenants, including as to compliance with laws (including environmental laws, ERISA and anti-corruption laws), maintenance of required insurance, delivery of quarterly and annual financial obligations and comply with its debt covenants. As a result, the Debtors filed Bankruptcy Petitions for relief under Chapter 11 of the Bankruptcy Code.
Although the Company believes its cash flow from operations and cash on hand will be adequate to meet the operating costs of its existing business, there are no assurances that the Company’s cash flow from operations and cash on hand will be sufficient to continue to fund its operations or to allow the Company to continue as a going concern until a Plan is confirmed by the Bankruptcy Court or other alternative restructuring transaction is approved by the Bankruptcy Court and consummated. The Company’s long-term liquidity requirements, the adequacy of its capital resources and its ability to continue as a going concern are difficult to predict at this time and ultimately cannot be determined until a Plan has been confirmed, if at all, by the Bankruptcy Court. See 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, 2015, for risks relating to liquidity and Chapter 11 proceedings.
The Company has utilized funds from debt and equity offerings, borrowings under its Credit Facilities and net cash provided by operating activities for capital resources and liquidity. To date, the primary use of capital has been for acquisitions and the development ofstatements, oil and natural gas properties. Forengineering reports and budgets, maintenance and operation of property (including oil and natural gas properties), restrictions on the nine months ended September 30, 2016,incurrence of liens and indebtedness, mergers, consolidations and sales of assets, transactions with affiliates and other customary covenants.
The Successor Credit Facility contains customary events of default and remedies for credit facilities of this nature. Failure to comply with the financial and other covenants in the Successor Credit Facility would allow the lenders, subject to customary cure rights, to require immediate payment of all amounts outstanding under the Successor Credit Facility.
Listing on the OTCQB Market
As a result of cancellation of the Predecessor’s units on the Effective Date, the units ceased to trade on the OTC Markets Group Inc.’s Pink marketplace. In April 2017, the Successor’s Class A common stock was approved for trading on the OTCQB market under the symbol “LNGG.”

36

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

Results of Operations
The following table reflects the Company’s total capital expenditures were approximately $115 million.
See belowresults of operations for details regarding capital expenditures foreach of the Successor and Predecessor periods presented:
 Three Months Ended
September 30,
 Nine Months Ended
September 30,
 2016 2015 2016 2015
 (in thousands)
        
Oil and natural gas$28,211
 $91,439
 $73,777
 $373,842
Plant and pipeline19,519
 8,887
 34,547
 13,889
Other784
 12,526
 6,471
 36,701
Capital expenditures$48,514
 $112,852
 $114,795
 $424,432
 Successor  Predecessor
 One Month Ended March 31, 2017  Two Months Ended February 28, 2017 Three Months Ended March 31, 2016
(in thousands)      
Revenues and other:      
Natural gas sales$38,070
  $99,561
 $96,025
Oil sales37,290
  73,323
 80,316
NGL sales12,085
  30,882
 23,508
Total oil, natural gas and NGL sales87,445
  203,766
 199,849
Gains (losses) on oil and natural gas derivatives(11,959)  92,691
 109,453
Marketing and other revenues (1)
4,947
  16,561
 37,397
 80,433
  313,018
 346,699
Expenses:      
Lease operating expenses27,166
  53,224
 88,387
Transportation expenses13,723
  25,972
 41,994
Marketing expenses2,539
  4,820
 7,833
General and administrative expenses (2)
10,411
  71,745
 83,720
Exploration costs55
  93
 2,693
Depreciation, depletion and amortization21,362
  56,484
 105,215
Impairment of long-lived assets
  
 123,316
Taxes, other than income taxes7,502
  15,747
 19,754
Losses on sale of assets and other, net445
  672
 1,269
 83,203
  228,757
 474,181
Other income and (expenses)(5,305)  (18,555) (85,199)
Reorganization items, net(2,565)  2,331,189
 
Income (loss) from continuing operations before income tax(10,640)  2,396,895
 (212,681)
Income tax expense (benefit)(3,384)  (166) 10,246
Income (loss) from continuing operations(7,256)  2,397,061
 (222,927)
Loss from discontinued operations, net of income taxes
  
 (1,124,819)
Net income (loss)$(7,256)  $2,397,061
 $(1,347,746)
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. This estimate is under continuous review 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.
Statements of Cash Flows
The following is a comparative cash flow summary:
 Nine Months Ended
September 30,
  
 2016 2015 Variance
 (in thousands)
Net cash:     
Provided by operating activities$885,192
 $1,034,769
 $(149,577)
Used in investing activities(129,063) (190,540) 61,477
Provided by (used in) financing activities42,210
 (501,232) 543,442
Net increase in cash and cash equivalents$798,339
 $342,997
 $455,342
Operating Activities
Cash provided by operating activities for the nine months ended September 30, 2016, was approximately $885 million, compared to approximately $1.0 billion for the nine months ended September 30, 2015. The decrease was primarily due to lower production related revenues principally due to lower commodity prices and lower production volumes, partially offset by lower expenses.
(1)
Marketing and other revenues for the two months ended February 28, 2017, and the three months ended March 31, 2016, include approximately $6 million and $23 million, respectively, of management fee revenues recognized by the Company from Berry. Management fee revenues are included in “other revenues” on the condensed consolidated statements of operations.
(2)
General and administrative expenses for the one month ended March 31, 2017, the two months ended February 28, 2017, and the three months ended March 31, 2016, include approximately $4 million, $50 million and $9 million, respectively, of noncash share-based compensation expenses. In addition, general and administrative expenses for the two months ended February 28, 2017, and the three months ended March 31, 2016, include expenses incurred by LINN Energy associated with the operations of Berry. On February 28, 2017, LINN Energy and Berry emerged from bankruptcy as stand-alone, unaffiliated entities.

6137

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

Investing Activities
 Successor  Predecessor
 One Month Ended March 31, 2017  Two Months Ended February 28, 2017 Three Months Ended March 31, 2016
Average daily production:      
Natural gas (MMcf/d)496
  495
 535
Oil (MBbls/d)25.6
  25.1
 29.5
NGL (MBbls/d)23.2
  21.4
 24.3
Total (MMcfe/d)788
  775
 858
       
Weighted average prices: (1)
      
Natural gas (Mcf)$2.48
  $3.41
 $1.97
Oil (Bbl)$47.07
  $49.50
 $29.91
NGL (Bbl)$16.82
  $24.41
 $10.61
       
Average NYMEX prices:      
Natural gas (MMBtu)$2.63
  $3.66
 $2.09
Oil (Bbl)$49.67
  $53.04
 $33.45
       
Costs per Mcfe of production:      
Lease operating expenses$1.11
  $1.16
 $1.13
Transportation expenses$0.56
  $0.57
 $0.54
General and administrative expenses (2)
$0.43
  $1.57
 $1.07
Depreciation, depletion and amortization$0.87
  $1.24
 $1.35
Taxes, other than income taxes$0.31
  $0.34
 $0.25
       
Average daily production – discontinued operations:      
Total (MMcfe/d)
  
 255
(1)
Does not include the effect of gains (losses) on derivatives.
(2)
General and administrative expenses for the one month ended March 31, 2017, the two months ended February 28, 2017, and the three months ended March 31, 2016, include approximately $4 million, $50 million and $9 million, respectively, of noncash share-based compensation expenses. In addition, general and administrative expenses for the two months ended February 28, 2017, and the three months ended March 31, 2016, include expenses incurred by LINN Energy associated with the operations of Berry. On February 28, 2017, LINN Energy and Berry emerged from bankruptcy as stand-alone, unaffiliated entities.

38

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

Revenues and Other
Oil, Natural Gas and NGL Sales
Oil, natural gas and NGL sales increased by approximately $91 million or 46% to approximately $87 million and $204 million for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, from approximately $200 million for the three months ended March 31, 2016, due to higher oil, natural gas and NGL prices, partially offset by lower production volumes. Higher oil, natural gas and NGL prices resulted in an increase in revenues of approximately $74 million, $61 million and $25 million, respectively.
Average daily production volumes decreased to approximately 788 MMcfe/d and 775 MMcfe/d for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, from approximately 858 MMcfe/d for the three months ended March 31, 2016. Lower oil, natural gas and NGL production volumes resulted in a decrease in revenues of approximately $44 million, $20 million and $5 million, respectively.
The following provides a comparative summary of cash flow from investing activities:table sets forth average daily production by region:
 Nine Months Ended
September 30,
 2016 2015
 (in thousands)
Cash flow from investing activities:   
Capital expenditures$(179,332) $(554,735)
Decrease in restricted cash53,418
 
Proceeds from sale of properties and equipment and other(3,149) 364,195
 $(129,063) $(190,540)
 Successor  Predecessor
 One Month Ended March 31, 2017  Two Months Ended February 28, 2017 Three Months Ended March 31, 2016
Average daily production (MMcfe/d):      
Rockies287
  294
 347
Hugoton Basin169
  159
 188
Mid-Continent127
  109
 97
TexLa77
  80
 72
Permian Basin46
  49
 62
California29
  30
 34
Michigan/Illinois29
  29
 30
South Texas24
  25
 28
 788
  775
 858
The primary useincreases in average daily production volumes in the Mid-Continent and TexLa primarily reflect increased development capital spending in the regions. The decreases in average daily production volumes in the remaining regions primarily reflect lower production volumes as a result of cash in investing activities is forreduced development capital spending throughout the development of the Company’s various regions, as well as marginal well shut-ins, driven by continued low commodity prices.
Gains (Losses) on Oil and Natural Gas Derivatives
Losses on oil and natural gas properties.derivatives were approximately $12 million for the one month ended March 31, 2017, and gains on oil and natural gas derivatives were approximately $93 million and $109 million for the two months ended February 28, 2017, and the three months ended March 31, 2016, respectively. Gains and losses on oil and natural gas derivatives were primarily due to changes in fair value of the derivative contracts. The fair value on unsettled derivative contracts changes as future commodity price expectations change compared to the contract prices on the derivatives. If the expected future commodity prices increase compared to the contract prices on the derivatives, losses are recognized; and if the expected future commodity prices decrease compared to the contract prices on the derivatives, gains are recognized.
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 expendituresResources” below.

39

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

Marketing and Other Revenues
Marketing revenues represent third-party activities associated with company-owned gathering systems, plants and facilities. Other revenues primarily include management fee revenues recognized by the Company from Berry (in the Predecessor periods) and helium sales revenue. Marketing and other revenues decreased by approximately $15 million or 42% to approximately $5 million and $17 million for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, from approximately $37 million for the three months ended March 31, 2016. The decrease was primarily due to the inclusion of management fee revenues from Berry included in the Predecessor periods and lower revenues generated by the Jayhawk natural gas processing plant in Kansas, 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 $8 million or 9% to approximately $27 million and $53 million for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, from approximately $88 million for the three months ended March 31, 2016. The decrease was primarily due to reduced labor costs for field operations as a result of cost savings initiatives. Lease operating expenses per Mcfe were $1.11 per Mcfe and $1.16 per Mcfe for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, compared to $1.13 per Mcfe for the three months ended March 31, 2016.
Transportation Expenses
Transportation expenses decreased by approximately $2 million or 5% to approximately $14 million and $26 million for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, from approximately $42 million for the three months ended March 31, 2016. The decrease was primarily due to reduced costs as a result of lower production volumes. Transportation expenses per Mcfe increased to $0.56 per Mcfe and $0.57 per Mcfe for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, compared to $0.54 per Mcfe for the three months ended March 31, 2016.
Marketing Expenses
Marketing expenses represent third-party activities associated with company-owned gathering systems, plants and facilities. Marketing expenses remained relatively consistent at approximately $3 million and $5 million for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, compared to approximately $8 million the three months ended March 31, 2016.
General and Administrative Expenses
General and administrative expenses are costs not directly associated with field operations and reflect the costs of employees including executive officers, related benefits, office leases and professional fees. In addition, general and administrative expenses in the Predecessor periods include expenses incurred by LINN Energy associated with the operations of Berry. General and administrative expenses decreased by approximately $2 million or 2% to approximately $10 million and $72 million for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, from approximately $84 million for the three months ended March 31, 2016. The decrease was primarily due to lower professional services expenses, the inclusion of costs associated with the operations of Berry in the Predecessor periods and lower various other administrative expenses including insurance and rent, partially offset by higher noncash share-based compensation expenses principally driven by the immediate vesting of certain awards on the Effective Date. General and administrative expenses per Mcfe were $0.43 per Mcfe and $1.57 per Mcfe for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, compared to $1.07 per Mcfe for the three months ended March 31, 2016.
For professional services expenses related to the Chapter 11 proceedings that were incurred since the Petition Date and prior to the Effective Date, see “Reorganization Items, Net.”
Exploration Costs
Exploration costs decreased by approximately $3 million to approximately $55,000 and $93,000 million for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, from approximately $3 million for the three months ended March 31, 2016. The decrease was primarily due to lower seismic data expenses.

40

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 $28 million or 26% to approximately $21 million and $56 million for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, from approximately $105 million for the three months ended March 31, 2016. The decrease was primarily due to lower rates as a result of the application of fresh start accounting and impairments recorded in the first quarter of 2016, as well as lower total production volumes. Depreciation, depletion and amortization per Mcfe also decreased to $0.87 per Mcfe and $1.24 per Mcfe for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, from $1.35 per Mcfe for the three months ended March 31, 2016.
Impairment of Long-Lived Assets
The Company recorded no impairment charges for the one month ended March 31, 2017, or the two months ended February 28, 2017. During the three months ended March 31, 2016, the Company recorded a noncash impairment charge of approximately $123 million associated with proved oil and natural gas properties in the Mid-Continent region due to a decline in commodity prices, changes in expected capital development and a decline in the Company’s estimates of proved reserves.
Taxes, Other Than Income Taxes
 Successor  Predecessor
 One Month Ended March 31, 2017  Two Months Ended February 28, 2017 Three Months Ended March 31, 2016
(in thousands)      
Severance taxes$3,921
  $9,223
 $7,103
Ad valorem taxes3,482
  6,359
 12,340
Other99
  165
 311
 $7,502
  $15,747
 $19,754
Severance taxes, which are a function of revenues generated from production, increased primarily due to higher oil, natural gas and NGL prices partially offset by lower production volumes. Ad valorem taxes, which are based on the value of reserves and production equipment and vary by location, decreased primarily due to lower spendingestimated valuations on development activities throughoutcertain of the Company’s various operating regions as a resultproperties.
Other Income and (Expenses)
 Successor  Predecessor
 One Month Ended March 31, 2017  Two Months Ended February 28, 2017 Three Months Ended March 31, 2016
(in thousands)      
Interest expense, net of amounts capitalized$(4,917)  $(18,406) $(85,267)
Other, net(388)  (149) 68
 $(5,305)  $(18,555) $(85,199)
Interest expense decreased primarily due to the Company’s discontinuation of continued low commodity prices. The Company made no acquisitions of properties duringinterest expense recognition on the ninesenior notes for the two months ended September 30, 2016, or September 30, 2015. In addition, during the second quarter of 2016, restricted cash was reduced by approximately $53 millionFebruary 28, 2017, as a result of the amendmentChapter 11 proceedings, lower outstanding debt and lower amortization of discounts and financing fees. For the two months ended February 28, 2017, contractual interest, which was not recorded, on the senior notes was approximately $37 million. See “Debt” under “Liquidity and Capital Resources” below for additional details.

41

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

The Second Lien Notes were accounted for as a troubled debt restructuring which requires that interest payments on the Second Lien Notes reduce the carrying value of the debt with no interest expense recognized. For the two months ended February 28, 2017, unrecorded contractual interest on the Second Lien Notes was $20 million.
Reorganization Items, Net
The Company incurred significant costs associated with the reorganization. Reorganization items represent costs and income directly associated with the Chapter 11 proceedings since the Petition Date, and also include adjustments to reflect the carrying value of certain liabilities subject to compromise at their estimated allowed claim amounts, as such adjustments were determined. The following table summarizes the components of reorganization items included on the condensed consolidated statements of operations:
 Successor  Predecessor
 One Month Ended March 31, 2017  Two Months Ended February 28, 2017
(in thousands)    
Gain on settlement of liabilities subject to compromise$
  $3,724,750
Recognition of an additional claim for the Predecessor’s Second Lien Notes settlement
  (1,000,000)
Fresh start valuation adjustments
  (591,525)
Income tax benefit related to implementation of the Plan
  264,889
Legal and other professional advisory fees(2,570)  (46,961)
Terminated contracts
  (6,915)
Other5
  (13,049)
Reorganization items, net$(2,565)  $2,331,189
Income Tax Expense (Benefit)
Effective February 28, 2017, upon the consummation of the Plan, the Successor became a C corporation. Prior to the Berry Credit Facilityconsummation of the Plan, the Predecessor was a limited liability company treated as a partnership for federal and state income tax purposes, with the exception of the state of Texas, in which income tax liabilities and/or benefits were passed through to its unitholders. Limited liability companies are subject to Texas margin tax. In addition, certain of the Predecessor’s subsidiaries were C corporations subject to federal and state income taxes. The Company recognized an income tax benefit of approximately $3 million and $166,000 for the one month ended March 31, 2017, and the Bank RSA. See Note 2 for additional details. Proceeds from saletwo months ended February 28, 2017, respectively, compared to income tax expense of properties and equipment and otherapproximately $10 million for the ninethree months ended September 30, 2015, includeMarch 31, 2016.
Loss from Discontinued Operations, Net of Income Taxes
Berry was deconsolidated effective December 3, 2016, and its results of operations are reported as discontinued operations for the three months ended March 31, 2016. Loss from discontinued operations, net of income taxes was approximately $276$1.1 billion for the three months ended March 31, 2016.
Net Income (Loss)
Net loss decreased by approximately $3.7 billion to net loss of approximately $7 million and net income of approximately $2.4 billion for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, from net loss of approximately $1.3 billion for the three months ended March 31, 2016. The decrease was primarily due to gains included in net cash proceeds received from the Howard County Assets Sale in August 2015.reorganization items, lower impairment charges and higher production revenues. See discussion above for explanations of variances.

42

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

Financing Activities
Successor Credit Facility
On the Effective Date, pursuant to the terms of the Plan, the Company entered into the Successor Credit Facility with Holdco II as borrower and Wells Fargo Bank, National Association, as administrative agent, providing for: 1) a revolving loan with an initial borrowing base of $1.4 billion and 2) a term loan in an original principal amount of $300 million. As of March 31, 2017, total borrowings outstanding under the Successor Credit Facility were approximately $834 million, and there was approximately $853 million of remaining available borrowing capacity (which includes a $7 million reduction for outstanding letters of credit).
There are no scheduled borrowing base redeterminations until April 1, 2018. After such time and until August 28, 2020, any scheduled redetermination of the borrowing base resulting in a decrease of the borrowing base will cause the borrowing base to be allocated into a conforming revolving loan tranche and a non-conforming revolving loan tranche that, in the aggregate, equal $1.4 billion. Interest on borrowings under the revolving loan is determined by reference to the London Interbank Offered Rate (“LIBOR”) plus an applicable margin of (a) 3.50% per annum in the case of the conforming revolving loan tranche and (b) 5.50% per annum in the case of the non-conforming revolving loan tranche. The revolving loan is not subject to amortization. The conforming revolving loan tranche matures on February 27, 2021, and the non-conforming revolving loan tranche matures on August 28, 2020.
The term loan incurs interest at a rate of LIBOR plus 7.50% per annum, amortizes quarterly, and matures on February 27, 2021.
Holdco II has the right to prepay any borrowings under the Successor Credit Facility at any time without a prepayment penalty, other than customary “breakage” costs with respect to eurodollar loans.
The obligations under the Successor Credit Facility are secured by mortgages covering approximately 95% of the total value of the proved reserves of the oil and natural gas properties of the Company, and certain equipment and facilities associated therewith, along with liens on substantially all personal property of the Company and are guaranteed by the Company, Linn Energy Holdco LLC and Holdco II’s subsidiaries, subject to customary exceptions. Under the Successor Credit Facility, the Company is required to maintain certain financial covenants including the maintenance of (i) an asset coverage ratio of at least 1.1 to 1.0, tested on (a) the date of each scheduled borrowing base redetermination commencing with the first scheduled borrowing base redetermination and (b) the date of each additional borrowing base redetermination done in conjunction with an asset sale and (ii) a maximum total net debt to last twelve months EBITDAX ratio of 6.75 to 1.0 for March 31, 2018 through December 31, 2018, 6.5 to 1.0 for March 31, 2019 through March 31, 2020, and 4.5 to 1.0 thereafter.

35

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

The Successor Credit Facility also contains customary affirmative and negative covenants, including as to compliance with laws (including environmental laws, ERISA and anti-corruption laws), maintenance of required insurance, delivery of quarterly and annual financial statements, oil and natural gas engineering reports and budgets, maintenance and operation of property (including oil and natural gas properties), restrictions on the incurrence of liens and indebtedness, mergers, consolidations and sales of assets, transactions with affiliates and other customary covenants.
The Successor Credit Facility contains customary events of default and remedies for credit facilities of this nature. Failure to comply with the financial and other covenants in the Successor Credit Facility would allow the lenders, subject to customary cure rights, to require immediate payment of all amounts outstanding under the Successor Credit Facility.
Listing on the OTCQB Market
As a result of cancellation of the Predecessor’s units on the Effective Date, the units ceased to trade on the OTC Markets Group Inc.’s Pink marketplace. In April 2017, the Successor’s Class A common stock was approved for trading on the OTCQB market under the symbol “LNGG.”

36

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

Results of Operations
The following table reflects the Company’s results of operations for each of the Successor and Predecessor periods presented:
 Successor  Predecessor
 One Month Ended March 31, 2017  Two Months Ended February 28, 2017 Three Months Ended March 31, 2016
(in thousands)      
Revenues and other:      
Natural gas sales$38,070
  $99,561
 $96,025
Oil sales37,290
  73,323
 80,316
NGL sales12,085
  30,882
 23,508
Total oil, natural gas and NGL sales87,445
  203,766
 199,849
Gains (losses) on oil and natural gas derivatives(11,959)  92,691
 109,453
Marketing and other revenues (1)
4,947
  16,561
 37,397
 80,433
  313,018
 346,699
Expenses:      
Lease operating expenses27,166
  53,224
 88,387
Transportation expenses13,723
  25,972
 41,994
Marketing expenses2,539
  4,820
 7,833
General and administrative expenses (2)
10,411
  71,745
 83,720
Exploration costs55
  93
 2,693
Depreciation, depletion and amortization21,362
  56,484
 105,215
Impairment of long-lived assets
  
 123,316
Taxes, other than income taxes7,502
  15,747
 19,754
Losses on sale of assets and other, net445
  672
 1,269
 83,203
  228,757
 474,181
Other income and (expenses)(5,305)  (18,555) (85,199)
Reorganization items, net(2,565)  2,331,189
 
Income (loss) from continuing operations before income tax(10,640)  2,396,895
 (212,681)
Income tax expense (benefit)(3,384)  (166) 10,246
Income (loss) from continuing operations(7,256)  2,397,061
 (222,927)
Loss from discontinued operations, net of income taxes
  
 (1,124,819)
Net income (loss)$(7,256)  $2,397,061
 $(1,347,746)
(1)
Marketing and other revenues for the two months ended February 28, 2017, and the three months ended March 31, 2016, include approximately $6 million and $23 million, respectively, of management fee revenues recognized by the Company from Berry. Management fee revenues are included in “other revenues” on the condensed consolidated statements of operations.
(2)
General and administrative expenses for the one month ended March 31, 2017, the two months ended February 28, 2017, and the three months ended March 31, 2016, include approximately $4 million, $50 million and $9 million, respectively, of noncash share-based compensation expenses. In addition, general and administrative expenses for the two months ended February 28, 2017, and the three months ended March 31, 2016, include expenses incurred by LINN Energy associated with the operations of Berry. On February 28, 2017, LINN Energy and Berry emerged from bankruptcy as stand-alone, unaffiliated entities.

37

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

 Successor  Predecessor
 One Month Ended March 31, 2017  Two Months Ended February 28, 2017 Three Months Ended March 31, 2016
Average daily production:      
Natural gas (MMcf/d)496
  495
 535
Oil (MBbls/d)25.6
  25.1
 29.5
NGL (MBbls/d)23.2
  21.4
 24.3
Total (MMcfe/d)788
  775
 858
       
Weighted average prices: (1)
      
Natural gas (Mcf)$2.48
  $3.41
 $1.97
Oil (Bbl)$47.07
  $49.50
 $29.91
NGL (Bbl)$16.82
  $24.41
 $10.61
       
Average NYMEX prices:      
Natural gas (MMBtu)$2.63
  $3.66
 $2.09
Oil (Bbl)$49.67
  $53.04
 $33.45
       
Costs per Mcfe of production:      
Lease operating expenses$1.11
  $1.16
 $1.13
Transportation expenses$0.56
  $0.57
 $0.54
General and administrative expenses (2)
$0.43
  $1.57
 $1.07
Depreciation, depletion and amortization$0.87
  $1.24
 $1.35
Taxes, other than income taxes$0.31
  $0.34
 $0.25
       
Average daily production – discontinued operations:      
Total (MMcfe/d)
  
 255
(1)
Does not include the effect of gains (losses) on derivatives.
(2)
General and administrative expenses for the one month ended March 31, 2017, the two months ended February 28, 2017, and the three months ended March 31, 2016, include approximately $4 million, $50 million and $9 million, respectively, of noncash share-based compensation expenses. In addition, general and administrative expenses for the two months ended February 28, 2017, and the three months ended March 31, 2016, include expenses incurred by LINN Energy associated with the operations of Berry. On February 28, 2017, LINN Energy and Berry emerged from bankruptcy as stand-alone, unaffiliated entities.

38

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

Revenues and Other
Oil, Natural Gas and NGL Sales
Oil, natural gas and NGL sales increased by approximately $91 million or 46% to approximately $87 million and $204 million for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, from approximately $200 million for the three months ended March 31, 2016, due to higher oil, natural gas and NGL prices, partially offset by lower production volumes. Higher oil, natural gas and NGL prices resulted in an increase in revenues of approximately $74 million, $61 million and $25 million, respectively.
Average daily production volumes decreased to approximately 788 MMcfe/d and 775 MMcfe/d for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, from approximately 858 MMcfe/d for the three months ended March 31, 2016. Lower oil, natural gas and NGL production volumes resulted in a decrease in revenues of approximately $44 million, $20 million and $5 million, respectively.
The following table sets forth average daily production by region:
 Successor  Predecessor
 One Month Ended March 31, 2017  Two Months Ended February 28, 2017 Three Months Ended March 31, 2016
Average daily production (MMcfe/d):      
Rockies287
  294
 347
Hugoton Basin169
  159
 188
Mid-Continent127
  109
 97
TexLa77
  80
 72
Permian Basin46
  49
 62
California29
  30
 34
Michigan/Illinois29
  29
 30
South Texas24
  25
 28
 788
  775
 858
The increases in average daily production volumes in the Mid-Continent and TexLa primarily reflect increased development capital spending in the regions. The decreases in average daily production volumes in the remaining regions primarily reflect lower production volumes as a result of reduced development capital spending throughout the Company’s various regions, as well as marginal well shut-ins, driven by continued low commodity prices.
Gains (Losses) on Oil and Natural Gas Derivatives
Losses on oil and natural gas derivatives were approximately $12 million for the one month ended March 31, 2017, and gains on oil and natural gas derivatives were approximately $93 million and $109 million for the two months ended February 28, 2017, and the three months ended March 31, 2016, respectively. Gains and losses on oil and natural gas derivatives were primarily due to changes in fair value of the derivative contracts. The fair value on unsettled derivative contracts changes as future commodity price expectations change compared to the contract prices on the derivatives. If the expected future commodity prices increase compared to the contract prices on the derivatives, losses are recognized; and if the expected future commodity prices decrease compared to the contract prices on the derivatives, gains are recognized.
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.

39

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

Marketing and Other Revenues
Marketing revenues represent third-party activities associated with company-owned gathering systems, plants and facilities. Other revenues primarily include management fee revenues recognized by the Company from Berry (in the Predecessor periods) and helium sales revenue. Marketing and other revenues decreased by approximately $15 million or 42% to approximately $5 million and $17 million for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, from approximately $37 million for the three months ended March 31, 2016. The decrease was primarily due to the inclusion of management fee revenues from Berry included in the Predecessor periods and lower revenues generated by the Jayhawk natural gas processing plant in Kansas, 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 $8 million or 9% to approximately $27 million and $53 million for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, from approximately $88 million for the three months ended March 31, 2016. The decrease was primarily due to reduced labor costs for field operations as a result of cost savings initiatives. Lease operating expenses per Mcfe were $1.11 per Mcfe and $1.16 per Mcfe for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, compared to $1.13 per Mcfe for the three months ended March 31, 2016.
Transportation Expenses
Transportation expenses decreased by approximately $2 million or 5% to approximately $14 million and $26 million for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, from approximately $42 million for the three months ended March 31, 2016. The decrease was primarily due to reduced costs as a result of lower production volumes. Transportation expenses per Mcfe increased to $0.56 per Mcfe and $0.57 per Mcfe for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, compared to $0.54 per Mcfe for the three months ended March 31, 2016.
Marketing Expenses
Marketing expenses represent third-party activities associated with company-owned gathering systems, plants and facilities. Marketing expenses remained relatively consistent at approximately $3 million and $5 million for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, compared to approximately $8 million the three months ended March 31, 2016.
General and Administrative Expenses
General and administrative expenses are costs not directly associated with field operations and reflect the costs of employees including executive officers, related benefits, office leases and professional fees. In addition, general and administrative expenses in the Predecessor periods include expenses incurred by LINN Energy associated with the operations of Berry. General and administrative expenses decreased by approximately $2 million or 2% to approximately $10 million and $72 million for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, from approximately $84 million for the three months ended March 31, 2016. The decrease was primarily due to lower professional services expenses, the inclusion of costs associated with the operations of Berry in the Predecessor periods and lower various other administrative expenses including insurance and rent, partially offset by higher noncash share-based compensation expenses principally driven by the immediate vesting of certain awards on the Effective Date. General and administrative expenses per Mcfe were $0.43 per Mcfe and $1.57 per Mcfe for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, compared to $1.07 per Mcfe for the three months ended March 31, 2016.
For professional services expenses related to the Chapter 11 proceedings that were incurred since the Petition Date and prior to the Effective Date, see “Reorganization Items, Net.”
Exploration Costs
Exploration costs decreased by approximately $3 million to approximately $55,000 and $93,000 million for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, from approximately $3 million for the three months ended March 31, 2016. The decrease was primarily due to lower seismic data expenses.

40

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 $28 million or 26% to approximately $21 million and $56 million for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, from approximately $105 million for the three months ended March 31, 2016. The decrease was primarily due to lower rates as a result of the application of fresh start accounting and impairments recorded in the first quarter of 2016, as well as lower total production volumes. Depreciation, depletion and amortization per Mcfe also decreased to $0.87 per Mcfe and $1.24 per Mcfe for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, from $1.35 per Mcfe for the three months ended March 31, 2016.
Impairment of Long-Lived Assets
The Company recorded no impairment charges for the one month ended March 31, 2017, or the two months ended February 28, 2017. During the three months ended March 31, 2016, the Company recorded a noncash impairment charge of approximately $123 million associated with proved oil and natural gas properties in the Mid-Continent region due to a decline in commodity prices, changes in expected capital development and a decline in the Company’s estimates of proved reserves.
Taxes, Other Than Income Taxes
 Successor  Predecessor
 One Month Ended March 31, 2017  Two Months Ended February 28, 2017 Three Months Ended March 31, 2016
(in thousands)      
Severance taxes$3,921
  $9,223
 $7,103
Ad valorem taxes3,482
  6,359
 12,340
Other99
  165
 311
 $7,502
  $15,747
 $19,754
Severance taxes, which are a function of revenues generated from production, increased primarily due to higher oil, natural gas and NGL prices partially offset by lower production volumes. Ad valorem taxes, which are based on the value of reserves and production equipment and vary by location, decreased primarily due to lower estimated valuations on certain of the Company’s properties.
Other Income and (Expenses)
 Successor  Predecessor
 One Month Ended March 31, 2017  Two Months Ended February 28, 2017 Three Months Ended March 31, 2016
(in thousands)      
Interest expense, net of amounts capitalized$(4,917)  $(18,406) $(85,267)
Other, net(388)  (149) 68
 $(5,305)  $(18,555) $(85,199)
Interest expense decreased primarily due to the Company’s discontinuation of interest expense recognition on the senior notes for the two months ended February 28, 2017, as a result of the Chapter 11 proceedings, lower outstanding debt and lower amortization of discounts and financing fees. For the two months ended February 28, 2017, contractual interest, which was not recorded, on the senior notes was approximately $37 million. See “Debt” under “Liquidity and Capital Resources” below for additional details.

41

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

The Second Lien Notes were accounted for as a troubled debt restructuring which requires that interest payments on the Second Lien Notes reduce the carrying value of the debt with no interest expense recognized. For the two months ended February 28, 2017, unrecorded contractual interest on the Second Lien Notes was $20 million.
Reorganization Items, Net
The Company incurred significant costs associated with the reorganization. Reorganization items represent costs and income directly associated with the Chapter 11 proceedings since the Petition Date, and also include adjustments to reflect the carrying value of certain liabilities subject to compromise at their estimated allowed claim amounts, as such adjustments were determined. The following table summarizes the components of reorganization items included on the condensed consolidated statements of operations:
 Successor  Predecessor
 One Month Ended March 31, 2017  Two Months Ended February 28, 2017
(in thousands)    
Gain on settlement of liabilities subject to compromise$
  $3,724,750
Recognition of an additional claim for the Predecessor’s Second Lien Notes settlement
  (1,000,000)
Fresh start valuation adjustments
  (591,525)
Income tax benefit related to implementation of the Plan
  264,889
Legal and other professional advisory fees(2,570)  (46,961)
Terminated contracts
  (6,915)
Other5
  (13,049)
Reorganization items, net$(2,565)  $2,331,189
Income Tax Expense (Benefit)
Effective February 28, 2017, upon the consummation of the Plan, the Successor became a C corporation. Prior to the consummation of the Plan, the Predecessor was a limited liability company treated as a partnership for federal and state income tax purposes, with the exception of the state of Texas, in which income tax liabilities and/or benefits were passed through to its unitholders. Limited liability companies are subject to Texas margin tax. In addition, certain of the Predecessor’s subsidiaries were C corporations subject to federal and state income taxes. The Company recognized an income tax benefit of approximately $3 million and $166,000 for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, compared to income tax expense of approximately $10 million for the three months ended March 31, 2016.
Loss from Discontinued Operations, Net of Income Taxes
Berry was deconsolidated effective December 3, 2016, and its results of operations are reported as discontinued operations for the three months ended March 31, 2016. Loss from discontinued operations, net of income taxes was approximately $1.1 billion for the three months ended March 31, 2016.
Net Income (Loss)
Net loss decreased by approximately $3.7 billion to net loss of approximately $7 million and net income of approximately $2.4 billion for the one month ended March 31, 2017, and the two months ended February 28, 2017, respectively, from net loss of approximately $1.3 billion for the three months ended March 31, 2016. The decrease was primarily due to gains included in reorganization items, lower impairment charges and higher production revenues. See discussion above for explanations of variances.

42

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

Liquidity and Capital Resources
Historically, the Company has utilized funds from debt and equity offerings, borrowings under its credit facilities and net cash provided by operating activities for capital resources and liquidity, and the primary use of capital has been for acquisitions and the development of oil and natural gas properties. For the one month ended March 31, 2017, and the two months ended February 28, 2017, the Company’s total capital expenditures were approximately $19 million and $46 million, respectively.
See below for details regarding capital expenditures for the periods presented:
 Successor  Predecessor
 One Month Ended March 31, 2017  Two Months Ended February 28, 2017 Three Months Ended March 31, 2016
(in thousands)      
Oil and natural gas$17,147
  $39,659
 $23,717
Plant and pipeline2,096
  5,176
 1,542
Other167
  1,243
 2,733
Capital expenditures, excluding acquisitions$19,410
  $46,078
 $27,992
Capital expenditures, excluding acquisitions – discontinued operations$
  $
 $9,303
The increase in capital expenditures was primarily due to oil and natural gas development activities in the SCOOP / STACK and plant and pipeline development activities associated with a processing facility in the Merge. For 2017, the Company estimates its total capital expenditures, excluding acquisitions, will be approximately $413 million, including approximately $300 million related to its oil and natural gas capital program and approximately $102 million related to its plant and pipeline capital. This estimate is under continuous review and subject to ongoing adjustments.
Statements of Cash Flows
The following is a comparative cash flow summary:
 Successor  Predecessor
 One Month Ended March 31, 2017  Two Months Ended February 28, 2017 Three Months Ended March 31, 2016
(in thousands)      
Net cash:      
Provided by (used in) operating activities$17,693
  $(20,814) $291,028
Used in investing activities(22,384)  (58,756) (91,421)
Provided by (used in) financing activities(48,592)  (560,932) 857,781
Net increase (decrease) in cash and cash equivalents$(53,283)  $(640,502) $1,057,388
Operating Activities
Cash provided by financingoperating activities was approximately $18 million and cash used in operating activities was approximately $21 million for the nineone month ended March 31, 2017, and the two months ended September 30, 2016, was approximately $42 million,February 28, 2017, respectively, compared to cash provided by operating activities of approximately $291 million for the three months ended March 31, 2016. The decrease was primarily due to lower cash settlements on derivatives partially offset by higher production related revenues principally due to higher commodity prices. In addition, in February 2017, restricted cash increased by approximately $80 million in order to fund the settlement of certain claims and pay certain professional fees in accordance with the Plan.

43

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

Investing Activities
The following provides a comparative summary of cash flow from investing activities:
 Successor  Predecessor
 One Month Ended March 31, 2017  Two Months Ended February 28, 2017 Three Months Ended March 31, 2016
(in thousands)      
Cash flow from investing activities:      
Capital expenditures$(22,710)  $(58,590) $(76,811)
Proceeds from sale of properties and equipment and other326
  (166) (280)
Net cash used in investing activities – continuing operations(22,384)  (58,756) (77,091)
Net cash used in investing activities – discontinued operations
  
 (14,330)
Net cash used in investing activities$(22,384)  $(58,756) $(91,421)
The primary use of cash in investing activities is for the development of the Company’s oil and natural gas properties. Capital expenditures increased primarily due to higher spending on development activities in the Company’s Mid-Continent and TexLa regions. The Company made no acquisitions of properties during the three months ended March 31, 2017, or March 31, 2016. Berry was deconsolidated effective December 3, 2016, and its cash flows are reported as discontinued operations for the three months ended March 31, 2016.
Financing Activities
Cash used in financing activities ofwas approximately $501$49 million and $561 million for the nineone month ended March 31, 2017, and the two months ended September 30, 2015.February 28, 2017, respectively, compared to cash provided by financing activities of approximately $858 million for the three months ended March 31, 2016. On February 28, 2017, the Company canceled its obligations under the Predecessor Credit Facility and entered into the Successor Credit Facility (see Note 6), which was a net transaction and is reflected as such on the condensed consolidated statement of cash flows. During the ninethree months ended September 30,March 31, 2016, the Company borrowed approximately $979 million under the LINNPredecessor Credit Facility, including approximately $919 million in February 2016 which represented the remaining undrawn amount that was available. In addition, during the nine months ended September 30, 2016, the Company repaid approximately $913 million under the LINN Credit Facility and term loan, and approximately $2 million under the Berry Credit Facility, primarily using the net cash proceeds from canceled derivative contracts (see Note 7).
The following provides a comparative summary of proceeds from borrowings and repayments of debt:
 Nine Months Ended
September 30,
 2016 2015
 (in thousands)
Proceeds from borrowings:   
LINN Credit Facility$978,500
 $1,405,000
 $978,500
 $1,405,000
Repayments of debt:   
LINN Credit Facility$(814,299) $(1,145,000)
Berry Credit Facility(1,701) 
Term loan(98,911) 
Senior notes
 (556,909)
 $(914,911) $(1,701,909)
 Successor  Predecessor
 One Month Ended March 31, 2017  Two Months Ended February 28, 2017 Three Months Ended March 31, 2016
(in thousands)      
Proceeds from borrowings:      
Successor Credit Facility$30,000
  $
 $
Predecessor Credit Facility
  
 978,500
 $
  $
 $978,500
Repayments of debt:      
Successor Credit Facility$(96,250)  $
 $
Predecessor Credit Facility
  (1,038,986) (100,000)
 $(96,250)  $(1,038,986) $(100,000)
See Note 13 for details about borrowingsIn addition, in February 2017, the Company made a $30 million payment to holders of claims under the Second Lien Notes and repaymentsalso issued 41,359,806 shares of debt that were reflected as noncash transactionsClass A common stock to participants in the rights offerings extended by the Company.Company to certain holders of claims arising under the Second Lien Notes and the Unsecured Notes for net proceeds of approximately $514 million.

6244

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

Debt
The following summarizes the Company’s outstanding debt:
 September 30, 2016 December 31, 2015
 (in thousands, except percentages)
    
LINN credit facility$1,654,745
 $2,215,000
Berry credit facility891,259
 873,175
Term loan284,241
 500,000
6.50% senior notes due May 2019562,234
 562,234
6.25% senior notes due November 2019581,402
 581,402
8.625% senior notes due April 2020718,596
 718,596
6.75% Berry senior notes due November 2020261,100
 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 2021779,474
 779,474
6.50% senior notes due September 2021381,423
 381,423
6.375% Berry senior notes due September 2022572,700
 572,700
Net unamortized discounts and premiums (2)

 (8,694)
Net unamortized deferred financing fees (2)
(1,397) (37,374)
Total debt, net7,685,777
 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
 Successor  Predecessor
 March 31, 2017  December 31, 2016
(in thousands, except percentages)    
Successor revolving loan$540,000
  $
Successor term loan293,750
  
Predecessor credit facility
  1,654,745
Predecessor term loan
  284,241
6.50% senior notes due May 2019
  562,234
6.25% senior notes due November 2019
  581,402
8.625% senior notes due April 2020
  718,596
12.00% senior secured second lien notes due December 2020
  1,000,000
7.75% senior notes due February 2021
  779,474
6.50% senior notes due September 2021
  381,423
Net unamortized deferred financing fees
  (1,257)
Total debt, net833,750
  5,960,858
Less current portion, net (1)
(28,125)  (1,937,729)
Less liabilities subject to compromise (2)

  (4,023,129)
Long-term debt$805,625
  $
(1) 
The issuanceAt March 31, 2017, the current portion of the Second Lien Notes was accounted for as a troubledlong-term debt restructuring, which requires that interestreflects required payments on the Second Lien Notes reduceSuccessor’s term loan in the carrying value ofnext twelve months. Due to covenant violations, 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 wasPredecessor’s credit facility and term loan were classified as liabilities subject to compromisecurrent at September 30,December 31, 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’sPredecessor’s senior notes and Second Lien Notes were classified as liabilities subject to compromise at September 30,December 31, 2016. On the Effective Date, pursuant to the terms of the Plan, all outstanding amounts under these debt instruments were canceled.
As of SeptemberApril 30, 2016,2017, total borrowings outstanding under the Successor Credit Facility were approximately $814 million, and there was noapproximately $872 million of remaining available borrowing capacity (which includes a $8 million reduction for outstanding letters of credit). Pursuant to the terms of the Plan, on the Effective Date, all obligations under the Credit Facilities. Predecessor’s credit facility, Second Lien Notes and senior notes were canceled.
For additional information related to the Company’s outstanding debt, see Note 6. The Company plans to file Berry’s stand-alone financial statements with the Securities and Exchange Commission at a later date.
Counterparty Credit Risk
The Company accounts for its commodity derivatives at fair value. The Company’s counterparties were former participants or affiliates of participants in the Predecessor Credit Facility or are current participants or affiliates of participants in itsthe Successor Credit Facilities.Facility. The Successor Credit Facilities areFacility is secured by certain of the Company’s and its subsidiaries’ oil, natural gas and NGL reserves;reserves and personal property; 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

63

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.

45

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

Dividends/Distributions
Under the Company’sPredecessor’s limited liability company agreement, unitholders arewere entitled to receive a distribution of available cash, which includesincluded cash on hand plus borrowings less any reserves established by the Company’sPredecessor’s Board of Directors to provide for the proper conduct of the Company’sPredecessor’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. In October 2015, the Company’sPredecessor’s Board of Directors determined to suspend payment of the Company’sPredecessor’s distribution. The Successor currently has no intention of paying cash dividends and any future payment of cash dividends would be subject to the restrictions in the Successor Credit Facility.
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 hasfollowing is a summary of the Company’s commitments and contractual obligations for long-term debt, operating leases and other long-term liabilities that were summarized in the tableas of contractual obligations in the 2015 Annual Report on Form 10-K. During the nine months ended September 30, 2016, the Company made approximately $758 million in net repayments of a portion of the borrowings outstanding under the Credit Facilities. The Company’s filing of the Bankruptcy Petitions constituted an event of default that accelerated the Company’s obligations under the Credit Facilities, the Second Lien Notes and the senior notes. See Note 6 for additional information about the Company’s debt instruments.March 31, 2017:
  Payments Due
Contractual Obligations Total 2017 2018 – 2019 2020 – 2021 2022 and Beyond
  (in thousands)
Debt obligations:          
Successor revolving loan $540,000
 $
 $
 $540,000
 $
Successor term loan 293,750
 18,750
 87,500
 187,500
 
Interest (1)
 165,435
 35,659
 86,705
 43,071
 
Operating lease obligations:  
  
  
  
  
Office, property and equipment leases 7,987
 2,595
 4,860
 472
 60
Other:  
  
  
  
  
Commodity derivatives 18,701
 16,081
 2,620
 
 
Asset retirement obligations 358,337
 9,858
 19,643
 17,438
 311,398
Other 946
 46
 122
 122
 656
  $1,385,156
 $82,989
 $201,450
 $788,603
 $312,114
(1)
Represents interest on the Successor’s revolving loan and the term loan computed at 4.33% and 8.33%, respectively, through contractual maturity.
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.

46

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

Recently Issued Accounting Standards
For a discussion of recently issued accounting standards, see Note 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 and disposition strategy;
financial strategy;

new capital structure and the adoption of fresh start accounting;
64

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 inabilityability to develop, confirmimprove its financial results and consummate a plan under Chapter 11 or an alternative restructuring transaction;profitability following emergence from bankruptcy and other risks and uncertainties related to the Company’s emergence from bankruptcy;
inability to maintain relationships with suppliers, customers, employees and other third parties as a result of the Chapter 11 filing;following emergence from bankruptcy;
failure to satisfy the Company’s short- or long-term liquidity needs, including its inability to generate sufficient cash flow from operations or to obtain adequate financing to fund its capital expenditures and meet working capital needs and its ability to continue as a going concern;following emergence from bankruptcy;
large or multiple customer defaults on contractual obligations, including defaults resulting from actual or potential insolvencies;
ability to comply with covenants under the Successor Credit Facility;
effects of legal proceedings;
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.intentions; and
taxes.
All of these types of statements, other than statements of historical fact included in this Quarterly Report on Form 10-Q, are forward-looking statements. These forward-looking statements may be found in Item 2. In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “could,” “should,” “expect,” “plan,” “project,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “pursue,” “target,” “continue,” the negative of such terms or other comparable terminology.
The forward-looking statements contained in this Quarterly Report on Form 10-Q are largely based on Company expectations, which reflect estimates and assumptions made by Company management. These estimates and assumptions reflect management’s best judgment based on currently known market conditions and other factors. Although the Company believes such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties beyond its control. In addition, management’s assumptions may prove to be inaccurate. The Company cautions that the forward-looking statements contained in this Quarterly Report on Form 10-Q are not guarantees of future performance, and it cannot assure any reader that such statements will be realized or the events will occur. Actual results may differ materially from those anticipated or implied in forward-looking statements due to factors set forth in Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q and in the Annual Report on Form 10-K for the year ended December 31, 2015,2016, 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 market risks are attributable to fluctuations in commodity prices and interest rates. These risks can affect the Company’s business, financial condition, operating results and cash flows. See below for 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 20152016 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 commodity prices decline or rise significantly, revenues and cash flows are likewise affected. In addition, future declines in commodity prices may result in noncash write-downs of the Company’s carrying amounts of its assets.
Historically, the Company has hedged a portion of its forecasted production to reduce exposure to fluctuations in oil and natural gas prices and provide long-term cash flow predictability to manage its business, service debt, and if and when resumed, pay distributions.business. The Company does not enter into derivative contracts for trading purposes. The appropriate level of production to be hedged is an ongoing consideration based on a variety of factors, including among other things, current and future expected commodity market prices, and the Company’s overall risk profile, including leverage and size and scale considerations. The Company does not enter into derivative contractsconsiderations, as well as any requirements for trading purposes.
or restrictions on levels of hedging contained in any credit facility or other debt instrument applicable at the time. In September 2016,addition, when commodity prices are depressed and forward commodity price curves are flat or in backwardation, the Company entered intomay 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 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 withprices recover during 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 portionduration of the borrowings outstanding under the LINN Credit Facility. Also, in May 2016 and July 2016, ascontracts. As a result, the appropriate percentage of the Chapter 11 proceedings, Berry’s counterparties canceled (priorproduction volumes 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.be hedged may change over time.
At September 30, 2016,March 31, 2017, the fair value of fixed price swaps and collars was a net liability of approximately $992,000.$8 million. A 10% increase in the index oil and natural gas prices above the September 30, 2016,March 31, 2017, prices would result in a net liability of approximately $37$88 million, which represents a decrease in the fair value of approximately $36$80 million; conversely, a 10% decrease in the index oil and natural gas prices below the September 30, 2016,March 31, 2017, prices would result in a net asset of approximately $35$71 million, which represents an increase in the fair value of approximately $36$79 million.
At December 31, 2015,2016, the fair value of fixed price swaps and put option contractscollars was a net assetliability of approximately $1.7 billion.$85 million. A 10% increase in the index oil and natural gas prices above the December 31, 2015,2016, prices would result in a net assetliability of approximately $1.5 billion,$183 million, which represents a decrease in the fair value of approximately $190$98 million; conversely, a 10% decrease in the index oil and natural gas prices below the December 31, 2015,2016, prices would result in a net asset of approximately $1.9 billion,$13 million, which represents an increase in the fair value of approximately $190$98 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. Additionally, the Company cannot be assured that its counterparties will be able to perform under its derivative contracts. If a counterparty fails to perform and the derivative arrangement is terminated, the Company’s cash flows could be impacted.

6648

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

Interest Rate Risk
At September 30, 2016,March 31, 2017, the Company had debt outstanding under its credit facilitiesthe Successor’s revolving loan and term loan of approximately $2.8 billion$834 million which incurred interest at floating rates (see Note 6).rates. A 1% increase in the respective market rates would result in an estimated $28$8 million increase in annual interest expense.
At December 31, 2015,2016, the Company had debt outstanding under its credit facilities and term loanthe Predecessor Credit Facility of approximately $3.6$1.9 billion which incurred interest at floating rates. A 1% increase in the respective market rates would result in an estimated $36$19 million increase in annual interest expense.
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, 2016.March 31, 2017.
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 thirdfirst quarter of 20162017 that materially affected, or were reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II – Other Information
Item 1.Legal Proceedings
On May 11, 2016, the Debtors filed Bankruptcy Petitions for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. The Debtors’ Chapter 11 cases were administered jointly under the caption In re Linn Energy, LLC, et al., Case No. 16‑60040. On January 27, 2017, the Bankruptcy Court entered the Confirmation Order. Consummation of the Plan was subject to certain conditions set forth in the Plan. On the Effective Date, all of the conditions were satisfied or waived and the Plan became effective and was implemented in accordance with its terms. The LINN Debtors Chapter 11 cases will remain pending until the final resolution of all outstanding claims.
The commencement of the Chapter 11 proceedings automatically stayed certain actions against the Company, including actions to collect prepetition liabilities or to exercise control over the property of the Company’s bankruptcy estates. For certain statewide class action royalty payment disputes, the Company filed notices advising that it had filed for bankruptcy protection and seeking a stay, which was granted. In addition,However, the Company is, involved in various other disputes arisingand will continue to be until the final resolution of all claims, subject to certain contested matters and adversary proceedings stemming from the Chapter 11 proceedings.
In March 2017, Wells Fargo Bank, National Association (“Wells Fargo”), the administrative agent under the Predecessor Credit Facility, filed a motion in the ordinary courseBankruptcy Court seeking payment of business. post-petition default interest of approximately $31 million. The Company has vigorously disputed that Wells Fargo is entitled to any default interest based on the plain language of the Plan and Confirmation Order. A hearing was held on April 27, 2017, and the parties are awaiting a ruling from the Bankruptcy Court on this matter.
The Company is not currently a party to any litigation or pending claims that it believes would have a material adverse effect on its overall business, financial position, results of operations or liquidity; however, cash flow could be significantly impacted in the reporting periods in which such matters are resolved.
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 unitsshares are described in Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015. Except as set forth below, as2016. 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.
Any plan of reorganization that we may implement will be based in large part upon assumptions and analyses developed by us. If these assumptions and analyses prove to be incorrect, our plan may be unsuccessful in its execution.
On October 21, 2016, we filed a proposed Plan with the Bankruptcy Court. Any plan of reorganization that we may implement could affect both our capital structure and the ownership, structure and operation of our business and will reflect assumptions and analyses based on our 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 consistent with management’s expectations and assumptions depends on a number of factors, including but not limited to (i) our ability to change substantially our capital structure; (ii) our ability to obtain adequate liquidity and financing sources; (iii) our ability to maintain customers’ confidence in our 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 respect to revenues, EBITDA, capital expenditures, debt service and cash 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 expect that our actual financial condition and results of operations will differ, perhaps materially, from what we have anticipated. Consequently, there can be no assurance that the results or 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 materialize as anticipated could materially adversely affect the successful execution of any plan of reorganization.
We have substantial liquidity needs and may not be able to obtain sufficient liquidity to confirm a plan of reorganization and exit bankruptcy.
Although we have lowered our capital budget and reduced the scale of our operations significantly, our business remains capital intensive. 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

68

Item 1A.    Risk Factors - Continued

professional fees and costs throughout the Chapter 11 proceedings. There are no assurances that our current liquidity is sufficient to 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 interim financing or exit financing sufficient to meet our liquidity needs.
In connection with a plan of reorganization, we may, for federal and state income tax purposes, trigger an actual or deemed sale of all or a portion of our properties which may result in unfavorable tax consequences.
In connection with a plan of reorganization, we may, for federal and state income tax purposes, trigger an actual or deemed sale of all or a portion of our properties and use the proceeds to satisfy debt. Our unitholders may be allocated substantial taxable income or loss with respect to such a sale, and our 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, our unitholders’ interest in our economic profits because of allocations under section 704(c) of the Internal Revenue Code.
We are subject to the risks and uncertainties associated with Chapter 11 proceedings.
For the duration of our Chapter 11 proceedings, our operations and our ability to develop and execute our business plan, as well as our continuation as a going concern, are subject to the risks and 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 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 Chapter 11 proceedings could adversely affect our relationships with our suppliers, service providers, customers, employees, and other third parties, which in turn could adversely affect our operations and financial condition. Also, we need the prior approval of the Bankruptcy Court for transactions outside the ordinary course of business, 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 the success and growth of our business. In addition, the longer the Chapter 11 proceedings continue, the more likely it is that our customers and suppliers will lose confidence in our ability to reorganize our business successfully and will seek to 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 expenses associated with the administration of the Chapter 11 proceedings. The Chapter 11 proceedings may also

69

Item 1A.    Risk Factors - Continued

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.

70

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

71

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 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 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 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 financing for the continuation of our operations;
the number of institutional and other investors that will consider investing in our units;
the number of market makers in our units;
the availability of information concerning the trading prices and volume of our units; and
the number of broker-dealers willing to execute trades in our units.
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
The Company’s Board of Directors 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 Company did not repurchase any units during the nine months ended September 30, 2016, and as of September 30, 2016, the Company does not intend to make any purchases under the program.None
Item 3.Defaults Upon Senior Securities
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.None


Item 4.Mine Safety Disclosures
Not applicable
Item 5.Other Information
None

Item 6.Exhibits

Exhibit Number Description
   
3.12.1CertificateAmended Joint Chapter 11 Plan of FormationReorganization of Linn Energy, LLC and Its Debtor Affiliates Other Than Linn Acquisition Company, LLC and Berry Petroleum Company, LLC, dated January 25, 2017 (incorporated by reference to Exhibit 2.1 to Current Report on Form 8‑K filed on January 31, 2017 (Case No. 16-60040))
2.2Purchase and Sale Agreement, dated April 30, 2017, by and between Linn Energy Holdings, LLC, (nowLinn Operating, LLC and Jonah Energy LLC (incorporated by reference to Exhibit 2.1 to Current Report on Form 8-K filed on May 4, 2017)
3.1Amended and Restated Certificate of Incorporation of Linn Energy, LLC)Inc. (incorporated herein by reference to Exhibit 3.1 to Registration Statement on Form S‑1 (File No. 333‑125501)S-8 filed on June 3, 2005)February 28, 2017)
3.2Certificate of Amendment to Certificate of FormationBylaws of Linn Energy, Holdings, LLC (now Linn Energy, LLC)Inc. (incorporated herein by reference to Exhibit 3.2 to Registration Statement on Form S‑1 (File No. 333-125501)S-8 filed on June 3, 2005)February 28, 2017)
3.34.1Third Amended and Restated Limited Liability Company AgreementForm of specimen New Common Stock certificate of Linn Energy, LLC dated September 3, 2010Inc. (incorporated herein by reference to Exhibit 3.14.1 to Current Report on Form 8-K filed on September 7, 2010)
3.4Amendment No. 1, dated April 23, 2013, to Third Amended and Restated LLC Agreement of Linn Energy, LLC, dated SeptemberMarch 3, 2010 (incorporated herein by reference to Exhibit 3.1 to Quarterly Report on Form 10-Q filed on April 25, 2013)2017)
10.1First Amendment to Linn 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 4, 2016)
10.2First Amendment to Restructuring SupportCredit Agreement dated as of September 8, 2016, by andFebruary 28, 2017, among the DebtorsLinn Energy Holdco II LLC, as borrower, Linn Energy Holdco LLC, as parent, Linn Energy, Inc. as holdings, subsidiary guarantors party thereto, Wells Fargo Bank, National Association, as administrative agent and the supporting partieslenders party thereto (incorporated herein by reference to Exhibit 10.1 to Current Report on Form 8-K filed on September 9, 2016)March 3, 2017)
10.310.2Second Amendment to Restructuring SupportRegistration Rights Agreement dated as of September 23, 2016, by andFebruary 28, 2017, among the DebtorsLinn Energy, Inc. and the supporting partiesholders party thereto (incorporated herein by reference to Exhibit 10.1 to Current Report on Form 8-K filed on September 26, 2016)
10.4Third Amendment to Restructuring Support Agreement, dated as of October 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)
10.5Fourth 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)March 3, 2017)
10.610.3†First AmendmentLinn Energy, Inc. 2017 Omnibus Incentive Plan (incorporated by reference to SettlementExhibit 10.1 to Registration Statement on Form S-8 filed on February 28, 2017)
10.4†Form of Restricted Stock Unit Agreement dated as(for executive officers with employment agreements) (incorporated by reference to Exhibit 10.2 to Registration Statement on Form S-8 filed on February 28, 2017)
10.5†Form of July 12, 2016Restricted Stock Unit Agreement (for employees) (incorporated by reference to Exhibit 10.3 to Registration Statement on Form S-8 filed on February 28, 2017)
10.6†Linn Energy Holdco LLC Incentive Interest Plan (incorporated herein by reference to Exhibit 10.110.6 to Annual Report on Form 10-K for the year ended December 31, 2016, filed on March 23, 2017)
10.7†Form of Award Agreement (base interests) (incorporated herein by reference to Exhibit 10.7 to Annual Report on Form 10-K for the year ended December 31, 2016, filed on March 23, 2017)
10.8†Form of Award Agreement (appreciation interests) (incorporated herein by reference to Exhibit 10.8 to Annual Report on Form 10-K for the year ended December 31, 2016, filed on March 23, 2017)
10.9*†Form of Special Bonus Award Agreement
10.10Membership Interest Purchase Agreement, dated as of February 28, 2017, by and between Linn Energy, LLC and Linn Energy, Inc. (incorporated by reference to Exhibit 10.6 to Current Report on Form 8-K filed on July 18, 2016)March 3, 2017)
10.710.11Second Amendment to SettlementTransition Services and Separation Agreement, dated as of September 8, 2016February 28, 2017, by and between Linn Energy, LLC, LinnCo, LLC, and certain subsidiaries of Linn Energy, Inc. party thereto and Berry Petroleum Company, LLC (incorporated herein by reference to Exhibit 10.210.7 to Current Report on Form 8‑K filed on March 3, 2017)
10.12Joint Operating Agreement, dated February 28, 2017, between Linn Operating, Inc., as operator, and Berry Petroleum Company, LLC, as non-operator (Hugoton) (incorporated by reference to Exhibit 10.8 to Current Report on Form 8-K filed on September 9, 2016)
10.8Third 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)
10.9Fourth 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)
10.10Restructuring Support Agreement, dated as of October 7, 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 11, 2016)
10.11First Amendment to Restructuring Support Agreement, dated as of October 14, 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 18, 2016)
10.12Backstop Commitment Letter, dated as of October 7, 2016, by and among the Company and backstop parties thereto (incorporated herein by reference to Exhibit 10.2 to Current Report on Form 8-K filed on October 11, 2016)
10.13First 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)March 3, 2017)

Item 6.Exhibits - Continued

Exhibit Number Description
   
10.1410.13Backstop CommitmentJoint Operating Agreement, dated February 28, 2017, between Berry Petroleum Company, LLC, as of October 25, 2016, byoperator, and among the Company and the parties theretoLinn Energy Holdings, LLC, as non-operator (Hill) (incorporated herein by reference to Exhibit 10.210.9 to Current Report on Form 8-K filed on October 27, 2016)March 3, 2017)
10.14†Form of Indemnity Agreement between Linn Energy, Inc. and the directors and officers of Linn Energy, Inc. (incorporated by reference to Exhibit 10.4 to Registration Statement on Form S-8 filed on February 28, 2017)
10.15†Second Amended and Restated Employment Agreement of Mark E. Ellis, dated February 28, 2017 (incorporated by reference to Exhibit 10.11 to Current Report on Form 8-K filed on March 3, 2017)
10.16†Third Amended and Restated Employment Agreement of David B. Rottino, dated February 28, 2017 (incorporated by reference to Exhibit 10.12 to Current Report on Form 8-K filed on March 3, 2017)
10.17†Second Amended and Restated Employment Agreement of Arden L. Walker, Jr., dated February 28, 2017 (incorporated by reference to Exhibit 10.13 to Current Report on Form 8-K filed on March 3, 2017)
10.18†Employment Agreement of Jamin B. McNeil, dated February 28, 2017 (incorporated by reference to Exhibit 10.14 to Current Report on Form 8-K filed on March 3, 2017)
10.19†Employment Agreement of Thomas E. Emmons, dated February 28, 2017 (incorporated by reference to Exhibit 10.15 to Current Report on Form 8-K filed on March 3, 2017)
10.20†Employment Agreement of Candice J. Wells, dated February 28, 2017 (incorporated by reference to Exhibit 10.16 to Current Report on Form 8-K filed on March 3, 2017)
10.21*†Linn Energy, Inc. Severance Plan, dated February 28, 2017
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
*Filed herewith.
**Furnished herewith.
Management contract or compensatory plan or arrangement to be filed as an Exhibit hereto pursuant to Item 601 of Regulation S‑K.

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 LINN ENERGY, LLCINC.
 (Registrant)
  
Date: November 3, 2016May 11, 2017/s/ Darren R. Schluter
 Darren R. Schluter
 Vice President and Controller
 (Duly Authorized Officer and Principal Accounting Officer)
  
  
Date: November 3, 2016May 11, 2017/s/ David B. Rottino
 David B. Rottino
 Executive Vice President and Chief Financial Officer
 (Principal Financial Officer)


7653