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EX-32.1 - CERTIFICATION OF CEO SECTION 906 - ROAN RESOURCES, INC.exhibit321q12016.htm
EX-31.1 - CERTIFICATION OF CEO SECTION 302 - ROAN RESOURCES, INC.exhibit311q12016.htm
EX-31.2 - CERTIFICATION OF CFO SECTION 302 - ROAN RESOURCES, INC.exhibit312q12016.htm
EX-32.2 - CERTIFICATION OF CFO SECTION 906 - ROAN RESOURCES, INC.exhibit322q12016.htm



 
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 March 31, 2016
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
(State or other jurisdiction of incorporation or organization)
65-1177591
(I.R.S. Employer
Identification No.)
600 Travis, Suite 5100
Houston, Texas
(Address of principal executive offices)
77002
(Zip Code)
(281) 840-4000
(Registrant’s telephone number, including area code)
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 the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x
As of April 30, 2016, there were 355,199,905 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 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


PART I – FINANCIAL INFORMATION
Item 1.
Financial Statements
LINN ENERGY, LLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
March 31,
2016
 
December 31,
2015
 
(in thousands,
except unit amounts)
ASSETS
 
Current assets:
 
 
 
Cash and cash equivalents
$
1,059,556

 
$
2,168

Accounts receivable – trade, net
186,052

 
216,556

Derivative instruments
1,096,224

 
1,220,230

Other current assets
101,911

 
95,593

Total current assets
2,443,743

 
1,534,547

 
 
 
 
Noncurrent assets:
 
 
 
Oil and natural gas properties (successful efforts method)
18,149,355

 
18,121,155

Less accumulated depletion and amortization
(12,393,562
)
 
(11,097,492
)
 
5,755,793

 
7,023,663

 
 
 
 
Other property and equipment
714,730

 
708,711

Less accumulated depreciation
(209,491
)
 
(195,661
)
 
505,239

 
513,050

 
 
 
 
Derivative instruments
451,843

 
566,401

Restricted cash
257,820

 
257,363

Other noncurrent assets
25,059

 
33,234

 
734,722

 
856,998

Total noncurrent assets
6,995,754

 
8,393,711

Total assets
$
9,439,497

 
$
9,928,258

 
 
 
 
LIABILITIES AND UNITHOLDERS’ DEFICIT
 
 
 
Current liabilities:
 
 
 
Accounts payable and accrued expenses
$
368,074

 
$
455,374

Derivative instruments
1,190

 
2,241

Current portion of long-term debt, net
4,593,332

 
3,714,693

Other accrued liabilities
170,517

 
119,593

Total current liabilities
5,133,113

 
4,291,901

 
 
 
 
Noncurrent liabilities:
 
 
 
Derivative instruments
474

 
857

Long-term debt, net
5,294,810

 
5,292,676

Other noncurrent liabilities
615,518

 
611,725

Total noncurrent liabilities
5,910,802

 
5,905,258

 
 
 
 
Commitments and contingencies (Note 10)


 


 
 
 
 
Unitholders’ deficit:
 
 
 
355,184,234 units and 355,017,428 units issued and outstanding at March 31, 2016, and December 31, 2015, respectively
5,355,345

 
5,343,116

Accumulated deficit
(6,959,763
)
 
(5,612,017
)
 
(1,604,418
)
 
(268,901
)
Total liabilities and unitholders’ deficit
$
9,439,497

 
$
9,928,258

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
March 31,
 
2016
 
2015
 
(in thousands, except per unit amounts)
Revenues and other:
 
 
 
Oil, natural gas and natural gas liquids sales
$
283,315

 
$
450,569

Gains on oil and natural gas derivatives
109,961

 
424,781

Marketing revenues
14,305

 
33,744

Other revenues
7,186

 
7,453

 
414,767

 
916,547

Expenses:
 
 
 
Lease operating expenses
137,645

 
173,021

Transportation expenses
54,923

 
53,540

Marketing expenses
12,288

 
28,841

General and administrative expenses
86,529

 
78,968

Exploration costs
2,693

 
396

Depreciation, depletion and amortization
164,058

 
215,014

Impairment of long-lived assets
1,153,904

 
532,617

Taxes, other than income taxes
34,067

 
54,045

(Gains) losses on sale of assets and other, net
1,077

 
(12,287
)
 
1,647,184

 
1,124,155

Other income and (expenses):
 
 
 
Interest expense, net of amounts capitalized
(105,219
)
 
(143,101
)
Gain on extinguishment of debt

 
6,635

Other, net
134

 
(2,213
)
 
(105,085
)
 
(138,679
)
Loss before income taxes
(1,337,502
)
 
(346,287
)
Income tax expense (benefit)
10,244

 
(7,127
)
Net loss
$
(1,347,746
)
 
$
(339,160
)
 
 
 
 
Net loss per unit:
 
 
 
Basic
$
(3.83
)
 
$
(1.03
)
Diluted
$
(3.83
)
 
$
(1.03
)
Weighted average units outstanding:
 
 
 
Basic
352,234

 
330,642

Diluted
352,234

 
330,642

 
 
 
 
Distributions declared per unit
$

 
$
0.313

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

2


LINN ENERGY, LLC
CONDENSED CONSOLIDATED STATEMENT OF UNITHOLDERS’ DEFICIT
(Unaudited)
 
Units
 
Unitholders’ Capital
 
Accumulated Deficit
 
Total Unitholders’ Deficit
 
(in thousands)
 
 
 
 
 
 
 
 
December 31, 2015
355,017

 
$
5,343,116

 
$
(5,612,017
)
 
$
(268,901
)
Issuance of units
167

 

 

 

Unit-based compensation expenses
 
 
12,425

 

 
12,425

Excess tax benefit from unit-based compensation and other
 
 
(196
)
 

 
(196
)
Net loss
 
 

 
(1,347,746
)
 
(1,347,746
)
March 31, 2016
355,184

 
$
5,355,345

 
$
(6,959,763
)
 
$
(1,604,418
)
The accompanying notes are an integral part of these condensed consolidated financial statements.

3


LINN ENERGY, LLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Three Months Ended
March 31,
 
2016
 
2015
 
(in thousands)
Cash flow from operating activities:
 
 
 
Net loss
$
(1,347,746
)
 
$
(339,160
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Depreciation, depletion and amortization
164,058

 
215,014

Impairment of long-lived assets
1,153,904

 
532,617

Unit-based compensation expenses
12,425

 
20,510

Gain on extinguishment of debt

 
(6,635
)
Amortization and write-off of deferred financing fees
4,858

 
6,712

(Gains) losses on sale of assets and other, net
1,916

 
(7,100
)
Deferred income taxes
9,420

 
(7,158
)
Derivatives activities:
 
 
 
Total gains
(106,593
)
 
(423,855
)
Cash settlements
343,723

 
282,082

Changes in assets and liabilities:
 
 
 
Decrease in accounts receivable – trade, net
31,113

 
135,230

Increase in other assets
(8,289
)
 
(12,399
)
Decrease in accounts payable and accrued expenses
(14,527
)
 
(29,868
)
Increase in other liabilities
46,766

 
8,713

Net cash provided by operating activities
291,028

 
374,703

 
 
 
 
Cash flow from investing activities:
 
 
 
Development of oil and natural gas properties
(81,426
)
 
(264,818
)
Purchases of other property and equipment
(9,731
)
 
(12,401
)
Proceeds from sale of properties and equipment and other
(264
)
 
27,500

Net cash used in investing activities
(91,421
)
 
(249,719
)
 
 
 
 
Cash flow from financing activities:
 
 
 
Proceeds from sale of units

 
15,900

Proceeds from borrowings
978,500

 
395,000

Repayments of debt
(100,000
)
 
(280,287
)
Distributions to unitholders

 
(104,815
)
Financing fees and offering costs
(32
)
 
(453
)
Excess tax benefit from unit-based compensation

 
(8,867
)
Other
(20,687
)
 
(94,959
)
Net cash provided by (used in) financing activities
857,781

 
(78,481
)
 
 
 
 
Net increase in cash and cash equivalents
1,057,388

 
46,503

Cash and cash equivalents:
 
 
 
Beginning
2,168

 
1,809

Ending
$
1,059,556

 
$
48,312

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 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, 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. The results reported in these unaudited condensed consolidated financial statements should not necessarily be taken as indicative of results that may be expected for the entire year.
The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated upon consolidation. Investments in noncontrolled entities over which the Company exercises significant influence are accounted for under the equity method.
The reference to “Berry” herein refers to Berry Petroleum Company, LLC, which is an indirect 100% wholly owned subsidiary of LINN Energy. The reference to “LinnCo” herein refers to LinnCo, LLC, which is an affiliate of LINN Energy.
The condensed consolidated financial statements for previous periods include certain reclassifications that were made to conform to current presentation. Such reclassifications have no impact on previously reported net income (loss), unitholders’ deficit 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 March 2016, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) that is intended to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.

5

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

Components of this ASU will be applied either prospectively, retrospectively or under a modified retrospective basis (as applicable for the respective provision) as of the date of adoption and is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company is currently evaluating the impact of the adoption of this ASU on its consolidated financial statements and related disclosures.
In February 2016, the FASB issued an ASU that is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet. This ASU will be applied retrospectively as of the date of adoption and is effective for fiscal years beginning after December 15, 2018, and interim periods within those years (early adoption permitted). The Company is currently evaluating the impact of the adoption of this ASU on its consolidated financial statements and related disclosures.
In November 2015, the FASB issued an ASU that is intended to simplify the presentation of deferred taxes by requiring that all deferred taxes be classified as noncurrent, presented as a single noncurrent amount for each tax-paying component of an entity. The ASU is effective for fiscal years beginning after December 15, 2016; however, the Company early adopted it on January 1, 2016, on a retrospective basis. The adoption of this ASU resulted in the reclassification of previously-classified net current deferred taxes of approximately $22 million from “other current assets,” as well as previously-classified net noncurrent deferred tax liabilities of approximately $11 million from “other noncurrent liabilities,” to “other noncurrent assets” resulting in net noncurrent deferred taxes of approximately $11 million on the Company’s consolidated balance sheet at December 31, 2015. There was no impact to the consolidated statements of operations.
In April 2015, the FASB issued an ASU that is intended to simplify the presentation of debt issuance costs by requiring that debt issuance costs related to a recognized debt liability be presented on the balance sheet as a direct deduction from the 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 expect the adoption of this ASU to have a material impact on its financial statements or related disclosures.
In May 2014, the FASB issued an ASU that is intended to improve and converge the financial reporting requirements for revenue from contracts with customers. This ASU will be applied either retrospectively or as a cumulative-effect adjustment as of the date of adoption and is effective for fiscal years beginning after December 15, 2017, and interim periods within those years (early adoption permitted for fiscal years beginning after December 15, 2016, including interim periods within that year). The Company is currently evaluating the impact, if any, of the adoption of this ASU on its consolidated financial statements and related disclosures.
Note 2 – Chapter 11 Proceedings, Ability to Continue as a Going Concern and Covenant Violations
Voluntary Reorganization Under Chapter 11
On May 11, 2016, the Company and certain of the Company’s direct and indirect subsidiaries (collectively with the Company, the “LINN Debtors”), LinnCo and Berry (collectively with the LINN Debtors and LinnCo, the “Debtors”), filed voluntary petitions (“Bankruptcy Petitions”) for reorganization 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 have filed a motion with the Bankruptcy Court seeking joint administration of their Chapter 11 cases.

6

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

Prior to the filing of the Bankruptcy Petitions, on May 10, 2016, the Debtors entered into a restructuring support agreement (“Restructuring Support Agreement”) with certain holders (“Consenting Creditors”) collectively holding or controlling at least 66.67% by aggregate outstanding principal amounts under (i) the Company’s Sixth Amended and Restated Credit Agreement (“LINN Credit Facility”) and (ii) Berry’s Second Amended and Restated Credit Agreement (“Berry Credit Facility”).
The Restructuring Support Agreement sets forth, subject to certain conditions, the commitment of the Debtors and the Consenting Creditors to support a comprehensive restructuring of the Debtors’ long-term debt (“Restructuring Transactions”). The Restructuring Transactions will be effectuated through one or more plans of reorganization (“Plan”) to be filed in cases commenced under Chapter 11 of the Bankruptcy Code.
The Restructuring Support Agreement provides that the Consenting Creditors will support the use of the LINN Debtors’ and Berry’s cash collateral under specified terms and conditions, including adequate protection terms. The Restructuring Support Agreement obligates the Debtors and the Consenting Creditors to, among other things, support and not interfere with consummation of the Restructuring Transactions and, as to the Consenting Creditors, vote their claims in favor of the Plan. The Restructuring Support Agreement may be terminated upon the occurrence of certain events, including the failure to meet specified milestones relating to the filing, confirmation and consummation of the Plan, among other requirements, and in the event of certain breaches by the parties under the Restructuring Support Agreement. The Restructuring Support Agreement is subject to termination if the effective date of the Plan has not occurred within 250 days of the bankruptcy filing. There can be no assurances that the Restructuring Transactions will be consummated.
Subject to certain exceptions, under the Bankruptcy Code, the filing of the 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 date of the Bankruptcy Petitions. Accordingly, although the filing of the Bankruptcy Petitions triggered defaults on the Debtors’ debt obligations, creditors are stayed from taking any actions against the Debtors as a result of such defaults, subject to certain limited exceptions permitted by the Bankruptcy Code. Absent an order of the Bankruptcy Court, substantially all of the Debtors’ pre-petition liabilities are subject to settlement under the Bankruptcy Code.
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 Court and certain other conditions. Generally, the rejection of an executory contract or unexpired lease is treated as a pre-petition 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 pre-petition 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 such 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 the Debtor in this quarterly report, including where applicable a quantification of the Company’s obligations under any such executory contract or unexpired lease with the 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.
Ability to Continue as a Going Concern
Continued low commodity prices are expected to result in significantly lower levels of cash flow from operating activities in the future 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 in April and October, 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, are expected to adversely impact upcoming redeterminations and will likely have a significant negative impact on the Company’s liquidity. The Company’s filing of the Bankruptcy Petitions described above accelerated the Company’s obligations under its Credit Facilities, its 12.00% senior secured second lien notes due December 2020 (“Second Lien Notes”) and its senior notes.

7

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

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 has undertaken a number of actions, including minimizing capital expenditures and further reducing its recurring operating expenses. The Company believes that even after taking these actions, it will 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 reorganization under Chapter 11 of the Bankruptcy Code.
Covenant Violations
As of March 31, 2016, the Company was in default under certain of its debt instruments, which have subsequently been cured or a forbearance has been received. The Company’s filing of the Bankruptcy Petitions described above constitutes 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 certain of its senior notes and 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 the 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 Berry Credit Facility. The amendments provided for, among other things, an agreement that (i) certain events (the “Specified Events”) would not become defaults or events of default until May 11, 2016, (ii) the borrowing bases would remain constant until May 11, 2016, unless reduced as a result of swap agreement terminations or collateral sales and (iii) the Company, the administrative agent and the lenders would negotiate in good faith the terms of a restructuring support agreement in furtherance of a restructuring of the capital structure of the Company and its subsidiaries. In addition, the amendment to the Berry Credit Facility provided Berry with access to $45 million in cash that was previously restricted in order to fund ordinary course operations.
Pursuant to the terms of the foregoing amendments and as a result of the execution of the Restructuring Support Agreement, in May 2016, the Company made a $350 million permanent repayment of a portion of the borrowings outstanding under the LINN Credit Facility.
Pursuant to the amendments, the Specified Events are:
The receipt of a going concern qualification or explanatory statement in the auditors’ report on the Company’s consolidated financial statements for the year ended December 31, 2015;
The receipt of a going concern qualification or explanatory statement in the auditors’ report on Berry’s financial statements for the year ended December 31, 2015;
The failure of the Company or Berry to make certain interest payments on their unsecured notes;

8

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

Any cross-defaults that may arise on account of any of the foregoing, provided that no event of default is continuing under any document giving rise to such cross default; and
Any failure to provide notice of any of the events described above.
The amendment to the Berry Credit Facility also includes the Specified Event of the failure to maintain the ratio of Adjusted EBITDAX to Interest Expense (as each term is defined in the Berry Credit Facility) (“Interest Coverage Ratio”).
As a condition to closing the amendments, in April 2016, (a) the Company made a $100 million permanent repayment of a portion of the borrowings outstanding under the LINN Credit Facility and (b) the Company and certain of its subsidiaries provided control agreements over certain deposit accounts.
The filing of the Bankruptcy Petitions constitutes 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 and is no longer in default under the Second Lien Indenture.
The settlement agreement provides that the parties will 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. If the parties are unable to reach agreement on the terms of a consensual restructuring on or before the date on which such Chapter 11 proceedings are commenced (or such later date as mutually agreed to by the parties), the parties will 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 terminates upon, among other events, (i) the expiration of 91 days after effectiveness of the settlement agreement, unless the Company has commenced Chapter 11 proceedings, or (ii) entry by the bankruptcy court of a final, non-appealable order denying the Company’s motion seeking entry of the Settlement Order.
The filing of the Bankruptcy Petitions constitutes 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 permit 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.

9

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

Furthermore, the Company decided to defer making interest payments of approximately $31 million due April 15, 2016, on LINN Energy’s 8.625% senior notes due April 2020, and interest payments due May 1, 2016, of approximately $18 million on LINN Energy’s 6.25% senior notes due November 2019 and approximately $9 million on Berry’s 6.75% senior notes due November 2020, which, as of the payment due dates, resulted in the Company being in default under these senior notes. The indentures governing each of the applicable series of notes permit the Company a 30 day grace period to make the interest payments.
The filing of the Bankruptcy Petitions constitutes 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.
Note 3 – Unitholders’ Deficit
At-the-Market Offering Program
The Company’s Board of Directors has authorized the sale of up to $500 million of units under an at-the-market offering program. Sales of units, if any, will be made under an equity distribution agreement by means of ordinary brokers’ transactions, through the facilities of the NASDAQ Global Select Market, any other national securities exchange or facility thereof, a trading facility of a national securities association or an alternate trading system, to or through a market maker or directly on or through an electronic communication network, a “dark pool” or any similar market venue, at market prices, in block transactions, or as otherwise agreed with a sales agent. The Company expects to use the net proceeds from any sale of units for general corporate purposes, which may include, among other things, capital expenditures, acquisitions and the repayment of debt.
No sales were made under the equity distribution agreement during the three months ended March 31, 2016. During the three months ended March 31, 2015, the Company, under its equity distribution agreement, sold 1,328,192 units representing limited liability company interests at an average price of $11.97 per unit for net proceeds of approximately $16 million (net of approximately $159,000 in commissions). In connection with the issuance and sale of these units, the Company also incurred professional services expenses of approximately $435,000. The Company used the net proceeds for general corporate purposes, including the open market repurchases of a portion of its senior notes (see Note 6). At March 31, 2016, units totaling approximately $455 million in aggregate offering price remained available to be sold under the agreement.
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. Distributions paid by the Company during 2015 are presented on the condensed consolidated statement of cash flows.

10

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

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:
 
March 31,
2016
 
December 31,
2015
 
(in thousands)
Proved properties:
 
 
 
Leasehold acquisition
$
13,372,330

 
$
13,361,171

Development
3,003,402

 
2,976,643

Unproved properties
1,773,623

 
1,783,341

 
18,149,355

 
18,121,155

Less accumulated depletion and amortization
(12,393,562
)
 
(11,097,492
)
 
$
5,755,793

 
$
7,023,663

Impairment of Proved Properties
The Company evaluates the impairment of its proved oil and natural gas properties on a field-by-field basis whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The carrying values of proved properties are reduced to fair value when the expected undiscounted future cash flows of proved and risk-adjusted probable and possible reserves are less than net book value. The fair values of proved properties are measured using valuation techniques consistent with the income approach, converting future cash flows to a single discounted amount. Significant inputs used to determine the fair values of proved properties include estimates of: (i) reserves; (ii) future operating and development costs; (iii) future commodity prices; and (iv) a market-based weighted average cost of capital rate. These inputs require significant judgments and estimates by the Company’s management at the time of the valuation and are the most sensitive and subject to change.
Based on the analysis described above, the Company recorded the following noncash impairment charges (before and after tax) associated with proved oil and natural gas properties:
 
Three Months Ended
March 31,
 
2016
 
2015
 
(in thousands)
 
 
 
 
California region
$
984,288

 
$
207,200

Mid-Continent region
129,703

 
5,703

Rockies region
26,677

 

Hugoton Basin region

 
277,914

TexLa region

 
33,100

South Texas region

 
8,700

 
$
1,140,668

 
$
532,617

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. 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 statements of operations.

11

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

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 three months ended March 31, 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 three months ended March 31, 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.
Note 5 – Unit-Based Compensation
The Company granted no unit-based awards during the three months ended March 31, 2016. A summary of unit-based compensation expenses included on the condensed consolidated statements of operations is presented below:
 
Three Months Ended
March 31,
 
2016
 
2015
 
(in thousands)
 
 
 
 
General and administrative expenses
$
9,460

 
$
16,633

Lease operating expenses
2,965

 
3,877

Total unit-based compensation expenses
$
12,425

 
$
20,510

Income tax benefit
$
4,591

 
$
7,579

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 March 31, 2016.

12

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

Note 6 – Debt
The following summarizes the Company’s outstanding debt:
 
March 31, 2016
 
December 31, 2015
 
(in thousands, except percentages)
 
 
 
 
LINN credit facility (1)
$
3,093,500

 
$
2,215,000

Berry credit facility (2)
873,175

 
873,175

Term loan (3)
500,000

 
500,000

6.50% senior notes due May 2019
562,234

 
562,234

6.25% senior notes due November 2019
581,402

 
581,402

8.625% senior notes due April 2020
718,596

 
718,596

6.75% Berry senior notes due November 2020
261,100

 
261,100

12.00% senior secured second lien notes due December 2020 (4)
1,000,000

 
1,000,000

Interest payable on senior secured second lien notes due December 2020 (4)
608,333

 
608,333

7.75% senior notes due February 2021
779,474

 
779,474

6.50% senior notes due September 2021
381,423

 
381,423

6.375% Berry senior notes due September 2022
572,700

 
572,700

Net unamortized discounts and premiums
(8,318
)
 
(8,694
)
Net unamortized deferred financing fees
(35,477
)
 
(37,374
)
Total debt, net
9,888,142

 
9,007,369

Less current portion, net (5)
(4,593,332
)
 
(3,714,693
)
Long-term debt, net
$
5,294,810

 
$
5,292,676

(1) 
Variable interest rates of 3.18% and 2.66% at March 31, 2016, and December 31, 2015, respectively.
(2) 
Variable interest rates of 5.25% and 3.17% at March 31, 2016, and December 31, 2015, respectively.
(3) 
Variable interest rates of 3.18% and 3.17% at March 31, 2016, and December 31, 2015, respectively.
(4) 
The issuance 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.
(5) 
Due to existing and anticipated covenant violations, the Company’s Credit Facilities and term loan were classified as current at March 31, 2016, and December 31, 2015. The current portion as of both March 31, 2016, and December 31, 2015, also includes approximately $128 million of interest payable on the Second Lien Notes due within one year.
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 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 secured 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.

13

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

 
March 31, 2016
 
December 31, 2015
 
Carrying Value
 
Fair Value
 
Carrying Value
 
Fair Value
 
(in thousands)
 
 
 
 
 
 
 
 
Senior secured second lien notes
$
1,000,000

 
$
140,000

 
$
1,000,000

 
$
501,250

Senior notes, net
3,814,810

 
501,073

 
3,812,676

 
662,179

Credit Facilities
LINN Credit Facility
The Company’s Sixth Amended and Restated Credit Agreement (“LINN Credit Facility”) provides for (1) a senior secured revolving credit facility and (2) a $500 million senior secured term loan, in aggregate subject to the then-effective borrowing base. Borrowing capacity under the revolving credit facility is limited to the lesser of: (i) the then-effective borrowing base reduced by the $500 million term loan and (ii) the maximum commitment amount of $4.0 billion, and was $3.1 billion as of March 31, 2016. The maturity date is April 2019, subject to a “springing maturity” based on the maturity of any outstanding LINN Energy junior lien debt. At March 31, 2016, the borrowing base under the LINN Credit Facility was $3.6 billion and there was no remaining availability.
In April 2016, the Company entered into an amendment to the LINN Credit Facility to provide for, among other things, an agreement that (i) certain Specified Events would not become defaults or events of default until May 11, 2016, (ii) the borrowing base 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.
Pursuant to the terms of the foregoing amendments and as a result of the execution of the Restructuring Support Agreement, in May 2016, the Company made a $350 million permanent repayment of a portion of the borrowings outstanding under the LINN Credit Facility.
Pursuant to the amendment, the Specified Events are:
The receipt of a going concern qualification or explanatory statement in the auditors’ report on the Company’s consolidated financial statements for the year ended December 31, 2015;
The receipt of a going concern qualification or explanatory statement in the auditors’ report on Berry’s financial statements for the year ended December 31, 2015;
The failure of the Company or Berry to make certain interest payments on their unsecured notes;
Any cross-defaults that may arise on account of any of the foregoing, provided that no event of default is continuing under any document giving rise to such cross default; and
Any failure to provide notice of any of the events described above.
As a condition to closing the amendment, 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.
Redetermination of the borrowing base under the LINN Credit Facility, based primarily on reserve reports using lender commodity price expectations at such time, occurs semi-annually, in April and October. The lenders under the LINN Credit Facility agreed to defer the April 2016 borrowing base redetermination to May 11, 2016.

14

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

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: 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 requirement 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 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 Facility is determined by reference to either the London Interbank Offered Rate (“LIBOR”) plus an applicable margin between 1.75% and 2.75% 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 0.75% and 1.75% 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 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% on the average daily unused amount of the maximum commitment amount of the lenders.
The $500 million 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 the LIBOR plus a margin of 2.75% per annum or the ABR plus a margin of 1.75% 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 the 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 its most recent reserve report, or 2) a Term Loan Collateral Coverage Ratio of at least 2.5 to 1.0. 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”) had a borrowing base of $900 million, subject to lender commitments, as of March 31, 2016. The maturity date is April 2019. At March 31, 2016, lender commitments under the facility were also $900 million but there was less than $1 million of available borrowing capacity, including outstanding letters of credit.
In April 2016, Berry entered into an amendment to the Berry Credit Facility to provide for, among other things, an agreement that (i) certain Specified Events would not become defaults or events of default until May 11, 2016, (ii) the borrowing base would remain constant until May 11, 2016, unless reduced as a result of swap agreement terminations or collateral sales, (iii) Berry would have access to $45 million in cash that is currently restricted in order to fund ordinary course operations and (iv) Berry, the Berry administrative agent and the Berry lenders would negotiate in good faith the terms of a restructuring support agreement in furtherance of a restructuring of the capital structure of Berry.
Pursuant to the amendment, the Berry Specified Events are:
The receipt of a going concern qualification or explanatory statement in the auditors’ report on Berry’s financial statements for the year ended December 31, 2015;
The receipt of a going concern qualification or explanatory statement in the auditors’ report on the Company’s consolidated financial statements for the year ended December 31, 2015;
The failure of Berry or the Company to make certain interest payments on their unsecured notes;

15

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

The failure to maintain the Interest Coverage Ratio;
Any cross-defaults that may arise on account of any of the foregoing, provided that no event of default is continuing under any document giving rise to such cross default; and
Any failure to provide notice of any of the events described above.
As a condition to closing the amendment, Berry provided control agreements over certain deposit accounts.
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, in April and October. 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 above, the lenders have agreed that the failure to maintain the EBITDAX to Interest Expense ratio would not be 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 quarterly 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 0.5% 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 constitutes 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.
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. As a result, the Company’s reported interest expense will be significantly less than the contractual interest payments throughout the term of the Second Lien Notes. There were no interest payments made on the Second Lien Notes for the three months ended March 31, 2016.
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”), pursuant to the terms of the exchange agreements. Under the Registration Rights Agreements, the Company agreed to use its reasonable efforts to file with the U.S. Securities and Exchange Commission 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 after the notes were issued. 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 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 after the notes were issued. If the

16

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

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 three months ended March 31, 2016. During the three months ended March 31, 2015, the Company repurchased on the open market approximately $79 million of its 8.625% senior notes due April 2020. In connection with the repurchases, the Company paid approximately $70 million and recorded a gain on extinguishment of debt of approximately $7 million for the three months ended March 31, 2015.
Notes Covenants
The Second Lien Indenture contains covenants that, among other things, 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. To the extent that Berry generates cash in excess of its needs and determines to distribute such amounts to LINN Energy, the indentures governing Berry’s senior notes limit the amount it may distribute to LINN Energy to the amount available under a “restricted payments basket,” and Berry may not distribute any such amounts unless it is permitted by the indentures to incur additional debt pursuant to the consolidated coverage ratio test set forth in the Berry indentures. Berry’s restricted payments basket may be increased in accordance with the terms of the Berry indentures by, among other things, 50% of Berry’s future net income, reductions in its indebtedness and restricted investments, and future capital contributions.
The filing of the Bankruptcy Petitions constitutes 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.
Covenant Violations
As of March 31, 2016, the Company was in default under certain of its debt instruments, which have subsequently been cured or a forbearance has been received. The Company’s filing of the Bankruptcy Petitions described in Note 2 constitutes 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 certain of its senior notes and the receipt of a going concern explanatory paragraph from the Company’s independent registered

17

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

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.
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. 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 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 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 periods indicated as of March 31, 2016:
 
April 1 - December 31, 2016
 
2017
 
2018
Natural gas positions:
 
 
 
 
 
Fixed price swaps (NYMEX Henry Hub):
 
 
 
 
 
Hedged volume (MMMBtu)
91,548

 
120,122

 
36,500

Average price ($/MMBtu)
$
4.20

 
$
4.26

 
$
5.00

Put options (NYMEX Henry Hub):
 
 
 
 
 
Hedged volume (MMMBtu)
57,306

 
66,886

 

Average price ($/MMBtu)
$
5.00

 
$
4.88

 
$

Oil positions:
 
 
 
 
 
Fixed price swaps (NYMEX WTI): (1)
 
 
 
 
 
Hedged volume (MBbls)
8,614

 
4,755

 

Average price ($/Bbl)
$
90.56

 
$
89.02

 
$

Put options (NYMEX WTI):
 
 
 
 
 
Hedged volume (MBbls)
2,457

 
384

 

Average price ($/Bbl)
$
90.00

 
$
90.00

 
$

Natural gas basis differential positions: (2)
 
 
 
 
 
Panhandle basis swaps: (3)
 
 
 
 
 
Hedged volume (MMMBtu)
45,049

 
59,138

 
16,425

Hedged differential ($/MMBtu)
$
(0.32
)
 
$
(0.33
)
 
$
(0.33
)

18

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

 
April 1 - December 31, 2016
 
2017
 
2018
NWPL Rockies basis swaps: (3)
 
 
 
 
 
Hedged volume (MMMBtu)
50,143

 
38,880

 
10,804

Hedged differential ($/MMBtu)
$
(0.24
)
 
$
(0.19
)
 
$
(0.19
)
MichCon basis swaps: (3)
 
 
 
 
 
Hedged volume (MMMBtu)
5,830

 
7,437

 
2,044

Hedged differential ($/MMBtu)
$
0.05

 
$
0.05

 
$
0.05

Houston Ship Channel basis swaps: (3)
 
 
 
 
 
Hedged volume (MMMBtu)
26,128

 
36,730

 
986

Hedged differential ($/MMBtu)
$
(0.02
)
 
$
(0.02
)
 
$
(0.08
)
Permian basis swaps: (3)
 
 
 
 
 
Hedged volume (MMMBtu)
2,274

 
2,629

 
1,314

Hedged differential ($/MMBtu)
$
(0.20
)
 
$
(0.20
)
 
$
(0.20
)
SoCal basis swaps: (4)
 
 
 
 
 
Hedged volume (MMMBtu)
24,750

 

 

Hedged differential ($/MMBtu)
$
(0.03
)
 
$

 
$

Oil timing differential positions:
 
 
 
 
 
Trade month roll swaps (NYMEX WTI): (5)
 
 
 
 
 
Hedged volume (MBbls)
1,992

 
2,654

 

Hedged differential ($/Bbl)
$
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 the year ending December 31, 2018, and $90.00 per Bbl for the year ending December 31, 2019, at counterparty election on a designated date in each respective preceding year. The extension for each year is exercisable without respect to the other year.
(2) 
Settle on the respective pricing index to hedge basis differential to the NYMEX Henry Hub natural gas price.
(3) 
For positions which hedge exposure to differentials in producing areas, the Company receives the NYMEX Henry Hub natural gas price plus the respective spread and pays the specified index price. Cash settlements are made on a net basis.
(4) 
For positions which hedge exposure to differentials in consuming areas, the Company pays the NYMEX Henry Hub natural gas price plus the respective spread and receives the specified index price. Cash settlements are made on a net basis.
(5) 
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”).
The Company did not enter into any commodity derivative contracts during the three months ended March 31, 2016. During the three months ended March 31, 2015, the Company entered into commodity derivative contracts consisting of natural gas basis swaps for May 2015 through December 2017 to hedge exposure to differentials in certain producing areas and oil swaps for April 2015 through December 2015. In addition, the Company entered into natural gas basis swaps for May 2015 through December 2016 to hedge exposure to the differential in California, where it consumes natural gas in its heavy oil development operations.
Settled derivatives on natural gas production for the three months ended March 31, 2016, included volumes of 49,257 MMMBtu at an average contract price of $4.51 per MMBtu. Settled derivatives on oil production for the three months ended March 31, 2016, included volumes of 3,664 MBbls at an average contract price of $90.44 per Bbl. Settled derivatives on natural gas production for the three months ended March 31, 2015, included volumes of 46,823 MMMBtu at an average contract price of $5.12 per MMBtu. Settled derivatives on oil production for the three months ended March 31, 2015, included volumes of 3,975 MBbls at an average contract price of $94.29 per Bbl.

19

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

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 summarizes the fair value of derivatives outstanding on a gross basis:
 
March 31, 2016
 
December 31,
2015
 
(in thousands)
Assets:
 
 
 
Commodity derivatives
$
1,569,054

 
$
1,812,375

Liabilities:
 
 
 
Commodity derivatives
$
22,651

 
$
28,842

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 $1.6 billion at March 31, 2016. 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
A summary of gains and losses on derivatives included on the condensed consolidated statements of operations is presented below:
 
Three Months Ended
March 31,
 
2016
 
2015
 
(in thousands)
 
 
 
 
Gains on oil and natural gas derivatives
$
109,961

 
$
424,781

Lease operating expenses (1)
(3,368
)
 
(926
)
Total gains on oil and natural gas derivatives
$
106,593

 
$
423,855

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

20

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

For the three months ended March 31, 2016, and March 31, 2015, the Company received net cash settlements of approximately $344 million and $282 million, respectively.
Commodity Derivatives – Subsequent Event
In April 2016 and May 2016, in connection with the Company’s restructuring efforts, the Company canceled (prior to the contract settlement dates) all of its derivative contracts (with the exception of Berry’s current remaining 26,108 MMMBtu of natural gas basis swaps for 2016) for net cash proceeds of approximately $1.2 billion. All net cash proceeds received were used to make permanent repayments of a portion of the borrowings outstanding under the LINN Credit Facility. Berry’s derivative contracts may be terminated unilaterally by the counterparty as a result of the bankruptcy filing or, if not automatically terminated, Berry may elect to monetize or terminate its derivative contracts.
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, 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, based on the priority of inputs to the valuation technique, into a three-level fair value hierarchy. 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:
 
March 31, 2016
 
Level 2
 
Netting (1)
 
Total
 
(in thousands)
Assets:
 
 
 
 
 
Commodity derivatives
$
1,569,054

 
$
(20,987
)
 
$
1,548,067

Liabilities:
 
 
 
 
 
Commodity derivatives
$
22,651

 
$
(20,987
)
 
$
1,664

 
December 31, 2015
 
Level 2
 
Netting (1)
 
Total
 
(in thousands)
Assets:
 
 
 
 
 
Commodity derivatives
$
1,812,375

 
$
(25,744
)
 
$
1,786,631

Liabilities:
 
 
 
 
 
Commodity derivatives
$
28,842

 
$
(25,744
)
 
$
3,098

(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

21

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

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 (2% for the three months ended March 31, 2016); and (iv) a credit-adjusted risk-free interest rate (average of 5.9% for the three months ended March 31, 2016). 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 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 drilling
307

Current year accretion expense
7,641

Settlements
(2,756
)
Asset retirement obligations at March 31, 2016
$
528,733


Note 10 – Commitments and Contingencies
For a certain statewide class action royalty payment dispute where a reserve has not yet been established, the court denied plaintiffs’ motion for class certification, which the plaintiffs subsequently appealed. The Company has denied that it has any liability on the claims and has raised arguments and defenses that, if accepted by the courts, will result in no loss to the Company. In another statewide class action royalty payment dispute where a reserve has not yet been established, the parties have stayed the dispute pending resolution of royalty disputes between other parties. 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.
During the three months ended March 31, 2016, and March 31, 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. 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 of the Chapter 11 proceedings automatically stayed certain actions against the Company, including actions to collect pre-petition liabilities or to exercise control over the property of the Company’s bankruptcy estates, and 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 Restructuring Support Agreement. The Plan in the Chapter 11 proceedings, if confirmed, will provide for the treatment of claims against the Company’s bankruptcy estates, including pre-petition liabilities that have not otherwise been satisfied or addressed during the Chapter 11 proceedings. See Note 2 for additional information.
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.

22

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 loss:
 
Three Months Ended
March 31,
 
2016
 
2015
 
(in thousands, except
per unit data)
 
 
 
 
Net loss
$
(1,347,746
)
 
$
(339,160
)
Allocated to participating securities

 
(1,781
)
 
$
(1,347,746
)
 
$
(340,941
)
 
 
 
 
Basic net loss per unit
$
(3.83
)
 
$
(1.03
)
Diluted net loss per unit
$
(3.83
)
 
$
(1.03
)
 
 
 
 
Basic weighted average units outstanding
352,234

 
330,642

Dilutive effect of unit equivalents

 

Diluted weighted average units outstanding
352,234

 
330,642

Basic units outstanding excludes the effect of weighted average anti-dilutive unit equivalents related to approximately 1 million and 5 million unit options and warrants for the three months ended March 31, 2016, and March 31, 2015, respectively. All equivalent units were antidilutive for both the three months ended March 31, 2016, and March 31, 2015.
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 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 Statements of Cash Flows
Supplemental disclosures to the condensed consolidated statements of cash flows are presented below:
 
Three Months Ended
March 31,
 
2016
 
2015
 
(in thousands)
 
 
 
 
Cash payments for interest, net of amounts capitalized
$
30,135

 
$
98,541

Cash payments for income taxes
$
1,228

 
$
57

 
 
 
 
Noncash investing activities:
 
 
 
Accrued capital expenditures
$
31,348

 
$
161,247


23

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

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 March 31, 2016, and December 31, 2015, “restricted cash” on the condensed consolidated balance sheets includes $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. Restricted cash also includes approximately $7 million at both March 31, 2016, and December 31, 2015, of cash deposited by the Company into a separate account designated for asset retirement obligations in accordance with contractual agreements.
At December 31, 2015, net outstanding checks of approximately $21 million were reclassified and included in “accounts payable and accrued expenses” on the condensed consolidated balance sheets. At March 31, 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 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 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 are held by the public. As of March 31, 2016, LinnCo had no significant assets or operations other than those related to its interest in LINN Energy and owned approximately 36% of LINN Energy’s outstanding units.
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. In April 2016, LinnCo extended the offer to April 25, 2016. The offer expired on April 25, 2016, and on April 26, 2016, LinnCo commenced a subsequent offering period that will expire on May 23, 2016, unless extended. During April 2016, 104,719,468 LINN Energy units were exchanged for an equal number of LinnCo shares. As a result of the exchange of LINN Energy units for LinnCo shares, LinnCo’s ownership of LINN Energy’s outstanding units increased from approximately 36% to approximately 66% as of April 30, 2016.
LINN Energy has 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 has 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 Energy on LinnCo’s behalf are expensed by LINN Energy.
For the three months ended March 31, 2016, LinnCo incurred total general and administrative expenses and certain offering costs of approximately $1.7 million, of which approximately $918,000 had been paid by LINN Energy on LinnCo’s behalf as of March 31, 2016. The expenses for the three months ended March 31, 2016, include approximately $603,000 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.
For the three months ended March 31, 2015, LinnCo incurred total general and administrative expenses and certain offering costs of approximately $1.4 million, of which approximately $1.1 million had been paid by LINN Energy on LinnCo’s behalf as of March 31, 2015. The expenses for the three months ended March 31, 2015, include approximately $491,000 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.

24

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

The Company did not pay any distributions to LinnCo during the three months ended March 31, 2016. During the three months ended March 31, 2015, the Company paid approximately $40 million 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 ended March 31, 2016, and March 31, 2015, the Company incurred expenditures of approximately $2 million and $3 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.

25

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

CONDENSED CONSOLIDATING BALANCE SHEETS
March 31, 2016
 
Linn Energy, LLC
 
Guarantor Subsidiaries
 
Non-
Guarantor Subsidiary
 
Eliminations
 
Consolidated
 
(in thousands)
ASSETS
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
917,814

 
$
134,408

 
$
7,334

 
$

 
$
1,059,556

Accounts receivable – trade, net

 
145,297

 
40,755

 

 
186,052

Accounts receivable – affiliates
2,885,185

 
50,518

 

 
(2,935,703
)
 

Derivative instruments

 
1,095,929

 
295

 

 
1,096,224

Other current assets
23,159

 
59,170

 
19,582

 

 
101,911

Total current assets
3,826,158

 
1,485,322

 
67,966

 
(2,935,703
)
 
2,443,743

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

 
13,129,776

 
5,019,579

 

 
18,149,355

Less accumulated depletion and amortization

 
(9,776,724
)
 
(2,682,011
)
 
65,173

 
(12,393,562
)
 

 
3,353,052

 
2,337,568

 
65,173

 
5,755,793

 
 
 
 
 
 
 
 
 
 
Other property and equipment

 
600,783

 
113,947

 

 
714,730

Less accumulated depreciation

 
(194,874
)
 
(14,617
)
 

 
(209,491
)
 

 
405,909

 
99,330

 

 
505,239

 
 
 
 
 
 
 
 
 
 
Derivative instruments

 
451,843

 

 

 
451,843

Restricted cash

 
7,208

 
250,612

 

 
257,820

Notes receivable – affiliates
162,700

 

 

 
(162,700
)
 

Investments in consolidated subsidiaries
2,675,208

 

 

 
(2,675,208
)
 

Other noncurrent assets

 
8,223

 
16,836

 

 
25,059

 
2,837,908

 
467,274

 
267,448

 
(2,837,908
)
 
734,722

Total noncurrent assets
2,837,908

 
4,226,235

 
2,704,346

 
(2,772,735
)
 
6,995,754

Total assets
$
6,664,066

 
$
5,711,557

 
$
2,772,312

 
$
(5,708,438
)
 
$
9,439,497

 
 
 
 
 
 
 
 
 
 
LIABILITIES AND UNITHOLDERS’ CAPITAL (DEFICIT)
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable and accrued expenses
$

 
$
269,911

 
$
98,163

 
$

 
$
368,074

Accounts payable – affiliates

 
2,885,185

 
50,518

 
(2,935,703
)
 

Derivative instruments

 

 
1,190

 

 
1,190

Current portion of long-term debt, net
3,720,157

 

 
873,175

 

 
4,593,332

Other accrued liabilities
107,536

 
32,985

 
29,996

 

 
170,517

Total current liabilities
3,827,693

 
3,188,081

 
1,053,042

 
(2,935,703
)
 
5,133,113

 
 
 
 
 
 
 
 
 
 
Noncurrent liabilities:
 

 
 

 
 

 
 

 
 

Derivative instruments

 
474

 

 

 
474

Long-term debt, net
4,449,883

 

 
844,927

 

 
5,294,810

Notes payable – affiliates

 
162,700

 

 
(162,700
)
 

Other noncurrent liabilities

 
402,515

 
213,003

 

 
615,518

Total noncurrent liabilities
4,449,883

 
565,689

 
1,057,930

 
(162,700
)
 
5,910,802

 
 
 
 
 
 
 
 
 
 
Unitholders’ capital (deficit):
 
 
 
 
 
 
 
 
 
Units issued and outstanding
5,346,253

 
4,831,568

 
2,798,713

 
(7,621,189
)
 
5,355,345

Accumulated deficit
(6,959,763
)
 
(2,873,781
)
 
(2,137,373
)
 
5,011,154

 
(6,959,763
)
 
(1,613,510
)
 
1,957,787

 
661,340

 
(2,610,035
)
 
(1,604,418
)
Total liabilities and unitholders’ capital (deficit)
$
6,664,066

 
$
5,711,557

 
$
2,772,312

 
$
(5,708,438
)
 
$
9,439,497


26

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

CONDENSED CONSOLIDATING BALANCE SHEETS
December 31, 2015
 
Linn Energy, LLC
 
Guarantor Subsidiaries
 
Non-
Guarantor Subsidiary
 
Eliminations
 
Consolidated
 
(in thousands)
ASSETS
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
1,073

 
$
72

 
$
1,023

 
$

 
$
2,168

Accounts receivable – trade, net

 
170,503

 
46,053

 

 
216,556

Accounts receivable – affiliates
2,920,082

 
8,621

 

 
(2,928,703
)
 

Derivative instruments

 
1,207,012

 
13,218

 

 
1,220,230

Other current assets
25,090

 
49,606

 
20,897

 

 
95,593

Total current assets
2,946,245

 
1,435,814

 
81,191

 
(2,928,703
)
 
1,534,547

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

 
13,110,094

 
5,011,061

 

 
18,121,155

Less accumulated depletion and amortization

 
(9,557,283
)
 
(1,596,165
)
 
55,956

 
(11,097,492
)
 

 
3,552,811

 
3,414,896

 
55,956

 
7,023,663

 
 
 
 
 
 
 
 
 
 
Other property and equipment

 
597,216

 
111,495

 

 
708,711

Less accumulated depreciation

 
(183,139
)
 
(12,522
)
 

 
(195,661
)
 

 
414,077

 
98,973

 

 
513,050

 
 
 
 
 
 
 
 
 
 
Derivative instruments

 
566,401

 

 

 
566,401

Restricted cash

 
7,004

 
250,359

 

 
257,363

Notes receivable – affiliates
175,100

 

 

 
(175,100
)
 

Investments in consolidated subsidiaries
3,940,444

 

 

 
(3,940,444
)
 

Other noncurrent assets

 
17,178

 
16,057

 
(1
)
 
33,234

 
4,115,544

 
590,583

 
266,416

 
(4,115,545
)
 
856,998

Total noncurrent assets
4,115,544

 
4,557,471

 
3,780,285

 
(4,059,589
)
 
8,393,711

Total assets
$
7,061,789

 
$
5,993,285

 
$
3,861,476

 
$
(6,988,292
)
 
$
9,928,258

 
 
 
 
 
 
 
 
 
 
LIABILITIES AND UNITHOLDERS’ CAPITAL (DEFICIT)
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable and accrued expenses
$
1,285

 
$
336,962

 
$
117,127

 
$

 
$
455,374

Accounts payable – affiliates

 
2,920,082

 
8,621

 
(2,928,703
)
 

Derivative instruments

 

 
2,241

 

 
2,241

Current portion of long-term debt, net
2,841,518

 

 
873,175

 

 
3,714,693

Other accrued liabilities
49,861

 
52,997

 
16,735

 

 
119,593

Total current liabilities
2,892,664

 
3,310,041

 
1,017,899

 
(2,928,703
)
 
4,291,901

 
 
 
 
 
 
 
 
 
 
Noncurrent liabilities:
 

 
 

 
 

 
 

 
 

Derivative instruments

 
857

 

 

 
857

Long-term debt, net
4,447,308

 

 
845,368

 

 
5,292,676

Notes payable – affiliates

 
175,100

 

 
(175,100
)
 

Other noncurrent liabilities

 
399,676

 
212,050

 
(1
)
 
611,725

Total noncurrent liabilities
4,447,308

 
575,633

 
1,057,418

 
(175,101
)
 
5,905,258

 
 
 
 
 
 
 
 
 
 
Unitholders’ capital (deficit):
 
 
 
 
 
 
 
 
 
Units issued and outstanding
5,333,834

 
4,831,758

 
2,798,713

 
(7,621,189
)
 
5,343,116

Accumulated deficit
(5,612,017
)
 
(2,724,147
)
 
(1,012,554
)
 
3,736,701

 
(5,612,017
)
 
(278,183
)
 
2,107,611

 
1,786,159

 
(3,884,488
)
 
(268,901
)
Total liabilities and unitholders’ capital (deficit)
$
7,061,789

 
$
5,993,285

 
$
3,861,476

 
$
(6,988,292
)
 
$
9,928,258


27

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

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2016
 
Linn Energy, LLC
 
Guarantor Subsidiaries
 
Non-
Guarantor Subsidiary
 
Eliminations
 
Consolidated
 
(in thousands)
Revenues and other:
 
 
 
 
 
 
 
 
 
Oil, natural gas and natural gas liquids sales
$

 
$
199,849

 
$
83,466

 
$

 
$
283,315

Gains on oil and natural gas derivatives

 
109,453

 
508

 

 
109,961

Marketing revenues

 
9,061

 
5,244

 

 
14,305

Other revenues

 
5,138

 
2,048

 

 
7,186

 

 
323,501

 
91,266

 

 
414,767

Expenses:
 
 
 
 
 
 
 
 
 
Lease operating expenses

 
87,552

 
50,093

 

 
137,645

Transportation expenses

 
41,994

 
12,929

 

 
54,923

Marketing expenses

 
7,833

 
4,455

 

 
12,288

General and administrative expenses

 
61,357

 
25,172

 

 
86,529

Exploration costs

 
2,693

 

 

 
2,693

Depreciation, depletion and amortization

 
108,045

 
58,843

 
(2,830
)
 
164,058

Impairment of long-lived assets

 
129,703

 
1,030,588

 
(6,387
)
 
1,153,904

Taxes, other than income taxes
2

 
19,752

 
14,313

 

 
34,067

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

 
1,269

 
(192
)
 

 
1,077

 
2

 
460,198

 
1,196,201

 
(9,217
)
 
1,647,184

Other income and (expenses):
 
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