Document
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2018
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
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12398022&doc=20
LINN ENERGY, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
83-1207960
(I.R.S. Employer
Identification No.)
600 Travis
Houston, Texas
(Address of principal executive offices)
77002
(Zip Code)
(281) 840-4000
(Registrant’s telephone number, including area code)
 
Linn Energy, Inc.
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ¨    No  x
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
¨
Accelerated filer
¨
Non-accelerated filer
x
(Do not check if a smaller reporting company)
 
 
 
Smaller reporting company
¨
 
 
Emerging growth company
¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes  x    No  ¨
As of July 31, 2018, there were 78,449,265 shares of Class A common stock, par value $0.001 per share, outstanding.
 



TABLE OF CONTENTS
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

i

Table of Contents

GLOSSARY OF TERMS
As commonly used in the oil and natural gas industry and as used in this Quarterly Report on Form 10-Q, the following terms have the following meanings:
Bbl. One stock tank barrel or 42 United States gallons liquid volume.
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.

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Table of Contents

PART I – FINANCIAL INFORMATION
Item 1.
Financial Statements
LINN ENERGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
June 30,
2018
 
December 31,
2017
 
(in thousands, except share amounts)
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
301,365

 
$
464,508

Accounts receivable – trade, net
64,686

 
140,485

Derivative instruments
3,934

 
9,629

Restricted cash
43,387

 
56,445

Other current assets
46,659

 
79,771

Assets held for sale
22

 
106,963

Total current assets
460,053

 
857,801

 
 
 
 
Noncurrent assets:
 
 
 
Oil and natural gas properties (successful efforts method)
785,815

 
950,083

Less accumulated depletion and amortization
(59,870
)
 
(49,619
)
 
725,945

 
900,464

 
 
 
 
Other property and equipment
566,861

 
480,729

Less accumulated depreciation
(44,412
)
 
(28,658
)
 
522,449

 
452,071

 
 
 
 
Derivative instruments
1,254

 
469

Deferred income taxes
169,691

 
198,417

Equity method investments
473,269

 
464,926

Other noncurrent assets
5,264

 
6,975

 
649,478

 
670,787

Total noncurrent assets
1,897,872

 
2,023,322

Total assets
$
2,357,925

 
$
2,881,123

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable and accrued expenses
$
179,887

 
$
253,975

Share-based payment liability
111,792

 

Derivative instruments
5,536

 
10,103

Other accrued liabilities
19,830

 
58,617

Liabilities held for sale

 
43,302

Total current liabilities
317,045

 
365,997

 
 
 
 
Noncurrent liabilities:
 
 
 
Derivative instruments
24

 
2,849

Asset retirement obligations and other noncurrent liabilities
105,531

 
160,720

Total noncurrent liabilities
105,555

 
163,569


1

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


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


 


 
 
 
 
Equity:
 
 
 
Preferred stock ($0.001 par value, 30,000,000 shares authorized; no shares issued at June 30, 2018, or December 31, 2017)

 

Class A common stock ($0.001 par value, 270,000,000 shares authorized; 78,749,510 shares and 83,582,176 shares issued at June 30, 2018, and December 31, 2017, respectively)
79

 
84

Additional paid-in capital
1,427,458

 
1,899,642

Retained earnings
507,788

 
432,860

Total common stockholders’ equity
1,935,325

 
2,332,586

Noncontrolling interests

 
18,971

Total equity
1,935,325

 
2,351,557

Total liabilities and equity
$
2,357,925

 
$
2,881,123

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

2

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

 
Successor
 
Three Months Ended June 30,
 
2018
 
2017
 
(in thousands, except per share amounts)
Revenues and other:
 
 
 
Oil, natural gas and natural gas liquids sales
$
87,004

 
$
243,167

Gains (losses) on oil and natural gas derivatives
(7,525
)
 
45,714

Marketing revenues
42,967

 
12,547

Other revenues
6,387

 
6,391

 
128,833

 
307,819

Expenses:
 
 
 
Lease operating expenses
24,088

 
71,057

Transportation expenses
21,213

 
37,388

Marketing expenses
40,327

 
6,976

General and administrative expenses
92,395

 
34,458

Exploration costs
53

 
811

Depreciation, depletion and amortization
21,980

 
51,987

Taxes, other than income taxes
7,297

 
17,871

Gains on sale of assets and other, net
(101,777
)
 
(306,878
)
 
105,576

 
(86,330
)
Other income and (expenses):
 
 
 
Interest expense, net of amounts capitalized
(584
)
 
(7,551
)
Earnings (losses) from equity method investments
(9,327
)
 
91

Other, net
538

 
(1,163
)
 
(9,373
)
 
(8,623
)
Reorganization items, net
(1,259
)
 
(3,377
)
Income from continuing operations before income taxes
12,625

 
382,149

Income tax expense
5,722

 
158,770

Income from continuing operations
6,903

 
223,379

Loss from discontinued operations, net of income taxes

 
(3,322
)
Net income
6,903

 
220,057

Net income attributable to noncontrolling interests
1,799

 

Net income attributable to common stockholders
$
5,104

 
$
220,057

 
 
 
 
Income (loss) per share attributable to common stockholders:
 
 
 
Income from continuing operations per share – Basic
$
0.06

 
$
2.49

Income from continuing operations per share – Diluted
$
0.06

 
$
2.47

 
 
 
 
Loss from discontinued operations per share – Basic
$

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

 
$
(0.04
)
 
 
 
 
Net income per share – Basic
$
0.06

 
$
2.45

Net income per share – Diluted
$
0.06

 
$
2.43

 
 
 
 
Weighted average shares outstanding – Basic
78,718

 
89,849

Weighted average shares outstanding – Diluted
79,277

 
90,484

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

3

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

 
Successor
 
 
Predecessor
 
Six Months Ended June 30, 2018
 
Four Months Ended June 30, 2017
 
 
Two Months Ended February 28, 2017
(in thousands, except per share and per unit amounts)
 
 
 
 
 
 
Revenues and other:
 
 
 
 
 
 
Oil, natural gas and natural gas liquids sales
$
223,880

 
$
323,492

 
 
$
188,885

Gains (losses) on oil and natural gas derivatives
(22,555
)
 
33,755

 
 
92,691

Marketing revenues
89,234

 
15,461

 
 
6,636

Other revenues
12,281

 
8,419

 
 
9,915

 
302,840

 
381,127

 
 
298,127

Expenses:
 
 
 
 
 
 
Lease operating expenses
71,972

 
95,687

 
 
49,665

Transportation expenses
40,307

 
51,111

 
 
25,972

Marketing expenses
82,082

 
9,515

 
 
4,820

General and administrative expenses
137,174

 
44,869

 
 
71,745

Exploration costs
1,255

 
866

 
 
93

Depreciation, depletion and amortization
50,445

 
71,901

 
 
47,155

Taxes, other than income taxes
15,749

 
24,948

 
 
14,877

(Gains) losses on sale of assets and other, net
(207,852
)
 
(306,394
)
 
 
829

 
191,132

 
(7,497
)
 
 
215,156

Other income and (expenses):
 
 
 
 
 
 
Interest expense, net of amounts capitalized
(988
)
 
(11,751
)
 
 
(16,725
)
Earnings from equity method investments
16,018

 
130

 
 
157

Other, net
369

 
(1,551
)
 
 
(149
)
 
15,399

 
(13,172
)
 
 
(16,717
)
Reorganization items, net
(3,210
)
 
(5,942
)
 
 
2,331,189

Income from continuing operations before income taxes
123,897

 
369,510

 
 
2,397,443

Income tax expense (benefit)
45,896

 
153,455

 
 
(166
)
Income from continuing operations
78,001

 
216,055

 
 
2,397,609

Loss from discontinued operations, net of income taxes

 
(3,254
)
 
 
(548
)
Net income
78,001

 
212,801

 
 
2,397,061

Net income attributable to noncontrolling interests
3,073

 

 
 

Net income attributable to common stockholders/unitholders
$
74,928

 
$
212,801

 
 
$
2,397,061

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

 
$
2.41

 
 
$
6.80

Income from continuing operations per share/unit – Diluted
$
0.93

 
$
2.40

 
 
$
6.80

 
 
 
 
 
 
 
Loss from discontinued operations per share/unit – Basic
$

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

 
$
(0.04
)
 
 
$
(0.01
)
 
 
 
 
 
 
 
Net income per share/unit – Basic
$
0.95

 
$
2.37

 
 
$
6.79

Net income per share/unit – Diluted
$
0.93

 
$
2.36

 
 
$
6.79

 
 
 
 
 
 
 
Weighted average shares/units outstanding – Basic
78,817

 
89,849

 
 
352,792

Weighted average shares/units outstanding – Diluted
79,764

 
90,065

 
 
352,792

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

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Table of Contents

LINN ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENT OF EQUITY
(Unaudited)
 
Class A Common Stock
 
Additional Paid-in Capital
 
Retained Earnings
 
Total Common Stockholders’ Equity
 
Noncontrolling Interests
 
Total Equity
 
Shares
 
Amount
 
 
 
 
 
(in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2017
83,582

 
$
84

 
$
1,899,642

 
$
432,860

 
$
2,332,586

 
$
18,971

 
$
2,351,557

Net income
 
 

 

 
74,928

 
74,928

 
3,073

 
78,001

Issuances of successor Class A common stock
811

 

 

 

 

 

 

Repurchases of successor Class A common stock
(8,429
)
 
(8
)
 
(394,407
)
 

 
(394,415
)
 

 
(394,415
)
Settlement of equity classified RSUs
 
 

 
(58,162
)
 

 
(58,162
)
 

 
(58,162
)
Share-based compensation expenses
 
 

 
25,132

 

 
25,132

 

 
25,132

Equity awards modified to liabilities
 
 

 
(70,550
)
 

 
(70,550
)
 

 
(70,550
)
Allocation of noncontrolling interest upon vesting of subsidiary units
 
 

 
(21,233
)
 

 
(21,233
)
 
21,233

 

Distributions to noncontrolling interests
 
 

 

 

 

 
(8,367
)
 
(8,367
)
Subsidiary equity transactions
 
 

 
646

 

 
646

 
(646
)
 

Other
 
 

 
12,129

 

 
12,129

 

 
12,129

Dissolution of noncontrolling interests
2,786

 
3

 
34,261

 

 
34,264

 
(34,264
)
 

June 30, 2018
78,750

 
$
79

 
$
1,427,458

 
$
507,788

 
$
1,935,325

 
$

 
$
1,935,325

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

5

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

 
Successor
 
 
Predecessor
 
Six Months Ended June 30, 2018
 
Four Months Ended June 30, 2017
 
 
Two Months Ended February 28, 2017
(in thousands)
 
 
 
 
 
 
Cash flow from operating activities:
 
 
 
 
 
 
Net income
$
78,001

 
$
212,801

 
 
$
2,397,061

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
 
Loss from discontinued operations

 
3,254

 
 
548

Depreciation, depletion and amortization
50,445

 
71,901

 
 
47,155

Deferred income taxes
46,031

 
131,055

 
 
(166
)
(Gains) losses on oil and natural gas derivatives
22,555

 
(33,755
)
 
 
(92,691
)
Cash settlements on derivatives
(25,037
)
 
7,929

 
 
(11,572
)
Share-based compensation expenses
66,374

 
19,599

 
 
50,255

Amortization and write-off of deferred financing fees
824

 
82

 
 
1,338

(Gains) losses on sale of assets and other, net
(224,091
)
 
(293,800
)
 
 
1,069

Reorganization items, net

 

 
 
(2,359,364
)
Changes in assets and liabilities:
 
 
 
 
 
 
(Increase) decrease in accounts receivable – trade, net
76,465

 
27,212

 
 
(7,216
)
(Increase) decrease in other assets
35,828

 
(9,146
)
 
 
528

Increase (decrease) in accounts payable and accrued expenses
(52,538
)
 
(89,755
)
 
 
20,949

Increase (decrease) in other liabilities
(22,955
)
 
22,421

 
 
2,801

Net cash provided by operating activities – continuing operations
51,902

 
69,798

 
 
50,695

Net cash provided by operating activities – discontinued operations

 
13,966

 
 
8,781

Net cash provided by operating activities
51,902

 
83,764

 
 
59,476

 
 
 
 
 
 
 
Cash flow from investing activities:
 
 
 
 
 
 
Development of oil and natural gas properties
(45,938
)
 
(61,534
)
 
 
(50,597
)
Purchases of other property and equipment
(87,377
)
 
(27,287
)
 
 
(7,409
)
Proceeds from sale of properties and equipment and other
369,489

 
697,829

 
 
(166
)
Net cash provided by (used in) investing activities – continuing operations
236,174

 
609,008

 
 
(58,172
)
Net cash used in investing activities – discontinued operations

 
(1,645
)
 
 
(584
)
Net cash provided by (used in) investing activities
236,174

 
607,363

 
 
(58,756
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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

 
Successor
 
 
Predecessor
 
Six Months Ended June 30, 2018
 
Four Months Ended June 30, 2017
 
 
Two Months Ended February 28, 2017
(in thousands)
 
 
 
 
 
 
Cash flow from financing activities:
 
 
 
 
 
 
Proceeds from rights offerings, net

 

 
 
514,069

Repurchases of shares
(393,647
)
 

 
 

Proceeds from borrowings

 
160,000

 
 

Repayments of debt

 
(876,570
)
 
 
(1,038,986
)
Payment to holders of claims under the Predecessor’s second lien notes

 

 
 
(30,000
)
Distributions to noncontrolling interests
(12,174
)
 
(2,973
)
 
 

Cash settlements of equity classified RSUs
(58,162
)
 

 
 

Other
(294
)
 
(87
)
 
 
(6,015
)
Net cash used in financing activities – continuing operations
(464,277
)
 
(719,630
)
 
 
(560,932
)
Net cash used in financing activities – discontinued operations

 

 
 

Net cash used in financing activities
(464,277
)
 
(719,630
)
 
 
(560,932
)
 
 
 
 
 
 
 
Net decrease in cash, cash equivalents and restricted cash
(176,201
)
 
(28,503
)
 
 
(560,212
)
Cash, cash equivalents and restricted cash:
 
 
 
 
 
 
Beginning
520,953

 
144,022

 
 
704,234

Ending
$
344,752

 
$
115,519

 
 
$
144,022

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

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Table of Contents

LINN ENERGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 – Basis of Presentation
When referring to Linn Energy, Inc. (“Successor,” “LINN Energy” or the “Company”), the intent is to refer to LINN Energy, a Delaware corporation formed in February 2017, and its then consolidated subsidiaries as a whole or on an individual basis, depending on the context in which the statements are made. During the reporting period Linn Energy, Inc. was a successor issuer of Linn Energy, LLC pursuant to Rule 15d‑5 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Linn Energy, Inc. was not a successor of Linn Energy, LLC for purposes of Delaware corporate law. When referring to the “Predecessor” in reference to the period prior to the emergence from bankruptcy, the intent is to refer to Linn Energy, LLC, the predecessor that will be dissolved following the effective date of the Plan (as defined in Note 2) and resolution of all outstanding claims, and its consolidated subsidiaries as a whole or on an individual basis, depending on the context in which the statements are made.
As discussed under Holding Company Reorganization below in this Note 1, subsequent to the reporting period, on July 25, 2018, the Company completed a corporate reorganization pursuant to which LINN Energy merged with and into Linn Merger Sub #1, LLC (“Merger Sub”), a newly formed Delaware limited liability company and wholly owned subsidiary of New LINN Inc., a newly formed Delaware corporation (“New LINN”), with Merger Sub surviving such merger (the “Merger”). Immediately following the Merger, New LINN changed its name to “Linn Energy, Inc.” For purposes of Rule 15d-5 under the Exchange Act, New LINN is the successor registrant to LINN Energy.
The reference to “Berry” herein refers to Berry Petroleum Company, LLC, which was an indirect 100% wholly owned subsidiary of the Predecessor through February 28, 2017. Berry was deconsolidated effective December 3, 2016. The reference to “LinnCo” herein refers to LinnCo, LLC, which was an affiliate of the Predecessor.
Nature of Business
LINN Energy was formed in February 2017, in connection with the reorganization of the Predecessor. The Predecessor was publicly traded from January 2006 to February 2017. As discussed further in Note 2, on May 11, 2016 (the “Petition Date”), Linn Energy, LLC, certain of its direct and indirect subsidiaries, and LinnCo (collectively, the “LINN Debtors”) and Berry (collectively with the LINN Debtors, the “Debtors”), filed voluntary petitions (“Bankruptcy Petitions”) for relief under Chapter 11 of the U.S. Bankruptcy Code (“Bankruptcy Code”) in the U.S. Bankruptcy Court for the Southern District of Texas (“Bankruptcy Court”). The Debtors’ Chapter 11 cases were administered jointly under the caption In re Linn Energy, LLC, et al., Case No. 16-60040. During the pendency of the Chapter 11 proceedings, the Debtors operated their businesses as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code. The Company emerged from bankruptcy effective February 28, 2017.
Prior to the Spin-off (as defined below), the Company’s upstream properties were located in six operating regions in the United States (“U.S.”): the Hugoton Basin, East Texas, North Louisiana, Michigan/Illinois, the Rockies and the Mid-Continent. The Company’s midstream business consisted of the Chisholm Trail gas plant system (“Chisholm Trail”) which is comprised of the newly constructed cryogenic natural gas processing facility, a refrigeration plant, and a network of gathering pipelines located in the Merge/SCOOP/STACK play. The Company also owns a 50% equity interest in Roan Resources LLC (“Roan”), which is focused on the accelerated development of the Merge/SCOOP/STACK play in Oklahoma. During 2018, the Company divested all of its properties located in the previous Permian Basin operating region. During 2017, the Company divested all of its properties located in the previous California and South Texas operating regions.
Holding Company Reorganization
On July 25, 2018, in accordance with Section 251(g) of the Delaware General Corporation Law, LINN Energy merged with and into Merger Sub, a newly formed Delaware limited liability company and wholly owned subsidiary of New LINN, with Merger Sub surviving the Merger. The Merger was completed pursuant to the terms of an Agreement and Plan of Merger by and among LINN Energy, New LINN and Merger Sub, dated July 25, 2018 (the “Merger Agreement”).

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

Pursuant to the Merger Agreement, at the effective time of the Merger, all outstanding shares of Class A common stock of LINN Energy were automatically converted into identical shares of Class A common stock of New LINN on a one-for-one basis, and LINN Energy’s existing stockholders became stockholders of New LINN in the same amounts and percentages as they were in LINN Energy immediately prior to the Merger.
Spin-Off Transactions
In April 2018, the Company announced its intention to separate its then wholly owned subsidiary, Riviera Resources, LLC (together with its corporate successor, “Riviera”) from LINN Energy. To effect the separation, Linn Energy, Inc. and certain of its direct and indirect subsidiaries undertook an internal reorganization (including the conversion of Riviera from a limited liability company to a corporation), following which Riviera Resources, Inc. holds, directly or through its subsidiaries, substantially all of the assets of LINN Energy, other than LINN Energy’s 50% equity interest in Roan. Following the internal reorganization, Linn Energy, Inc. distributed all of the outstanding shares of common stock of Riviera to LINN Energy stockholders on a pro rata basis (the “Spin-off”). Following the Spin-off, Riviera Resources, Inc. is an independent reporting company quoted for trading on the OTC Market under the ticker “RVRA.” LINN Energy did not retain any ownership interest in Riviera and will remain a reporting company quoted for trading on the OTCQB Market under the symbol “LNGG.” The Spin-off was completed on August 7, 2018.
Principles of Consolidation and Reporting
The information reported herein reflects all normal recurring adjustments that are, in the opinion of management, necessary for the fair presentation of the results for the interim periods. Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted under Securities and Exchange Commission 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, 2017. The results reported in these unaudited condensed consolidated financial statements should not necessarily be taken as indicative of results that may be expected for the entire year.
The condensed consolidated financial statements include the accounts of the Company and its pre-Spin-off subsidiaries. All significant intercompany transactions and balances have been eliminated upon consolidation. Noncontrolling interests represented ownership in the net assets of the Company’s previous consolidated subsidiary, Linn Energy Holdco LLC (“Holdco”), not attributable to LINN Energy, and were presented as a component of equity. Changes in the Company’s ownership interests in Holdco that did not result in deconsolidation were recognized in equity. Effective April 10, 2018, all outstanding Class A‑2 units in Holdco (“Holdco Class A-2 units”) were converted into Class A common stock in LINN Energy in accordance with the terms of Holdco’s Limited Liability Company Operating Agreement (the “Holdco LLC Agreement”) and the noncontrolling interest was dissolved. See Note 13 for additional information about noncontrolling interests. Investments in noncontrolled entities over which the Company exercises significant influence are accounted for under the equity method. See Note 6 for additional information about equity method investments.
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) or stockholders equity. As a result of the adoption of ASU 2016-18 and the inclusion of restricted cash in the statements of cash flows, previously reported net cash provided by operating activities and cash provided by investing activities have been updated to conform to current presentation. See recently adopted accounting standards below for additional information.
Bankruptcy Accounting
Upon emergence from bankruptcy on February 28, 2017, the Company adopted fresh start accounting which resulted in the Company becoming a new entity for financial reporting purposes. As a result of the adoption of fresh start accounting and the effects of the implementation of the Plan, the Company’s condensed consolidated financial statements subsequent to February 28, 2017, are not comparable to its condensed consolidated financial statements prior to February 28, 2017. References to “Successor” relate to the financial position and results of operations of the reorganized Company subsequent to

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

February 28, 2017. References to “Predecessor” relate to the financial position of the Company prior to, and results of operations through and including, February 28, 2017. The Company’s condensed consolidated financial statements and related footnotes are presented with a black line division, which delineates the lack of comparability between amounts presented after February 28, 2017, and amounts presented on or prior to February 28, 2017. See Note 2 for additional information.
Use of Estimates
The preparation of the accompanying condensed consolidated financial statements in conformity with GAAP requires management of the Company to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amount of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. The estimates that are particularly significant to the financial statements include estimates of the Company’s reserves of oil, natural gas and natural gas liquids (“NGL”), future cash flows from oil and natural gas properties, depreciation, depletion and amortization, asset retirement obligations, certain revenues and operating expenses, and fair values of commodity derivatives. In addition, as part of fresh start accounting, the Company made estimates and assumptions related to its reorganization value, liabilities subject to compromise, the fair value of assets and liabilities recorded as a result of the adoption of fresh start accounting and income taxes.
As fair value is a market-based measurement, it is determined based on the assumptions that market participants would use. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. Such estimates and assumptions are adjusted when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ from these estimates. Any changes in estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods.
Recently Adopted Accounting Standards
In November 2016, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) that is intended to address diversity in the classification and presentation of changes in restricted cash on the statement of cash flows. The Company adopted this ASU on January 1, 2018, on a retrospective basis. The adoption of this ASU resulted in the inclusion of restricted cash in the beginning and ending balances of cash on the statements of cash flows and disclosure reconciling cash and cash equivalents presented on the balance sheets to cash, cash equivalents and restricted cash on the statement of cash flows (see Note 17).
In May 2014, the FASB issued an ASU that is intended to improve and converge the financial reporting requirements for revenue from contracts with customers (“ASC 606”). The Company adopted this ASU on January 1, 2018, using the modified retrospective transition method. Accordingly, the comparative information for the six months ended June 30, 2017, has not been adjusted and continues to be reported under the previous revenue standard. The adoption of this ASU impacted the Company’s gross revenues and expenses as reported on its condensed consolidated statements of operations (see below), and resulted in increased disclosures regarding the Company’s disaggregation of revenue (see Note 3).
Under ASC 606, the Company recognizes revenues based on a determination of when control of its commodities is transferred and whether it is acting as a principal or agent in certain transactions. All facts and circumstances of an arrangement are considered and judgment is often required in making this determination. For its natural gas contracts, the Company generally records its sales at the wellhead or inlet of the plant as revenues net of transportation, gathering and processing expenses if the processor is the customer and there is no redelivery of commodities to the Company. Conversely, the Company generally records its sales at the tailgate of the plant on a gross basis along with the associated transportation, gathering and processing expenses if the processor is a service provider and there is redelivery of commodities to the Company.
In addition, the Company recognizes revenues for commodities received as noncash consideration in exchange for services provided by its midstream operations and revenues and associated cost of product for the subsequent sale of those same commodities. This recognition results in an increase to revenues and expenses with no material impact on net income.

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

The items discussed above impacted the Company’s reported “oil, natural gas and natural gas liquids sales,” “marketing revenues,” “other revenues,” “transportation expenses,” “marketing expenses” and “interest expense.” The impact of adoption on the Company’s current period results is as follows:
 
Three Months Ended June 30, 2018
 
Under ASC 606
 
Under Prior Rule
 
Increase/ (Decrease)
 
(in thousands)
Revenues:
 
 
 
 
 
Natural gas sales
$
53,662

 
$
53,285

 
$
377

Oil sales
10,919

 
10,919

 

NGL sales
22,423

 
22,280

 
143

Total oil, natural gas and NGL sales
87,004

 
86,484

 
520

Marketing revenues
42,967

 
25,406

 
17,561

Other revenues
6,387

 
6,003

 
384

 
136,358

 
117,893

 
18,465

Expenses:
 
 
 
 
 
Transportation expenses
21,213

 
20,693

 
520

Marketing expenses
40,327

 
22,766

 
17,561

Interest expense
584

 
420

 
164

Net income
$
6,903

 
$
6,683

 
$
220


 
Six Months Ended June 30, 2018
 
Under ASC 606
 
Under Prior Rule
 
Increase/ (Decrease)
 
(in thousands)
Revenues:
 
 
 
 
 
Natural gas sales
$
116,990

 
$
117,794

 
$
(804
)
Oil sales
56,615

 
56,615

 

NGL sales
50,275

 
50,222

 
53

Total oil, natural gas and NGL sales
223,880

 
224,631

 
(751
)
Marketing revenues
89,234

 
53,521

 
35,713

Other revenues
12,281

 
11,676

 
605

 
325,395

 
289,828

 
35,567

Expenses:
 
 
 
 
 
Transportation expenses
40,307

 
41,058

 
(751
)
Marketing expenses
82,082

 
46,369

 
35,713

Interest expense
988

 
824

 
164

Net income
$
78,001

 
$
77,560

 
$
441

New Accounting Standards Issued But Not Yet Adopted
In February 2016, the FASB issued an ASU that is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet. This ASU is effective for fiscal years beginning after

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

December 15, 2018, and interim periods within those years (early adoption permitted). The Company is currently evaluating the impact of the adoption of this ASU on its financial statements and related disclosures. The Company expects the adoption of this ASU to impact its balance sheet resulting from an increase in both assets and liabilities related to the Company’s leasing activities.
Note 2 – Emergence From Voluntary Reorganization Under Chapter 11 and Fresh Start Accounting
On the Petition Date, the Debtors filed Bankruptcy Petitions for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. The Debtors’ Chapter 11 cases were administered jointly under the caption In re Linn Energy, LLC, et al., Case No. 16‑60040.
On December 3, 2016, the LINN Debtors filed the Amended Joint Chapter 11 Plan of Reorganization of Linn Energy, LLC and Its Debtor Affiliates Other Than Linn Acquisition Company, LLC (“LAC”) and Berry Petroleum Company, LLC (the “Plan”). The LINN Debtors subsequently filed amended versions of the Plan with the Bankruptcy Court.
On December 13, 2016, LAC and Berry filed the Amended Joint Chapter 11 Plan of Reorganization of Linn Acquisition Company, LLC and Berry Petroleum Company, LLC (the “Berry Plan” and together with the Plan, the “Plans”). LAC and Berry subsequently filed amended versions of the Berry Plan with the Bankruptcy Court.
On January 27, 2017, the Bankruptcy Court entered an order approving and confirming the Plans (the “Confirmation Order”). On February 28, 2017 (the “Effective Date”), the Debtors satisfied the conditions to effectiveness of the respective Plans, the Plans became effective in accordance with their respective terms and LINN Energy and Berry emerged from bankruptcy as stand-alone, unaffiliated entities.
Reorganization Items, Net
The Company incurred significant costs and recognized significant gains associated with the reorganization. Reorganization items represent costs and income directly associated with the Chapter 11 proceedings since the Petition Date, and also include adjustments to reflect the carrying value of certain liabilities subject to compromise at their estimated allowed claim amounts, as such adjustments were determined. The following table summarizes the components of reorganization items included on the condensed consolidated statements of operations:
 
Successor
 
Three Months Ended June 30,
 
2018
 
2017
 
(in thousands)
 
 
 
 
Legal and other professional advisory fees
$
(1,255
)
 
$
(3,446
)
Other
(4
)
 
69

Reorganization items, net
$
(1,259
)
 
$
(3,377
)

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


 
Successor
 
 
Predecessor
 
Six Months Ended June 30, 2018
 
Four Months Ended June 30, 2017
 
 
Two Months Ended February 28, 2017
(in thousands)
 
 
 
 
 
 
Gain on settlement of liabilities subject to compromise
$

 
$

 
 
$
3,724,750

Recognition of an additional claim for the Predecessor’s second lien notes settlement

 

 
 
(1,000,000
)
Fresh start valuation adjustments

 

 
 
(591,525
)
Income tax benefit related to implementation of the Plan

 

 
 
264,889

Legal and other professional fees
(3,207
)
 
(6,016
)
 
 
(46,961
)
Terminated contracts

 

 
 
(6,915
)
Other
(3
)
 
74

 
 
(13,049
)
Reorganization items, net
$
(3,210
)
 
$
(5,942
)
 
 
$
2,331,189

Fresh Start Accounting
Upon the Company’s emergence from Chapter 11 bankruptcy, it adopted fresh start accounting in accordance with the provisions of Accounting Standards Codification 852 “Reorganizations” (“ASC 852”), which resulted in the Company becoming a new entity for financial reporting purposes. In accordance with ASC 852, the Company was required to adopt fresh start accounting upon its emergence from Chapter 11 because (i) the holders of existing voting ownership interests of the Predecessor received less than 50% of the voting shares of the Successor and (ii) the reorganization value of the Company’s assets immediately prior to confirmation of the Plan was less than the total of all post-petition liabilities and allowed claims.
Upon adoption of fresh start accounting, the reorganization value derived from the enterprise value as disclosed in the Plan was allocated to the Company’s assets and liabilities based on their fair values (except for deferred income taxes) in accordance with ASC 805 “Business Combinations.” The amount of deferred income taxes recorded was determined in accordance with ASC 740 “Income Taxes.” The Effective Date fair values of the Company’s assets and liabilities differed materially from their recorded values as reflected on the historical balance sheet. The effects of the Plan and the application of fresh start accounting were reflected on the condensed consolidated balance sheet as of February 28, 2017, and the related adjustments thereto were recorded on the condensed consolidated statement of operations for the two months ended February 28, 2017.
Note 3 – Revenues
Revenue from Contracts with Customers
The Company recognized sales of oil, natural gas and NGL when it satisfied a performance obligation by transferring control of the product to a customer, in an amount that reflected the consideration to which the Company expected to be entitled in exchange for the product.
Natural Gas and NGL Sales
The Company’s natural gas production was primarily sold under market-sensitive contracts that were typically priced at a differential to the published natural gas index price for the producing area due to the natural gas quality and the proximity to major consuming markets.
For its natural gas contracts, the Company generally recorded its wet gas sales at the wellhead or inlet of the plant as revenues net of transportation, gathering and processing expenses, and its residual natural gas and NGL sales at the tailgate of the plant on a gross basis along with the associated transportation, gathering and processing expenses. All facts and circumstances of an arrangement were considered and judgment was often required in making this determination.

13

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

Oil Sales
The Company’s oil production was primarily sold under market-sensitive contracts that were typically priced at a differential to the New York Mercantile Exchange (“NYMEX”) price or at purchaser posted prices for the producing area. For its oil contracts, the Company generally recorded its sales based on the net amount received.
Production Imbalances
The Company used the sales method to account for natural gas production imbalances. If the Company’s sales volumes for a well exceeded the Company’s proportionate share of production from the well, a liability was recognized to the extent that the Company’s share of estimated remaining recoverable reserves from the well was insufficient to satisfy this imbalance. No receivables were recorded for those wells on which the Company had taken less than its proportionate share of production.
Marketing Revenues
The Company engaged in the purchase, gathering and transportation of third-party natural gas and subsequently marketed such natural gas to independent purchasers under separate arrangements. As such, the Company separately reported third-party marketing revenues and marketing expenses.
Disaggregation of Revenue
The following tables present the Company’s disaggregated revenues by source and geographic area:
 
 
Three Months Ended June 30, 2018
 
 
Natural Gas
 
Oil
 
NGL
 
Oil, Natural Gas and NGL Sales
 
Marketing Revenues
 
Other Revenues
 
Total
 
 
(in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Hugoton Basin
 
$
17,401

 
$
238

 
$
16,875

 
$
34,514

 
$
22,421

 
$
6,303

 
$
63,238

Mid-Continent
 
7,622

 
4,880

 
3,307

 
15,809

 

 
25

 
15,834

East Texas
 
12,661

 
1,091

 
1,013

 
14,765

 
467

 
3

 
15,235

Permian Basin
 
256

 
546

 
(488
)
 
314

 

 
16

 
330

Rockies
 
2,146

 
1,885

 
1,201

 
5,232

 

 
1

 
5,233

North Louisiana
 
6,040

 
1,480

 
503

 
8,023

 
13

 
2

 
8,038

Michigan/Illinois
 
7,536

 
799

 
12

 
8,347

 

 
37

 
8,384

Chisholm Trail
 

 

 

 

 
20,066

 

 
20,066

Total
 
$
53,662

 
$
10,919

 
$
22,423

 
$
87,004

 
$
42,967

 
$
6,387

 
$
136,358


14

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

 
 
Six Months Ended June 30, 2018
 
 
Natural Gas
 
Oil
 
NGL
 
Oil, Natural Gas and NGL Sales
 
Marketing Revenues
 
Other Revenues
 
Total
 
 
(in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Hugoton Basin
 
$
39,764

 
$
2,970

 
$
36,389

 
$
79,123

 
$
46,501

 
$
12,134

 
$
137,758

Mid-Continent
 
15,555

 
16,747

 
6,361

 
38,663

 

 
39

 
38,702

East Texas
 
27,437

 
2,431

 
2,319

 
32,187

 
503

 
8

 
32,698

Permian Basin
 
2,282

 
20,654

 
2,557

 
25,493

 

 
32

 
25,525

Rockies
 
5,526

 
9,255

 
2,559

 
17,340

 

 
(1
)
 
17,339

North Louisiana
 
12,418

 
3,049

 
67

 
15,534

 
272

 
3

 
15,809

Michigan/Illinois
 
14,008

 
1,509

 
23

 
15,540

 

 
66

 
15,606

Chisholm Trail
 

 

 

 

 
41,958

 

 
41,958

Total
 
$
116,990

 
$
56,615

 
$
50,275

 
$
223,880

 
$
89,234

 
$
12,281

 
$
325,395

Contract Balances
Under the Company’s product sales contracts, its customers were invoiced once the Company’s performance obligations had been satisfied, at which point payment was unconditional. Accordingly, the Company’s product sales contracts did not give rise to material contract assets or contract liabilities.
The Company had trade accounts receivable related to revenue from contracts with customers of approximately $56 million and $117 million as of June 30, 2018, and December 31, 2017, respectively.
Performance Obligations
The majority of the Company’s sales were short-term in nature with a contract term of one year or less. For those contracts, the Company utilized the practical expedient in ASC 606-10-50-14 exempting the Company from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation was part of a contract that had an original expected duration of one year or less.
For the Company’s product sales that had a contract term greater than one year, the Company utilized the practical expedient in ASC 606-10-50-14(A) which states the Company was not required to disclose the transaction price allocated to remaining performance obligations if the variable consideration was allocated entirely to a wholly unsatisfied performance obligation. Under these sales contracts, each unit of product generally represented a separate performance obligation; therefore future volumes were wholly unsatisfied and disclosure of the transaction price allocated to remaining performance obligations was not required.
Note 4 – Divestitures and Discontinued Operations
Divestitures – 2018
On April 10, 2018, the Company completed the sale of its conventional properties located in New Mexico. Cash proceeds received from the sale of these properties were approximately $15 million and the Company recognized a net gain of approximately $11 million.

15

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

On April 4, 2018, the Company completed the sale of its interest in properties located in the Altamont Bluebell Field in Utah (the “Altamont Bluebell Assets Sale”). Cash proceeds received from the sale of these properties were approximately $132 million, net of costs to sell of approximately $2 million, and the Company recognized a net gain of approximately $83 million.
On March 29, 2018, the Company completed the sale of its interest in conventional properties located in west Texas. Cash proceeds received from the sale of these properties were approximately $107 million, net of costs to sell of approximately $2 million, and the Company recognized a net gain of approximately $55 million.
On February 28, 2018, the Company completed the sale of its Oklahoma waterflood and Texas Panhandle properties (the “Oklahoma and Texas Assets Sale”). Cash proceeds received from the sale of these properties were approximately $112 million (including a deposit of approximately $12 million received in 2017), net of costs to sell of approximately $1 million, and the Company recognized a net gain of approximately $46 million.
The divestitures discussed above are not presented as discontinued operations because they do not represent a strategic shift that will have a major effect on the Company’s operations and financial results. The gains on these divestitures are included in “(gains) losses on sale of assets and other, net” on the condensed consolidated statements of operations and were part of the upstream segment.
The assets and liabilities associated with the Oklahoma and Texas Assets Sale were classified as “held for sale” on the condensed consolidated balance sheet at December 31, 2017. At December 31, 2017, the Company’s condensed consolidated balance sheet included current assets of approximately $107 million included in “assets held for sale” and current liabilities of approximately $43 million included in “liabilities held for sale” related to this transaction.
The following table presents carrying amounts of the assets and liabilities of the Company’s properties classified as held for sale on the condensed consolidated balance sheet:
 
December 31, 2017
 
(in thousands)
Assets:
 
Oil and natural gas properties
$
92,245

Other property and equipment
12,983

Other
1,735

Total assets held for sale
$
106,963

Liabilities:
 
Asset retirement obligations
$
42,001

Other
1,301

Total liabilities held for sale
$
43,302

Other assets primarily include inventories and other liabilities primarily include accounts payable.
Divestitures – 2017
On June 30, 2017, the Company completed the sale of its interest in properties located in the Salt Creek Field in Wyoming to Denbury Resources Inc. (the “Salt Creek Assets Sale”). Cash proceeds received from the sale of these properties were approximately $76 million and the Company recognized a net gain of approximately $22 million.
On May 31, 2017, the Company completed the sale of its interest in properties located in western Wyoming to Jonah Energy LLC (the “Jonah Assets Sale”). Cash proceeds received from the sale of these properties were approximately $560 million, net of costs to sell of approximately $6 million, and the Company recognized a net gain of approximately $279 million.

16

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

The gains on these divestitures are included in “(gains) losses on sale of assets and other, net” on the condensed consolidated statements of operations.
Discontinued Operations
During 2017, the Company completed the sale of its interest in properties located in the San Joaquin Basin and the Los Angeles Basin in California. As a result of the Company’s strategic exit from California, the Company classified the results of operations and cash flows of its California properties as discontinued operations on its condensed consolidated financial statements. The California properties were included in the upstream segment.
The following tables present summarized financial results of the Company’s California properties classified as discontinued operations on the condensed consolidated statements of operations:
 
Successor
 
 
Predecessor
 
Three Months Ended June 30, 2017
 
Four Months Ended June 30, 2017
 
 
Two Months Ended February 28, 2017
(in thousands)
 
 
 
 
 
 
Revenues and other
$
20,511

 
$
27,636

 
 
$
14,891

Expenses
25,935

 
30,344

 
 
13,758

Other income and (expenses)
(2,074
)
 
(2,791
)
 
 
(1,681
)
Loss from discontinued operations before income taxes
(7,498
)
 
(5,499
)
 
 
(548
)
Income tax benefit
(4,176
)
 
(2,245
)
 
 

Loss from discontinued operations, net of income taxes
$
(3,322
)
 
$
(3,254
)
 
 
$
(548
)
Other income and (expenses) include an allocation of interest expense for the California properties which represents interest on debt that was required to be repaid as a result of the sales.
Berry Transition Services and Separation Agreement
On the Effective Date, Berry entered into a Transition Services and Separation Agreement (the “TSSA”) with LINN Energy and certain of its subsidiaries to facilitate the separation of Berry’s operations from LINN Energy’s operations. Pursuant to the TSSA, LINN Energy continued to provide, or caused to be provided, certain administrative, management, operating, and other services and support to Berry during a transitional period following the Effective Date (the “Transition Services”).
Under the TSSA, Berry reimbursed LINN Energy for any and all reasonable, third-party out-of-pocket costs and expenses, without markup, actually incurred by LINN Energy, to the extent documented, in connection with providing the Transition Services. Additionally, Berry paid to LINN Energy a management fee of $6 million per month, prorated for partial months, during the period from the Effective Date through the last day of the second full calendar month after the Effective Date (the “Transition Period”) and paid $2.7 million per month, prorated for partial months, from the first day following the Transition Period through the last day of the second full calendar month thereafter (the “Accounting Period”). During the Accounting Period, the scope of the Transition Services was reduced to specified accounting and administrative functions. The Transition Period ended April 30, 2017, and the Accounting Period ended June 30, 2017.

17

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

Note 5 – Oil and Natural Gas Properties
Oil and Natural Gas Capitalized Costs
Aggregate capitalized costs related to oil, natural gas and NGL production activities with applicable accumulated depletion and amortization are presented below:
 
June 30, 2018
 
December 31, 2017
 
(in thousands)
 
 
 
 
Proved properties
$
739,656

 
$
904,390

Unproved properties
46,159

 
45,693

 
785,815

 
950,083

Less accumulated depletion and amortization
(59,870
)
 
(49,619
)
 
$
725,945

 
$
900,464


Note 6 – Equity Method Investments
On August 31, 2017, the Company, through certain of its subsidiaries, completed the transaction in which LINN Energy and Citizen Energy II, LLC (“Citizen”) each contributed certain upstream assets located in Oklahoma to a newly formed company, Roan (the contribution, the “Roan Contribution”), focused on the accelerated development of the Merge/SCOOP/STACK play. In exchange for their respective contributions, LINN Energy and Citizen each received a 50% equity interest in Roan.
The Company uses the equity method of accounting for its investment in Roan. The Company’s equity earnings (losses) consists of its share of Roan’s earnings or losses and the amortization of the difference between the Company’s investment in Roan and Roan’s underlying net assets attributable to certain assets. At both June 30, 2018, and December 31, 2017, the Company owned 50% of Roan’s outstanding units.
At June 30, 2018, the carrying amount of the Company’s investment in Roan of approximately $466 million was less than the Company’s ownership interest in Roan’s underlying net assets by approximately $355 million. The difference is attributable to proved and unproved oil and natural gas properties and is amortized over the lives of the related assets. Such amortization is included in the equity earnings (losses) from the Company’s investment in Roan. At December 31, 2017, the carrying amount of the Company’s investment in Roan of approximately $458 million was less than the Company’s ownership interest in Roan’s underlying net assets by approximately $346 million.
Impairment testing on the Company’s investment in Roan is performed when events or circumstances warrant such testing and considers whether there is an inability to recover the carrying value of the investment that is other than temporary. No impairments occurred with respect to the Company’s investment in Roan for the six months ended June 30, 2018.
Following is summarized statements of operations information for Roan.

18

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

Summarized Roan Resources LLC Statements of Operations Information
 
Three Months Ended June 30, 2018
 
Six Months Ended June 30, 2018
 
(in thousands)
 
 
 
 
Revenues and other
$
44,789

 
$
145,873

Expenses
72,754

 
130,663

Other income and (expenses)
(1,087
)
 
(2,886
)
Net income (loss)
$
(29,052
)
 
$
12,324


Note 7 – Debt
Credit Facility
On August 4, 2017, the Company entered into a credit agreement with its then subsidiary, Linn Energy Holdco II LLC (“Holdco II”), as borrower, Royal Bank of Canada, as administrative agent, and the lenders and agents party thereto, providing for a new senior secured reserve-based revolving loan facility (the “Credit Facility”) with $500 million in borrowing commitments and an initial borrowing base of $500 million.
On April 30, 2018, the Company entered into an amendment to the Credit Facility which, among other things, modified the borrowing base and maximum borrowing commitment amount to $425 million.
As of June 30, 2018, there were no borrowings outstanding under the Credit Facility and there was approximately $378 million of available borrowing capacity (which includes a $47 million reduction for outstanding letters of credit). The maturity date is August 4, 2020. Pursuant to the Spin-off, Holdco II became a subsidiary of Riviera and as such, Riviera and its subsidiaries have assumed all obligations under the Credit Facility.
Redetermination of the borrowing base under the Credit Facility, based primarily on reserve reports using lender commodity price expectations at such time, occurs semi-annually, in April and October. At the Company’s election, interest on borrowings under the Credit Facility is determined by reference to either the London Interbank Offered Rate (“LIBOR”) plus an applicable margin ranging from 2.50% to 3.50% per annum or the alternate base rate (“ABR”) plus an applicable margin ranging from 1.50% to 2.50% per annum, depending on utilization of the borrowing base. Interest is generally payable in arrears quarterly for loans bearing interest based at the ABR and at the end of the applicable interest period for loans bearing interest at the LIBOR, or if such interest period is longer than three months, at the end of the three month intervals during such interest period. The Company is required to pay a commitment fee to the lenders under the Credit Facility, which accrues at a rate per annum of 0.50% on the average daily unused amount of the available revolving loan commitments of the lenders.
The obligations under the Credit Facility are secured by mortgages covering approximately 85% of the total value of the proved reserves of the oil and natural gas properties of the Company and certain of its subsidiaries, along with liens on substantially all personal property of the Company and certain of its subsidiaries, and are guaranteed by the Company, Holdco and certain of Holdco II’s subsidiaries, subject to customary exceptions. Under the Credit Facility, the Company is required to maintain (i) a maximum total net debt to last twelve months EBITDA ratio of 4.0 to 1.0, and (ii) a minimum adjusted current ratio of 1.0 to 1.0.
The Credit Facility also contains affirmative and negative covenants, including as to compliance with laws (including environmental laws, ERISA and anti-corruption laws), maintenance of required insurance, delivery of quarterly and annual financial statements, oil and gas engineering reports and budgets, maintenance and operation of property (including oil and gas properties), restrictions on the incurrence of liens and indebtedness, mergers, consolidations and sales of assets, paying

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

dividends or other distributions in respect of, or repurchasing or redeeming, the Company’s capital stock, making certain investments and transactions with affiliates.
The Credit Facility contains events of default and remedies customary for credit facilities of this nature. Failure to comply with the financial and other covenants in the Credit Facility would allow the lenders, subject to customary cure rights, to require immediate payment of all amounts outstanding under the Credit Facility.
Note 8 – Derivatives
Commodity Derivatives
Historically, the Company has hedged a portion of its forecasted production to reduce exposure to fluctuations in oil and natural gas prices and provide long-term cash flow predictability to manage its business. The current direct NGL hedging market is constrained in terms of price, volume, duration and number of counterparties, which limits the Company’s ability to effectively hedge its NGL production. The Company has also hedged its exposure to differentials in certain operating areas but does not currently hedge exposure to oil or natural gas differentials.
The Company has historically entered into commodity hedging transactions primarily in the form of swap contracts that are designed to provide a fixed price, collars and, from time to time, put options that are designed to provide a fixed price floor with the opportunity for upside. The Company enters into these transactions with respect to a portion of its projected production 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 9 for fair value disclosures about oil and natural gas commodity derivatives.
The following table presents derivative positions for the periods indicated as of June 30, 2018:
 
July 1 – December 31, 2018
 
2019
Natural gas positions:
 
 
 
Fixed price swaps (NYMEX Henry Hub):
 
 
 
Hedged volume (MMMBtu)
35,144

 
22,265

Average price ($/MMBtu)
$
3.02

 
$
2.89

Oil positions:
 
 
 
Fixed price swaps (NYMEX WTI):
 
 
 
Hedged volume (MBbls)
276

 
183

Average price ($/Bbl)
$
54.07

 
$
64.00

Natural gas basis differential positions: (1)
 
 
 
PEPL basis swaps:
 
 
 
Hedged volume (MMMBtu)
7,360

 
14,600

Hedge differential
$
(0.67
)
 
$
(0.67
)
NGPL TXOK basis swaps:
 
 
 
Hedged volume (MMMBtu)
1,840

 

Hedge differential
$
(0.19
)
 
$

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

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

During the six months ended June 30, 2018, the Company entered into commodity derivative contracts consisting of natural gas basis swaps for March 2018 through December 2019, natural gas fixed price swaps for January 2019 through December 2019 and oil fixed price swaps for January 2019 through December 2019. During the four months ended June 30, 2017, the Company entered into commodity derivative contracts consisting of oil fixed price swaps for January 2018 through December 2018 and natural gas fixed price swaps for January 2018 through December 2019. The Company did not enter into any commodity derivative contracts during the two months ended February 28, 2017.
In April 2018, in connection with the closing of the Altamont Bluebell Assets Sale, the Company canceled its oil collars for 2018 and 2019. The Company paid net cash settlements of approximately $20 million for the cancellations.
The natural gas derivatives are settled based on the closing price of NYMEX Henry Hub natural gas on the last trading day for the delivery month, which occurs on the third business day preceding the delivery month, or the relevant index prices of natural gas published in Inside FERC’s Gas Market Report on the first business day of the delivery month. The oil derivatives are settled based on the average closing price of NYMEX WTI crude oil for each day of the delivery month.
Balance Sheet Presentation
The Company’s commodity derivatives are presented on a net basis in “derivative instruments” on the condensed consolidated balance sheets. The following table summarizes the fair value of derivatives outstanding on a gross basis:
 
June 30, 2018
 
December 31, 2017
 
(in thousands)
Assets:
 
 
 
Commodity derivatives
$
6,825

 
$
22,589

Liabilities:
 
 
 
Commodity derivatives
$
7,197

 
$
25,443

By using derivative instruments to economically hedge exposures to changes in commodity prices, the Company exposed itself to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes the Company, which creates credit risk. The Company’s counterparties are participants in the Credit Facility. The Credit Facility was secured by certain of the Company’s and its then subsidiaries’ oil, natural gas and NGL reserves and personal property; therefore, the Company was not required to post any collateral. The Company did not receive collateral from its counterparties.
The maximum amount of loss due to credit risk that the Company would incur if its counterparties failed completely to perform according to the terms of the contracts, based on the gross fair value of financial instruments, was approximately $7 million at June 30, 2018. The Company minimized the credit risk in derivative instruments by: (i) limiting its exposure to any single counterparty; (ii) entering into derivative instruments only with counterparties that meet the Company’s minimum credit quality standard, or have a guarantee from an affiliate that meets the Company’s minimum credit quality standard; and (iii) monitoring the creditworthiness of the Company’s counterparties on an ongoing basis. In accordance with the Company’s standard practice, its commodity derivatives were subject to counterparty netting under agreements governing such derivatives and therefore the risk of loss due to counterparty nonperformance was somewhat mitigated.
Gains and Losses on Derivatives
Gains and losses on derivatives were net losses of approximately $8 million and $23 million for the three months and six months ended June 30, 2018, respectively, and net gains of approximately $46 million and $34 million for the three months and four months ended June 30, 2017, respectively, and approximately $93 million for the two months ended February 28, 2017.

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

Gains and losses on derivatives are reported on the condensed consolidated statements of operations in “gains (losses) on oil and natural gas derivatives.”
The Company paid net cash settlements of approximately $21 million and $25 million for the three months and six months ended June 30, 2018, respectively. The Company received net cash settlements of approximately $2 million and $8 million for the three months and four months ended June 30, 2017, respectively, and paid net cash settlements of approximately $12 million for the two months ended February 28, 2017.
Note 9 – Fair Value Measurements on a Recurring Basis
The Company accounted for its commodity derivatives at fair value (see Note 8) on a recurring basis. The Company determined the fair value of its oil and natural gas derivatives utilizing pricing models that use a variety of techniques, including market quotes and pricing analysis. Inputs to the pricing models included publicly available prices and forward price curves generated from a compilation of data gathered from third parties. Company management validated the data provided by third parties by understanding the pricing models used, obtaining market values from other pricing sources, analyzing pricing data in certain situations and confirming that those instruments trade in active markets. Assumed credit risk adjustments, based on published credit ratings and public bond yield spreads, were applied to the Company’s commodity derivatives.
Fair Value Hierarchy
In accordance with applicable accounting standards, the Company has categorized its financial instruments into a three-level fair value hierarchy based on the priority of inputs to the valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).
The following presents the fair value hierarchy for assets and liabilities measured at fair value on a recurring basis:
 
June 30, 2018
 
Level 2
 
Netting (1)
 
Total
 
(in thousands)
Assets:
 
 
 
 
 
Commodity derivatives
$
6,825

 
$
(1,637
)
 
$
5,188

Liabilities:
 
 
 
 
 
Commodity derivatives
$
7,197

 
$
(1,637
)
 
$
5,560


 
December 31, 2017
 
Level 2
 
Netting (1)
 
Total
 
(in thousands)
Assets:
 
 
 
 
 
Commodity derivatives
$
22,589

 
$
(12,491
)
 
$
10,098

Liabilities:
 
 
 
 
 
Commodity derivatives
$
25,443

 
$
(12,491
)
 
$
12,952

(1) 
Represents counterparty netting under agreements governing such derivatives.
Note 10 – Asset Retirement Obligations
The Company had the obligation to plug and abandon oil and natural gas wells and related equipment at the end of production operations. Estimated asset retirement costs were recognized as liabilities with an increase to the carrying amounts of the

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

related long-lived assets when the obligation is incurred. The liabilities are included in “other accrued liabilities” and “asset retirement obligations and other noncurrent liabilities” on the condensed consolidated balance sheets. Accretion expense is included in “depreciation, depletion and amortization” on the condensed consolidated statements of operations. The fair value of additions to the asset retirement obligations is estimated using valuation techniques that convert future cash flows to a single discounted amount. Significant inputs to the valuation include estimates of: (i) plug and abandon costs per well based on existing regulatory requirements; (ii) remaining life per well; (iii) future inflation factors; and (iv) a credit-adjusted risk-free interest rate. These inputs require significant judgments and estimates by the Company’s management at the time of the valuation and are the most sensitive and subject to change.
In addition, there is insufficient information to reasonably determine the timing and/or method of settlement for purposes of estimating the fair value of the asset retirement obligation of certain of the Company’s Chisholm Trail assets, which became assets of Riviera in connection with the Spin-off. In such cases, asset retirement obligation cost is considered indeterminate because there is no data or information that can be derived from past practice, industry practice, management’s experience, or the asset’s estimated economic life. Indeterminate asset retirement obligation costs associated with Chisholm Trail will be recognized in the period in which sufficient information exists to reasonably estimate potential settlement dates and methods.
The following table presents a reconciliation of the Company’s asset retirement obligations (in thousands):
Asset retirement obligations at December 31, 2017
$
164,553

Liabilities added from drilling
53

Liabilities associated with assets divested
(62,195
)
Current year accretion expense
4,081

Settlements
(1,859
)
Revisions of estimates
2,386

Asset retirement obligations at June 30, 2018
$
107,019

Note 11 – Commitments and Contingencies
On May 11, 2016, the Debtors filed Bankruptcy Petitions for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. The Debtors’ Chapter 11 cases were administered jointly under the caption In re Linn Energy, LLC, et al., Case No. 16‑60040. On January 27, 2017, the Bankruptcy Court entered the Confirmation Order. Consummation of the Plan was subject to certain conditions set forth in the Plan. On the Effective Date, all of the conditions were satisfied or waived and the Plan became effective and was implemented in accordance with its terms. The LINN Debtors Chapter 11 cases will remain pending until the final resolution of all outstanding claims.
The commencement of the Chapter 11 proceedings automatically stayed certain actions against the Company, including actions to collect prepetition liabilities or to exercise control over the property of the Company’s bankruptcy estates. However, the Company is, and will continue to be until the final resolution of all claims, subject to certain contested matters and adversary proceedings stemming from the Chapter 11 proceedings.
In March 2017, Wells Fargo Bank, National Association (“Wells Fargo”), the administrative agent under the Predecessor’s credit facility, filed a motion in the Bankruptcy Court seeking payment of post-petition default interest of approximately $31 million. The Company has vigorously disputed that Wells Fargo is entitled to any default interest based on the plain language of the Plan and Confirmation Order. On November 13, 2017, the Bankruptcy Court ruled that the secured lenders are not entitled to payment of post-petition default interest. That ruling was appealed by Wells Fargo and on March 29, 2018, the U.S. District Court for the Southern District of Texas affirmed the Bankruptcy Court’s ruling. On April 30, 2018, the Bankruptcy Court approved the substitution of UMB Bank, National Association (“UMB Bank”) as successor to Wells Fargo as administrative agent under the Predecessor’s credit facility. UMB Bank then immediately filed a notice of appeal to the United States Court of Appeals for the Fifth Circuit from the decision by the U.S. District Court for the Southern District of Texas, which affirmed the decision of the Bankruptcy Court. That appeal remains pending.

23

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

The Company is not currently a party to any litigation or pending claims that it believes would have a material adverse effect on its overall business, financial position, results of operations or liquidity; however, cash flow could be significantly impacted in the reporting periods in which such matters are resolved.
Except for in connection with its Chapter 11 proceedings, the Company made no significant payments to settle any legal, environmental or tax proceedings during the six months ended June 30, 2018, or June 30, 2017. The Company regularly analyzes current information and accrues for probable liabilities on the disposition of certain matters as necessary. Liabilities for loss contingencies arising from claims, assessments, litigation or other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated.
Note 12 – Equity
Shares Issued and Outstanding
As of June 30, 2018, there were 78,749,510 shares of Class A common stock issued and outstanding. An additional 922,696 unvested restricted stock units were outstanding under the Company’s Omnibus Incentive Plan. Effective April 10, 2018, all outstanding Holdco Class A-2 units were converted into Class A common stock in accordance with the terms of the Holdco LLC Agreement. Pursuant to such conversion, an aggregate of 2,785,681 shares of Class A common stock were issued to the respective holders, of which 914,632 remained subject to the vesting provisions applicable to the underlying Class A-2 units as of June 30, 2018. See Note 14 for additional information related to the restricted stock units and Holdco Class A-2 units.
Share Repurchase Program
The Company’s Board of Directors previously authorized the repurchase of up to $400 million of the Company’s outstanding shares of Class A common stock. The Company discontinued the share repurchase program in July 2018.
During the six months ended June 30, 2018, the Company repurchased an aggregate of 1,557,180 shares of Class A common stock at an average price of $39.13 per share for a total cost of approximately $61 million. In June 2017, the Company repurchased 7,540 shares of Class A common stock at an average price of $30.48 per share for a total cost of approximately $230,000.
In addition, in July 2018, the Company purchased 280,289 shares of Class A common stock at an average price of $40.30 for a total cost of approximately $11 million. During 2017 and 2018, the Company purchased an aggregate of 7,527,661 shares of Class A common stock at an average price of $35.94 for a total cost of approximately $271 million under the share repurchase program.
Tender Offer
On December 14, 2017, the Company’s Board of Directors announced the intention to commence a tender offer to purchase at least $250 million of the Company’s Class A common stock. In January 2018, upon the terms and subject to the conditions described in the Offer to Purchase dated December 20, 2017, as amended, the Company repurchased an aggregate of 6,770,833 shares of Class A common stock at a fixed price of $48.00 per share for a total cost of approximately $325 million (excluding expenses of approximately $4 million related to the tender offer).
Dividends
The Company is not currently paying a cash dividend; however, the Board of Directors periodically reviews the Company’s liquidity position to evaluate whether or not to pay a cash dividend.

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

Note 13 – Noncontrolling Interests
Noncontrolling interests represented ownership in the net assets of the Company’s then consolidated subsidiary, Holdco, not attributable to LINN Energy. On the Effective Date, Holdco granted incentive interest awards to certain members of its management in the form of Class B units (see Note 14). In accordance with the terms of the Holdco LLC Agreement, on July 31, 2017, all of the Class B units were converted to Class A-2 units of Holdco. At December 31, 2017, the noncontrolling Class A-2 units represented approximately 0.88% of Holdco’s total outstanding units. Effective April 10, 2018, all outstanding Holdco Class A-2 units were converted into Class A common stock in accordance with the terms of the Holdco LLC Agreement.
Note 14 – Share-Based Compensation
A summary of share-based compensation expenses included on the condensed consolidated statements of operations is presented below:
 
Three Months Ended June 30,
 
2018
 
2017
 
(in thousands)
 
 
 
 
General and administrative expenses
$
58,188

 
$
15,422

Income tax benefit
$
4,315

 
$
3,128


 
Successor
 
 
Predecessor
 
Six Months Ended June 30, 2018
 
Four Months Ended June 30, 2017
 
 
Two Months Ended February 28, 2017
(in thousands)
 
 
 
 
 
 
General and administrative expenses
$
75,225

 
$
19,599

 
 
$
50,255

Income tax benefit
$
6,732

 
$
3,555

 
 
$
5,170

During the six months ended June 30, 2018, the Company granted to certain employees 12,500 restricted stock units with an aggregate grant date fair value of approximately $519,000. The restricted stock units vest over three years.
As of June 30, 2018, 922,696 shares were issuable under the Omnibus Incentive Plan pursuant to outstanding restricted stock units and approximately 4.7 million additional shares were reserved for future issuance under the Plan. The Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”) generally has discretion regarding the timing, size and terms of future awards; however, the Omnibus Incentive Plan requires that 1) the portion of the Share Reserve that does not constitute the Emergence Awards, plus any subsequent awards forfeited before vesting (the “Remaining Share Reserve”), will be fully granted within the 36-month period immediately following the Effective Date (with such 36-month anniversary, the “Final Allocation Date”) and 2) if a Change in Control (as defined in the Omnibus Incentive Plan) occurs before the Final Allocation Date, the entire Remaining Share Reserve will be allocated on a fully-vested basis to actively employed employees (pro-rata based upon each such employee’s relative awards) upon the consummation of the Change in Control. As of April 30, 2018, all current participants in the Omnibus Incentive Plan have agreed to waive any rights they may have to future awards under this provision in consideration for the ability to participate in the Liquidity Program described below or a similar future program. The Compensation Committee has indicated that it does not intend to grant any future awards under the Omnibus Incentive Plan.
Upon a participant’s termination of employment and/or service (as applicable), the Company has the right (but not the obligation) to repurchase all or any portion of the shares of Class A common stock acquired pursuant to an award at a price equal to the fair market value (as determined under the Omnibus Incentive Plan) of the shares of Class A common stock to be

25

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

repurchased, measured as of the date of the Company’s repurchase notice. During May 2018, the Company began exercising its right to repurchase vesting awards under the Omnibus Incentive Plan which modified all outstanding awards to liability classification. For the six months ended June 30, 2018, the Company has repurchased 271,314 restricted stock units for a total cost of approximately $11 million pursuant to its right to repurchase vesting awards. The Company has recognized a liability of approximately $112 million related to awards required to be liability classified, included in “share-based payment liability” on the condensed consolidated balance sheet and recorded incremental share-based compensation expense of approximately $18 million related to modifying the awards to liability classification. At June 30, 2018, all outstanding share-based payment awards are liability classified.
In April 2018, the Company entered into agreements with each of the then serving executive officers of the Company, under which the Company agreed, at the option of each officer, to repurchase certain of their vested restricted stock unit awards and outstanding Class A common stock. Pursuant to those agreements, on August 7, 2018, the Company repurchased an aggregate of 2,477,834 shares of Class A common stock for a total cost of approximately $102 million.
On August 2, 2018, the Board authorized the termination of the Linn Energy, Inc. 2017 Omnibus Incentive Plan following the settlement of all outstanding RSUs and restricted common stock. In addition, all remaining unvested restricted stock units of Linn Energy, Inc. vested upon the Spin-off, which participants have the option to require the Company to settle in cash.
In addition, in January 2018, the Compensation Committee approved a one-time liquidity program under which the Company agreed, at the option of the participant, to 1) settle all or a portion of an eligible participant’s restricted stock units vesting on or before March 1, 2018 in cash and/or 2) repurchase all or a portion of any shares of Class A common stock held by an eligible participant as a result of a prior vesting of restricted stock units, in each case at an agreed upon price (the “Liquidity Program”). For the six months ended June 30, 2018, the Company settled 1,028,875 restricted stock units in cash and repurchased 120,829 shares of Class A common stock for a total cost of approximately $45 million pursuant to the Liquidity Program.
Note 15 – Earnings Per Share/Unit
Basic earnings per share/unit is computed by dividing net earnings attributable to common stockholders/unitholders by the weighted average number of shares/units outstanding during the period. Diluted earnings per share/unit is computed by adjusting the average number of shares/units outstanding for the dilutive effect, if any, of potential common shares/units.
The following tables provide a reconciliation of the numerators and denominators of the basic and diluted per share/unit computations for net income:
 
Successor
 
Three Months Ended June 30, 2018
 
Income
 
Shares
 
Per Share
 
(in thousands, except per share data)
 
 
 
 
 
 
Basic:
 
 
 
 
 
Net income attributable to common stockholders
$
5,104

 
78,718

 
$
0.06

 
 
 
 
 
 
Effect of Dilutive Securities:
 
 
 
 
 
Dilutive effect of restricted stock units
 
 
559

 
 
Dilutive effect of unvested Class A-2 units of Holdco
$

 

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

 
79,277

 
$
0.06



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

 
Successor
 
Three Months Ended June 30, 2017
 
Income
 
Shares
 
Per Share
 
(in thousands, except per share data)
 
 
 
 
 
 
Basic:
 
 
 
 
 
Income from continuing operations
$
223,379

 
89,849

 
$
2.49

Loss from discontinued operations, net of income taxes
(3,322
)
 
89,849

 
(0.04
)
Net income attributable to common stockholders
$
220,057

 
89,849

 
$
2.45

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

 
635

 
 
 
 
 
 
 
 
Diluted:
 
 
 
 
 
Income from continuing operations
$
223,379

 
90,484

 
$
2.47

Loss from discontinued operations
(3,322
)
 
90,484

 
(0.04
)
Net income attributable to common stockholders
$
220,057

 
90,484

 
$
2.43


 
Successor
 
Six Months Ended June 30, 2018
 
Income
 
Shares
 
Per Share
 
(in thousands, except per share data)
 
 
 
 
 
 
Basic:
 
 
 
 
 
Net income attributable to common stockholders
$
74,928

 
78,817

 
$
0.95

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

 
947

 
 
Dilutive effect of unvested Class A-2 units of Holdco
$
(1,140
)
 

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

 
79,764

 
$
0.93



27

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

 
Successor
 
Four Months Ended June 30, 2017
 
Income
 
Shares
 
Per Share
 
(in thousands, except per share data)
 
 
 
 
 
 
Basic:
 
 
 
 
 
Income from continuing operations
$
216,055

 
89,849

 
$
2.41

Loss from discontinued operations, net of income taxes
(3,254
)
 
89,849

 
(0.04
)
Net income attributable to common stockholders
$
212,801

 
89,849

 
$
2.37

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

 
216

 
 
 
 
 
 
 
 
Diluted:
 
 
 
 
 
Income from continuing operations
$
216,055

 
90,065

 
$
2.40

Loss from discontinued operations
(3,254
)