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 ~~September 30~~March 31, ~~2015~~2016



¨		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 1-9735

BERRY PETROLEUM COMPANY, LLC

(Successor in interest to Berry Petroleum Company)

(Exact name of registrant as specified in its charter)



Delaware (State of incorporation or organization)		77-0079387 (I.R.S. Employer Identification Number)

600 Travis, Suite 5100

Houston, Texas 77002

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code:

(281) 840-4000

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

Pursuant to the terms of its senior note indentures, the registrant is a voluntary filer of reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, and has filed all such reports as required by its senior note indentures during the preceding 12 months.

The registrant meets the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q as it is an indirect wholly owned subsidiary of Linn Energy, LLC, which is a reporting company under the Securities Exchange Act of 1934 and which has filed with the SEC all materials required to be filed pursuant to Section 13, 14 or 15(d) thereof, and the registrant is therefore filing this Form 10-Q with a reduced disclosure format.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filer x	Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x

On December 16, 2013, the registrant was acquired (see Note 1 of Notes to Condensed Financial Statements), as a result of which 100% of its membership interest is currently held by a single member and the registrant deregistered its equity under the Securities Exchange Act of 1934.

TABLE OF CONTENTS

		Page
	Glossary of Terms	ii
	Part I – Financial Information
Item 1.	Financial Statements
	Condensed Balance Sheets as of September 30, 2015, and December 31, 2014	1
	Condensed Balance Sheets as of March 31, 2016, and December 31, 2015	1
	Condensed Statements of Operations for the three months and nine months ended September 30, 2015, and September 30, 2014	2
	Condensed Statements of Operations for the three months ended March 31, 2016, and March 31, 2015	2
	Condensed Statement of Member’s Equity for the nine months ended September 30, 2015	3
	Condensed Statement of Member’s Equity for the three months ended March 31, 2016	3
	Condensed Statements of Cash Flows for the nine months ended September 30, 2015, and September 30, 2014	4
	Condensed Statements of Cash Flows for the three months ended March 31, 2016, and March 31, 2015	4
	Notes to Condensed Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1619
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3533
Item 4.	Controls and Procedures	3734
	Part II – Other Information
Item 1.	Legal Proceedings	3835
Item 1A.	Risk Factors	3835
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4038
Item 3.	Defaults Upon Senior Securities	4038
Item 4.	Mine Safety Disclosures	4038
Item 5.	Other Information	4038
Item 6.	Exhibits	4139
	Signatures	4240

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.

Bbls/d. Bbls per day.

Bcf. One billion cubic feet.

BOE. Barrel of oil equivalent, determined using the ratio of one Bbl of oil, condensate or natural gas liquids to six Mcf of natural gas.

BOE/d. BOE per day.

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.

MMBbls. One million barrels of oil or other liquid hydrocarbons.

MBOE. One thousand barrels of oil equivalent.

MBOE/d. MBOE per day.

MMBOE. One million barrels of oil equivalent.

MMBtu. One million British thermal units.

MMcf. One million cubic feet.

MMcf/d. MMcf per day.

Mwh. One thousand kilowatts of electricity used continuously for one hour.

Mwh/d. Mwh per day.

NGL. Natural gas liquids, which are the hydrocarbon liquids contained within natural gas.

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PART I – FINANCIAL INFORMATION


Item 1.	Financial Statements

BERRY PETROLEUM COMPANY, LLC

CONDENSED BALANCE SHEETS

(Unaudited)

	September 30,2015			December 31, 2014
	March 31, 2016			December 31, 2015
	(in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	~~282~~7,~~805~~334		$	1,~~586~~023
Accounts receivable – trade, net	5540,~~530~~755			~~100~~46,~~359~~053
Derivative instruments	~~26,529~~295			4313,~~694~~218
Other current assets	4319,~~420~~582			5920,~~259~~897
Total current assets	~~408~~67,~~284~~966			~~204~~81,~~898~~191
Noncurrent assets:
Oil and natural gas properties (successful efforts method)	5,~~000~~019,~~233~~579			45,~~872~~011,~~059~~061
Less accumulated depletion and amortization	(12,~~493~~682,~~749~~011		)	(~~525~~1,~~007~~596,165		)
	3,506,484			4,347,052
	2,337,568			3,414,896
Other property and equipment	~~128~~113,~~891~~947			~~115~~111,~~999~~495
Less accumulated depreciation	(1614,~~288~~617		)	(812,~~452~~522		)
	112,603			107,547
	99,330			98,973
Derivative instruments	336			—
Restricted cash	250,612			250,359
Advance to affiliate	—			293,627
Other noncurrent assets	16,836			16,057
Restricted cash	250,245			125
	267,448			266,416
Other noncurrent assets	10,747			14,159
Total noncurrent assets	2,704,346			3,780,285
	261,328			307,911
Total assets	$	2,772,312		$	3,861,476
Total noncurrent assets	3,880,415			4,762,510
Total assets	$	4,288,699		$	4,967,408
LIABILITIES AND MEMBER’S EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	~~182~~148,~~453~~681		$	~~242~~125,~~350~~748
Derivative instruments	1,~~462~~190			—2,241
Other accrued liabilities	12,707			19,087
Current portion of long-term debt	873,175			873,175
Total current liabilities	196,622			261,437
Other accrued liabilities	29,996			16,735
Total current liabilities	1,053,042			1,017,899
Noncurrent liabilities:
Credit facility	1,173,175			1,173,175
Long-term debt, net	844,927			845,368
Senior notes, net	845,804			913,777
Other noncurrent liabilities	213,003			212,050
Derivative instruments	423			—
Total noncurrent liabilities	1,057,930			1,057,418
Other noncurrent liabilities	200,931			200,015
Total noncurrent liabilities	2,220,333			2,286,967
Commitments and contingencies (Note 8)
Member’s equity:
Additional paid-in capital	2,~~757~~798,~~836~~713			2,~~416~~798,~~381~~713
Accumulated income (deficit)	(886,092		)	2,623
Accumulated deficit	(2,137,373		)	(1,012,554		)
	1,871,744			2,419,004
	661,340			1,786,159
Total liabilities and member’s equity	$	42,~~288~~772,~~699~~312		$	43,~~967~~861,~~408~~476

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

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BERRY PETROLEUM COMPANY, LLC

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months EndedSeptember 30,						Nine Months EndedSeptember 30,
	Three Months EndedMarch 31,
	2015			2014			2015			2014
	2016			2015
	(in thousands)
Revenues and other:
Oil, natural gas and natural gas liquids sales	$	~~140~~83,~~252~~466		$	~~350~~156,~~863~~586		$	~~470,219~~		$	~~1,044,359~~
Electricity sales	84,~~610~~211			115,~~300~~151			~~20,370~~			~~31,461~~
Gains on oil and natural gas derivatives	~~27,664~~508			443,~~990~~267			~~26,457~~			~~22,893~~
Marketing revenues	1,~~109~~033			2,~~018~~381			~~4,329~~			~~9,106~~
Other revenues	12,~~672~~048			~~245~~1,896			~~5,103~~			~~238~~
	179,307			409,416			526,478			1,108,057
	91,266			169,281
Expenses:
Lease operating expenses	6750,~~341~~093			8367,~~684~~189			~~184,426~~			~~267,069~~
Electricity generation expenses	43,~~759~~802			54,~~892~~570			~~14,322~~			~~21,904~~
Transportation expenses	1312,~~794~~929			1312,~~326~~606			~~39,378~~			~~28,802~~
Marketing expenses	~~967~~653			1,~~811~~075			~~3,047~~			~~6,505~~
General and administrative expenses	2125,~~564~~172			1621,~~566~~187			~~79,853~~			~~88,379~~
Depreciation, depletion and amortization	6358,~~057~~843			7972,~~725~~979			~~199,088~~			~~226,109~~
Impairment of long-lived assets	~~510~~1,~~631~~030,588			—272,000			~~782,631~~			—
Taxes, other than income taxes	14,~~520~~313			2423,~~830~~332			~~60,048~~			~~71,338~~
(Gains) losses on sale of assets and other, net	2,633			49,011			(2,651		)	56,635
Gains on sale of assets and other, net	(192		)	(4,473		)
	699,266			274,845			1,360,142			766,741
	1,196,201			470,465
Other income and (expenses):
Interest expense, net of amounts capitalized	(2119,~~484~~952		)	(1921,~~068~~421		)	~~(65,595~~		)	~~(66,555~~		)
Gain on extinguishment of debt	4,378			—			11,209			—
Other, net	66			(170		)
Other, net	(90		)	(179		)	(723		)	(813		)
	(19,886		)	(21,591		)
	(17,196		)	(19,247		)	(55,109		)	(67,368		)
Loss before income taxes	(1,124,821		)	(322,775		)
Income (loss) before income taxes	(537,155		)	115,324			(888,773		)	273,948
Income tax benefit	(2		)	(50		)
Income tax expense (benefit)	3			159			(58		)	77
Net loss	$	(1,124,819	)	$	(322,725	)
Net income (loss)	$	(537,158	)	$	115,165		$	(888,715	)	$	273,871

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

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BERRY PETROLEUM COMPANY, LLC

CONDENSED STATEMENT OF MEMBER’S EQUITY

(Unaudited)

	Additional Paid-In Capital			Accumulated ~~Income (~~Deficit)			Total Member’s Equity
	(in thousands)
December 31, 2014	$	2,416,381		$	2,623		$	2,419,004
December 31, 2015	$	2,798,713		$	(1,012,554	)	$	1,786,159
Capital contributions from affiliate	398,678			—			398,678
Net loss	—			(1,124,819		)	(1,124,819		)
Distributions to affiliate	(57,223		)	—			(57,223		)
March 31, 2016	$	2,798,713		$	(2,137,373	)	$	661,340
Net loss	—			(888,715		)	(888,715		)
September 30, 2015	$	2,757,836		$	(886,092	)	$	1,871,744

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

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BERRY PETROLEUM COMPANY, LLC

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months EndedSeptember 30,
	Three Months EndedMarch 31,
	2015			2014
	2016			2015
	(in thousands)
Cash flow from operating activities:
Net income (loss)	$	(888,715	)	$	273,871
Net loss	$	(1,124,819	)	$	(322,725	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation, depletion and amortization	~~199~~58,~~088~~843			~~226~~72,~~109~~979
Impairment of long-lived assets	~~782~~1,~~631~~030,588			—272,000
Gain on extinguishment of debt	(11,209		)	—
Amortization and write-off of deferred financing fees	182			259
Amortization and write-off of deferred financing fees	1,121			(5,174		)
Gains on sale of assets and other, net	(310		)	(1,857		)
(Gains) losses on sale of assets and other, net	(1,521		)	48,357
Deferred income taxes	(2		)	(50		)
Deferred income taxes	(58		)	77
Derivatives activities:
Total gains	(29,355		)	(22,893		)
Total (gains) losses	2,861			(2,341		)
Cash settlements	489,~~054~~011			~~(18~~27,~~130~~513		)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable – trade, net	43,709			(10,611		)
Decrease in accounts receivable – trade, net	5,298			16,392
Decrease in other assets	1,519			4,551
Increase in other assets	(64		)	(3,878		)
Decrease in accounts payable and accrued expenses	(15,171		)	(16,341		)
Increase (decrease) in accounts payable and accrued expenses	28,000			(5,878		)
Decrease in other liabilities	(20,789		)	(36,626		)
Increase (decrease) in other liabilities	11,053			(9,925		)
Net cash provided by operating activities	~~109~~20,~~304~~641			~~443~~42,~~190~~489
Cash flow from investing activities:
Development of oil and natural gas properties	(311,~~076~~019		)	(~~429~~1,~~940~~609		)
Purchases of other property and equipment	(123,~~760~~327		)	(81,~~316~~092		)
Settlement of advance to affiliate	129,217			—
Proceeds from sale of properties and equipment and other	16			3,813
Proceeds from sale of properties and equipment and other	22,486			256
Net cash provided by (used in) investing activities	(14,330		)	1,112
Net cash provided by (used in) investing activities	135,867			(438,000		)
Cash flow from financing activities:
Repayments of debt	(55,418		)	(206,124		)
Financing fees and other, net	—			15
Financing fees and other, net	11			(11,252		)
Distribution to affiliate	—			(43,778		)
Capital contributions from affiliate	148,678			220,000
Net cash used in financing activities	—			(43,763		)
Distributions to affiliate	(57,223		)	(52,279		)
Net increase (decrease) in cash and cash equivalents	6,311			(162		)
Net cash provided by (used in) financing activities	36,048			(49,655		)
Net increase (decrease) in cash and cash equivalents	281,219			(44,465		)
Cash and cash equivalents:
Beginning	1,~~586~~023			511,~~041~~586
Ending	$	~~282~~7,~~805~~334		$	61,~~576~~424

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

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BERRY PETROLEUM COMPANY, LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

Note 1 – Basis of Presentation

Nature of Business

Berry Petroleum Company, LLC (“Berry” or the “Company”) was formed as a Delaware limited liability company on December 16, 2013, and is an indirect wholly owned subsidiary of Linn Energy, LLC (“LINN Energy”) engaged in the production and development of oil and natural gas. The Company’s predecessor, Berry Petroleum Company, was publicly traded from 1987 until December 2013. On December 16, 2013, the Company completed the transactions contemplated by the merger agreement between LINN Energy, LinnCo, LLC (“LinnCo”), an affiliate of LINN Energy, and Berry under which LinnCo acquired all of the outstanding common shares of Berry and the contribution agreement between LinnCo and LINN Energy, under which LinnCo contributed Berry to LINN Energy in exchange for LINN Energy units. Linn Acquisition Company, LLC, a direct subsidiary of LINN Energy, is currently the Company’s sole member.

The Company’s properties are located in the United States (“U.S.”), in California (San Joaquin Valley and Los Angeles basins), Kansas and the Oklahoma Panhandle (Hugoton Basin), Utah (Uinta Basin), Colorado (Piceance Basin) and east Texas. ~~In August and November of 2014, the Company divested all of its properties located in the Permian Basin.~~

Principles of Reporting

The information reported herein reflects all normal recurring adjustments that are, in the opinion of management, necessary for the fair presentation of the results for the interim periods. Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted under Securities and Exchange Commission (“SEC”) rules and regulations; as such, this report should be read in conjunction with the financial statements and notes in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2014~~2015. The results reported in these unaudited condensed financial statements should not necessarily be taken as indicative of results that may be expected for the entire year.

Investments in noncontrolled entities over which the Company exercises significant influence are accounted for under the equity method.

The condensed 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), member’s equity or cash flows.

Use of Estimates

The preparation of the accompanying condensed financial statements in conformity with GAAP requires management of the Company to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amount of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. The estimates that are particularly significant to the financial statements include estimates of the Company’s reserves of oil, natural gas and natural gas liquids (“NGL”), future cash flows from oil and natural gas properties, depreciation, depletion and amortization, asset retirement obligations, certain revenues and operating expenses, fair values of commodity derivatives and fair values of assets acquired and liabilities assumed. As fair value is a market-based measurement, it is determined based on the assumptions that market participants would use. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. Such estimates and assumptions are adjusted when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ from these estimates. Any changes in estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods.

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BERRY PETROLEUM COMPANY, LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS – Continued

(Unaudited)

Recently Issued Accounting Standards

In ~~April~~February ~~2015~~2016, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) that is intended to ~~simplify~~increase ~~the~~transparency ~~presentation~~and ofcomparability ~~debt~~among ~~issuance~~organizations ~~costs~~ by ~~requiring~~recognizing ~~that~~lease ~~debt~~assets ~~issuance~~and ~~costs~~lease ~~related~~liabilities toon ~~a recognized debt liability be presented in~~ the balance sheet ~~as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts~~. This ASU will be applied retrospectively as of the date of adoption and is effective for fiscal years beginning after December 15, ~~2015~~2018, and interim periods within those years (early adoption permitted). The Company ~~does~~is ~~not~~currently ~~expect~~evaluating the impact of the adoption of this ASU ~~to have a material impact~~ on its financial statements and related disclosures.

In November 2015, the FASB issued an ASU that is intended to simplify the presentation of deferred taxes by requiring that all deferred taxes be classified as noncurrent, presented as a single noncurrent amount for each tax-paying component of an entity. The ASU is effective for fiscal years beginning after December 15, 2016; however, the Company early adopted it on January 1, 2016, on a retrospective basis. The adoption of this ASU did not have a material impact on the Company’s financial statements or related disclosures.

In April 2015, the FASB issued an ASU that is intended to simplify the presentation of debt issuance costs by requiring that debt issuance costs related to a recognized debt liability be presented on the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The Company adopted this ASU on January 1, 2016, on a retrospective basis. The adoption of this ASU had no impact on the Company’s financial statements or related disclosures, as the Company’s only debt issuance costs relate to the Credit Facility, as defined in Note 4, which were not reclassified.

In August 2014, the FASB issued an ASU that provides guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. This ASU is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter (early adoption permitted). The Company does not expect the adoption of this ASU to have a material impact on its financial statements or related disclosures.

In May 2014, the FASB issued an ASU that is intended to improve and converge the financial reporting requirements for revenue from contracts with customers. This ASU will be applied either retrospectively or as a cumulative-effect adjustment as of the date of adoption and is effective for fiscal years beginning after December 15, 2017, and interim periods within those years (early adoption permitted for fiscal years beginning after December 15, 2016, including interim periods within that year). The Company is currently evaluating the impact, if any, of the adoption of this ASU on its financial statements and related disclosures.

Note 2 – ~~Exchange~~Chapter of11 ~~Properties~~Proceedings, Ability to Continue as a Going Concern and Covenant Violations

OnVoluntary ~~August 15,~~Reorganization ~~2014,~~Under the Company, along with a subsidiary of its indirect parent LINN Energy, completed the trade of a portion of its Permian Basin properties to Exxon Mobil Corporation and its affiliates, including its wholly owned subsidiary XTO Energy Inc., in exchange for properties in the Hugoton Basin. The noncash exchange was accounted for at fair value and the Company recognized a net loss of approximately $49 million, equal to the difference between the carrying value and the fair value of the assets exchanged, which is included in “(gains) losses on sale of assets and other, net” on the condensed statements of operations. The fair value measurements were based on inputs that are not observable in the market and therefore represent LevelChapter ~~3 inputs under the fair value hierarchy.~~11

On May 11, 2016, the Company, LINN Energy and LinnCo (collectively, the “Debtors”), filed voluntary petitions (“Bankruptcy Petitions”) for reorganization under Chapter 11 of the U.S. Bankruptcy Code (“Bankruptcy Code”) in the U.S. Bankruptcy Court for the Southern District of Texas (“Bankruptcy Court”). The Debtors have filed a motion with the Bankruptcy Court seeking joint administration of their Chapter 11 cases.

Prior to the filing of the Bankruptcy Petitions, on May 10, 2016, the Debtors entered into a restructuring support agreement (“Restructuring Support Agreement”) with certain holders (“Consenting Creditors”) collectively holding or controlling at least 66.67% by aggregate outstanding principal amounts under (i) the Company’s Second Amended and Restated Credit Agreement (“Credit Facility”) and (ii) LINN Energy’s Sixth Amended and Restated Credit Agreement (“LINN Credit Facility”).

The Restructuring Support Agreement sets forth, subject to certain conditions, the commitment of the Debtors and the Consenting Creditors to support a comprehensive restructuring of the Debtors’ long-term debt (“Restructuring Transactions”). The Restructuring Transactions will be effectuated through one or more plans of reorganization (“Plan”) to be filed in cases commenced under Chapter 11 of the Bankruptcy Code.

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BERRY PETROLEUM COMPANY, LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS – Continued

(Unaudited)

The Restructuring Support Agreement provides that the Consenting Creditors will support the use of Berry’s cash collateral under specified terms and conditions, including adequate protection terms. The Restructuring Support Agreement obligates the Debtors and the Consenting Creditors to, among other things, support and not interfere with consummation of the Restructuring Transactions and, as to the Consenting Creditors, vote their claims in favor of the Plan. The Restructuring Support Agreement may be terminated upon the occurrence of certain events, including the failure to meet specified milestones relating to the filing, confirmation and consummation of the Plan, among other requirements, and in the event of certain breaches by the parties under the Restructuring Support Agreement. The Restructuring Support Agreement is subject to termination if the effective date of the Plan has not occurred within 250 days of the bankruptcy filing. There can be no assurances that the Restructuring Transactions will be consummated.

Subject to certain exceptions, under the Bankruptcy Code, the filing of the Bankruptcy Petitions automatically enjoined, or stayed, the continuation of most judicial or administrative proceedings or filing of other actions against the Debtors or their property to recover, collect or secure a claim arising prior to the date of the Bankruptcy Petitions. Accordingly, although the filing of the Bankruptcy Petitions triggered defaults on the Debtors’ debt obligations, creditors are stayed from taking any actions against the Debtors as a result of such defaults, subject to certain limited exceptions permitted by the Bankruptcy Code. Absent an order of the Bankruptcy Court, substantially all of the Debtors’ pre-petition liabilities are subject to settlement under the Bankruptcy Code.

Subject to certain exceptions, under the Bankruptcy Code, the Debtors may assume, assign or reject certain executory contracts and unexpired leases subject to the approval of the Court and certain other conditions. Generally, the rejection of an executory contract or unexpired lease is treated as a pre-petition breach of such executory contract or unexpired lease and, subject to certain exceptions, relieves the Debtors of performing their future obligations under such executory contract or unexpired lease but entitles the contract counterparty or lessor to a pre-petition general unsecured claim for damages caused by such deemed breach. Counterparties to such rejected contracts or leases may assert unsecured claims in the Bankruptcy Court against the applicable Debtors’ estate for such damages. Generally, the assumption of an executory contract or unexpired lease requires the Debtors to cure existing monetary defaults under such executory contract or unexpired lease and provide adequate assurance of future performance. Accordingly, any description of an executory contract or unexpired lease with the Debtor in this quarterly report, including where applicable a quantification of the Company’s obligations under any such executory contract or unexpired lease with the Debtor is qualified by any overriding rejection rights the Company has under the Bankruptcy Code. Further, nothing herein is or shall be deemed an admission with respect to any claim amounts or calculations arising from the rejection of any executory contract or unexpired lease and the Debtors expressly preserve all of their rights with respect thereto.

Ability to Continue as a Going Concern

Continued low commodity prices are expected to result in significantly lower levels of cash flow from operating activities in the future and have limited the Company’s ability to access the capital markets. In addition, the Company’s Credit Facility is subject to scheduled redeterminations of its borrowing base, semi-annually in April and October, based primarily on reserve reports using lender commodity price expectations at such time. The lenders under the Credit Facility agreed to defer the April 2016 borrowing base redetermination to May 11, 2016. Continued low commodity prices, reductions in the Company’s capital budget and the resulting reserve write-downs are expected to adversely impact upcoming redeterminations and will likely have a significant negative impact on the Company’s liquidity. The Company’s filing of the Bankruptcy Petitions described above accelerated the Company’s obligations under its Credit Facility and its senior notes.

The significant risks and uncertainties related to the Company’s liquidity and Chapter 11 proceedings described above raise substantial doubt about the Company’s ability to continue as a going concern. The condensed financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities and commitments in the normal course of business. The condensed financial statements do not include any adjustments that might result from the outcome of the going concern uncertainty. If the Company cannot continue as a going concern, adjustments to the carrying values and classification of its assets and liabilities and the reported amounts of income and expenses could be required and could be material.

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BERRY PETROLEUM COMPANY, LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS – Continued

(Unaudited)

In order to decrease the Company’s level of indebtedness and maintain the Company’s liquidity at levels sufficient to meet its commitments, the Company has undertaken a number of actions, including minimizing capital expenditures and further reducing its recurring operating expenses. The Company believes that even after taking these actions, it will not have sufficient liquidity to satisfy its debt service obligations, meet other financial obligations and comply with its debt covenants. As a result, the Debtors filed Bankruptcy Petitions for reorganization under Chapter 11 of the Bankruptcy Code.

Covenant Violations

As of March 31, 2016, the Company was in default under certain of its debt instruments, which have subsequently been cured or a forbearance has been received. The Company’s filing of the Bankruptcy Petitions described above constitutes an event of default that accelerated the Company’s obligations under its Credit Facility and its senior notes. Additionally, other events of default, including cross-defaults, are present, including the failure to make interest payments on certain of its senior notes and the receipt of a going concern explanatory paragraph from the Company’s independent registered public accounting firm on the Company’s financial statements for the year ended December 31, 2015. Under the Bankruptcy Code, the creditors under these debt agreements are stayed from taking any action against the Company as a result of an event of default. See Note 4 for additional details about the Company’s debt.

Credit Facility

The Company’s Credit Facility contains the requirement to deliver audited financial statements without a going concern or like qualification or exception. Consequently, the filing of the Company’s 2015 Annual Report on Form 10-K which included such explanatory paragraph resulted in a default under the Credit Facility as of the filing date, March 28, 2016, subject to a 30 day grace period.

On April 12, 2016, the Company entered into an amendment to the Credit Facility. The amendment provided for, among other things, an agreement that (i) certain events (the “Specified Events”) would not become defaults or events of default until May 11, 2016, (ii) the borrowing base would remain constant until May 11, 2016, unless reduced as a result of swap agreement terminations or collateral sales, (iii) the Company would have access to $45 million in cash that is currently restricted in order to fund ordinary course operations and (iv) the Company, the administrative agent and the lenders would negotiate in good faith the terms of a restructuring support agreement in furtherance of a restructuring of the capital structure of the Company.

Pursuant to the amendment, the Specified Events are:


•	The receipt of a going concern qualification or explanatory statement in the auditors’ report on the Company’s financial statements for the year ended December 31, 2015;


•	The receipt of a going concern qualification or explanatory statement in the auditors’ report on LINN Energy’s consolidated financial statements for the year ended December 31, 2015;


•	The failure of the Company or LINN Energy to make certain interest payments on their unsecured notes;


•	The failure to maintain the ratio of Adjusted EBITDAX to Interest Expense (as each term is defined in the Credit Facility) (“Interest Coverage Ratio”);


•	Any cross-defaults that may arise on account of any of the foregoing, provided that no event of default is continuing under any document giving rise to such cross default; and


•	Any failure to provide notice of any of the events described above.

As a condition to closing the amendment, the Company provided control agreements over certain deposit accounts.

The filing of the Bankruptcy Petitions constitutes an event of default that accelerated the Company’s obligations under the Credit Facility. However, under the Bankruptcy Code, the creditors under this debt agreement are stayed from taking any action against the Company as a result of the default.

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BERRY PETROLEUM COMPANY, LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS – Continued

(Unaudited)

Senior Notes

The Company deferred making an interest payment totaling approximately $18 million due March 15, 2016, on the Company’s 6.375% senior notes due September 2022, which resulted in the Company being in default under these senior notes. The indenture governing the notes permits the Company a 30 day grace period to make the interest payment.

On April 14, 2016, within the 30 day interest payment grace period provided for in the indenture governing the notes, the Company made an interest payment of approximately $18 million in satisfaction of its obligations.

Furthermore, the Company decided to defer making an interest payment of approximately $9 million due May 1, 2016, on the Company’s 6.75% senior notes due November 2020, which, as of the payment due date, resulted in the Company being in default under these senior notes. The indenture governing the notes permits the Company a 30 day grace period to make the interest payment.

The filing of the Bankruptcy Petitions constitutes an event of default that accelerated the Company’s obligations under the indentures governing the senior notes. However, under the Bankruptcy Code, holders of the senior notes are stayed from taking any action against the Company as a result of the default.

Note 3 – 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:

	September 30, 2015			December 31, 2014
	March 31, 2016			December 31, 2015
	(in thousands)
Oil and natural gas:
Proved properties	$	4,~~161~~246,~~155~~049		$	4,~~025~~231,~~595~~836
Unproved properties	~~839~~773,~~078~~530			~~846~~779,~~464~~225
	5,000,233			4,872,059
	5,019,579			5,011,061
Less accumulated depletion and amortization	(12,~~493~~682,~~749~~011		)	(~~525~~1,~~007~~596,165		)
	$	32,~~506~~337,~~484~~568		$	43,~~347~~414,~~052~~896

Impairment of Proved Properties

The Company evaluates the impairment of its proved oil and natural gas properties on a field-by-field basis whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The carrying values of proved properties are reduced to fair value when the expected undiscounted future cash flows of proved and risk-adjusted probable and possible reserves are less than net book value. The fair values of proved properties are measured using valuation techniques consistent with the income approach, converting future cash flows to a single discounted amount. Significant inputs used to determine the fair values of proved properties include estimates of: (i) reserves; (ii) future operating and development costs; (iii) future commodity prices; and (iv) a market-based weighted average cost of capital rate. These inputs require significant judgments and estimates by the Company’s management at the time of the valuation and are the most sensitive and subject to change.

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BERRY PETROLEUM COMPANY, LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS – Continued

(Unaudited)

commodity prices; and (iv) a market-based weighted average cost of capital rate. These inputs require significant judgments and estimates by the Company’s management at the time of the valuation and are the most sensitive and subject to change.

Based on the analysis described above, the Company recorded the following noncash impairment charges (before and after tax) associated with proved oil and natural gas properties:

	Three Months EndedSeptember 30, 2015		Nine Months EndedSeptember 30, 2015
	Three Months EndedMarch 31,
	2016		2015
	(in thousands)
California operating area	$	~~330~~984,~~311~~288	$	~~537~~207,~~511~~200
Uinta Basin operating area	~~111~~26,~~339~~677		~~111,339~~—
East Texas operating area	136,~~637~~387		7864,~~437~~800
Piceance Basin operating area	55,344		55,344
	$	1,017,352	$	272,000
	$	510,631	$	782,631

The impairment charges in ~~2015~~2016 were due to a decline in commodity prices, changes in expected capital development and a decline in the Company’s estimates of proved reserves. The ~~Company~~impairment ~~recorded~~charges noin ~~impairment~~2015 ~~charges~~were ~~for~~due to a decline in commodity prices. The carrying values of the ~~three~~impaired ~~months~~proved orproperties ~~nine~~were ~~months~~reduced ~~ended~~to ~~September 30~~fair value, ~~2014~~estimated using inputs characteristic of a Level 3 fair value measurement. The impairment charges are included in “impairment of long-lived assets” on the condensed statements of operations.

~~The~~Impairment ~~carrying values~~ of ~~the~~Unproved impaired proved properties were reduced to fair value, estimated using inputs characteristic of a Level 3 fair value measurement. The impairment charges are included in “impairment of long-lived assets” on the condensed statements of operations.Properties

The Company evaluates the impairment of its unproved oil and natural gas properties whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The carrying values of unproved properties are reduced to fair value based on management’s experience in similar situations and other factors such as the lease terms of the properties and the relative proportion of such properties on which proved reserves have been found in the past. For the three months ended March 31, 2016, the Company recorded noncash impairment charges (before and after tax) of approximately $13 million associated with unproved oil and natural gas properties in California. The Company recorded no impairment charges for unproved properties for the three months ended March 31, 2015.

The impairment charges in 2016 were due to a decline in commodity prices and changes in expected capital development. The carrying values of the impaired unproved properties were reduced to fair value, estimated using inputs characteristic of a Level 3 fair value measurement. The impairment charges are included in “impairment of long-lived assets” on the condensed statement of operations.

Note 4 – Debt

The following summarizes the Company’s outstanding debt:

	September 30, 2015			December 31, 2014
	March 31,2016			December 31, 2015
	(in thousands, except percentages)
Credit facility (1)	$	1873,~~173,~~175		$	1873,~~173,~~175
6.75% senior notes due November 2020	261,100			~~299~~261,~~970~~100
6.375% senior notes due September 2022	572,700			~~599~~572,~~163~~700
Net unamortized premiums	1211,~~004~~127			1411,~~644~~568
Total debt, net	21,~~018~~718,~~979~~102			21,~~086~~718,~~952~~543
Less current maturities	—			—
Less current portion, net (2)	(873,175		)	(873,175		)
Total long-term debt, net	$	2,018,979		$	2,086,952
Long-term debt, net	$	844,927		$	845,368

(1) Variable interest rates of 25.7125% and 23.6717% at ~~September~~March 3031, ~~2015~~2016, and December 31, ~~2014~~2015, respectively.

~~Fair Value~~10

The Company’s debt is recorded at the carrying amount in the condensed balance sheets. The carrying amount of the Company’s Credit Facility, as defined below, approximates fair value because the interest rate is variable and reflective of market rates. The Company uses a market approach to determine the fair value of its senior notes using estimates based on prices quoted from third-party financial institutions, which is a Level 2 fair value measurement.

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BERRY PETROLEUM COMPANY, LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS – Continued

(Unaudited)

	September 30, 2015				December 31, 2014
	Carrying Value		Fair Value		Carrying Value		Fair Value
	(in thousands)
Credit facility	$	1,173,175	$	1,173,175	$	1,173,175	$	1,173,175
Senior notes, net	845,804		269,564		913,777		699,462
Total debt, net	$	2,018,979	$	1,442,739	$	2,086,952	$	1,872,637


⁽²⁾	Due to existing and anticipated covenant violations, the Company’s credit facility was classified as current at March 31, 2016, and December 31, 2015.

Fair Value



	March 31, 2016				December 31, 2015
	Carrying Value		Fair Value		Carrying Value		Fair Value
	(in thousands)

Senior notes, net	$	844,927	$	158,548	$	845,368	$	200,249

Credit Facility

The Company’s Second Amended and Restated Credit Agreement (“Credit Facility”) had a borrowing base of $~~1.2~~900 ~~billion~~million, subject to lender commitments, as of ~~September~~March 3031, ~~2015~~2016. The maturity date is April 2019. At ~~September~~March 3031, ~~2015~~2016, lender commitments under the facility were also $~~1.2~~900 ~~billion~~million but there was less than $1 million of available borrowing capacity, including outstanding letters of credit.

In ~~October~~April ~~2015~~2016, the Company entered into an amendment to the Credit Facility to provide for, among other things:, an agreement that (i) acertain ~~springing~~Specified ~~maturity~~Events ~~based~~would onnot ~~the~~become ~~maturity~~defaults ofor ~~any~~events ~~outstanding~~of ~~junior~~default ~~lien~~until ~~debt;~~May 11, 2016, (ii) the ~~ability~~borrowing ofbase ~~the~~would ~~Company~~remain toconstant ~~incur~~until ~~junior~~May 11, ~~lien~~2016, ~~debt~~unless toreduced ~~refinance its senior notes or~~ as ~~additional~~a ~~indebtedness,~~result ~~but~~of ~~such~~swap ~~additional~~agreement ~~indebtedness~~terminations ~~issued~~or ~~may~~collateral ~~not~~sales, ~~exceed $500 million outstanding at any one time and is subject to a borrowing base reduction;~~ (iii) ~~a decrease in~~ the Company’s ~~covenant~~would ~~requiring~~have ~~the~~access ~~maintenance of an EBITDA~~ to ~~Interest~~$45 ~~Expense~~million ~~ratio~~in ofcash ~~2.5 to 1.0, such~~ that ~~the permissible ratio~~ is ~~decreased~~currently torestricted ~~2.0~~in toorder ~~1.0 from December 31, 2015 through December 31, 2016,~~ to ~~2.25~~fund toordinary ~~1.0~~course ~~from~~operations ~~March 31, 2017 through June 30, 2017~~ and ~~returning to 2.5 to 1.0 thereafter;~~ (iv) ~~an increase in~~ the ~~mortgage~~Company, ~~requirement on~~ the ~~total~~administrative ~~value~~agent ofand the ~~oil~~lenders ~~and~~would ~~natural~~negotiate ~~gas properties included~~ in ~~the~~good ~~Company’s~~faith ~~most recent reserve report from 80% to 90%; (v) an increase to~~ the ~~applicable~~terms ~~margin~~of ~~charged~~a onrestructuring ~~borrowings~~support ~~under~~agreement ~~the~~in ~~Credit~~furtherance ~~Facility~~of bya ~~0.25%~~restructuring ~~and~~of ~~increase~~ the ~~commitment~~capital ~~fee~~structure ~~under~~of the ~~Credit Facility to 0.5% per annum; and (vi) permission to prepay or exchange the~~ Company~~’s senior notes with notes issued by LINN Energy~~.

~~Redetermination~~Pursuant 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. A super-majority of the lenders under the Credit Facility and Berry also have the right to request interim borrowing base redeterminations once between scheduled redeterminations. The spring 2015 semi-annual borrowing base redetermination was completed in May 2015, and, as a result of lower commodity prices, the borrowing base under the Credit Facility decreased from $1.4 billion to $1.2 billion. The fall 2015 semi-annual redetermination was completed in October 2015 and the borrowing base under the Credit Facility decreased from $1.2 billion to $900 million. Continued low commodity pricesamendment, ~~reductions in~~ the ~~Company’s~~Specified ~~capital~~Events ~~budget and the resulting reserve write-downs may impact future redeterminations.~~are:

In• ~~connection~~The ~~with~~receipt ~~the reduction in Berry’s borrowing base in October 2015, Berry repaid $300 million~~ of ~~borrowings~~a ~~outstanding~~going ~~under~~concern ~~the~~qualification ~~Credit~~or ~~Facility. In~~explanatory ~~connection~~statement ~~with the reduction~~ in ~~Berry’s borrowing base in May 2015, LINN Energy borrowed $250 million under~~ the ~~LINN Credit Facility, which it contributed to Berry to post as restricted cash with Berry~~auditors’s ~~lenders. As~~report ~~directed by LINN Energy, the $250 million was deposited~~ on ~~Berry’s behalf in a security account with~~ the ~~administrative agent subject to a security control agreement. Berry~~Company’s ~~ability~~financial tostatements ~~withdraw~~for ~~funds from this account is subject to a concurrent reduction of~~ the ~~borrowing~~year ~~base~~ended ~~under~~December ~~the Credit Facility or lender’s consent in connection with a redetermination of such borrowing base. The $250 million may be used to satisfy obligations under the Credit Facility or~~31, subject to restrictions in the indentures governing Berry’s senior notes, may be returned to LINN Energy in the future. The amount is included in “restricted cash” on the condensed consolidated balance sheet.2015;

~~The~~• ~~Company’s obligations under the Credit Facility, as amended, are secured by mortgages on its oil and natural gas properties and other personal property.~~ The ~~Company~~receipt isof ~~required~~a togoing ~~maintain~~concern ~~mortgages~~qualification onor ~~properties~~explanatory ~~representing~~statement atin ~~least 90% of~~ the ~~present~~auditors’ ~~value~~report ofon ~~its~~LINN ~~oil~~Energy’s ~~and~~consolidated ~~natural gas proved reserves. The Company is in compliance with all~~ financial ~~and~~statements ~~other~~for ~~covenants~~the ofyear ~~the~~ended ~~Credit~~December ~~Facility.~~31, 2015;

8• The failure of the Company or LINN Energy to make certain interest payments on their unsecured notes;


•	The failure to maintain the Interest Coverage Ratio;


•	Any cross-defaults that may arise on account of any of the foregoing, provided that no event of default is continuing under any document giving rise to such cross default; and


•	Any failure to provide notice of any of the events described above.

As a condition to closing the amendment, the Company provided control agreements over certain deposit accounts.

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. The lenders under the Credit Facility have agreed to defer the April 2016 borrowing base redetermination to May 11, 2016.

The Company’s obligations under the Credit Facility are secured by mortgages on its oil and natural gas properties and other personal property. Berry is required to maintain: 1) mortgages on properties representing at least 90% of the present value of oil and natural gas properties included on its most recent reserve report, and 2) an EBITDAX to Interest Expense ratio of at

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BERRY PETROLEUM COMPANY, LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS – Continued

(Unaudited)

Atleast ~~the~~2.0 ~~Company’s election, interest on borrowings under the Credit Facility, as amended, is determined by reference~~ to ~~either the LIBOR plus an applicable margin between~~ 1.~~75%~~0 ~~and~~currently, 2.~~75%~~25 ~~per~~to ~~annum~~1.0 ~~(depending~~from onMarch 31, ~~the~~2017 ~~then-current~~through ~~level~~June 30, of2017 ~~borrowings~~and ~~under the Credit Facility) or a Base Rate (as defined in the Credit Facility) plus an applicable margin between 0~~2.~~75%~~5 ~~and~~to 1.~~75%~~0 ~~per annum (depending on the then-current level of borrowings under the Credit Facility)~~thereafter. ~~Interest~~In isaccordance ~~generally~~with ~~payable quarterly for loans bearing interest based on~~ the ~~Base~~amendment ~~Rate~~described ~~and~~above, at the ~~end~~lenders ofhave ~~the~~agreed ~~applicable~~that ~~interest period for loans bearing interest at~~ the ~~LIBOR. The~~failure ~~Company is required~~ to ~~pay~~maintain athe ~~commitment~~EBITDAX ~~fee~~ to ~~the~~Interest ~~lenders~~Expense ~~under~~ratio ~~the~~would ~~Credit~~not ~~Facility,~~be ~~which accrues at~~ a ~~rate~~default ~~per~~or ~~annum~~event of ~~0.5%~~default onuntil ~~the~~May 11, ~~average daily unused amount of the maximum commitment amount of the lenders~~2016.

~~Repurchases~~At the Company’s election, interest on borrowings under the Credit Facility is determined by reference to either the LIBOR plus an applicable margin between 1.75% and 2.75% per annum (depending on the then-current level of ~~Senior~~borrowings ~~Notes~~under the Credit Facility) or a Base Rate (as defined in the Credit Facility) plus an applicable margin between 0.75% and 1.75% per annum (depending on the then-current level of borrowings under the Credit Facility). Interest is generally payable quarterly for loans bearing interest based on the Base Rate and at the end of the applicable interest period for loans bearing interest at the LIBOR. The Company is required to pay a commitment fee to the lenders under the Credit Facility, which accrues at a rate per annum of 0.5% on the average daily unused amount of the maximum commitment amount of the lenders.

~~During~~The ~~the~~filing ~~nine~~of ~~months ended September 30, 2015,~~ the ~~Company~~Bankruptcy ~~repurchased,~~Petitions onconstitutes ~~the~~an ~~open~~event ~~market and through a privately negotiated transaction, approximately $65 million~~ of ~~its~~default ~~outstanding~~that ~~senior~~accelerated ~~notes~~the ~~including~~Company’s ~~approximately~~obligations ~~$39~~under ~~million~~the ofCredit ~~its 6~~Facility.~~75%~~ However, ~~senior~~under ~~notes~~the ~~due~~Bankruptcy ~~November~~Code, ~~2020~~the ~~and~~creditors ~~approximately~~under ~~$26~~these ~~million~~debt ofagreements ~~its~~are ~~6.375%~~stayed ~~senior~~from ~~notes~~taking ~~due~~any ~~September~~action ~~2022. In~~against ~~connection with~~ the ~~repurchases, the~~ Company ~~paid~~as ~~approximately $55 million in cash and recorded~~ a ~~gain~~result ~~on extinguishment~~ of ~~debt of approximately $11 million for~~ the ~~nine months ended September 30, 2015~~default.

Senior Notes Covenants

The Company’s senior notes contain covenants that, among other things, may limit its ability to: (i) incur or guarantee additional indebtedness; (ii) pay distributions or dividends on its equity or redeem its subordinated debt; (iii) create certain liens; (iv) enter into agreements that restrict distributions or other payments from the Company’s restricted subsidiaries to the Company; (v) sell assets; (vi) engage in transactions with affiliates; and (vii) consolidate, merge or transfer all or substantially all of the Company’s assets. ~~The Company is in compliance with all financial and other covenants of its senior notes.~~

In addition, any cash generated by the Company is currently being used by the Company to fund its activities. To the extent that the Company generates cash in excess of its needs and determines to distribute such amounts to LINN Energy, the indentures governing the Company’s senior notes limit the amount it may distribute to LINN Energy to the amount available under a “restricted payments basket,” and the Company may not distribute any such amounts unless it is permitted by the indentures to incur additional debt pursuant to the consolidated coverage ratio test set forth in the Company’s indentures. The Company’s restricted payments basket may be increased in accordance with the terms of the Company’s indentures by, among other things, 50% of the Company’s future net income, reductions in its indebtedness and restricted investments, and future capital contributions.

The Company may from time to time seek to repurchase its outstanding debt through open market purchases, privately negotiated transactions or otherwise. Such repurchases, if any, may be material and will depend on prevailing market conditions, the Company’s liquidity requirements, contractual restrictions and other factors.

~~Note~~The 5filing –of ~~Derivative~~the ~~Instruments~~Bankruptcy Petitions constitutes an event of default that accelerated the Company’s obligations under the senior notes. However, under the Bankruptcy Code, holders of the senior notes are stayed from taking any action against the Company as a result of the default.

~~The~~Covenant Company seeks to hedge a portion of its forecasted production to reduce exposure to commodity price fluctuations and provide long-term cash flow predictability to manage its business. The Company also, from time to time, enters into derivative contracts for a portion of its natural gas consumption. 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 also hedges its exposure to natural gas differentials in certain operating areas but does not currently hedge exposure to oil differentials.Violations

~~The~~As ~~Company~~of ~~enters~~March 31, ~~into~~2016, ~~commodity~~the ~~hedging~~Company ~~transactions~~was ~~primarily~~ in ~~the~~default ~~form~~under certain of ~~swap~~its ~~contracts~~debt instruments, ~~collars~~which ~~and~~have ~~three-way~~subsequently ~~collars~~been cured or a forbearance has been received. ~~Swap~~The ~~contracts~~Company’s ~~are~~filing ~~designed~~of tothe ~~provide~~Bankruptcy aPetitions ~~fixed~~described ~~price. Collar~~in ~~contracts~~Note 2 ~~specify~~constitutes ~~floor~~an ~~and~~event ~~ceiling~~of ~~prices~~default tothat beaccelerated ~~received~~the asCompany’s ~~compared~~obligations tounder ~~floating~~its ~~market~~Credit ~~prices~~Facility and its senior notes. ~~Three-way~~Additionally, ~~collar~~other ~~contracts~~events ~~combine~~of adefault, ~~short~~including ~~put~~cross-defaults, (are present, including the ~~lower~~failure ~~price),~~to amake ~~long~~interest ~~put~~payments ~~(the~~on ~~middle~~certain ~~price)~~of ~~and~~its asenior ~~short~~notes ~~call~~and (the ~~higher~~receipt ~~price)~~of toa ~~provide~~going aconcern ~~higher~~explanatory ~~ceiling~~paragraph ~~price~~from asthe ~~compared~~Company’s toindependent aregistered ~~regular~~public ~~collar~~accounting ~~and~~firm ~~limit~~on ~~downside~~the ~~risk~~Company’s tofinancial statements for the ~~market~~year ~~price~~ended ~~plus~~December 31, 2015. Under the ~~difference~~Bankruptcy ~~between~~Code, the ~~middle~~creditors ~~price~~under ~~and~~these ~~the~~debt ~~lower~~agreements ~~price~~are ifstayed ~~the~~from ~~market~~taking ~~price~~any ~~drops~~action ~~below~~against the ~~lower~~Company ~~price~~as a result of an event of default.

9Note 5 – Derivatives

Historically, the Company has hedged a portion of its forecasted production to reduce exposure to fluctuations in oil and natural gas prices. The Company also, from time to time, has entered into derivative contracts for a portion of its natural gas

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BERRY PETROLEUM COMPANY, LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS – Continued

(Unaudited)

consumption. The current direct NGL hedging market is constrained in terms of price, volume, duration and number of counterparties, which limits the Company’s ability to effectively hedge its NGL production. The Company has also hedged its exposure to natural gas differentials in certain operating areas but does not currently hedge exposure to oil differentials.

The Company has historically entered into commodity hedging transactions primarily in the form of swap contracts, collars and three-way collars. Swap contracts are designed to provide a fixed price. Collar contracts specify floor and ceiling prices to be received as compared to floating market prices. Three-way collar contracts combine a short put (the lower price), a long put (the middle price) and a short call (the higher price) to provide a higher ceiling price as compared to a regular collar and limit downside risk to the market price plus the difference between the middle price and the lower price if the market price drops below the lower price.

The Company enters into these transactions with respect to a portion of its projected production or consumption to provide an economic hedge of the risk related to the future commodity prices received or paid. The Company does not enter into derivative contracts for trading purposes. The Company did not designate any of its contracts as cash flow hedges; therefore, the changes in fair value of these instruments are recorded in current earnings. See Note 6 for fair value disclosures about oil and natural gas commodity derivatives.

The following table ~~summarizes~~presents derivative positions for the ~~periods~~period indicated as of ~~September~~March 3031, ~~2015~~2016:

	October 1 - December 31, 2015			2016
	April 1 - December 31, 2016
Oil positions:
Natural gas basis differential positions: (1)
Fixed price swaps (NYMEX WTI):
NWPL Rockies basis swaps: (2)
Hedged volume (MBbls)	966			—
Hedged volume (MMMBtu)	8,800
Average price ($/Bbl)	$	59.94		$	—
Hedged differential ($/MMBtu)	$	(0.34	)
Three-way collars (NYMEX WTI):
SoCal basis swaps: (3)
Hedged volume (MBbls)	276			—
Hedged volume (MMMBtu)	24,750
Short put ($/Bbl)	$	70.00		$	—
Hedged differential ($/MMBtu)	$	(0.03	)
Long put ($/Bbl)	$	90.00		$	—
Short call ($/Bbl)	$	101.62		$	—
Natural gas basis differential positions: (1)
NWPL Rockies basis swaps: (2)
Hedged volume (MMMBtu)	2,576			11,712
Hedged differential ($/MMBtu)	$	(0.34	)	$	(0.34	)
SoCal basis swaps: (3)
Hedged volume (MMMBtu)	8,280			32,940
Hedged differential ($/MMBtu)	$	(0.03	)	$	(0.03	)


⁽¹⁾	Settle on the respective pricing index to hedge basis differential to the NYMEX Henry Hub natural gas price.


⁽²⁾	For positions which hedge exposure to differentials in producing areas, the Company receives the NYMEX Henry Hub natural gas price plus the respective spread and pays the specified index price. Cash settlements are made on a net basis.


⁽³⁾	For positions which hedge exposure to differentials in consuming areas, the Company pays the NYMEX Henry Hub natural gas price plus the respective spread and receives the specified index price. Cash settlements are made on a net basis.

The Company did not enter into commodity derivative contracts during the three months ended March 31, 2016. During the ~~nine~~three months ended ~~September~~March 3031, 2015, the Company entered into commodity derivative contracts consisting of natural gas basis swaps for May 2015 through December 2016 to hedge exposure to differentials in certain producing areas, and oil swaps for April 2015 through December 2015. In addition, the Company entered into natural gas basis swaps for May 2015 through December 2016 to hedge exposure to the differential in California, where it consumes natural gas in its heavy oil development operations.

Settled derivatives on oil production for the three months and nine months ended September 30, 2015, included volumes of 1,273 MBbls and 2,617 MBbls, respectively, at average contract prices of $65.89 per Bbl and $68.44 per Bbl. Settled derivatives on oil production for the three months and nine months ended September 30, 2014, included volumes of 2,300 MBbls and 6,825 MBbls, respectively, at an average contract price of $92.16 per Bbl. The oil derivatives are settled based on the average closing price of NYMEX WTI crude oil for each day of the delivery month.13

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BERRY PETROLEUM COMPANY, LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS – Continued

(Unaudited)

Balance Sheet Presentation

The Company’s commodity derivatives are presented on a net basis in “derivative instruments” on the condensed balance sheets. The following table summarizes the fair value of derivatives outstanding on a gross basis:

	September 30, 2015		December 31, 2014
	March 31, 2016		December 31, 2015
	(in thousands)
Assets:
Commodity derivatives	$	342,~~416~~026	$	6013,~~843~~807
Liabilities:
Commodity derivatives	$	92,~~436~~921	$	172,~~149~~830

By using derivative instruments to economically hedge exposures to changes in commodity prices, the Company exposes itself to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes the Company, which creates credit risk. The Company’s counterparties are current participants or affiliates of participants in its Credit Facility or were participants or affiliates of participants in its Credit Facility at the time it originally entered into the derivatives. The Credit Facility is secured by the Company’s oil, natural gas and NGL reserves; therefore, the Company is not required to post any collateral. The Company does not receive collateral from its counterparties. The maximum amount of loss due to credit risk that the Company would incur if its counterparties failed completely to perform according to the terms of the contracts, based on the gross fair value of financial instruments, was approximately $342 million at ~~September~~March 3031, ~~2015~~2016. The Company minimizes the credit risk in derivative instruments by: (i) limiting its exposure to any single counterparty; (ii) entering into derivative instruments only with counterparties that meet the Company’s minimum credit quality standard, or have a guarantee from an affiliate that meets the Company’s minimum credit quality standard; and (iii) monitoring the creditworthiness of the Company’s counterparties on an ongoing basis. In accordance with the Company’s standard practice, its commodity derivatives are subject to counterparty netting under agreements governing such derivatives and therefore the risk of loss due to counterparty nonperformance is somewhat mitigated.

Gains (Losses) on Derivatives

A summary of gains and losses on the derivatives included on the condensed statements of operations is presented below:

	Three Months EndedSeptember 30,						Nine Months EndedSeptember 30,
	Three Months EndedMarch 31,
	2015			2014			2015		2014
	2016			2015
	(in thousands)
Gains on oil and natural gas derivatives	$	~~27,664~~508		$	443,~~990~~267		$	~~26,457~~	$	~~22,893~~
Lease operating expenses (1)	(~~162~~3,369		)	—(926		)	~~2,898~~		—
Total gains on oil and natural gas derivatives	$	27,502		$	44,990		$	29,355	$	22,893
Total gains (losses) on oil and natural gas derivatives	$	(2,861	)	$	2,341

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

For the three months ~~and nine months~~ ended ~~September~~March 3031, ~~2015~~2016, ~~the Company received net cash settlements of approximately $15 million~~ and ~~$48 million, respectively. For the three months and nine months ended September~~March 3031, ~~2014~~2015, the Company ~~paid~~received net cash settlements of approximately $89 million and $1928 million, respectively.

11Note 6 – Fair Value Measurements on a Recurring Basis

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BERRY PETROLEUM COMPANY, LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS – Continued

(Unaudited)

~~Note~~from 6a –compilation ~~Fair~~of ~~Value~~data ~~Measurements~~gathered from third parties. Company management validates the data provided by third parties by understanding the pricing models used, obtaining market values from other pricing sources, analyzing pricing data in certain situations and confirming that those instruments trade in active markets. Assumed credit risk adjustments, based on apublished ~~Recurring~~credit ~~Basis~~ratings, public bond yield spreads and credit default swap spreads are applied to the Company’s commodity derivatives.

The Company accounts for its commodity derivatives at fair value (see Note 5) on a recurring basis. The Company determines the fair value of its oil and natural gas derivatives utilizing pricing models that use a variety of techniques, including market quotes and pricing analysis. Inputs to the pricing models include publicly available prices and forward price curves generated from a compilation of data gathered from third parties. Company management validates the data provided by third parties by understanding the pricing models used, obtaining market values from other pricing sources, analyzing pricing data in certain situations and confirming that those instruments trade in active markets. Assumed credit risk adjustments, based on published credit ratings, public bond yield spreads and credit default swap spreads are applied to the Company’s commodity derivatives.

Fair Value Hierarchy

In accordance with applicable accounting standards, the Company has categorized its financial instruments, based on the priority of inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

The following presents the fair value hierarchy for assets and liabilities measured at fair value on a recurring basis:

	September 30, 2015
	March 31, 2016
	Level 2		Netting (1)			Total
	(in thousands)
Assets:
Commodity derivatives	$	342,~~416~~026	$	(71,~~551~~731	)	$	~~26,865~~295
Liabilities:
Commodity derivatives	$	92,~~436~~921	$	(71,~~551~~731	)	$	1,~~885~~190

	December 31, 2014
	December 31, 2015
	Level 2		Netting (1)			Total
	(in thousands)
Assets:
Commodity derivatives	$	6013,~~843~~807	$	(~~17,149~~589	)	$	4313,~~694~~218
Liabilities:
Commodity derivatives	$	172,~~149~~830	$	(~~17,149~~589	)	$	—2,241


⁽¹⁾	Represents counterparty netting under agreements governing such derivatives.

Note 7 – Asset Retirement Obligations

The Company has the obligation to plug and abandon oil and natural gas wells and related equipment at the end of production operations. Estimated asset retirement costs are recognized as liabilities with an increase to the carrying amounts of the related long-lived assets when the obligation is incurred. The liabilities are included in “other accrued liabilities” and “other noncurrent liabilities” on the condensed balance sheets. Accretion expense is included in “depreciation, depletion and amortization” on the statements of operations. The fair value of additions to the asset retirement obligations is estimated using valuation techniques that convert future cash flows to a single discounted amount. Significant inputs to the valuation include estimates of: (i) plug and abandon costs per well based on existing regulatory requirements; (ii) remaining life per well; (iii) future inflation factors (2% for the ~~nine~~three months ended ~~September~~March 3031, ~~2015~~2016); and (iv) a credit-adjusted risk-free interest rate (average of 5.59% for the ~~nine~~three months ended ~~September~~March 3031, ~~2015~~2016). These inputs require significant judgments and estimates by the Company’s management at the time of the valuation and are the most sensitive and subject to change.

1215

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BERRY PETROLEUM COMPANY, LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS – Continued

(Unaudited)

The following table presents a reconciliation of the Company’s asset retirement obligations (in thousands):

Asset retirement obligations at December 31, 2014	$	121,760
Asset retirement obligations at December 31, 2015	$	137,563
Liabilities added from drilling	~~1,185~~100
Current year accretion expense	51,~~051~~836
Settlements	(1,447		)
Revision of estimates	81,~~319~~545
Asset retirement obligations at September 30, 2015	$	135,868
Asset retirement obligations at March 31, 2016	$	139,597

Note 8 – Commitments and Contingencies

East Texas Gathering System

The Company is party to certain long-term natural gas gathering agreements for its East Texas production. The agreements contain embedded leases and the transaction was accounted for as a financing obligation. The asset is being depreciated over the remaining useful life and has a net book value of approximately $12 million at September 30, 2015. There are no minimum payments required under these agreements.

Carry and Earning Agreement

In January 2011, the Company entered into an amendment relating to certain contractual obligations to a third-party co-owner of certain Piceance Basin assets in Colorado. The amendment waives a $200,000 penalty for each well not spud by February 2011 and requires the Company to reassign to such third party, by January 31, 2020, all of the interest acquired by the Company from the third party in each 160-acre tract in which the Company has not drilled and completed a well that is producing or capable of producing from a designated formation, or deeper formation, on January 1, 2020. The amendment also requires the Company to pay the first $9 million of costs incurred in connection with the construction of either an extension of the existing access road or a new access road, including the third party’s 50% share. Pursuant to the terms of a further amendment effective September 30, 2015, if by September 30, 2017, the Company does not expend $9 million on the construction of either the extension of the existing access road or a new access road, the Company is obligated to pay the third party 50% of the difference between $12 million and the actual amount expended on road construction as of such date. Under the terms of the 2015 amendment, this deadline is subject to further extension to no later than December 31, 2017. Due to the need to obtain regulatory approvals, among other reasons, the Company has not yet commenced construction of either an extension of the existing access road or a new access road and may be unable to do so by the extended deadline, thus triggering the payment of the obligation to the third party.

Legal Matters

The Company is involved in various lawsuits, claims and inquiries, most of which are routine to the nature of its business. In the opinion of management, the resolution of these matters will not have a material adverse effect on its overall business, financial position, results of operations or liquidity; however, cash flow could be significantly impacted in the reporting periods in which such matters are resolved.

During the ~~nine~~three months ended ~~September~~March 3031, ~~2015~~2016, and ~~September~~March 3031, ~~2014~~2015, the Company made no significant payments to settle any legal, environmental or tax proceedings. The Company regularly analyzes current information and accrues for probable liabilities on the disposition of certain matters as necessary. Liabilities for loss contingencies arising from claims, assessments, litigation or other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated.

~~Note~~The 9commencement –of ~~Income~~the ~~Taxes~~Chapter 11 proceedings automatically stayed certain actions against the Company, including actions to collect pre-petition indebtedness or to exercise control over the property of the Company’s bankruptcy estates, and the Company intends to seek authority to pay all general claims in the ordinary course of business notwithstanding the commencement of the Chapter 11 proceedings in a manner consistent with the Restructuring Support Agreement. The Plan in the Chapter 11 proceedings, if confirmed, will provide for the treatment of claims against the Company’s bankruptcy estates, including pre-petition liabilities that have not otherwise been satisfied or addressed during the Chapter 11 proceedings. See Note 2 for additional information.

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BERRY PETROLEUM COMPANY, LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS – Continued

(Unaudited)

~~not~~Note ~~directly~~9 ~~pay~~– ~~federal~~Income and state income taxes, and therefore, recognition has not been given to federal and state income taxes for the operations of the Company. Amounts recognized for income taxes are reported in “income tax expense (benefit)” on the condensed statements of operations.Taxes

The Company is a limited liability company treated as a disregarded entity for federal and state income tax purposes, with the exception of the state of Texas. Limited liability companies are subject to Texas margin tax. As such, with the exception of the state of Texas, the Company is not a taxable entity, it does not directly pay federal and state income taxes, and recognition has not been given to federal and state income taxes for the operations of the Company. Amounts recognized for income taxes are reported in “income tax benefit” on the condensed statements of operations.

Note 10 – Supplemental Disclosures to the Condensed Balance Sheets and Condensed Statements of Cash Flows

“Other current assets” reported on the condensed balance sheets ~~primarily consist of inventories. “Other accrued liabilities” reported on the condensed balance sheets~~ include the following:

	September 30, 2015		December 31, 2014
	March 31, 2016		December 31, 2015
	(in thousands)
Accrued interest	$	9,548	$	15,803
California carbon allowance inventories	$	6,605	$	7,073
Asset retirement obligations	3,101		3,101
Oil inventories	3,583		3,446
Other	58		183
Deferred financing fees	7,484		8,108
	$	12,707	$	19,087
Prepaid expenses and other	1,910		2,270
	$	19,582	$	20,897

Supplemental disclosures to the condensed statements of cash flows are presented below:

	Nine Months EndedSeptember 30,
	Three Months EndedMarch 31,
	2015		2014
	2016		2015
	(in thousands)
Cash payments for interest, net of amounts capitalized	$	706,~~853~~404	$	7925,~~090~~707
Cash payments for income taxes	$	—	$	—
Noncash investing activities:
Accrued capital expenditures	$	205,~~959~~530	$	7940,~~425~~533

For the ~~nine~~three months ended ~~September~~March 3031, 2015, LINN Energy spent approximately $~~165~~73 million of capital expenditures in respect of Berry’s operations. Berry recorded the $~~165~~73 million to oil and natural gas properties with an offset to the advance due from LINN Energy. ~~On September 30, 2015, LINN Energy repaid in full the remaining advance of approximately $129 million.~~

In addition, in May 2015, LINN Energy made a capital contribution of $250 million to Berry which was deposited on Berry’s behalf and posted as restricted cash with Berry’s lenders in connection with the reduction in its borrowing base (see Note 4).

Note 11 – Related Party Transactions

LINN Energy

The Company has no employees. The employees of Linn Operating, Inc. (“LOI”), a subsidiary of LINN Energy, provide services and support to the Company in accordance with an agency agreement and power of attorney between the Company and LOI. For the three months ~~and nine months~~ ended ~~September~~March 3031, ~~2015~~2016, ~~the Company incurred management fee expenses of approximately $20 million~~ and ~~$73 million, respectively, for services provided by LOI. For the three months and nine months ended September~~March 3031, ~~2014~~2015, the Company incurred management fee expenses of approximately $1423 million and $7420 million, respectively, for services provided by LOI. The Company also had affiliated accounts payable due to LINN Energy of approximately $651 million and $139 million at ~~September~~March 3031, ~~2015~~2016, and December 31, ~~2014~~2015, respectively, included in “accounts payable and accrued expenses” on the condensed balance sheets.

14The Company made no cash distributions to LINN Energy during the three months ended March 31, 2016. During the three months ended March 31, 2015, the Company made a cash distribution of approximately $44 million to LINN Energy.

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BERRY PETROLEUM COMPANY, LLC

NOTES TO CONDENSED FINANCIAL STATEMENTS – Continued

(Unaudited)

During the nine months ended September 30, 2015, the Company made cash distributions of approximately $57 million to LINN Energy. During the nine months ended September 30, 2014, the Company made cash distributions of approximately $52 million to LINN Energy.

In 2014, the Company advanced approximately $352 million, to a subsidiary of LINN Energy, of net cash proceeds from the sale of certain of the Company’s Wolfberry properties in Ector and Midland counties in the Permian Basin to Fleur de Lis Energy, LLC. These proceeds must be used by LINN Energy on capital expenditures in respect of Berry’s operations, to repay Berry’s indebtedness or as otherwise permitted under the terms of Berry’s indentures and Credit Facility. During the twelve months ended September 30, 2015, LINN Energy spent approximately $223 million, including approximately $58 million in 2014, of capital expenditures in respect of Berry’s operations. On September 30, 2015, LINN Energy repaid in full the remaining advance of approximately $129 million. In October 2015, Berry used that cash to repay borrowings under its Credit Facility.

During the nine months ended September 30, 2015, Linn Energy made capital contributions of approximately $399 million to Berry including $250 million which was deposited on Berry’s behalf and posted as restricted cash with Berry’s lenders in connection with the reduction in its borrowing base in May 2015 (see Note 4). The $250 million may be used to satisfy obligations under the Credit Facility or may be returned to LINN Energy in the future if commodity prices improve. During the second quarter of 2014, LINN Energy made a cash capital contribution of $220 million to the Company which was used to pay in full the remaining outstanding principal amount of its approximate $205 million 10.25% senior notes due June 2014 plus accrued interest.

Other

One of LINN Energy’s directors is the President and Chief Executive Officer of Superior Energy Services, Inc. (“Superior”), which provides oilfield services to the Company. ~~For~~The ~~the~~Company ~~three~~incurred ~~months~~no ~~and~~significant ~~nine~~expenditures ~~months~~related ~~ended~~to ~~September 30,~~services ~~2015,~~rendered ~~the~~by ~~Company~~Superior ~~incurred~~and ~~expenditures~~its ofsubsidiaries ~~approximately~~for ~~$24,000~~the ~~and~~three ~~$342,000,~~months ~~respectively~~ended March 31, ~~and~~2016. For ~~for~~ the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015, the Company incurred expenditures of approximately $~~176~~100,000 related to services rendered by Superior and its subsidiaries. ~~No expenditures were incurred for the three months ended September 30, 2014.~~

1518

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

The following discussion ~~contains~~and ~~forward-looking~~analysis ~~statements~~should ~~that~~be ~~reflect~~read ~~the~~in ~~Company’s~~conjunction ~~future~~with ~~plans,~~the ~~estimates,~~financial ~~beliefs~~statements and ~~expected~~related ~~performance. The~~notes ~~forward-looking~~included ~~statements~~in ~~are~~this ~~dependent~~Quarterly ~~upon~~Report ~~events,~~on ~~risks~~Form 10-Q and ~~uncertainties~~in ~~that~~the ~~may~~Company’s beAnnual ~~outside~~Report on Form 10-K for the ~~Company’s~~year ~~control~~ended December 31, 2015. The ~~Company’s~~following ~~actual~~discussion contains forward-looking statements based on expectations, estimates and assumptions. Actual results ~~could~~may differ materially from those discussed in ~~these~~the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, market prices for oil, natural gas and NGL, production volumes, estimates of proved reserves, capital expenditures, economic and competitive conditions, credit and capital market conditions, regulatory changes and other uncertainties, as well as those factors set forth in “Cautionary Statement Regarding Forward-Looking Statements” below and in Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q and in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2014~~2015, and elsewhere in the Annual Report. ~~In light of these risks, uncertainties and assumptions, the forward-looking events discussed may not occur.~~

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, 2014. The reference to a “Note” herein refers to the accompanying Notes to Condensed Financial Statements contained in Item 1. “Financial Statements.”

Executive Overview

Berry Petroleum Company, LLC (“Berry” or the “Company”) was formed as a Delaware limited liability company on December 16, 2013, and is an indirect wholly owned subsidiary of Linn Energy, LLC (“LINN Energy”) engaged in the production and development of oil and natural gas. The Company’s predecessor, Berry Petroleum Company, was publicly traded from 1987 until ~~being acquired by LINN Energy in~~ December 2013. On December 16, 2013, the Company completed the transactions contemplated by the merger agreement between LINN Energy, LinnCo, LLC (“LinnCo”), an affiliate of LINN Energy, and Berry under which LinnCo acquired all of the outstanding common shares of Berry and the contribution agreement between LinnCo and LINN Energy, under which LinnCo contributed Berry to LINN Energy in exchange for LINN Energy units. Linn Acquisition Company, LLC, a direct subsidiary of LINN Energy, is currently the Company’s sole member.

The Company ~~currently~~ has five operating areas in the United States (“U.S.”): California, Hugoton Basin, Uinta Basin, Piceance Basin and East Texas. ~~In August and November of 2014, the Company divested all of its properties located in the Permian Basin.~~

Results for the three months ended ~~September~~March 3031, ~~2015~~2016, included the following:

• oil, natural gas and NGL sales of approximately $~~140~~83 million compared to $~~351~~157 million for the ~~third~~first quarter of ~~2014~~2015;

• average daily production of approximately 4842.35 MBOE/d compared to 5450.73 MBOE/d for the ~~third~~first quarter of ~~2014~~2015;

• net loss of approximately $~~537~~1.1 ~~million~~billion compared to ~~net income of~~ $~~115~~323 million for the ~~third~~first quarter of ~~2014~~2015;

• ~~capital~~net ~~expenditures,~~cash ~~excluding~~provided ~~acquisitions,~~by operating activities of approximately $3421 million compared to $~~163~~42 million for the ~~third~~first quarter of ~~2014~~2015; ~~and~~

• 19capital ~~wells~~expenditures, ~~drilled~~excluding ~~(all~~acquisitions, ~~successful)~~of ~~compared~~approximately to$9 ~~129~~million ~~wells~~compared ~~drilled~~to ~~(all~~$57 ~~successful)~~million for the ~~third~~first quarter of ~~2014.~~2015; and

~~Results~~• ~~for~~14 ~~the~~wells ~~nine~~drilled ~~months~~(all ~~ended~~successful) ~~September 30,~~compared ~~2015,~~to ~~included~~85 wells drilled (all successful) for the ~~following:~~first quarter of 2015.

•Voluntary ~~oil,~~Reorganization ~~natural~~Under ~~gas and NGL sales of approximately $470 million compared to $1.0 billion for the nine months ended September 30, 2014;~~Chapter 11

•On ~~average~~May 11, ~~daily~~2016, ~~production~~the Company, LINN Energy and LinnCo (collectively, the “Debtors”), filed voluntary petitions (“Bankruptcy Petitions”) for reorganization under Chapter 11 of ~~approximately~~the 49U.1S. ~~MBOE/d~~Bankruptcy ~~compared~~Code to(“Bankruptcy 50Code”) in the U.7S. ~~MBOE/d~~Bankruptcy Court for the ~~nine~~Southern ~~months~~District ~~ended~~of ~~September~~Texas ~~30,~~(“Bankruptcy ~~2014;~~Court”). The Debtors have filed a motion with the Bankruptcy Court seeking joint administration of their Chapter 11 cases.

•Prior ~~net~~to ~~loss~~the filing of ~~approximately~~the ~~$889~~Bankruptcy ~~million~~Petitions, ~~compared~~on toMay 10, ~~net~~2016, ~~income~~the ofDebtors ~~$274~~entered ~~million~~into ~~for~~a restructuring support agreement (“Restructuring Support Agreement”) with certain holders (“Consenting Creditors”) collectively holding or controlling at least 66.67% by aggregate outstanding principal amounts under (i) the ~~nine~~Company’s ~~months~~Second ~~ended~~Amended ~~September~~and ~~30,~~Restated ~~2014;~~Credit Agreement (“Credit Facility”) and (ii) LINN Energy’s Sixth Amended and Restated Credit Agreement (“LINN Credit Facility”).

•The ~~net~~Restructuring ~~cash~~Support ~~provided~~Agreement bysets ~~operating~~forth, ~~activities~~subject to certain conditions, the commitment of ~~approximately~~the ~~$109~~Debtors ~~million~~and ~~compared~~the Consenting Creditors to ~~$443~~support ~~million~~a ~~for~~comprehensive restructuring of the ~~nine~~Debtors’ ~~months~~long-term ~~ended~~debt ~~September~~(“Restructuring ~~30,~~Transactions”). The ~~2014;~~Restructuring Transactions will be effectuated through one or more plans of reorganization (“Plan”) to be filed in cases commenced under Chapter 11 of the Bankruptcy Code.

• capital expenditures, excluding acquisitions, of approximately $135 million compared to $438 million for the nine months ended September 30, 2014; and

• 119 wells drilled (all successful) compared to 317 wells drilled (all successful) for the nine months ended September 30, 2014.

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

Financing Activities

In October 2015, the Company entered into an amendment to its Second Amended and Restated Credit Agreement (“Credit Facility”). See Note 4 for additional details.

The spring 2015 semi-annual borrowing base redetermination of the Company’s Credit Facility was completed in May 2015, and, as a result of lower commodity prices, the borrowing base under the Credit Facility decreased from $1.4 billion to $1.2 billion. The fall 2015 semi-annual redetermination was completed in October 2015, and the borrowing base under the Credit Facility decreased from $1.2 billion to $900 million. Continued low commodity prices, reductions in the Company’s capital budget and the resulting reserve write-downs may impact future redeterminations.

In connection with the reduction in Berry’s borrowing base in October 2015, Berry repaid $300 million of borrowings outstanding under the Credit Facility. In connection with the reduction in Berry’s borrowing base in May 2015, LINN Energy contributed $250 million to Berry to post as restricted cash with Berry’s lenders. As directed by LINN Energy, the $250 million was deposited on Berry’s behalf in a security account with the administrative agent subject to a security control agreement. Berry’s ability to withdraw funds from this account is subject to a concurrent reduction of the borrowing base under the Credit Facility or lender’s consent in connection with a redetermination of such borrowing base. The $250 million may be used to satisfy obligations under the Credit Facility or, subject to restrictions in the indentures governing Berry’s senior notes, may be returned to LINN Energy in the future.

During the nine months ended September 30, 2015, the Company repurchased, on the open market and through a privately negotiated transaction, approximately $65 million of its outstanding senior notes. See Note 4 for additional details.

Commodity Derivatives

During the nine months ended September 30, 2015, the Company entered into commodity derivative contracts consisting of natural gas basis swaps for May 2015 through December 2016 to hedge exposure to differentials in certain producing areas, and oil swaps for April 2015 through December 2015. In addition, the Company entered into natural gas basis swaps for May 2015 through December 2016 to hedge exposure to the differential in California, where it consumes natural gas in its heavy oil development operations.

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

Results of Operations

Three Months Ended September 30, 2015, Compared to Three Months Ended September 30, 2014

	Three Months EndedSeptember 30,
	2015			2014			Variance
	(in thousands)
Revenues and other:
Oil sales	$	113,155		$	310,742		$	(197,587	)
Natural gas sales	23,190			34,950			(11,760		)
NGL sales	3,907			5,171			(1,264		)
Total oil, natural gas and NGL sales	140,252			350,863			(210,611		)
Electricity sales	8,610			11,300			(2,690		)
Gains on oil and natural gas derivatives	27,664			44,990			(17,326		)
Marketing and other revenues	2,781			2,263			518
	179,307			409,416			(230,109		)
Expenses:
Lease operating expenses	67,341			83,684			(16,343		)
Electricity generation expenses	4,759			5,892			(1,133		)
Transportation expenses	13,794			13,326			468
Marketing expenses	967			1,811			(844		)
General and administrative expenses	21,564			16,566			4,998
Depreciation, depletion and amortization	63,057			79,725			(16,668		)
Impairment of long-lived assets	510,631			—			510,631
Taxes, other than income taxes	14,520			24,830			(10,310		)
Losses on sale of assets and other, net	2,633			49,011			(46,378		)
	699,266			274,845			424,421
Other income and (expenses)	(17,196		)	(19,247		)	2,051
Income (loss) before income taxes	(537,155		)	115,324			(652,479		)
Income tax expense	3			159			(156		)
Net income (loss)	$	(537,158	)	$	115,165		$	(652,323	)

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

	Three Months EndedSeptember 30,
	2015		2014		Variance
Average daily production:
Oil (MBbls/d)	29.8		37.8		(21	)%
Natural gas (MMcf/d)	93.8		93.5		—
NGL (MBbls/d)	2.9		1.2		142	%
Total (MBOE/d)	48.3		54.7		(12	)%
Weighted average prices: (1)
Oil (Bbl)	$	41.32	$	89.24	(54	)%
Natural gas (Mcf)	$	2.69	$	4.06	(34	)%
NGL (Bbl)	$	14.43	$	45.56	(68	)%
Average NYMEX prices:
Oil (Bbl)	$	46.43	$	97.17	(52	)%
Natural gas (MMBtu)	$	2.77	$	4.06	(32	)%
Costs per BOE of production:
Lease operating expenses	$	15.14	$	16.64	(9	)%
Transportation expenses	$	3.10	$	2.65	17	%
General and administrative expenses	$	4.85	$	3.29	47	%
Depreciation, depletion and amortization	$	14.18	$	15.85	(11	)%
Taxes, other than income taxes	$	3.26	$	4.94	(34	)%

(1) Does not include the effect of gains (losses) on derivatives.

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

~~Revenues~~The Company expects ordinary-course operations to continue substantially uninterrupted during and ~~Other~~after the Chapter 11 proceedings. The Restructuring Support Agreement provides that the Consenting Creditors will support the use of Berry’s cash collateral under specified terms and conditions, including adequate protection terms.

~~Oil~~Certain principal terms of the Plan are outlined below. See Item 1A. “Risk Factors” for risks relating to Chapter 11 proceedings, ~~Natural~~including ~~Gas~~the ~~and~~risk ~~NGL~~that ~~Sales~~the Company may not be able to obtain confirmation of a Chapter 11 plan of reorganization.

~~Oil,~~• ~~natural~~The ~~gas~~Restructuring ~~and~~Support ~~NGL~~Agreement ~~sales~~contemplates ~~decreased~~that byBerry ~~approximately~~will ~~$211~~separate ~~million~~from orLINN ~~60%~~Energy tounder ~~approximately~~the ~~$140~~Plan. ~~million~~Claims ~~for~~under the ~~three~~Credit ~~months~~Facility ~~ended~~will ~~September 30,~~receive ~~2015,~~participation ~~from~~in ~~approximately~~a ~~$351~~new ~~million~~Berry ~~for~~exit ~~the three months ended September 30~~facility, ~~2014,~~if ~~due to lower oil~~any, ~~natural gas~~ and ~~NGL prices and lower production volumes. Lower oil, natural gas and NGL prices resulted in~~ a ~~decrease~~to-be-determined inallocation ~~revenues~~ of ~~approximately~~equity ~~$132~~in ~~million,~~reorganized ~~$12~~Berry ~~million~~(“New ~~and~~Berry $8Common ~~million, respectively~~Stock”).

~~Average~~• ~~daily~~Unsecured ~~production~~claims ~~volumes~~against ~~decreased~~Berry, toincluding ~~approximately~~under ~~48.3~~Berry’s ~~MBOE/d~~unsecured ~~for the three months ended September 30~~notes, ~~2015,~~will ~~from~~receive ~~54.7~~a ~~MBOE/d~~to-be-determined ~~for~~allocation ~~the~~of ~~three~~New ~~months~~Berry ~~ended~~Common ~~September 30,~~Stock ~~2014. Lower~~up ~~oil~~to ~~production~~the ~~volumes~~full ~~resulted~~amount ~~in a decrease in revenues~~ of ~~approximately~~Berry’s ~~$66~~unencumbered ~~million. Higher~~collateral ~~NGL~~and/or ~~production~~collateral ~~volumes~~value ~~resulted~~ in anexcess ~~increase in revenues~~ of ~~approximately~~amounts $7outstanding ~~million. Natural~~under ~~gas~~the ~~production~~Berry ~~volumes~~Credit ~~were virtually unchanged~~Facility.

	Three Months EndedSeptember 30,
	2015	2014	Variance
Average daily production (MBOE/d):
California	25.5	26.6	(1.1	)	(4	)%
Hugoton Basin	9.5	5.6	3.9		70	%
Uinta Basin	7.9	11.2	(3.3	)	(29	)%
Piceance Basin	3.8	1.9	1.9		100	%
East Texas	1.6	1.8	(0.2	)	(11	)%
Permian Basin	—	7.6	(7.6	)	(100	)%
	48.3	54.7	(6.4	)	(12	)%


•	Cash payments under the Plan may be funded by rights offerings or other new-money investments. The Restructuring Support Agreement contemplates that Berry may undertake a marketing process for the opportunity to sponsor its Plan.

~~The~~• ~~decrease~~All inexisting ~~average~~equity ~~daily~~interests ~~production volumes in California primarily reflects reduced development capital spending, partially offset by the impact~~ of ~~the~~Berry ~~properties~~will ~~received~~be inextinguished ~~the~~without ~~exchange with Exxon Mobil Corporation (“ExxonMobil”) on November 21, 2014~~recovery. Average daily production volumes in the Hugoton Basin operating area reflect the impact of the properties received in the exchange with Exxon Mobil Corporation and its affiliates, including its wholly owned subsidiary XTO Energy Inc. (“Exxon XTO”) on August 15, 2014. The decrease in average daily production volumes in the Uinta Basin and East Texas operating areas primarily reflects the effects of production declines due to reduced development capital spending. The increase in average daily production volumes in the Piceance Basin operating area primarily reflects development capital spending. The decrease in average daily production volumes in the Permian Basin operating area reflects the properties relinquished in the two exchanges with ExxonMobil and Exxon XTO and the properties sold to Fleur de Lis Energy, LLC on November 14, 2014. The Company had no Permian Basin properties remaining as of December 31, 2014.

~~Electricity~~The ~~Sales~~Plan will provide for the establishment of a customary management incentive plan at the Company under which no less than 10% of the New Berry Common Stock will be reserved for grants made from time to time to the officers and other key employees of the reorganized entity. The Plan will provide for releases of specified claims held by the Debtors, the Consenting Creditors and certain other specified parties against one another and for customary exculpations and injunctions.

The ~~following~~Restructuring ~~table~~Support ~~sets~~Agreement ~~forth~~obligates ~~selected~~the ~~electricity~~Debtors ~~data:~~and the Consenting Creditors to, among other things, support and not interfere with consummation of the Restructuring Transactions and, as to the Consenting Creditors, vote their claims in favor of the Plan. The Restructuring Support Agreement may be terminated upon the occurrence of certain events, including the failure to meet specified milestones relating to the filing, confirmation and consummation of the Plan, among other requirements, and in the event of certain breaches by the parties under the Restructuring Support Agreement. The Restructuring Support Agreement is subject to termination if the effective date of the Plan has not occurred within 250 days of the bankruptcy filing. There can be no assurances that the Restructuring Transactions will be consummated.

	Three Months EndedSeptember 30,
	2015		2014		Variance
Electricity sales (in thousands)	$	8,610	$	11,300	(24	)%
Electricity generation expenses (in thousands)	$	4,759	$	5,892	(19	)%
Electric power produced (Mwh/d)	2,159		2,119		2	%
Electric power sold (Mwh/d)	1,934		1,933		—
Average sales price per Mwh	$	48.35	$	71.18	(32	)%
Fuel gas cost per MMBtu (including transportation)	$	2.83	$	4.17	(32	)%
Estimated natural gas volumes consumed to produce electricity (MMBtu/d) (1)	14,764		14,557		1	%

~~(1)~~For ~~Estimate~~the isduration ~~based~~of onthe Company’s Chapter 11 proceedings, the ~~historical~~Company’s ~~allocation~~operations ofand ~~fuel~~ability ~~costs~~to develop and execute its business plan are subject to ~~electricity~~the risks and uncertainties associated with the Chapter 11 process as described in Item 1A. “Risk Factors.” As a result of these risks and uncertainties, the Company’s assets, liabilities, officers and/or directors could be significantly different following the outcome of the Chapter 11 proceedings, and the description of the Company’s operations, properties and capital plans included in this quarterly report may not accurately reflect its operations, properties and capital plans following the Chapter 11 process.

In particular, subject to certain exceptions, under the Bankruptcy Code, the Debtors may assume, assign or reject certain executory contracts and unexpired leases subject to the approval of the Court and certain other conditions. Generally, the rejection of an executory contract or unexpired lease is treated as a pre-petition breach of such executory contract or unexpired lease and, subject to certain exceptions, relieves the Debtors of performing their future obligations under such executory contract or unexpired lease but entitles the contract counterparty or lessor to a pre-petition general unsecured claim for damages caused by such deemed breach. Counterparties to such rejected contracts or leases may assert unsecured claims in the Bankruptcy Court against the applicable Debtors’ estate for such damages. Generally, the assumption of an executory contract or unexpired lease requires the Debtors to cure existing monetary defaults under such executory contract or unexpired lease and provide adequate assurance of future performance. Accordingly, any description of an executory contract or unexpired lease with the Debtor in this quarterly report, including where applicable a quantification of the Company’s obligations under any

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

~~Electricity~~such ~~sales~~executory ~~represent~~contract ~~sales~~or tounexpired ~~utilities~~lease ~~and~~with ~~decreased~~the byDebtor ~~approximately~~is $2qualified ~~million~~by orany ~~24%~~overriding torejection ~~approximately~~rights $9the ~~million~~Company ~~for~~has under the ~~three~~Bankruptcy ~~months~~Code. Further, ~~ended~~nothing ~~September 30,~~herein ~~2015,~~is ~~from~~or ~~approximately~~shall ~~$11~~be ~~million~~deemed ~~for~~an ~~the~~admission ~~three~~with ~~months~~respect ~~ended~~to ~~September 30,~~any ~~2014,~~claim ~~primarily~~amounts ~~due~~or tocalculations aarising ~~decrease~~from inthe rejection of any executory contract or unexpired lease and the ~~average~~Debtors ~~sales~~expressly ~~price~~preserve all of ~~electricity~~their ~~during~~rights ~~the~~with ~~period~~respect thereto.

~~Gains~~Ability ~~(Losses)~~to onContinue ~~Oil~~as ~~and~~a ~~Natural~~Going ~~Gas Derivatives~~Concern

~~Gains~~Continued onlow ~~oil~~commodity ~~and~~prices ~~natural~~are ~~gas~~expected ~~derivatives~~to ~~were~~result ~~approximately~~in ~~$28~~significantly ~~million~~lower ~~and~~levels ~~$45~~of ~~million~~cash ~~for~~flow ~~the~~from ~~three~~operating ~~months~~activities ~~ended~~in ~~September 30,~~the ~~2015,~~future and ~~September 30,~~have ~~2014,~~limited ~~respectively,~~the ~~representing~~Company’s aability ~~decrease~~to ofaccess ~~approximately~~the ~~$17~~capital ~~million~~markets. ~~Gains~~In onaddition, ~~oil~~the ~~and~~Company’s ~~natural~~Credit ~~gas~~Facility ~~derivatives~~is ~~were~~subject ~~primarily due~~ to ~~changes~~scheduled inredeterminations ~~fair~~of ~~value~~its ofborrowing ~~the~~base, ~~derivative~~semi-annually ~~contracts. The~~in ~~fair~~April ~~value~~and onOctober, ~~unsettled~~based ~~derivatives~~primarily ~~contracts~~on ~~changes~~reserve asreports ~~future~~using lender commodity price expectations ~~change~~at ~~compared~~such totime. The lenders under the ~~contract~~Credit ~~prices~~Facility onagreed ~~the~~to ~~derivatives. If~~defer the ~~expected~~April ~~future~~2016 borrowing base redetermination to May 11, 2016. Continued low commodity prices, ~~increase~~reductions ~~compared~~in to the ~~contract~~Company’s ~~prices~~capital onbudget and the ~~derivatives,~~resulting ~~losses~~reserve write-downs are ~~recognized;~~expected to adversely impact upcoming redeterminations and ifwill ~~the~~likely ~~expected~~have ~~future~~a ~~commodity~~significant ~~prices~~negative ~~decrease~~impact ~~compared~~on tothe Company’s liquidity. The Company’s filing of the ~~contract~~Bankruptcy ~~prices~~Petitions ondescribed above accelerated the ~~derivatives,~~Company’s ~~gains~~obligations ~~are~~under ~~recognized~~its Credit Facility and its senior notes.

The significant risks and uncertainties related to the Company’s ~~determines~~liquidity and Chapter 11 proceedings described above raise substantial doubt about the ~~fair~~Company’s ~~value~~ability ofto ~~its~~continue ~~oil~~as ~~and~~a ~~natural~~going ~~gas~~concern. The ~~derivatives~~condensed ~~utilizing~~financial ~~pricing~~statements ~~models~~have ~~that~~been ~~use~~prepared on a ~~variety~~going concern basis of ~~techniques~~accounting, ~~including~~which ~~market~~contemplates ~~quotes~~continuity of operations, realization of assets, and ~~pricing~~satisfaction ~~analysis~~of liabilities and commitments in the normal course of business. ~~See~~The ~~Item 3.~~condensed ~~“Quantitative~~financial ~~and~~statements ~~Qualitative~~do ~~Disclosures~~not ~~About~~include ~~Market~~any ~~Risk”~~adjustments ~~and~~that ~~Note 5~~might ~~and~~result ~~Note 6~~from ~~for~~the ~~additional~~outcome ~~information~~of ~~about~~ the ~~Company’s~~going ~~commodity~~concern ~~derivatives~~uncertainty. ~~For~~If ~~information about~~ the Company’s ~~credit~~cannot ~~risk~~continue ~~related~~as toa ~~derivative~~going ~~contracts~~concern, ~~see~~adjustments ~~“Counterparty~~to ~~Credit~~the ~~Risk”~~carrying ~~under~~values ~~“Liquidity~~and classification of its assets and ~~Capital~~liabilities ~~Resources”~~and ~~below~~the reported amounts of income and expenses could be required and could be material.

~~Marketing~~In order to decrease the Company’s level of indebtedness and ~~Other~~maintain ~~Revenues~~the Company’s liquidity at levels sufficient to meet its commitments, the Company has undertaken a number of actions, including minimizing capital expenditures and further reducing its recurring operating expenses. The Company believes that even after taking these actions, it will not have sufficient liquidity to satisfy its debt service obligations, meet other financial obligations and comply with its debt covenants. As previously disclosed, the Company has engaged financial and legal advisors to assist with, among other things, analyzing various strategic alternatives to address its liquidity and capital structure. The Company believes a filing under Chapter 11 may provide the most expeditious manner in which to effect a capital structure solution. There can be no assurances that the Company will be able to reorganize its capital structure on terms acceptable to the Company, its creditors, or at all.

~~Marketing~~Covenant revenues primarily represent third-party activities associated with the Company’s long-term firm transportation contracts. The Company’s current production is insufficient to fully utilize this capacity. To optimize its remaining capacity, the Company utilizes asset management agreements and various other marketing arrangements. Sales of third-party natural gas are recorded as marketing revenues. Marketing and other revenues increased by approximately $1 million or 23% to approximately $3 million for the three months ended September 30, 2015, from approximately $2 million for the three months ended September 30, 2014. The increase was primarily due to higher helium sales revenue in the Hugoton Basin partially offset by lower marketing revenues principally due to a decrease in natural gas prices.Violations

~~Expenses~~As of March 31, 2016, the Company was in default under certain of its debt instruments, which have subsequently been cured or a forbearance has been received. The Company’s filing of the Bankruptcy Petitions described above constitutes an event of default that accelerated the Company’s obligations under its Credit Facility and its senior notes. Additionally, other events of default, including cross-defaults, are present, including the failure to make interest payments on certain of its senior notes and the receipt of a going concern explanatory paragraph from the Company’s independent registered public accounting firm on the Company’s financial statements for the year ended December 31, 2015. Under the Bankruptcy Code, the creditors under these debt agreements are stayed from taking any action against the Company as a result of an event of default. See Note 4 for additional details about the Company’s debt.

~~Lease~~Credit ~~Operating Expenses~~Facility

~~Lease~~The ~~operating~~Company’s ~~expenses~~Credit ~~include~~Facility ~~expenses~~contains ~~such~~the asrequirement ~~labor,~~to ~~field~~deliver ~~office,~~audited ~~vehicle,~~financial ~~supervision,~~statements ~~maintenance,~~without ~~tools~~a ~~and~~going ~~supplies,~~concern ~~and~~or ~~workover~~like ~~expenses. Lease~~qualification ~~operating expenses decreased by approximately $17 million~~ or ~~20%~~exception. Consequently, tothe ~~approximately~~filing ~~$67~~of ~~million for~~ the ~~three~~Company’s ~~months ended September 30,~~ 2015, ~~from~~Annual ~~approximately~~Report ~~$84~~on ~~million for the three months ended September~~Form ~~30,~~10-K ~~2014. The~~which ~~decrease~~included ~~was~~such ~~primarily~~explanatory ~~due~~paragraph toresulted ~~a decrease~~ in ~~steam costs caused by lower prices for natural gas used in steam generation, cost savings initiatives and lower costs as~~ a ~~result~~default ofunder the ~~properties~~Credit ~~sold~~Facility ~~and~~as ~~exchanged during the third and fourth quarters~~ of ~~2014. Lease operating expenses per BOE also decreased to $15.14 per BOE for~~ the ~~three~~filing ~~months~~date, ~~ended September~~March 3028, ~~2015~~2016, ~~from~~subject ~~$16.64~~to ~~per~~a ~~BOE~~30 ~~for~~day ~~the~~grace ~~three months ended September 30, 2014~~period.

	Three Months EndedSeptember 30,
	2015		2014		Variance
Average net volume of steam injected (Bbls/d)	283,093		252,006		12	%
Fuel gas cost per MMBtu (including transportation)	$	2.83	$	4.17	(32	)%
Estimated natural gas volumes consumed to produce steam (MMBtu/d)	99,874		90,348		11	%

Electricity Generation Expenses

Electricity generation expenses decreased by approximately $1 million or 19% to approximately $5 million for the three months ended September 30, 2015, from approximately $6 million for the three months ended September 30, 2014, primarily due to a decrease in fuel gas cost partially offset by an increase in fuel gas volumes purchased.

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

~~Transportation~~to ~~Expenses~~fund ordinary course operations and (iv) the Company, the administrative agent and the lenders would negotiate in good faith the terms of a restructuring support agreement in furtherance of a restructuring of the capital structure of the Company.

~~Transportation~~Pursuant ~~expenses increased by approximately $1 million or 4%~~ to ~~approximately $14 million for~~ the ~~three months ended September 30~~amendment, ~~2015, from approximately $13 million for~~ the ~~three~~Specified ~~months~~Events ~~ended September 30, 2014, primarily due to costs associated with Hugoton Basin properties acquired in the exchange with Exxon XTO on August 15, 2014.~~are:

~~Marketing~~• ~~Expenses~~The receipt of a going concern qualification or explanatory statement in the auditors’ report on the Company’s financial statements for the year ended December 31, 2015;

~~Marketing~~• ~~expenses primarily represent third-party activities associated with the Company’s long-term firm transportation contracts.~~ The ~~Company’s~~receipt current production is insufficient to fully utilize its capacity. To optimize its remaining capacity, the Company utilizes asset management agreements and various other marketing arrangements. Purchases of ~~third-party~~a ~~natural~~going ~~gas~~concern ~~are~~qualification ~~recorded as marketing expenses. Marketing expenses decreased by approximately $1 million~~ or ~~47%~~explanatory tostatement ~~approximately~~in ~~$1 million for~~ the ~~three~~auditors’ ~~months~~report ~~ended~~on ~~September 30,~~LINN ~~2015,~~Energy’s ~~from~~consolidated ~~approximately~~financial $2statements ~~million~~ for the ~~three~~year ~~months~~ ended ~~September 30,~~December ~~2014~~31, ~~primarily due to a decrease in natural gas prices.~~2015;

~~General~~• ~~and~~The ~~Administrative~~failure ~~Expenses~~of the Company or LINN Energy to make certain interest payments on their unsecured notes;

~~General~~• and administrative expenses are costs not directly associated with field operations. General and administrative expenses increased by approximately $5 million or 30% to approximately $22 million for the three months ended September 30, 2015, from approximately $17 million for the three months ended September 30, 2014. The ~~increase~~failure ~~was primarily due~~ to ~~higher~~maintain ~~costs allocated to~~ the ~~Company~~ratio byof ~~Linn~~Adjusted ~~Operating,~~EBITDAX ~~Inc. General and administrative expenses per BOE also increased~~ to ~~$4.85~~Interest ~~per~~Expense ~~BOE~~(as ~~for~~each ~~the~~term ~~three~~is ~~months~~defined ~~ended~~in ~~September 30, 2015, from $3.29 per BOE for~~ the ~~three~~Credit ~~months~~Facility) ~~ended~~(“Interest ~~September 30,~~Coverage ~~2014.~~Ratio”);

~~Depreciation~~• Any cross-defaults that may arise on account of any of the foregoing, ~~Depletion~~provided ~~and~~that ~~Amortization~~no event of default is continuing under any document giving rise to such cross default; and

~~Depreciation,~~• ~~depletion~~Any ~~and~~failure ~~amortization decreased by approximately $17 million or 21%~~ to ~~approximately~~provide ~~$63~~notice ~~million for the three months ended September 30, 2015, from approximately $80 million for the three months ended September 30, 2014. The decrease was primarily due to lower rates as a result~~ of ~~the~~any ~~impairments recorded in the prior year and the first quarter~~ of ~~2015 as well as lower total production volumes. Depreciation, depletion and amortization per BOE also decreased to $14.18 per BOE for~~ the ~~three~~events ~~months~~described ~~ended September 30, 2015, from $15~~above.~~85 per BOE for the three months ended September 30, 2014.~~

~~Impairment~~As ofa ~~Long-Lived~~condition ~~Assets~~to closing the amendment, the Company provided control agreements over certain deposit accounts.

The filing of the Bankruptcy Petitions constitutes an event of default that accelerated the Company’s ~~recorded~~obligations under the ~~following~~Credit ~~noncash~~Facility. However, ~~impairment~~under ~~charges~~the ~~(before~~Bankruptcy ~~and~~Code, ~~after~~the ~~tax)~~creditors ~~associated~~under ~~with~~this ~~proved~~debt ~~oil~~agreement ~~and~~are ~~natural~~stayed ~~gas~~from ~~properties:~~taking any action against the Company as a result of the default.

	Three Months EndedSeptember 30, 2015
	(in thousands)
California operating area	$	330,311
Uinta Basin operating region	111,339
East Texas operating area	13,637
Piceance Basin operating region	55,344
	$	510,631

Senior Notes

The ~~impairment~~Company ~~charges~~deferred inmaking ~~2015~~an ~~were~~interest ~~due~~payment tototaling aapproximately ~~decline~~$18 inmillion ~~commodity~~due ~~prices~~March 15, ~~and~~2016, on the Company’s ~~estimates~~6.375% ofsenior ~~proved~~notes ~~reserves. The~~due September 2022, which resulted in the Company ~~recorded~~being noin ~~impairment~~default ~~charges~~under ~~for~~these senior notes. The indenture governing the ~~three~~notes ~~months~~permits ~~ended~~the ~~September~~Company a 30, ~~2014~~day grace period to make the interest payment.

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

~~Taxes,~~Results ~~Other~~of ~~Than Income Taxes~~Operations

	Three Months EndedSeptember 30,
	2015			2014		Variance
	(in thousands)
Severance taxes	$	(809	)	$	8,187	$	(8,996	)
Ad valorem taxes	9,966			12,529		(2,563		)
California carbon allowances	5,366			4,114		1,252
Other	(3		)	—		(3		)
	$	14,520		$	24,830	$	(10,310	)

Three Months Ended March 31, 2016, Compared to Three Months Ended March 31, 2015

Taxes, other than income taxes decreased by approximately $10 million or 42% for the three months ended September 30, 2015, compared to the three months ended September 30, 2014. Severance taxes, which are a function of revenues generated from production, decreased primarily due to lower oil, natural gas and NGL prices and lower production volumes. Ad valorem taxes, which are based on the value of reserves and production equipment and vary by location, decreased primarily due to a lower estimated valuation on certain of the Company’s California properties. California carbon allowances increased primarily due to an increase in estimated emissions for which credits are needed and higher costs for acquired allowances.



	Three Months Ended March 31,
	2016			2015			Variance
	(in thousands)
Revenues and other:
Oil sales	$	64,145		$	123,980		$	(59,835	)
Natural gas sales	14,372			25,976			(11,604		)
NGL sales	4,949			6,630			(1,681		)
Total oil, natural gas and NGL sales	83,466			156,586			(73,120		)
Electricity sales	4,211			5,151			(940		)
Gains on oil and natural gas derivatives	508			3,267			(2,759		)
Marketing and other revenues	3,081			4,277			(1,196		)
	91,266			169,281			(78,015		)
Expenses:
Lease operating expenses	50,093			67,189			(17,096		)
Electricity generation expenses	3,802			4,570			(768		)
Transportation expenses	12,929			12,606			323
Marketing expenses	653			1,075			(422		)
General and administrative expenses	25,172			21,187			3,985
Depreciation, depletion and amortization	58,843			72,979			(14,136		)
Impairment of long-lived assets	1,030,588			272,000			758,588
Taxes, other than income taxes	14,313			23,332			(9,019		)
Gains on sale of assets and other, net	(192		)	(4,473		)	4,281
	1,196,201			470,465			725,736
Other income and (expenses)	(19,886		)	(21,591		)	1,705
Loss before income taxes	(1,124,821		)	(322,775		)	(802,046		)
Income tax benefit	(2		)	(50		)	48
Net loss	$	(1,124,819	)	$	(322,725	)	$	(802,094	)

Losses on Sale of Assets and Other, Net

During the three months ended September 30, 2014, the Company recorded a net loss of approximately $49 million on the noncash exchange of a portion of its Permian Basin properties to Exxon XTO for properties in the Hugoton Basin (see Note 2).

Other Income and (Expenses)

	Three Months EndedSeptember 30,
	2015			2014			Variance
	(in thousands)
Interest expense, net of amounts capitalized	$	(21,484	)	$	(19,068	)	$	(2,416	)
Gain on extinguishment of debt	4,378			—			4,378
Other, net	(90		)	(179		)	89
	$	(17,196	)	$	(19,247	)	$	2,051

Other income and (expenses) decreased by approximately $2 million for the three months ended September 30, 2015, compared to the three months ended September 30, 2014. Interest expense increased primarily due to a decrease in capitalized interest, partially offset by lower outstanding debt during the period. In addition, for the three months ended September 30, 2015, the Company recorded a gain on extinguishment of debt of approximately $4 million as a result of the repurchases of a portion of its senior notes. See “Debt” under “Liquidity and Capital Resources” below for additional details.

Income Tax Expense (Benefit)

The Company is a limited liability company treated as a disregarded entity for federal and state income tax purposes, with the exception of the state of Texas. As such, with the exception of the state of Texas, the Company is not a taxable entity, it does not directly pay federal and state income taxes, and therefore, recognition has not been given to federal and state income taxes for the operations of the Company. The Company recognized income tax expense of approximately $3,000 and $159,000 for the three months ended September 30, 2015, and September 30, 2014, respectively. The decrease was primarily due to a decrease in state income tax expense resulting from changes in the Company’s operations during the three months ended September 30, 2015, compared to the same period in 2014.

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

Net Income (Loss)



	Three Months Ended March 31,
	2016		2015		Variance
Average daily production:
Oil (MBbls/d)	25.6		32.3		(21	)%
Natural gas (MMcf/d)	80.3		93.7		(14	)%
NGL (MBbls/d)	3.5		2.4		46	%
Total (MBOE/d)	42.5		50.3		(16	)%

Weighted average prices: ⁽¹⁾
Oil (Bbl)	$	27.58	$	42.69	(35	)%
Natural gas (Mcf)	$	1.97	$	3.08	(36	)%
NGL (Bbl)	$	15.48	$	30.87	(50	)%

Average NYMEX prices:
Oil (Bbl)	$	33.45	$	48.64	(31	)%
Natural gas (MMBtu)	$	2.09	$	2.98	(30	)%

Costs per BOE of production:
Lease operating expenses	$	12.96	$	14.85	(13	)%
Transportation expenses	$	3.35	$	2.79	20	%
General and administrative expenses	$	6.51	$	4.68	39	%
Depreciation, depletion and amortization	$	15.23	$	16.13	(6	)%
Taxes, other than income taxes	$	3.70	$	5.16	(28	)%

~~Net~~(1) ~~income~~Does ~~decreased~~not byinclude ~~approximately $652 million or 566% to a net loss of approximately $537 million for~~ the ~~three~~effect ~~months ended September 30, 2015, from net income~~ of ~~approximately~~gains ~~$115~~(losses) ~~million~~on ~~for the three months ended September 30, 2014~~derivatives. ~~The decrease was primarily due to higher impairment charges and lower production revenues, partially offset by lower expenses. See discussions above for explanations of variances.~~

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

Results of Operations

Nine Months Ended September 30, 2015, Compared to Nine Months Ended September 30, 2014

	Nine Months EndedSeptember 30,
	2015			2014			Variance
	(in thousands)
Revenues and other:
Oil sales	$	381,813		$	936,463		$	(554,650	)
Natural gas sales	71,694			88,339			(16,645		)
NGL sales	16,712			19,557			(2,845		)
Total oil, natural gas and NGL sales	470,219			1,044,359			(574,140		)
Electricity sales	20,370			31,461			(11,091		)
Gains on oil and natural gas derivatives	26,457			22,893			3,564
Marketing and other revenues	9,432			9,344			88
	526,478			1,108,057			(581,579		)
Expenses:
Lease operating expenses	184,426			267,069			(82,643		)
Electricity generation expenses	14,322			21,904			(7,582		)
Transportation expenses	39,378			28,802			10,576
Marketing expenses	3,047			6,505			(3,458		)
General and administrative expenses	79,853			88,379			(8,526		)
Depreciation, depletion and amortization	199,088			226,109			(27,021		)
Impairment of long-lived assets	782,631			—			782,631
Taxes, other than income taxes	60,048			71,338			(11,290		)
(Gains) losses on sale of assets and other, net	(2,651		)	56,635			(59,286		)
	1,360,142			766,741			593,401
Other income and (expenses)	(55,109		)	(67,368		)	12,259
Income (loss) before income taxes	(888,773		)	273,948			(1,162,721		)
Income tax expense (benefit)	(58		)	77			(135		)
Net income (loss)	$	(888,715	)	$	273,871		$	(1,162,586	)

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

	Nine Months EndedSeptember 30,
	2015		2014		Variance
Average daily production:
Oil (MBbls/d)	30.8		37.2		(17	)%
Natural gas (MMcf/d)	93.7		71.0		32	%
NGL (MBbls/d)	2.7		1.6		69	%
Total (MBOE/d)	49.1		50.7		(3	)%
Weighted average prices: (1)
Oil (Bbl)	$	45.36	$	92.19	(51	)%
Natural gas (Mcf)	$	2.80	$	4.56	(39	)%
NGL (Bbl)	$	23.03	$	43.68	(47	)%
Average NYMEX prices:
Oil (Bbl)	$	51.00	$	99.61	(49	)%
Natural gas (MMBtu)	$	2.80	$	4.55	(38	)%
Costs per BOE of production:
Lease operating expenses	$	13.76	$	19.30	(29	)%
Transportation expenses	$	2.94	$	2.08	41	%
General and administrative expenses	$	5.96	$	6.39	(7	)%
Depreciation, depletion and amortization	$	14.85	$	16.34	(9	)%
Taxes, other than income taxes	$	4.48	$	5.16	(13	)%

(1) Does not include the effect of gains (losses) on derivatives.

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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 $~~574~~74 million or 5547% to approximately $~~470~~83 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2015~~2016, from approximately $~~1.0~~157 ~~billion~~million for the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015, due to lower oil, natural gas and NGL prices and lower production volumes. Lower oil, natural gas and NGL prices resulted in a decrease in revenues of approximately $~~394~~36 million, $458 million and $155 million, respectively.

Average daily production volumes decreased to approximately 4942.15 MBOE/d for the ~~nine~~three months ended ~~September~~March 3031, ~~2015~~2016, from 50.73 MBOE/d for the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015. Lower oil and natural gas production volumes resulted in a decrease in revenues of approximately $~~160~~25 million~~. Higher~~ ~~natural~~and ~~gas~~$3 ~~and~~million, respectively. Higher NGL production volumes resulted in an increase in revenues of approximately $283 million ~~and $12 million, respectively.~~

The following table sets forth average daily production by operating area:

	Nine Months EndedSeptember 30,
	Three Months EndedMarch 31,
	2015	2014	Variance
	2016	2015	Variance
Average daily production (MBOE/d):
California	2622.36	2527.73	0(4.67	)	2(17	)%
Hugoton Basin	9.92	110.90	8.(0.8	)	~~421~~(8	)%
Uinta Basin	85.68	119.07	(23.49	)	(2240	)%
Piceance Basin	23.74	21.07	01.7		35100	%
East Texas	1.65	1.76	(0.1	)	(6	)%
Permian Basin	—	8.4	(8.4	)	(100	)%
	42.5	50.3	(7.8	)	(16	)%
	49.1	50.7	(1.6	)	(3	)%

The ~~increase~~decreases in average daily production volumes ~~in California~~ primarily ~~reflects~~reflect ~~the~~lower ~~impact~~production ofvolumes ~~the~~as ~~properties~~a ~~received~~result inof ~~the exchange with ExxonMobil on November 21, 2014, partially offset by~~ reduced development capital spending~~. Average~~ ~~daily~~throughout ~~production volumes in~~ the ~~Hugoton~~Company’s ~~Basin~~various operating ~~area~~areas, ~~reflect~~as ~~the~~well ~~impact~~as ofmarginal ~~the~~well ~~properties~~shut-ins, ~~received~~driven inby ~~the~~continued ~~exchange~~low ~~with~~commodity ~~Exxon XTO on August 15, 2014~~prices. The decrease in average daily production volumes in ~~the~~California ~~Uinta~~also ~~Basin~~reflects ~~and~~recent ~~East~~operational ~~Texas~~challenges ~~operating~~in ~~areas primarily reflects~~ the ~~effects~~Company’s ofDiatomite ~~production declines due to reduced~~ development ~~capital~~program, ~~spending. The~~where ~~increase~~the inCompany ~~average~~is ~~daily~~pursuing ~~production~~various ~~volumes~~remedies into ~~the~~address ~~Piceance~~wells ~~Basin~~performance ~~operating~~and ~~area~~has ~~primarily~~temporarily ~~reflects~~curtailed ~~development~~ capital spending in this program. The decrease in average daily production volumes in the ~~Permian~~Uinta Basin operating area also reflects ~~the~~lower ~~properties~~production ~~relinquished~~volumes inas ~~the~~a ~~two~~result ~~exchanges~~of ~~with~~wells ~~ExxonMobil~~that ~~and~~are ~~Exxon~~uneconomic ~~XTO~~to ~~and~~return ~~the properties sold~~ to ~~Fleur~~production. The deincrease ~~Lis~~in ~~Energy,~~average ~~LLC~~daily onproduction ~~November 14,~~volumes ~~2014. The~~in ~~Company~~the ~~had~~Piceance noBasin ~~Permian~~operating ~~Basin~~area ~~properties~~primarily ~~remaining~~reflects asdevelopment ofcapital ~~December 31,~~spending ~~2014~~during 2015.

Electricity Sales

~~The~~Electricity ~~following~~sales ~~table~~represent ~~sets~~sales ~~forth~~to ~~selected~~utilities and decreased by approximately $1 million or 18% to approximately $4 million for the three months ended March 31, 2016, from approximately $5 million for the three months ended March 31, 2015, primarily due to decreases in the average sales price of electricity ~~data:~~partially offset by an increase in electric power sold during the period.

	Nine Months EndedSeptember 30,
	2015		2014		Variance
Electricity sales (in thousands)	$	20,370	$	31,461	(35	)%
Electricity generation expenses (in thousands)	$	14,322	$	21,904	(35	)%
Electric power produced (Mwh/d)	2,021		2,076		(3	)%
Electric power sold (Mwh/d)	1,790		1,889		(5	)%
Average sales price per Mwh	$	41.68	$	63.61	(34	)%
Fuel gas cost per MMBtu (including transportation)	$	2.73	$	4.77	(43	)%
Estimated natural gas volumes consumed to produce electricity (MMBtu/d) (1)	14,019		15,098		(7	)%

Gains on Oil and Natural Gas Derivatives

~~(1)~~Gains ~~Estimate~~on isoil ~~based~~and natural gas derivatives were approximately $508,000 and $3 million, for the three months ended March 31, 2016, and March 31, 2015, respectively, representing a decrease of approximately $3 million. Gains on oil and natural gas derivatives decreased primarily due to changes in fair value of the ~~historical~~derivative ~~allocation~~contracts, and the comparison from period to period is impacted by the declining maturity schedule of ~~fuel~~the ~~costs~~Company’s hedges. The fair value on unsettled derivative contracts changes as future commodity price expectations change compared to ~~electricity~~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.

27The Company determines the fair value of its oil and natural gas derivatives utilizing pricing models that use a variety of techniques, including market quotes and pricing analysis. See Item 3. “Quantitative and Qualitative Disclosures About Market Risk” and Note 5 and Note 6 for additional details about the Company’s commodity derivatives. For information about the Company’s credit risk related to derivative contracts, see “Counterparty Credit Risk” under “Liquidity and Capital Resources” below.

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

Electricity sales represent sales to utilities and decreased by approximately $11 million or 35% to approximately $20 million for the nine months ended September 30, 2015, from approximately $31 million for the nine months ended September 30, 2014, primarily due to decreases in the average sales price of electricity and electric power sold during the period.

Gains (Losses) on Oil and Natural Gas Derivatives

Gains on oil and natural gas derivatives were approximately $26 million and $23 million for the nine months ended September 30, 2015, and September 30, 2014, respectively, representing an increase of approximately $3 million. Gains on oil and natural gas derivatives were primarily due to changes in fair value of the derivative contracts. The fair value on unsettled derivatives contracts changes as future commodity price expectations change compared to the contract prices on the derivatives. If the expected future commodity prices increase compared to the contract prices on the derivatives, losses are recognized; and if the expected future commodity prices decrease compared to the contract prices on the derivatives, gains are recognized.

The Company determines the fair value of its oil and natural gas derivatives utilizing pricing models that use a variety of techniques, including market quotes and pricing analysis. See Item 3. “Quantitative and Qualitative Disclosures About Market Risk” and Note 5 and Note 6 for additional information about the Company’s commodity derivatives. For information about the Company’s credit risk related to derivative contracts, see “Counterparty Credit Risk” under “Liquidity and Capital Resources” below.

Marketing and Other Revenues

Marketing revenues primarily represent third-party activities associated with the Company’s long-term firm transportation contracts. The Company’s current production is insufficient to fully utilize this capacity. To optimize its remaining capacity, the Company utilizes asset management agreements and various other marketing arrangements. Sales of third-party natural gas are recorded as marketing revenues. Marketing and other revenues ~~remained~~decreased ~~virtually~~by ~~unchanged~~approximately at$1 million or 28% to approximately $93 million for ~~both~~ the ~~nine~~three months ended ~~September~~March 3031, ~~2015~~2016, ~~and~~from ~~September 30,~~approximately ~~2014. For~~$4 million for the ~~nine~~three months ended ~~September~~March 3031, 2015,. The ~~higher~~decrease ~~helium sales revenue in the Hugoton Basin~~ was ~~offset~~primarily bydue to lower marketing revenues principally due to a decrease in natural gas prices partially offset by higher helium sales revenue in the Hugoton Basin.

Expenses

Lease Operating Expenses

Lease operating expenses include expenses such as labor, field office, vehicle, supervision, maintenance, tools and supplies, and workover expenses. Lease operating expenses decreased by approximately $8317 million or 3125% to approximately $~~184~~50 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2015~~2016, from approximately $~~267~~67 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015. The decrease was primarily due to cost savings initiatives, as well as a decrease in steam costs caused by lower prices for natural gas used in steam generation, ~~cost savings initiatives~~ and ~~lower costs as~~ a ~~result~~decrease ofin ~~the~~steam ~~properties~~injection ~~sold and exchanged during the third and fourth quarters of 2014~~volumes. Lease operating expenses per BOE also decreased to $1312.7696 per BOE for the ~~nine~~three months ended ~~September~~March 3031, ~~2015~~2016, from $1914.3085 per BOE for the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015.

	Nine Months EndedSeptember 30,
	2015		2014		Variance
Average net volume of steam injected (Bbls/d)	282,809		245,329		15	%
Fuel gas cost per MMBtu (including transportation)	$	2.73	$	4.77	(43	)%
Estimated natural gas volumes consumed to produce steam (MMBtu/d)	100,472		87,742		15	%

Electricity Generation Expenses

Electricity generation expenses decreased by approximately $81 million or 3517% to approximately $144 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2015~~2016, from approximately $225 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015, primarily due to a decrease in fuel gas cost partially offset by an increase in fuel gas volumes purchased.

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

Transportation Expenses

Transportation expenses ~~increased~~remained byconsistent ~~approximately~~at ~~$10 million or 37% to~~ approximately $3913 million for ~~the~~both ~~nine months ended September 30, 2015, from approximately $29 million for~~ the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2016, ~~primarily~~and ~~due to costs associated with Hugoton Basin properties acquired in the exchange with Exxon XTO on August~~March 1531, ~~2014~~2015.

Marketing Expenses

Marketing expenses primarily represent third-party activities associated with the Company’s long-term firm transportation contracts. The Company’s current production is insufficient to fully utilize its capacity. To optimize its remaining capacity, the Company utilizes asset management agreements and various other marketing arrangements. Purchases of third-party natural gas are recorded as marketing expenses. Marketing expenses ~~decreased~~remained byconsistent ~~approximately~~at ~~$4 million or 53% to~~ approximately $31 million for both the ~~nine~~three months ended ~~September~~March 3031, ~~2015~~2016, ~~from~~and ~~approximately $7 million for the nine months ended September~~March 3031, ~~2014, primarily due to a decrease in natural gas prices~~2015.

General and Administrative Expenses

General and administrative expenses are costs not directly associated with field operations. General and administrative expenses ~~decreased~~increased by approximately $84 million or 1019% to approximately $8025 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2015~~2016, from approximately $8821 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015. The ~~decrease~~increase was primarily due to ~~lower~~higher costs allocated to the Company by Linn Operating, Inc. (“LOI”), a subsidiary of LINN Energy, as well as ~~lower~~higher ~~transition~~professional services expenses ~~and~~principally ~~professional~~related ~~services~~to ~~expenses~~the Company’s strategic alternatives activities. General and administrative expenses per BOE also ~~decreased~~increased to $56.9651 per BOE for the ~~nine~~three months ended ~~September~~March 3031, ~~2015~~2016, from $64.3968 per BOE for the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015.

Depreciation, Depletion and Amortization

Depreciation, depletion and amortization decreased by approximately $2714 million or 1219% to approximately $~~199~~59 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2015~~2016, from approximately $~~226~~73 million for the ~~nine~~three months ended ~~September 30~~March 31, ~~2014~~2015. The decrease was primarily due to lower rates as a result of the impairments recorded in the prior year and ~~the first quarter of 2015 as well as~~ lower total production volumes. Depreciation, depletion and amortization per BOE also decreased to $1415.8523 per BOE for the ~~nine~~three months ended ~~September~~March 3031, ~~2015~~2016, from $16.3413 per BOE for the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015.

~~Impairment of Long-Lived Assets~~26

The Company recorded the following noncash impairment charges (before and after tax) associated with proved oil and natural gas properties:

	Nine Months EndedSeptember 30, 2015
	(in thousands)
California operating area	$	537,511
Uinta Basin operating region	111,339
East Texas operating area	78,437
Piceance Basin operating region	55,344
	$	782,631

The impairment charges in 2015 were due to a decline in commodity prices and the Company’s estimates of proved reserves. The Company recorded no impairment charges for the nine months ended September 30, 2014.

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

Impairment of Long-Lived Assets

The Company recorded the following noncash impairment charges (before and after tax) associated with proved and unproved oil and natural gas properties:



	Three Months Ended March 31,
	2016		2015
	(in thousands)

California operating area	$	984,288	$	207,200
Uinta Basin operating area	26,677		—
East Texas operating area	6,387		64,800
Proved oil and natural gas properties	1,017,352		272,000
California operating area unproved oil and natural gas properties	13,236		—
Impairment of long-lived assets	$	1,030,588	$	272,000

The impairment charges in 2016 were due to a decline in commodity prices, changes in expected capital development and a decline in the Company’s estimates of proved reserves. The impairment charges in 2015 were due to a decline in commodity prices.

Taxes, Other Than Income Taxes

	Nine Months EndedSeptember 30,
	Three Months EndedMarch 31,
	2015		2014		Variance
	2016		2015		Variance
	(in thousands)
Severance taxes	$	41,~~967~~476	$	193,~~429~~105	$	(141,~~462~~629	)
Ad valorem taxes	389,~~238~~678		3814,~~882~~124		(~~644~~4,446		)
California carbon allowances	163,~~834~~159		136,~~002~~103		3(2,~~832~~944		)
Other	9		25		(16		)
	$	14,313	$	23,332	$	(9,019	)
	$	60,048	$	71,338	$	(11,290	)

Taxes, other than income taxes decreased by approximately $119 million or 1639% for the ~~nine~~three months ended ~~September~~March 3031, ~~2015~~2016, compared to the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015. Severance taxes, which are a function of revenues generated from production, decreased primarily due to lower oil, natural gas and NGL prices and lower production volumes. Ad valorem taxes, which are based on the value of reserves and production equipment and vary by location, decreased primarily due to a lower estimated ~~valuation~~valuations on certain of the Company’s ~~California~~ properties. California carbon allowances ~~increased~~decreased primarily due to anlower ~~increase~~anticipated inemissions ~~estimated~~compliance ~~emissions~~obligations ~~for~~as ~~which~~a ~~credits~~result ~~are~~of ~~needed~~reduced capital spending levels and ~~higher~~a ~~costs~~decrease ~~for~~in ~~acquired~~steam ~~allowances~~injection volumes.

(Gains) Losses on Sale of Assets and Other, Net

During the nine months ended September 30, 2014, the Company recorded a net loss of approximately $49 million on the noncash exchange of a portion of its Permian Basin properties to Exxon XTO for properties in the Hugoton Basin (see Note 2).

Other Income and (Expenses)

	Nine Months EndedSeptember 30,
	Three Months EndedMarch 31,
	2015			2014			Variance
	2016			2015			Variance
	(in thousands)
Interest expense, net of amounts capitalized	$	(6519,~~595~~952	)	$	(6621,~~555~~421	)	$	~~960~~1,469
Gain on extinguishment of debt	11,209			—			11,209
Other, net	66			(170		)	236
Other, net	(723		)	(813		)	90
	$	(19,886	)	$	(21,591	)	$	1,705
	$	(55,109	)	$	(67,368	)	$	12,259

Other income and (expenses) decreased by approximately $12 million for the nine months ended September 30, 2015, compared to the nine months ended September 30, 2014. Interest expense decreased primarily due to lower outstanding debt during the period, partially offset by lower premium amortization related to the repayment of the June 2014 senior notes in May 2014 and a decrease in capitalized interest. In addition, for the nine months ended September 30, 2015, the Company recorded a gain on extinguishment of debt of approximately $11 million as a result of the repurchases of a portion its senior notes. See “Debt” under “Liquidity and Capital Resources” below for additional details.27

Income Tax Expense (Benefit)

The Company is a limited liability company treated as a disregarded entity for federal and state income tax purposes, with the exception of the state of Texas. As such, with the exception of the state of Texas, the Company is not a taxable entity, it does not directly pay federal and state income taxes, and therefore, recognition has not been given to federal and state income taxes for the operations of the Company. The Company recognized an income tax benefit of approximately $58,000 for the nine months ended September 30, 2015, compared to income tax expense of approximately $77,000 for the nine months ended September 30, 2014. The income tax benefit was primarily due to a decrease in state income tax expense resulting from changes in the Company’s operations during the nine months ended September 30, 2015, compared to the same period in 2014.

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

~~Net~~Other ~~Income~~income and (~~Loss~~expenses) decreased by approximately $2 million for the three months ended March 31, 2016, compared to the three months ended March 31, 2015. Interest expense decreased primarily due to lower debt outstanding during the period and lower amortization of financing fees and expenses related to the senior notes that were repurchased during 2015, partially offset by a decrease in capitalized interest. See “Debt” under “Liquidity and Capital Resources” below for additional details.

~~Net~~Income ~~income~~Tax decreased by approximately $1.2 billion or 425% to a net loss of approximately $889 million for the nine months ended September 30, 2015, from net income of approximately $274 million for the nine months ended September 30, 2014. The decrease was primarily due to higher impairment charges and lower production revenues, partially offset by lower expenses. See discussions above for explanations of variances.Benefit

The Company is a limited liability company treated as a disregarded entity for federal and state income tax purposes, with the exception of the state of Texas. Limited liability companies are subject to Texas margin tax. As such, with the exception of the state of Texas, the Company is not a taxable entity, it does not directly pay federal and state income taxes, and recognition has not been given to federal and state income taxes for the operations of the Company. The Company recognized an income tax benefit of approximately $2,000 and $50,000 for the three months ended March 31, 2016, and March 31, 2015, respectively. The decrease was primarily due to an increase in state taxes resulting from changes in the Company’s operations during the three months ended March 31, 2016, compared to the same period in 2015.

Net Loss

Net loss increased by approximately $802 million to approximately $1.1 billion for the three months ended March 31, 2016, from approximately $323 million for the three months ended March 31, 2015. The increase was primarily due to higher impairment charges and lower production revenues, partially offset by lower expenses. See discussions above for explanations of variances.

Liquidity and Capital Resources

The ~~Company~~significant ~~has~~risks ~~utilized funds from debt offerings, borrowings under its Credit Facility~~ and ~~net~~uncertainties ~~cash~~related ~~provided~~to ~~by operating activities for capital resources and liquidity. Historically,~~ the ~~primary use of capital has been for the development of oil and natural gas properties. For the nine months ended September 30, 2015, the~~ Company’s ~~total~~liquidity capital expenditures were approximately $135 million. LINN Energy continually evaluates the capital needs of the Company along with those of its other operating areas. LINN Energy establishes a capital plan each calendar year for all of its operations based on development opportunities and ~~the~~Chapter 11 ~~expected~~proceedings ~~cash~~described ~~flow~~under ~~from~~“Executive ~~operations~~Overview” ~~for~~raise ~~that~~substantial ~~year. The~~doubt ~~capital~~about ~~plan may be revised during~~ the year as a result of drilling outcomes or significant changes in cash flows. To the extent net cash provided by operating activities is higher or lower than currently anticipated, LINN Energy may adjust the Company’s ~~capital~~ability ~~plan~~to ~~accordingly~~continue ~~or adjust borrowings under the Company’s Credit Facility,~~ as ~~needed. However,~~a atgoing ~~September 30, 2015, the Company had less than $1 million of available borrowing capacity under its Credit Facility~~concern.

InAs ~~October~~of ~~2015~~March 31, 2016, the Company ~~entered~~was ~~into~~in default under certain of its debt instruments, which have subsequently been cured or a forbearance has been received. The Company’s filing of the Bankruptcy Petitions described above constitutes an ~~amendment~~event toof default that accelerated the Company’s obligations under its Credit Facility and its senior notes. Additionally, other events of default, including cross-defaults, are present, including the failure to make interest payments on certain of its senior notes and the receipt of a going concern explanatory paragraph from the Company’s independent registered public accounting firm on the Company’s financial statements for the year ended December 31, 2015. Under the Bankruptcy Code, the creditors under these debt agreements are stayed from taking any action against the Company as a result of an event of default. See ~~Note~~above under “Executive Overview 4– Voluntary Reorganization Under Chapter 11” for ~~additional~~a ~~details~~description of these and other developments.

~~The~~In ~~spring~~order ~~2015~~to ~~semi-annual~~decrease ~~borrowing~~the ~~base~~Company’s ~~redetermination~~level of indebtedness and maintain the Company’s ~~Credit~~liquidity ~~Facility~~at ~~was~~levels ~~completed~~sufficient into ~~May~~meet ~~2015,~~its ~~and~~commitments, asthe aCompany ~~result~~has ofundertaken ~~lower~~a ~~commodity~~number ~~prices~~of actions, ~~the~~including ~~borrowing~~minimizing ~~base~~capital ~~under~~expenditures ~~the~~and ~~Credit~~further ~~Facility~~reducing ~~decreased~~its ~~from~~recurring $1operating expenses.4 The ~~billion~~Company believes that even after taking these actions, it will not have sufficient liquidity to ~~$1.2~~satisfy ~~billion~~its debt service obligations, meet other financial obligations and comply with its debt covenants. ~~The~~As ~~fall~~previously ~~2015~~disclosed, ~~semi-annual~~the ~~redetermination~~Company ~~was~~has ~~completed~~engaged infinancial ~~October~~and ~~2015~~legal advisors to assist with, among other things, analyzing various strategic alternatives to address its liquidity and ~~the~~capital ~~borrowing~~structure. The ~~base~~Company believes a filing under ~~the~~Chapter 11 ~~Credit~~may ~~Facility~~provide ~~decreased~~the ~~from~~most ~~$1.2~~expeditious ~~billion~~manner in which to ~~$900~~effect ~~million~~a capital structure solution. ~~Continued~~There ~~low~~can ~~commodity~~be ~~prices,~~no ~~reductions~~assurances inthat the Company’s will be able to reorganize its capital ~~budget~~structure ~~and~~on ~~the~~terms ~~resulting~~acceptable ~~reserve~~to ~~write-downs~~the ~~may~~Company, ~~impact~~its ~~future~~creditors, ~~redeterminations~~or at all.

InThe ~~connection~~Company ~~with~~has ~~the~~utilized ~~reduction~~funds infrom ~~Berry’s~~debt ~~borrowing~~offerings, ~~base~~borrowings inunder ~~October~~its ~~2015~~Credit Facility, ~~Berry~~net ~~repaid~~cash ~~$300~~provided ~~million~~by ofoperating ~~borrowings~~activities ~~outstanding~~and ~~under~~funding ~~the~~from ~~Credit~~LINN ~~Facility~~Energy ~~using~~for ~~the~~capital ~~cash~~resources ~~received~~and ~~from~~liquidity. Historically, the ~~settlement~~primary use of ~~its~~capital ~~advance~~has ~~and~~been ~~capital~~for ~~contributions~~the ~~made~~development byof ~~LINN~~oil ~~Energy~~and natural gas properties. InFor ~~connection~~the ~~with~~three ~~the~~months ~~reduction~~ended inMarch 31, ~~Berry~~2016, the Company’s ~~borrowing~~total ~~base~~capital inexpenditures ~~May~~were ~~2015,~~approximately $9 million. LINN Energy ~~contributed~~continually ~~$250~~evaluates ~~million~~the tocapital ~~Berry~~needs toof ~~post~~the asCompany ~~restricted~~along ~~cash~~ with ~~Berry’s~~those ~~lenders. As~~of ~~directed~~its byother operating areas. LINN Energy, ~~the~~establishes ~~$250~~a ~~million~~capital ~~was~~plan ~~deposited~~each oncalendar ~~Berry’s~~year ~~behalf~~for inall aof ~~security~~its ~~account~~operations ~~with~~based on development opportunities and the ~~administrative~~expected ~~agent~~cash ~~subject~~flow tofrom aoperations ~~security~~for ~~control~~that ~~agreement~~year. ~~Berry’s~~The ~~ability~~capital toplan ~~withdraw~~may ~~funds~~be ~~from~~revised ~~this~~during ~~account~~the isyear ~~subject~~as to a ~~concurrent~~result ~~reduction~~ of ~~the~~drilling ~~borrowing~~outcomes ~~base~~or ~~under~~significant changes in cash flows. To the ~~Credit~~extent ~~Facility~~net orcash ~~lender’s~~provided ~~consent~~by inoperating ~~connection~~activities ~~with~~is ahigher ~~redetermination~~or oflower ~~such~~than ~~borrowing~~currently ~~base. The~~anticipated, ~~$250~~LINN ~~million~~Energy may beadjust ~~used~~the toCompany’s ~~satisfy~~capital ~~obligations~~plan accordingly or adjust borrowings under the Company’s Credit Facility or, ~~subject~~as toneeded. However, ~~restrictions~~at inMarch 31, 2016, the ~~indentures~~Company ~~governing~~had ~~Berry’s~~less ~~senior~~than ~~notes,~~$1 ~~may~~million beof ~~returned~~available toborrowing ~~LINN~~capacity ~~Energy~~under inits ~~the~~Credit ~~future~~Facility.

LINN Energy continually monitors the capital resources available to meet future financial obligations and planned capital expenditures. The Company’s future success in growing reserves and production volumes will be highly dependent on the capital resources available and its success in adding reserves from its drilling program. The Company’s Credit Facility and indentures governing its senior notes impose certain restrictions on the Company’s ability to obtain additional debt financing. The Company does not intend to obtain additional borrowing capacity under its Credit Facility or access the capital markets separately from LINN Energy. The Company intends to finance its operations, including its future capital expenditures, with net cash provided by operating activities and funding from LINN Energy. The Company believes such resources will be sufficient to conduct the Company’s business and operations.28

Any cash generated by the Company is currently being used by the Company to fund its activities. To the extent that the Company generates cash in excess of its needs and determines to distribute such amounts to LINN Energy, the indentures governing the Company’s senior notes limit the amount it may distribute to LINN Energy to the amount available under a “restricted payments basket,” and the Company may not distribute any such amounts unless it is permitted by the indentures to incur additional debt pursuant to the consolidated coverage ratio test set forth in the Company’s indentures. The Company’s restricted payments basket was approximately $563 million at September 30, 2015, and may be increased in accordance with the terms of the Company’s indentures by, among other things, 50% of the Company’s future net income, reductions in its indebtedness and restricted investments, and future capital contributions.

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

LINN Energy’s credit facility contains certain restrictions on its ability to contribute capital or loan funds to Berry. Based on current estimates, including the low commodity price environment, the Company expects to generate a cash shortfall in 2016. Historically, LINN Energy has contributed capital to Berry to fund capital expenditures and other cash shortfalls but LINN Energy is not obligated to continue to provide funding to Berry, nor is LINN Energy a guarantor of any of Berry’s indebtedness.

LINN Energy continually monitors the capital resources available to meet future financial obligations and planned capital expenditures. The Company’s future success in growing reserves and production volumes will be highly dependent on the capital resources available and its success in adding reserves from its drilling program. The Company’s Credit Facility and indentures governing its senior notes impose certain restrictions on the Company’s ability to obtain additional debt financing. The Company does not intend to obtain additional borrowing capacity under its Credit Facility or access the capital markets separately from LINN Energy. The Company intends to finance its operations, including its future capital expenditures, with net cash provided by operating activities and funding from LINN Energy, to the extent LINN Energy elects to provide such funding. See Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q and in the Annual Report on Form 10-K for the year ended December 31, 2015, for risks relating to liquidity and Chapter 11 proceedings.

Any cash generated by the Company is currently being used by the Company to fund its activities. To the extent that the Company generates cash in excess of its needs and determines to distribute such amounts to LINN Energy, the indentures governing the Company’s senior notes limit the amount it may distribute to LINN Energy to the amount available under a “restricted payments basket,” and the Company may not distribute any such amounts unless it is permitted by the indentures to incur additional debt pursuant to the consolidated coverage ratio test set forth in the Company’s indentures. The Company’s restricted payments basket was approximately $483 million at March 31, 2016, and may be increased in accordance with the terms of the Company’s indentures by, among other things, 50% of the Company’s future net income, reductions in its indebtedness and restricted investments, and future capital contributions.

Statements of Cash Flows

The following is a comparative cash flow summary:

	Nine Months EndedSeptember 30,
	Three Months EndedMarch 31,
	2015			2014			Variance
	2016			2015			Variance
	(in thousands)
Net cash:
Provided by operating activities	$	~~109~~20,~~304~~641		$	~~443~~42,~~190~~489		$	(~~333~~21,~~886~~848	)
Provided by (used in) investing activities	~~135~~(14,~~867~~330		)	~~(438~~1,~~000~~112		)	~~573~~(15,~~867~~442		)
Provided by (used in) financing activities	36,048			(49,655		)	85,703
Used in financing activities	—			(43,763		)	43,763
Net increase (decrease) in cash and cash equivalents	$	~~281~~6,~~219~~311		$	(~~44,465~~162	)	$	~~325~~6,~~684~~473

Operating Activities

Cash provided by operating activities for the ~~nine~~three months ended ~~September~~March 3031, ~~2015~~2016, was approximately $~~109~~21 million, compared to approximately $~~443~~42 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015. The decrease was primarily due to lower production related revenues principally due to lower commodity prices ~~partially~~and ~~offset~~lower byproduction ~~higher~~volumes, as well as lower cash settlements on derivatives.

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

Investing Activities

The following provides a comparative summary of cash flow from investing activities:

	Nine Months EndedSeptember 30,
	Three Months EndedMarch 31,
	2015			2014
	2016			2015
	(in thousands)
Cash flow from investing activities:
Capital expenditures	$	(1514,~~836~~346	)	$	(~~438~~2,~~256~~701	)
Settlement of advance to affiliate	129,217			—
Proceeds from sale of properties and equipment and other	16			3,813
Proceeds from sale of properties and equipment and other	22,486			256
	$	(14,330	)	$	1,112
	$	135,867		$	(438,000	)

The primary use of cash in investing activities is for the development of the Company’s oil and natural gas properties. Capital expenditures ~~decreased~~increased primarily due to ~~lower~~the ~~spending~~Company onfunding its development ~~activities~~operations, ~~during~~rather ~~2015~~that LINN Energy spending on the Company’s behalf. For the ~~nine~~three months ended ~~September~~March 3031, 2015, LINN Energy spent approximately $~~165~~73 million of capital expenditures in respect of Berry’s operations (see Note 10 and Note 11). ~~In addition, on September 30, 2015, LINN Energy repaid in full its remaining advance of approximately $129 million.~~

Financing Activities

~~Cash~~There ~~provided~~was byno ~~financing~~cash ~~activities~~flow offrom ~~approximately~~financing ~~$36~~activities ~~million~~ for the ~~nine~~three months ended ~~September~~March 3031, ~~2015, was primarily related to capital contributions made by LINN Energy, partially offset by cash distributions to LINN Energy and repurchases of senior notes~~2016. Cash used in financing activities of approximately $5044 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015, was primarily related to a cash ~~distributions~~distribution ~~of approximately $52 million~~ made to LINN Energy. In October 2015, Berry used the cash received from its remaining advance of approximately $129 million to repay borrowings outstanding under its Credit Facility. In addition, in May 2015, LINN Energy made a capital contribution of $250 million to Berry which was deposited on Berry’s behalf and posted as restricted cash with Berry’s lenders in connection with the reduction in its borrowing base (see Note 4).

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

Debt

~~During~~The ~~the~~Company’s ~~nine~~Credit ~~months~~Facility ~~ended~~had ~~September 30,~~a ~~2015,~~borrowing ~~the~~base ~~Company~~of ~~repurchased~~$900 million, onsubject ~~the~~to ~~open~~lender ~~market~~commitments, ~~and~~as ~~through~~of aMarch 31, ~~privately~~2016. At ~~negotiated~~March 31, ~~transaction~~2016, ~~approximately~~lender ~~$65~~commitments ~~million~~under ofthe ~~its~~facility ~~outstanding~~were ~~senior~~also ~~notes~~$900 ~~including~~million ~~approximately~~but there was less than $391 million of ~~its~~available ~~6.75%~~borrowing ~~senior~~capacity, ~~notes~~including ~~due~~outstanding ~~November~~letters ~~2020~~of ~~and~~credit. For ~~approximately~~additional ~~$26~~information ~~million~~related ofto ~~its~~the ~~6.375%~~Company’s ~~senior~~outstanding ~~notes~~debt, ~~due~~see ~~September 2022~~Note 4.

The Company’s Credit Facility had a borrowing base of $1.2 billion, subject to lender commitments, as of September 30, 2015. At September 30, 2015, lender commitments under the facility were $1.2 billion but there was less than $1 million of available borrowing capacity, including outstanding letters of credit. For additional information related to the Company’s outstanding debt, see Note 4.

Financial Covenants

The Credit Facility, ~~as amended in October 2015,~~ contains requirements and financial covenants, among others, to maintain: 1) a ratio of Adjusted EBITDAX to Interest Expense (as each term is defined in the Credit Facility) (“Interest Coverage Ratio”) for the preceding four quarters of ~~greater~~at ~~than~~least 2.5 to 1.0 ~~currently~~through September 30, 2015, 2.0 to 1.0 ~~from December 31~~currently, ~~2015 through December 31, 2016,~~ 2.25 to 1.0 from March 31, 2017 through June 30, 2017, and returning to 2.5 to 1.0 thereafter, and 2) a ratio of Current Assets to Current Liabilities (as each term is defined in the Credit Facility) (“Current Ratio”) as of the last day of any fiscal quarter of ~~greater~~at ~~than~~least 1.0 to 1.0. The Interest Coverage Ratio is intended as a measure of the Company’s ability to make interest payments on its outstanding indebtedness and the Current Ratio is intended as a measure of the Company’s solvency. The Company is required to demonstrate compliance with each of these ratios on a quarterly basis. The following represents the calculations of the Interest Coverage Ratio and the Current Ratio as presented to the lenders under the Credit Facility:

	At or for the Quarter Ended				Twelve Months Ended
	December 31, 2014	March 31, 2015	June 30, 2015	September 30,2015	Twelve Months Ended September 30, 2015
	June 30, 2015	September 30,2015	December 31, 2015	March 31, 2016	March 31,2016
Interest Coverage Ratio	62.56	12.72	21.6	2(0.28)	31.34
Current Ratio (1)	0.65	02.60	0.54	2.0.3	2.0.3
Current Ratio (consolidated) (1)	2.9	3.2.6	21.97	2.60	2.60


⁽¹⁾	The Credit Facility allows Berry to demonstrate its compliance with the Current Ratio financial covenant on a consolidated basis with LINN Energy for up to three quarters of each calendar year.

~~The Company has included disclosure of the Interest Coverage Ratio for the twelve months ended September~~ 30, 2015, and the Current Ratio as of September 30, 2015, to demonstrate its compliance for the quarter ended September 30, 2015, as well as the Interest Coverage Ratio for each of the preceding four quarters on an individual basis (rather than on a last twelve months basis) and the Current Ratio as of the end of each of the preceding four quarters to provide investors with trend information about the Company’s ongoing compliance with these financial covenants. If the Company fails to demonstrate compliance with either or both of the Interest Coverage Ratio or the Current Ratio as of the end of the quarter and such failure continues beyond applicable cure periods, an event of default would occur and the Company would be unable to make additional borrowings and outstanding indebtedness may be accelerated.

The Company is in compliance with all financial and other covenants of its Credit Facility and senior notes.

Counterparty Credit Risk

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

~~have~~The aCompany ~~guarantee~~has ~~from~~included andisclosure ~~affiliate~~of ~~that~~the ~~meets~~Interest Coverage Ratio for the ~~Company’s~~twelve ~~minimum~~months ~~credit~~ended ~~quality~~March 31, ~~standard;~~2016, and ~~(iii)~~the Current Ratio as of March ~~monitoring~~31, 2016, to demonstrate its compliance for the ~~creditworthiness~~quarter ended March 31, 2016, as well as the Interest Coverage Ratio for each of the ~~Company’s~~preceding ~~counterparties~~four quarters on an ~~ongoing~~individual basis~~. In~~ ~~accordance~~(rather than on a last twelve months basis) and the Current Ratio as of the end of each of the preceding four quarters to provide investors with trend information about the Company’s ~~standard~~ongoing ~~practice,~~compliance ~~its~~with ~~commodity~~these ~~derivatives~~financial ~~are~~covenants. If ~~subject~~the Company fails to ~~counterparty~~demonstrate ~~netting~~compliance ~~under~~with ~~agreements~~either ~~governing~~or both of the Interest Coverage Ratio or the Current Ratio as of the end of the quarter and such ~~derivatives~~failure continues beyond applicable cure periods, an event of default would occur and ~~therefore~~the Company would be unable to make additional borrowings and outstanding indebtedness may be accelerated. The Company did not meet the ~~risk~~Interest ofCoverage ~~loss~~Ratio ~~due~~requirement under the Credit Facility for the twelve months ended March 31, 2016; however, in accordance with the amendment to ~~counterparty~~the ~~nonperformance~~Berry isCredit ~~somewhat~~Facility ~~mitigated~~entered into in April 2016 (see Note 4), the lenders agreed that the failure to maintain the Interest Coverage Ratio would not be a default or event of default until May 11, 2016.

See above under “Executive Overview – Covenant Violations” for information about certain covenant violations.

Counterparty Credit Risk

The Company accounts for its commodity derivatives at fair value. The Company’s counterparties are current participants or affiliates of participants in its Credit Facility or were participants or affiliates of participants in its Credit Facility at the time it originally entered into the derivatives. The Credit Facility is secured by the Company’s oil, natural gas and NGL reserves; therefore, the Company is not required to post any collateral. The Company does not receive collateral from its counterparties. The Company minimizes the credit risk in derivative instruments by: (i) limiting its exposure to any single counterparty; (ii) entering into derivative instruments only with counterparties that meet the Company’s minimum credit quality standard, or have a guarantee from an affiliate that meets the Company’s minimum credit quality standard; and (iii) monitoring the creditworthiness of the Company’s counterparties on an ongoing basis. In accordance with the Company’s standard practice, its commodity derivatives are subject to counterparty netting under agreements governing such derivatives and therefore the risk of loss due to counterparty nonperformance is somewhat mitigated.

Off-Balance Sheet Arrangements

The Company does not currently have any off-balance sheet arrangements.

Contingencies

See Part II. Item 1. “Legal Proceedings” for information regarding legal proceedings that the Company is party to and any contingencies related to these legal proceedings.

Commitments and Contractual Obligations

The Company has contractual obligations for long-term debt, operating leases and other long-term liabilities that were summarized in the table of contractual obligations in the ~~2014~~2015 Annual Report on Form 10-K. ~~With~~There ~~the~~have ~~exception~~been ofno significant changes to the ~~repurchases~~Company’s ofcontractual ~~approximately~~obligations ~~$65~~since ~~million~~December 31, of2015. The ~~its~~Company’s ~~outstanding~~filing ~~senior~~of ~~notes,~~the ~~there~~Bankruptcy ~~have~~Petitions ~~been~~constitutes noan ~~significant~~event ~~changes~~of todefault that accelerated the Company’s ~~contractual~~ obligations ~~since~~under ~~December 31,~~the ~~2014~~Credit Facility and the senior notes. See Note 4 for additional information about the Company’s debt instruments.

Critical Accounting Policies and Estimates

The discussion and analysis of the Company’s financial condition and results of operations is based on the condensed 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.

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

Recently Issued Accounting Standards

For a discussion of recently issued accounting standards, see Note 1 ~~of Notes to Condensed Financial Statements~~.

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 and/or LINN Energy’s:


•	business strategy;


•	financial strategy;


•	ability to obtain additional funding from LINN Energy;


•	potential adverse impact of restructuring transactions on the Company’s operations and management, as well as the risks associated with operating the business during the anticipated Chapter 11 proceedings;


•	ability to consummate restructuring transactions;


•	large or multiple customer defaults on contractual obligations, including defaults resulting from actual or potential insolvencies;


•	effects of legal proceedings;


•	drilling locations;


•	oil, natural gas and NGL reserves;


•	realized oil, natural gas and NGL prices;


•	production volumes;


•	capital expenditures;


•	economic and competitive advantages;


•	credit and capital market conditions;


•	regulatory changes;


•	lease operating expenses, general and administrative expenses and development costs;

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


•	future operating results;


•	plans, objectives, expectations and intentions; and

• integration of the assets and operations acquired in the exchanges of properties and commencement of activities in LINN Energy’s strategic alliances with GSO Capital Partners LP and Quantum Energy Partners, which may take longer than anticipated, may be more costly than anticipated as a result of unexpected factors or events and may have an unanticipated adverse effect on the Company’s business.

All of these types of statements, other than statements of historical fact included in this Quarterly Report on Form 10-Q, are forward-looking statements. These forward-looking statements may be found in Item 2. In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “could,” “should,” “expect,” “plan,” “project,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “pursue,” “target,” “continue,” the negative of such terms or other comparable terminology.

The forward-looking statements contained in this Quarterly Report on Form 10-Q are largely based on Company expectations, which reflect estimates and assumptions made by Company management. These estimates and assumptions reflect management’s best judgment based on currently known market conditions and other factors. Although the Company believes such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties beyond its control. In addition, management’s assumptions may prove to be inaccurate. The Company cautions that the forward-looking statements contained in this Quarterly Report on Form 10-Q are not guarantees of future performance, and it cannot assure any reader that such statements will be realized or the events will occur. Actual results may differ materially from those anticipated or implied in forward-looking statements due to factors set forth in Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q and in the Annual Report on Form 10-K for the year ended December 31, ~~2014~~2015, 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.

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

The forward-looking statements related to the Plan involve known and unknown risks, uncertainties, assumptions and other factors that may cause the Company’s actual results, performance or achievements to be materially different from any results, performance or achievements expressed or implied by other forward-looking statements contained in this Quarterly Report on Form 10-Q, including but not limited to potential adverse effects related to the following: potential restructuring of the Company’s outstanding debt; potential effects of the industry downturn on the Company’s business, financial condition and results of operations; potential limitations on the Company’s ability to maintain contracts and other critical business relationships; requirements for adequate liquidity to fund the Company’s operations in the future, including obtaining sufficient financing on acceptable terms; and other matters related to the potential restructuring and the Company’s indebtedness, including any defaults related thereto.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company’s primary ~~objective of the following information is to provide forward-looking quantitative and qualitative information about potential exposure to~~ market risks~~. The~~ ~~term~~are ~~“market~~attributable ~~risk” refers~~ to ~~the~~fluctuations ~~risk of loss arising from adverse changes~~ in commodity prices and interest rates. ~~The~~These ~~disclosures~~risks ~~are~~can ~~not~~affect ~~meant~~the toCompany’s bebusiness, ~~precise~~financial ~~indicators of expected future losses~~condition, ~~but~~operating ~~rather~~results ~~indicators~~and ofcash ~~reasonably possible losses~~flows. ~~This~~See ~~forward-looking~~below ~~information~~for ~~provides~~quantitative ~~indicators of how the Company views~~ and ~~manages~~qualitative ~~its~~information ~~ongoing~~about ~~market~~these ~~risk exposures~~risks. ~~All of the Company’s market risk sensitive instruments were entered into for purposes other than trading.~~

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 ~~2014~~2015 Annual Report on Form 10-K. The reference to a “Note” herein refers to the accompanying Notes to Condensed Financial Statements contained in Item 1. “Financial Statements.”

Commodity Price Risk

The Company’s ~~seeks~~most tosignificant ~~hedge~~market arisk ~~portion~~relates ~~of its forecasted production~~ to ~~reduce~~prices ~~exposure~~of tooil, ~~commodity~~natural ~~price~~gas ~~fluctuations~~ and ~~provide long-term cash flow predictability to manage its business~~NGL. The Company ~~also,~~expects ~~from~~commodity ~~time~~prices to ~~time,~~remain ~~enters~~volatile ~~into~~and ~~derivative contracts for a portion of its natural gas consumption~~unpredictable. ~~The~~As ~~current~~commodity ~~direct~~prices ~~NGL~~decline ~~hedging~~or ~~market~~rise ~~is constrained in terms of price~~significantly, ~~volume,~~revenues ~~duration~~ and ~~number~~cash offlows ~~counterparties,~~are ~~which~~likewise ~~limits the Company’s ability to effectively hedge its NGL production~~affected. ~~The~~In ~~Company~~addition, ~~also~~future ~~hedges~~declines ~~its~~in ~~exposure~~commodity toprices ~~natural~~may ~~gas~~result ~~differentials~~ in ~~certain~~noncash ~~operating~~write-downs ~~areas but does not currently hedge exposure to oil differentials. By removing a portion~~ of the ~~price volatility associated with future production, the~~ Company’s ~~expects~~carrying toamounts ~~mitigate, but not eliminate, the potential effects~~ of ~~variability~~its ~~in net cash provided by operating activities due to fluctuations in commodity prices~~assets.

~~The~~Historically, ~~appropriate~~the ~~level~~Company has hedged a portion of its forecasted production to bereduce ~~hedged~~exposure isto anfluctuations ~~ongoing~~in ~~consideration~~oil and isnatural ~~based~~gas onprices. The Company also, from time to time, has entered into derivative contracts for a ~~variety~~portion of ~~factors,~~its ~~including~~natural ~~current~~gas ~~and~~consumption. The ~~future~~current ~~expected~~direct ~~commodity~~NGL hedging market ~~prices,~~is ~~cost~~constrained ~~and~~in ~~availability~~terms of ~~put~~price, ~~option contracts~~volume, ~~the~~duration ~~level~~and number of ~~LINN~~counterparties, ~~Energy~~which limits the Company’s ~~acquisition~~ability ~~activity~~to ~~and~~effectively ~~the~~hedge its NGL production. The Company’s ~~overall~~has ~~risk~~also ~~profile,~~hedged ~~including~~its ~~leverage~~exposure ~~and~~to ~~size~~natural ~~and~~gas ~~scale~~differentials ~~considerations. In~~in ~~addition,~~certain ~~when~~operating ~~commodity~~areas ~~prices~~but ~~are~~does ~~depressed~~not ~~and~~currently ~~forward~~hedge ~~commodity~~exposure ~~price~~to ~~curves~~oil ~~are~~differentials. By ~~flat~~removing ora inportion ~~backwardation~~of the price volatility associated with future production, the Company ~~may~~expects ~~determine~~to ~~that~~mitigate, ~~the~~but ~~benefit~~not ofeliminate, ~~hedging~~the ~~its~~potential ~~anticipated~~effects ~~production~~of atvariability ~~these~~in ~~levels~~net iscash ~~outweighed~~provided by ~~its~~operating ~~resultant~~activities ~~inability~~due to ~~obtain~~fluctuations in commodity prices.

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

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.

The Company has historically entered into commodity hedging transactions primarily in the form of swap contracts, collars and three-way collars, and may enter into put option contracts in the future. The Company does not enter into derivative contracts for trading purposes.

AtThe ~~September~~appropriate ~~30,~~level ~~2015,~~of ~~the~~production ~~fair~~to ~~value~~be ofhedged ~~fixed~~is ~~price~~an ~~swaps~~ongoing consideration and ~~three-way~~is ~~collars~~based ~~was~~on a ~~net~~variety ~~asset~~ of ~~approximately~~factors, ~~$19~~including ~~million. A~~current ~~10%~~and ~~increase~~future inexpected ~~the~~commodity ~~index~~market ~~oil~~prices, cost and ~~natural~~availability ~~gas~~of ~~prices~~put ~~above~~option contracts, the ~~September~~level 30of LINN Energy’s acquisition activity, ~~2015~~the Company’s overall risk profile, ~~prices~~including ~~would~~leverage ~~result~~and insize aand ~~net~~scale ~~asset~~considerations ofand ~~approximately~~an ~~$15~~actively ~~million~~traded market for hedging transactions, ~~which~~including ~~represents~~counterparty awillingness ~~decrease~~to inenter into derivative contracts with the ~~fair~~Company. In ~~value~~addition, ofwhen ~~approximately~~commodity $4prices ~~million;~~are ~~conversely,~~depressed aand ~~10%~~forward ~~decrease~~commodity price curves are flat or in backwardation, the ~~index~~Company ~~oil~~may ~~and~~determine ~~natural~~that ~~gas~~the ~~prices~~benefit ~~below~~of ~~the~~hedging ~~September~~its ~~30,~~anticipated ~~2015,~~production ~~prices~~at ~~would~~these ~~result~~levels inis aoutweighed ~~net~~by ~~asset~~its ofresultant ~~approximately~~inability ~~$24~~to ~~million,~~obtain ~~which~~higher ~~represents~~revenues anfor ~~increase~~its inproduction if commodity prices recover during the ~~fair~~duration ~~value~~of the contracts. As a result, the appropriate percentage of ~~approximately~~production $5volumes ~~million~~to be hedged may change over time.

AtAs ~~December~~of March 31, ~~2014~~2016, the ~~fair~~Company ~~value~~had of33,550 ~~three-way~~MMMBtu ~~collars was a net asset~~ of ~~approximately~~natural ~~$20~~gas ~~million. A~~basis ~~10%~~swaps ~~increase~~for ~~in the index oil price above the December 31~~2016, ~~2014,~~and ~~price~~no ~~would~~derivative ~~result~~contracts infor ayears ~~net~~subsequent ~~asset~~to of2016. As ~~approximately $18 million, which represents a decrease in the fair value~~ of ~~approximately $2 million; conversely, a 10% decrease in the index oil price below the~~ December 31, ~~2014~~2015, ~~price~~the ~~would~~Company ~~result~~had in44,652 aMMMBtu ~~net asset~~ of ~~approximately~~natural ~~$21~~gas ~~million,~~basis ~~which~~swaps ~~represents~~for an2016, ~~increase~~and inno ~~the~~derivative ~~fair~~contracts ~~value~~for ofyears ~~approximately~~subsequent $1to ~~million~~2016. AtSee ~~December~~Note ~~31,~~5 ~~2014,~~for details about the Company’s ~~had no outstanding natural gas~~ derivative instruments.

~~The~~Counterparties ~~Company~~under ~~determines~~ the ~~fair~~Company’s ~~value~~derivative ofcontracts ~~its~~may ~~oil~~terminate ~~and~~such ~~natural~~contracts ~~gas~~upon ~~derivatives~~certain ~~utilizing~~specified ~~pricing models that use a variety of techniques~~events, including ~~market~~a ~~quotes~~filing ~~and~~by ~~pricing analysis. Inputs to~~ the ~~pricing~~Company ~~models~~for ~~include~~protection ~~publicly~~under ~~available~~Chapter 11 ~~prices and forward price curves generated from a compilation~~ of ~~data~~the ~~gathered~~U.S. ~~from~~Bankruptcy ~~third parties~~Code. The Company’s ~~management~~derivative ~~validates~~contracts ~~the~~may ~~data~~be ~~provided~~terminated byunilaterally ~~third parties~~ by ~~understanding~~ the ~~pricing~~counterparty ~~models~~as ~~used,~~a ~~obtaining~~result ~~market~~of ~~values~~the ~~from~~bankruptcy ~~other~~filing ~~pricing sources~~or, ~~analyzing~~if ~~pricing~~not ~~data~~automatically interminated, ~~certain~~the ~~situations~~Company ~~and~~may ~~confirming~~elect ~~that~~to ~~those~~monetize ~~instruments~~or ~~trade~~terminate inits ~~active~~derivative ~~markets~~contracts.

The prices of oil, natural gas and NGL have been extremely volatile, and the Company expects this volatility to continue. Prices for these commodities may fluctuate widely in response to relatively minor changes in the supply of and demand for such commodities, market uncertainty and a variety of additional factors that are beyond its control. Actual gains or losses recognized related to the Company’s derivative contracts will likely differ from those estimated at September 30, 2015, and December 31, 2014, and will depend exclusively on the price of the commodities on the specified settlement dates provided by the derivative contracts.33

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.

Interest Rate Risk

At September 30, 2015, and December 31, 2014, the Company had long-term debt outstanding under its Credit Facility of approximately $1.2 billion which incurred interest at floating rates (see Note 4). A 1% increase in the London Interbank Offered Rate would result in an estimated $12 million increase in annual interest expense.

Counterparty Credit Risk

The Company accounts for its commodity derivatives at fair value on a recurring basis (see Note 6). The fair value of these derivative financial instruments includes the impact of assumed credit risk adjustments, which are based on the Company’s and counterparties’ published credit ratings, public bond yield spreads and credit default swap spreads, as applicable.

At September 30, 2015, the average public bond yield spread utilized to estimate the impact of the Company’s credit risk on derivative liabilities was approximately 1.85%. A 1% increase in the average public bond yield spread would result in an estimated $11,000 increase in net income for the nine months ended September 30, 2015. At September 30, 2015, the credit default swap spreads utilized to estimate the impact of counterparties’ credit risk on derivative assets ranged between 0% and 0.71%. A 1% increase in each of the counterparties’ credit default swap spreads would result in an estimated $41,000 decrease in net income for the nine months ended September 30, 2015.

At December 31, 2014, the average public bond yield spread utilized to estimate the impact of the Company’s credit risk on derivative liabilities was approximately 1.52%. A 1% increase in the average public bond yield spread would result in no

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

~~significant~~Interest ~~increase~~Rate or decrease in net income for the year ended December 31, 2014. At December 31, 2014, the credit default swap spreads utilized to estimate the impact of counterparties’ credit risk on derivative assets ranged between 0.20% and 0.27%. A 1% increase in each of the counterparties’ credit default swap spreads would result in an estimated $102,000 decrease in net income for the year ended December 31, 2014.Risk

At March 31, 2016, and December 31, 2015, the Company had debt outstanding under its Credit Facility of approximately $873 million which incurred interest at floating rates (see Note 4). A 1% increase in the respective market rate would result in an estimated $9 million increase in annual interest expense.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, and LINN Energy’s Audit Committee of the Board of Directors, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

The Company carried out an evaluation under the supervision and with the participation of its management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of its disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of ~~September 30~~March 31, ~~2015~~2016.

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 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 ~~third~~first quarter of ~~2015~~2016 that materially affected, or were reasonably likely to materially affect, the Company’s internal control over financial reporting.

3734

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Part II – Other Information

Item 1. Legal Proceedings

The commencement of the Chapter 11 proceedings automatically stayed certain actions against the Company, including actions to collect pre-petition liabilities or to exercise control over the property of the Company’s bankruptcy estates, and the Company intends to seek authority to pay all general claims in the ordinary course of business notwithstanding the commencement of the Chapter 11 proceedings in a manner consistent with the Restructuring Support Agreement. The Plan in the Chapter 11 proceedings, if confirmed, will provide for the treatment of claims against the Company’s bankruptcy estates, including pre-petition liabilities that have not otherwise been satisfied or addressed during the Chapter 11 proceedings. See above under Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Voluntary Reorganization Under Chapter 11” for information about the Company’s entry into the Restructuring Support Agreement.

Item 1A. Risk Factors

Our business has many risks. Factors that could materially adversely affect our business, financial condition, operating results or liquidity are described in Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2014~~2015. Except as set forth below, as of the date of this report, these risk factors have not changed materially. This information should be considered carefully, together with other information in this report and other reports and materials we file with the United States Securities and Exchange Commission.

IfWe we are ~~unable~~subject to ~~generate~~the ~~enough~~risks ~~cash~~and ~~flow~~uncertainties ~~from~~associated ~~operations~~with toChapter 11 service our indebtedness or are unable to use future borrowings to refinance our indebtedness or fund other capital needs, we may have to undertake alternative financing plans, which may have onerous terms or may be unavailableproceedings.

WeFor ~~cannot~~the ~~assure~~duration ~~you~~of ~~that~~ our ~~business~~Chapter 11 ~~will~~proceedings, ~~generate~~our ~~sufficient cash flow from~~ operations toand ~~service~~ our ~~outstanding~~ability ~~indebtedness,~~to ordevelop ~~that~~and ~~future~~execute ~~borrowings~~our ~~will~~business beplan, ~~available~~as towell usas orour ~~LINN~~continuation ~~Energy~~as ina angoing ~~amount~~concern, ~~sufficient~~are tosubject ~~enable us~~ to ~~pay~~the ~~our~~risks ~~indebtedness~~and oruncertainties toassociated ~~fund~~with ~~our other capital needs~~bankruptcy. IfThese werisks doinclude ~~not~~the ~~generate sufficient cash flow from operations to satisfy our debt obligations, we may have to undertake alternative financing plans, such as~~following:

• ~~refinancing~~our orability ~~restructuring~~to ~~all~~develop, orconfirm and consummate a ~~portion~~Chapter of11 ~~our~~plan ~~debt~~or alternative restructuring transaction;

• ~~obtaining~~our ~~alternative~~ability ~~financing~~to obtain court approval with respect to motions filed in Chapter 11 proceedings from time to time;

• ~~selling~~our ~~assets~~ability to maintain our relationships with our suppliers, service providers, customers, employees and other third parties;

• ~~reducing~~our orability ~~delaying~~to ~~capital~~maintain ~~investments~~contracts that are critical to our operations;

• ~~seeking~~our ability to ~~raise~~execute ~~additional~~our ~~capital;~~business orplan;

• ~~revising~~the orability ~~delaying~~of ~~our~~third ~~strategic~~parties ~~plans.~~to seek and obtain court approval to terminate contracts and other agreements with us;

~~However,~~• wethe ~~cannot~~ability ~~assure~~of ~~you~~third ~~that~~parties ~~we would be able~~ to ~~implement~~seek ~~alternative~~and ~~financing~~obtain ~~plans,~~court ifapproval ~~necessary,~~to onterminate ~~commercially reasonable terms~~ or atshorten ~~all,~~the orexclusivity ~~that~~period ~~undertaking~~for ~~alternative~~us ~~financing~~to ~~plans,~~propose ifand ~~necessary,~~confirm ~~would~~a ~~allow~~Chapter us11 plan, to ~~meet~~appoint ~~our~~a ~~debt~~Chapter ~~obligations~~11 ~~and~~trustee, ~~capital requirements~~ or ~~that~~to ~~these~~convert ~~actions~~the ~~would~~Chapter be11 ~~permitted~~proceedings ~~under~~to ~~the~~a ~~terms~~Chapter of7 ~~our~~proceeding; ~~various debt instruments.~~and

~~Our~~• ~~inability~~the toactions ~~generate sufficient cash flow to satisfy our debt obligations or to obtain alternative financing could materially~~ and ~~adversely~~decisions ~~affect our business, financial condition, results~~ of ~~operations, cash flows and prospects. Any failure to make scheduled payments of interest and principal on~~ our outstanding indebtedness would likely result in a reduction of our credit rating. Further, if for any reason we are unable to meet our debt service and repayment obligations, we would be in default under the terms of the agreements governing our debt, which would allow our creditors ~~at that time to declare all outstanding indebtedness to be due~~ and ~~payable~~other ~~(which~~third ~~would~~parties inwho ~~turn~~have ~~trigger~~interests ~~cross-acceleration or cross-default rights between the relevant agreements), the lenders under our Credit Facility, as defined~~ in ~~Note 4, could terminate their commitments to loan money, and the lenders could foreclose against~~ our ~~assets~~Chapter ~~securing~~11 ~~their~~proceedings borrowings and we could be forced into bankruptcy or liquidation. In addition, the lenders under our Credit Facility could compel us to apply all of our cash flow from operations to repay our borrowings or they could prevent us from making payments on our senior notes. If the amounts outstanding under our Credit Facility or any of our other indebtedness were to be accelerated, we cannot assure you that ~~our~~may ~~assets would~~ be ~~sufficient~~inconsistent towith ~~repay in full the money owed to the lenders or to~~ our ~~other debt holders~~plans.

~~Any~~These ~~further~~risks ~~reduction~~and uncertainties could affect our business and operations in various ways. For example, negative events associated with our Chapter 11 proceedings could adversely affect our relationships with our suppliers, service providers, customers, employees, and other third parties, which in turn could adversely affect our operations and financial condition. Also, we need the prior approval of the ~~borrowing~~Bankruptcy ~~base~~Court ~~under~~for ~~our~~transactions ~~Credit~~outside ~~Facility~~the ordinary course of business, which may ~~require~~limit usour ability to ~~repay~~respond ~~indebtedness~~timely ~~under~~to ~~our~~certain ~~Credit~~events ~~Facility~~or ~~earlier~~take ~~than~~advantage ~~anticipated~~of certain opportunities. Because of the risks and uncertainties associated with our Chapter 11 proceedings, ~~which~~we ~~would~~cannot ~~adversely~~accurately predict or quantify the ultimate impact of events that will occur during our ~~liquidity~~Chapter 11 proceedings that may be inconsistent with our plans.

WeOperating ~~have~~under ~~not~~Bankruptcy ~~historically~~Court ~~accumulated~~protection ~~cash to preserve liquidity and have been dependent on LINN Energy~~ for ~~liquidity. Due~~a tolong ~~low~~period ~~commodity~~of ~~prices~~time ~~and other factors, LINN Energy’s ability to provide liquidity~~ may beharm ~~constrained. If~~our ~~these constraints continue, we will be primarily reliant on the excess of net cash provided by operating activities for liquidity~~business.

38Our future results are dependent upon the successful confirmation and implementation of a plan of reorganization. A long period of operations under Bankruptcy Court protection could have a material adverse effect on our business, financial condition, results of operations and liquidity. So long as the Chapter 11 proceedings continue, our senior management will be

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Item 1A. Risk Factors - Continued

Inrequired ~~October~~to ~~2015,~~spend ~~the~~a ~~borrowing~~significant ~~base~~amount ~~under~~of time and effort dealing with the ~~Credit~~reorganization ~~Facility~~instead ~~decreased~~of ~~from~~focusing $1exclusively on our business operations.2 A ~~billion~~prolonged period of operating under Bankruptcy Court protection also may make it more difficult to ~~$900~~retain ~~million~~management and other key personnel necessary to the success and growth of our business. ~~Continued~~In ~~low~~addition, ~~commodity~~the ~~prices~~longer the Chapter 11 proceedings continue, ~~reductions~~the more likely it is that our customers and suppliers will lose confidence in our ~~capital~~ability ~~budget~~to ~~and~~reorganize ~~the~~our ~~resulting~~business ~~reserve~~successfully ~~write-downs~~and ~~may~~will ~~impact~~seek ~~future~~to ~~redeterminations~~establish alternative commercial relationships.

ToFurthermore, so long as the ~~extent~~Chapter 11 ~~our~~proceedings ~~borrowing~~continue, ~~base~~we iswill ~~reduced~~be required to orincur ~~below~~substantial costs for professional fees and other expenses associated with the ~~amount~~administration of ~~borrowings~~the ~~outstanding,~~Chapter 11 ~~any~~proceedings. The ~~excess~~Chapter 11 ~~borrowings~~proceedings may ~~become~~also ~~due~~require ~~within~~us ato ~~short~~seek ~~time~~debtor-in-possession ~~span~~financing to fund operations. ~~For~~If ~~example,~~we ~~upon~~are ~~the~~unable ~~most~~to ~~recent~~obtain ~~borrowing~~such ~~base~~financing ~~redetermination,~~on wefavorable ~~repaid~~terms ~~$300~~or ~~million~~at all, our chances of ~~borrowings~~successfully ~~outstanding~~reorganizing ~~under~~our business may be seriously jeopardized, the ~~Credit~~likelihood ~~Facility~~that towe ~~bring~~instead ~~our~~will ~~borrowings~~be ~~outstanding~~required to ~~$900~~liquidate ~~million. We~~our assets may ~~not~~be ~~have~~enhanced, ~~the~~and, ~~financial~~as ~~resources~~a toresult, ~~make~~any ~~mandatory~~securities ~~prepayments~~in ~~and~~us ~~our~~could ~~liquidity~~become ~~would~~further bedevalued ~~significantly~~or ~~impacted~~become worthless.

~~Restrictive~~Furthermore, ~~covenants~~we incannot predict the ~~indentures~~ultimate ~~governing~~amount ~~our~~of ~~senior~~all ~~notes~~settlement ~~and~~terms infor the ~~Credit~~liabilities ~~Facility~~that ~~could~~will ~~limit~~be ~~our~~subject ~~growth~~to a plan of reorganization. Even once a plan of reorganization is approved and implemented, our ~~ability~~operating toresults ~~finance~~may ~~our~~be ~~operations,~~adversely ~~fund~~affected ~~our~~by ~~capital~~the ~~needs,~~possible ~~respond~~reluctance toof ~~changing~~prospective ~~conditions~~lenders and ~~engage~~other incounterparties ~~other~~to do business ~~activities~~with ~~that~~a ~~may~~company bethat inrecently ~~our~~emerged ~~best~~from ~~interests~~Chapter 11 proceedings.

~~The~~We ~~indentures~~may ~~governing~~not ~~our~~be ~~senior~~able ~~notes~~to ~~impose~~obtain ~~significant~~confirmation ~~operating~~of ~~and~~a ~~financial~~Chapter 11 ~~restrictions~~plan ~~on us. These restrictions limit our ability and that~~ of ~~our restricted subsidiaries to, among other things:~~reorganization.

•To ~~make~~emerge ~~distributions~~successfully from Bankruptcy Court protection as a viable entity, we must meet certain statutory requirements with respect to ~~our~~adequacy ~~owner~~of ordisclosure ~~make~~with respect to the Plan, solicit and obtain the requisite acceptances of such a plan and fulfill other ~~restricted~~statutory ~~payments;~~conditions for confirmation of such a plan, which have not occurred to date. The confirmation process is subject to numerous, unanticipated potential delays, including a delay in the Bankruptcy Court’s commencement of the confirmation hearing regarding our Plan.

•Prior ~~incur~~to filing the Chapter 11 cases, we entered into the Restructuring Support Agreement with certain of our creditors. The restructuring transactions contemplated by the Restructuring Support Agreement will be effectuated through the Plan. However, we may not receive the requisite acceptances of constituencies in the Chapter 11 proceedings to confirm our Plan. Even if the requisite acceptances of the Plan are received, the Bankruptcy Court may not confirm such a plan. The precise requirements and evidentiary showing for confirming a plan, notwithstanding its rejection by one or ~~guarantee~~more ~~additional~~impaired ~~indebtedness;~~classes of claims or equity interests, depends upon a number of factors including, without limitation, the status and seniority of the claims or equity interests in the rejecting class (i.e., secured claims or unsecured claims or subordinated or senior claims).

•If ~~create~~a orChapter 11 ~~incur~~plan ~~liens;~~of reorganization is not confirmed by the Bankruptcy Court, it is unclear whether we would be able to reorganize our business and what, if anything, holders of claims against us would ultimately receive with respect to their claims.

•The ~~engage~~Restructuring inSupport ~~mergers~~Agreement oris ~~consolidations~~subject orto ~~sell~~significant orconditions ~~otherwise~~and ~~dispose~~milestones ofthat ~~all~~may orbe ~~substantially~~difficult ~~all~~for ofus ~~our~~to ~~assets;~~satisfy.

•There ~~make~~are certain ~~dispositions~~material conditions we must satisfy under the Restructuring Support Agreement, including the timely satisfaction of milestones in the anticipated Chapter 11 proceedings, such as confirmation of the Plan and ~~transfers~~effectiveness of ~~assets;~~the Plan. Our ability to timely complete such milestones is subject to risks and uncertainties that may be beyond our control.

•If ~~engage~~the inRestructuring ~~transactions~~Support ~~with~~Agreement ~~affiliates;~~is terminated, our ability to confirm and consummate the Plan could be materially and adversely affected.

•The ~~make~~Restructuring ~~investments;~~Support Agreement contains a number of termination events, upon the occurrence of which certain parties to the Restructuring Support Agreement may terminate the agreement. If the Restructuring Support Agreement is terminated, each of the parties thereto will be released from their obligations in accordance with the terms of the Restructuring Support Agreement. Such termination may result in the loss of support for the Plan by the parties to the Restructuring Support Agreement, which could adversely affect our ability to confirm and consummate the Plan. If the Plan is not consummated, there can be no assurance that any new Plan would be as favorable to holders of claims as the current Plan.

~~• refinance certain indebtedness.~~36

In addition, the Credit Facility contains a number of significant covenants that, among other things, restrict our ability to:

• dispose of assets;

• incur or guarantee additional indebtedness;

• make distributions to our owner;

• create liens on our assets;

• make investments or acquisitions;

• repurchase, redeem or retire our senior notes;

• merge or consolidate, or transfer all or substantially all of our assets and the assets of our subsidiaries;

• engage in specified transactions with subsidiaries and affiliates; and

• pursue other corporate activities.

We may be prevented from taking advantage of business opportunities that arise because of the limitations imposed on us by the restrictive covenants under the indentures governing our senior notes and under the Credit Facility. The restrictions contained in those indentures and the Credit Facility could:

• limit our ability to plan for, or react to, market conditions, to meet capital needs or otherwise to restrict our activities or business plan; and

• adversely affect our ability to finance our operations, enter into acquisitions or to engage in other business activities that would be in our interest.

Also, the Credit Facility requires us to maintain compliance with specified financial ratios and satisfy certain financial condition tests. Our ability to comply with these ratios and financial condition tests may be affected by events beyond our control and, as a result, we may be unable to meet these ratios and financial condition tests. These financial ratio restrictions and financial condition tests could limit our ability to make needed capital expenditures, withstand a continued downturn in our business or a downturn in the economy in general or otherwise conduct necessary corporate activities. Further declines in oil, natural gas and NGL prices, or a prolonged period of oil, natural gas and NGL prices at current levels, could eventually result in our failing to meet one or more of the financial covenants under the indentures governing our senior notes or the Credit Facility, which could require us to refinance or amend such obligations resulting in the payment of consent fees or higher interest rates, or require us to raise additional capital at an inopportune time or on terms not favorable to us.

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Item 1A. Risk Factors - Continued

AOur breach of any of these covenants or our inability to comply with the required financial ratios or financial condition tests could result in a default under our senior notes or the Credit Facility. A default under the Credit Facility or the indentures governing our senior notes, if not cured or waived, could result in acceleration of all indebtedness outstanding thereunder. The accelerated debt would become immediately due and payable, which would in turn trigger crosslong-~~acceleration~~term ~~and~~liquidity ~~cross-default~~requirements rights under our other debt. If that should occur, we may be unable to pay all such debt or to borrow sufficient funds to refinance it. Even if new financing were then available, it may not be on terms that are acceptable to us. In addition, if an event of default under the Credit Facility occurred, the lenders could foreclose on the collateral and ~~compel us to apply all of our cash flow from operations to repay our borrowings or they could prevent us from making payments on our senior notes. If~~ the ~~amounts~~adequacy ~~outstanding under the Credit Facility, the senior notes or any~~ of our ~~other~~capital ~~indebtedness~~resources ~~were~~are todifficult ~~be accelerated, our assets may not be sufficient~~ to ~~repay~~predict inat ~~full~~this ~~the money owed to the lenders or to our other debt holders~~time.

~~Moreover~~We face uncertainty regarding the adequacy of our liquidity and capital resources and have extremely limited, if any, ~~new~~access ~~indebtedness~~to additional financing. In addition to the cash requirements necessary to fund ongoing operations, we ~~incur~~have ~~may~~incurred ~~impose~~significant ~~financial~~professional ~~restrictions~~fees and other ~~covenants~~costs onin usconnection with preparation for the Chapter 11 proceedings and expect that ~~may~~we will continue to incur significant professional fees and costs throughout our Chapter 11 proceedings. We cannot assure you that cash on hand and cash flow from operations will be ~~more~~sufficient ~~restrictive~~to ~~than~~continue ~~the~~to ~~Credit~~fund ~~Facility~~our oroperations and allow us to satisfy our obligations related to the ~~indentures~~Chapter 11 ~~governing~~proceedings until we are able to emerge from our ~~senior~~Chapter 11 ~~notes~~proceedings.

Our liquidity, including our ability to meet our ongoing operational obligations, is dependent upon, among other things: (i) our ability to comply with the terms and conditions of any cash collateral order that may be entered by the Bankruptcy Court in connection with the Chapter 11 proceedings, (ii) our ability to maintain adequate cash on hand, (iii) our ability to generate cash flow from operations, (iv) our ability to develop, confirm and consummate a Chapter 11 plan or other alternative restructuring transaction, and (v) the cost, duration and outcome of the Chapter 11 proceedings.

As a result of the Chapter 11 proceedings, our financial results may be volatile and may not reflect historical trends.

During the Chapter 11 proceedings, we expect our financial results to continue to be volatile as restructuring activities and expenses, contract terminations and rejections, and claims assessments significantly impact our financial statements. As a result, our historical financial performance is likely not indicative of our financial performance after the date of the bankruptcy filing. In addition, if we emerge from Chapter 11, the amounts reported in subsequent financial statements may materially change relative to historical financial statements, including as a result of revisions to our operating plans pursuant to a plan of reorganization. We also may be required to adopt fresh start accounting, in which case our assets and liabilities will be recorded at fair value as of the fresh start reporting date, which may differ materially from the recorded values of assets and liabilities on our balance sheets. Our financial results after the application of fresh start accounting also may be different from historical trends.

We may be subject to claims that will not be discharged in the Chapter 11 proceedings, which could have a material adverse effect on our financial condition and results of operations.

The Bankruptcy Code provides that the confirmation of a plan of reorganization discharges a debtor from substantially all debts arising prior to confirmation. With few exceptions, all claims that arose prior to May 12, 2016, or before confirmation of the plan of reorganization (i) would be subject to compromise and/or treatment under the plan of reorganization and/or (ii) would be discharged in accordance with the terms of the Plan. Any claims not ultimately discharged through the Plan could be asserted against the reorganized entities and may have an adverse effect on our financial condition and results of operations on a post-reorganization basis.

LINN Energy may experience increased levels of employee attrition as a result of the Chapter 11 proceedings.

We do not have any employees. All of our former employees that were retained after the LINN Energy transaction became employees of Linn Operating, Inc. (“LOI”), a subsidiary of LINN Energy, and along with other LOI personnel, provide services and support to us in accordance with an agency agreement and power of attorney between us and LOI. We depend on the services of these individuals. As a result of the Chapter 11 proceedings, LINN Energy may experience increased levels of employee attrition, and its employees likely will face considerable distraction and uncertainty. A loss of key personnel or material erosion of employee morale could adversely affect our business and results of operations. LINN Energy’s ability to engage, motivate and retain key employees or take other measures intended to motivate and incent key employees to remain with LINN Energy through the pendency of the Chapter 11 proceedings is limited by restrictions on implementation of incentive programs under the Bankruptcy Code. The loss of services of members of LINN Energy’s senior management team could impair our ability to execute our strategy and implement operational initiatives, which would be likely to have a material adverse effect on our business, financial condition and results of operations.

In certain instances, a Chapter 11 case may be converted to a case under chapter 7 of the Bankruptcy Code.

There can be no assurance as to whether we will successfully reorganize and emerge from the Chapter 11 proceedings or, if we do successfully reorganize, as to when we would emerge from the Chapter 11 proceedings.

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Item 1A. Risk Factors - Continued

If the Bankruptcy Court finds that it would be in the best interest of creditors and/or the Debtors, the Bankruptcy Court may convert our anticipated Chapter 11 bankruptcy case to a case under chapter 7 of the Bankruptcy Code. In such event, a chapter 7 trustee would be appointed or elected to liquidate the Debtors’ assets for distribution in accordance with the priorities established by the Bankruptcy Code. The Debtors believe that liquidation under chapter 7 would result in significantly smaller distributions being made to the Debtors’ creditors than those provided for in a Chapter 11 plan because of (i) the likelihood that the assets would have to be sold or otherwise disposed of in a disorderly fashion over a short period of time rather than reorganizing or selling in a controlled manner the Debtors’ businesses as a going concern, (ii) additional administrative expenses involved in the appointment of a chapter 7 trustee, and (iii) additional expenses and claims, some of which would be entitled to priority, that would be generated during the liquidation and from the rejection of leases and other executory contracts in connection with a cessation of operations.

We have significant exposure to fluctuations in commodity prices since none of our estimated future production is covered by commodity derivatives and we may not be able to enter into commodity derivatives covering our estimated future production on favorable terms or at all.

During the Chapter 11 proceedings, our ability to enter into new commodity derivatives covering estimated future production will be dependent upon either entering into unsecured hedges or obtaining Bankruptcy Court approval to enter into secured hedges. As a result, we may not be able to enter into additional commodity derivatives covering our production in future periods on favorable terms or at all. If we cannot or choose not to enter into commodity derivatives in the future, we could be more affected by changes in commodity prices than our competitors who engage in hedging arrangements. Our inability to hedge the risk of low commodity prices in the future, on favorable terms or at all, could have a material adverse impact on our business, financial condition and results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

This item is intentionally omitted from this report pursuant to the reduced disclosure format permitted by General Instruction H to Form 10‑Q.

Item 3. Defaults Upon Senior Securities

~~This~~See ~~item~~Part I. isItem 1. ~~intentionally~~Note 2 ~~omitted~~to ~~from~~the ~~this~~Company’s ~~report~~condensed ~~pursuant~~financial statements entitled “Chapter 11 Proceedings, Ability to ~~the~~Continue ~~reduced~~as ~~disclosure~~a ~~format~~Going ~~permitted~~Concern byand ~~General~~Covenant ~~Instruction~~Violations” Hwhich tois ~~Form~~incorporated ~~10‑Q~~in this item by reference.

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

None

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Item 6. Exhibits

Exhibit Number		Description
3.1		Certificate of Formation of Berry Petroleum Company, LLC (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on December 20, 2013)
3.2		Limited Liability Company Agreement of Berry Petroleum Company, LLC dated December 16, 2013 (incorporated herein by reference to Exhibit 3.2 to the Company’s Current Report on Form 8‑K filed on December 20, 2013)
3.2*		Amended and Restated Limited Liability Company Agreement of Berry Petroleum Company, LLC dated March 28, 2016
10.1		~~Eleventh~~Twelfth Amendment to Second Amended and ~~Borrowing~~Restated ~~Base~~Credit Agreement, dated as of ~~October~~April 2112, ~~2015~~2016, among Berry Petroleum Company, LLC, as borrower, each of the lenders party thereto and Wells Fargo Bank, National Association, as administrative agent, ~~and each of the lenders party thereto~~ (incorporated herein by reference to Exhibit 10.2 to Linn Energy, LLC’s Current Report on Form 8-K filed on ~~October~~April 2215, ~~2015~~2016)
10.2		Restructuring Support Agreement, dated as of May 10, 2016, by and among the Debtors and the supporting parties thereto (incorporated herein by reference to Exhibit 10.1 to Current Report on Form 8-K filed on May 11, 2016)
31.1*		Section 302 Certification of Chief Executive Officer
31.2*		Section 302 Certification of Chief Financial Officer
32.1*		Section 906 Certification of Chief Executive Officer
32.2*		Section 906 Certification of Chief Financial Officer
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 Data Document
101.PRE**		XBRL Taxonomy Extension Presentation Linkbase Document


*	Filed herewith.


**	Furnished 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, ~~thereto~~thereunto duly authorized.

	BERRY PETROLEUM COMPANY, LLC
	(Registrant)
Date: November 10, 2015	/s/ Darren R. Schluter
Date: May 12, 2016	/s/ Darren R. Schluter
	Darren R. Schluter
	Vice President and Controller
	(Duly Authorized Officer and Principal Accounting Officer)
Date: November 10, 2015	/s/ David B. Rottino
Date: May 12, 2016	/s/ David B. Rottino
	David B. Rottino
	Executive Vice President and Chief Financial Officer
	(Principal Financial Officer)

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