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
LINNLOGOA21.JPG
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.

ii
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
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
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
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.

4

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
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
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 

6
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.

7

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”).

8
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

9
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.

10
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

11
Table of Contents
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
)

12
Table of Contents
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.

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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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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
)
 
90,065

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

 
90,065

 
$
2.36


 
Predecessor
 
Two Months Ended February 28, 2017
 
Income (Loss)
 
Units
 
Per Unit
 
(in thousands, except per unit data)
 
 
 
 
 
 
Basic and Diluted:
 
 
 
 
 
Income from continuing operations
$
2,397,609

 
352,792

 
$
6.80

Loss from discontinued operations, net of income taxes
(548
)
 
352,792

 
(0.01
)
Net income attributable to common unitholders
$
2,397,061

 
352,792

 
$
6.79

The diluted earnings per share calculation excludes approximately 1,989 restricted stock units that were anti-dilutive for the six months ended June 30, 2018 . No restricted stock units were anti-dilutive for the three months ended June 30, 2018 . The diluted earnings per share calculation for the three months and four months ended June 30, 2017 , exclude approximately 3,470,051 Class B units associated with management’s profits interests awards that were not yet considered to be dilutive as the applicable hurdle rate had not been met as of June 30, 2017 . There were no potential common units outstanding during the two months ended February 28, 2017.
Note 16 – Income Taxes
Amounts recognized as income taxes are included in “income tax expense (benefit),” as well as discontinued operations, on the consolidated statements of operations. The effective income tax rates were approximately 45% and 37% for the three months and six months ended June 30, 2018 , respectively, approximately 42% for both the three months and four months ended June 30, 2017 , and zero for the two months ended February 28, 2017. For the six months ended June 30, 2018 , the Company’s federal and state statutory rate net of the federal tax benefit was approximately 24% . The increase in the effective tax rate during 2018 is primarily due to non-deductible executive compensation.

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

The Successor was formed as a C corporation. For federal and state income tax purposes (with the exception of the state of Texas), the Predecessor was a limited liability company treated as a partnership, in which income tax liabilities and/or benefits were passed through to the Predecessor’s unitholders. Limited liability companies are subject to Texas margin tax. In addition, certain of the Predecessor’s subsidiaries were C corporations subject to federal and state income taxes. As such, with the exception of the state of Texas and certain subsidiaries, the Predecessor did not directly pay federal and state income taxes and recognition was not given to federal and state income taxes for the operations of the Predecessor. The deferred tax effects of the Company’s change to a C corporation are included in income from continuing operations for the two months ended February 28, 2017.
Note 17 – Supplemental Disclosures to the Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Cash Flows
“Other current assets” reported on the condensed consolidated balance sheets include the following:
 
June 30, 2018
 
December 31, 2017
 
(in thousands)
 
 
 
 
Prepaids
$
14,209

 
$
46,238

Receivable from related party
25,982

 
23,163

Inventories
3,981

 
7,667

Other
2,487

 
2,703

Other current assets
$
46,659

 
$
79,771

“Other accrued liabilities” reported on the condensed consolidated balance sheets include the following:
 
June 30, 2018
 
December 31, 2017
 
(in thousands)
 
 
 
 
Accrued compensation
$
13,533

 
$
29,089

Asset retirement obligations (current portion)
1,488

 
3,926

Deposits
3,170

 
15,349

Income taxes payable
23

 
7,496

Other
1,616

 
2,757

Other accrued liabilities
$
19,830

 
$
58,617

The following table provides a reconciliation of cash and cash equivalents on the condensed consolidated balance sheets to cash, cash equivalents and restricted cash on the condensed consolidated statement of cash flows:
 
June 30, 2018
 
December 31, 2017
 
(in thousands)
 
 
 
 
Cash and cash equivalents
$
301,365

 
$
464,508

Restricted cash
43,387

 
56,445

Cash, cash equivalents and restricted cash
$
344,752

 
$
520,953


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

Supplemental disclosures to the condensed consolidated statements of cash flows are presented below:
 
Successor
 
 
Predecessor
 
Six Months Ended June 30, 2018
 
Four Months Ended June 30, 2017
 
 
Two Months Ended February 28, 2017
(in thousands)
 
 
 
 
 
 
Cash payments for interest, net of amounts capitalized
$
—

 
$
14,436

 
 
$
17,651

Cash payments for income taxes
$
7,748

 
$
215

 
 
$
—

Cash payments for reorganization items, net
$
2,911

 
$
6,300

 
 
$
21,571

 
 
 
 
 
 
 
Noncash investing activities:
 
 
 
 
 
 
Accrued capital expenditures
$
21,968

 
$
34,547

 
 
$
22,191

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 June 30, 2018 , “restricted cash” on the condensed consolidated balance sheet consisted of approximately $33 million that will be used to settle certain claims in accordance with the Plan (which is the remainder of approximately $80 million transferred to restricted cash in February 2017 to fund such items), approximately $3 million related to deposits and approximately $7 million for other items. At December 31, 2017 , “restricted cash” on the condensed consolidated balance sheet consisted of approximately $36 million that will be used to settle certain claims in accordance with the Plan, approximately $15 million related to deposits and approximately $5 million for other items.
Note 18 – Related Party Transactions
Roan Resources LLC
On August 31, 2017, the Company completed the Roan Contribution. In exchange for their respective contributions, LINN Energy and Citizen each received a 50% equity interest in Roan. See Note 6 for additional information. Also on such date, Roan entered into a Master Services Agreement (the “MSA”) with Linn Operating, LLC (“Linn Operating”), a subsidiary of LINN Energy, pursuant to which Linn Operating agreed to provide certain operating, administrative and other services in respect of the assets contributed to Roan during a transitional period.
Under the MSA, Roan agreed to reimburse Linn Operating for certain costs and expenses incurred by Linn Operating in connection with providing the services, and to pay to Linn Operating a service fee of $1.25 million per month, prorated for partial months. The MSA terminated according to its terms on April 30, 2018.
In addition, the Company’s pre-Spin-off subsidiary, Blue Mountain Midstream LLC (“Blue Mountain”), has an agreement in place with Roan for the purchase and processing of natural gas from certain of Roan’s properties. Blue Mountain became a subsidiary of Riviera on August 7, 2018 in connection with the Spin-off.
For the three months and six months ended June 30, 2018 , the Company made natural gas purchases from Roan of approximately $15 million and $32 million , respectively, included in “marketing expenses” on the condensed consolidated statements of operations. In addition, for the three months and six months ended June 30, 2018 , the Company recognized service fees of approximately $1 million and $5 million , respectively, under the MSA, as a reduction to general and administrative expenses. At June 30, 2018 , the Company had approximately $26 million due from Roan, primarily associated with capital spending, included in “other current assets” and approximately $11 million due to Roan, associated with natural gas purchases, included in “accounts payable and accrued expenses” on the condensed consolidated balance sheet. At December 31, 2017 , the Company had approximately $23 million due from Roan, primarily associated with capital spending,

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

included in “other current assets” and approximately $18 million due to Roan, primarily associated with joint interest billings and natural gas purchases, included in “accounts payable and accrued expenses” on the condensed consolidated balance sheet.
Berry Petroleum Company, LLC
Berry, a former subsidiary of the Predecessor, was deconsolidated effective December 31, 2016 . The employees of Linn Operating, Inc. (“LOI”), a subsidiary of the Predecessor, provided services and support to Berry in accordance with an agency agreement and power of attorney between Berry and LOI. Upon deconsolidation, transactions between the Predecessor and Berry were no longer eliminated in consolidation and were treated as related party transactions. These transactions include, but are not limited to, management fees paid to the Company by Berry. On the Effective Date, Berry emerged from bankruptcy as a stand-alone, unaffiliated entity. For the two months ended February 28, 2017, Berry incurred management fees of approximately $6 million for services provided by LOI.
LinnCo, LLC
LinnCo, which was an affiliate of the Predecessor, was formed on April 30, 2012. The Predecessor had agreed to provide to LinnCo, or to pay on LinnCo’s behalf, any financial, legal, accounting, tax advisory, financial advisory and engineering fees, and other administrative and out-of-pocket expenses incurred by LinnCo, along with any other expenses incurred in connection with any public offering of shares in LinnCo or incurred as a result of being a publicly traded entity. These expenses include costs associated with annual, quarterly and other reports to holders of LinnCo shares, tax return and Form 1099 preparation and distribution, NASDAQ listing fees, printing costs, independent auditor fees and expenses, legal counsel fees and expenses, limited liability company governance and compliance expenses and registrar and transfer agent fees. In addition, the Predecessor had agreed to indemnify LinnCo and its officers and directors for damages suffered or costs incurred (other than income taxes payable by LinnCo) in connection with carrying out LinnCo’s activities. All expenses and costs paid by the Predecessor on LinnCo’s behalf were expensed by the Predecessor.
For the two months ended February 28, 2017, LinnCo incurred total general and administrative expenses of approximately $287,000 , including approximately $240,000 related to services provided by the Predecessor. All of the expenses incurred during the two months ended February 28, 2017, had been paid by the Predecessor on LinnCo’s behalf as of February 28, 2017.
Note 19 – Segments
During the second quarter of 2018, the Company had two reporting segments: Upstream and Chisholm Trail. The Upstream reporting segment was engaged in the exploration, development, production, and sale of oil, natural gas, and NGLs. The Chisholm Trail reporting segment is new for the second quarter of 2018 as a result of a change in the way our chief operating decision maker (“CODM”) assesses the Company’s results of operations following the hiring of a segment manager to lead the Chisholm Trail reporting segment and the commissioning of the cryogenic natural gas processing facility during the second quarter of 2018. The Chisholm Trail reporting segment consisted of the Chisholm Trail gas plant system, 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. To assess the performance of the Company’s operating segments, the CODM analyzes field level cash flow. The Company defines field level cash flow as revenues less direct operating expenses. Other indirect income (expenses) include “general and administrative expenses,” “exploration costs,” “depreciation, depletion and amortization,” “gains on sale of assets and other, net,” “other income and (expenses)” and “reorganization items, net.” Prior period amounts are presented on a comparable basis. In addition, information regarding total assets by segment is not presented because it is not reviewed by the CODM.

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

The following tables present the Company’s financial information by reportable segment:
 
Successor
 
Three Months Ended June 30, 2018
 
Upstream
 
Chisholm Trail
 
Not Allocated to Segments
 
Consolidated
 
(in thousands)
 
 
 
 
 
 
 
 
Oil, natural gas and natural gas liquids sales
$
87,004

 
$
—

 
$
—

 
$
87,004

Marketing revenues
22,901

 
20,066

 
—

 
42,967

Other revenues
6,387

 
—

 
—

 
6,387

 
116,292

 
20,066

 
—

 
136,358

Lease operating expenses
24,088

 
—

 
—

 
24,088

Transportation expenses
21,213

 
—

 
—

 
21,213

Marketing expenses
20,244

 
20,083

 
—

 
40,327

Taxes other than income taxes
6,737

 
285

 
275

 
7,297

Total direct operating expenses
72,282

 
20,368

 
275

 
92,925

Field level cash flow
$
44,010

 
$
(302
)
 
(275
)
 
43,433

Losses on oil and natural gas derivatives
 
 
 
 
(7,525
)
 
(7,525
)
Other indirect income (expenses)
 
 
 
 
(23,283
)
 
(23,283
)
Income from continuing operations before income taxes
 
 
 
 


 
$
12,625


 
Successor
 
Three Months Ended June 30, 2017
 
Upstream
 
Chisholm Trail
 
Not Allocated to Segments
 
Consolidated
 
(in thousands)
 
 
 
 
 
 
 
 
Oil, natural gas and natural gas liquids sales
$
243,167

 
$
—

 
$
—

 
$
243,167

Marketing revenues
10,793

 
1,754

 
—

 
12,547

Other revenues
6,391

 
—

 
—

 
6,391

 
260,351

 
1,754

 
—

 
262,105

Lease operating expenses
71,057

 
—

 
—

 
71,057

Transportation expenses
37,388

 
—

 
—

 
37,388

Marketing expenses
6,156

 
820

 
—

 
6,976

Taxes other than income taxes
17,486

 
116

 
269

 
17,871

Total direct operating expenses
132,087

 
936

 
269

 
133,292

Field level cash flow
$
128,264

 
$
818

 
(269
)
 
128,813

Gains on oil and natural gas derivatives
 
 
 
 
45,714

 
45,714

Other indirect income (expenses)
 
 
 
 
207,622

 
207,622

Income from continuing operations before income taxes
 
 
 
 


 
$
382,149



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

 
Successor
 
Six Months Ended June 30, 2018
 
Upstream
 
Chisholm Trail
 
Not Allocated to Segments
 
Consolidated
 
(in thousands)
 
 
 
 
 
 
 
 
Oil, natural gas and natural gas liquids sales
$
223,880

 
$
—

 
$
—

 
$
223,880

Marketing revenues
47,276

 
41,958

 
—

 
89,234

Other revenues
12,281

 
—

 
—

 
12,281

 
283,437

 
41,958

 
—

 
325,395

Lease operating expenses
71,972

 
—

 
—

 
71,972

Transportation expenses
40,307

 
—

 
—

 
40,307

Marketing expenses
41,380

 
40,702

 
—

 
82,082

Taxes other than income taxes
14,908

 
477

 
364

 
15,749

Total direct operating expenses
168,567

 
41,179

 
364

 
210,110

Field level cash flow
$
114,870

 
$
779

 
(364
)
 
115,285

Losses on oil and natural gas derivatives
 
 
 
 
(22,555
)
 
(22,555
)
Other indirect income (expenses)
 
 
 
 
31,167

 
31,167

Income from continuing operations before income taxes
 
 
 
 


 
$
123,897


 
Successor
 
Four Months Ended June 30, 2017
 
Upstream
 
Chisholm Trail
 
Not Allocated to Segments
 
Consolidated
 
(in thousands)
 
 
 
 
 
 
 
 
Oil, natural gas and natural gas liquids sales
$
323,492

 
$
—

 
$
—

 
$
323,492

Marketing revenues
13,273

 
2,188

 
—

 
15,461

Other revenues
8,419

 
—

 
—

 
8,419

 
345,184

 
2,188

 
—

 
347,372

Lease operating expenses
95,687

 
—

 
—

 
95,687

Transportation expenses
51,111

 
—

 
—

 
51,111

Marketing expenses
8,513

 
1,002

 
—

 
9,515

Taxes other than income taxes
24,478

 
155

 
315

 
24,948

Total direct operating expenses
179,789

 
1,157

 
315

 
181,261

Field level cash flow
$
165,395

 
$
1,031

 
(315
)
 
166,111

Gains on oil and natural gas derivatives
 
 
 
 
33,755

 
33,755

Other indirect income (expenses)
 
 
 
 
169,644

 
169,644

Income from continuing operations before income taxes
 
 
 
 


 
$
369,510



33
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LINN ENERGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued
(Unaudited)

 
Predecessor
 
Two Months Ended February 28, 2017
 
Upstream
 
Chisholm Trail
 
Not Allocated to Segments
 
Consolidated
 
(in thousands)
 
 
 
 
 
 
 
 
Oil, natural gas and natural gas liquids sales
$
188,885

 
$
—

 
$
—

 
$
188,885

Marketing revenues
5,999

 
637

 
—

 
6,636

Other revenues
9,915

 
—

 
—

 
9,915

 
204,799

 
637

 
—

 
205,436

Lease operating expenses
49,665

 
—

 
—

 
49,665

Transportation expenses
25,972

 
—

 
—

 
25,972

Marketing expenses
4,602

 
218

 
—

 
4,820

Taxes other than income taxes
14,773

 
78

 
26

 
14,877

Total direct operating expenses
95,012

 
296

 
26

 
95,334

Field level cash flow
$
109,787

 
$
341

 
(26
)
 
110,102

Gains on oil and natural gas derivatives
 
 
 
 
92,691

 
92,691

Other indirect income (expenses)
 
 
 
 
2,194,650

 
2,194,650

Income from continuing operations before income taxes
 
 
 
 


 
$
2,397,443



34
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Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with the financial statements and related notes included in this Quarterly Report on Form 10-Q and in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. The following discussion contains forward-looking statements based on expectations, estimates and assumptions. Actual results may differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, market prices for oil, natural gas and NGL, production volumes, estimates of proved reserves, capital expenditures, economic and competitive conditions, credit and capital market conditions, regulatory changes and other uncertainties, as well as those factors set forth in “Cautionary Statement Regarding Forward-Looking Statements” below and in Item 1A. “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, and elsewhere in the Annual Report.
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 below) and resolution of all outstanding claims, and its consolidated subsidiaries as a whole or on an individual basis, depending on the context in which the statements are made.
As discussed under Holding Company Reorganization below, 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.
The reference to a “Note” herein refers to the accompanying Notes to Condensed Consolidated Financial Statements contained in Item 1. “Financial Statements.”
Executive Overview
LINN Energy 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 below and 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.
On December 3, 2016, LINN Energy filed an amended plan of reorganization that excluded Berry. As a result of its loss of control of Berry, LINN Energy concluded that it was appropriate to deconsolidate Berry effective on the aforementioned date.
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.”):
•
Hugoton Basin, which includes oil and natural gas properties, as well as the Jayhawk natural gas processing plant, located in Kansas;

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

•
East Texas, which includes oil and natural gas properties producing primarily from the Cotton Valley and Bossier Sandstone;
•
North Louisiana, which includes oil and natural gas properties producing primarily from the Cotton Valley Sandstones;
•
Michigan/Illinois, which includes properties producing from the Antrim Shale formation located in northern Michigan and oil properties in southern Illinois;
•
Rockies, which includes non-operated properties located in the Dunkards Wash field in Utah; and
•
Mid-Continent, which includes properties in the Northwest STACK in northwestern Oklahoma, the Arkoma STACK located in southeastern Oklahoma, and various other oil and natural gas producing properties throughout Oklahoma.
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. See below and Note 4 for details of the Company’s divestitures.
For the three months ended June 30, 2018, the Company’s results included the following:
•
oil, natural gas and NGL sales of approximately $87 million compared to $243 million for the three months ended June 30, 2017;
•
average daily production of approximately 312 MMcfe/d compared to 710 MMcfe/d for the three months ended June 30, 2017;
•
net income attributable to common stockholders of approximately $5 million compared to $220 million for the three months ended June 30, 2017;
•
capital expenditures of approximately $42 million compared to $96 million for the three months ended June 30, 2017; and
•
10 wells drilled (all successful) compared to 14 wells drilled (all successful) for the three months ended June 30, 2017.
For the six months ended June 30, 2018, the Company’s results included the following:
•
oil, natural gas and NGL sales of approximately $224 million compared to $323 million and $189 million for the four months ended June 30, 2017, and the two months ended February 28, 2017, respectively;
•
average daily production of approximately 356 MMcfe/d compared to 722 MMcfe/d and 745 MMcfe/d for the four months ended June 30, 2017, and the two months ended February 28, 2017, respectively;
•
net income attributable to common stockholders/unitholders of approximately $75 million compared to $213 million and $2.4 billion for the four months ended June 30, 2017, and the two months ended February 28, 2017, respectively;
•
net cash provided by operating activities from continuing operations of $52 million compared to approximately $70 million and $51 million for the four months ended June 30, 2017, and the two months ended February 28, 2017, respectively;
•
capital expenditures of approximately $109 million compared to $114 million and $46 million for the four months ended June 30, 2017, and the two months ended February 28, 2017, respectively; and
•
15 wells drilled (all successful) compared to 41 wells drilled (all successful) for the six months ended June 30, 2017.
Predecessor and Successor Reporting
As a result of the application of fresh start accounting (see Note 3), the Company’s condensed consolidated financial statements and certain note presentations are separated into two distinct periods, the period before the Effective Date (labeled Predecessor) and the period after that date (labeled Successor), to indicate the application of a different basis of accounting between the periods presented. Despite this separate presentation, there was continuity of the Company’s operations.

36
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Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued

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”).
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.
Divestitures
Below are the Company’s completed divestitures in 2018:
On April 10, 2018, the Company completed the sale of its conventional properties located in New Mexico (the “New Mexico Assets Sale”). Cash proceeds received from the sale of these properties were approximately $15 million and the Company recognized a net gain of approximately $11 million.
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 (the “West Texas Assets Sale”). 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.
As a result of the Company’s strategic exit from California during 2017 (completed by the San Joaquin Basin Sale and Los Angeles Basin Sale), the Company classified the results of operations and cash flows of its California properties as discontinued operations on its condensed consolidated financial statements.
Construction of Cryogenic Plant
In July 2017, the Company’s then subsidiary, Blue Mountain Midstream LLC (“Blue Mountain”) entered into a definitive agreement with BCCK Engineering, Inc. to construct a 225 MMcf/d cryogenic natural gas processing facility with a total capacity of 250 MMcf/d. The facility was successfully commissioned in the second quarter of 2018. Blue Mountain became a subsidiary of Riviera on August 7, 2018 in connection with the Spin-off.

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

Financing Activities
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 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.
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).
Credit Facility
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. Pursuant to the Spin-off, the borrower under the Credit Facility became a subsidiary of Riviera and as such, Riviera and its subsidiaries have assumed all obligations under the Credit Facility.
Commodity Derivatives
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. 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.

38
Table of Contents
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued

Results of Operations
Three Months Ended June 30, 2018, Compared to Three Months Ended June 30, 2017
 
Successor
 
 
 
Three Months Ended June 30,
 
 
 
2018
 
2017
 
Variance
 
(in thousands)
Revenues and other:
 
 
 
 
 
Natural gas sales
$
53,662

 
$
110,481

 
$
(56,819
)
Oil sales
10,919

 
89,237

 
(78,318
)
NGL sales
22,423

 
43,449

 
(21,026
)
Total oil, natural gas and NGL sales
87,004

 
243,167

 
(156,163
)
Gains (losses) on oil and natural gas derivatives
(7,525
)
 
45,714

 
(53,239
)
Marketing and other revenues
49,354

 
18,938

 
30,416

 
128,833

 
307,819

 
(178,986
)
Expenses:
 
 
 
 
 
Lease operating expenses
24,088

 
71,057

 
(46,969
)
Transportation expenses
21,213

 
37,388

 
(16,175
)
Marketing expenses
40,327

 
6,976

 
33,351

General and administrative expenses (1)
92,395

 
34,458

 
57,937

Exploration costs
53

 
811

 
(758
)
Depreciation, depletion and amortization
21,980

 
51,987

 
(30,007
)
Taxes, other than income taxes
7,297

 
17,871

 
(10,574
)
Gains on sale of assets and other, net
(101,777
)
 
(306,878
)
 
205,101

 
105,576

 
(86,330
)
 
191,906

Other income and (expenses)
(9,373
)
 
(8,623
)
 
(750
)
Reorganization items, net
(1,259
)
 
(3,377
)
 
2,118

Income from continuing operations before income taxes
12,625

 
382,149

 
(369,524
)
Income tax expense
5,722

 
158,770

 
(153,048
)
Income from continuing operations
6,903

 
223,379

 
(216,476
)
Loss from discontinued operations, net of income taxes
—

 
(3,322
)
 
3,322

Net income
6,903

 
220,057

 
(213,154
)
Net income attributable to noncontrolling interests
1,799

 
—

 
1,799

Net income attributable to common stockholders
$
5,104

 
$
220,057

 
$
(214,953
)
(1)  
General and administrative expenses for the three months ended June 30, 2018, and June 30, 2017, include approximately $58 million and $15 million, respectively, of share-based compensation expenses. In addition, general and administrative expenses for the three months ended June 30, 2018, and June 30, 2017, include approximately $14 million and $502,000, respectively of severance costs.

39
Table of Contents
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued

 
Successor
 
 
 
Three Months Ended June 30,
 
 
 
2018
 
2017
 
Variance
Average daily production:
 
 
 
 
 
Natural gas (MMcf/d)
238

 
432

 
(45
)%
Oil (MBbls/d)
1.8

 
21.6

 
(92
)%
NGL (MBbls/d)
10.5

 
24.8

 
(58
)%
Total (MMcfe/d)
312

 
710

 
(56
)%
 
 
 
 
 
 
Average daily production – Equity method investments: (1)
 
 
 
 
 
Total (MMcfe/d)
109

 
—

 
100
 %
 
 
 
 
 
 
Weighted average prices: (2)
 
 
 
 
 
Natural gas (Mcf)
$
2.48

 
$
2.81

 
(12
)%
Oil (Bbl)
$
66.66

 
$
45.42

 
47
 %
NGL (Bbl)
$
23.43

 
$
19.29

 
21
 %
 
 
 
 
 
 
Average NYMEX prices:
 
 
 
 
 
Natural gas (MMBtu)
$
2.80

 
$
3.18

 
(12
)%
Oil (Bbl)
$
67.88

 
$
48.28

 
41
 %
 
 
 
 
 
 
Costs per Mcfe of production:
 
 
 
 
 
Lease operating expenses
$
0.85

 
$
1.10

 
(23
)%
Transportation expenses
$
0.75

 
$
0.58

 
29
 %
General and administrative expenses (3)
$
3.26

 
$
0.53

 
515
 %
Depreciation, depletion and amortization
$
0.77

 
$
0.80

 
(3
)%
Taxes, other than income taxes
$
0.26

 
$
0.28

 
(8
)%
 
 
 
 
 
 
Average daily production – discontinued operations:
 
 
 
 
 
Total (MMcfe/d)
—

 
29

 
(100
)%
(1)  
Represents the Company’s 50% equity interest in Roan.
(2)  
Does not include the effect of gains (losses) on derivatives.
(3)  
General and administrative expenses for the three months ended June 30, 2018, and June 30, 2017, include approximately $58 million and $15 million, respectively, of share-based compensation expenses. In addition, general and administrative expenses for the three months ended June 30, 2018, and June 30, 2017, include approximately $14 million and $502,000, respectively of severance costs.

40
Table of Contents
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued

Revenues and Other
Oil, Natural Gas and NGL Sales
Oil, natural gas and NGL sales decreased by approximately $156 million or 64% to approximately $87 million for the three months ended June 30, 2018, from approximately $243 million for the three months ended June 30, 2017, due to lower production volumes as a result of divestitures completed in 2017 and 2018. Lower natural gas prices resulted in a decrease in revenues of approximately $7 million. Higher NGL and oil prices resulted in an increase in revenues of approximately $4 million and $3 million, respectively. In addition, revenues increased by approximately $1 million due to the impact of the new accounting standard related to revenues from contracts with customers, adopted on January 1, 2018. As of January 1, 2017, revenue was recognized net of transportation expenses if the processor was the customer and there was no redelivery of commodities to the Company. See Note 1 for additional details of the revenue accounting standard.
Average daily production volumes decreased to approximately 312 MMcfe/d for the three months ended June 30, 2018, from 710 MMcfe/d for the three months ended June 30, 2017. Lower oil, natural gas and NGL production volumes resulted in a decrease in revenues of approximately $82 million, $50 million and $25 million, respectively.
The following table sets forth average daily production by region:
 
Successor
 
 
 
 
 
Three Months Ended June 30,
 
 
 
 
 
2018
 
2017
 
Variance
Average daily production (MMcfe/d):
 
 
 
 
 
 
 
Hugoton Basin
136

 
164

 
(28
)
 
(18
)%
Mid-Continent
49

 
126

 
(77
)
 
(61
)%
East Texas
51

 
53

 
(2
)
 
(3
)%
Rockies
22

 
244

 
(222
)
 
(91
)%
Michigan/Illinois
27

 
29

 
(2
)
 
(6
)%
North Louisiana
27

 
23

 
4

 
14
 %
Permian Basin
—

 
46

 
(46
)
 
(100
)%
South Texas
—

 
25

 
(25
)
 
(100
)%
 
312

 
710

 
(398
)
 
(56
)%
Equity method investments
109

 
—

 
109

 
100
 %
The increase in average daily production volumes in the North Louisiana region primarily reflect increased development capital spending in the region. The decrease in average daily production volumes in the Mid-Continent region primarily reflects lower production volumes as a result of the Roan Contribution on August 31, 2017, partially offset by increased development capital spending in the region. The decreases in average daily production volumes in the Hugoton Basin, Rockies, Permian Basin and South Texas regions primarily reflect lower production volumes as a result of divestitures completed during 2017 and 2018. See Note 4 for additional information of divestitures. In addition, the decreases in average daily production volumes in these and the remaining regions reflect lower production volumes as a result of reduced development capital spending driven by continued low commodity prices. Equity method investments represents the Company’s 50% equity interest in Roan.
Gains (Losses) on Oil and Natural Gas Derivatives
Losses on oil and natural gas derivatives were approximately $8 million for the three months ended June 30, 2018, compared to gains of approximately $46 million for the three months ended June 30, 2017, representing a variance of approximately $54 million. Gains and losses on oil and natural gas derivatives were primarily due to changes in fair value of the derivative contracts. The fair value on unsettled derivative contracts changes as future commodity price expectations change compared to the contract prices on the derivatives. If the expected future commodity prices increase compared to the contract prices on the derivatives, losses are recognized; and if the expected future commodity prices decrease compared to the contract prices on the derivatives, gains are recognized.

41
Table of Contents
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued

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. See Item 3. “Quantitative and Qualitative Disclosures About Market Risk” and Note 7 and Note 8 for additional details about the Company’s commodity derivatives. For information about the Company’s pre-Spin-off credit risk related to derivative contracts, see “Counterparty Credit Risk” under “Liquidity and Capital Resources” below.
Marketing and Other Revenues
Marketing revenues represent third-party activities associated with company-owned gathering systems, plants and facilities. Other revenues primarily include helium sales revenue. Consolidated marketing and other revenues increased by approximately $30 million or 161% to approximately $49 million for the three months ended June 30, 2018, from approximately $19 million for the three months ended June 30, 2017. Marketing and other revenues of the upstream segment increased by approximately $12 million or 70% to approximately $29 million for the three months ended June 30, 2018, from approximately $17 million for the three months ended June 30, 2017. The increase was primarily due to higher revenues generated by the Jayhawk natural gas processing plant in Kansas, principally driven by a change in contract terms and the impact of the new accounting standard related to revenues from contracts with customers, adopted on January 1, 2018. As of January 1, 2018, the Company recognized 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 resulted in an increase to revenues and expenses with no impact on net income. See Note 1 for additional details of the revenue accounting standard.
Expenses
Lease Operating Expenses
Lease operating expenses include expenses such as labor, field office, vehicle, supervision, maintenance, tools and supplies, and workover expenses. Lease operating expenses decreased by approximately $47 million or 66% to approximately $24 million for the three months ended June 30, 2018, from approximately $71 million for the three months ended June 30, 2017. The decrease was primarily due to reduced labor costs for field operations as a result of cost savings initiatives and the divestitures completed in 2017 and 2018. Lease operating expenses per Mcfe decreased to $0.85 per Mcfe for the three months ended June 30, 2018, from $1.10 per Mcfe for the three months ended June 30, 2017.
Transportation Expenses
Transportation expenses decreased by approximately $16 million or 43% to approximately $21 million for the three months ended June 30, 2018, from approximately $37 million for the three months ended June 30, 2017. The decrease was due to reduced costs as a result of lower production volumes primarily as a result of the divestitures completed in 2017 and 2018, partially offset by the impact of the new accounting standard related to revenues from contracts with customers, adopted on January 1, 2018. As of January 1, 2018, revenue is recognized net of transportation expenses if the processor is the customer and there is no redelivery of commodities to the Company. See Note 1 for additional details of the revenue accounting standard. Transportation expenses per Mcfe increased to $0.75 per Mcfe for the three months ended June 30, 2018, from $0.58 per Mcfe for the three months ended June 30, 2017.
Marketing Expenses
Marketing expenses represent third-party activities associated with company-owned gathering systems, plants and facilities. Consolidated marketing expenses increased by approximately $33 million to approximately $40 million for the three months ended June 30, 2018, from approximately $7 million for the three months ended June 30, 2017. Marketing expenses of the upstream segment increased by approximately $14 million to approximately $20 million for the three months ended June 30, 2018, from approximately $6 million for the three months ended June 30, 2017. The increase was primarily due to higher expenses associated with the Jayhawk natural gas processing plant in Kansas, principally driven by a change in contract terms and the impact of the new accounting standard related to revenues from contracts with customers, adopted on January 1, 2018. As of January 1, 2018, the Company recognized 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 resulted in an increase to revenues and expenses with no impact on net income. See Note 1 for additional details of the revenue accounting standard.

42
Table of Contents
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued

General and Administrative Expenses
General and administrative expenses are costs not directly associated with field operations and reflect the costs of employees including executive officers, related benefits, office leases and professional fees. General and administrative expenses increased by approximately $58 million or 168% to approximately $92 million for the three months ended June 30, 2018, from approximately $34 million for the three months ended June 30, 2017. The increase was primarily due to higher share-based compensation expenses, higher severance costs, and transition service fees received from Berry in the prior year, partially offset by lower salaries and benefits related expenses. General and administrative expenses per Mcfe increased to $3.26 per Mcfe for the three months ended June 30, 2018, from $0.53 per Mcfe for the three months ended June 30, 2017.
For the professional services expenses related to the Chapter 11 proceedings, see “Reorganization Items, Net.”
Exploration Costs
Exploration costs decreased by approximately $758,000 to approximately $53,000 for the three months ended June 30, 2018, from approximately $811,000 for the three months ended June 30, 2017. The decrease was primarily due to lower seismic data expenses.
Depreciation, Depletion and Amortization
Depreciation, depletion and amortization decreased by approximately $30 million or 58% to approximately $22 million for the three months ended June 30, 2018, from approximately $52 million for the three months ended June 30, 2017. The decrease was primarily due to lower total production volumes. Depreciation, depletion and amortization per Mcfe decreased to $0.77 per Mcfe for the three months ended June 30, 2018, from $0.80 per Mcfe for the three months ended June 30, 2017.
Taxes, Other Than Income Taxes
 
Successor
 
 
 
Three Months Ended June 30,
 
 
 
2018
 
2017
 
Variance
 
(in thousands)
 
 
 
 
 
 
Severance taxes
$
2,861

 
$
10,669

 
$
(7,808
)
Ad valorem taxes
4,161

 
6,933

 
(2,772
)
Other
275

 
269

 
6

 
$
7,297

 
$
17,871

 
$
(10,574
)
Severance taxes, which are a function of revenues generated from production, decreased primarily due to lower production volumes. Ad valorem taxes, which are based on the value of reserves and production equipment and vary by location, decreased primarily due to divestitures completed in 2017 and 2018 and lower estimated valuations on certain of the Company’s properties.
Gains on Sale of Assets and Other, Net
During the three months ended June 30, 2018, the Company recorded the following net gains on divestitures (see Note 4):
•
Net gain of approximately $11 million on the New Mexico Assets Sale; and
•
Net gain of approximately $83 million, including costs to sell of approximately $2 million, on the Altamont Bluebell Assets Sale.
During the three months ended June 30, 2017, the Company recorded the following net gains on divestitures (see Note 4):
•
Net gain of approximately $22 million on the Salt Creek Assets Sale; and
•
Net gain of approximately $279 million, including costs to sell of approximately $6 million, on the Jonah Assets Sale.

43
Table of Contents
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued

Other Income and (Expenses)
 
Successor
 
 
 
Three Months Ended June 30,
 
 
 
2018
 
2017
 
Variance
 
(in thousands)
 
 
 
 
 
 
Interest expense, net of amounts capitalized
$
(584
)
 
$
(7,551
)
 
$
6,967

Earnings (losses) from equity method investments
(9,327
)
 
91

 
(9,418
)
Other, net
538

 
(1,163
)
 
1,701

 
$
(9,373
)
 
$
(8,623
)
 
$
(750
)
Interest expense decreased primarily due to no outstanding debt during 2018, and lower amortization of financing fees. For the three months ended June 30, 2018, interest expense is primarily related to amortization of financing fees. See “Debt” under “Liquidity and Capital Resources” below for additional details.
Equity method investments primarily include the Company’s 50% equity interest in Roan. The Company’s equity earnings consists of its share of Roan’s earnings and the amortization of the difference between the Company’s investment in Roan and Roan’s underlying net assets attributable to certain assets. See Note 6 for additional information.
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 are 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
)
Income Tax Expense
The Company recognized income tax expense of approximately $6 million and $159 million for the three months ended June 30, 2018, and June 30, 2017, respectively. The decrease is primarily due to a decrease in taxable earnings and a decrease in the federal statutory income tax rate.
Loss from Discontinued Operations, Net of Income Taxes
As a result of the Company’s strategic exit from California (completed by the San Joaquin Basin Sale and Los Angeles Basin Sale), the Company has classified the results of operations of its California properties as discontinued operations. Loss from discontinued operations, net of income taxes was approximately $3 million for the three months ended June 30, 2017. See Note 4 for additional information.

44
Table of Contents
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued

Net Income Attributable to Common Stockholders
Net income attributable to common stockholders decreased by approximately $215 million to approximately $5 million for the three months ended June 30, 2018, from approximately $220 million the three months ended June 30, 2017. The decrease was primarily due to lower gains on sales of assets, lower production revenue and losses compared to gains on commodity derivatives, partially offset by lower expenses during the three months ended June 30, 2018. See discussion above for explanations of variances.
Chisholm Trail Reporting Segment
 
Successor
 
 
 
Three Months Ended June 30,
 
 
 
2018
 
2017
 
Variance
 
(in thousands)
 
 
 
 
 
 
Marketing revenues
$
20,066

 
$
1,754

 
$
18,312

 
 
 
 
 
 
Marketing expenses
20,083

 
820

 
19,263

Severance taxes and ad valorem taxes
285

 
116

 
169

Total direct operating expenses
20,368

 
936

 
19,432

Field level cash flow (1)
$
(302
)
 
$
818

 
$
(1,120
)
(1)  
Refer to Note 19 for a reconciliation of field level cash flow to income from continuing operations before income taxes.
Marketing Revenues
Chisholm Trail’s marketing revenue increased by approximately $18 million to approximately $20 million for the three months ended June 30, 2018, from approximately $2 million for the three months ended June 30, 2017. The increase was primarily due to the new accounting standard related to revenues from contracts with customers, adopted on January 1, 2018, and higher throughput volumes sold. As of January 1, 2018, 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 impact on net income. See Note 1 for additional details of the revenue accounting standard.
Marketing Expenses
Chisholm Trail’s marketing expenses increased by approximately $19 million to approximately $20 million for the three months ended June 30, 2018, from approximately $820,000 for the three months ended June 30, 2017. The increase was primarily due to the new accounting standard related to revenues from contracts with customers, adopted on January 1, 2018, and higher throughput volumes purchased. As of January 1, 2018, 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 impact on net income. See Note 1 for additional details of the revenue accounting standard.
Field Level Cash Flow
Chisholm Trail’s field level cash flow decreased by approximately $1 million to negative cash flow of approximately $302,000 for the three months ended June 30, 2018, from positive cash flow of approximately $818,000 for the three months ended June 30, 2017. The decrease was primarily due to widening pricing spreads between the Conway and Mont Belvieu market hubs.


45
Table of Contents
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued

Results of Operations
The following table reflects the Company’s results of operations for each of the Successor and Predecessor periods presented:
 
Successor
 
 
Predecessor
 
Six Months Ended June 30, 2018
 
Four Months Ended June 30, 2017
 
 
Two Months Ended February 28, 2017
(in thousands)
 
 
 
 
 
 
Revenues and other:
 
 
 
 
 
 
Natural gas sales
$
116,990

 
$
148,551

 
 
$
99,561

Oil sales
56,615

 
119,475

 
 
58,560

NGL sales
50,275

 
55,466

 
 
30,764

Total oil, natural gas and NGL sales
223,880

 
323,492

 
 
188,885

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

 
 
92,691

Marketing and other revenues  (1)
101,515

 
23,880

 
 
16,551

 
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 (2)
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)
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

(1)  
Marketing and other revenues for the two months ended February 28, 2017, include approximately $6 million of management fee revenues recognized by the Company from Berry. Management fee revenues are included in “other revenues” on the condensed consolidated statement of operations.
(2)  
General and administrative expenses for the six months ended June 30, 2018, the four months ended June 30, 2017, and the two months ended February 28, 2017, include approximately $75 million, $20 million and $50 million, respectively, of share-based compensation expenses. General and administrative expenses for the six months ended June 30, 2018, the four months ended June 30, 2017, and the two months ended February 28, 2017, also include approximately $18 million, $596,000 and $787,000, respectively, of severance costs. In addition, general and administrative expenses for the two months ended February 28, 2017, include expenses incurred by LINN Energy associated with the operations of Berry. On February 28, 2017, LINN Energy and Berry emerged from Bankruptcy as stand-alone, unaffiliated entities.

46
Table of Contents
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued

 
Successor
 
 
Predecessor
 
Six Months Ended June 30, 2018
 
Four Months Ended June 30, 2017
 
 
Two Months Ended February 28, 2017
Average daily production:
 
 
 
 
 
 
Natural gas (MMcf/d)
252

 
448

 
 
495

Oil (MBbls/d)
5.1

 
21.4

 
 
20.2

NGL (MBbls/d)
12.3

 
24.3

 
 
21.4

Total (MMcfe/d)
356

 
722

 
 
745

 
 
 
 
 
 
 
Average daily production – Equity method investments: (1)
 
 
 
 
 
 
Total (MMcfe/d)
111

 
—

 
 
—

 
 
 
 
 
 
 
Weighted average prices: (2)
 
 
 
 
 
 
Natural gas (Mcf)
$
2.57

 
$
2.72

 
 
$
3.41

Oil (Bbl)
$
61.07

 
$
45.79

 
 
$
49.16

NGL (Bbl)
$
22.56

 
$
18.68

 
 
$
24.37

 
 
 
 
 
 
 
Average NYMEX prices:
 
 
 
 
 
 
Natural gas (MMBtu)
$
2.90

 
$
3.05

 
 
$
3.66

Oil (Bbl)
$
65.37

 
$
48.63

 
 
$
53.04

 
 
 
 
 
 
 
Costs per Mcfe of production:
 
 
 
 
 
 
Lease operating expenses
$
1.12

 
$
1.09

 
 
$
1.13

Transportation expenses
$
0.62

 
$
0.58

 
 
$
0.59

General and administrative expenses (3)
$
2.13

 
$
0.51

 
 
$
1.63

Depreciation, depletion and amortization
$
0.78

 
$
0.82

 
 
$
1.07

Taxes, other than income taxes
$
0.24

 
$
0.28

 
 
$
0.34

 
 
 
 
 
 
 
Average daily production – discontinued operations:
 
 
 
 
 
 
Total (MMcfe/d)
—

 
29

 
 
30

(1)  
Represents the Company’s 50% equity interest in Roan.
(2)  
Does not include the effect of gains (losses) on derivatives.
(3)  
General and administrative expenses for the six months ended June 30, 2018, the four months ended June 30, 2017, and the two months ended February 28, 2017, include approximately $75 million, $20 million and $50 million, respectively, of share-based compensation expenses. General and administrative expenses for the six months ended June 30, 2018, the four months ended June 30, 2017, and the two months ended February 28, 2017, also include approximately $18 million, $596,000 and $787,000, respectively, of severance costs. In addition, general and administrative expenses for the two months ended February 28, 2017, include expenses incurred by LINN Energy associated with the operations of Berry. On February 28, 2017, LINN Energy and Berry emerged from Bankruptcy as stand-alone, unaffiliated entities.

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Item 2.
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Revenues and Other
Oil, Natural Gas and NGL Sales
Oil, natural gas and NGL sales decreased by approximately $288 million or 56% to approximately $224 million for the six months ended June 30, 2018, from approximately $323 million and $189 million for the four months ended June 30, 2017, and the two months ended February 28, 2017, respectively, due to lower production volumes as a result of divestitures completed in 2017 and 2018 partially offset by higher commodity prices. Higher oil and NGL prices resulted in an increase in revenues of approximately $13 million and $5 million, respectively. Lower natural gas prices resulted in a decrease in revenues of approximately $16 million. In addition, revenues decreased by approximately $1 million due to the impact of the new accounting standard related to revenues from contracts with customers, adopted on January 1, 2018. As of January 1, 2017, revenue was recognized net of transportation expenses if the processor was the customer and there was no redelivery of commodities to the Company. See Note 1 for additional details of the revenue accounting standard.
Average daily production volumes decreased to approximately 356 MMcfe/d for the six months ended June 30, 2018, from approximately 722 MMcfe/d and 745 MMcfe/d for the four months ended June 30, 2017, and the two months ended February 28, 2017, respectively. Lower oil, natural gas and NGL production volumes resulted in a decrease in revenues of approximately $135 million, $113 million and $41 million, respectively.
The following table sets forth average daily production by region:
 
Successor
 
 
Predecessor
 
Six Months Ended June 30, 2018
 
Four Months Ended June 30, 2017
 
 
Two Months Ended February 28, 2017
Average daily production (MMcfe/d):
 
 
 
 
 
 
Hugoton Basin
146

 
165

 
 
158

Mid-Continent
53

 
126

 
 
110

East Texas
53

 
53

 
 
52

Rockies
29

 
254

 
 
294

Michigan/Illinois
28

 
29

 
 
29

North Louisiana
27

 
24

 
 
28

Permian Basin
20

 
46

 
 
49

South Texas
—

 
25

 
 
25

 
356

 
722

 
 
745

Equity method investments
111

 
—

 
 
—

The decrease in average daily production volumes in the Mid-Continent region primarily reflects lower production volumes as a result of the Roan Contribution on August 31, 2017, partially offset by increased development capital spending in the region. The decreases in average daily production volumes in the Hugoton Basin, Rockies, Permian Basin and South Texas regions primarily reflect lower production volumes as a result of divestitures completed during 2017 and 2018. See Note 4 for additional information of divestitures. In addition, the decreases in average daily production volumes in these and the remaining regions reflect lower production volumes as a result of reduced development capital spending driven by continued low commodity prices. Equity method investments represents the Company’s 50% equity interest in Roan.
Gains (Losses) on Oil and Natural Gas Derivatives
Losses on oil and natural gas derivatives were approximately $23 million for the six months ended June 30, 2018, compared to gains of approximately $34 million and $93 million for the four months ended June 30, 2017, and the two months ended February 28, 2017, respectively, representing a variance of approximately $150 million. Gains and losses on oil and natural gas derivatives were primarily due to changes in fair value of the derivative contracts. The fair value on unsettled derivative contracts changes as future commodity price expectations change compared to the contract prices on the derivatives. If the

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

expected future commodity prices increase compared to the contract prices on the derivatives, losses are recognized; and if the expected future commodity prices decrease compared to the contract prices on the derivatives, gains are recognized.
The Company 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. See Item 3. “Quantitative and Qualitative Disclosures About Market Risk” and Note 8 and Note 9 for additional details about the Company’s commodity derivatives. For information about the Company’s pre-Spin-off credit risk related to derivative contracts, see “Counterparty Credit Risk” under “Liquidity and Capital Resources” below.
Marketing and Other Revenues
Marketing revenues represent third-party activities associated with company-owned gathering systems, plants and facilities. Other revenues primarily include management fee revenues recognized by the Company from Berry (in the Predecessor period) and helium sales revenue. Consolidated marketing and other revenues increased by approximately $61 million or 151% to approximately $102 million for the six months ended June 30, 2018, from approximately $24 million and $17 million for the four months ended June 30, 2017, and the two months ended February 28, 2017, respectively. Marketing and other revenues of the upstream segment increased by approximately $22 million or 58% to approximately $60 million for the six months ended June 30, 2018, from approximately $22 million and $16 million for the four months ended June 30, 2017, and the two months ended February 28, 2017, respectively. The increase was primarily due to higher revenues generated by the Jayhawk natural gas processing plant in Kansas, principally driven by a change in contract terms and the impact of the new accounting standard related to revenues from contracts with customers, adopted on January 1, 2018, partially offset by management fee revenues from Berry included in the Predecessor period. As of January 1, 2018, the Company recognized 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 resulted in an increase to revenues and expenses with no impact on net income. See Note 1 for additional details of the revenue accounting standard.
Expenses
Lease Operating Expenses
Lease operating expenses include expenses such as labor, field office, vehicle, supervision, maintenance, tools and supplies, and workover expenses. Lease operating expenses decreased by approximately $74 million or 50% to approximately $72 million for the six months ended June 30, 2018, from approximately $96 million and $50 million for the four months ended June 30, 2017, and the two months ended February 28, 2017, respectively. The decrease was primarily due to reduced labor costs for field operations as a result of cost savings initiatives and the divestitures completed in 2017 and 2018. Lease operating expenses per Mcfe were $1.12 per Mcfe for the six months ended June 30, 2018, compared to $1.09 per Mcfe and $1.13 per Mcfe for the four months ended June 30, 2017, and the two months ended February 28, 2017, respectively.
Transportation Expenses
Transportation expenses decreased by approximately $37 million or 48% to approximately $40 million for the six months ended June 30, 2018, from approximately $51 million and $26 million for the four months ended June 30, 2017, and the two months ended February 28, 2017, respectively. The decrease was due to reduced costs as a result of lower production volumes primarily as a result of the divestitures completed in 2017 and 2018 and due to the impact of the new accounting standard related to revenues from contracts with customers, adopted on January 1, 2018. As of January 1, 2018, revenue is recognized net of transportation expenses if the processor is the customer and there is no redelivery of commodities to the Company. See Note 1 for additional details of the revenue accounting standard. Transportation expenses per Mcfe increased to $0.62 per Mcfe for the six months ended June 30, 2018, from $0.58 per Mcfe and $0.59 per Mcfe for the four months ended June 30, 2017, and the two months ended February 28, 2017, respectively.
Marketing Expenses
Marketing expenses represent third-party activities associated with company-owned gathering systems, plants and facilities. Consolidated marketing expenses increased by approximately $67 million to approximately $82 million for the six months ended June 30, 2018, from approximately $10 million and $5 million for the four months ended June 30, 2017, and the two months ended February 28, 2017, respectively. Marketing expenses of the upstream segment increased by approximately $28 million to approximately $41 million for the six months ended June 30, 2018, from approximately $8 million and $5 million for the four months ended June 30, 2017, and the two months ended February 28, 2017, respectively. The increase was primarily due to higher expenses associated with the Jayhawk natural gas processing plant in Kansas, principally driven by a change in

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Item 2.
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contract terms and the impact of the new accounting standard related to revenues from contracts with customers, adopted on January 1, 2018. As of January 1, 2018, the Company recognized 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 resulted in an increase to revenues and expenses with no impact on net income. See Note 1 for additional details of the revenue accounting standard.
General and Administrative Expenses
General and administrative expenses are costs not directly associated with field operations and reflect the costs of employees including executive officers, related benefits, office leases and professional fees. In addition, general and administrative expenses in the Predecessor period includes costs incurred by LINN Energy associated with the operations of Berry. General and administrative expenses increased by approximately $20 million or 18% to approximately $137 million for the six months ended June 30, 2018, from approximately $45 million and $72 million for the four months ended June 30, 2017, and the two months ended February 28, 2017, respectively. The increase was primarily due to higher severance costs, transition service fees received from Berry in the prior year and higher share-based compensation expenses, partially offset by lower salaries and benefits related expenses. General and administrative expenses per Mcfe increased to $2.13 per Mcfe for the six months ended June 30, 2018, from $0.51 per Mcfe and $1.63 per Mcfe for the four months ended June 30, 2017, and the two months ended February 28, 2017, respectively.
For professional services expenses related to the Chapter 11 proceedings, see “Reorganization Items, Net.”
Exploration Costs
Exploration costs increased by approximately $296,000 to approximately $1 million for the six months ended June 30, 2018, from approximately $866,000 and $93,000 for the four months ended June 30, 2017, and the two months ended February 28, 2017, respectively. The increase was primarily due to higher seismic data expenses during the first quarter of 2018.
Depreciation, Depletion and Amortization
Depreciation, depletion and amortization decreased by approximately $69 million or 58% to approximately $50 million for the six months ended June 30, 2018, from approximately $72 million and $47 million for the four months ended June 30, 2017, and the two months ended February 28, 2017, respectively. The decrease was primarily due to lower rates as a result of the application of fresh start accounting, as well as lower total production volumes. Depreciation, depletion and amortization per Mcfe decreased to $0.78 per Mcfe for the six months ended June 30, 2018, from $0.82 per Mcfe and $1.07 per Mcfe for the four months ended June 30, 2017, and the two months ended February 28, 2017, respectively.
Taxes, Other Than Income Taxes
 
Successor
 
 
Predecessor
 
Six Months Ended June 30, 2018
 
Four Months Ended June 30, 2017
 
 
Two Months Ended February 28, 2017
(in thousands)
 
 
 
 
 
 
Severance taxes
$
7,267

 
$
14,532

 
 
$
9,107

Ad valorem taxes
8,118

 
10,101

 
 
5,744

Other
364

 
315

 
 
26

 
$
15,749

 
$
24,948

 
 
$
14,877

Severance taxes, which are a function of revenues generated from production, decreased primarily due to lower production volumes. Ad valorem taxes, which are based on the value of reserves and production equipment and vary by location, decreased primarily due to divestitures completed in 2017 and 2018 and lower estimated valuations on certain of the Company’s properties.

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

(Gains) Losses on Sale of Assets and Other, Net
During the six months ended June 30, 2018, the Company recorded the following amounts related to divestitures (see Note 4):
•
Net gain of approximately $11 million on the New Mexico Assets Sale;
•
Net gain of approximately $83 million, including costs to sell of approximately $2 million, on the Altamont Bluebell Assets Sale;
•
Net gain of approximately $55 million, including costs to sell of approximately $2 million, on the West Texas Assets Sale; and
•
Net gain of approximately $46 million, including costs to sell of approximately $1 million, on the Oklahoma and Texas Assets Sale.
During the four months ended June 30, 2017, the Company recorded the following net gains on divestitures (see Note 4):
•
Net gain of approximately $22 million on the Salt Creek Assets Sale; and
•
Net gain of approximately $279 million, including costs to sell of approximately $6 million, on the Jonah Assets Sale.
Other Income and (Expenses)
 
Successor
 
 
Predecessor
 
Six Months Ended June 30, 2018
 
Four Months Ended June 30, 2017
 
 
Two Months Ended February 28, 2017
(in thousands)
 
 
 
 
 
 
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
)
Interest expense decreased primarily due to no outstanding debt during 2018, and lower amortization of financing fees. For the two months ended February 28, 2017, contractual interest, which was not recorded, on the Predecessor’s senior notes was approximately $37 million. For the six months ended June 30, 2018, interest expense is related primarily to amortization of financing fees. See “Debt” under “Liquidity and Capital Resources” below for additional details.
Equity method investments primarily include the Company’s 50% equity interest in Roan. The Company’s equity earnings consists of its share of Roan’s earnings and the amortization of the difference between the Company’s investment in Roan and Roan’s underlying net assets attributable to certain assets. See Note 6 for additional information.

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

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
 
 
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

Income Tax Expense (Benefit)
The Successor was formed as a C corporation. For federal and state income tax purposes (with the exception of the state of Texas), the Predecessor was a limited liability company treated as a partnership, in which income tax liabilities and/or benefits were passed through to the Predecessor’s unitholders. Limited liability companies are subject to Texas margin tax. In addition, certain of the Predecessor’s subsidiaries were C corporations subject to federal and state income taxes. The Company recognized income tax expense of approximately $46 million for the six months ended June 30, 2018, compared to income tax expense of approximately $153 million and an income tax benefit of approximately $166,000 for the four months ended June 30, 2017, and the two months ended February 28, 2017, respectively. The decrease is primarily due to a decrease in taxable earnings and a decrease in the federal statutory income tax rate.
Loss from Discontinued Operations, Net of Income Taxes
As a result of the Company’s strategic exit from California (completed by the San Joaquin Basin Sale and Los Angeles Basin Sale), the Company has classified the results of operations of its California properties as discontinued operations. Loss from discontinued operations, net of income taxes was approximately $3 million and $548,000 for the four months ended June 30, 2017, and the two months ended February 28, 2017, respectively. See Note 4 for additional information.
Net Income Attributable to Common Stockholders/Unitholders
Net income attributable to common stockholders/unitholders decreased by approximately $2.5 billion to approximately $75 million for the six months ended June 30, 2018, from a net income of approximately $213 million and $2.4 billion for the four months ended June 30, 2017, and the two months ended February 28, 2017, respectively. The decrease was primarily due to gains included in reorganization items in the Predecessor period, lower production revenue, losses compared to gains on commodity derivatives and lower gains on sales of assets, partially offset by lower expenses. See discussion above for explanations of variances.

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Item 2.
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Chisholm Trail Reporting Segment
 
Successor
 
 
Predecessor
 
Six Months Ended June 30, 2018
 
Four Months Ended June 30, 2017
 
 
Two Months Ended February 28, 2017
(in thousands)
 
 
 
 
 
 
Marketing revenues
$
41,958

 
$
2,188

 
 
$
637

 
 
 
 
 
 
 
Marketing expenses
40,702

 
1,002

 
 
218

Severance taxes and ad valorem taxes
477

 
155

 
 
78

Total direct operating expenses
41,179

 
1,157

 
 
296

Field level cash flow (1)
$
779

 
$
1,031

 
 
$
341

(1)  
Refer to Note 19 for a reconciliation of field level cash flow to income from continuing operations before income taxes.
Marketing Revenues
Chisholm Trail’s marketing revenue increased by approximately $39 million to approximately $42 million for the six months ended June 30, 2018, from approximately $2 million and $637,000 for the four months ended June 30, 2017, and the two months ended February 28, 2017, respectively. The increase was primarily due to the new accounting standard related to revenues from contracts with customers, adopted on January 1, 2018, and higher throughput volumes sold. As of January 1, 2018, 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 impact on net income.
Marketing Expenses
Chisholm Trail’s marketing expenses increased by approximately $39 million to approximately $41 million for the six months ended June 30, 2018, from approximately $1 million and $218,000 for the four months ended June 30, 2017, and the two months ended February 28, 2017, respectively. The increase was primarily due to the new accounting standard related to revenues from contracts with customers, adopted on January 1, 2018, and higher throughput volumes sold. As of January 1, 2018, 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 impact on net income.
Field Level Cash Flow
Chisholm Trail’s field level cash flow decreased by approximately $593,000 million to positive cash flow of approximately $779,000 for the six months ended June 30, 2018, from approximately $1 million and $341,000 for the four months ended June 30, 2017 and the two months ended February 28, 2017, respectively. The decrease was primarily due to widening pricing spreads between the Conway and Mont Belvieu market hubs.
Liquidity and Capital Resources
Since its emergence from Chapter 11 bankruptcy in February 2017, the Company’s sources of cash have primarily consisted of proceeds from its divestitures of oil and natural gas properties and net cash provided by operating activities. As a result of divesting certain oil and natural gas properties during the six months ended June 30, 2018, the Company received approximately $368 million in net cash proceeds. During 2018, the Company used its cash for repurchases of its Class A common stock and to fund capital expenditures, primarily for plant and pipeline construction. Prior to the Spin-off, a then subsidiary of the Company distributed $40 million of cash to Linn Energy, Inc. to fund its administrative activities arising subsequent to the Spin-off. In addition, Linn Energy, Inc. has entered into a transition services agreement with Riviera, pursuant to which Riviera has agreed to fund certain future obligations of Linn Energy, Inc. for a transitional period following the Spin-off, to be determined based upon certain future specified events but to end no later than December 31, 2018.

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Item 2.
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See below for details regarding capital expenditures for the periods presented:
 
Successor
 
 
Predecessor
 
Six Months Ended June 30, 2018
 
Four Months Ended June 30, 2017
 
 
Two Months Ended February 28, 2017
(in thousands)
 
 
 
 
 
 
Oil and natural gas
$
17,231

 
$
87,632

 
 
$
39,409

Plant and pipeline
91,125

 
22,724

 
 
4,990

Other
598

 
3,919

 
 
1,243

Capital expenditures, excluding acquisitions
$
108,954

 
$
114,275

 
 
$
45,642

Capital expenditures, excluding acquisitions – discontinued operations
$
—

 
$
1,790

 
 
$
436

The decrease in capital expenditures was primarily due to lower oil and natural gas development activities, partially offset by higher plant and pipeline construction activities associated with Chisholm Trail. Prior to the Spin-off, the Company estimated its total capital expenditures, excluding acquisitions, would be approximately $195 million, including approximately $75 million related to its oil and natural gas capital program and approximately $120 million related to Chisholm Trail. The Company does not anticipate any additional capital expenditures will accrue following the Spin-off.
Statements of Cash Flows
The following is a comparative cash flow summary:
 
Successor
 
 
Predecessor
 
Six Months Ended June 30, 2018
 
Four Months Ended June 30, 2017
 
 
Two Months Ended February 28, 2017
(in thousands)
 
 
 
 
 
 
Net cash:
 
 
 
 
 
 
Provided by operating activities
$
51,902

 
$
83,764

 
 
$
59,476

Provided by (used in) investing activities
236,174

 
607,363

 
 
(58,756
)
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
)
Operating Activities
Cash provided by operating activities was approximately $52 million for the six months ended June 30, 2018, compared to approximately $84 million and $59 million for the four months ended March 31, 2017, and the two months ended February 28, 2017, respectively. The decrease was primarily due to lower production related revenues principally due to lower production volumes.

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Investing Activities
The following provides a comparative summary of cash flow from investing activities:
 
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 investing activities:
 
 
 
 
 
 
Capital expenditures
$
(133,315
)
 
$
(88,821
)
 
 
$
(58,006
)
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
)
The primary use of cash in investing activities is for the development of the Company’s oil and natural gas properties and construction of Chisholm Trail’s cryogenic natural gas processing facility. Capital expenditures decreased primarily due to lower oil and natural gas capital spending, partially offset by higher spending on plant and pipeline construction related to Chisholm Trail. The Company made no material acquisitions of properties during the six months ended June 30, 2018, or June 30, 2017. The Company has classified the cash flows of its California properties as discontinued operations.
Proceeds from sale of properties and equipment and other for the six months ended June 30, 2018, include cash proceeds received of approximately $109 million from the West Texas Assets Sale, approximately $101 million (excluding a deposit of approximately $12 million received in 2017) from the Oklahoma and Texas Assets Sale, approximately $134 million related to the Altamont Bluebell Assets Sale approximately $15 million related to and the New Mexico Assets Sale. Proceeds from sale of properties and equipment and other for the four months ended June 30, 2017, include approximately $76 million in net cash proceeds received from the Salt Creek Assets Sale in June 2017 and approximately $560 million in net cash proceeds received from the Jonah Assets Sale in May 2017 and deposits received of approximately $57 million associated with divestitures completed during the third quarter of 2017. See Note 4 for additional details of divestitures.
Financing Activities
Cash used in financing activities was approximately $464 million for the six months ended June 30, 2018, compared to approximately $720 million and $561 million for the four months ended June 30, 2017, and the two months ended February 28, 2017, respectively. During the six months ended June 30, 2018, the primary use of cash in financing activities was for repurchases of the Company’s Class A common stock and settlement of restricted stock units (see Note 14). During the four months ended June 30, 2017, and the two months ended February 28, 2017, the primary use of cash in financing activities was for repayments of debt.

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Item 2.
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The following provides a comparative summary of proceeds from borrowings and repayments of debt:
 
Successor
 
 
Predecessor
 
Four Months Ended June 30, 2017
 
 
Two Months Ended February 28, 2017
(in thousands)
 
 
 
 
Proceeds from borrowings:
 
 
 
 
Successor’s previous credit facility
$
160,000

 
 
$
—

 
$
160,000

 
 
$
—

Repayments of debt:
 
 
 
 
Successor’s previous credit facility
$
(576,570
)
 
 
$
—

Successor term loan
(300,000
)
 
 
—

Predecessor’s credit facility
—

 
 
(1,038,986
)
 
$
(876,570
)
 
 
$
(1,038,986
)
On February 28, 2017, the Company canceled its obligations under the Predecessor’s credit facility and entered into the Successor’s previous credit facility, which was a net transaction and is reflected as such on the condensed consolidated statement of cash flows. In addition, in February 2017, the Company made a $30 million payment to holders of claims under the Predecessor’s second lien notes, and also issued 41,359,806 shares of Class A common stock to participants in the rights offerings extended by the Company to certain holders of claims arising under the Predecessor’s second lien notes and senior notes for net proceeds of approximately $514 million.
Debt
There were no borrowings outstanding under the Credit Facility as of June 30, 2018, or December 31, 2017. As of June 30, 2018, there was approximately $378 million of available borrowing capacity (which includes a $47 million reduction for outstanding letters of credit). Pursuant to the Spin-off, the borrower under the Credit Facility became a subsidiary of Riviera and as such, Riviera and its subsidiaries have assumed all obligations under the Credit Facility.
For additional information related to the Company’s debt, see Note 7.
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.
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).

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

Counterparty Credit Risk
The Company accounted for its commodity derivatives at fair value. The Company’s counterparties were 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 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 met the Company’s minimum credit quality standard, or had a guarantee from an affiliate that met 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.
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.
Contingencies
See Part II. Item 1. “Legal Proceedings” for information regarding legal proceedings that the Company is party to and any contingencies related to these legal proceedings.
Off-Balance Sheet Arrangements
The Company historically entered into certain off-balance sheet arrangements and transactions, including operating lease arrangements and undrawn letters of credit. In addition, the Company historically entered into other contractual agreements in the normal course of business for processing and transportation as well as for other oil and natural gas activities. Other than the items discussed above, there are no other arrangements, transactions or other relationships with unconsolidated entities or other persons that are reasonably likely to materially affect the Company’s liquidity or capital resource positions.
Commitments and Contractual Obligations
The Company had asset retirement obligations, capital commitments, operating leases and commodity derivative liabilities that were summarized in the table of commitments and contractual obligations in its Annual Report on Form 10‑K for the year ended December 31, 2017. During the six months ended June 30, 2018, the Company paid approximately $30 million of its capital commitments. As part of the Spin-Off, Riviera assumed substantially all of the Company’s contractual obligations reported in the Company’s Annual Report on Form 10-K.
Critical Accounting Policies and Estimates
The discussion and analysis of the Company’s financial condition and results of operations is based on the condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires management of the Company to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors that are believed to be reasonable under the circumstances. Such estimates and assumptions are adjusted when facts and circumstances dictate. Actual results may differ from these estimates and assumptions used in the preparation of the financial statements.
Recently Issued Accounting Standards
For a discussion of recently issued accounting standards, see Note 1.

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

Cautionary Statement Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond the Company’s control. These statements may include discussions about the Company’s:
•
equity investment in Roan;
•
ability to realize the anticipated benefits of the Spin-off;
•
the potential negative effects of the Spin-off;
•
business strategy;
•
acquisition and disposition strategy;
•
financial strategy;
•
effects of legal proceedings;
•
drilling locations;
•
oil, natural gas and NGL reserves;
•
realized oil, natural gas and NGL prices;
•
production volumes;
•
economic and competitive advantages;
•
credit and capital market conditions;
•
regulatory changes;
•
future operating results;
•
plans, objectives, expectations and intentions; and
•
taxes.
All of these types of statements, other than statements of historical fact included in this Quarterly Report on Form 10-Q, are forward-looking statements. These forward-looking statements may be found in Item 2. In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “could,” “should,” “expect,” “plan,” “project,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “pursue,” “target,” “continue,” the negative of such terms or other comparable terminology.
The forward-looking statements contained in this Quarterly Report on Form 10-Q are largely based on Company expectations, which reflect estimates and assumptions made by Company management. These estimates and assumptions reflect management’s best judgment based on currently known market conditions and other factors. Although the Company believes such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties beyond its control. In addition, management’s assumptions may prove to be inaccurate. The Company cautions that the forward-looking statements contained in this Quarterly Report on Form 10-Q are not guarantees of future performance, and it cannot assure any reader that such statements will be realized or the events will occur. Actual results may differ materially from those anticipated or implied in forward-looking statements due to factors set forth in Item 1A. “Risk Factors” in the Annual Report on Form 10-K for the year ended December 31, 2017, and elsewhere in the Annual Report. The forward-looking statements speak only as of the date made and, other than as required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
The Company’s primary market risk is attributable to fluctuations in commodity prices. This risk can affect the Company’s business, financial condition, operating results and cash flows. See below for quantitative and qualitative information about this risk.
The following should be read in conjunction with the financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and in the Company’s 2017 Annual Report on Form 10-K. The reference to a “Note” herein refers to the accompanying Notes to Condensed Consolidated Financial Statements contained in Item 1. “Financial Statements.”

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

Commodity Price Risk
The Company’s most significant market risk relates to prices of oil, natural gas and NGL. The Company expects commodity prices to remain volatile and unpredictable. As commodity prices decline or rise significantly, revenues and cash flows are likewise affected. In addition, future declines in commodity prices may result in noncash write-downs of the Company’s carrying amounts of its assets.
Historically, the Company has hedged a portion of its forecasted production to reduce exposure to fluctuations in oil and natural gas prices and provide long-term cash flow predictability to manage its business. The Company does not enter into derivative contracts for trading purposes. The appropriate level of production to be hedged is an ongoing consideration based on a variety of factors, including among other things, current and future expected commodity market prices, the Company’s overall risk profile, including leverage and size and scale considerations, as well as any requirements for or restrictions on levels of hedging contained in any credit facility or other debt instrument applicable at the time. In addition, when commodity prices are depressed and forward commodity price curves are flat or in backwardation, the Company may determine that the benefit of hedging its anticipated production at these levels is outweighed by its resultant inability to obtain higher revenues for its production if commodity prices recover during the duration of the contracts. As a result, the appropriate percentage of production volumes to be hedged may change over time.
At June 30, 2018, the fair value of fixed price swaps was a net liability of approximately $1 million. A 10% increase in the NYMEX WTI oil and NYMEX Henry Hub natural gas prices above the June 30, 2018, prices would result in a net liability of approximately $19 million, which represents a decrease in the fair value of approximately $18 million; conversely, a 10% decrease in the NYMEX oil and Henry Hub natural gas prices below the June 30, 2018, prices would result in a net asset of approximately $17 million, which represents an increase in the fair value of approximately $18 million.
At December 31, 2017, the fair value of fixed price swaps and collars was a net liability of approximately $2 million. A 10% increase in the NYMEX WTI oil and NYMEX Henry Hub natural gas prices above the December 31, 2017, prices would result in a net liability of approximately $45 million, which represents a decrease in the fair value of approximately $43 million; conversely, a 10% decrease in the NYMEX oil and Henry Hub natural gas prices below the December 31, 2017, prices would result in a net asset of approximately $38 million, which represents an increase in the fair value of approximately $40 million.
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.
The prices of oil, natural gas and NGL have been extremely volatile, and the Company expects this volatility to continue. Prices for these commodities may fluctuate widely in response to relatively minor changes in the supply of and demand for such commodities, market uncertainty, including regional conditions and a variety of additional factors that are beyond its control. Actual gains or losses recognized related to the Company’s derivative contracts depend exclusively on the price of the commodities on the specified settlement dates provided by the derivative contracts. Additionally, the Company cannot be assured that its counterparties will be able to perform under its derivative contracts. If a counterparty fails to perform and the derivative arrangement is terminated, the Company’s cash flows could be impacted.
Item 4.    Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the U.S. Securities and Exchange Commission, and that such information is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, and the Company’s Audit Committee of the Board of Directors, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control

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Item 4.    Controls and Procedures - Continued

objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
The Company carried out an evaluation under the supervision and with the participation of its management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of its disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2018.
Changes in the Company’s Internal Control Over Financial Reporting
The Company’s management is also responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. The Company’s internal controls were designed to provide reasonable assurance as to the reliability of its financial reporting and the preparation and presentation of the condensed consolidated financial statements for external purposes in accordance with accounting principles generally accepted in the United States.
Because of its inherent limitations, internal control over financial reporting may not detect or prevent misstatements. Projections of any evaluation of the effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
There were no changes in the Company’s internal control over financial reporting during the second quarter of 2018 that materially affected, or were reasonably likely to materially affect, the Company’s internal control over financial reporting.

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Part II – Other Information
Item 1.
Legal Proceedings
On May 11, 2016, the Debtors filed Bankruptcy Petitions for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. The Debtors’ Chapter 11 cases were administered jointly under the caption In re Linn Energy, LLC, et al., Case No. 16‑60040. On January 27, 2017, the Bankruptcy Court entered the Confirmation Order. Consummation of the Plan was subject to certain conditions set forth in the Plan. On February 28, 2017, 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.
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.
Item 1A.
Risk Factors
Our business has many risks. Factors that could materially adversely affect our business, financial condition, operating results or liquidity and the trading price of our shares are described in Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2017. The following risk factors update the Risk Factors included in the Annual Report. Except as set forth below, there have been no material changes to the risks described in the Annual Report on Form 10-K. This information should be considered carefully, together with other information in this report and other reports and materials we file with the United States Securities and Exchange Commission.
Our financial information after the impact of the Spin-off may not be meaningful to investors.
The historical financial data included in this Quarterly Report on Form 10‑Q is not necessarily indicative of our future performance and does not necessarily reflect what our financial position and results of operations would have been had the Spin-Off been completed prior to the periods presented. For example, our historical consolidated and combined financial statements include pre-Spin-off assets that are now held by Riviera as an independent company. As a result of the Spin-off, our historical results of operations and period-to-period comparisons of those results and certain other financial data may not be meaningful or indicative of future results. The lack of comparable historical financial information may discourage investors from purchasing our common stock.
We have limited control over the operations of the Roan joint venture, which could adversely affect our business.
We have limited control over the operations of Roan. Following the Spin-off, our 50% equity interest in Roan constitutes our sole significant asset. Although we own a 50% equity interest in Roan and our manager nominees have veto rights over most actions of the Roan board of managers, we do not have sole control over its board of managers. Because of this limited control:
•
Roan may take actions contrary to our strategy or objectives;

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Item 1A.    Risk Factors - Continued

•
we have limited ability to influence Roan’s financial performance or operating results;
•
we have limited ability to influence the day to day operations of Roan or its properties, including compliance with environmental, safety and other regulations; and
•
we are dependent on third parties for financial reporting matters upon which our financial statements are based.
Since Roan represents a significant investment of ours, adverse developments in Roan’s business could adversely affect our business.
We rely on Roan to provide us with the financial information that we use in accounting for our equity interest in Roan as well as information regarding Roan that we include in our public filings.
We account for our 50% equity interest in Roan using the equity method of accounting and, accordingly, in our financial statements we record our share of Roan’s net income or loss. Within the meaning of U.S. accounting rules, we rely on Roan to provide us with financial information prepared in accordance with generally accepted accounting principles, which we use in the application of the equity method. We also rely on Roan to provide us with certain information that we include in our public filings. In addition, we cannot change the way in which Roan reports its financial results or require Roan to change its internal controls over financial reporting. No assurance can be given that Roan will provide us with the information necessary to enable us to complete our public filings on a timely basis or at all. Furthermore, any material misstatements or omissions in the information Roan provides to us or publicly files could have a material adverse effect on our financial statements and filing status under federal securities laws.
All of Roan’s properties are located in the Merge/SCOOP/STACK play in Oklahoma, making us vulnerable to risks associated with operating in a single geographic area.
All of Roan’s properties are geographically concentrated in the Merge/SCOOP/STACK play in Oklahoma. Following the Spin-off, our 50% equity interest in Roan constitutes our sole significant asset. As a result of this concentration, we and Roan may be disproportionately exposed to the impact of regional supply and demand factors, delays or interruptions of production from wells in this area caused by governmental regulation, processing or transportation capacity constraints, market limitations, availability of equipment and personnel, water shortages or other drought related conditions or interruption of the processing or transportation of oil, natural gas or NGLs.
We may not realize the potential benefits from the Spin-off in the near term or at all.
We anticipate strategic and financial benefits as a result of the Spin-off. However, as only a relatively short period of time has passed since the Spin-off, no assurance can be given that the market will react favorably in the long-term to the Spin-off. Given the added costs associated with the completion of the Spin-off, our failure to realize the anticipated benefits of the Spin-off in the near term or at all could adversely affect our company.
Our company has overlapping directors with Roan and overlapping directors and officers with Riviera, which may lead to conflicting interests.
As a result of the Spin-off, all of the Company’s executive officers also serve as executive officers of Riviera, and there are overlapping directors between the Company, Riviera and Roan. Our executive officers and members of the Board of Directors have fiduciary duties to our stockholders. Likewise, any such persons who serve in similar capacities at Riviera or Roan or any other public or private company have fiduciary duties to that company’s stockholders. For example, there may be the potential for a conflict of interest when the Company, Riviera or Roan pursues acquisitions and other business opportunities that may be suitable for each of them. Therefore, such persons may have conflicts of interest or the appearance of conflicts of interest with respect to matters involving or affecting more than one of the companies to which they owe fiduciary duties. In addition, any potential conflict that qualifies as a “related party transaction” (as defined in Item 404 of Regulation S-K) is subject to review by an independent committee of the applicable issuer’s board of directors in accordance with its corporate governance guidelines. Any other potential conflicts that arise will be addressed on a case-by-case basis, keeping in mind the applicable fiduciary duties owed by the executive officers and directors of each issuer.

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Item 1A.    Risk Factors - Continued

From time to time, we may enter into transactions with Riviera or Roan. There can be no assurance that the terms of any such transactions will be as favorable to the Company, Riviera or Roan as would be the case where there is no overlapping officer or director.
Our inter-company agreements were negotiated prior to the Spin-Off.
We entered into a number of inter-company agreements covering matters such as tax sharing and our responsibility for certain liabilities previously undertaken by us for certain of our businesses. In addition, we have entered into a transition services agreement with Riviera, pursuant to which Riviera agreed to provide the Company with certain finance, financial reporting, information technology, investor relations, legal, payroll, tax and other services, and to fund certain future obligations of the Company for a transitional period following the Spin-off. We believe that the terms of these inter-company agreements are commercially reasonable and fair to all parties under the circumstances; however, conflicts could arise in the interpretation or any extension or renegotiation of the foregoing agreements after the Spin-off.
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
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.
The following sets forth information with respect to the Company’s repurchases of its shares of Class A common stock during the second quarter of 2018:
Period
 
Total Number of Shares Purchased
 
Average Price Paid Per Share
 
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
 
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)
 
 
 
 
 
 
 
 
(in thousands)
 
 
 
 
 
 
 
 
 
April 1 – 30
 
194,083

 
$
38.80

 
194,083

 
$
159,418

May 1 – 31
 
286,789

 
$
40.70

 
286,789

 
$
147,744

June 1 – 30
 
178,634

 
$
38.97

 
178,637

 
$
140,782

Total
 
659,506

 
$
39.68

 
659,509

 
 
(1)  
The Company’s Board of Directors previously authorized the repurchase of up to $400 million of the Company’s outstanding shares of a Class A common stock. The Company discontinued the share repurchase program in July 2018.
Item 3.
Defaults Upon Senior Securities
None
Item 4.
Mine Safety Disclosures
Not applicable
Item 5.
Other Information
None

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Item 6.
Exhibits

Exhibit Number
 
Description
 
 
 
3.1
—
3.2
—
3.3
—
3.4
—
3.5*
—
10.1*
—
10.2*
—
10.3*
—
10.4*
—
10.5*
—
10.6*
—
10.7
—
31.1*
—
31.2*
—
32.1*
—
32.2*
—
101.INS*
—
XBRL Instance Document
101.SCH*
—
XBRL Taxonomy Extension Schema Document
101.CAL*
—
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*
—
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*
—
XBRL Taxonomy Extension Label Linkbase Document
101.PRE*
—
XBRL Taxonomy Extension Presentation Linkbase Document
*
Filed herewith.


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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
LINN ENERGY, INC.
 
(Registrant)
 
 
Date: August 8, 2018
/s/ Darren R. Schluter
 
Darren R. Schluter
 
Executive Vice President, Finance, Administration and
Chief Accounting Officer
 
(Duly Authorized Officer and Principal Accounting Officer)


65

Exhibit 3.5

AMENDED AND RESTATED BYLAWS
OF
LINN ENERGY, INC.
As adopted on August 2, 2018
ARTICLE I - STOCKHOLDERS
Section 1.      Annual Meeting.
(1)      An annual meeting of the stockholders of Linn Energy, Inc. (the “ Corporation ”), for the election of directors and for the transaction of such other business as may properly come before the meeting, shall be held at such place, on such date, and at such time as the Board of Directors (as defined below) shall fix.
(2)      Nominations of persons for election to the Board of Directors and proposals of business to be transacted by the stockholders may be made at an annual meeting of stockholders (a) pursuant to the Corporation’s proxy materials with respect to such meeting, (b) by or at the direction of the Board of Directors, or (c) by any stockholder of record of the Corporation (the “ Record Stockholder ”) at the time of the giving of the Record Stockholder Notice (as defined below), who is entitled to vote at the meeting and who has complied with the notice procedures set forth in this Section 1 of Article I . For the avoidance of doubt, the foregoing clause (c) shall be the exclusive means for a stockholder to make nominations or propose business at an annual meeting of stockholders, other than, to the extent the Corporation is then subject to such Rule, business included in the Corporation’s proxy materials pursuant to Rule 14a-8 under Securities Exchange Act of 1934, as amended (such act, and the rules and regulations promulgated thereunder, the “ Exchange Act ”).
(3)      For nominations of directors or proposals of business to be properly brought before an annual meeting by a Record Stockholder pursuant to clause (c) of the immediately preceding paragraph, (a) the Record Stockholder must have given timely notice thereof in writing (“ Record Stockholder Notice ”) to the Secretary of the Corporation (the “ Secretary ”) and (b) any such business must be a proper matter for stockholder action under Delaware law. To be timely, a Record Stockholder’s notice shall be received by the Secretary at the principal executive offices of the Corporation not less than 45 nor more than 75 days prior to the one-year anniversary of the date on which the Corporation first mailed its proxy materials for the preceding year’s annual meeting of stockholders; provided, however, that, (i) subject to the last sentence of this Section 1(3) of Article I , if the meeting is convened more than 30 days prior to or delayed by more than 30 days after the one-year anniversary of the preceding year’s annual meeting, or if no annual meeting was held during the preceding year, notice by the Record Stockholder to be timely must be so received not later than the close of business on the later of (A) the 45th day before such annual meeting or (B) the 10th day following the date on which public announcement of the date of such meeting is first made and (ii) in the event that the number of directors to be elected to the Board of Directors is increased and a public announcement naming all of the nominees for director or indicating the increase in the size of the Board of Directors is not made by the Corporation at least 10 days before the last day a Record Stockholder may timely deliver a notice of nomination in accordance with the foregoing provisions of this paragraph, a Record Stockholder Notice shall




also be considered timely, but only with respect to nominees for any new positions created by such increase, if it is received by the Secretary at the principal executive offices of the Corporation not later than the close of business on the 10th day following the date on which such public announcement is first made by the Corporation. Notwithstanding anything to the contrary in these Bylaws of the Corporation (these “ Bylaws ”), for the first annual meeting of the stockholders after the effective date of these Bylaws, to be timely, a Record Stockholder Notice shall be delivered to the Secretary at the principal executive offices of the Corporation no earlier than the close of business on the 75th day prior to the scheduled date of such annual meeting and not later than the close of business on the later of the date that is 45 days prior to the scheduled date of such annual meeting or 10 days following the date on which public announcement of the date of such meeting is first made by the Corporation. In no event shall an adjournment, or postponement of an annual meeting for which notice has been given, commence a new time period for the giving of a Record Stockholder Notice.
(4)      Any Record Stockholder Notice shall set forth the following information:
(a)      if such notice pertains to the nomination of directors, as to each person whom the Record Stockholder proposes to nominate for election or reelection as a director, all information relating to such person as would be required to be disclosed in a solicitation of proxies for the election of such nominee as a director pursuant to Regulation 14A under the Exchange Act, and such person’s written consent to serve as a nominee and to serve as a director if elected;
(b)      with respect to any other business that the Record Stockholder proposes to bring before the meeting, a brief description of such business, the reasons for conducting such business at the meeting, and any material interest that such Record Stockholder (and, if applicable, the beneficial owner on whose behalf the proposal is made) has in such business; and
(c)      with respect to the Record Stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (each, a “ party ”):
(i)      the name and address of each such party;
(ii)      (A) the class, series, and number of shares of the Corporation that are owned, directly or indirectly, beneficially and of record by each such party, (B) any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the Corporation or with a value derived in whole or in part from the value of any class or series of shares of the Corporation, whether or not such instrument or right shall be subject to Settlement in the underlying class or series of capital stock of the Corporation or otherwise (a “ Derivative Instrument ”) directly or indirectly owned beneficially by each such party, and any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of shares of the

2



Corporation, (C) any proxy, contract, arrangement, understanding, or relationship pursuant to which each such party has a right to vote, directly or indirectly, any shares of any security of the Corporation, (D) any short interest in any security of the Corporation held by each such party (for purposes hereof, a person shall be deemed to have a short interest in a security if such person directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has the opportunity to profit or share in any profit derived from any decrease in the value of the subject security), (E) any rights to dividends on the shares of the Corporation owned beneficially directly or indirectly by each such party that are separated or separable from the underlying shares of the Corporation, (F) any proportionate interest in shares of the Corporation or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which each such party is a general partner or, directly or indirectly, beneficially owns an interest in a general partner and (G) any performance-related fees (other than an asset-based fee) that each such party is directly or indirectly entitled to based on any increase or decrease in the value of shares of the Corporation or Derivative Instruments, if any, as of the date of such notice, and each such party shall supplement the information provided pursuant to the foregoing clauses (A) through (G), to the extent necessary, by the earlier of the 10th day after the record date for determining the stockholders entitled to vote at the meeting and the day prior to the meeting; and
(iii)      any other information relating to each such party that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or the election of directors in a contested election pursuant to Section 14 of the Exchange Act.
(5)      A person shall not be eligible for election or re-election as a director at an annual meeting unless (i) the person is nominated by a Record Stockholder in accordance with Section 1(2)(c) of this Article I or (ii) the person is nominated by or at the direction of the Board of Directors. Only such business shall be conducted at an annual meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 1 of Article I . The chairman of the meeting shall have the power and the duty to determine whether a nomination or any business proposed to be brought before the meeting has been made in accordance with the procedures set forth in these Bylaws and, if any proposed nomination or business is not in compliance with these Bylaws, to declare that such defectively proposed business or nomination shall not be presented for stockholder action at the meeting and shall be disregarded.
(6)      As used in these Bylaws, “ public announcement ” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or a comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act.

3



(7)      Notwithstanding the foregoing provisions of this Section 1 of Article I , a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to matters set forth in this Section 1 of Article I . Nothing in this Section 1 of Article I shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act, to the extent applicable.
Section 2.      Special Meetings.
(1)      Special meetings of the stockholders, other than those required by statute, may be called at any time pursuant to a resolution adopted by the Board of Directors, or upon the written request to the Secretary by one or more stockholders holding, in the aggregate, at least a majority of the voting power of the shares entitled to vote in the election of directors of the Corporation. Any such written request shall specify the time of such meeting and the general nature of the business proposed to be transacted and shall be delivered to the Secretary at the principal executive offices of the Corporation, and the Secretary shall, promptly following his or her receipt of such request, cause notice of such meeting to be given in accordance with these Bylaws to each of the stockholders entitled to vote at such meeting. The Board of Directors may postpone or reschedule any previously scheduled special meeting called by the Board of Directors.
(2)      The notice of a special meeting shall include the purpose for which such meeting is called. Only such business shall be conducted at a special meeting of stockholders as shall have been specified in the notice of such special meeting (or any supplement thereto).
(3)      Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected, as follows: (a) by or at the direction of the Board of Directors or by any stockholder of record of the Corporation who is entitled to vote at such meeting and delivers (while it is a Record Stockholder) a written notice to the Secretary setting forth the information required by Sections 1(4)(a) and 1(4)(c) of Article I . Nominations by stockholders of persons for election to the Board of Directors may be made at such meeting only if the Record Stockholder’s notice required by the immediately preceding sentence is received by the Secretary at the principal executive offices of the Corporation not later than the close of business on the later of the 45th day prior to such special meeting and the 10th day following the date on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall an adjournment, or postponement of a special meeting for which notice has been given, commence a new time period for the giving of a Record Stockholder’s notice. A person shall not be eligible for election or reelection as a director at a special meeting of stockholders unless the person is nominated in accordance with this paragraph. Notwithstanding anything in this Section 2(3) of Article I or otherwise in these Bylaws to the contrary, this Section 2(3) of Article I shall not apply to any special meetings of the stockholders called at the request of stockholders to the extent permitted by Section 2(1) of Article I .
(4)      Notwithstanding the foregoing provisions of this Section 2 of Article I , a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to matters set forth in this Section 2 of Article I . Nothing in this Section 2 of Article I shall be deemed to affect any rights of stockholders to request inclusion

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of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act, if the Corporation is then subject to such Rule.
Section 3.      Notice of Meetings; Adjournment.
Notice of the place, date, and time of all meetings of the stockholders, the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting, and the record date for determining the stockholders entitled to vote at the meeting, if such date is different from the record date for determining stockholders entitled to notice of the meeting, shall be given, not less than 10 days nor more than 60 days before the date on which the meeting is to be held, to each stockholder entitled to vote at such meeting as of the record date for determining the stockholders entitled to notice of the meeting, except as otherwise provided herein or required by law.
Any meeting of stockholders, whether annual or special, may be adjourned from time to time for any reason by either the chairman of the meeting, or by the vote of the holders of a majority in voting power of the shares present in person or represented by proxy and entitled to vote thereon, whether or not a quorum is present. When a meeting of stockholders is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place, if any, thereof, and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting and the record date for determining the stockholders entitled to vote at the meeting (if such date is different from the record date for determining stockholders entitled to notice of the meeting) are announced at the meeting at which the adjournment is taken; provided , however, that if the date of any adjourned meeting is more than 30 days after the date for which the meeting was originally noticed, notice of the adjourned meeting shall be given to each stockholder in conformity herewith. If after the adjournment a new record date for stockholders entitled to vote at such meeting is fixed for the adjourned meeting, the Board of Directors shall fix a new record date for notice of such adjourned meeting, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors and, except as otherwise required by law, shall not be less than 10 nor more than 60 days before the date of such adjourned meeting, and shall give notice of the adjourned meeting to each Record Stockholder entitled to vote at such adjourned meeting as of the record date fixed for notice of such adjourned meeting. At any adjourned meeting, any business may be transacted which might have been transacted at the original meeting.
Section 4.      Quorum.
At any meeting of the stockholders, the holders of a majority of the voting power of all of the shares of the stock entitled to vote at the meeting, present in person or by proxy, shall constitute a quorum for all purposes, unless or except to the extent that the presence of a larger number may be required by law or by the rules of any stock exchange upon which the Corporation’s securities are listed. Where a separate vote by a class or classes or series is required, a majority of the voting power of the shares of such class or classes or series present in person or represented by proxy shall constitute a quorum entitled to take action with respect to that vote on that matter.
If a quorum shall not be present or represented at any meeting of the stockholders, the chairman of the meeting or the stockholders entitled to vote thereon, by a majority in voting power

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thereof, present in person or represented by proxy, may adjourn the meeting in the manner provided in Section 3 of Article I , until a quorum shall be present or represented. A quorum, once established, shall not be broken by the withdrawal of enough stockholders to leave less than a quorum.
Section 5.      Organization.
Such person as the Board of Directors may have designated or, in the absence of such a person, the Chairman of the Board or, in his or her absence, the Chief Executive Officer of the Corporation or, in his or her absence, such person as may be chosen by the holders of a majority of the voting power of the shares entitled to vote who are present, in person or by proxy, shall call to order any meeting of the stockholders and act as chairman of the meeting. In the absence of the Secretary, the secretary of the meeting shall be such person as the chairman of the meeting appoints.
Section 6.      Conduct of Business.
The chairman of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of discussion as seem to him or her in order. The date and time of the opening and closing of the polls for each matter upon which the stockholders will vote at the meeting shall be announced at the meeting.
Section 7.      Proxies and Voting.
At any meeting of the stockholders, every stockholder entitled to vote may vote in person or by proxy authorized by an instrument in writing or by a transmission permitted by law filed in accordance with the procedure established for the meeting. Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission created pursuant to this paragraph may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided, that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission.
The Corporation may, and to the extent required by law, shall, in advance of any meeting of stockholders, appoint one or more inspectors to act at the meeting and make a written report thereof. The Corporation may designate one or more alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the person presiding at the meeting may, and to the extent required by law, shall, appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. Every vote taken by ballots shall be counted by a duly appointed inspector or inspectors.
All elections of directors of the Corporation shall be determined by a plurality of the votes cast, and except as otherwise required by law or the rules of any stock exchange upon which the Corporation’s securities are listed or as otherwise provided in these Bylaws or the Certificate of

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Incorporation of the Corporation (the “ Certificate of Incorporation ”), all other matters shall be determined by a majority of the votes cast affirmatively or negatively, on such matter.
Section 8.      Stockholder List.
The officer who has charge of the stock ledger of the Corporation shall, at least 10 days before every meeting of stockholders, prepare and make a complete list of stockholders entitled to vote at any meeting of stockholders, provided , however, if the record date for determining the stockholders entitled to vote is less than 10 days before the meeting date, the list shall reflect the stockholders entitled to vote as of the 10th day before the meeting date, arranged in alphabetical order and showing the address of each such stockholder and the number of shares registered in his or her name. Such list shall be open to the examination of any stockholder for a period of at least 10 days prior to the meeting in the manner provided by law.
A stock list shall also be open to the examination of any stockholder during the whole time of the meeting as provided by law. This list shall presumptively determine (a) the identity of the stockholders entitled to examine such stock list and to vote at the meeting and (b) the number of shares held by each of them.
ARTICLE II - BOARD OF DIRECTORS AND GOVERNANCE
Section 1.      Number, Election and Term of Directors.
Subject to the rights of the holders of any series of preferred stock of the Corporation to elect additional directors under specified circumstances and except as provided otherwise in the Certificate of Incorporation, the total authorized number of directors shall be fixed from time to time exclusively by the Board of Directors pursuant to a resolution adopted by a majority of the Whole Board (as defined below). The directors, other than those who may be elected by the holders of any series of preferred stock under specified circumstances, shall be of one class and each director shall serve until his or her successor shall have been duly elected and qualified or, if earlier, until his or her death, resignation or removal. As used in these Bylaws, “ Whole Board ” shall mean, at any given time, the total number of directorships then authorized, whether or not any vacancies exist with respect to such directorships.
Section 2.      Newly Created Directorships and Vacancies.
Subject to the rights of the holders of any series of preferred stock of the Corporation then outstanding, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation, disqualification, removal from office or other cause may be filled (a) by the stockholders at a special meeting or an annual meeting, or by the written consent of holders of a majority of the voting power of the shares entitled to vote in connection with the election of the directors of the Corporation, voting together as a single class or (b) by a majority vote of the directors then in office, though less than a quorum, or by a sole remaining director. Any director elected in accordance with this Section 2 of Article II shall hold office for the remainder of the term of the director for whom the vacancy was created or occurred and until such director’s successor shall have been duly elected and qualified or, if earlier, such director’s death, resignation or removal. No decrease in the authorized number of directors shall shorten the term of any incumbent director.

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Section 3.      Regular Meetings.
Regular meetings of the Board of Directors shall be held at such place or places, on such date or dates, and at such time or times as shall have been established by the Board of Directors and publicized among all directors. A notice of each regular meeting shall not be required.
Section 4.      Special Meetings.
Special meetings of the Board of Directors may be called by the Chairman of the Board or the Chief Executive Officer, or by any two or more directors and shall be held on such date and at such place and time as the person(s) calling such meeting shall fix. At least 24 hours’ notice of the place, date, and time of each such special meeting shall be given to each director by whom it is not waived and such notice will be effective (i) when received if given in a writing delivered by hand or courier, (ii) when given, if by telephone or in person, or (iii) when transmitted with transmission confirmed, if sent by e-mail or by facsimile to the director’s residence or usual place of business, to an email address or facsimile number, as applicable to which the director has expressly consented to receive notice. Unless otherwise indicated in the notice thereof, any and all business may be transacted at a special meeting.
Section 5.      Quorum.
A majority of the Whole Board shall constitute a quorum for all purposes at any meeting of the Board of Directors (unless the Certificate of Incorporation provides for a vote on a particular matter by the Disinterested Directors (as defined in Section 6 of Article VIII ), in which case a majority of the Disinterested Directors shall constitute a quorum for such matter). If a quorum shall fail to attend any meeting, a majority of those present may adjourn the meeting to another place, date, or time, without further notice or waiver thereof.
Section 6.      Participation in Meetings by Conference Telephone.
Members of the Board of Directors, or of any committee thereof, may participate in a meeting of such Board of Directors or committee by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other and such participation shall constitute presence in person at such meeting.
Section 7.      Conduct of Business.
At any meeting of the Board of Directors, business shall be transacted in such order and manner as the Board of Directors may from time to time determine, and, except as otherwise expressly required by law or the Certificate of Incorporation, all matters shall be determined by the affirmative vote of a majority of the directors present at any meeting at which a quorum is present. Action may be taken by the Board of Directors without a meeting if all members thereof consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board of Directors. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

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Section 8.      Resignations and Removal of Directors.
Any director of the Corporation may resign from the Board of Directors or any committee thereof at any time, by giving notice in writing to the Chairman of the Board, if there be one, or the Chief Executive Officer or the Secretary and, in the case of a committee, to the chairman of such committee, if there be one. Such resignation shall take effect at the time therein specified or, if no time is specified, immediately; and, unless otherwise specified in such notice, the acceptance of such resignation shall not be necessary to make it effective. Except as otherwise required by applicable law and subject to the rights of the holders of any series of preferred stock of the Corporation then outstanding, directors may be removed from office with or without cause by the affirmative vote of holders of a majority of the voting power of the shares entitled to vote in connection with the election of the directors of the Corporation, voting together as a single class. Any director serving on a committee of the Board of Directors may be removed from such committee at any time by the Board of Directors.
Section 9.      Compensation of Directors.
Unless otherwise restricted by the Certificate of Incorporation, the Board of Directors shall have the authority to fix the compensation of the directors. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or paid a stated salary or paid other compensation as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed compensation for attending committee meetings.
ARTICLE III - COMMITTEES
Section 1.      Committees of the Board of Directors.
The Board of Directors may from time to time designate committees of the Board of Directors, with such lawfully delegable powers and duties as it thereby confers, to serve at the pleasure of the Board of Directors and shall, for those committees and any others provided for herein, elect a director or directors to serve as the member or members, designating, if it desires, other directors as alternate members who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of any member of any committee and any alternate member in his or her place, the member or members of the committee present at the meeting and not disqualified from voting, whether or not he or she or they constitute a quorum, may by unanimous vote appoint another member of the Board of Directors to act at the meeting in the place of the absent or disqualified member.
Section 2.      Conduct of Business.
Each committee may determine the procedural rules for meeting and conducting its business and shall act in accordance therewith, except as otherwise provided herein or required by law. Adequate provision shall be made for notice to members of all meetings. The presence of at least a majority of the members of the committee shall constitute a quorum for the transaction of business. All matters shall be determined by a majority vote of the members present at any meeting at which a quorum is present. Action may be taken by any committee without a meeting if all

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members thereof consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of the proceedings of such committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.
ARTICLE IV - OFFICERS
Section 1.      Generally.
The Board of Directors, at its next meeting following each annual meeting of the stockholders, shall elect officers of the Corporation, including a Chief Executive Officer and a Secretary. The Board of Directors may also from time to time elect such other officers as it may deem proper or may delegate to any elected officer of the Corporation the power to appoint and remove any such other officers and to prescribe their respective terms of office, authorities and duties. Any Vice President may be designated Executive, Senior or Corporate, or may be given such other designation or combination of designations as the Board of Directors or the Chief Executive Officer may determine. Any two or more offices may be held by the same person. The Board may also elect or appoint a Chairman of the Board, who may or may not also be an officer of the Corporation.
Section 2.      Terms of Office.
All officers of the Corporation elected by the Board of Directors shall hold office for such terms as may be determined by the Board or, except with respect to his or her own office, the Chief Executive Officer, or until their respective successors are chosen and qualified or until his or her earlier resignation or removal. Any officer may be removed from office at any time either with or without cause by affirmative vote of a majority of the members of the Board then in office, or, in the case of appointed officers, by any elected officer upon whom such power of removal shall have been conferred by the Board of Directors. A vacancy in any office because of death, resignation, removal, disqualification or otherwise shall be filled by the Board in the manner prescribed in these Bylaws for election or appointment to such office.
Section 3.      Powers and Duties.
Each of the officers of the Corporation elected by the Board of Directors or appointed by an officer in accordance with these Bylaws shall have the powers and duties prescribed by law, by these Bylaws or by the Board and, in the case of appointed officers, the powers and duties prescribed by the appointing officer, and, unless otherwise prescribed by these Bylaws or by the Board of Directors or such appointing officer, shall have such further powers and duties as ordinarily pertain to that office. The Chief Executive Officer shall have authority over the general direction of the affairs of the Corporation.
Section 4.      Delegation of Authority.
The Board of Directors may from time to time delegate the powers or duties of any officer to any other officers or agents, notwithstanding any provision hereof.

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Section 5.      Action with Respect to Securities of Other Corporations.
Unless otherwise directed by the Board of Directors, the President or any officer of the Corporation authorized by the President shall have power to vote and otherwise act on behalf of the Corporation, in person or by proxy, at any meeting of security holders of or with respect to any action of security holders of any other corporation or entity in which this Corporation may hold securities and otherwise to exercise any and all rights and powers which this Corporation may possess by reason of its ownership of securities in such other corporation or entity.
ARTICLE V - INFORMATION RIGHTS
Section 1.      Financial Statements and Periodic Reports.
At all times when the Corporation is not obligated to file reports under Section 13 or Section 15(d) of the Exchange Act, the Corporation shall provide the following information to each holder of the Corporation’s Class A Common Stock, par value $0.001 per share (the “ Common Stock ” and each such holder, a “ Common Stockholder ”), and shall satisfy such obligation by timely posting all such information to its website and making such information accessible to the general public, or by timely and publicly filing all such information with the Securities and Exchange Commission on Form 10-K, Form 10-Q or Form 8-K as applicable, as if the Corporation were required to file such reports under the Exchange Act:
(1)      for each fiscal year of the Corporation ending on or after December 31, 2018, copies of an annual report on Form 10-K for such fiscal year, which report shall be delivered no later than ninety (90) days following the end of such fiscal year and shall include the same information and disclosures as the Corporation would be required to include in such report if it were a reporting company under the Exchange Act, including, without limitation, (a) consolidated financial statements of the Corporation and its subsidiaries as of the end of such fiscal year, which financial statements shall (i) include a comparison to the prior fiscal year results, (ii) be prepared in accordance with generally accepted accounting principles as in effect from time to time in the United States (“ GAAP ”) and (iii) be audited by a nationally recognized accounting firm approved by the Board of Directors and accompanied by a report and opinion thereon by such accounting firm prepared in accordance with GAAP and (b) a management discussion and analysis of financial condition and results of operations with respect to such financial statements (an “ MD&A ”);
(2)      for each of the first three (3) fiscal quarters of each fiscal year of the Corporation, copies of a quarterly report on Form 10-Q for such fiscal quarter, which report shall be delivered no later than forty-five (45) days following the end of such fiscal quarter and shall include the same information and disclosures as the Corporation would be required to include in such report if it were a reporting company under the Exchange Act, including, without limitation, (a) consolidated financial statements of the Corporation and its subsidiaries as of the end of such fiscal quarter, which statements shall (i) include year-to-date results and a comparison to the corresponding period in the prior fiscal year and (ii) be prepared in accordance with GAAP, and (b) an MD&A with respect to such financial statements; provided , however , that with respect to the second fiscal quarter of 2018, such quarterly report shall be delivered no later than 60 days following the end of such quarter;

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(3)      from time to time after the occurrence of any event that the Corporation would be required to report on a Form 8-K if it had been a reporting company under the Exchange Act, a current report on Form 8-K containing the same information as would be required to be contained in, and within the timing required by, a Current Report on Form 8-K under the Exchange Act;
(4)      a complete transcript of each quarterly conference call hosted by the Corporation pursuant to Section 2 of this Article V , which transcript shall be provided no later than two Business Days after the date of such conference call; and
(5)      such additional information as is required to ensure that sufficient “current public information” with respect to the Corporation is available on the Corporation’s website to satisfy the requirements of Section 4(a)(7) (as may be amended from time to time, “ Section 4(a)(7) ”) of the Securities Act of 1933, as amended (such act, and the rules and regulations promulgated thereunder, the “ Securities Act ”) and Rule 144A and Rule 144(c) promulgated under the Securities Act. As used in these Bylaws, “ Business Day ” shall mean any day other than a Saturday, Sunday or day on which commercial banks in the State of Texas or the State of New York are authorized or required by law to close for business.
Section 2.      Quarterly Conference Calls.
The Corporation shall host, and each Common Stockholder shall have access to, quarterly conference calls with senior officers of the Corporation to discuss the results of operations for the relevant reporting period, which calls shall (except as otherwise determined by the Board of Directors with respect to any particular reporting period) include a reasonable and customary question and answer session; provided , that such obligation with respect to quarterly conference calls shall commence in connection with the Corporation’s results of operations for the three months ended June 30, 2018. Each such quarterly and annual call shall be hosted no later than thirty days after the Corporation provides the corresponding annual or quarterly financial statements to Common Stockholders in accordance with this Article V .
Section 3.      Rule 144, 144A and Section 4(a)(7) Information.
With a view to making available to Common Stockholders the benefits of Section 4(a)(7) , Rule 144A promulgated under the Securities Act (as may be amended from time to time, “ Rule 144 A ”) and Rule 144 promulgated under the Securities Act (as may be amended from time to time, “ Rule 144 ”) and other rules and regulations of the U.S. Securities and Exchange Commission that may at any time permit a Common Stockholder to sell shares of Common Stock to the public without registration, the Corporation shall use commercially reasonable efforts to (i) post to the Corporation’s website in a timely manner all reports and other documents required, if any, to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted thereunder and (ii) make and keep publicly available all information necessary to comply with Section 4(a)(7) , Rule 144A and Rule 144 with respect to resales of shares of Common Stock, to the extent required from time to time to enable Common Stockholders to sell shares of Common Stock without registration under the Securities Act within the limitation of the exemptions provided by (x) Section 4(a)(7) , Rule 144A and Rule 144 or (y) any other rules or regulations now existing or hereafter adopted by the U.S. Securities and Exchange Commission. Upon the

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reasonable request of any Common Stockholder, the Corporation will deliver to such Common Stockholder a written statement as to whether it has complied with such information requirements, and, if not, the specific reasons for non-compliance.
ARTICLE VI -STOCK
Section 1.      Certificates of Stock.
The shares of capital stock of the Corporation may be in certificated or uncertificated form at the discretion of the Board. Each holder of stock represented by certificates shall be entitled to a certificate signed by, or in the name of the Corporation by, the President or a Vice President, and by the Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer, certifying the number of shares owned by him or her. Any or all of the signatures on the certificate may be by facsimile. If an officer, transfer agent or registrar of the Corporation who has signed or whose facsimile signature has been placed upon a certificate is no longer serving in that capacity when the certificate is issued, it may be issued by the Corporation with the same effect as if that person were still serving in that capacity at the time of issue.
Section 2.      Transfers of Stock.
Transfers of stock shall be made only upon the transfer books of the Corporation kept at an office of the Corporation or by transfer agents designated to transfer shares of the stock of the Corporation. Except where a certificate is issued in accordance with Section 4 of Article VI of these Bylaws, an outstanding certificate for the number of shares involved, if one has been issued, shall be surrendered for cancellation before a new certificate, if any, is issued therefor.
Section 3.      Record Date.
In order that the Corporation may determine the stockholders entitled to notice of any meeting of stockholders or any adjournment thereof, the Board of Directors may, except as otherwise required by law, fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be less than 10 days nor more than 60 days before the date of such meeting. If the Board of Directors so fixes a date, such date shall also be the record date for determining the stockholders entitled to vote at such meeting unless the Board of Directors determines, at the time it fixes such record date, that a later date on or before the date of the meeting shall be the date for making such determination. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of and to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided , however, that the Board of Directors may fix a new record date for determination of stockholders entitled to vote at the adjourned meeting, and in such case shall also fix as the record date for stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote in accordance with the foregoing provisions of this Section 3 of Article VI at the adjourned meeting.

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In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than 60 days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.
Section 4.      Lost, Stolen or Destroyed Certificates.
In the event of the loss, theft or destruction of any certificate of stock, another may be issued in its place pursuant to such regulations as the Board of Directors may establish concerning proof of such loss, theft or destruction and concerning the giving of a satisfactory bond or bonds of indemnity.
Section 5.      Registered Stockholders.
The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Delaware.
Section 6.      Additional Regulations.
The issue, transfer, conversion and registration of certificates of stock shall be governed by such other regulations as the Board of Directors may establish from time to time.
ARTICLE VII - NOTICES
Section 1.      Notices.
If mailed, notice to stockholders shall be deemed given when deposited in the mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the records of the Corporation. Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders may be given by electronic transmission in the manner provided in Section 232 of the General Corporation Law of the State of Delaware (the “ DGCL ”).
Section 2.      Waivers.
A written waiver of any notice, signed by a stockholder or director, or waiver by electronic transmission by such person, whether given before or after the time of the event for which notice is to be given, shall be deemed equivalent to the notice required to be given to such person. Neither the business nor the purpose of any meeting need be specified in such a waiver. Attendance of a person at any meeting, present in person or represented by proxy, shall constitute waiver of notice

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except attendance for the express purpose of objecting at the beginning of the meeting to the transaction of business because the meeting is not lawfully called or convened.
ARTICLE VIII - MISCELLANEOUS
Section 1.      Facsimile Signatures.
In addition to the provisions for use of facsimile signatures elsewhere specifically authorized in these Bylaws, facsimile signatures of any officer or officers of the Corporation may be used whenever and as authorized by the Board of Directors or a committee thereof.
Section 2.      Corporate Seal.
The Board of Directors may provide a suitable seal, containing the name of the Corporation, which seal shall be in the charge of the Secretary. If and when so directed by the Board of Directors or a committee thereof, duplicates of the seal may be kept and used by the Treasurer or by an Assistant Secretary or Assistant Treasurer.
Section 3.      Reliance upon Books, Reports and Records.
Each director, each member of any committee designated by the Board of Directors, and each officer of the Corporation shall, in the performance of his or her duties, be fully protected in relying in good faith upon the books of account or other records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of its officers or employees, or committees of the Board of Directors so designated, or by any other person as to matters which such director, committee member or officer reasonably believes are within such other person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation.
Section 4.      Fiscal Year.
The fiscal year of the Corporation shall be as fixed by the Board of Directors.
Section 5.      Time Periods.
In applying any provision of these Bylaws which requires that an act be done or not be done a specified number of days prior to an event or that an act be done during a period of a specified number of days prior to an event, calendar days shall be used, the day of the doing of the act shall be excluded, and the day of the event shall be included.
Section 6.      Affiliate Transactions; Certain Definitions.
The Corporation shall not, and shall not cause or permit any of its subsidiaries to, enter into, consummate, amend, modify (including by waiver) or terminate any Affiliate Transaction or any agreement with respect thereto, unless it (a) is on Arm’s Length Terms and (b) is approved by a majority of the directors who were not appointed by, are not otherwise affiliated with, the Related Party to which the Affiliate Transaction relates or any Affiliate of such Related Party (such directors, the “ Disinterested Directors ”).

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As used in these Bylaws, the following terms shall have the meanings set forth below:
“ Affiliate ” shall mean, with respect to any person, any other person directly or indirectly controlling, controlled by, or under common control with, such person as of the date on which, or at any time during the period for which, the determination of affiliation is being made (including any investment fund the primary investment manager or investment advisor to which is such person or its Affiliate). For purposes of this definition, the term “ control ” (including the correlative meanings of the terms “ controlled by ” and “ under common control with ”), as used with respect to any person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such person, whether through the ownership of voting securities, by contract or otherwise.
“ Affiliate Transaction ” shall mean any contract, agreement, transaction or other arrangement (whether written or unwritten) between the Corporation or any of its subsidiaries, on the one hand, and any Stockholder or any Affiliate (including any portfolio company or funds under management of such Stockholder or its Affiliates) of any stockholder of the Corporation, on the other hand; provided , that it shall not include any contract, agreement, transaction or other arrangement that is solely between the Corporation and/or any one or more of its wholly-owned subsidiaries.
“ Arm’s Length Terms ” shall mean, with respect to any agreement or transaction, that the terms thereof are at least as favorable to the Corporation (or any subsidiary) as could reasonably be obtained from an independent third party (including with respect to prevailing market terms and pricing provisions).
“ Majority Stockholder Approval ” means, with respect to any matter, the affirmative vote or written consent of one or more stockholders then holding, in the aggregate, a majority of the voting power of all of the then-outstanding shares of capital stock entitled to vote generally in the election of directors, voting together as a single class.
“ Related Party ” shall mean a stockholder of the Corporation who, collectively with its Affiliates (including any controlled portfolio companies and funds under management of such stockholder or its Affiliates), holds more than ten percent (10.0%) of the voting power of all of the then-outstanding shares of capital stock entitled to vote generally in the election of directors of the Corporation.
“ Supermajority Stockholder Approval ” means, with respect to any matter, the affirmative vote or written consent of one or more stockholders then holding, in the aggregate, at least sixty-six and two-thirds percent (66 2/3%) of the voting power of all of the then- outstanding shares of capital stock entitled to vote generally in the election of directors, voting together as a single class.
Section 7.      Actions Requiring Stockholder Approval.
(1)      Notwithstanding anything to the contrary contained in these Bylaws or that a lesser percentage vote or consent may be required under the DGCL or other applicable law, until the earlier of (i) the date the Common Stock is listed on a national securities exchange in the United

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States (a “ Listing ”) or (ii) the consummation of the first public offering and sale of Common Stock (other than on Forms S-4 or S-8 or their equivalent), pursuant to an effective registration statement under the Securities Act (an “ IPO ”), the Corporation shall not, and shall not permit or cause any of its subsidiaries to, cause or engage in any of the following transactions or take any of the following actions, without first obtaining (in addition to authorization by the Board of Directors) Majority Stockholder Approval, and any such transaction or action shall not be authorized unless and until such approval is obtained:
(a)      any merger, consolidation, recapitalization, reorganization or other similar transaction involving the Corporation or any of its material subsidiaries in which the holders of the Common Stock (or equivalent securities of any subsidiary) immediately prior to such transaction hold in the aggregate less than a majority of the outstanding voting equity securities of the surviving entity immediately after such transaction (other than pursuant to any merger, consolidation, recapitalization, reorganization or similar transactions solely between wholly-owned subsidiaries of the Corporation);
(b)      any sale, lease, conveyance or other disposition of all or substantially all of the assets of the Corporation and its subsidiaries on a consolidated basis, or of any of its material subsidiaries (other than pursuant to (i) any sale, lease, conveyance or other disposition solely between wholly-owned subsidiaries of the Corporation or (ii) a pro rata distribution or stock dividend to the holders of Common Stock);
(c)      the liquidation, dissolution or winding up of any material subsidiary of the Corporation, or the taking of any action that results in the liquidation, dissolution or winding up of any material subsidiary of the Corporation; or
(d)      the entering into of any contract, agreement, or binding arrangement or commitment to do or engage in any of the foregoing, unless such transaction or action is conditioned on such Majority Stockholder Approval.
(2)      Notwithstanding anything to the contrary contained in these Bylaws or that a lesser percentage vote or consent may be required under the DGCL or other applicable law, until the earlier of a Listing or the consummation of an IPO, the Corporation shall not, and shall not permit or cause any of its subsidiaries to, cause or engage in any of the following transactions or take any of the following actions, without first obtaining (in addition to authorization by the Board of Directors) Supermajority Stockholder Approval, and any such transaction or action shall not be authorized unless and until such approval is obtained:
(a)      the liquidation, dissolution or winding up of the Corporation on a going concern basis, or the taking of any action that results in the liquidation, dissolution or winding up of the Corporation on a going concern basis; or
(b)      the entering into of any contract, agreement, or binding arrangement or commitment to do or engage in any of the foregoing, unless such transaction or action is conditioned on such Supermajority Stockholder Approval.

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ARTICLE IX - AMENDMENTS
In furtherance and not in limitation of the powers conferred by law, the Board of Directors is expressly authorized to adopt, amend and repeal these Bylaws pursuant to a resolution adopted by a majority of the Whole Board, subject to the power of the holders of capital stock of the Corporation to adopt, amend or repeal these Bylaws by Majority Stockholder Approval (in addition to any approval by the holders of any particular class or series of capital stock required by law or these Bylaws or the terms of any preferred stock of the Corporation). Notwithstanding the foregoing, until the earlier of a Listing and the consummation of an IPO, none of the provisions of Article V , Sections 6 or 7 of Article VIII , or this Article IX shall be repealed or amended in any manner that is materially adverse to any stockholder, unless such repeal or amendment shall have been approved by Supermajority Stockholder Approval.
ARTICLE X - CONFLICTS WITH CERTIFICATE OF INCORPORATION
Notwithstanding anything to the contrary contained in these Bylaws, to the extent that any provision set forth herein conflicts with or is inconsistent with any provision of the Certificate of Incorporation, the provision set forth in the Certificate of Incorporation shall take precedence and shall control, to the fullest extent permitted by applicable law.
[Remainder of page intentionally left blank]

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Exhibit 10.1

EXHIBIT101LINNENERGYS_IMAGE1.GIF     
600 T RAVIS, S UITE 1400
H OUSTON , TX 77002
PHONE : (281) 840-4000
FAX : (281) 840-4001

April 18, 2018


Mark E. Ellis
c/o LINN Energy, Inc.
JP Morgan Chase Tower
600 Travis, Suite 1400
Houston, TX 77002


Re: Remaining Employment with Linn Energy, Inc. and its Affiliates

Dear Mark:

This letter (this “ Separation Agreement ”) will confirm our agreement relating to the terms of your remaining employment with Linn Energy, Inc. (“ Linn Energy ”), Linn Operating LLC (“ Linn Operating ” and, together with Linn Energy, the “ Linn Parties ”), and their respective affiliates and successors (collectively, with the Linn Parties, the “ Linn Group ”). Capitalized terms not defined herein will have the respective meanings ascribed to them in the Second Amended and Restated Employment Agreement by and among you and the Linn Parties, dated as of February 28, 2017 (the “ Employment Agreement ”).

1. Termination of Employment. Your employment with the Linn Group will automatically terminate upon the effective date of a Spinoff (as defined below) (the “ Scheduled Termination Date ”). You or Linn Operating may terminate your employment prior to the Scheduled Termination Date pursuant to Section 5 of the Employment Agreement, provided that, in determining whether you have Good Reason to terminate your employment at any time hereafter, the definition contained in Section 5.3(c) shall apply (without regard to the occurrence of a Change of Control), but shall apply without regard to clause (iv) thereof to the extent attributable to the appointment of any new management team to manage any business within the Linn Group. The actual date of termination of your employment, whether on the Scheduled Termination Date or prior thereto pursuant to Section 5 of the Employment Agreement, is hereinafter referred to as the “ Termination Date ”, and the period from the date hereof through the Termination Date is hereinafter referred to as the “ Transition Period ”. For purposes hereof, “ Spinoff ” means any distribution by Linn Energy (or any successor or entity that, after the date of this Separation Agreement, becomes the owner of 100% of Linn Energy) to its stockholders of the equity securities of an entity that conducts, or holds an interest in the entity that conducts, any of the three businesses described under “ Strategic Plan to Separate into Three Companies ” in Item 1 of Linn Energy’s Form 10-K filed for the year ended December 31, 2017.

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2.      Responsibilities during the Transition Period . During the Transition Period, you will continue to perform your duties as required by Section 1.2 of the Employment Agreement, provided that you acknowledge that such duties may include transitioning your authority and responsibilities to any new management team that has been appointed to any business within the Linn Group and cooperating with the Board on the content of any press releases (including any press release in connection with your termination).

3.      Compensation during the Transition Period. During the Transition Period:

(a)      the Linn Parties will continue to pay you your Base Salary pursuant to Section 3.1 of the Employment Agreement;
(b)      you will continue to be entitled to the expense reimbursements and other benefits set forth in Section 4 of the Employment Agreement;
(c)      you will not be entitled to any further bonus compensation pursuant to Section 3.2 of the Employment Agreement or otherwise, provided that, for the avoidance of doubt, the Linn Parties acknowledge that you will be entitled to retain any bonus compensation previously paid to you, including the bonus paid to you on January 12, 2018 in respect of 2017 performance (the payment and/or retention of which will not be used as the basis of any claim or action against you); and
(d)      you will not be entitled to any further long-term incentive compensation awards pursuant to Section 3.3 of the Employment Agreement or otherwise, including, without limitation, pursuant to Section 4.1(c) of the Linn Energy, Inc. 2017 Omnibus Incentive Plan (the “ Omnibus Plan ”), provided that, for the avoidance of doubt, with respect to the awards previously granted to you under the Omnibus Plan or directly or indirectly under the Linn Energy Holdco LLC Incentive Interest Plan, the Linn Parties acknowledge that you will continue to be eligible to vest in accordance with, and subject to, the terms of such awards. You agree that no “Change in Control” or “Change of Control” or other similar term has occurred through the date of this Agreement for purposes of your Employment Agreement, the Omnibus Plan, any equity award agreements, or any other agreement governing the terms of any equity awards or units held by you (collectively, the “ Governing Documents ”), and you agree that the Spinoff and any related transactions will not constitute a “Change in Control” or Change of Control” or other similar term under the terms of any of the Governing Documents. You further agree that within 5 business days of the date hereof, you will convert all of your Class A-2 Units of Linn ManagementCo or Linn Energy Holdco LLC you may then own (whether vested or unvested) into shares of Linn Energy common stock in accordance with the “Conversion Procedures” set forth in the Amended and Restated Limited Liability Company Operating Agreement of Linn Energy Holdco LLC, dated as of June 19, 2017 (the “ Conversion ”).
4.      Compensation and Obligations upon the Termination Date . Your entitlements and obligations upon and following the Termination Date will be determined in accordance with Section 6 and Section 7, respectively, of the Employment Agreement; provided that:

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(a)      the automatic termination of your employment on the Scheduled Termination Date will be treated as a termination of employment by you for Good Reason/by Linn Operating without Cause under Section 6.4(a);
(b)      your severance entitlements under Section 6.4 of the Employment Agreement (for which, for the avoidance of doubt, you will be eligible on any termination of your employment following the date hereof other than (i) by Linn Operating for Cause, (ii) by you without Good Reason, or (iii) by reason of your death and Disability, and which are subject to your execution and non-revocation of the Release (as defined below) within sixty (60) days of termination of your employment) will be determined pursuant to Section 6.4(a) of the Employment Agreement; provided that you are not waiving your entitlements, if any, pursuant to Section 6.4(b) of the Employment Agreement should a Change of Control occur (other than by reason of the Spinoff) on or before the Termination Date or within the six (6)-month period immediately following the Termination Date (provided that, for the avoidance of doubt, if the Change of Control occurs after the Termination Date, you would only be to entitled to any payments and benefits provided under Section 6.4(b) of the Employment Agreement which are in excess of the payments and benefits provided under Section 6.4(a) of the Employment Agreement); provided, further that following the end of the 6 month period contemplated by Section 6.4(a)(iii) of the Employment Agreement, you and your current spouse will continue to be eligible for coverage under the Company’s group medical, vision and dental benefit plans, in accordance with and subject to the terms and conditions of such plans, through the date each has attained age 65, subject to (x) your continued payment of one hundred percent of the applicable premium otherwise payable for such coverage under COBRA, as such premiums are in effect from time to time, and (y) the Company’s ability to (A) amend or terminate such benefit plans to comply with applicable law or (B) terminate such plans for all of its active employees;
(c)      the release that is required pursuant to Section 6.4(d)(i) of the Employment Agreement shall be substantially in the form attached hereto as Exhibit A (the “ Release ”);
(d)      the Restrictive Covenants set forth in Section 7 of the Employment Agreement, including the non-compete obligations of Section 7.3(b) of the Employment Agreement and the non-solicit obligations of Section 7.4(a) of the Employment Agreement, shall continue to apply following the Termination Date as set forth in the Employment Agreement, unless, and only to the extent, at your request, the Board consents in writing, such consent to be provided or withheld in its sole and absolute discretion, to the waiver of any obligation contained therein; and for the avoidance of doubt, (i) where applicable, the Restrictive Covenants shall be those that apply other than following a Change of Control Termination (as defined in the Employment Agreement), and (ii) your service as a member of the board of directors of PDC Energy, Inc. shall not constitute a breach of Section 7.3 of the Employment Agreement; and
(e)      by providing written notice to the Board prior to the date of the Spinoff, you will have the right, but not the obligation, to sell a portion of your vested shares of Linn Energy (including any Converted Shares (as defined below) and RSU Shares (as defined below) which will become vested under Section 6.4 of the Employment Agreement following your execution and non-revocation of the Release (the “ Vesting Shares ”)) to the Linn Parties, with the number of shares sold hereunder not to exceed the number of shares (adjusted for stock splits

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etc.) equal to two-thirds of the aggregate of the following: (i) any shares of Linn Energy you own as of the date of this Separation Agreement, (ii) any shares of Linn Energy you receive upon the conversion of any Class A-2 Units, as described in paragraph 3(d) above (“ Converted Shares ”), and (iii) any shares of Linn Energy underlying any then outstanding restricted stock units granted to you under the Omnibus Plan (“ RSU Shares ”), in the case of each of (ii) or (iii), whether or not vested, and if you provide such notice, the Linn Parties will purchase such shares immediately prior to the Spinoff and will promptly make a payment to you equal to the value of such shares, which value will be determined without applying discounts and will be based on the volume weighted average trading price of Linn Energy common stock for the 10 consecutive trading days immediately preceding the earlier of (A) the date of the Spinoff and (B) the date on which Linn Energy common stock first trades ex-dividend, with such payment made less any applicable withholding taxes; provided that this paragraph 4(e) shall not apply if, following the Termination Date and prior to the date of the Spinoff, you sell a number of shares of Linn Energy that exceeds the number of shares (adjusted for stock splits etc.) that became vested by reason of Section 6.4(a)(v) of the Employment Agreement. Notwithstanding the foregoing, with respect to any payment under this paragraph 4(e) which is in respect of any Vesting Shares (the “ Vesting Share Payment ”), such Vesting Share Payment will be made on the first business day following the date on which the Release is effective and all periods for revocation have expired (provided that if the 60 day period following the Termination Date spans two calendar years, the Vesting Share Payment will be made on the later of (x) the first business day in the later calendar year and (y) the first business day following the date on which the Release is effective and all periods for revocation have expired), and if the Release is not executed with all periods for revocation having expired within the time period set forth in Section 6.4(d) of the Employment Agreement, you will forfeit any right to the Vesting Share Payment.
5.      Miscellaneous.

(a)      Except as modified herein, the Employment Agreement will remain in full force and effect in accordance with its terms, as will any other agreement in effect between you and any member of the Linn Group.

(b)      Each of the provisions of Section 8 of the Employment Agreement are incorporated by reference and treated as if they were contained herein; provided that (i) for purposes of incorporating Section 8.1 of the Employment Agreement, in connection with the Spinoff, the Linn Parties agree, and will cause the entities that are separated in connection with the Spinoff to agree, to be jointly and severally liable with respect to all obligations to you hereunder, and (ii) for purposes of incorporating Section 8.6 of the Employment Agreement, the Linn Parties agree that, (x) as currently contemplated, the Spinoff is not intended to constitute a change in ownership or control within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended, and, accordingly, unless the Linn Parties’ auditors find that such a position lacks reasonable support, the Linn Parties will cause each member of the Linn Group not to report on a Form W-2 or withhold any taxes pursuant to Section 4999 of the Code with respect to any payments or benefits under this Separation Agreement or the Employment Agreement, and (y) unless the Linn Parties’ auditors find that such a position lacks reasonable support, the Linn Parties will cause each member of the Linn Group not to report on a Form W-2 or withhold any taxes with respect to the Conversion.

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(c)      Subject to your execution and non-revocation of the Release in accordance with the terms of this Separation Agreement, if, subsequent to the Conversion, you receive notice from the Internal Revenue Service or any other taxing authority asserting that, as a result of the Conversion, an amount is required to be included in your income for the taxable year of the date of grant of the Class B Units or Class A-2 Units, and such amount is attributable to the grant of the Class B Units or Class A-2 Units (the " IRS Notice "), you shall (i) give written notice to Linn Energy (or its successor) within 30 days following receipt of such IRS Notice and (ii) permit Linn Energy (or its successor), at Linn Energy’s (or its successor’s) expense, to engage counsel to contest and control that aspect of any resulting audit or proceedings to resolve the issue. If, upon final adjudication and assessment of the matters described in the IRS Notice, you are required to pay any taxes with respect to the taxable year of the date of grant of the Class B Units or Class A-2 Units as a result of the Conversion and such taxes are attributable to the grant of the Class B Units or Class A-2 Units, Linn Energy (or its successor) shall pay to you a cash lump sum amount equal to the excess, if any, of (x) any federal, state and local income taxes and any employment taxes payable by you thereon, and any interest or penalties payable by you thereon, over (y) the excess of (I) the amount of any federal, state or local taxes you would have owed in the taxable year in which the Conversion occurs had no taxes been paid as a result of the matter described in this Section 5(c) over (II) the amount of taxes actually owed by you for the taxable year in which the Conversion occurs, and Linn Energy (or its successor) shall fully gross you up for any taxes which result from Linn Energy’s (or its successor’s) payment to you under this Section 5(c).


[ Remainder of page intentionally left blank ]



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If the terms of this Separation Agreement are acceptable to you, please sign, date and return it to me by April 19, 2018. At the time that you sign it, this Separation Agreement shall take effect as a legally binding agreement between you and the Linn Parties on the basis set forth above.


 
Sincerely,
 
 
 
Linn Energy, Inc.
 
 
 
 
By:
/s/ Candice J. Wells
 
 
Candice J. Wells
 
 
Senior Vice President, General Counsel and Corporate Secretary
 
 
 
 
 
 
 
Linn Operating, LLC
 
 
 
 
By:
/s/ Candice J. Wells
 
 
Candice J. Wells
 
 
Senior Vice President, General Counsel and Corporate Secretary
 
 
 
 
 
 
Accepted and agreed:
 
 
 
 
 
 
 
 
 
 
 
Signature:
/s/ Mark E. Ellis
 
 
Mark E. Ellis
 
Date:
April 18, 2018
 



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Exhibit A

RELEASE


I, Mark E. Ellis , in consideration of the relevant payments and benefits (the “Release Payments”) due to me under Section 6.4(a) of the Second Amended and Restated Employment Agreement by and among me, Linn Energy, Inc. and Linn Operating LLC (individually and collectively, the “Company”), dated as of February 28, 2017, (the “Employment Agreement”) as modified by the Separation Agreement between the Company and me, dated April 18, 2018 (the “Separation Agreement”), hereby agree as follows:
1. Release of Claims . I irrevocably and unconditionally release, acquit and discharge the Company and its officers, directors, employees and agents, and all of its affiliates, successors and assigns, and all of their officers, directors, employees and agents (collectively, the “Releasees”) from any and all claims or causes of action, suits, agreements, promises, damages, disputes, controversies, contentions, differences, judgments, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, variances, trespasses, extents, executions and demands of any kind whatsoever which I have ever had, now have or may have against the Releasees, in law, admiralty or equity, whether known or unknown to me, for, upon, or by reason of, any matter, action, omission, course or thing whatsoever occurring up to the date this Release is signed by me, including without limitation, any claim arising out of or related to my employment or termination of such employment. I hereby waive any and all rights I may have, directly or indirectly, now or at any time in the future of any nature, with respect to any claim, charge, or lawsuit, arising out of my employment and termination of employment up and through the date of the execution of this Release, including for purposes of obtaining any monetary award, reinstatement of employment or for any equitable relief. I acknowledge that this Release includes, but is not limited to, all claims arising under federal, state or local laws prohibiting employment discrimination and all claims growing out of any legal restrictions on the Company’s right to terminate its employees including any common law and/or breach of contract, whistleblower, tort, or retaliation claims and all claims related to payment of compensation. This Release also specifically encompasses, without limitation, all claims of employment discrimination based on race, color, religion, sex, and national origin, as provided under Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. § 1981(a), all claims of discrimination based on age, as provided under the Age Discrimination in Employment Act of 1967, as amended, the Older Worker Benefit Protection Act ("ADEA"), all claims under the Employee Retirement Income Security Act (“ERISA”), all claims under the Family and Medical Leave Act (“FMLA”), all claims under the Fair Credit Reporting Act, all claims under the National Labor Relations Act, and all claims of employment discrimination under the Americans with Disabilities Act (“ADA”) under any law of the state of Texas, including all claims but not limited to, the Texas Commission on Human Rights Act, (TCHRA”), The Texas Payday Act, and any other applicable federal, state or local laws concerning my employment. I agree not to file any claim, charge or cause of action whatsoever against the Releasees concerning actions occurring during employment whether or not of an employment related matter. Notwithstanding the foregoing, I expressly do not waive any claims I may have (i) to enforce my rights to receive severance under Section 6.4(a) of the Employment Agreement or my rights under Sections 4 and 5 of the Separation Agreement; (ii) to indemnification that I may have against any of the




Releasees in connection with my service to the Company and its affiliates through the date of my termination of employment; or (iii) related to any coverage that I may have under any directors and officers liability insurance policy maintained by the Company or its affiliates.
2.      Period to Consider/Revoke Release . I acknowledge that I have been advised to consult with an attorney before executing this Release, and I understand that I have a period of up to 21 days from my receipt of this Release to review and consider this Release. I acknowledge that I may not sign this Release before the date that my employment with the Company terminates. I further understand that once I have signed this Release, I may revoke it at any time during the 7 days following (and not including) the date of its execution by delivering a written notice of revocation to the Company, attention General Counsel. I further understand that if I fail to execute and return this Release to the Company, attention General Counsel, prior to the expiration of such 21-day period, or if I revoke my execution of the Release during such 7-day period, I will be required to repay the Release Payments as provided for under the Separation Agreement. I specifically acknowledge that $100 of the Release Payments are consideration for my waiver of any right I may have to bring a claim with respect to a violation of ADEA.
3.      Subject to Sections 7.1(a) and (b) of the Employment Agreement, I agree that I will not make any negative, disparaging, detrimental or derogatory remarks or public statements (written, oral, telephonic, electronic, or by any other method) about the Releasees that could be reasonably expected to adversely affect in any manner (i) the conduct of the Company’s or any of its affiliates’ or successors’ businesses or (ii) the business reputation or relationships of the Company or any of its affiliates or successors and/or any of their past or present officers, directors, agents, employees, attorneys, and assigns.
4.      I agree that I remain subject to all covenants and obligations as set forth in Section 7 of the Employment Agreement, unless, and only to the extent, the Board of Directors of Linn Energy, Inc. (or its successor) (the “Board”), at my request, consents in writing, such consent to be provided or withheld in its sole and absolute discretion, to the waiver of any obligation contained therein.
5.      I agree that, for the 12-month period immediately following my termination, I will, (i) provide reasonable cooperation in connection with (A) any legal action or proceeding (or any appeal from any action or proceeding) which relates to events occurring during my employment with the Company (“ Claims ”), (B) the Spinoff (as defined in the Separation Agreement), (C) the transition of my duties to any successor, and (D) respond and provide information with regard to matters in which I have knowledge as a result of my employment with the Company, and (ii) make myself available to answer questions or to assist with any reasonable request made by any member of the Board; provided, in each case, that if I am required to provide any material assistance in connection with the foregoing, the Company will pay me at a rate of $500 per hour for such assistance. I agree to promptly inform the Company if I become aware of any lawsuits involving Claims that may be filed or threatened against the Company or its affiliates. I also agree to promptly inform the Company (to the extent that I am legally permitted to do so) if I am asked to assist in any investigation of the Company or its affiliates (or their actions) or another party attempts to obtain information or documents from me (other than in connection with any litigation or other proceeding in which I am a party-in-opposition) with respect to matters I believe in good faith to relate to any investigation of the Company or its




affiliates, in each case, regardless of whether a lawsuit or other proceeding has then been filed against the Company or its affiliates with respect to such investigation, and shall not do so unless legally required. During the pendency of any litigation or other proceeding involving such Claims, I shall not communicate with anyone (other than my attorneys and tax and/or financial advisors and except to the extent that I determine in good faith is necessary in connection with the performance of my duties for the Company) with respect to the facts or subject matter of any pending or potential litigation or regulatory or administrative proceeding involving the Company or any of its affiliates, without giving prior written notice to the Company or the Company’s counsel.
6.      If and to the extent a court of competent jurisdiction shall determine any part or portion of this Release to be invalid or unenforceable, the same shall not affect the remainder of the Release, which shall be given full effect without regard to the invalid part or portion.
7.      This Release will be governed by and construed in accordance with the laws of the State of Texas, without regard to the principles of conflicts of law thereof.





I ACKNOWLEDGE THAT I HAVE READ THIS RELEASE AND I UNDERSTAND AND ACCEPT ITS TERMS.

NOT TO BE EXECUTED PRIOR TO THE LAST DAY OF EMPLOYMENT.


 
 
 
Mark E. Ellis
 
Date




Exhibit 10.2

EXHIBIT101LINNENERGYS_IMAGE1.GIF     
600 T RAVIS, S UITE 1400
H OUSTON , TX 77002
PHONE : (281) 840-4000
FAX : (281) 840-4001


April 18, 2018


Thomas E. Emmons
c/o LINN Energy, Inc.
JP Morgan Chase Tower
600 Travis, Suite 1400
Houston, TX 77002


Re: Remaining Employment with Linn Energy, Inc. and its Affiliates

Dear Thomas:

This letter (this “ Separation Agreement ”) will confirm our agreement relating to the terms of your remaining employment with Linn Energy, Inc. (“ Linn Energy ”), Linn Operating LLC (“ Linn Operating ” and, together with Linn Energy, the “ Linn Parties ”), and their respective affiliates and successors (collectively, with the Linn Parties, the “ Linn Group ”). Capitalized terms not defined herein will have the respective meanings ascribed to them in the Employment Agreement by and among you and the Linn Parties, dated as of February 28, 2017 (the “ Employment Agreement ”).

1. Termination of Employment. Your employment with the Linn Group will automatically terminate upon the effective date of a Spinoff (as defined below) (the “ Scheduled Termination Date ”). You or Linn Operating may terminate your employment prior to the Scheduled Termination Date pursuant to Section 5 of the Employment Agreement, provided that, in determining whether you have Good Reason to terminate your employment at any time hereafter, the definition contained in Section 5.3(c) shall apply (without regard to the occurrence of a Change of Control), but shall apply without regard to clause (iv) thereof to the extent attributable to the appointment of any new management team to manage any business within the Linn Group. The actual date of termination of your employment, whether on the Scheduled Termination Date or prior thereto pursuant to Section 5 of the Employment Agreement, is hereinafter referred to as the “ Termination Date ”, and the period from the date hereof through the Termination Date is hereinafter referred to as the “ Transition Period ”. For purposes hereof, “ Spinoff ” means any distribution by Linn Energy (or any successor or entity that, after the date of this Separation Agreement, becomes the owner of 100% of Linn Energy) to its stockholders of the equity securities of an entity that conducts, or holds an interest in the entity that conducts, any of the three businesses described under “ Strategic Plan to Separate into Three Companies ” in Item 1 of Linn Energy’s Form 10-K filed for the year ended December 31, 2017.

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2.      Responsibilities during the Transition Period . During the Transition Period, you will continue to perform your duties as required by Section 1.2 of the Employment Agreement, provided that you acknowledge that such duties may include transitioning your authority and responsibilities to any new management team that has been appointed to any business within the Linn Group and cooperating with the Board on the content of any press releases (including any press release in connection with your termination).

3.      Compensation during the Transition Period. During the Transition Period:

(a)      the Linn Parties will continue to pay you your Base Salary pursuant to Section 3.1 of the Employment Agreement;
(b)      you will continue to be entitled to the expense reimbursements and other benefits set forth in Section 4 of the Employment Agreement;
(c)      you will not be entitled to any further bonus compensation pursuant to Section 3.2 of the Employment Agreement or otherwise, provided that, for the avoidance of doubt, the Linn Parties acknowledge that you will be entitled to retain any bonus compensation previously paid to you, including the bonus paid to you on January 12, 2018 in respect of 2017 performance (the payment and/or retention of which will not be used as the basis of any claim or action against you); and
(d)      you will not be entitled to any further long-term incentive compensation awards pursuant to Section 3.3 of the Employment Agreement or otherwise, including, without limitation, pursuant to Section 4.1(c) of the Linn Energy, Inc. 2017 Omnibus Incentive Plan (the “ Omnibus Plan ”), provided that, for the avoidance of doubt, with respect to the awards previously granted to you under the Omnibus Plan or directly or indirectly under the Linn Energy Holdco LLC Incentive Interest Plan, the Linn Parties acknowledge that you will continue to be eligible to vest in accordance with, and subject to, the terms of such awards. You agree that no “Change in Control” or “Change of Control” or other similar term has occurred through the date of this Agreement for purposes of your Employment Agreement, the Omnibus Plan, any equity award agreements, or any other agreement governing the terms of any equity awards or units held by you (collectively, the “ Governing Documents ”), and you agree that the Spinoff and any related transactions will not constitute a “Change in Control” or Change of Control” or other similar term under the terms of any of the Governing Documents. You further agree that within 5 business days of the date hereof, you will convert all of your Class A-2 Units of Linn ManagementCo or Linn Energy Holdco LLC you may then own (whether vested or unvested) into shares of Linn Energy common stock in accordance with the “Conversion Procedures” set forth in the Amended and Restated Limited Liability Company Operating Agreement of Linn Energy Holdco LLC, dated as of June 19, 2017 (the “ Conversion ”).
4.      Compensation and Obligations upon the Termination Date . Your entitlements and obligations upon and following the Termination Date will be determined in accordance with Section 6 and Section 7, respectively, of the Employment Agreement; provided that:

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(a)      the automatic termination of your employment on the Scheduled Termination Date will be treated as a termination of employment by you for Good Reason/by Linn Operating without Cause under Section 6.4(a);
(b)      your severance entitlements under Section 6.4 of the Employment Agreement (for which, for the avoidance of doubt, you will be eligible on any termination of your employment following the date hereof other than (i) by Linn Operating for Cause, (ii) by you without Good Reason, or (iii) by reason of your death and Disability, and which are subject to your execution and non-revocation of the Release (as defined below) within sixty (60) days of termination of your employment) will be determined pursuant to Section 6.4(a) of the Employment Agreement; provided that you are not waiving your entitlements, if any, pursuant to Section 6.4(b) of the Employment Agreement should a Change of Control occur (other than by reason of the Spinoff) on or before the Termination Date or within the six (6)-month period immediately following the Termination Date (provided that, for the avoidance of doubt, if the Change of Control occurs after the Termination Date, you would only be to entitled to any payments and benefits provided under Section 6.4(b) of the Employment Agreement which are in excess of the payments and benefits provided under Section 6.4(a) of the Employment Agreement);
(c)      the release that is required pursuant to Section 6.4(d)(i) of the Employment Agreement shall be substantially in the form attached hereto as Exhibit A (the “ Release ”);
(d)      the Restrictive Covenants set forth in Section 7 of the Employment Agreement, including the non-solicit obligations of Section 7.4(a) of the Employment Agreement, shall continue to apply following the Termination Date as set forth in the Employment Agreement, unless, and only to the extent, at your request, the Board consents in writing, such consent to be provided or withheld in its sole and absolute discretion, to the waiver of any obligation contained therein; and for the avoidance of doubt, where applicable, the Restrictive Covenants shall be those that apply other than following a Change of Control Termination (as defined in the Employment Agreement); and
(e)      by providing written notice to the Board prior to the date of the Spinoff, you will have the right, but not the obligation, to sell a portion of your vested shares of Linn Energy (including any Converted Shares (as defined below) and RSU Shares (as defined below) which will become vested under Section 6.4 of the Employment Agreement following your execution and non-revocation of the Release (the “ Vesting Shares ”)) to the Linn Parties, with the number of shares sold hereunder not to exceed the number of shares (adjusted for stock splits etc.) equal to two-thirds of the aggregate of the following: (i) any shares of Linn Energy you own as of the date of this Separation Agreement, (ii) any shares of Linn Energy you receive upon the conversion of any Class A-2 Units, as described in paragraph 3(d) above (“ Converted Shares ”), and (iii) any shares of Linn Energy underlying any then outstanding restricted stock units granted to you under the Omnibus Plan (“ RSU Shares ”), in the case of each of (ii) or (iii), whether or not vested, and if you provide such notice, the Linn Parties will purchase such shares immediately prior to the Spinoff and will promptly make a payment to you equal to the value of such shares, which value will be determined without applying discounts and will be based on the volume weighted average trading price of Linn Energy common stock for the 10 consecutive

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trading days immediately preceding the earlier of (A) the date of the Spinoff and (B) the date on which Linn Energy common stock first trades ex-dividend, with such payment made less any applicable withholding taxes; provided that this paragraph 4(e) shall not apply if, following the Termination Date and prior to the date of the Spinoff, you sell a number of shares of Linn Energy that exceeds the number of shares (adjusted for stock splits etc.) that became vested by reason of Section 6.4(a)(v) of the Employment Agreement. Notwithstanding the foregoing, with respect to any payment under this paragraph 4(e) which is in respect of any Vesting Shares (the “ Vesting Share Payment ”), such Vesting Share Payment will be made on the first business day following the date on which the Release is effective and all periods for revocation have expired (provided that if the 60 day period following the Termination Date spans two calendar years, the Vesting Share Payment will be made on the later of (x) the first business day in the later calendar year and (y) the first business day following the date on which the Release is effective and all periods for revocation have expired), and if the Release is not executed with all periods for revocation having expired within the time period set forth in Section 6.4(d) of the Employment Agreement, you will forfeit any right to the Vesting Share Payment.
5.      Miscellaneous.
(a)      Except as modified herein, the Employment Agreement will remain in full force and effect in accordance with its terms, as will any other agreement in effect between you and any member of the Linn Group.
(b)      Each of the provisions of Section 8 of the Employment Agreement are incorporated by reference and treated as if they were contained herein; provided that (i) for purposes of incorporating Section 8.1 of the Employment Agreement, in connection with the Spinoff, the Linn Parties agree, and will cause the entities that are separated in connection with the Spinoff to agree, to be jointly and severally liable with respect to all obligations to you hereunder, and (ii) for purposes of incorporating Section 8.6 of the Employment Agreement, the Linn Parties agree that, (x) as currently contemplated, the Spinoff is not intended to constitute a change in ownership or control within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended, and, accordingly, unless the Linn Parties’ auditors find that such a position lacks reasonable support, the Linn Parties will cause each member of the Linn Group not to report on a Form W-2 or withhold any taxes pursuant to Section 4999 of the Code with respect to any payments or benefits under this Separation Agreement or the Employment Agreement, and (y) unless the Linn Parties’ auditors find that such a position lacks reasonable support, the Linn Parties will cause each member of the Linn Group not to report on a Form W-2 or withhold any taxes with respect to the Conversion.
(c)      Subject to your execution and non-revocation of the Release in accordance with the terms of this Separation Agreement, if, subsequent to the Conversion, you receive notice from the Internal Revenue Service or any other taxing authority asserting that, as a result of the Conversion, an amount is required to be included in your income for the taxable year of the date of grant of the Class B Units or Class A-2 Units, and such amount is attributable to the grant of the Class B Units or Class A-2 Units (the " IRS Notice "), you shall (i) give written notice to Linn Energy (or its successor) within 30 days following receipt of such IRS Notice and (ii) permit Linn Energy (or its successor), at Linn Energy’s (or its successor’s) expense, to engage counsel to contest and control that aspect of any resulting audit or proceedings to resolve the issue. If,

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upon final adjudication and assessment of the matters described in the IRS Notice, you are required to pay any taxes with respect to the taxable year of the date of grant of the Class B Units or Class A-2 Units as a result of the Conversion and such taxes are attributable to the grant of the Class B Units or Class A-2 Units, Linn Energy (or its successor) shall pay to you a cash lump sum amount equal to the excess, if any, of (x) any federal, state and local income taxes and any employment taxes payable by you thereon, and any interest or penalties payable by you thereon, over (y) the excess of (I) the amount of any federal, state or local taxes you would have owed in the taxable year in which the Conversion occurs had no taxes been paid as a result of the matter described in this Section 5(c) over (II) the amount of taxes actually owed by you for the taxable year in which the Conversion occurs, and Linn Energy (or its successor) shall fully gross you up for any taxes which result from Linn Energy’s (or its successor’s) payment to you under this Section 5(c).


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If the terms of this Separation Agreement are acceptable to you, please sign, date and return it to me by April 19, 2018. At the time that you sign it, this Separation Agreement shall take effect as a legally binding agreement between you and the Linn Parties on the basis set forth above.

 
Sincerely,
 
 
 
Linn Energy, Inc.
 
 
 
 
By:
/s/ Mark E. Ellis
 
 
Mark E. Ellis
 
 
President and Chief Executive Officer
 
 
 
 
 
 
 
Linn Operating, LLC
 
 
 
 
By:
/s/ Mark E. Ellis
 
 
Mark E. Ellis
 
 
President and Chief Executive Officer
 
 
 
 
 
 
Accepted and agreed:
 
 
 
 
 
 
 
 
 
 
 
Signature:
/s/ Thomas E. Emmons
 
 
Thomas E. Emmons
 
Date:
April 18, 2018
 



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Exhibit A

RELEASE


I, Thomas E. Emmons , in consideration of the relevant payments and benefits (the “Release Payments”) due to me under Section 6.4(a) of the Employment Agreement by and among me, Linn Energy, Inc. and Linn Operating LLC (individually and collectively, the “Company”), dated as of February 28, 2017, (the “Employment Agreement”) as modified by the Separation Agreement between the Company and me, dated April 18, 2018 (the “Separation Agreement”), hereby agree as follows:
1. Release of Claims . I irrevocably and unconditionally release, acquit and discharge the Company and its officers, directors, employees and agents, and all of its affiliates, successors and assigns, and all of their officers, directors, employees and agents (collectively, the “Releasees”) from any and all claims or causes of action, suits, agreements, promises, damages, disputes, controversies, contentions, differences, judgments, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, variances, trespasses, extents, executions and demands of any kind whatsoever which I have ever had, now have or may have against the Releasees, in law, admiralty or equity, whether known or unknown to me, for, upon, or by reason of, any matter, action, omission, course or thing whatsoever occurring up to the date this Release is signed by me, including without limitation, any claim arising out of or related to my employment or termination of such employment. I hereby waive any and all rights I may have, directly or indirectly, now or at any time in the future of any nature, with respect to any claim, charge, or lawsuit, arising out of my employment and termination of employment up and through the date of the execution of this Release, including for purposes of obtaining any monetary award, reinstatement of employment or for any equitable relief. I acknowledge that this Release includes, but is not limited to, all claims arising under federal, state or local laws prohibiting employment discrimination and all claims growing out of any legal restrictions on the Company’s right to terminate its employees including any common law and/or breach of contract, whistleblower, tort, or retaliation claims and all claims related to payment of compensation. This Release also specifically encompasses, without limitation, all claims of employment discrimination based on race, color, religion, sex, and national origin, as provided under Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. § 1981(a), all claims of discrimination based on age, as provided under the Age Discrimination in Employment Act of 1967, as amended, the Older Worker Benefit Protection Act ("ADEA"), all claims under the Employee Retirement Income Security Act (“ERISA”), all claims under the Family and Medical Leave Act (“FMLA”), all claims under the Fair Credit Reporting Act, all claims under the National Labor Relations Act, and all claims of employment discrimination under the Americans with Disabilities Act (“ADA”) under any law of the state of Texas, including all claims but not limited to, the Texas Commission on Human Rights Act, (TCHRA”), The Texas Payday Act, and any other applicable federal, state or local laws concerning my employment. I agree not to file any claim, charge or cause of action whatsoever against the Releasees concerning actions occurring during employment whether or not of an employment related matter. Notwithstanding the foregoing, I expressly do not waive any claims I may have (i) to enforce my rights to receive severance under Section 6.4(a) of the Employment Agreement or my rights under Sections 4 and 5 of the Separation Agreement; (ii) to indemnification that I may have against any of the




Releasees in connection with my service to the Company and its affiliates through the date of my termination of employment; or (iii) related to any coverage that I may have under any directors and officers liability insurance policy maintained by the Company or its affiliates.
2.      Period to Consider/Revoke Release . I acknowledge that I have been advised to consult with an attorney before executing this Release, and I understand that I have a period of up to 21 days from my receipt of this Release to review and consider this Release. I acknowledge that I may not sign this Release before the date that my employment with the Company terminates. I further understand that once I have signed this Release, I may revoke it at any time during the 7 days following (and not including) the date of its execution by delivering a written notice of revocation to the Company, attention General Counsel. I further understand that if I fail to execute and return this Release to the Company, attention General Counsel, prior to the expiration of such 21-day period, or if I revoke my execution of the Release during such 7-day period, I will be required to repay the Release Payments as provided for under the Separation Agreement. I specifically acknowledge that $100 of the Release Payments are consideration for my waiver of any right I may have to bring a claim with respect to a violation of ADEA.
3.      Subject to Sections 7.1(a) and (b) of the Employment Agreement, I agree that I will not make any negative, disparaging, detrimental or derogatory remarks or public statements (written, oral, telephonic, electronic, or by any other method) about the Releasees that could be reasonably expected to adversely affect in any manner (i) the conduct of the Company’s or any of its affiliates’ or successors’ businesses or (ii) the business reputation or relationships of the Company or any of its affiliates or successors and/or any of their past or present officers, directors, agents, employees, attorneys, and assigns.
4.      I agree that I remain subject to all covenants and obligations as set forth in Section 7 of the Employment Agreement, unless, and only to the extent, the Board of Directors of Linn Energy, Inc. (or its successor) (the “Board”), at my request, consents in writing, such consent to be provided or withheld in its sole and absolute discretion, to the waiver of any obligation contained therein.
5.      I agree that, for the 12-month period immediately following my termination, I will, (i) provide reasonable cooperation in connection with (A) any legal action or proceeding (or any appeal from any action or proceeding) which relates to events occurring during my employment with the Company (“ Claims ”), (B) the Spinoff (as defined in the Separation Agreement), (C) the transition of my duties to any successor, and (D) respond and provide information with regard to matters in which I have knowledge as a result of my employment with the Company, and (ii) make myself available to answer questions or to assist with any reasonable request made by any member of the Board; provided, in each case, that if I am required to provide any material assistance in connection with the foregoing, the Company will pay me at a rate of $500 per hour for such assistance. I agree to promptly inform the Company if I become aware of any lawsuits involving Claims that may be filed or threatened against the Company or its affiliates. I also agree to promptly inform the Company (to the extent that I am legally permitted to do so) if I am asked to assist in any investigation of the Company or its affiliates (or their actions) or another party attempts to obtain information or documents from me (other than in connection with any litigation or other proceeding in which I am a party-in-opposition) with respect to matters I believe in good faith to relate to any investigation of the Company or its

    



affiliates, in each case, regardless of whether a lawsuit or other proceeding has then been filed against the Company or its affiliates with respect to such investigation, and shall not do so unless legally required. During the pendency of any litigation or other proceeding involving such Claims, I shall not communicate with anyone (other than my attorneys and tax and/or financial advisors and except to the extent that I determine in good faith is necessary in connection with the performance of my duties for the Company) with respect to the facts or subject matter of any pending or potential litigation or regulatory or administrative proceeding involving the Company or any of its affiliates, without giving prior written notice to the Company or the Company’s counsel.
6.      If and to the extent a court of competent jurisdiction shall determine any part or portion of this Release to be invalid or unenforceable, the same shall not affect the remainder of the Release, which shall be given full effect without regard to the invalid part or portion.
7.      This Release will be governed by and construed in accordance with the laws of the State of Texas, without regard to the principles of conflicts of law thereof.


    



I ACKNOWLEDGE THAT I HAVE READ THIS RELEASE AND I UNDERSTAND AND ACCEPT ITS TERMS.

NOT TO BE EXECUTED PRIOR TO THE LAST DAY OF EMPLOYMENT.


 
 
 
Thomas E. Emmons
 
Date




Exhibit 10.3

EXHIBIT101LINNENERGYS_IMAGE1.GIF     
600 T RAVIS, S UITE 1400
H OUSTON , TX 77002
PHONE : (281) 840-4000
FAX : (281) 840-4001


April 18, 2018


Jamin McNeil
c/o LINN Energy, Inc.
JP Morgan Chase Tower
600 Travis, Suite 1400
Houston, TX 77002


Re: Remaining Employment with Linn Energy, Inc. and its Affiliates

Dear Jamin:

This letter (this “ Separation Agreement ”) will confirm our agreement relating to the terms of your remaining employment with Linn Energy, Inc. (“ Linn Energy ”), Linn Operating LLC (“ Linn Operating ” and, together with Linn Energy, the “ Linn Parties ”), and their respective affiliates and successors (collectively, with the Linn Parties, the “ Linn Group ”). Capitalized terms not defined herein will have the respective meanings ascribed to them in the Employment Agreement by and among you and the Linn Parties, dated as of February 28, 2017 (the “ Employment Agreement ”).

1. Termination of Employment. Your employment with the Linn Group will automatically terminate upon the effective date of a Spinoff (as defined below) (the “ Scheduled Termination Date ”). You or Linn Operating may terminate your employment prior to the Scheduled Termination Date pursuant to Section 5 of the Employment Agreement, provided that, in determining whether you have Good Reason to terminate your employment at any time hereafter, the definition contained in Section 5.3(c) shall apply (without regard to the occurrence of a Change of Control), but shall apply without regard to clause (iv) thereof to the extent attributable to the appointment of any new management team to manage any business within the Linn Group. The actual date of termination of your employment, whether on the Scheduled Termination Date or prior thereto pursuant to Section 5 of the Employment Agreement, is hereinafter referred to as the “ Termination Date ”, and the period from the date hereof through the Termination Date is hereinafter referred to as the “ Transition Period ”. For purposes hereof, “ Spinoff ” means any distribution by Linn Energy (or any successor or entity that, after the date of this Separation Agreement, becomes the owner of 100% of Linn Energy) to its stockholders of the equity securities of an entity that conducts, or holds an interest in the entity that conducts, any of the three businesses described under “ Strategic Plan to Separate into Three Companies ” in Item 1 of Linn Energy’s Form 10-K filed for the year ended December 31, 2017.

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2.      Responsibilities during the Transition Period . During the Transition Period, you will continue to perform your duties as required by Section 1.2 of the Employment Agreement, provided that you acknowledge that such duties may include transitioning your authority and responsibilities to any new management team that has been appointed to any business within the Linn Group and cooperating with the Board on the content of any press releases (including any press release in connection with your termination).

3.      Compensation during the Transition Period. During the Transition Period:

(a)      the Linn Parties will continue to pay you your Base Salary pursuant to Section 3.1 of the Employment Agreement;
(b)      you will continue to be entitled to the expense reimbursements and other benefits set forth in Section 4 of the Employment Agreement;
(c)      you will not be entitled to any further bonus compensation pursuant to Section 3.2 of the Employment Agreement or otherwise, provided that, for the avoidance of doubt, the Linn Parties acknowledge that you will be entitled to retain any bonus compensation previously paid to you, including the bonus paid to you on January 12, 2018 in respect of 2017 performance (the payment and/or retention of which will not be used as the basis of any claim or action against you); and
(d)      you will not be entitled to any further long-term incentive compensation awards pursuant to Section 3.3 of the Employment Agreement or otherwise, including, without limitation, pursuant to Section 4.1(c) of the Linn Energy, Inc. 2017 Omnibus Incentive Plan (the “ Omnibus Plan ”), provided that, for the avoidance of doubt, with respect to the awards previously granted to you under the Omnibus Plan or directly or indirectly under the Linn Energy Holdco LLC Incentive Interest Plan, the Linn Parties acknowledge that you will continue to be eligible to vest in accordance with, and subject to, the terms of such awards. You agree that no “Change in Control” or “Change of Control” or other similar term has occurred through the date of this Agreement for purposes of your Employment Agreement, the Omnibus Plan, any equity award agreements, or any other agreement governing the terms of any equity awards or units held by you (collectively, the “ Governing Documents ”), and you agree that the Spinoff and any related transactions will not constitute a “Change in Control” or Change of Control” or other similar term under the terms of any of the Governing Documents. You further agree that within 5 business days of the date hereof, you will convert all of your Class A-2 Units of Linn ManagementCo or Linn Energy Holdco LLC you may then own (whether vested or unvested) into shares of Linn Energy common stock in accordance with the “Conversion Procedures” set forth in the Amended and Restated Limited Liability Company Operating Agreement of Linn Energy Holdco LLC, dated as of June 19, 2017 (the “ Conversion ”).
4.      Compensation and Obligations upon the Termination Date . Your entitlements and obligations upon and following the Termination Date will be determined in accordance with Section 6 and Section 7, respectively, of the Employment Agreement; provided that:

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(a)      the automatic termination of your employment on the Scheduled Termination Date will be treated as a termination of employment by you for Good Reason/by Linn Operating without Cause under Section 6.4(a);
(b)      your severance entitlements under Section 6.4 of the Employment Agreement (for which, for the avoidance of doubt, you will be eligible on any termination of your employment following the date hereof other than (i) by Linn Operating for Cause, (ii) by you without Good Reason, or (iii) by reason of your death and Disability, and which are subject to your execution and non-revocation of the Release (as defined below) within sixty (60) days of termination of your employment) will be determined pursuant to Section 6.4(a) of the Employment Agreement; provided that you are not waiving your entitlements, if any, pursuant to Section 6.4(b) of the Employment Agreement should a Change of Control occur (other than by reason of the Spinoff) on or before the Termination Date or within the six (6)-month period immediately following the Termination Date (provided that, for the avoidance of doubt, if the Change of Control occurs after the Termination Date, you would only be to entitled to any payments and benefits provided under Section 6.4(b) of the Employment Agreement which are in excess of the payments and benefits provided under Section 6.4(a) of the Employment Agreement);
(c)      the release that is required pursuant to Section 6.4(d)(i) of the Employment Agreement shall be substantially in the form attached hereto as Exhibit A (the “ Release ”);
(d)      the Restrictive Covenants set forth in Section 7 of the Employment Agreement, including the non-compete obligations of Section 7.3(b) of the Employment Agreement and the non-solicit obligations of Section 7.4(a) of the Employment Agreement, shall continue to apply following the Termination Date as set forth in the Employment Agreement, unless, and only to the extent, at your request, the Board consents in writing, such consent to be provided or withheld in its sole and absolute discretion, to the waiver of any obligation contained therein; and for the avoidance of doubt, where applicable, the Restrictive Covenants shall be those that apply other than following a Change of Control Termination (as defined in the Employment Agreement); and
(e)      by providing written notice to the Board prior to the date of the Spinoff, you will have the right, but not the obligation, to sell a portion of your vested shares of Linn Energy (including any Converted Shares (as defined below) and RSU Shares (as defined below) which will become vested under Section 6.4 of the Employment Agreement following your execution and non-revocation of the Release (the “ Vesting Shares ”)) to the Linn Parties, with the number of shares sold hereunder not to exceed the number of shares (adjusted for stock splits etc.) equal to two-thirds of the aggregate of the following: (i) any shares of Linn Energy you own as of the date of this Separation Agreement, (ii) any shares of Linn Energy you receive upon the conversion of any Class A-2 Units, as described in paragraph 3(d) above (“ Converted Shares ”), and (iii) any shares of Linn Energy underlying any then outstanding restricted stock units granted to you under the Omnibus Plan (“ RSU Shares ”), in the case of each of (ii) or (iii), whether or not vested, and if you provide such notice, the Linn Parties will purchase such shares immediately prior to the Spinoff and will promptly make a payment to you equal to the value of such shares, which value will be determined without applying discounts and will be based on the

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volume weighted average trading price of Linn Energy common stock for the 10 consecutive trading days immediately preceding the earlier of (A) the date of the Spinoff and (B) the date on which Linn Energy common stock first trades ex-dividend, with such payment made less any applicable withholding taxes; provided that this paragraph 4(e) shall not apply if, following the Termination Date and prior to the date of the Spinoff, you sell a number of shares of Linn Energy that exceeds the number of shares (adjusted for stock splits etc.) that became vested by reason of Section 6.4(a)(v) of the Employment Agreement. Notwithstanding the foregoing, with respect to any payment under this paragraph 4(e) which is in respect of any Vesting Shares (the “ Vesting Share Payment ”), such Vesting Share Payment will be made on the first business day following the date on which the Release is effective and all periods for revocation have expired (provided that if the 60 day period following the Termination Date spans two calendar years, the Vesting Share Payment will be made on the later of (x) the first business day in the later calendar year and (y) the first business day following the date on which the Release is effective and all periods for revocation have expired), and if the Release is not executed with all periods for revocation having expired within the time period set forth in Section 6.4(d) of the Employment Agreement, you will forfeit any right to the Vesting Share Payment.
5.      Miscellaneous.
(a)      Except as modified herein, the Employment Agreement will remain in full force and effect in accordance with its terms, as will any other agreement in effect between you and any member of the Linn Group.
(b)      Each of the provisions of Section 8 of the Employment Agreement are incorporated by reference and treated as if they were contained herein; provided that (i) for purposes of incorporating Section 8.1 of the Employment Agreement, in connection with the Spinoff, the Linn Parties agree, and will cause the entities that are separated in connection with the Spinoff to agree, to be jointly and severally liable with respect to all obligations to you hereunder, and (ii) for purposes of incorporating Section 8.6 of the Employment Agreement, the Linn Parties agree that, (x) as currently contemplated, the Spinoff is not intended to constitute a change in ownership or control within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended, and, accordingly, unless the Linn Parties’ auditors find that such a position lacks reasonable support, the Linn Parties will cause each member of the Linn Group not to report on a Form W-2 or withhold any taxes pursuant to Section 4999 of the Code with respect to any payments or benefits under this Separation Agreement or the Employment Agreement, and (y) unless the Linn Parties’ auditors find that such a position lacks reasonable support, the Linn Parties will cause each member of the Linn Group not to report on a Form W-2 or withhold any taxes with respect to the Conversion.
(c)      Subject to your execution and non-revocation of the Release in accordance with the terms of this Separation Agreement, if, subsequent to the Conversion, you receive notice from the Internal Revenue Service or any other taxing authority asserting that, as a result of the Conversion, an amount is required to be included in your income for the taxable year of the date of grant of the Class B Units or Class A-2 Units, and such amount is attributable to the grant of the Class B Units or Class A-2 Units (the " IRS Notice "), you shall (i) give written notice to Linn Energy (or its successor) within 30 days following receipt of such IRS Notice and (ii) permit Linn Energy (or its successor), at Linn Energy’s (or its successor’s) expense, to engage counsel

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to contest and control that aspect of any resulting audit or proceedings to resolve the issue. If, upon final adjudication and assessment of the matters described in the IRS Notice, you are required to pay any taxes with respect to the taxable year of the date of grant of the Class B Units or Class A-2 Units as a result of the Conversion and such taxes are attributable to the grant of the Class B Units or Class A-2 Units, Linn Energy (or its successor) shall pay to you a cash lump sum amount equal to the excess, if any, of (x) any federal, state and local income taxes and any employment taxes payable by you thereon, and any interest or penalties payable by you thereon, over (y) the excess of (I) the amount of any federal, state or local taxes you would have owed in the taxable year in which the Conversion occurs had no taxes been paid as a result of the matter described in this Section 5(c) over (II) the amount of taxes actually owed by you for the taxable year in which the Conversion occurs, and Linn Energy (or its successor) shall fully gross you up for any taxes which result from Linn Energy’s (or its successor’s) payment to you under this Section 5(c).


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If the terms of this Separation Agreement are acceptable to you, please sign, date and return it to me by April 19, 2018. At the time that you sign it, this Separation Agreement shall take effect as a legally binding agreement between you and the Linn Parties on the basis set forth above.

 
Sincerely,
 
 
 
Linn Energy, Inc.
 
 
 
 
By:
/s/ Mark E. Ellis
 
 
Mark E. Ellis
 
 
President and Chief Executive Officer
 
 
 
 
 
 
 
Linn Operating, LLC
 
 
 
 
By:
/s/ Mark E. Ellis
 
 
Mark E. Ellis
 
 
President and Chief Executive Officer
 
 
 
 
 
 
Accepted and agreed:
 
 
 
 
 
 
 
 
 
 
 
Signature:
/s/ Jamin McNeil
 
 
Jamin McNeil
 
Date:
April 18, 2018
 



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Exhibit A

RELEASE


I, Jamin McNeil , in consideration of the relevant payments and benefits (the “Release Payments”) due to me under Section 6.4(a) of the Employment Agreement by and among me, Linn Energy, Inc. and Linn Operating LLC (individually and collectively, the “Company”), dated as of February 28, 2017, (the “Employment Agreement”) as modified by the Separation Agreement between the Company and me, dated April 18, 2018 (the “Separation Agreement”), hereby agree as follows:
1. Release of Claims . I irrevocably and unconditionally release, acquit and discharge the Company and its officers, directors, employees and agents, and all of its affiliates, successors and assigns, and all of their officers, directors, employees and agents (collectively, the “Releasees”) from any and all claims or causes of action, suits, agreements, promises, damages, disputes, controversies, contentions, differences, judgments, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, variances, trespasses, extents, executions and demands of any kind whatsoever which I have ever had, now have or may have against the Releasees, in law, admiralty or equity, whether known or unknown to me, for, upon, or by reason of, any matter, action, omission, course or thing whatsoever occurring up to the date this Release is signed by me, including without limitation, any claim arising out of or related to my employment or termination of such employment. I hereby waive any and all rights I may have, directly or indirectly, now or at any time in the future of any nature, with respect to any claim, charge, or lawsuit, arising out of my employment and termination of employment up and through the date of the execution of this Release, including for purposes of obtaining any monetary award, reinstatement of employment or for any equitable relief. I acknowledge that this Release includes, but is not limited to, all claims arising under federal, state or local laws prohibiting employment discrimination and all claims growing out of any legal restrictions on the Company’s right to terminate its employees including any common law and/or breach of contract, whistleblower, tort, or retaliation claims and all claims related to payment of compensation. This Release also specifically encompasses, without limitation, all claims of employment discrimination based on race, color, religion, sex, and national origin, as provided under Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. § 1981(a), all claims of discrimination based on age, as provided under the Age Discrimination in Employment Act of 1967, as amended, the Older Worker Benefit Protection Act ("ADEA"), all claims under the Employee Retirement Income Security Act (“ERISA”), all claims under the Family and Medical Leave Act (“FMLA”), all claims under the Fair Credit Reporting Act, all claims under the National Labor Relations Act, and all claims of employment discrimination under the Americans with Disabilities Act (“ADA”) under any law of the state of Texas, including all claims but not limited to, the Texas Commission on Human Rights Act, (TCHRA”), The Texas Payday Act, and any other applicable federal, state or local laws concerning my employment. I agree not to file any claim, charge or cause of action whatsoever against the Releasees concerning actions occurring during employment whether or not of an employment related matter. Notwithstanding the foregoing, I expressly do not waive any claims I may have (i) to enforce my rights to receive severance under Section 6.4(a) of the Employment Agreement or my rights under Sections 4 and 5 of the Separation Agreement; (ii) to indemnification that I may have against any of the




Releasees in connection with my service to the Company and its affiliates through the date of my termination of employment; or (iii) related to any coverage that I may have under any directors and officers liability insurance policy maintained by the Company or its affiliates.
2.      Period to Consider/Revoke Release . I acknowledge that I have been advised to consult with an attorney before executing this Release, and I understand that I have a period of up to 21 days from my receipt of this Release to review and consider this Release. I acknowledge that I may not sign this Release before the date that my employment with the Company terminates. I further understand that once I have signed this Release, I may revoke it at any time during the 7 days following (and not including) the date of its execution by delivering a written notice of revocation to the Company, attention General Counsel. I further understand that if I fail to execute and return this Release to the Company, attention General Counsel, prior to the expiration of such 21-day period, or if I revoke my execution of the Release during such 7-day period, I will be required to repay the Release Payments as provided for under the Separation Agreement. I specifically acknowledge that $100 of the Release Payments are consideration for my waiver of any right I may have to bring a claim with respect to a violation of ADEA.
3.      Subject to Sections 7.1(a) and (b) of the Employment Agreement, I agree that I will not make any negative, disparaging, detrimental or derogatory remarks or public statements (written, oral, telephonic, electronic, or by any other method) about the Releasees that could be reasonably expected to adversely affect in any manner (i) the conduct of the Company’s or any of its affiliates’ or successors’ businesses or (ii) the business reputation or relationships of the Company or any of its affiliates or successors and/or any of their past or present officers, directors, agents, employees, attorneys, and assigns.
4.      I agree that I remain subject to all covenants and obligations as set forth in Section 7 of the Employment Agreement, unless, and only to the extent, the Board of Directors of Linn Energy, Inc. (or its successor) (the “Board”), at my request, consents in writing, such consent to be provided or withheld in its sole and absolute discretion, to the waiver of any obligation contained therein.
5.      I agree that, for the 12-month period immediately following my termination, I will, (i) provide reasonable cooperation in connection with (A) any legal action or proceeding (or any appeal from any action or proceeding) which relates to events occurring during my employment with the Company (“ Claims ”), (B) the Spinoff (as defined in the Separation Agreement), (C) the transition of my duties to any successor, and (D) respond and provide information with regard to matters in which I have knowledge as a result of my employment with the Company, and (ii) make myself available to answer questions or to assist with any reasonable request made by any member of the Board; provided, in each case, that if I am required to provide any material assistance in connection with the foregoing, the Company will pay me at a rate of $500 per hour for such assistance. I agree to promptly inform the Company if I become aware of any lawsuits involving Claims that may be filed or threatened against the Company or its affiliates. I also agree to promptly inform the Company (to the extent that I am legally permitted to do so) if I am asked to assist in any investigation of the Company or its affiliates (or their actions) or another party attempts to obtain information or documents from me (other than in connection with any litigation or other proceeding in which I am a party-in-opposition) with respect to matters I believe in good faith to relate to any investigation of the Company or its




affiliates, in each case, regardless of whether a lawsuit or other proceeding has then been filed against the Company or its affiliates with respect to such investigation, and shall not do so unless legally required. During the pendency of any litigation or other proceeding involving such Claims, I shall not communicate with anyone (other than my attorneys and tax and/or financial advisors and except to the extent that I determine in good faith is necessary in connection with the performance of my duties for the Company) with respect to the facts or subject matter of any pending or potential litigation or regulatory or administrative proceeding involving the Company or any of its affiliates, without giving prior written notice to the Company or the Company’s counsel.
6.      If and to the extent a court of competent jurisdiction shall determine any part or portion of this Release to be invalid or unenforceable, the same shall not affect the remainder of the Release, which shall be given full effect without regard to the invalid part or portion.
7.      This Release will be governed by and construed in accordance with the laws of the State of Texas, without regard to the principles of conflicts of law thereof.





I ACKNOWLEDGE THAT I HAVE READ THIS RELEASE AND I UNDERSTAND AND ACCEPT ITS TERMS.

NOT TO BE EXECUTED PRIOR TO THE LAST DAY OF EMPLOYMENT.


 
 
 
Jamin McNeil
 
Date



Exhibit 10.4

EXHIBIT101LINNENERGYS_IMAGE1.GIF     
600 T RAVIS, S UITE 1400
H OUSTON , TX 77002
PHONE : (281) 840-4000
FAX : (281) 840-4001


April 18, 2018

Arden L. Walker, Jr.
c/o LINN Energy, Inc.
JP Morgan Chase Tower
600 Travis, Suite 1400
Houston, TX 77002


Re: Remaining Employment with Linn Energy, Inc. and its Affiliates

Dear Arden:
This letter (this “ Separation Agreement ”) will confirm our agreement relating to the terms of your remaining employment with Linn Energy, Inc. (“ Linn Energy ”), Linn Operating LLC (“ Linn Operating ” and, together with Linn Energy, the “ Linn Parties ”), and their respective affiliates and successors (collectively, with the Linn Parties, the “ Linn Group ”). Capitalized terms not defined herein will have the respective meanings ascribed to them in the Second Amended and Restated Employment Agreement by and among you and the Linn Parties, dated as of February 28, 2017 (the “ Employment Agreement ”).

1. Termination of Employment. Your employment with the Linn Group will automatically terminate upon the effective date of a Spinoff (as defined below) (the “ Scheduled Termination Date ”). You or Linn Operating may terminate your employment prior to the Scheduled Termination Date pursuant to Section 5 of the Employment Agreement, provided that, in determining whether you have Good Reason to terminate your employment at any time hereafter, the definition contained in Section 5.3(c) shall apply (without regard to the occurrence of a Change of Control), but shall apply without regard to clause (iv) thereof to the extent attributable to the appointment of any new management team to manage any business within the Linn Group. The actual date of termination of your employment, whether on the Scheduled Termination Date or prior thereto pursuant to Section 5 of the Employment Agreement, is hereinafter referred to as the “ Termination Date ”, and the period from the date hereof through the Termination Date is hereinafter referred to as the “ Transition Period ”. For purposes hereof, “ Spinoff ” means any distribution by Linn Energy (or any successor or entity that, after the date of this Separation Agreement, becomes the owner of 100% of Linn Energy) to its stockholders of the equity securities of an entity that conducts, or holds an interest in the entity that conducts, any of the three businesses described under “ Strategic Plan to Separate into Three Companies ” in Item 1 of Linn Energy’s Form 10-K filed for the year ended December 31, 2017.

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2.      Responsibilities during the Transition Period . During the Transition Period, you will continue to perform your duties as required by Section 1.2 of the Employment Agreement, provided that you acknowledge that such duties may include transitioning your authority and responsibilities to any new management team that has been appointed to any business within the Linn Group and cooperating with the Board on the content of any press releases (including any press release in connection with your termination).

3.      Compensation during the Transition Period. During the Transition Period:

(a)      the Linn Parties will continue to pay you your Base Salary pursuant to Section 3.1 of the Employment Agreement;
(b)      you will continue to be entitled to the expense reimbursements and other benefits set forth in Section 4 of the Employment Agreement;
(c)      you will not be entitled to any further bonus compensation pursuant to Section 3.2 of the Employment Agreement or otherwise, provided that, for the avoidance of doubt, the Linn Parties acknowledge that you will be entitled to retain any bonus compensation previously paid to you, including the bonus paid to you on January 12, 2018 in respect of 2017 performance (the payment and/or retention of which will not be used as the basis of any claim or action against you); and
(d)      you will not be entitled to any further long-term incentive compensation awards pursuant to Section 3.3 of the Employment Agreement or otherwise, including, without limitation, pursuant to Section 4.1(c) of the Linn Energy, Inc. 2017 Omnibus Incentive Plan (the “ Omnibus Plan ”), provided that, for the avoidance of doubt, with respect to the awards previously granted to you under the Omnibus Plan or directly or indirectly under the Linn Energy Holdco LLC Incentive Interest Plan, the Linn Parties acknowledge that you will continue to be eligible to vest in accordance with, and subject to, the terms of such awards. You agree that no “Change in Control” or “Change of Control” or other similar term has occurred through the date of this Agreement for purposes of your Employment Agreement, the Omnibus Plan, any equity award agreements, or any other agreement governing the terms of any equity awards or units held by you (collectively, the “ Governing Documents ”), and you agree that the Spinoff and any related transactions will not constitute a “Change in Control” or Change of Control” or other similar term under the terms of any of the Governing Documents. You further agree that within 5 business days of the date hereof, you will convert all of your Class A-2 Units of Linn ManagementCo or Linn Energy Holdco LLC you may then own (whether vested or unvested) into shares of Linn Energy common stock in accordance with the “Conversion Procedures” set forth in the Amended and Restated Limited Liability Company Operating Agreement of Linn Energy Holdco LLC, dated as of June 19, 2017 (the “ Conversion ”).
4.      Compensation and Obligations upon the Termination Date . Your entitlements and obligations upon and following the Termination Date will be determined in accordance with Section 6 and Section 7, respectively, of the Employment Agreement; provided that:

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(a)      the automatic termination of your employment on the Scheduled Termination Date will be treated as a termination of employment by you for Good Reason/by Linn Operating without Cause under Section 6.4(a);
(b)      your severance entitlements under Section 6.4 of the Employment Agreement (for which, for the avoidance of doubt, you will be eligible on any termination of your employment following the date hereof other than (i) by Linn Operating for Cause, (ii) by you without Good Reason, or (iii) by reason of your death and Disability, and which are subject to your execution and non-revocation of the Release (as defined below) within sixty (60) days of termination of your employment) will be determined pursuant to Section 6.4(a) of the Employment Agreement; provided that you are not waiving your entitlements, if any, pursuant to Section 6.4(b) of the Employment Agreement should a Change of Control occur (other than by reason of the Spinoff) on or before the Termination Date or within the six (6)-month period immediately following the Termination Date (provided that, for the avoidance of doubt, if the Change of Control occurs after the Termination Date, you would only be to entitled to any payments and benefits provided under Section 6.4(b) of the Employment Agreement which are in excess of the payments and benefits provided under Section 6.4(a) of the Employment Agreement);
(c)      the release that is required pursuant to Section 6.4(d)(i) of the Employment Agreement shall be substantially in the form attached hereto as Exhibit A (the “ Release ”);
(d)      the Restrictive Covenants set forth in Section 7 of the Employment Agreement, including the non-compete obligations of Section 7.3(b) of the Employment Agreement and the non-solicit obligations of Section 7.4(a) of the Employment Agreement, shall continue to apply following the Termination Date as set forth in the Employment Agreement, unless, and only to the extent, at your request, the Board consents in writing, such consent to be provided or withheld in its sole and absolute discretion, to the waiver of any obligation contained therein; and for the avoidance of doubt, where applicable, the Restrictive Covenants shall be those that apply other than following a Change of Control Termination (as defined in the Employment Agreement); and
(e)      by providing written notice to the Board prior to the date of the Spinoff, you will have the right, but not the obligation, to sell a portion of your vested shares of Linn Energy (including any Converted Shares (as defined below) and RSU Shares (as defined below) which will become vested under Section 6.4 of the Employment Agreement following your execution and non-revocation of the Release (the “ Vesting Shares ”)) to the Linn Parties, with the number of shares sold hereunder not to exceed the number of shares (adjusted for stock splits etc.) equal to two-thirds of the aggregate of the following: (i) any shares of Linn Energy you own as of the date of this Separation Agreement, (ii) any shares of Linn Energy you receive upon the conversion of any Class A-2 Units, as described in paragraph 3(d) above (“ Converted Shares ”), and (iii) any shares of Linn Energy underlying any then outstanding restricted stock units granted to you under the Omnibus Plan (“ RSU Shares ”), in the case of each of (ii) or (iii), whether or not vested, and if you provide such notice, the Linn Parties will purchase such shares immediately prior to the Spinoff and will promptly make a payment to you equal to the value of such shares, which value will be determined without applying discounts and will be based on the

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volume weighted average trading price of Linn Energy common stock for the 10 consecutive trading days immediately preceding the earlier of (A) the date of the Spinoff and (B) the date on which Linn Energy common stock first trades ex-dividend, with such payment made less any applicable withholding taxes; provided that this paragraph 4(e) shall not apply if, following the Termination Date and prior to the date of the Spinoff, you sell a number of shares of Linn Energy that exceeds the number of shares (adjusted for stock splits etc.) that became vested by reason of Section 6.4(a)(v) of the Employment Agreement. Notwithstanding the foregoing, with respect to any payment under this paragraph 4(e) which is in respect of any Vesting Shares (the “ Vesting Share Payment ”), such Vesting Share Payment will be made on the first business day following the date on which the Release is effective and all periods for revocation have expired (provided that if the 60 day period following the Termination Date spans two calendar years, the Vesting Share Payment will be made on the later of (x) the first business day in the later calendar year and (y) the first business day following the date on which the Release is effective and all periods for revocation have expired), and if the Release is not executed with all periods for revocation having expired within the time period set forth in Section 6.4(d) of the Employment Agreement, you will forfeit any right to the Vesting Share Payment.
5.      Miscellaneous.
(a)      Except as modified herein, the Employment Agreement will remain in full force and effect in accordance with its terms, as will any other agreement in effect between you and any member of the Linn Group.
(b)      Each of the provisions of Section 8 of the Employment Agreement are incorporated by reference and treated as if they were contained herein; provided that (i) for purposes of incorporating Section 8.1 of the Employment Agreement, in connection with the Spinoff, the Linn Parties agree, and will cause the entities that are separated in connection with the Spinoff to agree, to be jointly and severally liable with respect to all obligations to you hereunder, and (ii) for purposes of incorporating Section 8.6 of the Employment Agreement, the Linn Parties agree that, (x) as currently contemplated, the Spinoff is not intended to constitute a change in ownership or control within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended, and, accordingly, unless the Linn Parties’ auditors find that such a position lacks reasonable support, the Linn Parties will cause each member of the Linn Group not to report on a Form W-2 or withhold any taxes pursuant to Section 4999 of the Code with respect to any payments or benefits under this Separation Agreement or the Employment Agreement, and (y) unless the Linn Parties’ auditors find that such a position lacks reasonable support, the Linn Parties will cause each member of the Linn Group not to report on a Form W-2 or withhold any taxes with respect to the Conversion.
(c)      Subject to your execution and non-revocation of the Release in accordance with the terms of this Separation Agreement, if, subsequent to the Conversion, you receive notice from the Internal Revenue Service or any other taxing authority asserting that, as a result of the Conversion, an amount is required to be included in your income for the taxable year of the date of grant of the Class B Units or Class A-2 Units, and such amount is attributable to the grant of the Class B Units or Class A-2 Units (the " IRS Notice "), you shall (i) give written notice to Linn Energy (or its successor) within 30 days following receipt of such IRS Notice and (ii) permit Linn Energy (or its successor), at Linn Energy’s (or its successor’s) expense, to engage counsel

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to contest and control that aspect of any resulting audit or proceedings to resolve the issue. If, upon final adjudication and assessment of the matters described in the IRS Notice, you are required to pay any taxes with respect to the taxable year of the date of grant of the Class B Units or Class A-2 Units as a result of the Conversion and such taxes are attributable to the grant of the Class B Units or Class A-2 Units, Linn Energy (or its successor) shall pay to you a cash lump sum amount equal to the excess, if any, of (x) any federal, state and local income taxes and any employment taxes payable by you thereon, and any interest or penalties payable by you thereon, over (y) the excess of (I) the amount of any federal, state or local taxes you would have owed in the taxable year in which the Conversion occurs had no taxes been paid as a result of the matter described in this Section 5(c) over (II) the amount of taxes actually owed by you for the taxable year in which the Conversion occurs, and Linn Energy (or its successor) shall fully gross you up for any taxes which result from Linn Energy’s (or its successor’s) payment to you under this Section 5(c).


[ Remainder of page intentionally left blank ]



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If the terms of this Separation Agreement are acceptable to you, please sign, date and return it to me by April 19, 2018. At the time that you sign it, this Separation Agreement shall take effect as a legally binding agreement between you and the Linn Parties on the basis set forth above.

 
Sincerely,
 
 
 
Linn Energy, Inc.
 
 
 
 
By:
/s/ Mark E. Ellis
 
 
Mark E. Ellis
 
 
President and Chief Executive Officer
 
 
 
 
 
 
 
Linn Operating, LLC
 
 
 
 
By:
/s/ Mark E. Ellis
 
 
Mark E. Ellis
 
 
President and Chief Executive Officer
 
 
 
 
 
 
Accepted and agreed:
 
 
 
 
 
 
 
 
 
 
 
Signature:
/s/ Arden L. Walker, Jr.
 
 
Arden L. Walker, Jr.
 
Date:
April 18, 2018
 



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Exhibit A

RELEASE


I, Arden L. Walker, Jr. , in consideration of the relevant payments and benefits (the “Release Payments”) due to me under Section 6.4(a) of the Second Amended and Restated Employment Agreement by and among me, Linn Energy, Inc. and Linn Operating LLC (individually and collectively, the “Company”), dated as of February 28, 2017, (the “Employment Agreement”) as modified by the Separation Agreement between the Company and me, dated April 18, 2018 (the “Separation Agreement”), hereby agree as follows:
1. Release of Claims . I irrevocably and unconditionally release, acquit and discharge the Company and its officers, directors, employees and agents, and all of its affiliates, successors and assigns, and all of their officers, directors, employees and agents (collectively, the “Releasees”) from any and all claims or causes of action, suits, agreements, promises, damages, disputes, controversies, contentions, differences, judgments, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, variances, trespasses, extents, executions and demands of any kind whatsoever which I have ever had, now have or may have against the Releasees, in law, admiralty or equity, whether known or unknown to me, for, upon, or by reason of, any matter, action, omission, course or thing whatsoever occurring up to the date this Release is signed by me, including without limitation, any claim arising out of or related to my employment or termination of such employment. I hereby waive any and all rights I may have, directly or indirectly, now or at any time in the future of any nature, with respect to any claim, charge, or lawsuit, arising out of my employment and termination of employment up and through the date of the execution of this Release, including for purposes of obtaining any monetary award, reinstatement of employment or for any equitable relief. I acknowledge that this Release includes, but is not limited to, all claims arising under federal, state or local laws prohibiting employment discrimination and all claims growing out of any legal restrictions on the Company’s right to terminate its employees including any common law and/or breach of contract, whistleblower, tort, or retaliation claims and all claims related to payment of compensation. This Release also specifically encompasses, without limitation, all claims of employment discrimination based on race, color, religion, sex, and national origin, as provided under Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. § 1981(a), all claims of discrimination based on age, as provided under the Age Discrimination in Employment Act of 1967, as amended, the Older Worker Benefit Protection Act ("ADEA"), all claims under the Employee Retirement Income Security Act (“ERISA”), all claims under the Family and Medical Leave Act (“FMLA”), all claims under the Fair Credit Reporting Act, all claims under the National Labor Relations Act, and all claims of employment discrimination under the Americans with Disabilities Act (“ADA”) under any law of the state of Texas, including all claims but not limited to, the Texas Commission on Human Rights Act, (TCHRA”), The Texas Payday Act, and any other applicable federal, state or local laws concerning my employment. I agree not to file any claim, charge or cause of action whatsoever against the Releasees concerning actions occurring during employment whether or not of an employment related matter. Notwithstanding the foregoing, I expressly do not waive any claims I may have (i) to enforce my rights to receive severance under Section 6.4(a) of the Employment Agreement or my rights under Sections 4 and 5 of the Separation Agreement; (ii) to indemnification that I may have against any of the




Releasees in connection with my service to the Company and its affiliates through the date of my termination of employment; or (iii) related to any coverage that I may have under any directors and officers liability insurance policy maintained by the Company or its affiliates.
2.      Period to Consider/Revoke Release . I acknowledge that I have been advised to consult with an attorney before executing this Release, and I understand that I have a period of up to 21 days from my receipt of this Release to review and consider this Release. I acknowledge that I may not sign this Release before the date that my employment with the Company terminates. I further understand that once I have signed this Release, I may revoke it at any time during the 7 days following (and not including) the date of its execution by delivering a written notice of revocation to the Company, attention General Counsel. I further understand that if I fail to execute and return this Release to the Company, attention General Counsel, prior to the expiration of such 21-day period, or if I revoke my execution of the Release during such 7-day period, I will be required to repay the Release Payments as provided for under the Separation Agreement. I specifically acknowledge that $100 of the Release Payments are consideration for my waiver of any right I may have to bring a claim with respect to a violation of ADEA.
3.      Subject to Sections 7.1(a) and (b) of the Employment Agreement, I agree that I will not make any negative, disparaging, detrimental or derogatory remarks or public statements (written, oral, telephonic, electronic, or by any other method) about the Releasees that could be reasonably expected to adversely affect in any manner (i) the conduct of the Company’s or any of its affiliates’ or successors’ businesses or (ii) the business reputation or relationships of the Company or any of its affiliates or successors and/or any of their past or present officers, directors, agents, employees, attorneys, and assigns.
4.      I agree that I remain subject to all covenants and obligations as set forth in Section 7 of the Employment Agreement, unless, and only to the extent, the Board of Directors of Linn Energy, Inc. (or its successor) (the “Board”), at my request, consents in writing, such consent to be provided or withheld in its sole and absolute discretion, to the waiver of any obligation contained therein.
5.      I agree that, for the 12-month period immediately following my termination, I will, (i) provide reasonable cooperation in connection with (A) any legal action or proceeding (or any appeal from any action or proceeding) which relates to events occurring during my employment with the Company (“ Claims ”), (B) the Spinoff (as defined in the Separation Agreement), (C) the transition of my duties to any successor, and (D) respond and provide information with regard to matters in which I have knowledge as a result of my employment with the Company, and (ii) make myself available to answer questions or to assist with any reasonable request made by any member of the Board; provided, in each case, that if I am required to provide any material assistance in connection with the foregoing, the Company will pay me at a rate of $500 per hour for such assistance. I agree to promptly inform the Company if I become aware of any lawsuits involving Claims that may be filed or threatened against the Company or its affiliates. I also agree to promptly inform the Company (to the extent that I am legally permitted to do so) if I am asked to assist in any investigation of the Company or its affiliates (or their actions) or another party attempts to obtain information or documents from me (other than in connection with any litigation or other proceeding in which I am a party-in-opposition) with respect to matters I believe in good faith to relate to any investigation of the Company or its




affiliates, in each case, regardless of whether a lawsuit or other proceeding has then been filed against the Company or its affiliates with respect to such investigation, and shall not do so unless legally required. During the pendency of any litigation or other proceeding involving such Claims, I shall not communicate with anyone (other than my attorneys and tax and/or financial advisors and except to the extent that I determine in good faith is necessary in connection with the performance of my duties for the Company) with respect to the facts or subject matter of any pending or potential litigation or regulatory or administrative proceeding involving the Company or any of its affiliates, without giving prior written notice to the Company or the Company’s counsel.
6.      If and to the extent a court of competent jurisdiction shall determine any part or portion of this Release to be invalid or unenforceable, the same shall not affect the remainder of the Release, which shall be given full effect without regard to the invalid part or portion.
7.      This Release will be governed by and construed in accordance with the laws of the State of Texas, without regard to the principles of conflicts of law thereof.





I ACKNOWLEDGE THAT I HAVE READ THIS RELEASE AND I UNDERSTAND AND ACCEPT ITS TERMS.

NOT TO BE EXECUTED PRIOR TO THE LAST DAY OF EMPLOYMENT.


 
 
 
Arden L. Walker, Jr.
 
Date




Exhibit 10.5

EXHIBIT101LINNENERGYS_IMAGE1.GIF     
600 T RAVIS, S UITE 1400
H OUSTON , TX 77002
PHONE : (281) 840-4000
FAX : (281) 840-4001


April 18, 2018


Candice J. Wells
c/o LINN Energy, Inc.
JP Morgan Chase Tower
600 Travis, Suite 1400
Houston, TX 77002


Re: Remaining Employment with Linn Energy, Inc. and its Affiliates

Dear Candice:

This letter (this “ Separation Agreement ”) will confirm our agreement relating to the terms of your remaining employment with Linn Energy, Inc. (“ Linn Energy ”), Linn Operating LLC (“ Linn Operating ” and, together with Linn Energy, the “ Linn Parties ”), and their respective affiliates and successors (collectively, with the Linn Parties, the “ Linn Group ”). Capitalized terms not defined herein will have the respective meanings ascribed to them in the Employment Agreement by and among you and the Linn Parties, dated as of February 28, 2017 (the “ Employment Agreement ”).

1. Termination of Employment. Your employment with the Linn Group will automatically terminate upon the effective date of a Spinoff (as defined below) (the “ Scheduled Termination Date ”). You or Linn Operating may terminate your employment prior to the Scheduled Termination Date pursuant to Section 5 of the Employment Agreement, provided that, in determining whether you have Good Reason to terminate your employment at any time hereafter, the definition contained in Section 5.3(c) shall apply (without regard to the occurrence of a Change of Control), but shall apply without regard to clause (iv) thereof to the extent attributable to the appointment of any new management team to manage any business within the Linn Group. The actual date of termination of your employment, whether on the Scheduled Termination Date or prior thereto pursuant to Section 5 of the Employment Agreement, is hereinafter referred to as the “ Termination Date ”, and the period from the date hereof through the Termination Date is hereinafter referred to as the “ Transition Period ”. For purposes hereof, “ Spinoff ” means any distribution by Linn Energy (or any successor or entity that, after the date of this Separation Agreement, becomes the owner of 100% of Linn Energy) to its stockholders of the equity securities of an entity that conducts, or holds an interest in the entity that conducts, any of the three businesses described under “ Strategic Plan to Separate into Three Companies ” in Item 1 of Linn Energy’s Form 10-K filed for the year ended December 31, 2017.


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2.      Responsibilities during the Transition Period . During the Transition Period, you will continue to perform your duties as required by Section 1.2 of the Employment Agreement, provided that you acknowledge that such duties may include transitioning your authority and responsibilities to any new management team that has been appointed to any business within the Linn Group and cooperating with the Board on the content of any press releases (including any press release in connection with your termination).

3.      Compensation during the Transition Period. During the Transition Period:

(a)      the Linn Parties will continue to pay you your Base Salary pursuant to Section 3.1 of the Employment Agreement;
(b)      you will continue to be entitled to the expense reimbursements and other benefits set forth in Section 4 of the Employment Agreement;
(c)      you will not be entitled to any further bonus compensation pursuant to Section 3.2 of the Employment Agreement or otherwise, provided that, for the avoidance of doubt, the Linn Parties acknowledge that you will be entitled to retain any bonus compensation previously paid to you, including the bonus paid to you on January 12, 2018 in respect of 2017 performance (the payment and/or retention of which will not be used as the basis of any claim or action against you); and
(d)      you will not be entitled to any further long-term incentive compensation awards pursuant to Section 3.3 of the Employment Agreement or otherwise, including, without limitation, pursuant to Section 4.1(c) of the Linn Energy, Inc. 2017 Omnibus Incentive Plan (the “ Omnibus Plan ”), provided that, for the avoidance of doubt, with respect to the awards previously granted to you under the Omnibus Plan or directly or indirectly under the Linn Energy Holdco LLC Incentive Interest Plan, the Linn Parties acknowledge that you will continue to be eligible to vest in accordance with, and subject to, the terms of such awards. You agree that no “Change in Control” or “Change of Control” or other similar term has occurred through the date of this Agreement for purposes of your Employment Agreement, the Omnibus Plan, any equity award agreements, or any other agreement governing the terms of any equity awards or units held by you (collectively, the “ Governing Documents ”), and you agree that the Spinoff and any related transactions will not constitute a “Change in Control” or Change of Control” or other similar term under the terms of any of the Governing Documents. You further agree that within 5 business days of the date hereof, you will convert all of your Class A-2 Units of Linn ManagementCo or Linn Energy Holdco LLC you may then own (whether vested or unvested) into shares of Linn Energy common stock in accordance with the “Conversion Procedures” set forth in the Amended and Restated Limited Liability Company Operating Agreement of Linn Energy Holdco LLC, dated as of June 19, 2017 (the “ Conversion ”).
4.      Compensation and Obligations upon the Termination Date . Your entitlements and obligations upon and following the Termination Date will be determined in accordance with Section 6 and Section 7, respectively, of the Employment Agreement; provided that:

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(a)      the automatic termination of your employment on the Scheduled Termination Date will be treated as a termination of employment by you for Good Reason/by Linn Operating without Cause under Section 6.4(a);
(b)      your severance entitlements under Section 6.4 of the Employment Agreement (for which, for the avoidance of doubt, you will be eligible on any termination of your employment following the date hereof other than (i) by Linn Operating for Cause, (ii) by you without Good Reason, or (iii) by reason of your death and Disability, and which are subject to your execution and non-revocation of the Release (as defined below) within sixty (60) days of termination of your employment) will be determined pursuant to Section 6.4(a) of the Employment Agreement; provided that you are not waiving your entitlements, if any, pursuant to Section 6.4(b) of the Employment Agreement should a Change of Control occur (other than by reason of the Spinoff) on or before the Termination Date or within the six (6)-month period immediately following the Termination Date (provided that, for the avoidance of doubt, if the Change of Control occurs after the Termination Date, you would only be to entitled to any payments and benefits provided under Section 6.4(b) of the Employment Agreement which are in excess of the payments and benefits provided under Section 6.4(a) of the Employment Agreement);
(c)      the release that is required pursuant to Section 6.4(d)(i) of the Employment Agreement shall be substantially in the form attached hereto as Exhibit A (the “ Release ”);
(d)      the Restrictive Covenants set forth in Section 7 of the Employment Agreement, including the non-solicit obligations of Section 7.4(a) of the Employment Agreement, shall continue to apply following the Termination Date as set forth in the Employment Agreement, unless, and only to the extent, at your request, the Board consents in writing, such consent to be provided or withheld in its sole and absolute discretion, to the waiver of any obligation contained therein; and for the avoidance of doubt, where applicable, the Restrictive Covenants shall be those that apply other than following a Change of Control Termination (as defined in the Employment Agreement); and
(e)      by providing written notice to the Board prior to the date of the Spinoff, you will have the right, but not the obligation, to sell a portion of your vested shares of Linn Energy (including any Converted Shares (as defined below) and RSU Shares (as defined below) which will become vested under Section 6.4 of the Employment Agreement following your execution and non-revocation of the Release (the “ Vesting Shares ”)) to the Linn Parties, with the number of shares sold hereunder not to exceed the number of shares (adjusted for stock splits etc.) equal to two-thirds of the aggregate of the following: (i) any shares of Linn Energy you own as of the date of this Separation Agreement, (ii) any shares of Linn Energy you receive upon the conversion of any Class A-2 Units, as described in paragraph 3(d) above (“ Converted Shares ”), and (iii) any shares of Linn Energy underlying any then outstanding restricted stock units granted to you under the Omnibus Plan (“ RSU Shares ”), in the case of each of (ii) or (iii), whether or not vested, and if you provide such notice, the Linn Parties will purchase such shares immediately prior to the Spinoff and will promptly make a payment to you equal to the value of such shares, which value will be determined without applying discounts and will be based on the volume weighted average trading price of Linn Energy common stock for the 10 consecutive

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trading days immediately preceding the earlier of (A) the date of the Spinoff and (B) the date on which Linn Energy common stock first trades ex-dividend, with such payment made less any applicable withholding taxes; provided that this paragraph 4(e) shall not apply if, following the Termination Date and prior to the date of the Spinoff, you sell a number of shares of Linn Energy that exceeds the number of shares (adjusted for stock splits etc.) that became vested by reason of Section 6.4(a)(v) of the Employment Agreement. Notwithstanding the foregoing, with respect to any payment under this paragraph 4(e) which is in respect of any Vesting Shares (the “ Vesting Share Payment ”), such Vesting Share Payment will be made on the first business day following the date on which the Release is effective and all periods for revocation have expired (provided that if the 60 day period following the Termination Date spans two calendar years, the Vesting Share Payment will be made on the later of (x) the first business day in the later calendar year and (y) the first business day following the date on which the Release is effective and all periods for revocation have expired), and if the Release is not executed with all periods for revocation having expired within the time period set forth in Section 6.4(d) of the Employment Agreement, you will forfeit any right to the Vesting Share Payment.
5.      Miscellaneous.
(a)      Except as modified herein, the Employment Agreement will remain in full force and effect in accordance with its terms, as will any other agreement in effect between you and any member of the Linn Group.
(b)      Each of the provisions of Section 8 of the Employment Agreement are incorporated by reference and treated as if they were contained herein; provided that (i) for purposes of incorporating Section 8.1 of the Employment Agreement, in connection with the Spinoff, the Linn Parties agree, and will cause the entities that are separated in connection with the Spinoff to agree, to be jointly and severally liable with respect to all obligations to you hereunder, and (ii) for purposes of incorporating Section 8.6 of the Employment Agreement, the Linn Parties agree that, (x) as currently contemplated, the Spinoff is not intended to constitute a change in ownership or control within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended, and, accordingly, unless the Linn Parties’ auditors find that such a position lacks reasonable support, the Linn Parties will cause each member of the Linn Group not to report on a Form W-2 or withhold any taxes pursuant to Section 4999 of the Code with respect to any payments or benefits under this Separation Agreement or the Employment Agreement, and (y) unless the Linn Parties’ auditors find that such a position lacks reasonable support, the Linn Parties will cause each member of the Linn Group not to report on a Form W-2 or withhold any taxes with respect to the Conversion.
(c)      Subject to your execution and non-revocation of the Release in accordance with the terms of this Separation Agreement, if, subsequent to the Conversion, you receive notice from the Internal Revenue Service or any other taxing authority asserting that, as a result of the Conversion, an amount is required to be included in your income for the taxable year of the date of grant of the Class B Units or Class A-2 Units, and such amount is attributable to the grant of the Class B Units or Class A-2 Units (the " IRS Notice "), you shall (i) give written notice to Linn Energy (or its successor) within 30 days following receipt of such IRS Notice and (ii) permit Linn Energy (or its successor), at Linn Energy’s (or its successor’s) expense, to engage counsel to contest and control that aspect of any resulting audit or proceedings to resolve the issue. If,

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upon final adjudication and assessment of the matters described in the IRS Notice, you are required to pay any taxes with respect to the taxable year of the date of grant of the Class B Units or Class A-2 Units as a result of the Conversion and such taxes are attributable to the grant of the Class B Units or Class A-2 Units, Linn Energy (or its successor) shall pay to you a cash lump sum amount equal to the excess, if any, of (x) any federal, state and local income taxes and any employment taxes payable by you thereon, and any interest or penalties payable by you thereon, over (y) the excess of (I) the amount of any federal, state or local taxes you would have owed in the taxable year in which the Conversion occurs had no taxes been paid as a result of the matter described in this Section 5(c) over (II) the amount of taxes actually owed by you for the taxable year in which the Conversion occurs, and Linn Energy (or its successor) shall fully gross you up for any taxes which result from Linn Energy’s (or its successor’s) payment to you under this Section 5(c).


[ Remainder of page intentionally left blank ]



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If the terms of this Separation Agreement are acceptable to you, please sign, date and return it to me by April 19, 2018. At the time that you sign it, this Separation Agreement shall take effect as a legally binding agreement between you and the Linn Parties on the basis set forth above.

 
Sincerely,
 
 
 
Linn Energy, Inc.
 
 
 
 
By:
/s/ Mark E. Ellis
 
 
Mark E. Ellis
 
 
President and Chief Executive Officer
 
 
 
 
 
 
 
Linn Operating, LLC
 
 
 
 
By:
/s/ Mark E. Ellis
 
 
Mark E. Ellis
 
 
President and Chief Executive Officer
 
 
 
 
 
 
Accepted and agreed:
 
 
 
 
 
 
 
 
 
 
 
Signature:
/s/ Candice J. Wells
 
 
Candice J. Wells
 
Date:
April 18, 2018
 



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Exhibit A

RELEASE


I, Candice J. Wells , in consideration of the relevant payments and benefits (the “Release Payments”) due to me under Section 6.4(a) of the Employment Agreement by and among me, Linn Energy, Inc. and Linn Operating LLC (individually and collectively, the “Company”), dated as of February 28, 2017, (the “Employment Agreement”) as modified by the Separation Agreement between the Company and me, dated April 18, 2018 (the “Separation Agreement”), hereby agree as follows:
1. Release of Claims . I irrevocably and unconditionally release, acquit and discharge the Company and its officers, directors, employees and agents, and all of its affiliates, successors and assigns, and all of their officers, directors, employees and agents (collectively, the “Releasees”) from any and all claims or causes of action, suits, agreements, promises, damages, disputes, controversies, contentions, differences, judgments, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, variances, trespasses, extents, executions and demands of any kind whatsoever which I have ever had, now have or may have against the Releasees, in law, admiralty or equity, whether known or unknown to me, for, upon, or by reason of, any matter, action, omission, course or thing whatsoever occurring up to the date this Release is signed by me, including without limitation, any claim arising out of or related to my employment or termination of such employment. I hereby waive any and all rights I may have, directly or indirectly, now or at any time in the future of any nature, with respect to any claim, charge, or lawsuit, arising out of my employment and termination of employment up and through the date of the execution of this Release, including for purposes of obtaining any monetary award, reinstatement of employment or for any equitable relief. I acknowledge that this Release includes, but is not limited to, all claims arising under federal, state or local laws prohibiting employment discrimination and all claims growing out of any legal restrictions on the Company’s right to terminate its employees including any common law and/or breach of contract, whistleblower, tort, or retaliation claims and all claims related to payment of compensation. This Release also specifically encompasses, without limitation, all claims of employment discrimination based on race, color, religion, sex, and national origin, as provided under Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. § 1981(a), all claims of discrimination based on age, as provided under the Age Discrimination in Employment Act of 1967, as amended, the Older Worker Benefit Protection Act ("ADEA"), all claims under the Employee Retirement Income Security Act (“ERISA”), all claims under the Family and Medical Leave Act (“FMLA”), all claims under the Fair Credit Reporting Act, all claims under the National Labor Relations Act, and all claims of employment discrimination under the Americans with Disabilities Act (“ADA”) under any law of the state of Texas, including all claims but not limited to, the Texas Commission on Human Rights Act, (TCHRA”), The Texas Payday Act, and any other applicable federal, state or local laws concerning my employment. I agree not to file any claim, charge or cause of action whatsoever against the Releasees concerning actions occurring during employment whether or not of an employment related matter. Notwithstanding the foregoing, I expressly do not waive any claims I may have (i) to enforce my rights to receive severance under Section 6.4(a) of the Employment Agreement or my rights under Sections 4 and 5 of the Separation Agreement; (ii) to indemnification that I may have against any of the




Releasees in connection with my service to the Company and its affiliates through the date of my termination of employment; or (iii) related to any coverage that I may have under any directors and officers liability insurance policy maintained by the Company or its affiliates.
2.      Period to Consider/Revoke Release . I acknowledge that I have been advised to consult with an attorney before executing this Release, and I understand that I have a period of up to 21 days from my receipt of this Release to review and consider this Release. I acknowledge that I may not sign this Release before the date that my employment with the Company terminates. I further understand that once I have signed this Release, I may revoke it at any time during the 7 days following (and not including) the date of its execution by delivering a written notice of revocation to the Company, attention General Counsel. I further understand that if I fail to execute and return this Release to the Company, attention General Counsel, prior to the expiration of such 21-day period, or if I revoke my execution of the Release during such 7-day period, I will be required to repay the Release Payments as provided for under the Separation Agreement. I specifically acknowledge that $100 of the Release Payments are consideration for my waiver of any right I may have to bring a claim with respect to a violation of ADEA.
3.      Subject to Sections 7.1(a) and (b) of the Employment Agreement, I agree that I will not make any negative, disparaging, detrimental or derogatory remarks or public statements (written, oral, telephonic, electronic, or by any other method) about the Releasees that could be reasonably expected to adversely affect in any manner (i) the conduct of the Company’s or any of its affiliates’ or successors’ businesses or (ii) the business reputation or relationships of the Company or any of its affiliates or successors and/or any of their past or present officers, directors, agents, employees, attorneys, and assigns.
4.      I agree that I remain subject to all covenants and obligations as set forth in Section 7 of the Employment Agreement, unless, and only to the extent, the Board of Directors of Linn Energy, Inc. (or its successor) (the “Board”), at my request, consents in writing, such consent to be provided or withheld in its sole and absolute discretion, to the waiver of any obligation contained therein.
5.      I agree that, for the 12-month period immediately following my termination, I will, (i) provide reasonable cooperation in connection with (A) any legal action or proceeding (or any appeal from any action or proceeding) which relates to events occurring during my employment with the Company (“ Claims ”), (B) the Spinoff (as defined in the Separation Agreement), (C) the transition of my duties to any successor, and (D) respond and provide information with regard to matters in which I have knowledge as a result of my employment with the Company, and (ii) make myself available to answer questions or to assist with any reasonable request made by any member of the Board; provided, in each case, that if I am required to provide any material assistance in connection with the foregoing, the Company will pay me at a rate of $500 per hour for such assistance. I agree to promptly inform the Company if I become aware of any lawsuits involving Claims that may be filed or threatened against the Company or its affiliates. I also agree to promptly inform the Company (to the extent that I am legally permitted to do so) if I am asked to assist in any investigation of the Company or its affiliates (or their actions) or another party attempts to obtain information or documents from me (other than in connection with any litigation or other proceeding in which I am a party-in-opposition) with respect to matters I believe in good faith to relate to any investigation of the Company or its affiliates, in each case, regardless of whether a lawsuit or other proceeding has then been filed against the Company or its




affiliates with respect to such investigation, and shall not do so unless legally required. During the pendency of any litigation or other proceeding involving such Claims, I shall not communicate with anyone (other than my attorneys and tax and/or financial advisors and except to the extent that I determine in good faith is necessary in connection with the performance of my duties for the Company) with respect to the facts or subject matter of any pending or potential litigation or regulatory or administrative proceeding involving the Company or any of its affiliates, without giving prior written notice to the Company or the Company’s counsel.
6.      If and to the extent a court of competent jurisdiction shall determine any part or portion of this Release to be invalid or unenforceable, the same shall not affect the remainder of the Release, which shall be given full effect without regard to the invalid part or portion.
7.      This Release will be governed by and construed in accordance with the laws of the State of Texas, without regard to the principles of conflicts of law thereof.





I ACKNOWLEDGE THAT I HAVE READ THIS RELEASE AND I UNDERSTAND AND ACCEPT ITS TERMS.

NOT TO BE EXECUTED PRIOR TO THE LAST DAY OF EMPLOYMENT.


 
 
 
Candice J. Wells
 
Date




Exhibit 10.6

EXHIBIT101LINNENERGYS_IMAGE1.GIF     
600 T RAVIS, S UITE 1400
H OUSTON , TX 77002
PHONE : (281) 840-4000
FAX : (281) 840-4001


April 19, 2018


David B. Rottino

Re:
Change in Control Waiver; Conversion and Related Indemnity; Existing and Go-Forward Equity Arrangements

Dear David:

This letter (this “ Agreement ”) will confirm our agreement relating to the terms of your equity awards issued in connection with your employment with Linn Energy, Inc. (“ Linn Energy ”) and its affiliates and successors (collectively, with Linn Energy, the “ Linn Group ”) and certain related issues with respect to the contemplated Spinoff (which, for purposes hereof, means any distribution by Linn Energy (or any successor or entity that, after the date of this Agreement, becomes the owner of 100% of Linn Energy) to its stockholders of the equity securities of an entity that conducts, or holds an interest in the entity that conducts, any of the three businesses described under “ Strategic Plan to Separate into Three Companies ” in Item 1 of Linn Energy’s Form 10-K filed for the year ended December 31, 2017).

1. No Change in Control. You hereby agree that no “change in control” or “change of control” or other similar term has occurred through the date of this Agreement for purposes of (i) that certain Third Amended and Restated Employment Agreement, by and among you, Linn Energy and Linn Operating, LLC, dated as of February 28, 2017 (the “ Employment Agreement ”), (ii) the Linn Energy Holdco LLC Incentive Interest Plan, (iii) the Linn Energy, Inc. 2017 Omnibus Incentive Plan (the “ Omnibus Plan ”), (iv) any of your equity award agreements, or (v) any other agreement governing the terms of any equity awards or units held by you (collectively, the “ Governing Documents ”), and you agree that the Spinoff and any related transactions will not constitute a “change in control” or “change of control” or other similar term under the terms of any of the Governing Documents, including, without limitation, for purposes of Section 4.1(c) of the Omnibus Plan. For the avoidance of doubt, regardless of whether or not the Spinoff occurs, you hereby waive any and all rights you may have under Section 4.1(c) of the Omnibus Plan.
2.      Conversion; Indemnity. You hereby agree that, within 5 business days of the date hereof, you will convert all of your Class A-2 Units of Linn ManagementCo or Linn Energy Holdco LLC you may then own (whether vested or unvested) into shares of Linn Energy common stock in accordance with the “Conversion Procedures” set forth in the Amended and Restated Limited Liability Company Operating Agreement of Linn Energy Holdco LLC, dated as of June 19, 2017 (the “ Conversion ”).




If, subsequent to the Conversion, you receive notice from the Internal Revenue Service or any other taxing authority asserting that, as a result of the Conversion, an amount is required to be included in your income for the taxable year of the date of grant of the Class B Units or Class A-2 Units, and such amount is attributable to the grant of the Class B Units or Class A-2 Units (the " IRS Notice "), you shall (i) give written notice to Linn Energy (or its successor) within thirty (30) days following receipt of such IRS Notice and (ii) permit Linn Energy (or its successor), at Linn Energy’s (or its successor’s) expense, to engage counsel to contest and control that aspect of any resulting audit or proceedings to resolve the issue. If, upon final adjudication and assessment of the matters described in the IRS Notice, you are required to pay any taxes with respect to the taxable year of the date of grant of the Class B Units or Class A-2 Units as a result of the Conversion and such taxes are attributable to the grant of the Class B Units or Class A-2 Units, Linn Energy (or its successor) shall pay to you a cash lump sum amount equal to the excess, if any, of (A) any federal, state and local income taxes and any employment taxes payable by you thereon, and any interest or penalties payable by you thereon, over (B) the excess of (I) the amount of any federal, state or local taxes you would have owed in the taxable year in which the Conversion occurs had no taxes been paid as a result of the matter described in this paragraph 2 over (II) the amount of taxes actually owed by you for the taxable year in which the Conversion occurs, and Linn Energy (or its successor) shall fully gross you up for any taxes which result from Linn Energy’s (or its successor’s) payment to you under this paragraph 2.

3.      Existing and Go-Forward Equity Arrangements. Following the date hereof, you and the Board of Directors of Linn Energy (the “ Board ”) will work together, in good faith, to effectuate the terms and conditions of that certain term sheet, titled “RIVIERA ENERGY LLC MANAGEMENT INCENTIVE PLAN AND PERFORMANCE SHARE UNIT AWARDS SUMMARY OF MATERIAL TERMS” (the “ Riviera Term Sheet ”), including with respect to the treatment of your existing, outstanding Linn Energy equity awards. Without limiting the foregoing, you shall be eligible to participate in (i) a liquidity program with respect to your vested shares of Linn Energy, which will be established after the date hereof on terms consistent with the liquidity program established by the Board for the other executive officers of Linn Energy, and (ii) a new liquidity program with respect to the fully vested shares of Roan that you will receive in connection with the Spinoff, the terms of which you and the Board of Directors of Linn Energy will negotiate in good faith.
4.      Miscellaneous. Except as modified herein, the Employment Agreement will remain in full force and effect in accordance with its terms, as will any other agreement in effect between you and any member of the Linn Group, including, without limitation, the Riviera Term Sheet.

[ Remainder of page intentionally left blank ]



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Exhibit 10.6

If the terms of this Agreement are acceptable to you, please sign, date and return it to me by April ___, 2018. At the time that you sign it, this Agreement shall take effect as a legally binding agreement between you and the Linn Group on the basis set forth above.

 
Sincerely,
 
 
 
Linn Energy, Inc.
 
 
 
 
By:
/s/ Mark E. Ellis
 
 
Mark E. Ellis
 
 
President and Chief Executive Officer
 
 
 
Accepted and agreed:
 
 
 
 
 
David B. Rottino
 
 
 
 
 
 
 
 
Signature:
/s/ David B. Rottino
 
 
 
 
Date:
April 23, 2018
 


Signature Page to Agreement – David B. Rottino
Exhibit 31.1
CERTIFICATION
I, David B. Rottino, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Linn Energy, Inc. (the “registrant”);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
(a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 8, 2018
/s/ David B. Rottino
 
David B. Rottino
 
President and Chief Executive Officer
 



Exhibit 31.2
CERTIFICATION
I, James G. Frew, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Linn Energy, Inc. (the “registrant”);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
(a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 8, 2018
/s/ James G. Frew
 
James G. Frew
 
Executive Vice President and Chief Financial Officer
 



Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Linn Energy, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David B. Rottino, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: August 8, 2018
/s/ David B. Rottino
 
David B. Rottino
 
President and Chief Executive Officer



Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Linn Energy, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James G. Frew, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: August 8, 2018
/s/ James G. Frew
 
James G. Frew
 
Executive Vice President and Chief Financial Officer