EX-99.1 2 exhibit991amend2.htm EXHIBIT 99-1 PRO FORMA FINANCIALS Exhibit 99.1 Amend 2
Exhibit 99.1
LINN ENERGY, LLC
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
INDEX


1


LINN ENERGY, LLC
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
June 30, 2012
 
LINN Energy Historical
 
Pro Forma Adjustments
 
LINN Energy Pro Forma
 
(in thousands)
ASSETS
 
 
 
 
 
Current assets:
 
 
 
 
 
Cash and cash equivalents
$
1,883

 
$
—

 
$
1,883

Accounts receivable - trade, net
321,012

 
1,726

(a)
322,738

Derivative instruments
489,530

 
—

 
489,530

Other current assets
69,884

 
—

 
69,884

Total current assets
882,309

 
1,726

 
884,035

 
 
 
 
 
 
Noncurrent assets:
 
 
 
 
 
Oil and natural gas properties (successful efforts method), net
8,569,616

 
1,033,012

(a)
9,602,628

Other property and equipment, net
369,206

 
—

 
369,206

Derivative instruments
924,317

 
—

 
924,317

Other noncurrent assets
434,654

 
(307,500
)
(b)
127,154

Total noncurrent assets
10,297,793

 
725,512

 
11,023,305

Total assets
$
11,180,102

 
$
727,238

 
$
11,907,340

 
 
 
 
 
 
LIABILITIES AND UNITHOLDERS’ CAPITAL
 
 
 
 
 
Current liabilities:
 
 
 
 
 
Accounts payable and accrued expenses
$
667,541

 
$
15,147

(a)
$
682,688

Derivative instruments
3,461

 
—

 
3,461

Other accrued liabilities
108,841

 
—

 
108,841

Total current liabilities
779,843

 
15,147

 
794,990

 
 
 
 
 
 
Noncurrent liabilities:
 
 
 
 
 
Credit facility
1,150,000

 
682,291

(c)
1,832,291

Senior notes, net
4,855,547

 
—

 
4,855,547

Derivative instruments
250

 
—

 
250

Other noncurrent liabilities
262,799

 
29,800

(a)
292,599

Total noncurrent liabilities
6,268,596

 
712,091

 
6,980,687

 
 
 
 
 
 
Commitments and contingencies
 
 
 
 
 
 
 
 
 
 
 
Unitholders’ capital:
 
 
 
 
 
Units issued and outstanding
3,223,223

 
—

 
3,223,223

Accumulated income
908,440

 
—

 
908,440

 
4,131,663

 
—

 
4,131,663

Total liabilities and unitholders' capital
$
11,180,102

 
$
727,238

 
$
11,907,340


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

2


LINN ENERGY, LLC
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
Six Months Ended June 30, 2012
 
LINN
Energy
Historical
 
BP Green
River
Historical
 
BP Hugoton
Historical
 
Pro Forma
Adjustments
 
LINN
Energy
Pro Forma
 
(in thousands, except per unit amounts)
Revenues and other:
 
 
 
 
 
 
 
 
 
Oil, natural gas and natural gas liquids sales
$
696,122

 
$
86,655

 
$
56,882

 
$
—

 
$
839,659

Gains on oil and natural gas derivatives
441,678

 
—

 
—

 
—

 
441,678

Marketing revenues
12,131

 
—

 
—

 
—

 
12,131

Other revenues
4,756

 
—

 
—

 
—

 
4,756

 
1,154,687

 
86,655

 
56,882

 
—

 
1,298,224

Expenses:
 
 
 
 
 
 
 
 
 
Lease operating expenses
141,765

 
27,353

 
20,129

 
—

 
189,247

Transportation expenses
32,377

 
—

 
—

 
—

 
32,377

Marketing expenses
7,150

 
—

 
6,188

 
—

 
13,338

General and administrative expenses
84,506

 
—

 
—

 
—

 
84,506

Exploration costs
817

 
—

 
—

 
—

 
817

Bad debt expenses
(22
)
 
—

 
—

 
—

 
(22
)
Depreciation, depletion and amortization
260,782

 
—

 
—

 
52,846

(d)
315,027

 
 
 
 
 
 
 
1,399

(e)
 
Impairment of long-lived assets
146,499

 
—

 
—

 
—

 
146,499

Taxes, other than income taxes
55,851

 
11,275

 
4,995

 
—

 
72,121

Losses on sale of assets and other, net
1,514

 
—

 
—

 
—

 
1,514

 
731,239

 
38,628

 
31,312

 
54,245

 
855,424

Other income and (expenses):
 
 
 
 
 
 
 
 
 
Interest expense, net of amounts capitalized
(171,909
)
 
—

 
—

 
(29,445
)
(f)
(202,305
)
 
 
 
 
 
 
 
(951
)
(g)
 
Other, net
(11,225
)
 
—

 
—

 
—

 
(11,225
)
 
(183,134
)
 
—

 
—

 
(30,396
)
 
(213,530
)
Income before income taxes
240,314

 
48,027

 
25,570

 
(84,641
)
 
229,270

Income tax expense
(9,430
)
 
—

 
—

 
—

(h)
(9,430
)
Net income
$
230,884

 
$
48,027

 
$
25,570

 
$
(84,641
)
 
$
219,840

 
 
 
 
 
 
 
 
 
 
Net income per unit:
 
 
 
 
 
 
 
 
 
Basic
$
1.17

 
 
 
 
 
 
 
$
1.11

Diluted
$
1.16

 
 
 
 
 
 
 
$
1.11

Weighted average units outstanding:
 
 
 
 
 
 
 
 
 
Basic
195,382

 
 
 
 
 
 
 
195,382

Diluted
196,039

 
 
 
 
 
 
 
196,039


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


LINN ENERGY, LLC
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
Year Ended December 31, 2011
 
LINN
Energy
Historical
 
BP Green
River
Historical
 
BP Hugoton
Historical
 
2011 Acquisitions Historical
 
Pro Forma
Adjustments
 
LINN
Energy
Pro Forma
 
(in thousands, except per unit amounts)
Revenues and other:
 
 
 
 
 
 
 
 
 
 
 
Oil, natural gas and natural gas liquids sales
$
1,162,037

 
$
312,263

 
$
290,240

 
$
197,424

 
$
—

 
$
1,961,964

Gains on oil and natural gas derivatives
449,940

 
—

 
—

 
—

 
—

 
449,940

Marketing revenues
5,868

 
—

 
—

 
—

 
—

 
5,868

Other revenues
4,609

 
—

 
—

 
—

 
—

 
4,609

 
1,622,454

 
312,263

 
290,240

 
197,424

 
—

 
2,422,381

Expenses:
 
 
 
 
 
 
 
 
 
 
 
Lease operating expenses
232,619

 
69,927

 
80,493

 
36,725

 
—

 
419,764

Transportation expenses
28,358

 
—

 
—

 
—

 
—

 
28,358

Marketing expenses
3,681

 
—

 
37,675

 
—

 
—

 
41,356

General and administrative expenses
133,272

 
—

 
—

 
—

 
—

 
133,272

Exploration costs
2,390

 
—

 
—

 
—

 
—

 
2,390

Bad debt expenses
(22
)
 
—

 
—

 
—

 
—

 
(22
)
Depreciation, depletion and amortization
334,084

 
—

 
—

 
—

 
173,699

(d)
511,880

 
 
 
 
 
 
 
 
 
4,097

(e)
 
Taxes, other than income taxes
78,522

 
38,500

 
22,997

 
12,750

 
—

 
152,769

Losses on sale of assets and other, net
3,516

 
—

 
—

 
—

 
—

 
3,516

 
816,420

 
108,427

 
141,165

 
49,475

 
177,796

 
1,293,283

Other income and (expenses):
 
 
 
 
 
 
 
 
 
 
 
Loss on extinguishment of debt
(94,612
)
 
—

 
—

 
—

 
—

 
(94,612
)
Interest expense, net of amounts capitalized
(259,725
)
 
—

 
—

 
—

 
(117,243
)
(f)
(381,564
)
 
 
 
 
 
 
 
 
 
(4,596
)
(g)
 
Other, net
(7,792
)
 
—

 
—

 
—

 
—

 
(7,792
)
 
(362,129
)
 
—

 
—

 
—

 
(121,839
)
 
(483,968
)
Income before income taxes
443,905

 
203,836

 
149,075

 
147,949

 
(299,635
)
 
645,130

Income tax expense
(5,466
)
 
—

 
—

 
—

 
—

(h)
(5,466
)
Net income
$
438,439

 
$
203,836

 
$
149,075

 
$
147,949

 
$
(299,635
)
 
$
639,664

 
 
 
 
 
 
 
 
 
 
 
 
Net income per unit:
 
 
 
 
 
 
 
 
 
 
 
Basic
$
2.52

 
 
 
 
 
 
 
 
 
$
3.65

Diluted
$
2.51

 
 
 
 
 
 
 
 
 
$
3.64

Weighted average units outstanding:
 
 
 
 
 
 
 
 
 
 
 
Basic
172,044

 
 
 
 
 
 
 
 
 
173,728

Diluted
172,729

 
 
 
 
 
 
 
 
 
174,453


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

4


LINN ENERGY, LLC

NOTES TO THE UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS



Note 1 – Basis of Presentation
The unaudited pro forma condensed combined balance sheet as of June 30, 2012, is derived from:
•
the historical consolidated financial statements of Linn Energy, LLC (“LINN Energy” or the “Company”); and
•
the preliminary values assigned to the identifiable assets acquired and liabilities assumed from BP America Production Company (“BP” and the properties, the “BP Green River Properties”).
The unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2012, is derived from:
•
the historical consolidated financial statements of LINN Energy; and
•
the historical statements of revenues and direct operating expenses of certain oil and natural gas properties acquired from BP (BP Green River Properties and “BP Hugoton Properties”).
The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2011, is derived from:
•
the historical consolidated financial statements of LINN Energy;
•
the historical statements of revenues and direct operating expenses of certain oil and natural gas properties acquired from BP;
•
the historical statements of revenues and direct operating expenses of certain oil and natural gas properties acquired from Plains Exploration & Production Company (“Plains” and the properties, the “Plains Properties”);
•
the historical statements of revenues and direct operating expenses of certain oil and natural gas properties acquired from Panther Energy Company, LLC and Red Willow Mid-Continent, LLC (collectively referred to as “Panther” and the properties, the “Panther Properties”);
•
the historical statements of revenues and direct operating expenses of certain oil and natural gas properties acquired from SandRidge Exploration and Production, LLC (“SandRidge” and the properties, the “SandRidge Properties”); and
•
the historical statements of revenues and direct operating expenses of certain oil and natural gas properties acquired from Concho Resources Inc. (“Concho” and the properties, the “Concho Properties” and together with the Plains Properties, Panther Properties and the SandRidge Properties, the “2011 Acquisitions Properties”).
The unaudited pro forma condensed combined balance sheet gives effect to the acquisition of the BP Green River Properties as if the transaction had occurred on June 30, 2012. The unaudited pro forma condensed combined statements of operations give effect to the acquisitions from BP as if they had been completed as of January 1, 2011, and the acquisitions from Plains, Panther, SandRidge and Concho as if they had been completed as of January 1, 2010. The transactions and the related adjustments are described in the accompanying notes. In the opinion of Company management, all adjustments have been made that are necessary to present fairly, in accordance with Regulation S-X, the pro forma condensed combined financial statements.

5


LINN ENERGY, LLC

NOTES TO THE UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS - Continued

The unaudited pro forma condensed combined balance sheet and statements of operations are presented for illustrative purposes only, and do not purport to be indicative of the results of operations that would actually have occurred if the transactions described had occurred as presented in such statements or that may be obtained in the future. In addition, future results may vary significantly from those reflected in such statements due to factors described in “Risk Factors” included in the Company's Annual Report on Form 10-K for the year ended December 31, 2011, and elsewhere in the Company’s reports and filings with the Securities and Exchange Commission (“SEC”).
The unaudited pro forma condensed combined balance sheet and statements of operations should be read in conjunction with the Company’s historical consolidated financial statements and the notes thereto included in its Annual Report on Form 10-K for the year ended December 31, 2011. The pro forma statements should also be read in conjunction with the historical statements of revenues and direct operating expenses for the BP Green River Properties and BP Hugoton Properties and the notes thereto filed as Exhibit 99.1 to the Current Report on Form 8-K/A filed September 17, 2012, and Exhibit 99.1 to the current report on Form 8-K/A filed April 30, 2012, respectively, and the statements of revenues and direct operating expenses for the 2011 Acquisitions Properties and the notes thereto filed as exhibit 99.1 to the Current Report on Form 8-K filed December 12, 2011, and as exhibits 99.1, 99.2 and 99.3 to the Current Report on Form 8-K filed August 2, 2011.
Note 2 – Acquisition Dates
The results of operations of the BP Green River Properties, BP Hugoton Properties and the 2011 Acquisitions Properties have been included in the historical financial statements of the Company since their acquisition dates.
The acquisition of BP Green River Properties was completed on July 31, 2012, with an effective date of April 1, 2012, for total consideration of approximately $990 million.
The acquisition of BP Hugoton Properties was completed on March 30, 2012, with an effective date of January 1, 2012, for total consideration of approximately $1.17 billion.
The acquisition of Plains Properties was completed on December 15, 2011, with an effective date of November 1, 2011, for total consideration of approximately $555 million.
The acquisition of Panther Properties was completed on June 1, 2011, with an effective date of January 1, 2011, for total consideration of approximately $223 million.
The acquisition of SandRidge Properties was completed on April 1, 2011, with the same effective date, for total consideration of approximately $201 million.
The acquisition of Concho Properties was completed on March 31, 2011, with an effective date of March 1, 2011, for total consideration of approximately $194 million.
Note 3 – Preliminary Acquisition Accounting
The acquisitions are accounted for under the acquisition method of accounting. Accordingly, the Company conducts assessments of net assets acquired and recognizes amounts for identifiable assets acquired and liabilities assumed at their estimated acquisition date fair values, while transaction and integration costs associated with the acquisitions are expensed as incurred. The initial accounting for the acquisition of the BP Green River Properties is not complete and adjustments to estimated amounts, or recognition of additional assets acquired or liabilities assumed, may occur as more detailed analyses are completed and additional information is obtained about the facts and circumstances that existed as of the acquisition date.

6


LINN ENERGY, LLC

NOTES TO THE UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS - Continued

The following presents the values assigned to the net assets for BP Green River Properties acquired from BP as of the acquisition date (in thousands):
Assets:
 
Current
$
1,726

Oil and natural gas properties
1,033,012

Total assets acquired
$
1,034,738

 
 
Liabilities:
 
Current
$
15,147

Asset retirement obligations
29,800

Total liabilities assumed
$
44,947

Net assets acquired
$
989,791

Current assets include receivables. Current liabilities include payables, ad valorem taxes payable and environmental liabilities.
The fair value measurements of assets acquired and liabilities assumed are based on inputs that are not observable in the market and therefore represent Level 3 inputs. The fair value of oil and natural gas properties and asset retirement obligations were measured using valuation techniques that convert future cash flows to a single discounted amount. Significant inputs to the valuation of oil and natural gas properties include estimates of: (i) reserves; (ii) future operating and development costs; (iii) future commodity prices; (iv) estimated future cash flows; and (v) 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.
Note 4 – Pro Forma Adjustments
The Company’s historical results of operations include the results of properties acquired since the acquisition dates. The pro forma statements of operations include adjustments to reflect the acquisitions from BP as if they had been completed as of January 1, 2011, and the acquisitions from Plains, Panther, SandRidge and Concho as if they had been completed as of January 1, 2010. The unaudited pro forma condensed combined financial statements have been adjusted to:
(a)
reflect the total consideration paid by LINN Energy for the purchase of the BP Green River Properties and adjustments to historical book values of the BP Green River Properties to their estimated fair values in accordance with the acquisition method of accounting
(b)
reflect the deposit of approximately $308 million paid in June 2012, which is reported in “other noncurrent assets” on the Company’s historical balance sheet at June 30, 2012
(c)
reflect the incremental debt of approximately $682 million incurred to fund the purchase price of the BP Green River Properties, which excludes the deposit of approximately $308 million borrowed in June 2012 and reported in “credit facility” on the Company’s historical balance sheet at June 30, 2012
(d)
record incremental depreciation, depletion and amortization expense, using the units-of-production method, related to oil and natural gas properties acquired as follows:
•
for the period from January 1 through June 30, 2012, and for the year ended December 31, 2011, $37 million and $73 million, respectively, related to the BP Green River Properties
•
for the period from January 1 through March 30, 2012, and for the year ended December 31, 2011, $16 million and $65 million, respectively, related to the BP Hugoton Properties

7


LINN ENERGY, LLC

NOTES TO THE UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS - Continued

•
for the period from January 1 through December 15, 2011, $23 million related to the Plains Properties
•
for the period from January 1 through June 1, 2011, $7 million related to the Panther Properties
•
for the period from January 1 through April 1, 2011, $2 million related to the SandRidge Properties
•
for the period from January 1 through March 31, 2011, $3 million related to the Concho Properties

(e)
record accretion expense related to asset retirement obligations on oil and natural gas properties acquired as follows:
•
for the period from January 1 through June 30, 2012, and for the year ended December 31, 2011, $1 million and $2 million, respectively, related to the BP Green River Properties
•
for the period from January 1 through March 30, 2012, and for the year ended December 31, 2011, $342,000 and $1 million, respectively, related to the BP Hugoton Properties
•
for the period from January 1 through December 15, 2011, $520,000 related to the Plains Properties
•
for the period from January 1 through June 1, 2011, $26,000 related to the Panther Properties
•
for the period from January 1 through April 1, 2011, $128,000 related to the SandRidge Properties
•
for the period from January 1 through March 31, 2011, $3,000 related to the Concho Properties
(f)
record interest expense as follows:
•
incremental debt of approximately $990 million incurred to fund the purchase price of the BP Green River Properties; the assumed interest rate was 2.2%
•
incremental debt of approximately $1.17 billion incurred to fund the purchase price of the BP Hugoton Properties; the assumed interest rate was 6.25%
•
incremental debt of approximately $544 million incurred to fund the purchase price of the Plains Properties; the assumed interest rate was 2.9%
•
incremental debt of approximately $223 million incurred to fund the purchase price of the Panther Properties; the assumed interest rate was 6.5%
A 1/8 percentage change in the assumed interest rate would result in an adjustment to pro forma net income as follows:
 
Six Months Ended
June 30, 2012
 
Year Ended
December 31, 2011
 
(in thousands)
 
 
 
 
BP Green River Properties
$
625

 
$
1,251

BP Hugoton Properties
369

 
1,475

Plains Properties
—

 
688

Panther Properties
—

 
141

 
$
994

 
$
3,555

(g)
record incremental amortization of deferred financing fees associated with debt incurred to fund the purchase price of the BP Hugoton Properties and the Panther Properties
(h)
The Company is treated as a partnership for federal and state income tax purposes. The Company subsidiaries that acquired the Properties are also treated as partnerships for federal and state income tax purposes. Accordingly, no recognition has been given to federal and state income taxes in the accompanying unaudited pro forma condensed combined statements of operations.
The pro forma statements of operations also include an adjustment to the weighted average units outstanding to reflect units issued to fund the purchase price of the SandRidge Properties and the Concho Properties.

8


LINN ENERGY, LLC

NOTES TO THE UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS - Continued

Note 5 – Supplemental Oil and Natural Gas Reserve Information
The following tables set forth certain unaudited pro forma information concerning LINN Energy’s proved oil, natural gas and natural gas liquids (“NGL”) reserves for the year ended December 31, 2011, giving effect to the Properties acquired from BP as if they had occurred on January 1, 2011. There are numerous uncertainties inherent in estimating the quantities of proved reserves and projecting future rates of production and timing of development costs. The following reserve data represent estimates only and should not be construed as being precise.
 
Year Ended December 31, 2011
 
LINN Energy Historical
 
BP Green
River
Historical
 
BP Hugoton
Historical
 
LINN Energy
Pro Forma
 
Natural Gas (Bcf)
Proved developed and undeveloped reserves:
 
 
 
 
 
 
 
Beginning of year
1,233

 
679

 
472

 
2,384

Revisions of previous estimates
(71
)
 
4

 
7

 
(60
)
Purchase of minerals in place
337

 
—

 
—

 
337

Extension and discoveries
240

 
—

 
—

 
240

Production
(64
)
 
(55
)
 
(29
)
 
(148
)
End of year
1,675

 
628

 
450

 
2,753

Proved developed reserves:
 
 
 
 
 
 
 
Beginning of year
805

 
402

 
472

 
1,679

End of year
998

 
350

 
450

 
1,798

Proved undeveloped reserves:
 
 
 
 
 
 
 
Beginning of year
428

 
277

 
—

 
705

End of year
677

 
278

 
—

 
955


 
Year Ended December 31, 2011
 
LINN Energy Historical
 
BP Green
River
Historical
 
BP Hugoton
Historical
 
LINN Energy
Pro Forma
 
Oil and NGL (MMBbls)
Proved developed and undeveloped reserves:
 
 
 
 
 
 
 
Beginning of year
227.3

 
41.0

 
46.7

 
315.0

Revisions of previous estimates
(8.3
)
 
0.2

 
0.8

 
(7.3
)
Purchase of minerals in place
40.3

 
—

 
—

 
40.3

Extension and discoveries
34.9

 
—

 
—

 
34.9

Production
(11.7
)
 
(2.3
)
 
(3.1
)
 
(17.1
)
End of year
282.5

 
38.9

 
44.4

 
365.8

Proved developed reserves:
 
 
 
 
 
 
 
Beginning of year
142.9

 
22.9

 
46.7

 
212.5

End of year
172.6

 
20.7

 
44.4

 
237.7

Proved undeveloped reserves:
 
 
 
 
 
 
 
Beginning of year
84.4

 
18.1

 
—

 
102.5

End of year
109.9

 
18.2

 
—

 
128.1



9


LINN ENERGY, LLC

NOTES TO THE UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS - Continued

 
Year Ended December 31, 2011
 
LINN Energy Historical
 
BP Green
River
Historical
 
BP Hugoton
Historical
 
LINN Energy
Pro Forma
 
Total (Bcfe)
Proved developed and undeveloped reserves:
 
 
 
 
 
 
 
Beginning of year
2,597

 
925

 
752

 
4,274

Revisions of previous estimates
(121
)
 
6

 
13

 
(102
)
Purchase of minerals in place
579

 
—

 
—

 
579

Extension and discoveries
450

 
—

 
—

 
450

Production
(135
)
 
(69
)
 
(48
)
 
(252
)
End of year
3,370

 
862

 
717

 
4,949

Proved developed reserves:
 
 
 
 
 
 
 
Beginning of year
1,662

 
540

 
752

 
2,954

End of year
2,034

 
475

 
717

 
3,226

Proved undeveloped reserves:
 
 
 
 
 
 
 
Beginning of year
935

 
385

 
—

 
1,320

End of year
1,336

 
387

 
—

 
1,723


Summarized in the following table is information for the standardized measure of discounted cash flows relating to proved reserves as of December 31, 2011, giving effect to the BP Green River Properties and BP Hugoton Properties. There are no future income tax expenses because the Company is not subject to federal income taxes. Limited liability companies are subject to state income taxes in Texas; however, these amounts are immaterial. The standardized measure of discounted future net cash flows does not purport to be, nor should it be interpreted to present, the fair value of the oil and natural gas reserves of the properties. An estimate of fair value would also take into account, among other things, the recovery of reserves not presently classified as proved, the value of unproved properties, and consideration of expected future economic and operating conditions. For a discussion of the assumptions used in preparing the information presented, refer to the Company’s financial statements for the fiscal year ended December 31, 2011, as well as to the historical statements of revenues and direct operating expenses of the BP Green River Properties included in the Current Report on Form 8-K/A filed September 17, 2012, and the BP Hugoton Properties included in the Current Report on Form 8-K/A filed April 30, 2012.
 
December 31, 2011
 
LINN Energy Historical
 
BP Green
River
Historical
 
BP Hugoton
Historical
 
LINN Energy
Pro Forma
 
(in thousands)
 
 
 
 
 
 
 
 
Future estimated revenues
$
29,319,369

 
$
4,190,099

 
$
3,892,894

 
$
37,402,362

Future estimated production costs
(9,464,319
)
 
(1,704,182
)
 
(1,740,911
)
 
(12,909,412
)
Future estimated development costs
(2,848,497
)
 
(564,964
)
 
(34,753
)
 
(3,448,214
)
Future net cash flows
17,006,553

 
1,920,953

 
2,117,230

 
21,044,736

10% annual discount for estimated timing of cash flows
(10,391,693
)
 
(938,572
)
 
(1,138,761
)
 
(12,469,026
)
Standardized measure of discounted future net cash flows
$
6,614,860

 
$
982,381

 
$
978,469

 
$
8,575,710

 
 
 
 
 
 
 
 
Representative NYMEX prices: (1)
 
 
 
 
 
 
 
Natural gas (MMBtu)
$
4.12

 
 
 
 
 
 
Oil (Bbl)
$
95.84

 
 
 
 
 
 
(1) 
In accordance with SEC regulations, reserves at December 31, 2011, were estimated using the average price during the 12-month period, determined as an unweighted average of the first-day-of-the-month price for each month, unless prices are

10


LINN ENERGY, LLC

NOTES TO THE UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS - Continued

defined by contractual arrangements, excluding escalations based upon future conditions. The price used to estimate reserves is held constant over the life of the reserves.
The following table summarizes the principal sources of change in the standardized measure of discounted future net cash flows:
 
Year Ended December 31, 2011
 
LINN Energy Historical
 
BP Green
River
Historical
 
BP Hugoton
Historical
 
LINN Energy
Pro Forma
 
(in thousands)
 
 
 
 
 
 
 
 
Sales and transfers of oil, natural gas and NGL produced during the period
$
(822,602
)
 
$
(203,836
)
 
$
(149,075
)
 
$
(1,175,513
)
Changes in estimated future development costs
27,236

 
(26,362
)
 
(59
)
 
815

Net change in sales and transfer prices and production costs related to future production
784,308

 
194,908

 
94,698

 
1,073,914

Purchase of minerals in place
1,452,169

 
—

 
—

 
1,452,169

Extensions, discoveries, and improved recovery
552,704

 
—

 
—

 
552,704

Previously estimated development costs incurred during the period
306,827

 
—

 
—

 
306,827

Net change due to revisions in quantity estimates
(292,343
)
 
8,278

 
19,811

 
(264,254
)
Accretion of discount
422,353

 
102,918

 
106,219

 
631,490

Changes in production rates and other
(39,324
)
 
(122,707
)
 
(155,318
)
 
(317,349
)
 
$
2,391,328

 
$
(46,801
)
 
$
(83,724
)
 
$
2,260,803

It is necessary to emphasize that the data presented should not be viewed as representing the expected cash flow from, or current value of, existing proved reserves since the computations are based on a large number of estimates and arbitrary assumptions. Reserve quantities cannot be measured with precision and their estimation requires many judgmental determinations and frequent revisions. The required projection of production and related expenditures over time requires further estimates with respect to pipeline availability, rates of demand and governmental control. Actual future prices and costs are likely to be substantially different from the current prices and costs utilized in the computation of reported amounts. Any analysis or evaluation of the reported amounts should give specific recognition to the computational methods utilized and the limitations inherent therein.

11