Attached files

file filename
EX-31.1 - CERTIFICATION OF CEO SECTION 302 - LINN ENERGY, INC.exhibit311q22014.htm
EX-32.1 - CERTIFICATION OF CEO SECTION 906 - LINN ENERGY, INC.exhibit321q22014.htm
EX-31.2 - CERTIFICATION OF CFO SECTION 302 - LINN ENERGY, INC.exhibit312q22014.htm
EX-32.2 - CERTIFICATION OF CFO SECTION 906 - LINN ENERGY, INC.exhibit322q22014.htm
EX-2.3 - DEVON PSA - LINN ENERGY, INC.exhibit23devonpsa.htm
EXCEL - IDEA: XBRL DOCUMENT - LINN ENERGY, INC.Financial_Report.xls

 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q

x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2014

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


LINN ENERGY, LLC
(Exact name of registrant as specified in its charter)

Delaware
65-1177591
(State or other jurisdiction of incorporation or organization)
(IRS Employer
Identification No.)
600 Travis, Suite 5100
Houston, Texas
77002
(Address of principal executive offices)
(Zip Code)
(281) 840-4000
(Registrant’s telephone number, including area code)
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. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer  x      Accelerated filer  ¨    Non-accelerated filer  ¨    Smaller reporting company ¨
Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x
As of July 31, 2014, there were 331,729,246 units outstanding.
 




TABLE OF CONTENTS
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

i


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 a 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 a 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


PART I – FINANCIAL INFORMATION
Item 1.
Financial Statements
LINN ENERGY, LLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
June 30,
2014
 
December 31,
2013
 
(in thousands,
except unit amounts)
ASSETS
 
Current assets:
 
 
 
Cash and cash equivalents
$
38,339

 
$
52,171

Accounts receivable – trade, net
549,589

 
488,202

Derivative instruments
91,611

 
176,130

Other current assets
107,882

 
99,437

Total current assets
787,421

 
815,940

 
 
 
 
Noncurrent assets:
 
 
 
Oil and natural gas properties (successful efforts method)
18,684,209

 
17,888,559

Less accumulated depletion and amortization
(4,051,761
)
 
(3,546,284
)
 
14,632,448

 
14,342,275

 
 
 
 
Other property and equipment
676,294

 
647,882

Less accumulated depreciation
(135,316
)
 
(110,939
)
 
540,978

 
536,943

 
 
 
 
Derivative instruments
175,537

 
682,002

Other noncurrent assets
132,280

 
127,804

 
307,817

 
809,806

Total noncurrent assets
15,481,243

 
15,689,024

Total assets
$
16,268,664

 
$
16,504,964

 
 
 
 
LIABILITIES AND UNITHOLDERS’ CAPITAL
 
 
 
Current liabilities:
 
 
 
Accounts payable and accrued expenses
$
860,171

 
$
849,624

Derivative instruments
59,907

 
28,176

Other accrued liabilities
138,378

 
163,375

Current portion of long-term debt

 
211,558

Total current liabilities
1,058,456

 
1,252,733

 
 
 
 
Noncurrent liabilities:
 
 
 
Credit facilities
3,418,175

 
2,733,175

Term loan
500,000

 
500,000

Senior notes, net
5,726,176

 
5,725,483

Derivative instruments
8,827

 
4,649

Other noncurrent liabilities
395,907

 
397,497

Total noncurrent liabilities
10,049,085

 
9,360,804

 
 
 
 
Commitments and contingencies (Note 10)


 


 
 
 
 
Unitholders’ capital:
 
 
 
331,667,975 units and 329,661,161 units issued and outstanding at June 30, 2014, and December 31, 2013, respectively
5,854,727

 
6,291,824

Accumulated deficit
(693,604
)
 
(400,397
)
 
5,161,123

 
5,891,427

Total liabilities and unitholders’ capital
$
16,268,664

 
$
16,504,964


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

1


LINN ENERGY, LLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2014
 
2013
 
2014
 
2013
 
(in thousands, except per unit amounts)
Revenues and other:
 
 
 
 
 
 
 
Oil, natural gas and natural gas liquids sales
$
967,850

 
$
488,207

 
$
1,906,727

 
$
950,939

Gains (losses) on oil and natural gas derivatives
(408,788
)
 
326,733

 
(650,281
)
 
218,363

Marketing revenues
30,273

 
17,222

 
60,819

 
27,074

Other revenues
7,616

 
6,663

 
13,273

 
11,509

 
596,951

 
838,825

 
1,330,538

 
1,207,885

Expenses:
 
 
 
 
 
 
 
Lease operating expenses
184,901

 
83,584

 
378,934

 
172,305

Transportation expenses
44,854

 
29,298

 
90,484

 
56,481

Marketing expenses
23,274

 
9,360

 
44,346

 
16,734

General and administrative expenses
66,906

 
46,305

 
146,134

 
104,871

Exploration costs
1,551

 
818

 
2,642

 
3,044

Depreciation, depletion and amortization
274,435

 
198,629

 
542,236

 
396,070

Impairment of long-lived assets

 
(14,851
)
 

 
42,202

Taxes, other than income taxes
68,531

 
32,397

 
134,244

 
72,068

(Gains) losses on sale of assets and other, net
5,467

 
(959
)
 
8,053

 
2,213

 
669,919

 
384,581

 
1,347,073

 
865,988

Other income and (expenses):
 
 
 
 
 
 
 
Interest expense, net of amounts capitalized
(134,300
)
 
(103,847
)
 
(268,113
)
 
(204,206
)
Loss on extinguishment of debt

 
(4,187
)
 

 
(4,187
)
Other, net
(2,549
)
 
(2,182
)
 
(4,852
)
 
(3,825
)
 
(136,849
)
 
(110,216
)
 
(272,965
)
 
(212,218
)
Income (loss) before income taxes
(209,817
)
 
344,028

 
(289,500
)
 
129,679

Income tax expense (benefit)
(1,947
)
 
(1,129
)
 
3,707

 
6,407

Net income (loss)
$
(207,870
)
 
$
345,157

 
$
(293,207
)
 
$
123,272

 
 
 
 
 
 
 
 
Net income (loss) per unit:
 
 
 
 
 
 
 
Basic
$
(0.64
)
 
$
1.47

 
$
(0.91
)
 
$
0.52

Diluted
$
(0.64
)
 
$
1.46

 
$
(0.91
)
 
$
0.52

Weighted average units outstanding:
 
 
 
 
 
 
 
Basic
328,844

 
233,448

 
328,588

 
233,313

Diluted
328,844

 
233,910

 
328,588

 
233,800

 
 
 
 
 
 
 
 
Distributions declared per unit
$
0.725

 
$
0.725

 
$
1.45

 
$
1.45


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

2


LINN ENERGY, LLC
CONDENSED CONSOLIDATED STATEMENT OF UNITHOLDERS’ CAPITAL
(Unaudited)
 
Units
 
Unitholders’ Capital
 
Accumulated Deficit
 
Total Unitholders’ Capital
 
(in thousands)
 
 
 
 
 
 
 
 
December 31, 2013
329,661

 
$
6,291,824

 
$
(400,397
)
 
$
5,891,427

Issuance of units
2,007

 
7,887

 

 
7,887

Distributions to unitholders
 
 
(480,583
)
 

 
(480,583
)
Unit-based compensation expenses
 
 
32,583

 

 
32,583

Excess tax benefit from unit-based compensation
 
 
3,016

 

 
3,016

Net loss
 
 

 
(293,207
)
 
(293,207
)
June 30, 2014
331,668

 
$
5,854,727

 
$
(693,604
)
 
$
5,161,123


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


3


LINN ENERGY, LLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Six Months Ended
June 30,
 
2014
 
2013
 
(in thousands)
Cash flow from operating activities:
 
 
 
Net income (loss)
$
(293,207
)
 
$
123,272

Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
Depreciation, depletion and amortization
542,236

 
396,070

Impairment of long-lived assets

 
42,202

Unit-based compensation expenses
32,583

 
19,575

Loss on extinguishment of debt

 
4,187

Amortization and write-off of deferred financing fees
6,202

 
10,905

Losses on sale of assets and other, net
3,506

 
16,814

Deferred income taxes
3,475

 
5,725

Derivatives activities:
 
 
 
Total (gains) losses
650,281

 
(218,363
)
Cash settlements
(23,123
)
 
144,502

Changes in assets and liabilities:
 
 
 
(Increase) decrease in accounts receivable – trade, net
(61,891
)
 
36,174

(Increase) decrease in other assets
(6,947
)
 
2,260

Increase (decrease) in accounts payable and accrued expenses
113,582

 
(5,319
)
Decrease in other liabilities
(51,062
)
 
(16,648
)
Net cash provided by operating activities
915,635

 
561,356

 
 
 
 
Cash flow from investing activities:
 
 
 
Acquisition of oil and natural gas properties and joint-venture funding
(25,891
)
 
(64,381
)
Development of oil and natural gas properties
(805,617
)
 
(495,899
)
Purchases of other property and equipment
(31,411
)
 
(55,147
)
Proceeds from sale of properties and equipment and other
(11,730
)
 
210,899

Net cash used in investing activities
(874,649
)
 
(404,528
)
 
 
 
 
Cash flow from financing activities:
 
 
 
Proceeds from borrowings
1,095,000

 
775,000

Repayments of debt
(616,124
)
 
(560,737
)
Distributions to unitholders
(480,583
)
 
(341,117
)
Financing fees and other, net
(56,127
)
 
(30,656
)
Excess tax benefit from unit-based compensation
3,016

 
591

Net cash used in financing activities
(54,818
)
 
(156,919
)
 
 
 
 
Net decrease in cash and cash equivalents
(13,832
)
 
(91
)
Cash and cash equivalents:
 
 
 
Beginning
52,171

 
1,243

Ending
$
38,339

 
$
1,152

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

4


LINN ENERGY, LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 – Basis of Presentation
Nature of Business
Linn Energy, LLC (“LINN Energy” or the “Company”) is an independent oil and natural gas company. LINN Energy’s mission is to acquire, develop and maximize cash flow from a growing portfolio of long-life oil and natural gas assets. The Company’s properties are located in the United States (“U.S.”), in the Mid-Continent, the Rockies, the Permian Basin, California, the Hugoton Basin, Michigan, Illinois and east 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, 2013. 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 Company’s other investment is accounted for at cost.
The condensed consolidated financial statements for previous periods include certain reclassifications that were made to conform to current presentation. Such reclassifications have no impact on previously reported net income (loss), unitholders’ capital or cash flows.
Use of Estimates
The preparation of the accompanying condensed consolidated financial statements in conformity with GAAP requires management of the Company to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amount of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. The estimates that are particularly significant to the financial statements include estimates of the Company’s reserves of oil, natural gas and natural gas liquids (“NGL”), future cash flows from oil and natural gas properties, depreciation, depletion and amortization, asset retirement obligations, certain revenues and operating expenses, fair values of commodity derivatives and fair values of assets acquired and liabilities assumed. As fair value is a market-based measurement, it is determined based on the assumptions that market participants would use. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. Such estimates and assumptions are adjusted when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ from these estimates. Any changes in estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods.
Recently Issued Accounting Standards
In May 2014, the Financial Accounting Standards Board issued an Accounting Standards Update (“ASU”) that is intended to improve and converge the financial reporting requirements for revenue from contracts with customers. The 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, 2016, and interim periods within those years (early adoption prohibited). The Company is currently evaluating the impact, if any, of the adoption of this ASU on its consolidated financial statements and related disclosures.

5

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

Note 2 – Acquisitions, Joint-Venture Funding and Divestitures
For the six months ended June 30, 2014, the Company paid approximately $25 million, including interest, towards the future funding commitment related to the joint-venture agreement it entered into with an affiliate of Anadarko Petroleum Corporation (“Anadarko”) in April 2012. As of February 2014, the Company had fully funded the total commitment of $400 million.
During the six months ended June 30, 2014, the Company completed small acquisitions of oil and natural gas properties located in its various operating regions. The Company, in the aggregate, paid approximately $1 million in total consideration for these properties.
Properties Exchange – Pending
On May 20, 2014, the Company, through two of its wholly owned subsidiaries, entered into a definitive agreement to trade a portion of its Permian Basin properties to Exxon Mobil Corporation and its affiliates, including its wholly owned subsidiary XTO Energy Inc., for operating interests in the Hugoton Basin. The Company anticipates the transaction will close in the third quarter of 2014, subject to closing conditions. There can be no assurance that all of the conditions to closing will be satisfied.
Acquisitions and Divestiture Pending
On June 27, 2014, the Company, through one of its wholly owned subsidiaries, entered into a definitive purchase and sale agreement to acquire certain oil and natural gas properties and related assets located primarily in the Rockies, Mid-Continent, east Texas, north Louisiana and south Texas from affiliates of Devon Energy Corporation for a contract price of $2.3 billion. The Company anticipates the acquisition will close in the third quarter of 2014, subject to closing conditions, and has secured $2.3 billion of committed interim financing for the acquisition, subject to final documentation. There can be no assurance that all of the conditions to closing will be satisfied.
On July 18, 2014, the Company, through one of its wholly owned subsidiaries, entered into a definitive purchase and sale agreement to acquire certain oil and natural gas properties located in the Hugoton Basin from Pioneer Natural Resources Company for a contract price of $340 million, including a deposit of $34 million paid in July 2014. The Company anticipates the acquisition will close in the third quarter of 2014, subject to closing conditions, and will be financed with borrowings under the LINN Credit Facility, as defined in Note 6. There can be no assurance that all of the conditions to closing will be satisfied.
On July 24, 2014, the Company, through one of its wholly owned subsidiaries, entered into a definitive purchase and sale agreement to sell its interests in certain non-producing oil and natural gas properties located in the Mid-Continent region for a purchase price of approximately $90 million, subject to closing adjustments. The sale is anticipated to close in the fourth quarter of 2014, subject to closing conditions. There can be no assurance that all of the conditions to closing will be satisfied. The Company plans to use the net proceeds from the sale to repay borrowings under the LINN Credit Facility.
Acquisitions – 2013
Berry Acquisition
On December 16, 2013, the Company completed the transactions contemplated by the merger agreement between the Company, LinnCo, LLC (“LinnCo”), an affiliate of LINN Energy, and Berry Petroleum Company, now Berry Petroleum Company, LLC (“Berry”), under which LinnCo acquired all of the outstanding common shares of Berry and the contribution agreement between LinnCo and the Company, under which LinnCo contributed Berry to the Company in exchange for LINN Energy units. Under the merger agreement, as amended, Berry’s shareholders received 1.68 LinnCo common shares for each Berry common share they owned, totaling 93,756,674 LinnCo common shares. Under the contribution agreement, LinnCo contributed Berry to LINN Energy in exchange for 93,756,674 newly issued LINN Energy units, after which Berry became an indirect wholly owned subsidiary of LINN Energy. The transaction has a value of approximately $4.6 billion, including the assumption of approximately $2.3 billion of Berry’s debt and net of cash acquired of approximately $451 million.
This acquisition was accounted for under the acquisition method of accounting. Accordingly, the Company conducted assessments of net assets acquired and recognized amounts for identifiable assets acquired and liabilities assumed at their estimated fair values on the acquisition date, while transaction and integration costs associated with the acquisitions were

6

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

expensed as incurred. The initial accounting for the business combination is not complete and adjustments to provisional amounts, or recognition of additional assets acquired or liabilities assumed, may occur as more detailed analyses are completed and additional information is obtained about the facts and circumstances that existed as of the acquisition date. The results of operations of the acquisition have been included in the condensed consolidated financial statements since the acquisition date.
The following unaudited pro forma financial information presents a summary of the Company’s consolidated results of operations for the three months and six months ended June 30, 2013, assuming the Berry acquisition had been completed as of January 1, 2013, including adjustments to reflect the values assigned to the net assets acquired:
 
Three Months Ended
June 30, 2013
 
Six Months Ended
June 30, 2013
 
(in thousands, except
per unit amounts)
 
 
 
 
Total revenues and other
$
1,161,137

 
$
1,806,346

Total operating expenses
$
586,909

 
$
1,256,821

Net income
$
441,935

 
$
284,615

 
 
 
 
Net income per unit:
 
 
 
Basic
$
1.34

 
$
0.86

Diluted
$
1.34

 
$
0.86

The pro forma condensed combined statements of operations includes adjustments to:
Reflect the results of Berry.
Reflect incremental depreciation, depletion and amortization expense, using the units-of-production method, related to oil and natural gas properties acquired and using an estimated useful life of 20 years for other property and equipment.
Reflect a reduction in interest expense related to the amortization of the adjustment to fair value of Berry’s debt using the effective interest method.
Exclude transaction costs included in the historical statements of operations for the three months and six months ended June 30, 2013, as they reflect nonrecurring charges not expected to have a continuing impact on the combined results.
Reflect approximately 93.8 million LINN Energy units assumed to be issued in conjunction with the transaction on January 1, 2013.
Divestiture – 2013
On May 31, 2013, the Company, through one of its wholly owned subsidiaries, together with the Company’s partners, Panther Energy, LLC and Red Willow Mid-Continent, LLC, completed the sale of its interests in certain oil and natural gas properties located in the Mid-Continent region (“Panther Operated Cleveland Properties”) to Midstates Petroleum Company, Inc. At March 31, 2013, the carrying value of the Panther Operated Cleveland Properties was reduced to fair value less costs to sell resulting in an impairment charge of approximately $57 million and the properties were classified as “assets held for sale.” On May 31, 2013, upon the completion of the sale, the Company recorded an adjustment of approximately $15 million to reduce the initial impairment charge recorded in March 2013 resulting in a total impairment charge of approximately $42 million for the six months ended June 30, 2013. The charge is included in “impairment of long-lived assets” on the condensed consolidated statement of operations. Proceeds received for the Company’s portion of its interests in the properties were approximately $219 million, net of costs to sell of approximately $2 million.

7

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

Note 3 – Unitholders’ Capital
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 over the next four quarters. Distributions paid by the Company are presented on the condensed consolidated statement of unitholders’ capital and the condensed consolidated statements of cash flows. On July 1, 2014, the Company’s Board of Directors declared a cash distribution of $0.725 per unit with respect to the second quarter of 2014, to be paid in three equal installments of $0.2416 per unit. The first monthly distribution with respect to the second quarter of 2014, totaling approximately $80 million, was paid on July 16, 2014, to unitholders of record as of the close of business on July 11, 2014.
Note 4 – Oil and Natural Gas Properties
Oil and Natural Gas Capitalized Costs
Aggregate capitalized costs related to oil, natural gas and NGL production activities with applicable accumulated depletion and amortization are presented below:
 
June 30,
2014
 
December 31,
2013
 
(in thousands)
Proved properties:
 
 
 
Leasehold acquisition
$
12,329,359

 
$
12,277,089

Development
4,468,702

 
3,660,277

Unproved properties
1,886,148

 
1,951,193

 
18,684,209

 
17,888,559

Less accumulated depletion and amortization
(4,051,761
)
 
(3,546,284
)
 
$
14,632,448

 
$
14,342,275


Note 5 – Unit-Based Compensation
During the six months ended June 30, 2014, the Company granted 1,447,577 restricted units and 214,875 phantom units to employees, primarily as part of its annual review of its employees’ compensation, including executives, with an aggregate fair value of approximately $56 million. The restricted units and phantom units vest over three years. The Company also granted 212,524 performance units (the maximum number of units available to be earned) to certain executive officers, with an aggregate fair value of approximately $5 million. The initial 2014 performance unit awards vest 50% in two years and 50% in three years from the award date. A summary of unit-based compensation expenses included on the condensed consolidated statements of operations is presented below:
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2014
 
2013
 
2014
 
2013
 
(in thousands)
 
 
 
 
 
 
 
 
General and administrative expenses
$
9,496

 
$
7,136

 
$
27,719

 
$
17,001

Lease operating expenses
1,587

 
1,177

 
4,864

 
2,574

Total unit-based compensation expenses
$
11,083

 
$
8,313

 
$
32,583

 
$
19,575

Income tax benefit
$
4,095

 
$
3,072

 
$
12,039

 
$
7,233


8

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

Note 6 – Debt
The following summarizes the Company’s outstanding debt:
 
June 30,
2014
 
December 31, 2013
 
(in thousands, except percentages)
 
 
 
 
LINN credit facility (1)
$
2,245,000

 
$
1,560,000

Berry credit facility (2)
1,173,175

 
1,173,175

Term loan (3)
500,000

 
500,000

10.25% Berry senior notes due June 2014

 
205,257

6.50% senior notes due May 2019
750,000

 
750,000

6.25% senior notes due November 2019
1,800,000

 
1,800,000

8.625% senior notes due April 2020
1,300,000

 
1,300,000

6.75% Berry senior notes due November 2020
299,970

 
300,000

7.75% senior notes due February 2021
1,000,000

 
1,000,000

6.375% Berry senior notes due September 2022
599,163

 
600,000

Net unamortized discounts and premiums
(22,957
)
 
(18,216
)
Total debt, net
9,644,351

 
9,170,216

Less current maturities

 
(211,558
)
Total long-term debt, net
$
9,644,351

 
$
8,958,658

(1) 
Variable interest rates of 1.90% and 1.92% at June 30, 2014, and December 31, 2013, respectively.
(2) 
Variable interest rates of 2.66% and 2.67% at June 30, 2014, and December 31, 2013, respectively.
(3) 
Variable interest rates of 2.65% and 2.67% at June 30, 2014, and December 31, 2013, respectively.
Fair Value
The Company’s debt is recorded at the carrying amount in the condensed consolidated balance sheets. The carrying amounts of the Company’s Credit Facilities, as defined below, and term loan approximate fair value because the interest rates are variable and reflective of market rates. The Company uses a market approach to determine the fair value of its senior notes using estimates based on prices quoted from third-party financial institutions, which is a Level 2 fair value measurement.
 
June 30, 2014
 
December 31, 2013
 
Carrying Value
 
Fair Value
 
Carrying Value
 
Fair Value
 
(in thousands)
 
 
 
 
 
 
 
 
Credit Facilities
$
3,418,175

 
$
3,418,175

 
$
2,733,175

 
$
2,733,175

Term loan
500,000

 
500,000

 
500,000

 
500,000

Senior notes, net
5,726,176

 
6,091,525

 
5,937,041

 
6,162,402

Total debt, net
$
9,644,351

 
$
10,009,700

 
$
9,170,216

 
$
9,395,577


9

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

Credit Facilities
LINN Credit Facility
The Company’s Sixth Amended and Restated Credit Agreement (“LINN Credit Facility”) provides for a revolving credit facility up to the lesser of: (i) the then-effective borrowing base and (ii) the maximum commitment amount of $4.0 billion. At June 30, 2014, the LINN Credit Facility had a borrowing base of $4.5 billion and available borrowing capacity of approximately $1.8 billion, which includes a $5 million reduction for outstanding letters of credit. In April 2014, the Company entered into an amendment to the LINN Credit Facility to extend the maturity from April 2018 to April 2019, among other items.
Redetermination of the borrowing base under the LINN Credit Facility, based primarily on reserve reports that reflect commodity prices at such time, occurs semi-annually, in April and October. The administrative agent, at the direction of certain of the lenders, has the right to request one interim borrowing base redetermination per year. The Company also has the right to request one interim borrowing base redetermination per year, as well as the right to an additional interim redetermination each year in connection with certain acquisitions. Significant declines in commodity prices may result in a decrease in the borrowing base. The Company’s obligations under the LINN Credit Facility are secured by mortgages on certain of its material subsidiaries’ oil and natural gas properties and other personal property as well as a pledge of all ownership interests in the Company’s direct and indirect material subsidiaries. The Company is required to maintain either: 1) mortgages on properties representing at least 80% of the total value of oil and natural gas properties included on the most recent reserve report, or 2) a Collateral Coverage Ratio of at least 2.5 to 1. Collateral Coverage Ratio is defined as the ratio of the present value of future cash flows from proved reserves from the currently mortgaged properties to the lesser of: (i) the then-effective borrowing base and (ii) the maximum commitment amount. 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. The Company is in compliance with all financial and other covenants of the LINN Credit Facility.
At the Company’s election, interest on borrowings under the LINN Credit Facility is determined by reference to either the London Interbank Offered Rate (“LIBOR”) plus an applicable margin between 1.5% and 2.5% per annum (depending on the then-current level of borrowings under the LINN Credit Facility) or the alternate base rate (“ABR”) plus an applicable margin between 0.5% and 1.5% per annum (depending on the then-current level of borrowings under the LINN Credit Facility). Interest is generally payable quarterly for loans bearing interest based on the ABR and at the end of the applicable interest period for loans bearing interest at 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 between 0.375% and 0.5% (depending on the then-current level of borrowings under the LINN Credit Facility) on the average daily unused amount of the maximum commitment amount of the lenders.
In addition, the Company has a $500 million senior secured term loan with certain participants in its lender group under the LINN Credit Facility. Upon the amendment of the LINN Credit Facility in April 2014, the term loan has a maturity date of April 2019, consistent with the maturity of the LINN Credit Facility, and incurs interest based on either the LIBOR plus a margin of 2.5% per annum or the ABR plus a margin of 1.5% per annum, at the Company’s election. Interest is generally payable quarterly for loans bearing interest based on the ABR and at the end of the applicable interest period for loans bearing interest at LIBOR. The term loan may be repaid at the option of the Company without premium or penalty, subject to breakage costs. While the term loan is outstanding, the Company is required to maintain either: 1) mortgages on properties representing at least 80% of the total value of oil and natural gas properties included on the most recent reserve report, or 2) a Term Loan Collateral Coverage Ratio of at least 2.5 to 1. The Term Loan Collateral Coverage Ratio is defined as the ratio of the present value of future cash flows from proved reserves from the currently mortgaged properties to the lesser of: (i) the then-effective borrowing base and (ii) the 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”) has a borrowing base of $1.4 billion, subject to lender commitments. At June 30, 2014, lender commitments under the facility were $1.2 billion but there was less than $1 million of available borrowing capacity, including outstanding letters of credit. In February 2014, Berry entered into an amendment to the Berry Credit Facility to amend the terms of certain financial and reporting covenants, and in April 2014,

10

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

Berry entered into an amendment to the Berry Credit Facility to extend the maturity from May 2016 to April 2019 and to amend the terms of certain financial covenants and definitions, among other items.
Redetermination of the borrowing base under the Berry Credit Facility, based primarily on reserve reports that reflect commodity prices at such time, occurs semi-annually, in April and October. The lenders under the Berry Credit Facility and Berry also have the right to request interim borrowing base redeterminations once between scheduled redeterminations. Significant declines in commodity prices may result in a decrease in the borrowing base. 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 mortgages on properties representing at least 80% of the present value of its oil and natural gas proved reserves.
Berry is currently in compliance with all financial and other covenants of the Berry Credit Facility. At December 31, 2013, Berry’s Current Ratio (as defined in the Berry Credit Facility), fell short of the requirement under its covenant primarily due to factors related to the transactions between the Company, LinnCo and Berry, including a reassessment of the carrying value of items on Berry’s balance sheet as of the acquisition date and updated accruals as of December 31, 2013. In February 2014, Berry received a waiver of the applicability of that covenant and any noncompliance which may have resulted as of December 31, 2013, and entered into an amendment to its credit facility to address this covenant for future periods. The shortfall and related waiver and amendment had no effect on Berry’s compliance with the indentures governing its outstanding senior notes for the quarter ended December 31, 2013, and Berry was in compliance with all of the covenants under the indentures governing its senior notes at December 31, 2013.
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 1.5% and 2.5% 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 0.5% and 1.5% per annum (depending on the then-current level of borrowings under the Berry Credit Facility). Interest is generally payable quarterly for loans bearing interest based on the Base Rate and at the end of the applicable interest period for loans bearing interest at LIBOR. Berry is required to pay a commitment fee to the lenders under the Berry Credit Facility, which accrues at a rate per annum between 0.375% and 0.5% (depending on the then-current level of utilization under the Berry Credit Facility) 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.”
Senior Notes Due May 2019
The Company has $750 million in aggregate principal amount of 6.50% senior notes due May 2019 (the “May 2019 Senior Notes”). In an exchange offer that expired in October 2012, the Company exchanged all of its $750 million outstanding principal amount of May 2019 Senior Notes for an equal amount of new May 2019 Senior Notes. The terms of the new May 2019 Senior Notes are substantially similar in all material respects to those of the outstanding May 2019 Senior Notes, except that the transfer restrictions, registration rights and additional interest provisions relating to the outstanding May 2019 Senior Notes do not apply to the new May 2019 Senior Notes.
Senior Notes Due November 2019
The Company has $1.8 billion in aggregate principal amount of 6.25% senior notes due November 2019 (the “November 2019 Senior Notes”). In connection with the issuance and sale of the November 2019 Senior Notes, the Company entered into a Registration Rights Agreement (“November 2019 Registration Rights Agreement”) with the initial purchasers. Under the November 2019 Registration Rights Agreement, 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 similar to the November 2019 Senior Notes in exchange for outstanding November 2019 Senior Notes within 400 days after the notes were issued. On March 22, 2013, the Company filed a registration statement on Form S-4 to register exchange notes that are substantially similar to the November 2019 Senior Notes. On June 2, 2014, the registration statement was declared effective and the Company commenced an offer to exchange any and all of its $1.8 billion outstanding principal amount of November 2019 Senior Notes for an equal amount of new November 2019 Senior Notes.
The terms of the new November 2019 Senior Notes are substantially similar in all material respects to those of the outstanding November 2019 Senior Notes, except that the transfer restrictions, registration rights and additional interest provisions relating

11

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

to the outstanding November 2019 Senior Notes do not apply to the new November 2019 Senior Notes. The exchange offer expired on June 28, 2014. The effective date of the registration statement was past the deadline in the registration rights agreement, and therefore, the Company paid additional interest of approximately $15 million since the deadline.
Senior Notes Due April 2020 and Senior Notes Due February 2021
The Company has $1.3 billion in aggregate principal amount of 8.625% senior notes due April 2020 (the “April 2020 Senior Notes”) and $1.0 billion in aggregate principal amount of 7.75% senior notes due February 2021 (the “February 2021 Senior Notes,” and together with the April 2020 Senior Notes, the “2010 Issued Senior Notes”). The restrictive legends from each of the 2010 Issued Senior Notes have been removed making them freely tradable (other than with respect to persons that are affiliates of the Company), thereby terminating the Company’s obligations under each of the registration rights agreements entered into in connection with the issuance of the 2010 Issued Senior Notes.
Berry Senior Notes Due November 2020
Berry has $300 million in aggregate principal amount of 6.75% senior notes due November 2020 (the “Berry November 2020 Senior Notes”). The Berry November 2020 Senior Notes were recorded at their fair value of approximately $310 million on the Berry acquisition date including a $10 million premium which is being amortized to interest expense over the life of the related notes.
Berry Senior Notes Due September 2022
Berry has $599 million in aggregate principal amount of 6.375% senior notes due September 2022 (the “Berry September 2022 Senior Notes”). The Berry September 2022 Senior Notes were recorded at their fair value of approximately $607 million on the Berry acquisition date including a $7 million premium which is being amortized to interest expense over the life of the related notes.
Repurchases of Berry Senior Notes
In February 2014, in accordance with the indentures related to Berry’s senior notes, the Company repurchased through cash tender offers $321,000, $30,000 and $837,000 of Berry’s 10.25% senior notes due June 2014 (the “Berry June 2014 Senior Notes”), November 2020 Senior Notes and September 2022 Senior Notes, respectively.
Payment of Berry June 2014 Senior Notes
On May 30, 2014, in accordance with the provisions of the indenture related to the Berry June 2014 Senior Notes, the Company paid in full the remaining outstanding principal amount of approximately $205 million.
Senior Notes Covenants
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. The Company is in compliance with all financial and other covenants of its senior notes.
Berry’s senior notes contain covenants that, among other things, may limit its ability to: (i) incur or guarantee additional indebtedness; (ii) pay distributions 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. Berry is in compliance with all financial and other covenants of its senior notes.

12

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

Note 7 – Derivatives
Commodity Derivatives
The Company hedges a significant portion of its forecasted production to reduce exposure to fluctuations in the prices of oil and natural gas and provide long-term cash flow predictability to manage its business, service debt and pay distributions. The current direct NGL hedging market is constrained in terms of price, volume, duration and number of counterparties, which limits the Company’s ability to effectively hedge its NGL production. As a result, currently, the Company directly hedges only its oil and natural gas production.
The Company enters into commodity hedging transactions primarily in the form of swap contracts that are designed to provide a fixed price 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 to provide an economic hedge of the risk related to the future commodity prices received. The Company does not enter into derivative contracts for trading purposes. In connection with the Berry acquisition (see Note 2), the Company assumed certain derivative contracts that Berry had entered into prior to the acquisition date, including oil swaps, oil trade month roll swaps and oil collars through 2014, and oil basis swaps and oil three-way collars through 2015. The Company did not designate any of these 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 summarizes derivative positions for the periods indicated as of June 30, 2014:
 
July 1 - December 31, 2014
 
2015
 
2016
 
2017
 
2018
Natural gas positions:
 
 
 
 
 
 
 
 
 
Fixed price swaps (NYMEX Henry Hub):
 
 
 
 
 
 
 
 
 
Hedged volume (MMMBtu)
49,100

 
118,041

 
121,841

 
120,122

 
36,500

Average price ($/MMBtu)
$
5.25

 
$
5.19

 
$
4.20

 
$
4.26

 
$
5.00

Put options (NYMEX Henry Hub):
 
 
 
 
 
 
 
 
 
Hedged volume (MMMBtu)
40,141

 
71,854

 
76,269

 
66,886

 

Average price ($/MMBtu)
$
5.00

 
$
5.00

 
$
5.00

 
$
4.88

 
$

Oil positions:
 
 
 
 
 
 
 
 
 
Fixed price swaps (NYMEX WTI): (1)
 
 
 
 
 
 
 
 
 
Hedged volume (MBbls)
8,485

 
11,599

 
11,465

 
4,755

 

Average price ($/Bbl)
$
92.44

 
$
96.23

 
$
90.56

 
$
89.02

 
$

Collars (NYMEX WTI):
 
 
 
 
 
 
 
 
 
Hedged volume (MBbls)
368

 

 

 

 

Average floor price ($/Bbl)
$
90.00

 
$

 
$

 
$

 
$

Average ceiling price ($/Bbl)
$
102.87

 
$

 
$

 
$

 
$

Three-way collars (NYMEX WTI):
 
 
 
 
 
 
 
 
 
Hedged volume (MBbls)
1,564

 
1,095

 

 

 

Short put ($/Bbl)
$
72.11

 
$
70.00

 
$

 
$

 
$

Long put ($/Bbl)
$
93.76

 
$
90.00

 
$

 
$

 
$

Short call ($/Bbl)
$
109.79

 
$
101.62

 
$

 
$

 
$


13

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

 
July 1 - December 31, 2014
 
2015
 
2016
 
2017
 
2018
Put options (NYMEX WTI):
 
 
 
 
 
 
 
 
 
Hedged volume (MBbls)
1,996

 
3,426

 
3,271

 
384

 

Average price ($/Bbl)
$
91.30

 
$
90.00

 
$
90.00

 
$
90.00

 
$

Three-way collars (ICE Brent):
 
 
 
 
 
 
 
 
 
Hedged volume (MBbls)
184

 

 

 

 

Short put ($/Bbl)
$
80.00

 
$

 
$

 
$

 
$

Long put ($/Bbl)
$
100.00

 
$

 
$

 
$

 
$

Short call ($/Bbl)
$
114.05

 
$

 
$

 
$

 
$

Natural gas basis differential positions: (2)
 
 
 
 
 
 
 
 
 
Panhandle basis swaps:
 
 
 
 
 
 
 
 
 
Hedged volume (MMMBtu)
40,020

 
87,162

 
59,954

 
59,138

 
16,425

Hedged differential ($/MMBtu)
$
(0.33
)
 
$
(0.33
)
 
$
(0.32
)
 
$
(0.33
)
 
$
(0.33
)
NWPL Rockies basis swaps:
 
 
 
 
 
 
 
 
 
Hedged volume (MMMBtu)
20,619

 
43,292

 
46,294

 
38,880

 
10,804

Hedged differential ($/MMBtu)
$
(0.20
)
 
$
(0.20
)
 
$
(0.20
)
 
$
(0.19
)
 
$
(0.19
)
MichCon basis swaps:
 
 
 
 
 
 
 
 
 
Hedged volume (MMMBtu)
4,784

 
9,344

 
7,768

 
7,437

 
2,044

Hedged differential ($/MMBtu)
$
0.08

 
$
0.06

 
$
0.05

 
$
0.05

 
$
0.05

Houston Ship Channel basis swaps:
 
 
 
 
 
 
 
 
 
Hedged volume (MMMBtu)
2,650

 
4,891

 
4,575

 
3,604

 
986

Hedged differential ($/MMBtu)
$
(0.10
)
 
$
(0.10
)
 
$
(0.10
)
 
$
(0.08
)
 
$
(0.08
)
Permian basis swaps:
 
 
 
 
 
 
 
 
 
Hedged volume (MMMBtu)
2,466

 
5,074

 
4,219

 
4,819

 
1,314

Hedged differential ($/MMBtu)
$
(0.21
)
 
$
(0.21
)
 
$
(0.20
)
 
$
(0.20
)
 
$
(0.20
)
Oil basis differential positions:
 
 
 
 
 
 
 
 
 
ICE Brent - NYMEX WTI basis swaps:
 
 
 
 
 
 
 
 
 
Hedged volume (MBbls)
1,840

 
2,920

 

 

 

Hedged differential ($/Bbl)
$
11.60

 
$
11.60

 
$

 
$

 
$

Oil timing differential positions:
 
 
 
 
 
 
 
 
 
Trade month roll swaps (NYMEX WTI): (3)
 
 
 
 
 
 
 
 
 
Hedged volume (MBbls)
4,577

 
7,251

 
7,446

 
6,486

 

Hedged differential ($/Bbl)
$
0.24

 
$
0.24

 
$
0.25

 
$
0.25

 
$

(1) 
Includes certain outstanding fixed price oil swaps of approximately 5,384 MBbls which may be extended annually at a price of $100.00 per Bbl for each of the years ending December 31, 2017, and December 31, 2018, and $90.00 per Bbl for the year ending December 31, 2019, if the counterparties determine that the strike prices are in-the-money on a designated date in each respective preceding year. The extension for each year is exercisable without respect to the other years.
(2) 
Settle on the respective pricing index to hedge basis differential to the NYMEX Henry Hub natural gas price.

14

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

(3) 
The Company hedges the timing risk associated with the sales price of oil in the Mid-Continent, Hugoton Basin and Permian Basin regions. In these regions, the Company generally sells oil for the delivery month at a sales price based on the average NYMEX WTI price during that month, plus an adjustment calculated as a spread between the weighted average prices of the delivery month, the next month and the following month during the period when the delivery month is prompt (the “trade month roll”).
Settled derivatives on natural gas production for the three months and six months ended June 30, 2014, included volumes of 44,136 MMMBtu and 87,787 MMMBtu, respectively, at an average contract price of $5.14 per MMBtu. Settled derivatives on oil production for the three months and six months ended June 30, 2014, included volumes of 6,230 MBbls and 12,391 MBbls, respectively, at an average contract price of $92.39 per Bbl. Settled derivatives on natural gas production for the three months and six months ended June 30, 2013, included volumes of 43,253 MMMBtu and 86,031 MMMBtu, respectively, at an average contract price of $5.29 per MMBtu. Settled derivatives on oil production for the three months and six months ended June 30, 2013, included volumes of 3,734 MBbls and 7,426 MBbls, respectively, at an average contract price of $95.57 per Bbl. The natural gas derivatives are settled based on the closing price of NYMEX 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 prices of NYMEX WTI and ICE Brent 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 summarizes the fair value of derivatives outstanding on a gross basis:
 
June 30,
2014
 
December 31,
2013
 
(in thousands)
Assets:
 
 
 
Commodity derivatives
$
551,636

 
$
1,048,212

Liabilities:
 
 
 
Commodity derivatives
$
353,222

 
$
222,905

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 are current participants or affiliates of participants in its Credit Facilities or were participants or affiliates of participants in its Credit Facilities at the time it originally entered into the derivatives. The Credit Facilities are secured by the Company’s oil, natural gas and NGL reserves; therefore, the Company is not required to post any collateral. The Company does not receive collateral from its counterparties. 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 $552 million at June 30, 2014. 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 (Losses) on Derivatives
Gains and losses on derivatives were net losses of approximately $409 million and $650 million for the three months and six months ended June 30, 2014, respectively. Net losses for the three months and six months ended June 30, 2014, include cash settlement payments of approximately $9 million and $23 million, respectively. Gains and losses on derivatives were net gains of approximately $327 million and $218 million for the three months and six months ended June 30, 2013, respectively. Net gains for the three months and six months ended June 30, 2013, include cash settlement receipts of approximately $59 million and $145 million, respectively. These amounts are reported on the condensed consolidated statements of operations in “gains (losses) on oil and natural gas derivatives.”

15

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


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 securities trade in active markets. Assumed credit risk adjustments, based on published credit ratings, public bond yield spreads and credit default swap spreads, are applied to the Company’s commodity derivatives.
The following presents the fair value hierarchy for assets and liabilities measured at fair value on a recurring basis:
 
June 30, 2014
 
Level 2
 
Netting (1)
 
Total
 
(in thousands)
Assets:
 
 
 
 
 
Commodity derivatives
$
551,636

 
$
(284,488
)
 
$
267,148

Liabilities:
 
 
 
 
 
Commodity derivatives
$
353,222

 
$
(284,488
)
 
$
68,734

 
December 31, 2013
 
Level 2
 
Netting (1)
 
Total
 
(in thousands)
Assets:
 
 
 
 
 
Commodity derivatives
$
1,048,212

 
$
(190,080
)
 
$
858,132

Liabilities:
 
 
 
 
 
Commodity derivatives
$
222,905

 
$
(190,080
)
 
$
32,825

(1) 
Represents counterparty netting under agreements governing such derivatives.
Note 9 – Asset Retirement Obligations
Asset retirement obligations associated with retiring tangible long-lived assets are recognized as a liability in the period in which a legal obligation is incurred and becomes determinable and 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 (2.0% for the six months ended June 30, 2014); and (iv) a credit-adjusted risk-free interest rate (average of 5.4% for the six months ended June 30, 2014). 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.

16

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

The following presents a reconciliation of the asset retirement obligations (in thousands):
Asset retirement obligations at December 31, 2013
$
289,321

Liabilities added from drilling
5,673

Current year accretion expense
9,570

Settlements
(9,947
)
Revision of estimates
9,130

Asset retirement obligations at June 30, 2014
$
303,747


Note 10 – Commitments and Contingencies
The Company has been named as a defendant in a number of lawsuits, including claims from royalty owners related to disputed royalty payments and royalty valuations. With respect to a certain statewide class action case, the parties in this case are currently engaged in settlement negotiations and based on the current status of those negotiations, the Company estimates a range of possible loss of $1 million to $4.5 million for which an appropriate reserve has been established. For a certain statewide class action royalty payment dispute where a reserve has not yet been established, the Company has denied that it has any liability on the claims and has raised arguments and defenses that, if accepted by the court, will result in no loss to the Company. Based on the 10th Circuit Court of Appeals’ decision to reverse class certification orders in two unrelated certification cases, the court has permitted additional limited discovery prior to the briefing and hearing on class certification. Briefing and the hearing on class certification have not yet been set by the court. As a result, the Company is unable to estimate a possible loss, or range of possible loss, if any. In addition, the Company is involved in various other disputes arising in the ordinary course of business. The Company is not currently a party to any litigation or pending claims that it believes would have a material adverse effect on its overall business, financial position, results of operations or liquidity; however, cash flow could be significantly impacted in the reporting periods in which such matters are resolved.
Prior to the Company’s acquisition of Berry, Berry became, and continues to be, a defendant in a certain statewide royalty class action case, in which the parties have entered into a settlement agreement to settle past claims for approximately $2.4 million. Subject to approval of the settlement agreement by the court, Berry and the Company anticipate distribution of settlement funds to begin late in the third quarter or early fourth quarter of 2014.
In the summer of 2013, several class action complaints were filed in the United States District Court, Southern District of Texas and the United States District Court, Southern District of New York (the “SDNY”) against LINN Energy, LinnCo, certain of their officers and directors and the various underwriters for LinnCo’s initial public offering (these cases were subsequently consolidated in the SDNY (the “Combined Actions”)). These cases collectively asserted claims based on allegations that LINN Energy made false or misleading statements relating to its hedging strategy, the cash flow available for distribution to unitholders, and LINN Energy’s energy production in its Exchange Act filings and additional claims based on alleged misstatements relating to these issues in the prospectus and registration statement for LinnCo’s initial public offering.
In November 2013, LINN Energy and the other defendants filed a motion to dismiss the Combined Actions. On July 8, 2014, the Court dismissed the plaintiff’s claims with prejudice concluding that the plaintiff failed to demonstrate any material misstatement or omission by LINN Energy or LinnCo.
On July 10, 2013, Judy Mesirov, derivatively on behalf of nominal defendant LINN Energy, filed a shareholder derivative petition against Mark E. Ellis, Kolja Rockov, David B. Rottino, Arden L. Walker, Jr., Charlene A. Ripley, Michael C. Linn, Joseph P. McCoy, George A. Alcorn, Terrence S. Jacobs, David D. Dunlap, Jeffrey C. Swoveland, and Linda M. Stephens in the District Court of Harris County, Texas (the “Mesirov Action”). On July 12, 2013, John Peters, derivatively on behalf of nominal defendant LINN Energy, filed a shareholder derivative petition against many of the same defendants in the District Court of Harris County, Texas (the “Peters Action”). On August 26, 2013, Joseph Abdalla, derivatively on behalf of nominal defendant LINN Energy, filed a shareholder derivative petition against many of the same defendants in the District Court of Harris County, Texas (the “Abdalla Action”) (the Mesirov Action, Peters Action, and Abdalla Actions together, the “Texas State Court Derivative Actions”). On August 19, 2013, the Charlote J. Lombardo Trust of 2004, derivatively on behalf of nominal defendant LINN Energy, filed a shareholder derivative petition against many of the same defendants in the United States District Court for the Southern District of Texas (the “Lombardo Action”). On September 30, 2013, the Thelma Feldman Rev. Trust, derivatively on behalf of nominal defendant LINN Energy, filed a shareholder derivative petition against many of the same defendants (the “Feldman Rev. Trust Action”). On October 21, 2013, the Parker Family Trust of 2012, derivatively on

17

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

behalf of nominal defendant LINN Energy, filed a shareholder derivative petition against many of the same defendants (the “Parker Family Trust Action”) (the Lombardo Action, Feldman Rev. Trust Action, and Parker Family Trust Action together, the “Texas Federal Court Derivative Actions”) (the Texas State Court Derivative Action and Texas Federal Court Derivative Actions together, the “Texas Derivative Actions”). On May 28, 2014, Bill McKinnon, derivatively on behalf of nominal defendant LINN Energy, filed a shareholder derivative petition against many of the same defendants (the “McKinnon Action”) in the Delaware Court of Chancery (the “Delaware Derivative Action”) (the Delaware Derivative Action and the Texas Derivative Actions collectively, the “Derivative Actions”). The Derivative Actions assert derivative claims on behalf of LINN Energy against the individual defendants for alleged breaches of fiduciary duty, waste of corporate assets, mismanagement, abuse of control, and unjust enrichment based on factual allegations similar to those in the Combined Actions. The cases are in their preliminary stages and it is possible that additional similar actions could be filed in the District Court of Harris County, Texas, the Delaware Court of Chancery, or in other jurisdictions. As a result, the Company is unable to estimate a possible loss, or range of possible loss, if any.
During the six months ended June 30, 2014, and June 30, 2013, the Company made no significant payments to settle any legal, environmental or tax proceedings. The Company regularly analyzes current information and accrues for probable liabilities on the disposition of certain matters as necessary. Liabilities for loss contingencies arising from claims, assessments, litigation or other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated.
In 2008, Lehman Brothers Holdings Inc. and Lehman Brothers Commodity Services Inc. (together “Lehman”), filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code with the U.S. Bankruptcy Court for the Southern District of New York. In March 2011, the Company and Lehman entered into Termination Agreements under which the Company was granted general unsecured claims against Lehman in the amount of $51 million (the “Company Claim”). In December 2011, a Chapter 11 Plan (“Lehman Plan”) was approved by the Bankruptcy Court. Based on the recovery estimates described in the approved disclosure statement relating to the Lehman Plan, the Company expects to ultimately receive a substantial portion of the Company Claim. In April 2014 and April 2013, the Company received approximately $3 million and $5 million, respectively, of the Company Claim of which both amounts are included in “gains (losses) on oil and natural gas derivatives” on the condensed consolidated statements of operations. In the aggregate, the Company has received approximately $42 million of the Company Claim and additional distributions are expected to occur in the future.
Note 11 – Earnings Per Unit
Basic earnings per unit is computed by dividing net earnings attributable to unitholders by the weighted average number of units outstanding during each period. Diluted earnings per unit is computed by adjusting the average number of units outstanding for the dilutive effect, if any, of unit equivalents. The Company uses the treasury stock method to determine the dilutive effect.

18

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

The following table provides a reconciliation of the numerators and denominators of the basic and diluted per unit computations for net income (loss):
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2014
 
2013
 
2014
 
2013
 
(in thousands, except per unit data)
 
 
 
 
 
 
 
 
Net income (loss)
$
(207,870
)
 
$
345,157

 
$
(293,207
)
 
$
123,272

Allocated to participating securities
(2,154
)
 
(2,629
)
 
(4,306
)
 
(2,599
)
 
$
(210,024
)
 
$
342,528

 
$
(297,513
)
 
$
120,673

 
 
 
 
 
 
 
 
Basic net income (loss) per unit
$
(0.64
)
 
$
1.47

 
$
(0.91
)
 
$
0.52

Diluted net income (loss) per unit
$
(0.64
)
 
$
1.46

 
$
(0.91
)
 
$
0.52

 
 
 
 
 
 
 
 
Basic weighted average units outstanding
328,844

 
233,448

 
328,588

 
233,313

Dilutive effect of unit equivalents

 
462

 

 
487

Diluted weighted average units outstanding
328,844

 
233,910

 
328,588

 
233,800

Basic units outstanding excludes the effect of weighted average anti-dilutive unit equivalents related to approximately 6 million unit options and warrants for the three months and six months ended June 30, 2014, and 3 million for the three months and six months ended June 30, 2013. All equivalent units were antidilutive for the three months and six months ended June 30, 2014.
Note 12 – Income Taxes
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 of the Company 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. As such, with the exception of the state of Texas and certain subsidiaries, the Company is not a taxable entity, it does not directly pay federal and state income taxes and recognition has not been given to federal and state income taxes for the operations of the Company. Amounts recognized for income taxes are reported in “income tax expense (benefit)” on the condensed consolidated statements of operations.
Note 13 – Supplemental Disclosures to the Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Cash Flows
“Other accrued liabilities” reported on the condensed consolidated balance sheets include the following:
 
June 30,
2014
 
December 31,
2013
 
(in thousands)
 
 
 
 
Accrued compensation
$
31,702

 
$
55,257

Accrued interest
92,019

 
93,998

Asset retirement obligations
12,616

 
6,270

Other
2,041

 
7,850

 
$
138,378

 
$
163,375


19

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

Supplemental disclosures to the condensed consolidated statements of cash flows are presented below:
 
Six Months Ended
June 30,
 
2014
 
2013
 
(in thousands)
 
 
 
 
Cash payments for interest, net of amounts capitalized
$
264,141

 
$
192,517

Cash payments for income taxes
$

 
$
14

 
 
 
 
Noncash investing activities:
 
 
 
In connection with the acquisition of oil and natural gas properties and joint-venture funding, assets were acquired and liabilities were assumed as follows:
 
 
 
Fair value of assets acquired
$
4,242

 
$
7,655

Cash (paid) received
(1,139
)
 
3,231

Receivables from sellers

 
1,792

Payables to sellers

 
(6,854
)
Liabilities assumed
$
3,103

 
$
5,824

Included in “acquisition of oil and natural gas properties and joint-venture funding” on the condensed consolidated statements of cash flows for the six months ended June 30, 2014, and June 30, 2013, is approximately $25 million and $68 million, respectively, paid by the Company towards the future funding commitment related to the joint-venture agreement entered into with Anadarko in April 2012 (see Note 2).
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. Restricted cash of approximately $6 million is included in “other noncurrent assets” on the condensed consolidated balance sheets at June 30, 2014, and December 31, 2013, and primarily represents cash deposited by the Company into a separate account and designated for asset retirement obligations in accordance with contractual agreements.
The Company manages its working capital and cash requirements to borrow only as needed from its Credit Facilities. At December 31, 2013, net outstanding checks of approximately $48 million were reclassified and included in “accounts payable and accrued expenses” on the condensed consolidated balance sheet. At June 30, 2014, there were no net outstanding checks reclassified. The Company presents net outstanding checks as cash flows from financing activities on the condensed consolidated statements of cash flows.
Note 14 – Related Party Transactions
LinnCo
LinnCo, an affiliate of LINN Energy, was formed on April 30, 2012. LinnCo’s initial sole purpose was to own units in LINN Energy. In connection with the 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 are held by the public. As of June 30, 2014, LinnCo had no significant assets or operations other than those related to its interest in LINN Energy and owned approximately 39% of LINN Energy’s outstanding units.
LINN Energy has agreed to provide to LinnCo, or to pay on LinnCo’s behalf, any legal, accounting, tax advisory, financial advisory and engineering fees, printing costs or 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 has agreed to indemnify LinnCo and its officers and directors for damages

20

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

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 Energy on LinnCo’s behalf are accounted for as investment at cost.
For the three months and six months ended June 30, 2014, LinnCo incurred total general and administrative expenses and certain offering costs of approximately $749,000 and $1.5 million, respectively, all of which had been paid by LINN Energy on LinnCo’s behalf as of June 30, 2014. The expenses for the three months and six months ended June 30, 2014, include approximately $471,000 and $941,000, respectively, related to services provided by LINN Energy necessary for the conduct of LinnCo’s business, such as accounting, legal, tax, information technology and other expenses. In addition, during the six months ended June 30, 2014, LINN Energy paid approximately $11 million on LinnCo’s behalf for general and administrative expenses incurred by LinnCo in 2013.
For the three months and six months ended June 30, 2013, LinnCo incurred total general and administrative expenses and certain offering costs of approximately $3 million and $15 million, respectively, of which approximately $8 million had been paid by LINN Energy on LinnCo’s behalf as of June 30, 2013. The expenses for the three months and six months ended June 30, 2013, included approximately $2 million and $13 million, respectively, of transaction costs related to professional services rendered by third parties in connection with the Berry acquisition. The expenses for the three months and six months ended June 30, 2013, also included approximately $344,000 and $806,000, respectively, related to services provided by LINN Energy necessary for the conduct of LinnCo’s business, such as accounting, legal, tax, information technology and other expenses.
During the three months and six months ended June 30, 2014, the Company paid approximately $93 million and $186 million, respectively, in distributions to LinnCo attributable to LinnCo’s interest in LINN Energy. During the three months and six months ended June 30, 2013, the Company paid approximately $25 million and $50 million, respectively, in distributions to LinnCo attributable to LinnCo’s interest in LINN Energy.
Other
One of the Company’s directors is the President and Chief Executive Officer of Superior Energy Services, Inc. (“Superior”), which provides oilfield services to the Company. For the three months and six months ended June 30, 2014, the Company paid approximately $8 million and $12 million, respectively, and for the three months and six months ended June 30, 2013, the Company paid approximately $7 million and $13 million, respectively, to Superior and its subsidiaries for services rendered to the Company. The transactions associated with these payments were consummated on terms equivalent to those that prevail in arm’s-length transactions.
Note 15 – Subsidiary Guarantors
LINN Energy, LLC’s November 2019 Senior Notes, May 2019 Senior Notes and 2010 Issued Senior Notes are guaranteed by all of the Company’s material subsidiaries, other than Berry which is an indirect 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.

21

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

CONDENSED CONSOLIDATING BALANCE SHEETS
June 30, 2014
 
LINN Energy, LLC
 
Guarantor Subsidiaries
 
Non-
Guarantor Subsidiary
 
Eliminations
 
Consolidated
 
(in thousands)
ASSETS
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
32

 
$
35,818

 
$
2,489

 
$

 
$
38,339

Accounts receivable – trade, net

 
393,012

 
156,577

 

 
549,589

Accounts receivable – affiliates
4,025,707

 
26,914

 

 
(4,052,621
)
 

Derivative instruments

 
89,541

 
2,070

 

 
91,611

Other current assets
476

 
77,171

 
30,235

 

 
107,882

Total current assets
4,026,215

 
622,456

 
191,371

 
(4,052,621
)
 
787,421

 
 
 
 
 
 
 
 
 
 
Noncurrent assets:
 
 
 
 
 
 
 
 
 
Oil and natural gas properties (successful efforts method)

 
13,558,084

 
5,126,125

 

 
18,684,209

Less accumulated depletion and amortization

 
(3,901,130
)
 
(150,631
)
 

 
(4,051,761
)
 

 
9,656,954

 
4,975,494

 

 
14,632,448

 
 
 
 
 
 
 
 
 
 
Other property and equipment

 
586,438

 
89,856

 

 
676,294

Less accumulated depreciation

 
(131,526
)
 
(3,790
)
 

 
(135,316
)
 

 
454,912

 
86,066

 

 
540,978

 
 
 
 
 
 
 
 
 
 
Derivative instruments

 
174,327

 
1,210

 

 
175,537

Notes receivable – affiliates
114,400

 

 

 
(114,400
)
 

Investments in consolidated subsidiaries
8,540,562

 

 

 
(8,540,562
)
 

Other noncurrent assets, net
105,004

 
11,072

 
16,204

 

 
132,280

 
8,759,966

 
185,399

 
17,414

 
(8,654,962
)
 
307,817

Total noncurrent assets
8,759,966

 
10,297,265

 
5,078,974

 
(8,654,962
)
 
15,481,243

Total assets
$
12,786,181

 
$
10,919,721

 
$
5,270,345

 
$
(12,707,583
)
 
$
16,268,664

 
 
 
 
 
 
 
 
 
 
LIABILITIES AND UNITHOLDERS’ CAPITAL
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable and accrued expenses
$
1,822

 
$
570,680

 
$
287,669

 
$

 
$
860,171

Accounts payable – affiliates

 
4,026,182

 
26,439

 
(4,052,621
)
 

Derivative instruments

 
28,332

 
31,575

 

 
59,907

Other accrued liabilities
75,773

 
43,045

 
19,560

 

 
138,378

Total current liabilities
77,595

 
4,668,239

 
365,243

 
(4,052,621
)
 
1,058,456

 
 
 
 
 
 
 
 
 
 
Noncurrent liabilities:
 

 
 

 
 

 
 

 
 

Credit facilities
2,245,000

 

 
1,173,175

 

 
3,418,175

Term loan
500,000

 

 

 

 
500,000

Senior notes, net
4,811,496

 

 
914,680

 

 
5,726,176

Notes payable – affiliates

 
114,400

 

 
(114,400
)
 

Derivative instruments

 
8,827

 

 

 
8,827

Other noncurrent liabilities

 
211,316

 
184,591

 

 
395,907

Total noncurrent liabilities
7,556,496

 
334,543

 
2,272,446

 
(114,400
)
 
10,049,085

 
 
 
 
 
 
 
 
 
 
Unitholders’ capital:
 
 
 
 
 
 
 
 
 
Units issued and outstanding
5,845,694

 
4,833,310

 
2,493,923

 
(7,318,200
)
 
5,854,727

Accumulated income (deficit)
(693,604
)
 
1,083,629

 
138,733

 
(1,222,362
)
 
(693,604
)
 
5,152,090

 
5,916,939

 
2,632,656

 
(8,540,562
)
 
5,161,123

Total liabilities and unitholders’ capital
$
12,786,181

 
$
10,919,721

 
$
5,270,345

 
$
(12,707,583
)
 
$
16,268,664


22

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

CONDENSED CONSOLIDATING BALANCE SHEETS
December 31, 2013
 
LINN Energy, LLC
 
Guarantor Subsidiaries
 
Non-
Guarantor Subsidiary
 
Eliminations
 
Consolidated
 
(in thousands)
ASSETS
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
52

 
$
1,078

 
$
51,041

 
$

 
$
52,171

Accounts receivable – trade, net

 
365,347

 
122,855

 

 
488,202

Accounts receivable – affiliates
4,212,348

 
16,950

 

 
(4,229,298
)
 

Derivative instruments

 
170,534

 
5,596

 

 
176,130

Other current assets
330

 
68,274

 
30,833

 

 
99,437

Total current assets
4,212,730

 
622,183

 
210,325

 
(4,229,298
)
 
815,940

 
 
 
 
 
 
 
 
 
 
Noncurrent assets:
 
 
 
 
 
 
 
 
 
Oil and natural gas properties (successful efforts method)

 
13,074,900

 
4,813,659

 

 
17,888,559

Less accumulated depletion and amortization

 
(3,535,890
)
 
(10,394
)
 

 
(3,546,284
)
 

 
9,539,010

 
4,803,265

 

 
14,342,275

 
 
 
 
 
 
 
 
 
 
Other property and equipment

 
564,756

 
83,126

 

 
647,882

Less accumulated depreciation

 
(110,706
)
 
(233
)
 

 
(110,939
)
 

 
454,050

 
82,893

 

 
536,943

 
 
 
 
 
 
 
 
 
 
Derivative instruments

 
679,491

 
2,511

 

 
682,002

Notes receivable – affiliates
86,200

 

 

 
(86,200
)
 

Investments in consolidated subsidiaries
8,433,290