10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2013

or

o 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: 001-36026

ATHLON ENERGY INC.

(Exact name of registrant as specified in its charter)

Delaware	46-2549833
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
420 Throckmorton Street, Suite 1200, Fort Worth, Texas	76102
(Address of principal executive offices)	(Zip Code)

(817) 984-8200

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o

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

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

Large accelerated filer o	Accelerated filer o
Non-accelerated filer x (Do not check if a smaller reporting company)	Smaller reporting company o

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

As of November 14, 2013, we had 82,129,089 outstanding shares of common stock, $0.01 par value, excluding Athlon Holdings LP units exchangeable for 1,855,563 shares of our common stock.

ATHLON ENERGY INC.

INDEX

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets as of September 30, 2013 and December 31, 2012	1
	Consolidated Statements of Operations for the three and nine months ended September 30, 2013 and 2012	2
	Consolidated Statement of Changes in Equity for the nine months ended September 30, 2013	3
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2013 and 2012	4
	Notes to Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	37
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 5.	Other Information	38
Item 6.	Exhibits	39

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

Certain information included in this Quarterly Report on Form 10-Q (the “Report”) and our other materials filed with the United States Securities and Exchange Commission (“SEC”), or in other written or oral statements made or to be made by us, other than statements of historical fact, are forward-looking statements.  These forward-looking statements give our current expectations or forecasts of future events.  Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts.  These statements may include words such as “may”, “will”, “could”, “anticipate”, “estimate”, “expect”, “project”, “intend”, “plan”, “believe”, “should”, “predict”, “potential”, “pursue”, “target”, “continue”, and other words and terms of similar meaning.  You are cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date of this Report.  Our actual results may differ significantly from the results discussed in the forward-looking statements.  Such statements involve risks and uncertainties, including, but not limited to, the matters discussed in “Risk Factors” in our final prospectus dated August 1, 2013 and filed with the SEC pursuant to Rule 424(b)(4) of the Securities Act of 1933, as amended (the “Securities Act”) on August 5, 2013.  If one or more of these risks or uncertainties materialize (or the consequences of such a development changes), or should underlying assumptions prove incorrect, actual outcomes may vary materially from those forecasted or expected.  We undertake no responsibility to update forward-looking statements for changes related to these or any other factors that may occur subsequent to this filing for any reason.

i

GLOSSARY

The following are abbreviations and definitions of certain terms used in this Report:

·Basin.  A large natural depression on the earth’s surface in which sediments generally brought by water accumulate.

·Bbl.  One stock tank barrel, of 42 U.S. gallons liquid volume, used in reference to crude oil, condensate, or natural gas liquids.

·Bbl/D.  One Bbl per day.

·BOE.  One barrel of oil equivalent, with 6,000 cubic feet of natural gas being equivalent to one barrel of oil.

·BOE/D.  One barrel of oil equivalent per day.

·Completion.  The process of treating a drilled well followed by the installation of permanent equipment for the production of oil or natural gas, or in the case of a dry hole, the reporting of abandonment to the appropriate agency.

·Condensate.  A mixture of hydrocarbons that exists in the gaseous phase at original reservoir temperature and pressure, but that, when produced, is in the liquid phase at surface pressure and temperature.

·Developed acreage.  The number of acres that are allocated or assignable to productive wells or wells capable of production.

·Development capital.  Expenditures to obtain access to proved reserves and to construct facilities for producing, treating, and storing hydrocarbons.

·Dry hole.  A well found to be incapable of producing hydrocarbons in sufficient quantities such that proceeds from the sale of such production exceed production expenses and taxes.

·Economically producible.  A resource that generates revenue that exceeds, or is reasonably expected to exceed, the costs of the operation.  For a complete definition of economically producible, refer to the SEC’s Regulation S-X, Rule 4-10(a)(10).

·Exploratory well.  A well drilled to find a new field or to find a new reservoir in a field previously found to be productive of oil or natural gas in another reservoir.

·FASB.  Financial Accounting Standards Board.

·Field.  An area consisting of a single reservoir or multiple reservoirs all grouped on or related to the same individual geological structural feature and/or stratigraphic condition.  The field name refers to the surface area, although it may refer to both the surface and the underground productive formations.  For a complete definition of field, refer to the SEC’s Regulation S-X, Rule 4-10(a)(15).

·Formation.  A layer of rock which has distinct characteristics that differ from nearby rock.

·GAAP.  Accounting principles generally accepted in the United States.

·Gross acres or Gross wells.  The total acres or wells, as the case may be, in which an entity owns a working interest.

·Holdings.  Athlon Holdings LP, our accounting predecessor.

·Horizontal drilling.  A drilling technique used in certain formations where a well is drilled vertically to a certain depth and then drilled at a right angle within a specified interval.

·Infill wells.  Wells drilled into the same pool as known producing wells so that oil or natural gas does not have to travel as far through the formation.

·Lease operating expense (“LOE”).  All direct and allocated indirect costs of lifting hydrocarbons from a producing formation to the surface constituting part of the current operating expenses of a working interest.  Such costs include labor, superintendence, supplies, repairs, maintenance, allocated overhead charges, workover, insurance, and other expenses incidental to production, but exclude lease acquisition or drilling or completion expenses.

·LIBOR.  London Interbank Offered Rate.

·MBbl.  One thousand barrels of crude oil, condensate, or NGLs.

·MBOE.  One thousand barrels of oil equivalent.

·Mcf.  One thousand cubic feet of natural gas.

·MMBOE.  One million barrels of oil equivalent.

·MMcf.  One million cubic feet of natural gas.

·MMcf/D.  One million cubic feet of natural gas per day.

·MMcfe/D.  One million cubic feet of natural gas equivalent per day.

·Natural gas liquids (“NGLs”).  The combination of ethane, propane, butane, isobutane, and natural gasolines that when removed from natural gas become liquid under various levels of higher pressure and lower temperature.

·Net acres or Net wells.  The percentage of total acres or wells, as the case may be, an owner has out of a particular number of gross acres or wells.  For example, an owner who has 50% interest in 100 gross acres owns 50 net acres.

·NYMEX.  The New York Mercantile Exchange.

·Operator.  The entity responsible for the exploration, development, and production of a well or lease.

ii

·Production margin.  Total wellhead revenues less total production costs.

·Productive well.  A well that is found to be capable of producing hydrocarbons in sufficient quantities such that proceeds from the sale of the production exceed production expenses and taxes.

·Proved developed reserves.  Proved reserves that can be expected to be recovered:

i.Through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared with the cost of a new well; or

ii.Through installed extraction equipment and infrastructure operational at the time of the reserves estimate if the extraction is by means not involving a well.

·Proved reserves.  Those quantities of oil and natural gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible—from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations—prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation.  The project to extract the hydrocarbons must have commenced, or the operator must be reasonably certain that it will commence, the project within a reasonable time.  For a complete definition of proved oil and natural gas reserves, refer to the SEC’s Regulation S-X, Rule 4-10(a)(22).

·Proved undeveloped reserves (PUDs).  Proved reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion.

Reserves on undrilled acreage shall be limited to those directly offsetting development spacing areas that are reasonably certain of production when drilled, unless evidence using reliable technology exists that establishes reasonable certainty of economic producibility at greater distances.

Undrilled locations can be classified as having undeveloped reserves only if a development plan has been adopted indicating that they are scheduled to be drilled within five years, unless the specific circumstances justify a longer time.

Under no circumstances shall estimates for proved undeveloped reserves be attributable to any acreage for which an application of fluid injection or other improved recovery technique is contemplated, unless such techniques have been proved effective by actual projects in the same reservoir or an analogous reservoir, or by other evidence using reliable technology establishing reasonable certainty.

·Reasonable certainty.  A high degree of confidence.  For a complete definition of reasonable certainty, refer to the SEC’s Regulation S-X, Rule 4-10(a)(24).

·Recompletion.  The process of re-entering an existing wellbore that is either producing or not producing and completing new reservoirs in an attempt to establish or increase existing production.

·Reliable technology.  A grouping of one or more technologies (including computational methods) that have been field tested and have been demonstrated to provide reasonably certain results with consistency and repeatability in the formation being evaluated or in an analogous formation.

·Reserves.  Estimated remaining quantities of oil and natural gas and related substances anticipated to be economically producible, as of a given date, by application of development prospects to known accumulations.  In addition, there must exist, or there must be a reasonable expectation that there will exist, the legal right to produce or a revenue interest in the production, installed means of delivering oil and natural gas or related substances to market, and all permits and financing required to implement the project.

·Reservoir.  A porous and permeable underground formation containing a natural accumulation of producible hydrocarbons that is confined by impermeable rock or water barriers and is separate from other reservoirs.

·Spacing.  The distance between wells producing from the same reservoir.  Spacing is often expressed in terms of acres, e.g., 40-acre spacing, and is often established by regulatory agencies.

·Stacked pay.  Multiple geological zones that potentially contain hydrocarbons and are arranged in a vertical stack.

·Undeveloped acreage.  Lease acreage on which wells have not been drilled or completed to a point that would permit the production of economic quantities of oil or natural gas regardless of whether such acreage contains proved reserves.

·Wellbore.  The hole drilled by the bit that is equipped for oil or gas production on a completed well.  Also called well or borehole.

·Working interest.  The right granted to the lessee of a property to explore for and to produce and own oil, natural gas, or other minerals.  The working interest owners bear the exploration, development, and operating costs on either a cash, penalty, or carried basis.

·Workover.  Operations on a producing well to restore or increase production.

·WTI.  West Texas Intermediate crude oil, which is a light, sweet crude oil, characterized by an American Petroleum Institute gravity, or API gravity, between 39 and 41 and a sulfur content of approximately 0.4 weight percent that is used as a benchmark for other crude oils.

iii

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ATHLON ENERGY INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and par value amounts)

	September 30,			December 31,
	2013			2012
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	196,888		$	8,871
Accounts receivable	45,851			24,501
Derivatives, at fair value	—			2,246
Inventory	972			1,022
Other	1,205			2,486
Total current assets	244,916			39,126
Properties and equipment, at cost - full cost method:
Proved properties, including wells and related equipment	1,084,881			788,571
Unproved properties	110,095			89,860
Accumulated depletion, depreciation, and amortization	(135,689		)	(73,824		)
	1,059,287			804,607
Derivatives, at fair value	1,211			2,854
Debt issuance costs	14,603			4,418
Other	1,400			1,293
Total assets	$	1,321,417		$	852,298
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable:
Trade	$	2,338		$	3,170
Affiliate	2			935
Accrued liabilities:
Lease operating	5,391			3,858
Production, severance, and ad valorem taxes	5,362			1,307
Development capital	60,092			39,483
Interest	16,802			834
Derivatives, at fair value	10,185			592
Revenue payable	19,550			9,330
Deferred taxes	14,529			58
Other	2,021			1,808
Total current liabilities	136,272			61,375
Derivatives, at fair value	992			519
Asset retirement obligations, net of current portion	6,439			5,049
Long-term debt	500,000			362,000
Deferred taxes	67,878			2,340
Other	109			138
Total liabilities	711,690			431,421
Commitments and contingencies
Equity:
Partners’ equity	—			420,877
Preferred stock, $.01 par value, at September 30, 2013, 50,000,000 shares authorized, none issued and outstanding	—			—
Common stock, $.01 par value, at September 30, 2013, 500,000,000 shares authorized, 82,189,089 issued and outstanding	821			—
Additional paid-in capital	588,583			—
Retained earnings	10,278			—
Total stockholders’ equity	599,682			—
Noncontrolling interest	10,045			—
Total equity	609,727			420,877
Total liabilities and equity	$	1,321,417		$	852,298

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

1

ATHLON ENERGY INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)

	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013			2012
Revenues:
Oil	$	75,666		$	34,357		$	175,934		$	91,407
Natural gas	4,164			2,383			11,894			5,323
Natural gas liquids	8,595			5,346			20,508			14,379
Total revenues	88,425			42,086			208,336			111,109
Expenses:
Production:
Lease operating	8,762			7,205			23,774			17,846
Production, severance, and ad valorem taxes	5,439			2,806			13,380			7,617
Processing, gathering, and overhead	59			29			169			55
Depletion, depreciation, and amortization	23,611			15,091			62,022			37,770
General and administrative	6,725			2,134			13,723			7,212
Contract termination fee	2,408			—			2,408			—
Derivative fair value loss (gain)	27,037			14,268			21,331			(9,590		)
Accretion of discount on asset retirement obligations	174			123			485			343
Total expenses	74,215			41,656			137,292			61,253
Operating income	14,210			430			71,044			49,856
Other income (expenses):
Interest	(10,039		)	(2,602		)	(26,595		)	(5,804		)
Other	30			—			30			2
Total other expenses	(10,009		)	(2,602		)	(26,565		)	(5,802		)
Income (loss) before income taxes	4,201			(2,172		)	44,479			44,054
Income tax provision (benefit)	1,934			(76		)	6,805			1,546
Consolidated net income (loss)	2,267			(2,096		)	37,674			42,508
Less: net income (loss) attributable to noncontrolling interest	(215		)	—			616			—
Net income (loss) attributable to stockholders	$	2,482		$	(2,096	)	$	37,058		$	42,508
Net income (loss) per common share:
Basic	$	0.03		$	(0.03	)	$	0.53		$	0.64
Diluted	$	0.03		$	(0.03	)	$	0.53		$	0.62
Weighted average common shares outstanding:
Basic	76,637			66,340			69,810			66,340
Diluted	78,493			66,340			71,666			68,196

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

2

ATHLON ENERGY INC.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(in thousands)

(unaudited)

				Athlon Stockholders
				Issued
				Shares of			Additional					Total
	Partners’			Common	Common		Paid-in			Retained		Stockholders’			Noncontrolling		Total
	Equity			Stock	Stock		Capital			Earnings		Equity			Interest		Equity
Balance at December 31, 2012	$	420,877		—	$	—	$	—		$	—	$	—		$	—	$	420,877
Capital contributions	1,500			—	—		—			—		—			—		1,500
Equity-based compensation prior to corporate reorganization	89			—	—		—			—		—			—		89
Net income prior to corporate reorganization	26,780			—	—		—			—		—			—		26,780
Distributions to Athlon Holdings LP’s Class A limited partners	(75,000		)	—	—		—			—		—			—		(75,000		)
Common stock issued in corporate reorganization	(374,246		)	66,340	663		364,154			—		364,817			9,429		—
Tax impact of corporate reorganization	—			—	—		(73,204		)	—		(73,204		)	—		(73,204		)
Equity-based compensation subsequent to corporate reorganization	—			—	—		2,160			—		2,160			—		2,160
Shares of common stock sold in initial public offering, net of offering costs	—			15,789	158		295,473			—		295,631			—		295,631
Consolidated net income subsequent to corporate reorganization	—			—	—		—			10,278		10,278			616		10,894
Balance at September 30, 2013	$	—		82,129	$	821	$	588,583		$	10,278	$	599,682		$	10,045	$	609,727

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

3

ATHLON ENERGY INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Nine months ended September 30,
	2013			2012
Cash flows from operating activities:
Consolidated net income	$	37,674		$	42,508
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Depletion, depreciation, and amortization	62,022			37,770
Deferred taxes	6,805			1,546
Non-cash derivative loss (gain)	13,955			(11,760		)
Equity-based compensation	1,799			118
Other	4,756			952
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable	(21,350		)	(7,390		)
Other current assets	(155		)	(975		)
Accounts payable	(702		)	(461		)
Accrued interest	15,968			478
Revenue payable	9,718			3,317
Other current liabilities	6,285			(3,349		)
Net cash provided by operating activities	136,775			62,754
Cash flows from investing activities:
Acquisitions of oil and natural gas properties	(36,533		)	(3,290		)
Development of oil and natural gas properties	(257,984		)	(183,327		)
Other	(486		)	(283		)
Net cash used in investing activities	(295,003		)	(186,900		)
Cash flows from financing activities:
Proceeds from long-term debt, net of issuance costs	629,627			425,684
Payments on long-term debt	(505,926		)	(325,000		)
Distributions to Athlon Holdings LP’s Class A limited partners	(75,000		)	—
Shares of common stock sold in initial public offering, net of offering costs	296,044			—
Other	1,500			166
Net cash provided by financing activities	346,245			100,850
Increase (decrease) in cash and cash equivalents	188,017			(23,296		)
Cash and cash equivalents, beginning of period	8,871			32,030
Cash and cash equivalents, end of period	$	196,888		$	8,734

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

4

ATHLON ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1.Formation of the Company and Description of Business

Athlon Energy Inc. (together with its subsidiaries, “Athlon”), a Delaware corporation, was formed on April 1, 2013 and is an independent exploration and production company focused on the acquisition, development, and exploitation of unconventional oil and liquids-rich natural gas reserves in the Permian Basin.

On April 26, 2013, Athlon Holdings LP (together with its subsidiaries, “Holdings”), a Delaware limited partnership, underwent a corporate reorganization and as a result, Holdings became a majority-owned subsidiary of Athlon.  Holdings is considered Athlon’s accounting predecessor.  Athlon operates and controls all of the business and affairs of Holdings and consolidates its financial results.  Holdings is not subject to federal income taxes.  On the date of the corporate reorganization, a corresponding “first day” net deferred tax liability of approximately $73.2 million was recorded for differences between the tax and book basis of Athlon’s assets and liabilities.  The offset of the deferred tax liability was recorded to additional paid-in capital.

Prior to the corporate reorganization, Holdings was a party to a limited partnership agreement with its management group and Apollo Athlon Holdings, LP (“Apollo”), which is an affiliate of Apollo Global Management, LLC.  Prior to the corporate reorganization, Apollo Investment Fund VII, L.P. and its parallel funds (the “Apollo Funds”), members of Holdings’ management team, and certain employees owned all of the Class A limited partner interests in Holdings and members of Holdings’ management team and certain employees owned all of the Class B limited partner interests in Holdings.

In the corporate reorganization, the Apollo Funds entered into a number of distribution and contribution transactions pursuant to which the Apollo Funds exchanged their Class A limited partner interests in Holdings for common stock of Athlon.  The remaining holders of Class A limited partner interests in Holdings have not exchanged their interests in the reorganization transactions.  In addition, the holders of the Class B limited partner interests in Holdings exchanged their interests for common stock of Athlon subject to the same conditions and vesting terms.

Initial Public Offering

On August 7, 2013, Athlon completed its initial public offering (“IPO”) of 15,789,474 shares of its common stock at $20.00 per share and received net proceeds of approximately $295.6 million, after deducting underwriting discounts and commissions and offering expenses.  Upon closing of the IPO, the limited partnership agreement of Holdings was amended and restated to, among other things, modify Holdings’ capital structure by replacing its different classes of interests with a single new class of units, the “New Holdings Units”.  The members of Holdings’ management team and certain employees that held Class A limited partner interests now own 1,855,563 New Holdings Units and entered into an exchange agreement under which (subject to the terms of the exchange agreement) they have the right to exchange their New Holdings Units for shares of common stock of Athlon on a one-for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends, and reclassifications.  All other New Holdings Units are held by Athlon.  Athlon used the net proceeds from the IPO to purchase New Holdings Units from Holdings.  Holdings used the proceeds it received as a result of Athlon’s purchase of New Holdings Units (i) to reduce outstanding borrowings under its credit agreement, (ii) to provide additional liquidity for use in its drilling program, and (iii) for general corporate purposes, including potential acquisitions.

Note 2.Basis of Presentation

Athlon’s consolidated financial statements include the accounts of its wholly owned and majority-owned subsidiaries.  All material intercompany balances and transactions have been eliminated in consolidation.

In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments necessary to present fairly, in all material respects, Athlon’s financial position as of September 30, 2013, results of operations for the three and nine months ended September 30, 2013 and 2012, and cash flows for the nine months ended September 30, 2013 and 2012.  All adjustments are of a normal recurring nature.  These interim results are not necessarily indicative of results for an entire year.

Certain amounts and disclosures have been condensed and omitted from the unaudited consolidated financial statements pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”).  Therefore, these unaudited consolidated financial statements should be read in conjunction with Holdings’ audited consolidated financial statements and related notes thereto included in Athlon’s final prospectus dated August 1, 2013 and filed with the SEC pursuant to Rule 424(b)(4) of the Securities Act of 1933, as amended, on August 5, 2013.

5

ATHLON ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued

(unaudited)

Income Taxes

Athlon accounts for income taxes using the asset and liability method.  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.  Deferred tax assets and liabilities are measured using enacted tax laws and rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

Athlon periodically assesses whether it is more likely than not that it will generate sufficient taxable income to realize its deferred income tax assets, including net operating losses.  In making this determination, Athlon considers all available positive and negative evidence and makes certain assumptions.  Athlon considers, among other things, its deferred tax liabilities, the overall business environment, its historical earnings and losses, current industry trends, and its outlook for future years.  Athlon believes it is more likely than not that certain net operating losses can be carried forward and utilized.

In April 2013, Athlon had a corporate reorganization to effectuate its IPO.  Holdings, Athlon’s accounting predecessor, is a partnership not subject to federal income tax.  Pursuant to the steps of the corporate reorganization, certain Class A limited partners and the Class B limited partners of Holdings exchanged their interests for shares of Athlon’s common stock.  Athlon’s operations are now subject to federal income tax.  The tax implications of the corporate reorganization and the tax impact of the conversion to operating as a taxable entity have been reflected in the accompanying consolidated financial statements.

Noncontrolling Interest

As of September 30, 2013, management and employees owned approximately 2.2% of Holdings.  Athlon owns 100% of Athlon Holdings GP LLC, which is Holdings’ general partner.  Considering the presumption of control, Athlon has fully consolidated the financial position, results of operations, and cash flows of Holdings.

As presented in the accompanying Consolidated Balance Sheets, “Noncontrolling interest” as of September 30, 2013 of approximately $10.0 million represents management and employees’ 1,855,563 New Holdings Units that are exchangeable for shares of Athlon’s common stock on a one-for-one basis.  As presented in the accompanying Consolidated Statements of Operations, “Net income (loss) attributable to noncontrolling interest” for the three and nine months ended September 30, 2013 of approximately $(0.2) million and $0.6 million, respectively, represents the net income of Holdings attributable to management and employees since April 26, 2013.

The following table summarizes the effects of changes in Athlon’s partnership interest in Holdings on Athlon’s equity for the periods indicated:

	Three months ended September 30, 2013		Nine months ended September 30, 2013
	(in thousands)
Net income attributable to stockholders	$	2,482	$	37,058
Transfer from noncontrolling interest:
Increase in Athlon’s paid-in capital for corporate reorganization	—		290,950
Increase in Athlon’s paid-in capital for issuance of 15,789,474 shares of common stock in initial public offering	295,473		295,473
Net transfer from noncontrolling interest	295,473		586,423
Change from net income attributable to stockholders and transfers from (to) noncontrolling interest	$	297,955	$	623,481

6

ATHLON ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued

(unaudited)

New Accounting Pronouncements

In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2011-11, “Disclosures about Offsetting Assets and Liabilities” and in January 2013 issued ASU 2013-01, “Clarifying the Scope of Disclosures About Offsetting Assets and Liabilities”.  These ASUs created new disclosure requirements regarding the nature of an entity’s rights of setoff and related arrangements associated with its derivative instruments, repurchase agreements, and securities lending transactions.  Certain disclosures of the amounts of certain instruments subject to enforceable master netting arrangements are required, irrespective of whether the entity has elected to offset those instruments in the statement of financial position.  These ASUs were effective retrospectively for annual reporting periods beginning on or after January 1, 2013.  The adoption of these ASUs did not impact Athlon’s financial position, results of operations, or liquidity.

No other new accounting pronouncements issued or effective from January 1, 2013 through the date of this Report, had or are expected to have a material impact on Athlon’s unaudited consolidated financial statements.

Note 3. Proved Properties

Amounts shown in the accompanying Consolidated Balance Sheets as “Proved properties, including wells and related equipment” consisted of the following as of the dates indicated:

	September 30,		December 31,
	2013		2012
	(in thousands)
Proved leasehold costs	$	411,657	$	376,271
Wells and related equipment - Completed	634,980		379,036
Wells and related equipment - In process	38,244		33,264
Total proved properties	$	1,084,881	$	788,571

Note 4.  Fair Value Measurements

The book values of cash and cash equivalents, accounts receivable, and accounts payable approximate fair value due to the short-term nature of these instruments.  Commodity derivative contracts are marked-to-market each quarter and are thus stated at fair value in the accompanying Consolidated Balance Sheets.  As of September 30, 2013, the fair value of the senior notes was approximately $515.6 million using open market quotes (“Level 1” input).

Derivative Policy

Athlon uses various financial instruments for non-trading purposes to manage and reduce price volatility and other market risks associated with its oil production.  These arrangements are structured to reduce Athlon’s exposure to commodity price decreases, but they can also limit the benefit Athlon might otherwise receive from commodity price increases.  Athlon’s risk management activity is generally accomplished through over-the-counter commodity derivative contracts with large financial institutions, most of which are lenders underwriting Holdings’ credit agreement.

Athlon applies the provisions of the “Derivatives and Hedging” topic of the Accounting Standards Codification, which requires each derivative instrument to be recorded in the accompanying Consolidated Balance Sheets at fair value.  If a derivative has not been designated as a hedge or does not otherwise qualify for hedge accounting, it must be adjusted to fair value through earnings.  Athlon elected not to designate its current portfolio of commodity derivative contracts as hedges for accounting purposes.  Therefore, changes in fair value of these derivative instruments are recognized in earnings and included in “Derivative fair value loss (gain)” in the accompanying Consolidated Statements of Operations.

Athlon enters into commodity derivative contracts for the purpose of economically fixing the price of its anticipated oil production even though Athlon does not designate the derivatives as hedges for accounting purposes.  Athlon classifies cash flows related to derivative contracts based on the nature and purpose of the derivative.  As the derivative cash flows are considered an integral part of Athlon’s oil and natural gas operations, they are classified as cash flows from operating activities in the accompanying Consolidated Statements of Cash Flows.

Commodity Derivative Contracts

Commodity prices are often subject to significant volatility due to many factors that are beyond Athlon’s control, including but not limited to: prevailing economic conditions, supply and demand of hydrocarbons in the marketplace, actions by speculators, and geopolitical events such as wars or natural disasters.  Athlon manages oil price risk with swaps and collars.  Swaps provide a fixed

7

ATHLON ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued

(unaudited)

price for a notional amount of sales volumes.  Collars provide a floor price on a notional amount of sales volumes while allowing some additional price participation if the relevant index price closes above the floor price.  This participation is limited by a ceiling price specified in the contract.

The following table summarizes Athlon’s open commodity derivative contracts as of September 30, 2013:

	Average	Weighted -		Average	Weighted -		Average	Weighted -		Asset
	Daily	Average		Daily	Average		Daily	Average		(Liability)
	Floor	Floor		Cap	Cap		Swap	Swap		Fair Market
Period	Volume	Price		Volume	Price		Volume	Price		Value
	(Bbl)	(per Bbl)		(Bbl)	(per Bbl)		(Bbl)	(per Bbl)		(in thousands)
Oct. - Dec. 2013	150	$	75.00	150	$	105.95	7,000	$	95.01	$	(4,205	)
2014	—	—		—	—		7,950	92.67		(7,532		)
2015	—	—		—	—		1,300	93.18		2,101
										$	(9,636	)

Athlon is also a party to Midland-Cushing basis differential swaps for 5,000 Bbls/D at $1.20/Bbl for the fourth quarter of 2013.  At September 30, 2013, the fair value of these contracts was a liability of approximately $0.3 million.

Counterparty Risk.  At September 30, 2013, Athlon had committed 10% or greater (in terms of fair market value) of its oil derivative contracts in asset positions from the following counterparties, or their affiliates:

	Fair Market Value of
	Oil Derivative
	Contracts
Counterparty	Committed
	(in thousands)
BNP Paribas	$	458

Athlon does not require collateral from its counterparties for entering into financial instruments, so in order to mitigate the credit risk associated with financial instruments, Athlon enters into master netting agreements with its counterparties.  The master netting agreement is a standardized, bilateral contract between a given counterparty and Athlon.  Instead of treating each financial transaction between the counterparty and Athlon separately, the master netting agreement enables the counterparty and Athlon to aggregate all financial trades and treat them as a single agreement.  This arrangement is intended to benefit Athlon in two ways: (i) default by a counterparty under a single financial trade can trigger rights to terminate all financial trades with such counterparty; and (ii) netting of settlement amounts reduces Athlon’s credit exposure to a given counterparty in the event of close-out.  Athlon’s accounting policy is to not offset fair value amounts between different counterparties for derivative instruments in the accompanying Consolidated Balance Sheets.

8

ATHLON ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued

(unaudited)

Tabular Disclosures of Fair Value Measurements

The following table summarizes the fair value of Athlon’s derivative instruments not designated as hedging instruments as of the dates indicated:

	Oil			Commodity			Total
Balance Sheet	Commodity			Derivatives			Commodity
Location	Derivatives			Netting (a)			Derivatives
	(in thousands)
As of September 30, 2013
Assets
Derivatives - current	$	162		$	(162	)	$	—
Derivatives - noncurrent	2,149			(938		)	1,211
Total assets	2,311			(1,100		)	1,211
Liabilities
Derivatives - current	(10,347		)	162			(10,185		)
Derivatives - noncurrent	(1,930		)	938			(992		)
Total liabilities	(12,277		)	1,100			(11,177		)
Net liabilities	$	(9,966	)	$	—		$	(9,966	)
As of December 31, 2012
Assets
Derivatives - current	$	3,386		$	(1,140	)	$	2,246
Derivatives - noncurrent	3,265			(411		)	2,854
Total assets	6,651			(1,551		)	5,100
Liabilities
Derivatives - current	(1,732		)	1,140			(592		)
Derivatives - noncurrent	(930		)	411			(519		)
Total liabilities	(2,662		)	1,551			(1,111		)
Net assets	$	3,989		$	—		$	3,989

(a)Represents counterparty netting under master netting agreements, which allow for netting of commodity derivative contracts.  These derivative instruments are reflected net on the accompanying Consolidated Balance Sheets.

The following table summarizes the effect of derivative instruments not designated as hedges on the accompanying Consolidated Statements of Operations for the periods indicated (in thousands):

		Amount of Loss (Gain) Recognized in Income
	Location of Loss (Gain)	Three months ended September 30,				Nine months ended September 30,
Derivatives Not Designated as Hedges	Recognized in Income	2013		2012		2013		2012
Commodity derivative contracts	Derivative fair value loss (gain)	$	27,037	$	14,268	$	21,331	$	(9,590	)

Fair Value Hierarchy

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  Accounting principles generally accepted in the United States (“GAAP”) establishes a three-tier fair value hierarchy, which prioritizes the inputs used to measure fair value.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).  The three levels of the fair value hierarchy are defined as follows:

·Level 1 — Inputs such as unadjusted, quoted prices that are available in active markets for identical assets or liabilities.

·Level 2 — Inputs, other than quoted prices within Level 1, that are either directly or indirectly observable, such as quoted prices for similar assets and liabilities or quoted prices in inactive markets.

9

ATHLON ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued

(unaudited)

·Level 3 — Inputs that are unobservable for use when little or no market data exists requiring the use of valuation methodologies that result in management’s best estimate of fair value.

As required by GAAP, Athlon utilizes the most observable inputs available for the valuation technique used.  The financial assets and liabilities are classified in their entirety based on the lowest level of input that is of significance to the fair value measurement.  Athlon’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the financial assets and liabilities and their placement within the fair value hierarchy levels.  The following methods and assumptions were used to estimate the fair values of Athlon’s assets and liabilities that are accounted for at fair value on a recurring basis:

·Level 2 — Fair values of swaps are estimated using a combined income-based and market-based valuation methodology based upon forward commodity price curves obtained from independent pricing services.  Athlon’s collars are average value options.  Settlement is determined by the average underlying price over a predetermined period of time.  Athlon uses observable inputs in an option pricing valuation model to determine fair value such as: (i) current market and contractual prices for the underlying instruments; (ii) quoted forward prices for oil and natural gas; (iii) interest rates, such as a LIBOR curve for a term similar to the commodity derivative contract; and (iv) appropriate volatilities.

Athlon adjusts the valuations from the valuation model for nonperformance risk.  For commodity derivative contracts which are in an asset position, Athlon adds the counterparty’s credit default swap spread to the risk-free rate.  If a counterparty does not have a credit default swap spread, Athlon uses other companies with similar credit ratings to determine the applicable spread.  For commodity derivative contracts which are in a liability position, Athlon uses the yield on its senior notes less the risk-free rate.  All fair values have been adjusted for nonperformance risk resulting in a decrease in the net commodity derivative liability of approximately $136,000 as of September 30, 2013 and an increase in the net commodity derivative asset of approximately $125,000 as of December 31, 2012.

The following table sets forth Athlon’s assets and liabilities that were accounted for at fair value on a recurring basis as of the dates indicated:

				Fair Value Measurements at Reporting Date Using
				Quoted Prices in
				Active Markets for		Significant Other			Significant
				Identical Assets		Observable Inputs			Unobservable Inputs
Description	Asset (liability), net			(Level 1)		(Level 2)			(Level 3)
	(in thousands)
As of September 30, 2013
Oil derivative contracts - swaps	$	(9,622	)	$	—	$	(9,622	)	$	—
Oil derivative contracts - basis differential swaps	(330		)	—		(330		)	—
Oil derivative contracts - collars	(14		)	—		(14		)	—
Total	$	(9,966	)	$	—	$	(9,966	)	$	—
As of December 31, 2012
Oil derivative contracts - swaps	$	4,069		$	—	$	4,069		$	—
Oil derivative contracts - collars	(80		)	—		(80		)	—
Total	$	3,989		$	—	$	3,989		$	—

10

ATHLON ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued

(unaudited)

Note 5. Asset Retirement Obligations

Asset retirement obligations relate to future plugging and abandonment expenses on oil and natural gas properties and related facilities disposal.  The following table summarizes the changes in Athlon’s asset retirement obligations for the nine months ended September 30, 2013 (in thousands):

Balance at January 1	$	5,049
Liabilities assumed in acquisitions	335
Liabilities incurred from new wells	735
Liabilities settled	(108		)
Accretion of discount	485
Revisions of previous estimates	3
Balance at September 30	6,499
Less: current portion	60
Asset retirement obligations - long-term	$	6,439

Note 6. Long-Term Debt

Senior Notes

In April 2013, Holdings issued $500 million aggregate principal amount of 7 3/8% senior notes due 2021 (the “Notes”).  The net proceeds from the Notes were used to repay a portion of the outstanding borrowings under Holdings’ credit agreement, to repay in full and terminate Holdings’ former second lien term loan, to make a $75 million distribution to Holdings’ Class A limited partners, and for general partnership purposes.  On August 14, 2013, Holdings entered into a supplemental indenture pursuant to which Athlon became an unconditional guarantor of the Notes.

The indenture governing the Notes contains covenants, including, among other things, covenants that restrict Holdings’ ability to:

·make distributions, investments, or other restricted payments if Holdings’ fixed charge coverage ratio is less than 2.0 to 1.0;

·incur additional indebtedness if Holdings’ fixed charge coverage ratio would be less than 2.0 to 1.0; and

·create liens, sell assets, consolidate or merge with any other person, or engage in transactions with affiliates.

These covenants are subject to a number of important qualifications, limitations, and exceptions.  In addition, the indenture contains other customary terms, including certain events of default upon the occurrence of which the senior notes may be declared immediately due and payable.

Under the indenture, starting on April 15, 2016, Holdings will be able to redeem some or all of the Notes at a premium that will decrease over time, plus accrued and unpaid interest to the date of redemption.  Prior to April 15, 2016, Holdings will be able, at its option, to redeem up to 35% of the aggregate principal amount of the Notes at a price of 107.375% of the principal thereof, plus accrued and unpaid interest to the date of redemption, with an amount equal to the net proceeds from certain equity offerings.  In addition, at Holdings’ option, prior to April 15, 2016, Holdings may redeem some or all of the Notes at a redemption price equal to 100% of the principal amount of the Notes, plus an “applicable premium”, plus accrued and unpaid interest to the date of redemption.  If a change of control occurs on or prior to July 15, 2014, Holdings may redeem all, but not less than all, of the notes at 110% of the principal amount thereof plus accrued and unpaid interest to, but not including, the redemption date.  Certain asset dispositions will be triggering events that may require Holdings to repurchase all or any part of a noteholder’s Notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to but excluding the date of repurchase.  Interest on the Notes is payable in cash semi-annually in arrears, commencing on October 15, 2013, through maturity.

As a result of the issuance of the Notes, Holdings’ former second lien term loan was paid off and retired and the borrowing base of the credit agreement was reduced resulting in a write off of unamortized debt issuance costs of approximately $2.8 million, which is included in “Interest expense” in the accompanying Consolidated Statements of Operations and “Other” in the operating activities section of the accompanying Consolidated Statements of Cash Flows for the nine months ended September 30, 2013.

11

ATHLON ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued

(unaudited)

Credit Agreement

Holdings is a party to an amended and restated credit agreement dated March 19, 2013 (the “Holdings Credit Agreement”), which matures on March 19, 2018.  The Holdings Credit Agreement provides for revolving credit loans to be made to Holdings from time to time and letters of credit to be issued from time to time for the account of Holdings or any of its restricted subsidiaries.  The aggregate amount of the commitments of the lenders under the Holdings Credit Agreement is $1.0 billion.  Availability under the Holdings Credit Agreement is subject to a borrowing base, which is redetermined semi-annually and upon requested special redeterminations.

In conjunction with the offering of the Notes in April 2013 as discussed above, the borrowing base under the Holdings Credit Agreement was reduced to $267.5 million.  In May 2013, Holdings amended the Holdings Credit Agreement to, among other things, increase the borrowing base to $320 million.  As of September 30, 2013, the borrowing base was $320 million and there were no outstanding borrowings and no outstanding letters of credit under the Holdings Credit Agreement.  Please see “Note 12. Subsequent Events” for discussion of Athlon’s borrowing base redetermination.

Obligations under the Holdings Credit Agreement are secured by a first-priority security interest in substantially all of Holdings’ proved reserves and in the equity interests of its operating subsidiaries.  In addition, obligations under the Holdings Credit Agreement are guaranteed by Athlon and Holdings’ operating subsidiaries.

Loans under the Holdings Credit Agreement are subject to varying rates of interest based on (i) outstanding borrowings in relation to the borrowing base and (ii) whether the loan is a Eurodollar loan or a base rate loan.  Eurodollar loans under the Holdings Credit Agreement bear interest at the Eurodollar rate plus the applicable margin indicated in the following table, and base rate loans under the Holdings Credit Agreement bear interest at the base rate plus the applicable margin indicated in the following table.  Holdings also incurs a quarterly commitment fee on the unused portion of the Holdings Credit Agreement indicated in the following table:

Ratio of Outstanding Borrowings to Borrowing Base	Unused Commitment Fee		Applicable Margin for Eurodollar Loans		Applicable Margin for Base Rate Loans
Less than or equal to .30 to 1	0.375	%	1.50	%	0.50	%
Greater than .30 to 1 but less than or equal to .60 to 1	0.375	%	1.75	%	0.75	%
Greater than .60 to 1 but less than or equal to .80 to 1	0.50	%	2.00	%	1.00	%
Greater than .80 to 1 but less than or equal to .90 to 1	0.50	%	2.25	%	1.25	%
Greater than .90 to 1	0.50	%	2.50	%	1.50	%

The “Eurodollar rate” for any interest period (either one, two, three, or nine months, as selected by Holdings) is the rate equal to the British Bankers Association London Interbank Offered Rate (“LIBOR”) for deposits in dollars for a similar interest period.  The “Base Rate” is calculated as the highest of: (i) the annual rate of interest announced by Bank of America, N.A. as its “prime rate”; (ii) the federal funds effective rate plus 0.5%; or (iii) except during a “LIBOR Unavailability Period”, the Eurodollar rate (for dollar deposits for a one-month term) for such day plus 1.0%.

Any outstanding letters of credit reduce the availability under the Holdings Credit Agreement.  Borrowings under the Holdings Credit Agreement may be repaid from time to time without penalty.

The Holdings Credit Agreement contains covenants including, among others, the following:

·a prohibition against incurring debt, subject to permitted exceptions;

·a restriction on creating liens on Holdings’ assets and the assets of its operating subsidiaries, subject to permitted exceptions;

·restrictions on merging and selling assets outside the ordinary course of business;

·restrictions on use of proceeds, investments, transactions with affiliates, or change of principal business;

·a requirement that Holdings maintain a ratio of consolidated total debt to EBITDAX (as defined in the Holdings Credit Agreement) of not more than 4.75 to 1.0 (which ratio changes to 4.5 to 1.0 beginning with the quarter ending June 30, 2014); and

·a provision limiting commodity derivative contracts to a volume not exceeding 85% of projected production from proved reserves for a period not exceeding 66 months from the date the commodity derivative contract is entered into.

The Holdings Credit Agreement contains customary events of default, including our failure to comply with the financial ratios described above, which would permit the lenders to accelerate the debt if not cured within applicable grace periods.  If an event of default occurs and is continuing, lenders with a majority of the aggregate commitments may require Bank of America, N.A. to declare all amounts outstanding under the Holdings Credit Agreement to be immediately due and payable.

12

ATHLON ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued

(unaudited)

Note 7. Stockholders’ Equity

In connection with Athlon’s incorporation on April 1, 2013 under the laws of the State of Delaware, it issued 1,000 shares of its common stock to Athlon Holdings GP LLC for an aggregate purchase price of $10.00.  On April 26, 2013, in connection with Athlon’s reorganization transactions, certain holders of limited partner interests in Holdings exchanged their Class A interests and Class B interests for an aggregate of 960,907 shares of Athlon’s common stock.  In connection with the effectiveness of Athlon’s IPO, these shares were subject to an adjustment based on Athlon’s IPO price of $20.00 per share and an actual 65.266-for-1 stock split resulting in 66,339,615 shares of Athlon’s common stock to be outstanding prior to the closing of the IPO.

As discussed in “Note 1. Formation of the Company and Description of Business”, on August 7, 2013, Athlon completed its IPO of 15,789,474 shares of its common stock at $20.00 per share and received net proceeds of approximately $295.6 million, after deducting underwriting discounts and commissions and offering expenses.  Athlon used the net proceeds from the IPO to purchase New Holdings Units from Holdings.  Holdings used the proceeds it received as a result of Athlon’s purchase of New Holdings Units (i) to reduce outstanding borrowings under the Holdings Credit Agreement, (ii) to provide additional liquidity for use in its drilling program, and (iii) for general corporate purposes, including potential acquisitions.  Upon consummation of the IPO, Athlon’s ownership percentage of Holdings increased, resulting in a decrease in the noncontrolling interest from approximately 3.2% to approximately 2.2%.

During the third quarter of 2013, Athlon recorded a reclassification of approximately $12.5 million from “Retained earnings” to “Additional paid-in capital” on the accompanying Consolidated Statement of Changes in Equity related to derivative activity that occurred prior to Athlon’s corporate reorganization on April 26, 2013.  This resulted in a decrease in “Net income attributable to noncontrolling interest” on the accompanying Consolidated Statements of Operations of approximately $0.4 million during the third quarter of 2013.

Note 8. Earnings Per Share

Prior to the consummation of Athlon’s IPO, Athlon had 960,907 shares of outstanding common stock.  In conjunction with the closing of the IPO, certain Class A limited partners and Class B limited partners of Holdings that exchanged their interests for shares of Athlon’s common stock were subject to an adjustment based on Athlon’s IPO price of $20.00 per share and an actual 65.266-for-1 stock split.  Following this adjustment and stock split, the number of outstanding shares of Athlon’s common stock increased from 960,907 shares to 66,339,615 shares.  The one-to-one conversion of the Holdings interests in April 2013 to 960,907 shares of Athlon common stock that occurred in connection with the IPO is akin to a stock split and has been treated as such in Athlon’s earnings per share (“EPS”) calculations.  Accordingly, Athlon assumes that 66,339,615 shares of common stock were outstanding during periods prior to Athlon’s IPO for purposes of calculating EPS.

13

ATHLON ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued

(unaudited)

The following table reflects the allocation of net income (loss) to common stockholders and EPS computations for the periods indicated:

	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013			2012
	(in thousands, except per share amounts)
Basic EPS
Numerator:
Undistributed net income (loss) attributable to stockholders	$	2,482		$	(2,096	)	$	37,058		$	42,508
Participation rights of unvested RSUs in undistributed earnings	(6		)	—			(6		)	—
Basic undistributed net income (loss) attributable to stockholders	$	2,476		$	(2,096	)	$	37,052		$	42,508
Denominator:
Basic weighted average shares outstanding	76,637			66,340			69,810			66,340
Basic EPS attributable to stockholders	$	0.03		$	(0.03	)	$	0.53		$	0.64
Diluted EPS
Numerator:
Undistributed net income (loss) attributable to stockholders	$	2,482		$	(2,096	)	$	37,058		$	42,508
Participation rights of unvested RSUs in undistributed earnings	(6		)	—			(6		)	—
Effect of conversion of New Holdings Units to shares of Athlon’s common stock	(215		)	—			616			—
Diluted undistributed net income (loss) attributable to stockholders	$	2,261		$	(2,096	)	$	37,668		$	42,508
Denominator:
Basic weighted average shares outstanding	76,637			66,340			69,810			66,340
Effect of conversion of New Holdings Units to shares of Athlon’s common stock (a)	1,856			—			1,856			1,856
Diluted weighted average shares outstanding	78,493			66,340			71,666			68,196
Diluted EPS attributable to stockholders	$	0.03		$	(0.03	)	$	0.53		$	0.62

(a)For the three months ended September 30, 2012, 1,855,563 New Holdings Units were outstanding but excluded from the EPS calculations because their effect would have been antidilutive.

Note 9.  Incentive Stock Plans

In August 2013, Athlon adopted the Athlon Energy Inc. 2013 Incentive Award Plan (the “Plan”).  The principal purpose of the Plan will be to attract, retain and engage selected employees, consultants, and directors through the granting of equity and equity-based compensation awards.  Employees, consultants, and directors of Athlon and its subsidiaries are eligible to receive awards under the Plan.  The Compensation Committee will administer the Plan unless our Board of Directors assumes direct authority for administration.  The Plan provides for the grant of stock options (including non-qualified stock options and incentive stock options), restricted stock, dividend equivalents, stock payments, restricted stock units (“RSUs”), performance awards, stock appreciation rights, and other equity-based and cash-based awards, or any combination thereof.

Initially, the aggregate number of our shares of common stock available for issuance pursuant to awards granted under the Plan will be the sum of 8,400,000 shares, subject to adjustment as described below plus an annual increase on the first day of each calendar year beginning January 1, 2014 and ending on and including the last January 1 prior to the expiration date of the Plan, equal to the least of (i) 12,000,000 shares, (ii) 4% of the shares outstanding (on an as-converted basis) on the final day of the immediately preceding calendar year, and (iii) such smaller number of shares as determined by the Board of Directors.  This number will also be adjusted due to the following shares becoming eligible to be used again for grants under the Plan:

·shares subject to awards or portions of awards granted under the Plan which are forfeited, expire, or lapse for any reason, or are settled for cash without the delivery of shares, to the extent of such forfeiture, expiration, lapse or cash settlement; and

·shares that Athlon repurchases prior to vesting so that such shares are returned to Athlon.

The Plan does not provide for individual limits on awards that may be granted to any individual participant under the Plan.  Rather, the amount of awards to be granted to individual participants are determined by the Board of Directors or the Compensation Committee from time to time, as part of their compensation decision-making processes, provided, however, that the Plan does not permit awards having a grant date fair value in excess of $700,000 to be granted to Athlon’s non-employee directors in any year.

14

ATHLON ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued

(unaudited)

As of September 30, 2013, there were 7,776,087 shares available for issuance under the Plan.  During the nine months ended September 30, 2013, Athlon recorded non-cash stock-based compensation expense related to the Plan of $492,000, which was allocated to lease operating expense and general and administrative expense in the accompanying Consolidated Statements of Operations based on the allocation of the respective employees’ compensation.  During the nine months ended September 30, 2013, Athlon capitalized $37,000 of non-cash stock-based compensation expense related to the Plan as a component of “Proved properties, including wells and related equipment” in the accompanying Consolidated Balance Sheets.

RSUs vest over three years, subject to performance criteria for certain members of management.  The following table summarizes the changes in Athlon’s unvested RSUs for the nine months ended September 30, 2013:

		Weighted -
		Average
	Number of	Grant Date
	Shares	Fair Value
Outstanding at January 1	—	$	—
Granted	623,913	32.21
Vested	—	—
Forfeited	—	—
Outstanding at September 30	623,913	32.21

As of September 30, 2013, there were 396,413 unvested RSUs, all of which were granted during September 2013, in which the vesting is dependent only on the passage of time and continued employment.  Additionally, as of September 30, 2013, there were 227,500 unvested RSUs, all of which were granted during September 2013, in which the vesting is dependent not only on the passage of time and continued employment, but also on the achievement of certain performance criteria.

None of Athlon’s unvested RSUs are subject to variable accounting.  As of September 30, 2013, Athlon had approximately $17.9 million of total unrecognized compensation cost related to unvested RSUs, which is expected to be recognized over a weighted-average period of approximately 2.8 years.

Class B Interests

Holdings’ limited partnership agreement provided for the issuance of Class B limited partner interests.  As discussed in “Note 1. Formation of the Company and Description of Business”, in connection with Holdings’ corporate reorganization, the holders of the Class B limited partner interests in Holdings exchanged their interests for common stock of Athlon subject to the same conditions and vesting terms.  Upon the consummation of Athlon’s IPO on August 1, 2013, the remaining unvested common stock awards, which were formerly Class B interests in Holdings, vested and Athlon recognized non-cash equity-based compensation expense of approximately $1.5 million.

During the nine months ended September 30, 2013 and 2012, Athlon recorded approximately $1.3 million and $186,000, respectively, of non-cash equity-based compensation expense related to Class B interests, which was allocated to lease operating expense and general and administrative expenses in the accompanying Consolidated Statements of Operations based on the allocation of the respective employees’ compensation.  During the nine months ended September 30, 2013 and 2012, Athlon capitalized approximately $421,000 and $68,000, respectively, of non-cash stock-based compensation expense related to Class B interests as a component of “Proved properties, including wells and related equipment” in the accompanying Consolidated Balance Sheets.

Note 10. Commitments and Contingencies

From time to time, Athlon is a party to ongoing legal proceedings in the ordinary course of business, including workers’ compensation claims and employment related disputes.  Management does not believe the results of these proceedings, individually or in the aggregate, will have a material adverse effect on Athlon’s business, financial position, results of operations, or liquidity.

Additionally, Athlon has contractual obligations related to future plugging and abandonment expenses on oil and natural gas properties and related facilities disposal, long-term debt, commodity derivative contracts, operating leases, and development commitments.

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ATHLON ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued

(unaudited)

Note 11. Related Party Transactions

Transaction Fee Agreement

Holdings was a party to a Transaction Fee Agreement, dated August 23, 2010, which required Holdings to pay a fee to Apollo equal to 2% of the total equity contributed to Holdings, as defined in the agreement, in exchange for consulting and advisory services provided by Apollo.  In October 2012, Apollo assigned its rights and obligations under the Transaction Fee Agreement to an affiliate, Apollo Global Securities, LLC.  Upon the consummation of Athlon’s IPO, Holdings terminated the Transaction Fee Agreement.  Since Holdings’ inception through the termination of the Transaction Fee Agreement, it incurred transaction fees under the Transaction Fee Agreement of approximately $7.5 million in total.

Services Agreement

Holdings was a party to a Services Agreement, dated August 23, 2010, which required Holdings to compensate Apollo for consulting and advisory services equal to the higher of (i) 1% of earnings before interest, income taxes, DD&A, and exploration expense per quarter and (ii) $62,500 per quarter (the “Advisory Fee”); provided, however, that such Advisory Fee for any calendar year shall not exceed $500,000.  The Services Agreement also provided for reimbursement to Apollo for any reasonable out-of-pocket expenses incurred while performing services under the Services Agreement.  During the nine months ended September 30, 2013 and 2012, Holdings incurred approximately $500,000 and $493,000, respectively, of Advisory Fees.  All fees incurred under the Services Agreement are included in “General and administrative expenses” in the accompanying Consolidated Statements of Operations.

Upon the consummation of Athlon’s IPO, Holdings terminated the Services Agreement and, in connection with the termination, Holdings paid $2.4 million (plus $132,000 of unreimbursed fees) to Apollo.  Such payment corresponded to the present value as of the date of termination of the aggregate annual fees that would have been payable during the remainder of the term of the Services Agreement (assuming a term ending on August 23, 2020).  Under the Services Agreement, Holdings also agreed to indemnify Apollo and its affiliates and their respective limited partners, general partners, directors, members, officers, managers, employees, agents, advisors, their directors, officers, and representatives for potential losses relating to the services contemplated under the Services Agreement.

Participation of Apollo Global Securities, LLC in Senior Notes Offering and IPO

Apollo Global Securities, LLC is an affiliate of the Apollo Funds and received a portion of the gross spread as an initial purchaser of the Notes of $0.5 million.  Apollo Global Securities, LLC was also an underwriter in Athlon’s IPO and received a portion of the discounts and commissions paid to the underwriters in the IPO of approximately $0.9 million.

Distribution

Holdings used a portion of the net proceeds from the Notes to make a distribution to its Class A limited partners, including the Apollo Funds and its management team and employees.  The Apollo Funds received approximately $73 million of the distribution and the remaining Class A limited partners received approximately $2 million, in the aggregate.

Exchange Agreement

Upon the consummation of its IPO, Athlon entered into an exchange agreement with certain members of its management team and employees who hold New Holdings Units after the closing of the IPO.  Under the exchange agreement, each such holder (and certain permitted transferees thereof) may, under certain circumstances after the date of the closing of the IPO (subject to the terms of the exchange agreement), exchange their New Holdings Units for shares of Athlon’s common stock on a one-for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends, and reclassifications.  As a holder exchanges its New Holdings Units, Athlon’s interest in Holdings will be correspondingly increased.

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ATHLON ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued

(unaudited)

Tax Receivable Agreement

Upon the consummation of its IPO, Athlon entered into a tax receivable agreement with certain members of its management team and employees who hold New Holdings Units after the closing of the IPO that provides for the payment from time to time by Athlon to such unitholders of Holdings of 85% of the amount of the benefits, if any, that Athlon is deemed to realize as a result of increases in tax basis and certain other tax benefits related to exchanges of New Holdings Units pursuant to the exchange agreement, including tax benefits attributable to payments under the tax receivable agreement.  These payment obligations are obligations of Athlon and not of Holdings.  For purposes of the tax receivable agreement, the benefit deemed realized by Athlon will be computed by comparing its actual income tax liability (calculated with certain assumptions) to the amount of such taxes that Athlon would have been required to pay had there been no increase to the tax basis of the assets of Holdings as a result of the exchanges and had Athlon not entered into the tax receivable agreement.

The step-up in basis will depend on the fair value of the New Holdings Units at conversion.  There is no intent of the holders of New Holdings Units to exchange their units for shares of Athlon’s common stock in the foreseeable future.  In addition, Athlon does not expect to be in a tax paying position before 2019.  Therefore, Athlon cannot presently estimate what the benefit or payments under the tax receivable agreement will be on a factually supportable basis, and accordingly not recognized as a liability.

Note 12. Subsequent Events

In November 2013, Holdings amended the Holdings Credit Agreement to, among other things, increase the borrowing base to $525 million.  As of November 14, 2013, there were no of outstanding borrowings under the Holdings Credit Agreement.

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ATHLON ENERGY INC.

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes in “Item 1. Financial Statements”.  The following discussion and analysis contains forward-looking statements, including, without limitation, statements relating to our plans, strategies, objectives, expectations, intentions, and resources.  Actual results could differ materially from those discussed in these forward-looking statements.  We do not undertake to update, revise, or correct any of the forward-looking information unless required to do so under law.  Readers are cautioned that such forward-looking statements should be read in conjunction with our disclosures under “Cautionary Note Regarding Forward-Looking Information” and “Risk Factors” in our final prospectus dated August 1, 2013 and filed with the SEC pursuant to Rule 424(b)(4) of the Securities Act on August 5, 2013.

Overview

We are an independent exploration and production company focused on the acquisition, development, and exploitation of unconventional oil and liquids-rich natural gas reserves in the Permian Basin.  The Permian Basin spans portions of Texas and New Mexico and consists of three primary sub-basins: the Delaware Basin, the Central Basin Platform, and the Midland Basin.  All of our properties are located in the Midland Basin.  Our drilling activity is currently focused on the low-risk vertical development of stacked pay zones, including the Spraberry, Wolfcamp, Cline, Strawn, Atoka, and Mississippian formations, which we refer to collectively as the Wolfberry play.  We are a returns-focused organization and have targeted the Wolfberry play in the Midland Basin because of its favorable operating environment, consistent reservoir quality across multiple target horizons, long-lived reserve characteristics, and high drilling success rates.

We were founded in August 2010 by a group of executives from Encore Acquisition Company following its acquisition by Denbury Resources, Inc.  With an average of approximately 20 years of industry experience and 10 years of history working together, our founding management has a proven track record of working as a team to acquire, develop, and exploit oil and natural gas reserves in the Permian Basin as well as other resource plays in North America.

Initial Public Offering

On August 7, 2013, we completed our IPO of 15,789,474 shares of our common stock at $20.00 per share and received net proceeds of approximately $295.6 million, after deducting underwriting discounts and commissions and offering expenses.  Upon closing of the IPO, the limited partnership agreement of Holdings was amended and restated to, among other things, modify Holdings’ capital structure by replacing its different classes of interests with a single new class of units, the “New Holdings Units”.  The members of Holdings’ management team and certain employees who held Class A limited partner interests now own New Holdings Units and entered into an exchange agreement under which (subject to the terms of the exchange agreement) they have the right to exchange their New Holdings Units for shares of our common stock on a one-for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends, and reclassifications.  All other New Holdings Units are held by us.  We used the net proceeds from the IPO to purchase New Holdings Units from Holdings.  Holdings used the proceeds it received as a result of our purchase of New Holdings Units (i) to reduce outstanding borrowings under its credit agreement, (ii) to provide additional liquidity for use in its drilling program, and (iii) for general corporate purposes, including potential acquisitions.

Factors That Significantly Affect Our Financial Condition and Results of Operations

Our revenues, cash flow from operations, and future growth depend substantially on factors beyond our control, such as economic, political, and regulatory developments and competition from other sources of energy.  Oil and natural gas prices have historically been volatile and may fluctuate widely in the future due to a variety of factors, including but not limited to, prevailing economic conditions, supply and demand of hydrocarbons in the marketplace, actions by speculators, and geopolitical events such as wars or natural disasters.  Sustained periods of low prices for oil, natural gas, or NGLs could materially and adversely affect our financial condition, our results of operations, the quantities of oil and natural gas that we can economically produce, and our ability to access capital.

We use commodity derivative instruments, such as swaps and collars to manage and reduce price volatility and other market risks associated with our oil production.  These arrangements are structured to reduce our exposure to commodity price decreases, but they can also limit the benefit we might otherwise receive from commodity price increases.  Our risk management activity is generally accomplished through over-the-counter commodity derivative contracts with large financial institutions.  We elected not to designate our current portfolio of commodity derivative contracts as hedges for accounting purposes.  Therefore, changes in fair value of these derivative instruments are recognized in earnings.  Please read “Item 3. Quantitative and Qualitative Disclosures About Market Risk” for additional discussion of our commodity derivative contracts.

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The prices we realize on the oil we produce are affected by the ability to transport crude oil to the Cushing, Oklahoma transport hub and the Gulf Coast refineries.  Periodically, logistical and infrastructure constraints at the Cushing, Oklahoma transport hub have resulted in an oversupply of crude oil at Midland, Texas and thus lower prices for Midland WTI.  These lower prices have adversely affected the prices we realize on oil sales and increased our differential to NYMEX WTI.  However, several projects have recently been implemented and several more are underway to ease these transportation difficulties which we believe could reduce our differentials to NYMEX in the future.  We have also entered into Midland-Cushing differential swaps for 2013 to mitigate the adverse effects of any further widening of the Midland-Cushing WTI differential (the difference between Midland WTI and Cushing WTI).

Like all businesses engaged in the exploration and production of oil and natural gas, we face the challenge of natural production declines.  As initial reservoir pressures are depleted, oil and natural gas production from a given well naturally decreases.  Thus, an oil and natural gas exploration and production company depletes part of its asset base with each unit of oil or natural gas it produces.  We attempt to overcome this natural decline by drilling to find additional reserves and acquiring more reserves than we produce.  Our future growth will depend on our ability to enhance production levels from our existing reserves and to continue to add reserves in excess of production in a cost effective manner.  Our ability to make capital expenditures to increase production from our existing reserves and to add reserves through drilling is dependent on our capital resources and can be limited by many factors, including our ability to access capital in a cost-effective manner and to timely obtain drilling permits and regulatory approvals.

As with our historical acquisitions, any future acquisitions could have a substantial impact on our financial condition and results of operations. In addition, funding future acquisitions may require us to incur additional indebtedness or issue additional equity.

The volumes of oil and natural gas that we produce are driven by several factors, including:

·success in drilling wells, including exploratory wells, and the recompletion of existing wells;

·the amount of capital we invest in the leasing and development of our oil and natural gas properties;

·facility or equipment availability and unexpected downtime;

·delays imposed by or resulting from compliance with regulatory requirements; and

·the rate at which production volumes on our wells naturally decline.

Factors That Significantly Affect Comparability of Our Financial Condition and Results of Operations

Our historical financial condition and results of operations for the periods presented may not be comparable, either from period to period or going forward, for the following reasons:

Corporate Reorganization.  We were formed on April 1, 2013.  On April 26, 2013, Holdings underwent a corporate reorganization and as a result, Holdings became a majority-owned subsidiary of ours.  We operate and control all of Holdings’ business and affairs and consolidate its financial results.  The historical consolidated financial statements included herein for periods prior to the reorganization transactions are based on Holdings consolidated financial statements.  As a result, the historical financial data may not give you an accurate indication of what our actual results would have been if the reorganization transactions had been completed at the beginning of the periods presented or what our future results of operations are likely to be.

Public Company Expenses.  We now incur direct, incremental general and administrative (“G&A”) expenses as a result of being a publicly traded company, including, but not limited to, costs associated with annual and quarterly reports to stockholders, tax return preparation, independent auditor fees, investor relations activities, registrar and transfer agent fees, incremental director and officer liability insurance costs, and independent director compensation.  We estimate these direct, incremental G&A expenses initially to total approximately $2.0 million per year.  These direct, incremental G&A expenses are not included in our results of operations for periods prior to the completion of our IPO.

Income Taxes.  Holdings, our accounting predecessor, is a limited partnership not subject to federal income taxes.  Accordingly, no provision for federal income taxes has been provided for in our historical results of operations for periods prior to the reorganization transactions because taxable income was passed through to Holdings partners.  However, we are a corporation under the Internal Revenue Code, subject to federal income taxes at a statutory rate of 35% of pretax earnings.

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Increased Drilling Activity.  We began operations in January 2011 and gradually added operated vertical drilling rigs.  At September 30, 2013, we operated seven vertical drilling rigs and one horizontal rig on our properties.  Our 2013 drilling capital expenditures are expected to be between $380 million and $390 million, plus an additional $15 million for infrastructure, leasing, and capitalized workovers.  We expect to drill 169 gross vertical Wolfberry wells and 4 gross horizontal Wolfcamp wells.  In 2014, we intend to expand to an eight-rig vertical drilling program and a two-rig horizontal drilling program.  The ultimate amount of capital that we expend may fluctuate materially based on market conditions and our drilling results in each particular year.

Senior Notes.  In April 2013, Holdings issued $500 million in aggregate principal amount of 7 3/8% senior notes due 2021.  We used the proceeds from the Notes offering to repay a portion of the amounts outstanding under our credit agreement, to repay in full and terminate our second lien term loan, to make a $75 million distribution to our Class A limited partners, and for general partnership purposes.  The Notes bear interest at a rate significantly higher than the rates under our credit agreement which resulted in higher interest expense in periods subsequent to April 2013 as compared to periods prior to April 2013.  In the future, we may incur additional indebtedness to fund our acquisition and development activities.  Please read “—Capital Commitments, Capital Resources, and Liquidity—Liquidity” for additional discussion of our financing arrangements.

Sources of Our Revenues

Our revenues are derived from the sale of oil, natural gas, and NGLs within the continental United States and do not include the effects of derivatives.  For the third quarter of 2013, oil and NGLs represented approximately 82% of our total production volumes.  Our revenues may vary significantly from period to period as a result of changes in volumes of production sold or changes in commodity prices.

NYMEX WTI and Henry Hub prompt month contract prices are widely-used benchmarks in the pricing of oil and natural gas.  The following table provides the high and low prices for NYMEX WTI and Henry Hub prompt month contract prices and our differential to the average of those benchmark prices for the periods indicated:

	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013			2012
Oil
NYMEX WTI High	$	110.53		$	99.00		$	110.53		$	109.77
NYMEX WTI Low	97.99			83.75			86.68			77.69
Differential to Average NYMEX WTI	(1.61		)	(3.91		)	(3.74		)	(5.74		)
Natural Gas
NYMEX Henry Hub High	3.81			3.32			4.41			3.32
NYMEX Henry Hub Low	3.23			2.61			3.11			1.91
Differential to Average NYMEX Henry Hub	(0.30		)	(0.15		)	(0.25		)	(0.13		)

We normally sell production to a relatively small number of customers. If any significant customer decided to stop purchasing oil and natural gas from us, our revenues could decline and our operating results and financial condition could be harmed.  However, based on the current demand for oil and natural gas, and the availability of other purchasers, we believe that the loss of any one or all of our significant customers would not have a material adverse effect on our financial condition and results of operations, as crude oil and natural gas are fungible products with well-established markets and numerous purchasers.

Principal Components of Our Cost Structure

Lease Operating Expense.  LOE includes the daily costs incurred to bring crude oil and natural gas out of the ground and to the market, together with the daily costs incurred to maintain our producing properties.  Such costs include field personnel compensation, utilities, maintenance, and workover expenses related to our oil and natural gas properties.

Production, Severance, and Ad Valorem Taxes.  Production and severance taxes are paid on produced oil, natural gas, and NGLs based on a percentage of revenues from production sold at fixed rates established by federal, state, or local taxing authorities.  In general, the production and severance taxes we pay correlate to the changes in oil and natural gas revenues.  We are also subject to ad valorem taxes primarily in the counties where our production is located.  Ad valorem taxes are generally based on the valuation of our oil and natural gas properties and are assessed annually.

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Depreciation, Depletion, and Amortization.  Depreciation, depletion, and amortization (“DD&A”) is the expensing of the capitalized costs incurred to acquire, explore, and develop oil and natural gas reserves.  We use the full cost method of accounting for oil and natural gas activities.

General and Administrative Expense.  G&A expense consists of company overhead, including payroll and benefits for our corporate staff, costs of maintaining our headquarters, costs of managing our production and development operations, audit and other professional fees, and legal compliance costs.  Upon completion of our IPO, G&A expense includes public company expenses as described above under “—Factors That Significantly Affect Comparability of Our Financial Condition and Results of Operations—Public Company Expenses”.

Interest Expense.  We finance a portion of our working capital requirements, capital expenditures, and acquisitions with borrowings under our credit agreement.  As a result, we incur interest expense that is affected by both fluctuations in interest rates and our financing decisions.  Interest incurred under our debt agreements, the amortization of deferred financing costs (including origination and amendment fees), commitment fees, and annual agency fees are included in interest expense.  Interest expense is net of capitalized interest on expenditures made in connection with exploratory projects that are not subject to current amortization.

Derivative Fair Value Loss (Gain).  We utilize commodity derivative contracts to reduce our exposure to fluctuations in the price of oil.  We recognize gains and losses associated with our open commodity derivative contracts as commodity prices and the associated fair value of our commodity derivative contracts change.  The commodity derivative contracts we have in place are not designated as hedges for accounting purposes.  Consequently, these commodity derivative contracts are marked-to-market each quarter with fair value gains and losses recognized currently as a gain or loss in our results of operations.  Cash flow is only impacted to the extent the actual settlements under the contracts result in making a payment to or receiving a payment from the counterparty.

How We Evaluate Our Operations

In evaluating our financial results, we focus on the mix of our revenues from oil, natural gas, and NGLs, the average realized price from sales of our production, our production margins, and our net income.  Below are highlights of our financial and operating results for the third quarter of 2013:

·Our oil, natural gas, and NGLs revenues increased 110% to $88.4 million in the third quarter of 2013 as compared to $42.1 million in the third quarter of 2012.

·Our average daily production volumes increased 69% to 12,960 BOE/D in the third quarter of 2013 as compared to 7,673 BOE/D in the third quarter of 2012.  Oil and NGLs represented approximately 82% of our total production volumes in the third quarter of 2013.

·Our average realized oil price increased 18% to $104.21 per Bbl in the third quarter of 2013 as compared to $88.28 per Bbl in the third quarter of 2012, our average realized natural gas price increased 23% to $3.28 per Mcf in the third quarter of 2013 as compared to $2.66 per Mcf in the third quarter of 2012, and our average realized NGL price increased 6% to $33.76 per Bbl in the third quarter of 2013 as compared to $31.90 per Bbl in the third quarter of 2012.

·Our production margin increased 131% to $74.2 million in the third quarter of 2013 as compared to $32.0 million in the third quarter of 2012.  Total wellhead revenues per BOE increased 24% and total production expenses per BOE decreased 16%.  On a per BOE basis, our production margin increased 37% to $62.20 per BOE in the third quarter of 2013 as compared to $45.39 per BOE in the third quarter of 2012.

·We invested $128.0 million in oil and natural gas activities, of which $107.8 million was invested in development and exploration activities, yielding 46 gross (45 net) productive wells, and $20.1 million was invested in acquisitions of oil and natural gas properties.

We also evaluate our rates of return on invested capital in our wells.  We believe the quality of our assets combined with the technical capabilities of our management team can generate attractive rates of return as we develop our extensive resource base.  Additionally, by focusing on concentrated acreage positions, we can build and own centralized production infrastructure, including saltwater disposal facilities, which enable us to reduce reliance on outside service companies, minimize costs, and increase our returns.

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Results of Operations

Comparison of Quarter Ended September 30, 2013 to Quarter Ended September 30, 2012

Revenues.The following table provides the components of our revenues for the periods indicated, as well as each period’s respective production volumes and average prices:

	Three months ended September 30,				Increase / (Decrease)
	2013		2012		$		%
Revenues (in thousands):
Oil	$	75,666	$	34,357	$	41,309	120	%
Natural gas	4,164		2,383		1,781		75	%
NGLs	8,595		5,346		3,249		61	%
Total revenues	$	88,425	$	42,086	$	46,339	110	%
Average realized prices:
Oil ($/Bbl) (excluding impact of cash settled derivatives)	$	104.21	$	88.28	$	15.93	18	%
Oil ($/Bbl) (after impact of cash settled derivatives)	$	94.39	$	89.03	$	5.36	6	%
Natural gas ($/Mcf)	$	3.28	$	2.66	$	0.62	23	%
NGLs ($/Bbl)	$	33.76	$	31.90	$	1.86	6	%
Combined ($/BOE) (excluding impact of cash settled derivatives)	$	74.16	$	59.62	$	14.54	24	%
Combined ($/BOE) (after impact of cash settled derivatives)	$	68.18	$	60.03	$	8.15	14	%
Total production volumes:
Oil (MBbls)	726		389		337		87	%
Natural gas (MMcf)	1,270		895		375		42	%
NGLs (MBbls)	255		168		87		52	%
Combined (MBOE)	1,192		706		486		69	%
Average daily production volumes:
Oil (Bbls/D)	7,893		4,230		3,663		87	%
Natural gas (Mcf/D)	13,804		9,724		4,080		42	%
NGLs (Bbls/D)	2,767		1,822		945		52	%
Combined (BOE/D)	12,960		7,673		5,287		69	%

The following table shows the relationship between our average oil and natural gas realized prices as a percentage of average NYMEX prices for the periods indicated.  Management uses the realized price to NYMEX margin analysis to analyze trends in our oil and natural gas revenues.

	Three months ended September 30,
	2013			2012
Average realized oil price ($/Bbl)	$	104.21		$	88.28
Average NYMEX ($/Bbl)	$	105.82		$	92.19
Differential to NYMEX	$	(1.61	)	$	(3.91	)
Average realized oil price to NYMEX percentage	98		%	96		%
Average realized natural gas price ($/Mcf)	$	3.28		$	2.66
Average NYMEX ($/Mcf)	$	3.58		$	2.81
Differential to NYMEX	$	(0.30	)	$	(0.15	)
Average realized natural gas price to NYMEX percentage	92		%	95		%

Our average realized oil price as a percentage of the average NYMEX price improved to 98% for the third quarter of 2013 as compared to 96% for the third quarter of 2012, primarily due to the alleviation of certain capacity constraints between the Midland Basin, Cushing, Oklahoma, and Gulf Coast refineries.  Our average realized natural gas price as a percentage of the average NYMEX price remained relatively constant at 92% for the third quarter of 2013 as compared to 95% for the third quarter of 2012.

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Oil revenues increased 120% to $75.7 million in the third quarter of 2013 from $34.4 million in the third quarter of 2012 as a result of an increase in our oil production volumes of 337 MBbls and a $15.93 per Bbl increase in our average realized oil price.  Our higher oil production increased oil revenues by $29.7 million and was primarily the result of our development program in the Permian Basin.  Our higher average realized oil price increased oil revenues by $11.6 million and was primarily due to a higher average NYMEX price, which increased to $105.82 per Bbl in the third quarter of 2013 from $92.19 per Bbl in the third quarter of 2012, and the tightening of our oil differentials as previously discussed.

Natural gas revenues increased 75% to $4.2 million in the third quarter of 2013 from $2.4 million in the third quarter of 2012 as a result of an increase in our natural gas production volumes of 375 MMcf and a $0.62 per Mcf increase in our average realized natural gas price.  Our higher average realized natural gas price increased natural gas revenues by $0.8 million and was primarily due to a higher average NYMEX price, which increased to $3.58 per Mcf in the third quarter of 2013 from $2.81 per Mcf in the third quarter of 2012.  Our higher natural gas production increased natural gas revenues by $1.0 million and was primarily the result of our development program in the Permian Basin, partially offset by flaring a portion of our natural gas production as either (i) our well is not yet tied into the third-party gathering system, (ii) the pressures on the third-party gathering system are too high to allow additional production from our well to be transported, or (iii) our production is prorated due to high demand on the third-party gathering system.  During the third quarter of 2013, we estimate that we flared approximately 4.4 MMcfe/D net, which included both residue gas and NGL production.  We expect to continue flaring until further improvements can be made to various third-party gathering systems, which are scheduled to be completed early in the fourth quarter of 2013.

NGL revenues increased 61% to $8.6 million in the third quarter of 2013 from $5.3 million in the third quarter of 2012 as a result of an increase in our NGL production volumes of 87 MBbls and a $1.86 per Bbl increase in our average realized NGL price.  Our higher NGL production increased NGL revenues by $2.8 million and was primarily the result of our development program in the Permian Basin, partially offset by flaring as described above.  Our higher average realized NGL price increased NGL revenues by $0.5 million.

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Expenses.The following table summarizes our expenses for the periods indicated:

	Three months ended September 30,					Increase / (Decrease)
	2013		2012			$			%
Expenses (in thousands):
Production:
Lease operating (a)	$	8,762	$	7,205		$	1,557		22	%
Production, severance, and ad valorem taxes	5,439		2,806			2,633			94	%
Processing, gathering, and overhead	59		29			30			103	%
Total production expenses	14,260		10,040			4,220			42	%
Other:
Depletion, depreciation, and amortization	23,611		15,091			8,520			56	%
General and administrative	6,725		2,134			4,591			215	%
Contract termination fee	2,408		—			2,408			N/A
Derivative fair value loss	27,037		14,268			12,769			89	%
Accretion of discount on asset retirement obligations	174		123			51			41	%
Total operating	74,215		41,656			32,559			78	%
Interest	10,039		2,602			7,437			286	%
Income tax provision (benefit)	1,934		(76		)	2,010			-2645	%
Total expenses	$	86,118	$	44,182		$	42,006		95	%
Expenses (per BOE):
Production:
Lease operating (a)	$	7.35	$	10.21		$	(2.86	)	-28	%
Production, severance, and ad valorem taxes	4.56		3.98			0.58			15	%
Processing, gathering, and overhead	0.05		0.04			0.01			25	%
Total production expenses	11.96		14.23			(2.27		)	-16	%
Other:
Depletion, depreciation, and amortization	19.80		21.38			(1.58		)	-7	%
General and administrative	5.64		3.02			2.62			87	%
Contract termination fee	2.02		—			2.02			N/A
Derivative fair value loss	22.68		20.21			2.47			12	%
Accretion of discount on asset retirement obligations	0.15		0.17			(0.02		)	-12	%
Total operating	62.25		59.01			3.24			5	%
Interest	8.42		3.69			4.73			128	%
Income tax provision (benefit)	1.62		(0.11		)	1.73			-1573	%
Total expenses	$	72.29	$	62.59		$	9.70		15	%

(a)   Includes non-cash equity-based compensation of $187,000 ($0.16 per BOE) and $(2,000) ($0.00 per BOE) for the three months ended September 30, 2013 and 2012, respectively.

Production expenses.  Production expenses attributable to LOE increased 22% to $8.8 million in the third quarter of 2013 from $7.2 million in the third quarter of 2012 as a result of an increase in production volumes from wells drilled, which contributed $5.0 million of additional LOE, partially offset by a $2.86 decrease in the average per BOE rate, which would have reduced LOE by $3.4 million if production had been unchanged.  The decrease in our average LOE per BOE rate was attributable to wells we successfully drilled and completed in 2013 where we are experiencing economies of scale from our drilling program and from savings achieved through 2012 infrastructure projects that have resulted in material efficiencies in our field operations and, in particular, our disposal of saltwater.

Production expenses attributable to production, severance, and ad valorem taxes increased 94% to $5.4 million in the third quarter of 2013 from $2.8 million in the third quarter of 2012 primarily due to higher wellhead revenues resulting from increased production from our drilling activity.  As a percentage of wellhead revenues, production, severance, and ad valorem taxes decreased to 6.2% in the third quarter of 2013 as compared to 6.7% in the third quarter of 2012 primarily due to an increase in the number of wells brought on production in the third quarter of 2013 as compared to the third quarter of 2012 as we had additional rigs and continue to utilize more efficient drilling rigs, reducing our time from spud to rig release.

24

DD&A expense.  DD&A expense increased 56% to $23.6 million in the third quarter of 2013 from $15.1 million in the third quarter of 2012 primarily due to an increase in production volumes and an increase in our asset base subject to amortization as a result of our drilling activity.

G&A expense.  G&A expense increased 215% to $6.7 million in the third quarter of 2013 from $2.1 million in the third quarter of 2012 primarily due to (i) $1.1 million of bonuses paid subsequent to the successful completion of our IPO, (ii) $1.0 million of non-cash equity-based compensation related to the accelerated vesting of Holdings’ Class B limited partner interest as a result of the IPO, and (iii) higher payroll and payroll-related costs as we continue to add employees in order to manage our growing asset base.

Contract termination fee.  Holdings was a party to a Services Agreement, dated August 23, 2010, which required Holdings to compensate Apollo for consulting and advisory services.  Upon the consummation of our IPO, Holdings terminated the Services Agreement and, in connection with the termination, Holdings paid $2.4 million to Apollo.  Such payment corresponded to the present value as of the date of termination of the aggregate annual fees that would have been payable during the remainder of the term of the Services Agreement (assuming a term ending on August 23, 2020).

Derivative fair value loss.  During the third quarter of 2013, we recorded a $27.0 million derivative fair value loss as compared to $14.3 million in the third quarter of 2012.  Since we do not use hedge accounting, changes in fair value of our derivatives are recognized as gains and losses in the current period.  Included in these amounts were total cash settlements paid on derivatives adjusted for recovered premiums during the third quarter of 2013 of $7.1 million as compared to total cash settlements received on derivatives adjusted for recovered premiums of $0.3 million during the third quarter of 2012.

Interest expense.  Interest expense increased to $10.0 million in the third quarter of 2013 from $2.6 million in the third quarter of 2012 due to higher long-term debt balances and higher borrowing costs in the third quarter of 2013 when compared to the third quarter of 2012.  Our weighted-average total debt was $527.7 million for the third quarter of 2013 as compared to $248.0 million for the third quarter of 2012.  This increase in total debt was due to funding requirements to develop our oil and natural gas properties that are not covered by our operating cash flows.

Our weighted-average interest rate increased to 7.5% for the third quarter of 2013 as compared to 4.2% for the third quarter of 2012.  This increase in borrowing cost is primarily due to the issuance of the Notes, a portion of the net proceeds from which were used to substantially pay down outstanding borrowings on our credit agreement that were subject to lower interest rates than borrowings on the Notes.

The following table provides the components of our interest expense for the periods indicated:

	Three months ended September 30,					Increase /
	2013			2012		(Decrease)
	(in thousands)
Credit agreement	$	417		$	1,690	$	(1,273	)
Senior notes	9,147			—		9,147
Former second lien term loan	—			679		(679		)
Write off of debt issuance costs	—			57		(57		)
Amortization of debt issuance costs	545			176		369
Less: interest capitalized	(70		)	—		(70		)
Total	$	10,039		$	2,602	$	7,437

Income taxes.  In the third quarter of 2013, we recorded an income tax provision of $1.9 million as compared to an income tax benefit of $76,000 in the third quarter of 2012.  In the third quarter of 2013, we had income before income taxes and noncontrolling interest of $4.2 million as compared to a loss before income taxes and noncontrolling interest $2.2 million in the third quarter of 2012.  Our effective tax rate increased to 46.0% in the third quarter of 2013 as compared to 3.5% in the third quarter of 2012 as a result of our corporate reorganization on April 26, 2013 in which Athlon (a C-corporation) obtained most of the interests in Holdings.  Prior to April 26, 2013, Holdings, our accounting predecessor, was a limited partnership not subject to federal income taxes.  We expect our effective tax rate to be approximately 39.8% for the fourth quarter of 2013.

25

Comparison of Nine Months Ended September 30, 2013 to Nine Months Ended September 30, 2012

Revenues.The following table provides the components of our revenues for the periods indicated, as well as each period’s respective production volumes and average prices:

	Nine months ended September 30,				Increase / (Decrease)
	2013		2012		$			%
Revenues (in thousands):
Oil	$	175,934	$	91,407	$	84,527		92	%
Natural gas	11,894		5,323		6,571			123	%
NGLs	20,508		14,379		6,129			43	%
Total revenues	$	208,336	$	111,109	$	97,227		88	%
Average realized prices:
Oil ($/Bbl) (excluding impact of cash settled derivatives)	$	94.43	$	90.46	$	3.97		4	%
Oil ($/Bbl) (after impact of cash settled derivatives)	$	90.19	$	88.00	$	2.19		2	%
Natural gas ($/Mcf)	$	3.42	$	2.46	$	0.96		39	%
NGLs ($/Bbl)	$	30.87	$	35.37	$	(4.50	)	-13	%
Combined ($/BOE) (excluding impact of cash settled derivatives)	$	67.07	$	62.49	$	4.58		7	%
Combined ($/BOE) (after impact of cash settled derivatives)	$	64.52	$	61.09	$	3.43		6	%
Total production volumes:
Oil (MBbls)	1,863		1,011		852			84	%
Natural gas (MMcf)	3,474		2,165		1,309			60	%
NGLs (MBbls)	664		407		257			63	%
Combined (MBOE)	3,106		1,778		1,328			75	%
Average daily production volumes:
Oil (Bbls/D)	6,824		3,688		3,136			85	%
Natural gas (Mcf/D)	12,725		7,903		4,822			61	%
NGLs (Bbls/D)	2,433		1,484		949			64	%
Combined (BOE/D)	11,378		6,489		4,889			75	%

The following table shows the relationship between our average oil and natural gas realized prices as a percentage of average NYMEX prices for the periods indicated.  Management uses the realized price to NYMEX margin analysis to analyze trends in our oil and natural gas revenues.

	Nine months ended September 30,
	2013			2012
Average realized oil price ($/Bbl)	$	94.43		$	90.46
Average NYMEX ($/Bbl)	$	98.17		$	96.20
Differential to NYMEX	$	(3.74	)	$	(5.74	)
Average realized oil price to NYMEX percentage	96		%	94		%
Average realized natural gas price ($/Mcf)	$	3.42		$	2.46
Average NYMEX ($/Mcf)	$	3.67		$	2.59
Differential to NYMEX	$	(0.25	)	$	(0.13	)
Average realized natural gas price to NYMEX percentage	93		%	95		%

Our average realized oil price as a percentage of the average NYMEX price improved to 96% for the first nine months of 2013 as compared to 94% for the first nine months of 2012, primarily due to the alleviation of certain capacity constraints between the Midland Basin, Cushing, Oklahoma, and Gulf Coast refineries.  Our average realized natural gas price as a percentage of the average NYMEX price remained relatively constant at 93% for the first nine months of 2013 as compared to 95% for the first nine months of 2012.

Oil revenues increased 92% to $175.9 million in the first nine months of 2013 from $91.4 million in the first nine months of 2012 as a result of an increase in our oil production volumes of 852 MBbls and a $3.97 per Bbl decrease in our average realized oil price.

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Our higher oil production increased oil revenues by $77.1 million and was primarily the result of our development program in the Permian Basin.  Our higher average realized oil price increased oil revenues by $7.4 million and was primarily due to a higher average NYMEX price, which increased to $98.17 per Bbl in the first nine months of 2013 from $96.20 per Bbl in the first nine months of 2012, partially offset by the narrowing of our oil differentials as previously discussed.

Natural gas revenues increased 123% to $11.9 million in the first nine months of 2013 from $5.3 million in the first nine months of 2012 as a result of an increase in our natural gas production volumes of 1,309 MMcf and a $0.96 per Mcf increase in our average realized natural gas price.  Our higher average realized natural gas price increased natural gas revenues by $3.3 million and was primarily due to a higher average NYMEX price, which increased to $3.67 per Mcf in the first nine months of 2013 from $2.59 per Mcf in the first nine months of 2012.  Our higher natural gas production increased natural gas revenues by $2.2 million and was primarily the result of our development program in the Permian Basin, partially offset by flaring a portion of our natural gas production as either (i) our well is not yet tied into the third-party gathering system, (ii) the pressures on the third-party gathering system are too high to allow additional production from our well to be transported, or (iii) our production is prorated due to high demand on the third-party gathering system.  During the first nine months of 2013, we estimate that we flared approximately 3.4 MMcfe/D net, which included both residue gas and NGL production.  We expect to continue flaring until further improvements can be made to various third-party gathering systems, which are scheduled to be completed early in the fourth quarter of 2013.

NGL revenues increased 43% to $20.5 million in the first nine months of 2013 from $14.4 million in the first nine months of 2012 as a result of an increase in our NGL production volumes of 257 MBbls, partially offset by a $4.50 per Bbl decrease in our average realized NGL price.  Our higher NGL production increased NGL revenues by $9.1 million and was primarily the result of our development program in the Permian Basin, partially offset by flaring as described above.  Our lower average realized NGL price decreased NGL revenues by $3.0 million and was primarily due to increased supplies of NGLs from NGL-rich shales in the Permian Basin and other basins including the Eagle Ford and the Williston.

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Expenses.The following table summarizes our expenses for the periods indicated:

	Nine months ended September 30,					Increase / (Decrease)
	2013		2012			$			%
Expenses (in thousands):
Production:
Lease operating (a)	$	23,774	$	17,846		$	5,928		33	%
Production, severance, and ad valorem taxes	13,380		7,617			5,763			76	%
Processing, gathering, and overhead	169		55			114			207	%
Total production expenses	37,323		25,518			11,805			46	%
Other:
Depletion, depreciation, and amortization	62,022		37,770			24,252			64	%
General and administrative	13,723		7,212			6,511			90	%
Contract termination fee	2,408		—			2,408			N/A
Derivative fair value loss (gain)	21,331		(9,590		)	30,921			-322	%
Accretion of discount on asset retirement obligations	485		343			142			41	%
Total operating	137,292		61,253			76,039			124	%
Interest	26,595		5,804			20,791			358	%
Income tax provision	6,805		1,546			5,259			340	%
Total expenses	$	170,692	$	68,603		$	102,089		149	%
Expenses (per BOE):
Production:
Lease operating (a)	$	7.65	$	10.04		$	(2.39	)	-24	%
Production, severance, and ad valorem taxes	4.31		4.27			0.04			1	%
Processing, gathering, and overhead	0.05		0.03			0.02			67	%
Total production expenses	12.01		14.34			(2.33		)	-16	%
Other:
Depletion, depreciation, and amortization	19.97		21.24			(1.27		)	-6	%
General and administrative	4.42		4.06			0.36			9	%
Contract termination fee	0.78		—			0.78			N/A
Derivative fair value loss (gain)	6.87		(5.39		)	12.26			-227	%
Accretion of discount on asset retirement obligations	0.16		0.19			(0.03		)	-16	%
Total operating	44.21		34.44			9.77			28	%
Interest	8.56		3.26			5.30			163	%
Income tax provision	2.19		0.87			1.32			152	%
Total expenses	$	54.96	$	38.57		$	16.39		42	%

(a)   Includes non-cash equity-based compensation of $203,000 ($0.07 per BOE) and $21,000 ($0.01 per BOE) for the nine months ended September 30, 2013 and 2012, respectively.

Production expenses.  Production expenses attributable to LOE increased 33% to $23.8 million in the first nine months of 2013 from $17.8 million in the first nine months of 2012 as a result of an increase in production volumes from wells drilled, which contributed $13.3 million of additional LOE, partially offset by a $2.39 decrease in the average per BOE rate, which would have reduced LOE by $7.4 million if production had been unchanged. The decrease in our average LOE per BOE rate was attributable to wells we successfully drilled and completed in 2013 where we are experiencing economies of scale from our drilling program and from savings achieved through 2012 infrastructure projects that have resulted in material efficiencies in our field operations and, in particular, our disposal of saltwater.

Production expenses attributable to production, severance, and ad valorem taxes increased 76% to $13.4 million in the first nine months of 2013 from $7.6 million in the first nine months of 2012 primarily due to higher wellhead revenues resulting from increased production from our drilling activity.  As a percentage of wellhead revenues, production, severance, and ad valorem taxes decreased to 6.4% in the first nine months of 2013 as compared to 6.9% in the first nine months of 2012 primarily due to an increase in the number of wells brought on production in the first nine months of 2013 as compared to the first nine months of 2012 as we continue to utilize more efficient drilling rigs, reducing our time from spud to rig release.

DD&A expense.  DD&A expense increased 64% to $62.0 million in the first nine months of 2013 from $37.8 million in the first nine months of 2012 primarily due to an increase in production volumes and an increase in our asset base subject to amortization as a result of our drilling activity.

28

G&A expense.  G&A expense increased 90% to $13.7 million in the first nine months of 2013 from $7.2 million in the first nine months of 2012 primarily due to (i) $1.1 million of bonuses paid subsequent to the successful completion of our IPO, (ii) $1.0 million of non-cash equity-based compensation related to the accelerated vesting of Holdings’ Class B limited partner interest as a result of the IPO, (iii) nonrecurring corporate reorganization costs related to the transition from a partnership to a corporation of $0.7 million, and (iv) higher payroll and payroll-related costs as we continue to add employees in order to manage our growing asset base.

Contract termination fee.  Holdings was a party to a Services Agreement, dated August 23, 2010, which required Holdings to compensate Apollo for consulting and advisory services.  Upon the consummation of our IPO, Holdings terminated the Services Agreement and, in connection with the termination, Holdings paid $2.4 million to Apollo.  Such payment corresponded to the present value as of the date of termination of the aggregate annual fees that would have been payable during the remainder of the term of the Services Agreement (assuming a term ending on August 23, 2020).

Derivative fair value loss (gain).  During the first nine months of 2013, we recorded a $21.3 million derivative fair value loss as compared to a $9.6 million derivative fair value gain in the first nine months of 2012.  Since we do not use hedge accounting, changes in fair value of our derivatives are recognized as gains and losses in the current period.  Included in these amounts were total cash settlements paid on derivatives adjusted for recovered premiums during the first nine months of 2013 of $7.9 million as compared to $2.5 million during the first nine months of 2012.

Interest expense.  Interest expense increased to $26.6 million in the first nine months of 2013 from $5.8 million in the first nine months of 2012 due to higher long-term debt balances and higher borrowing costs in the first nine months of 2013 when compared to the first nine months of 2012.  Our weighted-average total debt was $481.1 million for the first nine months of 2013 as compared to $208.4 million for the first nine months of 2012.  This increase in total debt was due to (i) funding requirements to develop our oil and natural gas properties that are not covered by our operating cash flows and (ii) a $75 million distribution to Holdings Class A limited partners in April 2013.  Also, as a result of the issuance of the Notes, our former second lien term loan was paid off and retired and the borrowing base of our credit agreement was reduced resulting in a write off of unamortized debt issuance costs of approximately $2.8 million to interest expense.

Our weighted-average interest rate increased to 7.3% for the first nine months of 2013 as compared to 3.7% for the first nine months of 2012.  This increase in borrowing cost is primarily due to the issuance of the Notes, a portion of the net proceeds from which were used to substantially pay down outstanding borrowings on our credit agreement that were subject to lower interest rates than borrowings on the Notes.  Our weighted-average interest expense for the first nine months of 2013 includes the impact of the write off of unamortized debt issuance costs and is expected to decline in future periods as we are not anticipating a need for a similar write off and as borrowings on the credit agreement increase relative to the Notes resulting in a lower average interest rate.

The following table provides the components of our interest expense for the periods indicated:

	Nine months ended September 30,					Increase /
	2013			2012		(Decrease)
	(in thousands)
Credit agreement	$	3,027		$	4,613	$	(1,586	)
Senior notes	16,854			—		16,854
Former second lien term loan	2,777			679		2,098
Write off of debt issuance costs	2,838			57		2,781
Amortization of debt issuance costs	1,280			455		825
Less: interest capitalized	(181		)	—		(181		)
Total	$	26,595		$	5,804	$	20,791

Income taxes.  In the first nine months of 2013, we recorded an income tax provision of $6.8 million as compared to $1.5 million in the first nine months 2012.  In the first nine months of 2013, we had income before income taxes and noncontrolling interest of $44.5 million as compared to $44.1 million in the first nine months of 2012.  Our effective tax rate increased to 15.3% in the first nine months of 2013 as compared to 3.5% in the first nine months of 2012 as a result of our corporate reorganization on April 26, 2013 in which Athlon (a C-corporation) obtained most of the interests in Holdings.  Prior to April 26, 2013, Holdings, our accounting predecessor, was a limited partnership not subject to federal income taxes.

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Capital Commitments, Capital Resources, and Liquidity

Capital commitments

Our primary uses of cash are:

·Development and exploration of oil and natural gas properties;

·Acquisitions of oil and natural gas properties;

·Funding of working capital; and

·Contractual obligations.

Development and exploration of oil and natural gas properties.  The following table summarizes our costs incurred related to development and exploration activities for the periods indicated:

	Three months ended September 30,				Nine months ended September 30,
	2013		2012		2013		2012
	(in thousands)
Development (a)	$	42,430	$	37,173	$	132,883	$	97,884
Exploration (b)	65,402		33,666		145,435		90,892
Total	$	107,832	$	70,839	$	278,318	$	188,776

(a)Includes asset retirement obligations incurred of $200,000 and $154,000 during the three months ended September 30, 2013 and 2012, respectively, and $426,000 and $317,000 during the nine months ended September 30, 2013 and 2012, respectively.

(b)Includes asset retirement obligations incurred of $117,000 and $76,000 during the three months ended September 30, 2013 and 2012, respectively, and $311,000 and $237,000 during the nine months ended September 30, 2013 and 2012, respectively.

Our development capital primarily relates to the drilling of development and infill wells, workovers of existing wells, and the construction of field related facilities.  Our development capital for the third quarter of 2013 yielded 18 gross (18 net) productive wells and no dry holes.  Our development capital for the first nine months of 2013 yielded 51 gross (50 net) productive wells and no dry holes.

Our exploration expenditures primarily relate to the drilling of exploratory wells, seismic costs, delay rentals, and geological and geophysical costs.  Our exploration capital for the third quarter of 2013 yielded 28 gross (27 net) productive wells and no dry holes.  Our exploration capital for the first nine months of 2013 yielded 74 gross (70 net) productive wells and no dry holes.

Our development and exploration activities in the third quarter and first nine months of 2013 were higher than in the comparable periods of 2012 primarily due to (i) our utilization of more efficient vertical drilling rigs that have significantly reduced the time from spud to rig release, allowing us to drill and complete more wells over the same period, and (ii) our higher rig count, including our first horizontal drilling rig which was added in the third quarter of 2013.

In 2013, we expect our drilling capital expenditures to be between $380 million to $390 million, plus an additional $15 million for leasing, infrastructure, and capital workovers, and drill 169 gross vertical Wolfberry wells and 4 gross horizontal Wolfcamp wells.

Acquisitions of oil and natural gas properties.  The following table summarizes our costs incurred related to oil and natural gas property acquisitions for the periods indicated:

	Three months ended September 30,				Nine months ended September 30,
	2013		2012		2013		2012
	(in thousands)
Acquisitions of proved properties (a)	$	3,113	$	223	$	5,883	$	3,126
Acquisitions of unproved proerpties	17,009		302		30,985		532
Total	$	20,122	$	525	$	36,868	$	3,658

(a)Includes asset retirement obligations incurred of $70,000 and $335,000 during the three and nine months ended September 30, 2013, respectively.

30

Funding of working capital.  As of September 30, 2013 and December 31, 2012, our working capital (defined as total current assets less total current liabilities) was a $108.6 million surplus and a $22.2 million deficit, respectively.  Since our principal source of operating cash flows comes from oil and natural gas reserves to be produced in future periods, which cannot be reported as working capital, we often have negative working capital.  For the remainder of 2013, we expect to continue to have a working capital surplus unless significant acquisition opportunities present themselves.  We expect that our cash flows from operating activities and availability under our credit agreement will be sufficient to fund our working capital needs, capital expenditures, and other obligations for at least the next 12 months.  We expect that our production volumes, commodity prices, and differentials to NYMEX prices for our oil and natural gas production will be the largest variables affecting our working capital.

Contractual obligations.  The following table provides our contractual obligations and commitments as of September 30, 2013:

	Payments Due by Period
Contractual Obligations and Commitments	Total		Three Months Ending December 31, 2013		Years Ending December 31, 2014 - 2015		Years Ending December 31, 2016 - 2017		Thereafter
	(in thousands)
Credit agreement (a)	$	—	$	—	$	—	$	—	$	—
Senior notes (a)	795,000		18,437		73,750		73,750		629,063
Commodity derivative contracts (b)	9,966		4,536		5,430		—		—
Development commitments (c)	60,092		60,092		—		—		—
Operating leases and commitments (d)	1,433		117		938		378		—
Asset retirement obligations (e)	39,275		60		—		—		39,215
Total	$	905,766	$	83,242	$	80,118	$	74,128	$	668,278

(a)Includes principal and projected interest payments.  As of September 30, 2013, there were no outstanding borrowings under our credit agreement.  Please read “—Liquidity” for additional information regarding our long-term debt.

(b)Represents net liabilities for our commodity derivative contracts, the ultimate settlement of which are unknown because they are subject to continuing market risk.  Please read “Item 3. Quantitative and Qualitative Disclosures about Market Risk” for additional information regarding our commodity derivative contracts.

(c)Represents authorized purchases for work in process related to our drilling activities.

(d)Represents operating leases that have non-cancelable lease terms in excess of one year.

(e)Represents the undiscounted future plugging and abandonment expenses on oil and natural gas properties and related facilities disposal at the end of field life. Because these costs typically extend many years into the future, estimating these future costs requires management to make estimates and judgments that are subject to future revisions based upon numerous factors.

Off-balance sheet arrangements.  We have no investments in unconsolidated entities or persons that could materially affect our liquidity or the availability of capital resources.  We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, an effect on our financial condition or results of operations.

Capital resources

The following table summarizes our cash flows for the periods indicated:

	Nine months ended September 30,						Increase /
	2013			2012			(Decrease)
	(in thousands)
Net cash provided by operating activities	$	136,775		$	62,754		$	74,021
Net cash used in investing activities	(295,003		)	(186,900		)	(108,103		)
Net cash provided by financing activities	346,245			100,850			245,395
Net increase (decrease) in cash	$	188,017		$	(23,296	)	$	211,313

Cash flows from operating activities.  Cash provided by operating activities increased $74.0 million to $136.8 million in the first nine months of 2013 from $62.8 million in the first nine months of 2012, primarily due to an increase in our production margin due to a 75% increase in our total production volumes as a result of wells drilled, partially offset by increased expenses as a result of having more producing wells in the first nine months of 2013 as compared to the first nine months of 2012.

31

Cash flows used in investing activities.  Cash used in investing activities increased $108.1 million to $295.0 million in the first nine months of 2013 from $186.9 million in the first nine months of 2012, primarily due to a $74.7 million increase in amounts paid to develop oil and natural gas properties and a $33.2 million increase in leasehold acquisition costs.  The increase in our development expenditures was primarily due to (i) our utilization of more efficient vertical drilling rigs that have significantly reduced the time from spud to rig release allowing, us to drill and complete more wells over the same time period, and (ii) our higher rig count, including our first horizontal drilling rig which was added in the third quarter of 2013.

Cash flows from financing activities.  Our cash flows from financing activities have historically consisted of net proceeds from and payments on long-term debt and contributions from partners.  We periodically draw on our credit agreement and seek funding from partners to fund acquisitions and other capital commitments.

During the first nine months of 2013, we received net cash of $346.2 million from financing activities, including $296.0 million of net proceeds from our IPO and $487.1 million of net proceeds from the issuance of our senior notes, partially offset by $125 million used to repay in full and terminate our former second lien term loan, net repayments of $237 million under our credit agreement, and a $75 million distribution to Holdings’ Class A limited partners.  Net repayments reduced the outstanding borrowings under our credit agreement from $237 million at December 31, 2012 to none at September 30, 2013.

During the first nine months of 2012, we received net cash of $100.9 million from financing activities, including $122.9 million of net proceeds from the issuance of our former second lien term loan, partially offset by net repayments of $21.5 million under our credit agreement.

Liquidity

Our primary sources of liquidity historically have been internally generated cash flows, the borrowing capacity under our credit agreement, and partner contributions, including partner contributions from our equity sponsor, the Apollo Funds.  Since we operate a majority of our wells, we have the ability to adjust our capital expenditures as economic conditions change.  We may use other sources of capital, including the issuance of debt or equity securities, to fund acquisitions or maintain our financial flexibility.  We believe that our internally generated cash flows and expected future availability under our credit agreement will be sufficient to fund our operations and planned capital expenditures for at least the next 12 months.  However, should commodity prices decline for an extended period of time or the capital/credit markets become constrained, the borrowing capacity under our credit agreement could be adversely affected.  In the event of a reduction in the borrowing base under our credit agreement, we may be required to prepay some or all of our indebtedness, which would adversely affect our capital expenditure program.  In addition, because wells funded in the next 12 months represent only a small percentage of our identified net drilling locations, we will be required to generate or raise additional capital to develop our entire inventory of identified drilling locations should we elect to do so.

In 2013, we expect our drilling capital expenditures to be between $380 million to $390 million, plus an additional $15 million for leasing, infrastructure, and capital workovers.  The level of these and other future expenditures is largely discretionary, and the amount of funds devoted to any particular activity may increase or decrease significantly, depending on available opportunities, timing of projects, and market conditions.  We plan to finance our ongoing expenditures using internally generated cash flow and availability under our credit agreement.

Internally generated cash flows.  Our internally generated cash flows, results of operations, and financing for our operations are largely dependent on oil, natural gas, and NGL prices.  During the first nine months of 2013, our average realized oil and natural prices increased by 4% and 39%, respectively, as compared to the first nine months of 2012, while our average realized NGL price decreased by 13%.  Realized commodity prices fluctuate widely in response to changing market forces.  If commodity prices decline or we experience a significant widening of our differentials to NYMEX prices, then our results of operations, cash flows from operations, and borrowing base under our credit agreement may be adversely impacted.  Prolonged periods of lower commodity prices or sustained wider differentials to NYMEX prices could cause us to not be in compliance with financial covenants under our credit agreement and thereby affect our liquidity.  To offset reduced cash flows in a lower commodity price environment, we have established a portfolio of commodity derivative contracts consisting primarily of oil swaps that will provide stable cash flows on a portion of our oil production.  As of September 30, 2013, our hedged oil volumes for the fourth quarter of 2013, 2014, and 2015 represent 89%, 101%, and 16%, respectively, of our third quarter of 2013 oil production at weighted average prices of $95.01 per Bbl, $92.67 per Bbl, and $93.18 per Bbl, respectively.  An increase in oil prices above the ceiling prices in our commodity derivative contracts limits cash inflows because we would be required to pay our counterparties for the difference between the market price for oil and the ceiling price of the commodity derivative contract resulting in a loss.  Please read “Item 3. Quantitative and Qualitative Disclosures About Market Risk” for additional information regarding our commodity derivative contracts.

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Credit agreement.  We are a party to an amended and restated credit agreement dated March 19, 2013, which we refer to as our credit agreement, which matures on March 19, 2018.  Our credit agreement provides for revolving credit loans to be made to us from time to time and letters of credit to be issued from time to time for the account of us or any of our restricted subsidiaries.  The aggregate amount of the commitments of the lenders under our credit agreement is $1.0 billion.  Availability under our credit agreement is subject to a borrowing base, which is redetermined semi-annually and upon requested special redeterminations.

In conjunction with the offering of our senior notes in April 2013 as discussed below, the borrowing base under our credit agreement was reduced to $267.5 million.  We used a portion of the net proceeds from the offering of the senior notes and our IPO to reduce the outstanding borrowings under our credit agreement.   In May 2013, we amended our credit agreement to, among other things, increase the borrowing base to $320 million.  As of September 30, 2013, the borrowing base was $320 million and there were no outstanding borrowings and no outstanding letters of credit under our credit agreement. In November 2013, we amended our credit agreement to, among other things, increase the borrowing base to $525 million.As of November 14, 2013, there were no outstanding borrowings under our credit agreement.

Obligations under our credit agreement are secured by a first-priority security interest in substantially all of our proved reserves and in the equity interests of our operating subsidiaries.  In addition, obligations under our credit agreement are guaranteed by our operating subsidiaries.

Loans under our credit agreement are subject to varying rates of interest based on (i) outstanding borrowings in relation to the borrowing base and (ii) whether the loan is a Eurodollar loan or a base rate loan. Eurodollar loans under our credit agreement bear interest at the Eurodollar rate plus the applicable margin indicated in the following table, and base rate loans under our credit agreement bear interest at the base rate plus the applicable margin indicated in the following table.  We also incur a quarterly commitment fee on the unused portion of our credit agreement indicated in the following table:

Ratio of Outstanding Borrowings to Borrowing Base	Unused Commitment Fee		Applicable Margin for Eurodollar Loans		Applicable Margin for Base Rate Loans
Less than or equal to .30 to 1	0.375	%	1.50	%	0.50	%
Greater than .30 to 1 but less than or equal to .60 to 1	0.375	%	1.75	%	0.75	%
Greater than .60 to 1 but less than or equal to .80 to 1	0.50	%	2.00	%	1.00	%
Greater than .80 to 1 but less than or equal to .90 to 1	0.50	%	2.25	%	1.25	%
Greater than .90 to 1	0.50	%	2.50	%	1.50	%

The “Eurodollar rate” for any interest period (either one, two, three, or nine months, as selected by us) is the rate equal to the LIBOR for deposits in dollars for a similar interest period.  The “Base Rate” is calculated as the highest of: (i) the annual rate of interest announced by Bank of America, N.A. as its “prime rate”; (ii) the federal funds effective rate plus 0.5%; or (iii) except during a “LIBOR Unavailability Period”, the Eurodollar rate (for dollar deposits for a one-month term) for such day plus 1.0%.

Any outstanding letters of credit reduce the availability under our credit agreement.  Borrowings under our credit agreement may be repaid from time to time without penalty.

Our credit agreement contains covenants including, among others, the following:

·a prohibition against incurring debt, subject to permitted exceptions;

·a restriction on creating liens on our assets and the assets of our operating subsidiaries, subject to permitted exceptions;

·restrictions on merging and selling assets outside the ordinary course of business;

·restrictions on use of proceeds, investments, transactions with affiliates, or change of principal business;

·a requirement that we maintain a ratio of consolidated total debt to EBITDAX (as defined in our credit agreement) of not more than 4.75 to 1.0 (which ratio changes to 4.5 to 1.0 beginning with the quarter ending June 30, 2014); and

·a provision limiting commodity derivative contracts to a volume not exceeding 85% of projected production from proved reserves for a period not exceeding 66 months from the date the commodity derivative contract is entered into.

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Our credit agreement contains customary events of default, including our failure to comply with our financial ratios described above, which would permit the lenders to accelerate the debt if not cured within applicable grace periods.  If an event of default occurs and is continuing, lenders with a majority of the aggregate commitments may require Bank of America, N.A. to declare all amounts outstanding under our credit agreement to be immediately due and payable, which would materially and adversely affect our financial condition and liquidity.

Certain of the lenders underwriting our credit agreement are also counterparties to our commodity derivative contracts. Please read “Item 3. Quantitative and Qualitative Disclosures About Market Risk” for additional discussion.

Senior notes.  In April 2013, we issued $500 million aggregate principal amount of 7 3/8% senior notes due 2021.  The net proceeds from the senior notes offering were used to repay a portion of the outstanding borrowings under our credit agreement, to repay in full and terminate our former second lien term loan, to make a $75 million distribution to Holdings Class A limited partners, and for general partnership purposes.  On August 14, 2013, Holdings entered into a supplemental indenture pursuant to which we became an unconditional guarantor of the Notes.

The indenture governing the senior notes contains covenants, including, among other things, covenants that restrict our ability to:

·make distributions, investments, or other restricted payments if our fixed charge coverage ratio is less than 2.0 to 1.0;

·incur additional indebtedness if our fixed charge coverage ratio would be less than 2.0 to 1.0; and

·create liens, sell assets, consolidate or merge with any other person, or engage in transactions with affiliates.

These covenants are subject to a number of important qualifications, limitations, and exceptions.  In addition, the indenture contains other customary terms, including certain events of default upon the occurrence of which the senior notes may be declared immediately due and payable.

Under the indenture, starting on April 15, 2016, we will be able to redeem some or all of the senior notes at a premium that will decrease over time, plus accrued and unpaid interest to the date of redemption.  Prior to April 15, 2016, we will be able, at our option, to redeem up to 35% of the aggregate principal amount of the senior notes at a price of 107.375% of the principal thereof, plus accrued and unpaid interest to the date of redemption, with an amount equal to the net proceeds from certain equity offerings.  In addition, at our option, prior to April 15, 2016, we may redeem some or all of the senior notes at a redemption price equal to 100% of the principal amount of the senior notes, plus an “applicable premium”, plus accrued and unpaid interest to the date of redemption.  If a change of control occurs on or prior to July 15, 2014, we may redeem all, but not less than all, of the notes at 110% of the principal amount thereof plus accrued and unpaid interest to, but not including, the redemption date.  Certain asset dispositions will be triggering events that may require us to repurchase all or any part of a noteholder’s notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to but excluding the date of repurchase. Interest on the senior notes is payable in cash semi-annually in arrears, commencing on October 15, 2013, through maturity.

Capitalization.  At September 30, 2013, we had total assets of $1.3 billion and total capitalization of $1.1 billion, of which 55% was represented by equity and 45% by long-term debt.  At December 31, 2012, we had total assets of $852.3 million and total capitalization of $782.9 million, of which 54% was represented by equity and 46% by long-term debt.  The percentages of our capitalization represented by equity and long-term debt could vary in the future if debt or equity is used to finance capital projects or acquisitions.

On August 7, 2013, we completed our IPO of 15,789,474 shares of our common stock at $20.00 per share and received net proceeds of approximately $295.6 million, after deducting underwriting discounts and commissions and offering expenses.  We used the net proceeds from the IPO to purchase New Holdings Units from Holdings.  Holdings used the proceeds it received as a result of our purchase of New Holdings Units (i) to reduce outstanding borrowings under our credit agreement, (ii) to provide additional liquidity for use in our drilling program, and (iii) for general corporate purposes, including potential acquisitions.

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Changes in Prices

Our revenues, the value of our assets, and our ability to obtain bank loans or additional capital on attractive terms are affected by changes in commodity prices, which can fluctuate significantly.  The following table provides our average realized prices for the periods indicated:

	Three months ended September 30,				Nine months ended September 30,
	2013		2012		2013		2012
Average realized prices:
Oil ($/Bbl) (excluding impact of cash settled derivatives)	$	104.21	$	88.28	$	94.43	$	90.46
Oil ($/Bbl) (after impact of cash settled derivatives)	94.39		89.03		90.19		88.00
Natural gas ($/Mcf)	3.28		2.66		3.42		2.46
NGLs ($/Bbl)	33.76		31.90		30.87		35.37
Combined ($/BOE) (excluding impact of cash settled derivatives)	74.16		59.62		67.07		62.49
Combined ($/BOE) (after impact of cash settled derivatives)	68.18		60.03		64.52		61.09

Increases in commodity prices may be accompanied by or result in: (i) increased development costs, as the demand for drilling operations increases; (ii) increased severance taxes, as we are subject to higher severance taxes due to the increased value of hydrocarbons extracted from our wells; and (iii) increased LOE, such as electricity costs, as the demand for services related to the operation of our wells increases.  Decreases in commodity prices can have the opposite impact of those listed above and can result in an impairment charge to our oil and natural gas properties.

Critical Accounting Policies and Estimates

Please read “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in our final prospectus dated August 1, 2013 and filed with the SEC on August 5, 2013.

Income Taxes

We account for income taxes using the asset and liability method.  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.  Deferred tax assets and liabilities are measured using enacted tax laws and rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

We periodically assess whether it is more likely than not that we will generate sufficient taxable income to realize our deferred income tax assets, including net operating losses.  In making this determination, we consider all available positive and negative evidence and make certain assumptions.  We consider, among other things, our deferred tax liabilities, the overall business environment, our historical earnings and losses, current industry trends, and our outlook for future years.  We believe it is more likely than not that certain net operating losses can be carried forward and utilized.

In April 2013, we had a corporate reorganization to effectuate our IPO.  Holdings, our accounting predecessor, is a partnership structure not subject to federal income tax.  Pursuant to the steps of the corporate reorganization, the Apollo Funds’ Class A limited partner interests and the Class B limited partner interests of Holdings were exchanged for shares of our common stock.  Our operations are now subject to federal income tax.  The tax implications of the corporate reorganization and the tax impact of the conversion to operating as a taxable entity have been reflected in our consolidated financial statements.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

The primary objective of the following information is to provide quantitative and qualitative information about our potential exposure to market risks.  The term “market risk” refers to the risk of loss arising from adverse changes in oil and natural gas prices and interest rates.  The disclosures are not meant to be precise indicators of exposure, but rather indicators of potential exposure.  This information provides indicators of how we view and manage our ongoing market risk exposures.  We do not enter into market risk sensitive instruments for speculative trading purposes.

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Derivative policy

Due to the volatility of commodity prices, we enter into various derivative instruments to manage and reduce our exposure to price changes.  We primarily utilize WTI crude oil swaps that establish a fixed price for the production covered by the swaps.  We also have employed WTI crude oil options (including puts and collars) to further mitigate our commodity price risk.  All contracts are settled with cash and do not require the delivery of physical volumes to satisfy settlement.  While this strategy may result in lower net cash inflows in times of higher oil prices than we would otherwise have, had we not utilized these instruments, management believes that the resulting reduced volatility of cash flow resulting from use of derivatives is beneficial.

Counterparties

At September 30, 2013, we had committed 10% or greater (in terms of fair market value) of our oil derivative contracts in asset positions to the following counterparties, or one of their affiliates:

	Fair Market Value of
	Oil Derivative
	Contracts
Counterparty	Committed
	(in thousands)
BNP Paribas	$	458

We do not require collateral from our counterparties for entering into financial instruments, so in order to mitigate the credit risk of financial instruments, we enter into master netting agreements with our counterparties.  The master netting agreement is a standardized, bilateral contract between a given counterparty and us.  Instead of treating each financial transaction between the counterparty and us separately, the master netting agreement enables the counterparty and us to aggregate all financial trades and treat them as a single agreement.  This arrangement is intended to benefit us in two ways: (i) default by a counterparty under a single financial trade can trigger rights to terminate all financial trades with such counterparty; and (ii) netting of settlement amounts reduces our credit exposure to a given counterparty in the event of close-out.

The counterparties to our commodity derivative contracts are composed of six institutions, all of which are rated A- or better by Standard & Poor’s and Baa2 or better by Moody’s and five of which are lenders under our credit agreement.

Commodity price sensitivity

Commodity prices are often subject to significant volatility due to many factors that are beyond our control, including but not limited to: prevailing economic conditions, supply and demand of hydrocarbons in the marketplace, actions by speculators, and geopolitical events such as wars or natural disasters.  We manage oil price risk with swaps and collars.  Swaps provide a fixed price for a notional amount of sales volumes.  Collars provide a floor price on a notional amount of sales volumes while allowing some additional price participation if the relevant index price closes above the floor price.  This participation is limited by a ceiling price specified in the contract.

The following table summarizes our open commodity derivative contracts as of September 30, 2013:

	Average	Weighted -		Average	Weighted -		Average	Weighted -		Asset
	Daily	Average		Daily	Average		Daily	Average		(Liability)
	Floor	Floor		Cap	Cap		Swap	Swap		Fair Market
Period	Volume	Price		Volume	Price		Volume	Price		Value
	(Bbl)	(per Bbl)		(Bbl)	(per Bbl)		(Bbl)	(per Bbl)		(in thousands)
Oct. - Dec. 2013	150	$	75.00	150	$	105.95	7,000	$	95.01	$	(4,205	)
2014	—	—		—	—		7,950	92.67		(7,532		)
2015	—	—		—	—		1,300	93.18		2,101
										$	(9,636	)

We are also a party to Midland-Cushing basis differential swaps for 5,000 Bbls/D at $1.20/Bbl for October through December 2013.  At September 30, 2013, the fair value of these contracts was a liability of approximately $0.3 million.

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As of September 30, 2013, the fair market value of our oil derivative contracts was a net liability of $10.0 million.  Based on our open commodity derivative positions at September 30, 2013, a 10% increase in NYMEX prices for oil would increase our net commodity derivative liability by approximately $37.2 million, while a 10% decrease in NYMEX prices for oil would change our net commodity derivative liability to a net commodity derivative asset of approximately $27.2 million.

Interest rate sensitivity

At September 30, 2013, we had outstanding debt of $500 million, all of which bears interest at a fixed rate of 7 3/8%.  At September 30, 2013, the fair value of our senior notes was approximately $515.6 million.

Item 4.  Controls and Procedures

In accordance with the Securities Exchange Act of 1934 (the “Exchange Act”) Rules 13a-15 and 15d-15, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures.  Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2013 to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that information required to be disclosed is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

We are not currently required to comply with the SEC’s rules implementing Section 404 of the Sarbanes Oxley Act, and are therefore not required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose.  However, we are required to comply with the SEC’s rules implementing Section 302 of the Sarbanes-Oxley Act, which requires our management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of its internal control over financial reporting.  We will not be required to make our first assessment of internal control over financial reporting under Section 404 until the year following our first annual report required to be filed with the SEC.

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PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

From time to time, we are a party to ongoing legal proceedings in the ordinary course of business, including workers’ compensation claims and employment related disputes.  We do not believe the results of these proceedings, individually or in the aggregate, will have a material adverse effect on our business, financial condition, results of operations, or liquidity.

Item 1A.  Risk Factors

In addition to the other information set forth in this Report, you should carefully consider the factors discussed in “Risk Factors” in our final prospectus dated August 1, 2013 and filed with the SEC pursuant to Rule 424(b)(4) of the Securities Act on August 5, 2013, which could materially affect our business, financial condition, and/or future results.  The risks described in our final prospectus are not the only risks we face.  Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, or results of operations.

Item 5.  Other Information

Disclosure Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act

Apollo Global Management, LLC (“Apollo”) has provided notice to us that, as of October 24, 2013, certain investment funds managed by affiliates of Apollo beneficially owned approximately 22% of the limited liability company interests of CEVA Holdings, LLC (“CEVA”).  Under the limited liability company agreement governing CEVA, certain investment funds managed by affiliates of Apollo hold a majority of the voting power of CEVA and have the right to elect a majority of the board of CEVA.  CEVA may be deemed to be under common control with us, but this statement is not meant to be an admission that common control exists.  As a result, it appears that we are required to provide disclosures as set forth below pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 (“ITRA”) and Section 13(r) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Apollo has informed us that CEVA has provided it with the information below relevant to Section 13(r) of the Exchange Act.  The disclosure below does not relate to any activities conducted by us and does not involve us or our management.  The disclosure relates solely to activities conducted by CEVA and its consolidated subsidiaries.  We have not independently verified or participated in the preparation of the disclosure below.

“Through an internal review of its global operations, CEVA has identified the following transactions in an Initial Notice of Voluntary Self-Disclosure that CEVA filed with the U.S. Treasury Department Office of Foreign Assets Control (“OFAC”) on October 28, 2013.  CEVA’s review is ongoing.  CEVA will file a further report with OFAC after completing its review.

The internal review indicates that, in December 2012, CEVA Freight Italy Srl (“CEVA Italy”) provided customs brokerage and freight forwarding services for the export to Iran of two measurement instruments to the Iranian Offshore Engineering Construction Company, a joint venture between two entities that are identified on OFAC’s list of Specially Designated Nationals (“SDN”).  The revenues and net profits for these services were approximately $1,260.64 USD and $151.30 USD, respectively.  In February 2013, CEVA Freight Holdings (Malaysia) SDN BHD (“CEVA Malaysia”) provided customs brokerage for export and local haulage services for a shipment of polyethylene resin to Iran shipped on a vessel owned and/or operated by HDS Lines, also an SDN.  The revenues and net profits for these services were approximately $779.54 USD and $311.13 USD, respectively.  In September 2013, CEVA Malaysia provided customs brokerage services for the import into Malaysia of fruit juice from Alifard Co. in Iran via HDS Lines.  The revenues and net profits for these services were approximately $227.41 USD and $89.29 USD, respectively.

These transactions violate the terms of internal CEVA compliance policies, which prohibit transactions involving Iran.  Upon discovering these transactions, CEVA promptly launched an internal investigation, and is taking action to block and prevent such transactions in the future.  CEVA intends to cooperate with OFAC in its review of this matter.”

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Item 6.  Exhibits

Exhibit No.	Description
3.1	Amended and Restated Certificate of Incorporation of Athlon Energy Inc. (incorporated by reference from Exhibit 3.1 of Athlon’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, filed with the SEC on August 14, 2013).
3.2	Amended and Restated Bylaws of Athlon Energy Inc. (incorporated by reference from Exhibit 3.2 of Athlon’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, filed with the SEC on August 14, 2013).
4.1	Supplemental Indenture, dated August 14, 2013, among Athlon Energy Inc., Athlon Holdings LP, Athlon Finance Corp., and Wells Fargo Bank, National Association, as Trustee, with respect to the indenture, dated as of April 17, 2013, relating to Athlon Holdings LP and Athlon Finance Corp.’s 7 3/8% Senior Notes due 2021 (incorporated by reference to Exhibit 4.2 to Athlon’s Current Report on Form 8-K, filed with the SEC on August 20, 2013).
10.1+	Employment Agreement, dated as of August 7, 2013, by and between Athlon Holdings LP and Robert C. Reeves (incorporated by reference to Exhibit 10.1 to Athlon’s Current Report on Form 8-K, filed with the SEC on August 15, 2013).
10.2+	Employment Agreement, dated as of August 7, 2013, by and between Athlon Holdings LP and William B. D. Butler (incorporated by reference to Exhibit 10.1 to Athlon’s Current Report on Form 8-K, filed with the SEC on August 15, 2013).
10.3+	Employment Agreement, dated as of August 7, 2013, by and between Athlon Holdings LP and Nelson K. Treadway (incorporated by reference to Exhibit 10.1 to Athlon’s Current Report on Form 8-K, filed with the SEC on August 15, 2013).
10.4+	Employment Agreement, dated as of August 7, 2013, by and between Athlon Holdings LP and David B. McClelland (incorporated by reference to Exhibit 10.1 to Athlon’s Current Report on Form 8-K, filed with the SEC on August 15, 2013).
10.5+	Athlon Energy Inc. 2013 Incentive Stock Plan (incorporated by reference from Exhibit 4.3 to Athlon’s Registration Statement on Form S-8 (File No. 333-190734), filed with the SEC on August 20, 2013).
10.6*+	Form of Restricted Stock Unit Grant Notice—Executive.
10.7*	Tax Receivable Agreement by and among Athlon Energy Inc., Athlon Holdings LP, and each of the Partners named therein.
10.8*	Exchange Agreement by and among Athlon Energy Inc. and each of the Partners named therein.
10.9*	Stockholders Agreement by and among Athlon Energy Inc. and those stockholders named therein.
10.10*	Advisory Services and Transaction Fee Termination Agreement by and among Athlon Holdings LP, Apollo Management VII, L.P. and Apollo Global Securities, LLC.
10.11*	Amended and Restated Agreement of Limited Partnership of Athlon Holdings LP.
31.1*	Rule 13a-14(a)/15d-14(a) Certification (Principal Executive Officer).
31.2*	Rule 13a-14(a)/15d-14(a) Certification (Principal Financial Officer).
32.1*	Section 1350 Certification (Principal Executive Officer).
32.2*	Section 1350 Certification (Principal Financial Officer).
101.INS*	XBRL Instance Document.
101.SCH*	XBRL Taxonomy Extension Schema Document.
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase.
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*	XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document.

*Filed herewith.

+Management contract or compensatory plan, contract, or arrangement.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ATHLON ENERGY INC.
	/s/ William B. D. Butler
	William B. D. Butler
	Vice President—Chief Financial Officer and
	Principal Financial Officer
	/s/ John C. Souders
	John C. Souders
	Vice President—Controller and
	Principal Accounting Officer
Date: November 14, 2013

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EX-10.6

Exhibit 10.6

ATHLON ENERGY INC.
2013 INCENTIVE AWARD PLAN

RESTRICTED STOCK UNIT GRANT NOTICE

Athlon Energy Inc., a Delaware corporation (the “Company”), pursuant to its 2013 Incentive Award Plan, as amended from time to time (the “Plan”), hereby grants to the holder listed below (“Participant”) the number of Restricted Stock Units (the “RSUs”) set forth below.  The RSUs are subject to the terms and conditions set forth in this Restricted Stock Unit Grant Notice (the “Grant Notice”) and the Restricted Stock Unit Agreement attached hereto as Exhibit A (the “Agreement”) and the Plan, which are incorporated herein by reference.  Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in the Grant Notice and the Agreement.

Participant:	[                ]
Grant Date:	[                ], 2013
Target Number of Performance-Based RSUs:	[                ]
Number of Time-Based RSUs:	[                ]
Type of Shares Issuable:	Common Stock
Vesting Schedule:	This award will vest and become exercisable in accordance with the vesting schedule set forth in Exhibit A.

By Participant’s signature below, Participant agrees to be bound by the terms and conditions of the Plan, the Agreement and the Grant Notice.  Participant has reviewed the Agreement, the Plan and the Grant Notice in their entirety, has had an opportunity to obtain the advice of counsel prior to executing the Grant Notice and fully understands all provisions of the Grant Notice, the Agreement and the Plan.  Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan, the Grant Notice or the Agreement.

ATHLON ENERGY INC.	PARTICIPANT
By:	By:
Print Name:	Print Name:
Title:

EXHIBIT A

TO RESTRICTED STOCK UNIT GRANT NOTICE

RESTRICTED STOCK UNIT AGREEMENT

Pursuant to the Grant Notice to which this Agreement is attached, the Company has granted to Participant RSUs  (including “Performance-Based RSUs” and “Time-Based RSUs”) as set forth in the Grant Notice.

ARTICLE I.

GENERAL

1.1Defined Terms.  Capitalized terms not specifically defined herein shall have the meanings specified in the Plan or the Grant Notice.

1.2Incorporation of Terms of Plan.  The RSUs and the shares of Common Stock (“Stock”) issued to Participant hereunder (“Shares”) are subject to the terms and conditions set forth in this Agreement and the Plan, which is incorporated herein by reference.  In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control.

ARTICLE II.

AWARD OF RESTRICTED STOCK UNITS AND DIVIDEND EQUIVALENTS

2.1Award of RSUs and Dividend Equivalents.

(a)In consideration of Participant’s past and/or continued employment with or service to the Company or a Subsidiary and for other good and valuable consideration, effective as of the grant date set forth in the Grant Notice (the “Grant Date”), the Company has granted to Participant RSUs as set forth in the Grant Notice, upon the terms and conditions set forth in the Grant Notice, the Plan and this Agreement, subject to adjustment as provided in Section 12.2 of the Plan.  Each RSU represents the right to receive one Share or, at the option of the Company, an amount of cash as set forth in Section 2.3(b), in either case, at the times and subject to the conditions set forth herein.  However, unless and until the RSUs have vested, Participant will have no right to the payment of any Shares subject thereto.  Prior to the actual delivery of any Shares, the RSUs will represent an unsecured obligation of the Company, payable only from the general assets of the Company.

(b)The Company hereby grants to Participant an Award of Dividend Equivalents with respect to each RSU granted pursuant to the Grant Notice for all ordinary cash dividends which are paid to all or substantially all holders of the outstanding shares of Stock between the Grant Date and the date when the applicable RSU is distributed or paid to Participant or is forfeited or expires.  The Dividend Equivalents for each RSU shall be equal to the amount of cash which is paid as a dividend on one share of Stock.  The Company shall establish, with respect to each RSU, a separate Dividend Equivalent bookkeeping account for such RSU (a “Dividend Equivalent Account”), which shall be credited (without interest) on the

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applicable dividend payment dates with an amount equal to any ordinary cash dividends paid during the period that such RSU remains outstanding with respect to the Share underlying the RSU to which such Dividend Equivalent relates.  Upon the vesting of an RSU, the Dividend Equivalent (and the Dividend Equivalent Account) with respect to such vested RSU shall also become vested.  Similarly, upon the forfeiture of an RSU, the Dividend Equivalent (and the Dividend Equivalent Account) with respect to such forfeited RSU shall also be forfeited.

2.2Vesting of RSUs and Dividend Equivalents.

(a)Vesting of Performance-Based RSUs.  The Performance-Based RSUs shall be divided into three equal tranches (each a “Performance Tranche”), which shall vest, if at all, in amounts up to 200% of the applicable installment of the Target Number of Performance-Based RSUs on August 1, 2014, 2015 and 2016, respectively, as follows, subject to Section 2.2(c) below:

(i)If, with respect to a Performance Tranche, the Company achieves a TSR over the Performance Period that is below the 25th percentile of the TSRs of the component members of the Company’s Peer Group over the Performance Period, none of the Performance-Based RSUs in such Performance Tranche shall vest;

(ii)If, with respect to a Performance Tranche, the Company achieves a TSR over the Performance Period that is at the 25th percentile or between the 25th percentile and the 75th percentile of the TSRs of the component members of the Company’s Peer Group over the Performance Period, a number of RSUs equal to 100% (but not more than 100%) of the applicable installment of the Target Number of Performance-Based RSUs (as indicated in the Grant Notice above) shall vest; or

(iii)If, with respect to a Performance Tranche, the Company achieves a TSR over the Performance Period that is at or above the 75th percentile of the TSRs of the component members of the Company’s Peer Group over the Performance Period, a number of RSUs equal to 200% of the applicable installment of the Target Number of Performance-Based RSUs (as indicated in the Grant Notice above) shall vest.

(b)Vesting of Time-Based RSUs.  Subject to Section 2.2(c) below, the Time-Based RSUs shall vest in three equal annual installments on August 1, 2014, 2015 and 2016, respectively.

(c)In the event Participant incurs a Termination of Service, except as may be otherwise provided by the Administrator or as set forth in a written agreement between Participant and the Company, Participant shall immediately forfeit any and all RSUs and Dividend Equivalents granted under this Agreement which have not vested or do not vest on or prior to the date on which such Termination of Service occurs, and Participant’s rights in any such RSUs and Dividend Equivalents which are not so vested shall lapse and expire. In the event of a Change in Control, all RSUs granted under this agreement that were not previously eligible to vest will vest in full, with the Performance-Based RSUs vesting at the maximum level (200%).

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(d)Definitions.

(i)Performance Period.  For purposes of this Agreement, “Performance Period” means (A) for Performance-Based RSUs that are eligible to vest on August 1, 2014, the period beginning on August 2, 2013 and ending on August 1, 2014, (B) for Performance-Based RSUs that are eligible to vest on August 1, 2015, the period beginning on August 2, 2014 and ending on August 1, 2015, and (C) for Performance-Based RSUs that are eligible to vest on August 1, 2016, the period beginning on August 2, 2015 and ending on August 1, 2016.

(ii)TSR.  For purposes of this Agreement, “TSR” means, as applicable, the Company’s or a member of the Peer Group’s total stockholder return for the applicable Performance Period calculated based on the change in the trading price of the applicable shares over the Performance Period (where the trading price for any date is calculated as the average of the closing price of the applicable shares of Stock on the applicable securities exchange, where reasonably available, on such date and on the nine (9) preceding trading days) and assuming the reinvestment of all dividends or distributions paid on shares during such period, all as determined by the Committee in its discretion; provided, however, that the trading price of the Company’s shares of Stock as of August 2, 2013 shall be deemed for all purposes under this Agreement to be $20.00 per share.

(iii)Peer Group.  For purposes of this Agreement, the “Peer Group” shall consist of the companies listed on Schedule A hereto, provided, however, that the Committee may make such changes and adjustments to the Peer Group from time to time that it deems equitable or appropriate in its discretion as a result of or to account for a Change in Control or any similar or other extraordinary transaction that may occur with respect a member of the Peer Group or a member of the Peer Group ceasing to be a publicly traded company, which change(s) or adjustment(s) may include, but are not limited to removing, replacing or adding additional members to the Peer Group for all or any purposes under this Agreement.

2.3Distribution or Payment of RSUs and Dividend Equivalents.

(a)Participant’s vested RSUs shall be distributed in Shares (either in book-entry form or otherwise) or, at the option of the Company, paid in an amount of cash as set forth in Section 2.3(b), in either case, as soon as administratively practicable following the vesting of the applicable RSU pursuant to Section 2.2, and, in any event, within sixty (60) days following such vesting.  Notwithstanding the foregoing, the Company may delay a distribution or payment in settlement of RSUs if it reasonably determines that such payment or distribution will violate Federal securities laws or any other Applicable Law, provided that such distribution or payment shall be made at the earliest date at which the Company reasonably determines that the making of such distribution or payment will not cause such violation, as required by Treasury Regulation Section 1.409A-2(b)(7)(ii), and provided further that no payment or distribution shall be delayed under this Section 2.3(a) if such delay will result in a violation of Section 409A of the Code.

(b)In the event that the Company elects to make payment of Participant’s RSUs in cash, the amount of cash payable with respect to each RSU shall be equal to the Fair Market Value of a Share on the day immediately preceding the applicable distribution or payment date set forth in Section 2.3(a).  All distributions made in Shares shall be made by the Company in the form of whole Shares, and any fractional share shall be distributed in cash in an

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amount equal to the value of such fractional share determined based on the Fair Market Value as of the date immediately preceding the date of such distribution.

(c)Unpaid, vested Dividend Equivalents shall be paid to the Participant as follows: as soon as administratively practicable following the vesting of the applicable RSU and related Dividend Equivalent, and, in any event, within sixty (60) days following such vesting, the Participant shall be paid an amount in cash equal to the amount then credited to the Dividend Equivalent Account maintained with respect to such RSU.  For the avoidance of doubt, Dividend Equivalents relating to Performance-Based RSUs may be paid up to 200% based on the level at which the corresponding Performance Tranche of the Performance-Based RSUs vests.

2.4Conditions to Issuance of Certificates.  The Company shall not be required to issue or deliver any certificate or certificates for any Shares prior to the fulfillment of all of the following conditions:  (A) the admission of the Shares to listing on all stock exchanges on which such Shares are then listed, (B) the completion of any registration or other qualification of the Shares under any state or federal law or under rulings or regulations of the Securities and Exchange Commission or other governmental regulatory body, which the Administrator shall, in its absolute discretion, deem necessary or advisable, and (C) the obtaining of any approval or other clearance from any state or federal governmental agency that the Administrator shall, in its absolute discretion, determine to be necessary or advisable.

2.5Tax Withholding.  Notwithstanding any other provision of this Agreement:

(a)The Company and its Subsidiaries have the authority to deduct or withhold, or require Participant to remit to the Company or the applicable Subsidiary, an amount sufficient to satisfy applicable federal, state, local and foreign taxes (including the employee portion of any FICA obligation) required by law to be withheld with respect to any taxable event arising pursuant to this Agreement.  The Company and its Subsidiaries may withhold or Participant may make such payment in one or more of the forms specified below:

(i)by cash or check made payable to the Company or the Subsidiary with respect to which the withholding obligation arises;

(ii)by the deduction of such amount from other compensation payable to Participant;

(iii)with respect to any withholding taxes arising in connection with the distribution of the RSUs, with the consent of the Administrator, by requesting that the Company and its Subsidiaries withhold a net number of vested Shares otherwise issuable pursuant to the RSUs having a then current Fair Market Value not exceeding the amount necessary to satisfy the withholding obligation of the Company and its Subsidiaries based on the minimum applicable statutory withholding rates for federal, state, local and foreign income tax and payroll tax purposes;

(iv)with respect to any withholding taxes arising in connection with the distribution of the RSUs, with the consent of the Administrator, by tendering to the Company vested Shares having a then current Fair Market Value not exceeding the amount necessary to satisfy the withholding obligation of the Company and its Subsidiaries based on the minimum

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applicable statutory withholding rates for federal, state, local and foreign income tax and payroll tax purposes;

(v)with respect to any withholding taxes arising in connection with the distribution of the RSUs, through the delivery of a notice that Participant has placed a market sell order with a broker acceptable to the Company with respect to Shares then issuable to Participant pursuant to the RSUs, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company or the Subsidiary with respect to which the withholding obligation arises in satisfaction of such withholding taxes; provided that payment of such proceeds is then made to the Company or the applicable Subsidiary at such time as may be required by the Administrator, but in any event not later than the settlement of such sale; or

(vi)in any combination of the foregoing.

(b)With respect to any withholding taxes arising in connection with the RSUs, in the event Participant fails to provide timely payment of all sums required pursuant to Section 2.5(a), the Company shall have the right and option, but not the obligation, to treat such failure as an election by Participant to satisfy all or any portion of Participant’s required payment obligation pursuant to Section 2.5(a)(ii) or (iii) above, or any combination of the foregoing as the Company may determine to be appropriate. The Company shall not be obligated to deliver any certificate representing Shares issuable with respect to the RSUs to Participant or his or her legal representative unless and until Participant or his or her legal representative shall have paid or otherwise satisfied in full the amount of all federal, state, local and foreign taxes applicable with respect to the taxable income of Participant resulting from the vesting or settlement of the RSUs or any other taxable event related to the RSUs.

(c)In the event any tax withholding obligation arising in connection with the RSUs will be satisfied under Section 2.5(a)(iii), then the Company may elect to instruct any brokerage firm determined acceptable to the Company for such purpose to sell on Participant’s behalf a whole number of shares from those Shares then issuable to Participant pursuant to the RSUs as the Company determines to be appropriate to generate cash proceeds sufficient to satisfy the tax withholding obligation and to remit the proceeds of such sale to the Company or the Subsidiary with respect to which the withholding obligation arises.  Participant’s acceptance of this Award constitutes Participant’s instruction and authorization to the Company and such brokerage firm to complete the transactions described in this Section 2.5(c), including the transactions described in the previous sentence, as applicable.  The Company may refuse to issue any Shares in settlement of the RSUs to Participant until the foregoing tax withholding obligations are satisfied, provided that no payment shall be delayed under this Section 2.5(c) if such delay will result in a violation of Section 409A of the Code.

(d)Participant is ultimately liable and responsible for all taxes owed in connection with the RSUs, regardless of any action the Company or any Subsidiary takes with respect to any tax withholding obligations that arise in connection with the RSUs.  Neither the Company nor any Subsidiary makes any representation or undertaking regarding the treatment of any tax withholding in connection with the awarding, vesting or payment of the RSUs or the subsequent sale of Shares.  The Company and the Subsidiaries do not commit and are under no obligation to structure the RSUs to reduce or eliminate Participant’s tax liability.

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2.6Rights as Stockholder.  Neither Participant nor any person claiming under or through Participant will have any of the rights or privileges of a stockholder of the Company in respect of any Shares deliverable hereunder unless and until certificates representing such Shares (which may be in book-entry form) will have been issued and recorded on the records of the Company or its transfer agents or registrars, and delivered to Participant (including through electronic delivery to a brokerage account).  Except as otherwise provided herein, after such issuance, recordation and delivery, Participant will have all the rights of a stockholder of the Company with respect to such Shares, including, without limitation, the right to receipt of dividends and distributions on such Shares.

ARTICLE III.

OTHER PROVISIONS

3.1Administration.  The Administrator shall have the power to interpret the Plan, the Grant Notice and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan, the Grant Notice and this Agreement as are consistent therewith and to interpret, amend or revoke any such rules.  All actions taken and all interpretations and determinations made by the Administrator will be final and binding upon Participant, the Company and all other interested persons.  To the extent allowable pursuant to Applicable Law, no member of the Committee or the Board will be personally liable for any action, determination or interpretation made with respect to the Plan, the Grant Notice or this Agreement.

3.2RSUs Not Transferable.  The RSUs may not be sold, pledged, assigned or transferred in any manner other than by will or the laws of descent and distribution, unless and until the Shares underlying the RSUs have been issued, and all restrictions applicable to such Shares have lapsed.  No RSUs or any interest or right therein or part thereof shall be liable for the debts, contracts or engagements of Participant or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect, except to the extent that such disposition is permitted by the preceding sentence.

3.3Adjustments.  The Administrator may accelerate the vesting of all or a portion of the RSUs in such circumstances as it, in its sole discretion, may determine.  Participant acknowledges that the RSUs and the Shares subject to the RSUs are subject to adjustment, modification and termination in certain events as provided in this Agreement and the Plan, including Section 12.2 of the Plan.

3.4Notices.  Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of the Secretary of the Company at the Company’s principal office, and any notice to be given to Participant shall be addressed to Participant at Participant’s last address reflected on the Company’s records.  By a notice given pursuant to this Section 3.4, either party may hereafter designate a different address for notices to be given to that party.  Any notice shall be deemed duly given when sent via email or when sent

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by certified mail (return receipt requested) and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.

3.5Titles.  Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.

3.6Governing Law.  The laws of the State of Delaware shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws.

3.7Conformity to Securities Laws.  Participant acknowledges that the Plan, the Grant Notice and this Agreement are intended to conform to the extent necessary with all Applicable Laws, including, without limitation, the provisions of the Securities Act and the Exchange Act, and any and all regulations and rules promulgated thereunder by the Securities and Exchange Commission, and state securities laws and regulations.  Notwithstanding anything herein to the contrary, the Plan shall be administered, and the RSUs are granted, only in such a manner as to conform to Applicable Law.  To the extent permitted by Applicable Law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to Applicable Law.

3.8Amendment, Suspension and Termination.  To the extent permitted by the Plan, this Agreement may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Administrator or the Board, provided that, except as may otherwise be provided by the Plan, no amendment, modification, suspension or termination of this Agreement shall adversely affect the RSUs in any material way without the prior written consent of Participant.

3.9Successors and Assigns.  The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company.  Subject to the restrictions on transfer set forth in Section 3.2 and the Plan, this Agreement shall be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.

3.10Limitations Applicable to Section 16 Persons.  Notwithstanding any other provision of the Plan or this Agreement, if Participant is subject to Section 16 of the Exchange Act, the Plan, the RSUs (including RSUs which result from the deemed reinvestment of Dividend Equivalents), the Dividend Equivalents, the Grant Notice and this Agreement shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule.  To the extent permitted by Applicable Law, this Agreement shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.

3.11Not a Contract of Employment.  Nothing in this Agreement or in the Plan shall confer upon Participant any right to continue to serve as an employee or other service provider of the Company or any Subsidiary or shall interfere with or restrict in any way the rights of the Company and its Subsidiaries, which rights are hereby expressly reserved, to discharge or terminate the services of Participant at any time for any reason whatsoever, with or without

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cause, except to the extent expressly provided otherwise in a written agreement between the Company or a Subsidiary and Participant.

3.12Entire Agreement.  The Plan, the Grant Notice and this Agreement (including any exhibit hereto) constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof.

3.13Section 409A.  This Award is not intended to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code (together with any Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the date hereof, “Section 409A”).  However, notwithstanding any other provision of the Plan, the Grant Notice or this Agreement, if at any time the Administrator determines that this Award (or any portion thereof) may be subject to Section 409A, the Administrator shall have the right in its sole discretion (without any obligation to do so or to indemnify Participant or any other person for failure to do so) to adopt such amendments to the Plan, the Grant Notice or this Agreement, or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, as the Administrator determines are necessary or appropriate for this Award either to be exempt from the application of Section 409A or to comply with the requirements of Section 409A.

3.14Agreement Severable.  In the event that any provision of the Grant Notice or this Agreement is held invalid or unenforceable, such provision will be severable from, and such invalidity or unenforceability will not be construed to have any effect on, the remaining provisions of the Grant Notice or this Agreement.

3.15Limitation on Participant’s Rights.  Participation in the Plan confers no rights or interests other than as herein provided.  This Agreement creates only a contractual obligation on the part of the Company as to amounts payable and shall not be construed as creating a trust.  Neither the Plan nor any underlying program, in and of itself, has any assets.  Participant shall have only the rights of a general unsecured creditor of the Company with respect to amounts credited and benefits payable, if any, with respect to the RSUs and Dividend Equivalents.

3.16Counterparts.  The Grant Notice may be executed in one or more counterparts, including by way of any electronic signature, subject to Applicable Law, each of which shall be deemed an original and all of which together shall constitute one instrument.

3.17Broker-Assisted Sales.  In the event of any broker-assisted sale of Shares in connection with the payment of withholding taxes as provided in Section 2.5(a)(iii) or (v): (A) any Shares to be sold through a broker-assisted sale will be sold on the day the tax withholding obligation arises or as soon thereafter as practicable; (B) such Shares may be sold as part of a block trade with other participants in the Plan in which all participants receive an average price; (C) Participant will be responsible for all broker’s fees and other costs of sale, and Participant agrees to indemnify and hold the Company harmless from any losses, costs, damages, or expenses relating to any such sale; (D) to the extent the proceeds of such sale exceed the applicable tax withholding obligation, the Company agrees to pay such excess in cash to

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Participant as soon as reasonably practicable; (E) Participant acknowledges that the Company or its designee is under no obligation to arrange for such sale at any particular price, and that the proceeds of any such sale may not be sufficient to satisfy the applicable tax withholding obligation; and (F) in the event the proceeds of such sale are insufficient to satisfy the applicable tax withholding obligation, Participant agrees to pay immediately upon demand to the Company or its Subsidiary with respect to which the withholding obligation arises an amount in cash sufficient to satisfy any remaining portion of the Company’s or the applicable Subsidiary’s withholding obligation.

***

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SCHEDULE A

TO RESTRICTED STOCK UNIT AGREEMENT

PEER GROUP

Approach Resources, Inc.

Berry Petroleum Co.

Bill Barrett Corp.

Bonanza Creek Energy, Inc.

Carrizo Oil & Gas Inc.

Comstock Resources Inc.

Diamondback Energy, Inc.

EXCO Resources Inc.

Forest Oil Corporation

Kodiak Oil & Gas Corp.

Laredo Petroleum Holdings, Inc.

PDC Energy, Inc.

Quicksilver Resources Inc.

Resolute Energy Corporation

Rosetta Resources, Inc.

Swift Energy Co.

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EX-10.7

Exhibit 10.7

Execution Version

TAX RECEIVABLE AGREEMENT

This TAX RECEIVABLE AGREEMENT (as amended from time to time, this “Agreement”), dated as of August 7, 2013, is hereby entered into by and among Athlon Energy Inc., a Delaware corporation (the “Corporation”), Athlon Holdings LP, a Delaware limited partnership (the “Partnership”), and each of the Partners (as defined herein).

RECITALS

WHEREAS, the Partners own limited partner interests (“Units”) in the Partnership, which is treated as a partnership for United States federal income tax purposes;

WHEREAS, the Corporation owns the general partner interest and limited partner interests in the Partnership;

WHEREAS, the Units held by the Partners are exchangeable for shares of common stock, par value $0.01 per share (the “Common Stock”), of the Corporation;

WHEREAS, the Partnership and each of its direct and indirect subsidiaries treated as a partnership for United States federal income tax purposes will have in effect an election under Section 754 of the United States Internal Revenue Code of 1986, as amended (the “Code”), for each Taxable Year (as defined below) in which an exchange of Units for Common Stock occurs, which election is intended to result in an adjustment to the tax basis of the assets owned by the Partnership and such subsidiaries (solely with respect to the Corporation) at the time of (i) any Section 734(b) Distribution (as defined below) or (ii) an exchange of Units for Common Stock or any other acquisition of Units by the Corporation or its successor (or any entity that is a member of the Corporation’s (or its successor’s) affiliated or consolidated group) for cash or otherwise (the transactions described in clauses (i) and (ii), collectively, an “Exchange”) (each such time described in clauses (i) and (ii), the “Exchange Date”) by reason of such Exchange and the payments under this Agreement;

WHEREAS, the income, gain, loss, expense and other Tax (as defined below) items of (i) the Corporation, as a partner of the Partnership (and in respect of each of the Partnership’s direct and indirect Subsidiaries (as defined below) treated as a partnership for United States federal income tax purposes) with respect to the Specified Assets (as defined below) may be affected by the Basis Adjustment (as defined below) and (ii) the Corporation may be affected by the Imputed Interest (as defined below); and

WHEREAS, the parties to this Agreement desire to make certain arrangements with respect to the actual or deemed effect of the Basis Adjustment and the Imputed Interest on the liability for Taxes of the Corporation.

NOW, THEREFORE, in consideration of the foregoing and the respective covenants and agreements set forth herein, and intending to be legally bound hereby, the parties hereto agree as follows:

ARTICLE I
DEFINITIONS

Definitions.  As used in this Agreement, the terms set forth in this Article I shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined).

“Advisory Firm” means any law or accounting firm that is nationally recognized as being an expert in Tax matters and that is agreed to by the Board.

“Advisory Firm Letter” means a letter from the Advisory Firm stating that the relevant schedule, notice or other information to be provided by the Corporation to the Exchanging Partner and all supporting schedules and work papers were prepared in a manner consistent with the terms of this Agreement and, to the extent not expressly provided in this Agreement, on a reasonable basis in light of the facts and law in existence on the date such schedule, notice or other information is delivered to the Exchanging Partner.

“Affiliate” means, with respect to any Person, any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such first Person.

“Agreed Rate” means LIBOR plus 300 basis points.

“Agreement” is defined in the Preamble of this Agreement.

“Amended Schedule” is defined in Section 2.04(b) of this Agreement.

“Amount Realized” means, in respect of an Exchange by an Exchanging Partner, the amount that is deemed for purposes of this Agreement to be the amount realized by the Exchanging Partner on the Exchange, which shall be the sum of (i) the Market Value of the Common Stock, the amount of cash and the amount or fair market value of other consideration received (or deemed received) by the Exchanging Partner in the Exchange and (ii) the Share of Liabilities attributable to the Units Exchanged.  The amount realized by an Exchanging Partner, as so determined, may differ from the amount realized by the Exchanging Partner for purposes of Section 1001 of the Code.

“Basis Adjustment” means the deemed adjustment to the Tax basis of a Specified Asset, arising in respect of an Exchange, as calculated under Section 2.01 of this Agreement, under the principles of Sections 743(b) and 754 of the Code (including in situations where, following an Exchange, the Partnership remains in existence as an entity for tax purposes, or situations where, following one or more Section 734(b) Distributions, the Partnership remains in existence as an entity for tax purposes) and, in each case, comparable sections of state, local and foreign Tax laws.  Notwithstanding any other provision of this Agreement, the amount of any Basis Adjustment resulting from an Exchange of one or more Units shall be determined without regard to any Pre-Exchange Transfer of such Units and as if any such Pre-Exchange Transfer had not occurred.  Immediately after any Section 732 Event, “Basis Adjustment” means a portion of the tax basis of a Specified Asset, equal to the Basis Adjustment attributable to such Specified Asset immediately prior to such Section 732 Event, including, for this purpose, any increase in the

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basis of a Specified Asset pursuant to Section 1012 of the Code and Revenue Ruling 99-6, 1999-1 C.B. 532, due to an Exchange that causes the Partnership to become an entity disregarded as separate from its owner for tax purposes.

“Beneficial Owner”, with respect to a security, means a Person who directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares: (i) voting power, which includes the power to vote, or to direct the voting of, such security and/or (ii) investment power, which includes the power to dispose of, or to direct the disposition of, such security.  The terms “Beneficially Own” and “Beneficial Ownership” shall have correlative meanings.

“Board” means the board of directors of the Corporation.

“Business Day” means Monday through Friday of each week, except that a legal holiday recognized as such by the government of the United States of America or the State of Texas shall not be regarded as a Business Day.

“Change of Control” means the occurrence of either of the following events:

(a)the sale, lease or transfer (other than by way of merger or consolidation, including any merger or consolidation involving an Affiliate of the Corporation solely for the purpose of reorganizing the Corporation in another jurisdiction to realize tax or other benefits), in one or a series of related transactions, of all or substantially all the assets of the Corporation and its Subsidiaries, taken as a whole, to a Person other than any of the Permitted Holders; or

(b)the Corporation becomes aware (by way of a report or any other filing pursuant to Section 13(d) of the Exchange Act, proxy, vote, written notice or otherwise) of the acquisition by any Person or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision), including any group acting for the purpose of acquiring, holding or disposing of securities (within the meaning of Rule 13d-5(b)(1) under the Exchange Act), other than any of the Permitted Holders, in a single transaction or in a related series of transactions, by way of merger, consolidation, amalgamation or other business combination or purchase of Beneficial Ownership, of more than 50% of the total capital stock of the Corporation that is entitled to vote in the election of the Board.

Notwithstanding the foregoing, a “Change of Control” shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which the record holders of the shares of the Corporation immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of the Corporation immediately following such transaction or series of transactions.

“Code” is defined in the Recitals of this Agreement.

“Common Stock” is defined in the Recitals of this Agreement.

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“Control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.

“Corporation” is defined in the Preamble of this Agreement.

“Corporation Return” means the United States federal, state, local and/or foreign Tax Return, as applicable, of the Corporation filed with respect to Taxes of any Taxable Year.

“Cumulative Net Realized Tax Benefit” for a Taxable Year means the cumulative amount of Realized Tax Benefits for all Taxable Years of the Corporation, up to and including such Taxable Year, net of the cumulative amount of Realized Tax Detriments for the same period.  The Realized Tax Benefit and Realized Tax Detriment for each Taxable Year shall be determined based on the most recent Tax Benefit Schedule or Amended Schedule, if any, in existence at the time of such determination.

“Default Rate” means LIBOR plus 625 basis points.

“Determination” shall have the meaning ascribed to such term in Section 1313(a) of the Code or similar provision of state, local and foreign Tax law, as applicable, or any other event (including the execution of an IRS Form 870-AD) that finally and conclusively establishes the amount of any liability for Tax.

“Dispute” is defined in Section 7.08(a) of this Agreement.

“Early Payment Right” is defined in Section 4.04 of this Agreement.

“Early Termination Date” means the date of an Early Termination Notice for purposes of determining the Early Termination Payment.

“Early Termination Notice” is defined in Section 4.02 of this Agreement.

“Early Termination Payment” is defined in Section 4.03(b) of this Agreement.

“Early Termination Rate” means LIBOR plus 300 basis points.

“Early Termination Schedule” is defined in Section 4.02 of this Agreement.

“Exchange” is defined in the Recitals of this Agreement, and “Exchanged” and “Exchanging” shall have correlative meanings.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Exchange Basis Schedule” is defined in Section 2.02 of this Agreement.

“Exchange Date” is defined in the Recitals of this Agreement.

“Exchange Payment” is defined in Section 5.01.

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“Exchanging Partner” means a Partner that Exchanges some or all of its Units.

“Expert” is defined in Section 7.09 of this Agreement.

“Hypothetical Tax Liability” means, with respect to any Taxable Year, the liability for Taxes of the Corporation (or the Partnership, but only with respect to Taxes imposed on the Partnership and allocable to the Corporation) using the same methods, elections, conventions and similar practices used on the relevant Corporation Return, but using the Non-Stepped Up Tax Basis instead of the Tax basis reflecting the Basis Adjustments of the Specified Assets and excluding any deduction attributable to Imputed Interest.

“Imputed Interest” means any interest imputed under Section 1272, 1274 or 483 or other provision of the Code and any similar provision of state, local and foreign Tax law with respect to the Corporation’s payment obligations under this Agreement.

“Interest Amount” is defined in Section 3.01(b) of this Agreement.

“IPO” means the initial public offering of Common Stock by the Corporation.

“IPO Date” means the date on which the Corporation contributes to the Partnership the net proceeds received by the Corporation in connection with the IPO.

“IRS” means the United States Internal Revenue Service.

“LIBOR” means for each month (or portion thereof) during any period, an interest rate per annum equal to the rate per annum reported, on the date two Business Days prior to the first day of such month, on the Telerate Page 3750 (or if such screen shall cease to be publicly available, as reported on Reuters Screen page “LIBO” or by any other publicly available source of such market rate) for London interbank offered rates for United States dollar deposits for such month (or portion thereof).

“LP Agreement” means the Amended and Restated Limited Partnership Agreement of the Partnership, dated on or about the date hereof, as such agreement may be amended from time to time.

“Management Group” means the group consisting of the directors, executive officers and other management personnel of the Corporation or any direct or indirect parent of the Corporation, as the case may be, on the date hereof together with (1) any new directors whose election by the Board or whose nomination for election by the equity holders of the Corporation or any direct or indirect parent of the Corporation, as applicable, was approved by a vote of a majority of the directors of the Corporation or any direct or indirect parent of the Corporation, as applicable, then still in office who are directors on the date hereof or whose election or nomination was previously so approved and (2) executive officers and other management personnel of the Corporation or any direct or indirect parent of the Corporation, as applicable, hired at a time when the directors on the date hereof together with the directors so approved constituted a majority of the directors of the Corporation or any direct or indirect parent of the Corporation, as applicable.

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“Market Value” means the closing price of the Common Stock on the applicable Exchange Date on the national securities exchange or interdealer quotation system on which such Common Stock is then traded or listed, as reported by the Wall Street Journal; provided that if the closing price is not reported by the Wall Street Journal for the applicable Exchange Date, then the Market Value shall mean the closing price of the Common Stock on the Business Day immediately preceding such Exchange Date on the national securities exchange or interdealer quotation system on which such Common Stock is then traded or listed, as reported by the Wall Street Journal; provided further, that if the Common Stock is not then listed on a National Securities Exchange or Interdealer Quotation System, “Market Value” shall mean the cash consideration paid for Common Stock, or the fair market value of the other property delivered for Common Stock, as determined by the Board in good faith.

“Material Objection Notice” is defined in Section 4.02 of this Agreement.

“Net Tax Benefit” is defined in Section 3.01(b) of this Agreement.

“Non-Stepped Up Tax Basis” means, with respect to any asset at any time, the tax basis that such asset would have had at such time if no Basis Adjustment had been made or, immediately after any Section 732 Event, the tax basis that such asset would have had if the Basis Adjustment were not included in such asset’s tax basis.

“Objection Notice” is defined in Section 2.04(a) of this Agreement.

“Original Partners” means the partners set forth on Annex A hereto.

“Partners” means the parties hereto, other than the Corporation and the Partnership, and each other Person who from time to time executes a Joinder Agreement in the form attached hereto as Exhibit A.

“Partnership” is defined in the Preamble of this Agreement.

“Payment Date” means any date on which a payment is required to be made pursuant to this Agreement.

“Permitted Holders” means, at any time, each of

(a)Apollo Investment Fund VII, L.P. and its parallel funds (the “Apollo Funds”), Apollo Global Management, LLC and any of their respective Affiliates other than any portfolio companies (collectively, the “Equity Investor”) and any Person that forms a group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision) with the Equity Investor; provided that the Equity Investor (x) owns a majority of the voting power and (y) controls a majority of the Board,

(b)the Management Group,

(c)any Person that has no material assets other than the capital stock of the Corporation and, directly or indirectly, holds or acquires 100% of the capital stock of the

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Corporation that is entitled to vote in the election of the Board, and of which no other Person or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision), other than any of the other Permitted Holders specified in clauses (i) and (ii) above, holds more than 50% of the total voting power of the capital stock of such Person that is entitled to vote in the election of the board of directors of such Person and (iv) any group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision) the members of which include any of the Permitted Holders specified in clauses (i) and (ii) above and that, directly or indirectly, hold or acquire Beneficial Ownership of the total capital stock of the Corporation that is entitled to vote in the election of the Board (a “Permitted Holder Group”), so long as (1) each member of the Permitted Holder Group has voting rights proportional to the percentage of ownership interests held or acquired by such member and (2) no Person or other “group” (other than Permitted Holders specified in clauses (i) and (ii) above) Beneficially Owns more than 50% on a fully diluted basis of the total capital stock of the Corporation that is entitled to vote in the election of the Board held by the Permitted Holder Group.

“Person” means any individual, corporation, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, governmental entity or other entity.

“Pre-Exchange Transfer” means any transfer (including upon the death of a Partner) of one or more Units (i) that occurs prior to an Exchange of such Units, and (ii) to which Section 743(b) of the Code applies.

“Realized Tax Benefit” means, for a Taxable Year and for all Taxes collectively, the net excess, if any, of the Hypothetical Tax Liability over the “actual” liability for Taxes of the Corporation (or the Partnership, but only with respect to Taxes imposed on the Partnership and allocable to the Corporation for such Taxable Year), such “actual” liability to be computed with the adjustments described in this Agreement.  If all or a portion of the actual liability for Taxes of the Corporation (or the Partnership, but only with respect to Taxes imposed on the Partnership and allocable to the Corporation for such Taxable Year) for the Taxable Year arises as a result of an audit by a Taxing Authority of any Taxable Year, such liability shall not be included in determining the Realized Tax Benefit unless and until there has been a Determination.

“Realized Tax Detriment” means, for a Taxable Year and for all Taxes collectively, the net excess, if any, of the “actual” liability for Taxes of the Corporation (or the Partnership, but only with respect to Taxes imposed on the Partnership and allocable to the Corporation for such Taxable Year), such “actual” liability to be computed with the adjustments described in this Agreement, over the Hypothetical Tax Liability for such Taxable Year.  If all or a portion of the actual liability for Taxes of the Corporation (or the Partnership, but only with respect to Taxes imposed on the Partnership and allocable to the Corporation for such Taxable Year) for the Taxable Year arises as a result of an audit by a Taxing Authority of any Taxable Year, such liability shall not be included in determining the Realized Tax Detriment unless and until there has been a Determination.

“Reconciliation Dispute” is defined in Section 7.09 of this Agreement.

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“Reconciliation Procedures” is defined in Section 2.04(a) of this Agreement.

“Schedule” means any Exchange Basis Schedule or Tax Benefit Schedule and the Early Termination Schedule.

“Section 732 Event” is defined in Section 2.01(c) of this Agreement.

“Section 734(b) Distribution” means any actual or deemed distribution to the Partners by the Partnership to which Section 734(b)(1) of the Code (or any similar provision of state, local or foreign tax law) applies.

“Senior Obligations” is defined in Section 5.01 of this Agreement.

“Share of Base Liabilities”, as to any Unit at the time of an Exchange, means the product of (i) the lesser of (x) the aggregate amount of the liabilities of the Partnership, for purposes of Section 752 and Section 1001 of the Code, at the time of the Exchange and (y) the aggregate amount of the liabilities of the Partnership, for purposes of Section 752 and Section 1001 of the Code, immediately prior to the IPO Date and (ii) the percentage share of the Unit in the profits of the Partnership immediately prior to the IPO Date, as set out on Annex A to this Agreement; provided, however, that for purposes of this definition, the amount of the liabilities of the Partnership at the time of the Exchange shall be increased by any reduction in the liabilities of the Partnership at or after the time of the IPO arising from the use of the proceeds of the IPO, or any other contribution to the capital of the Partnership, to fund or repay liabilities.

“Share of Excess Liabilities”, as to any Unit at the time of an Exchange, means the product of (i) the excess, if any, of (x) the aggregate amount of the liabilities of the Partnership, for purposes of Section 752 and Section 1001 of the Code, at the time of the Exchange over (y) the aggregate amount of the liabilities of the Partnership, for purposes of Section 752 and Section 1001 of the Code, immediately prior to the IPO Date and (ii) the percentage share of the Unit in the profits of the Partnership at the time of the Exchange; provided, however, that for purposes of this definition, the amount of the liabilities of the Partnership at the time of the Exchange shall be increased by any reduction in the liabilities of the Partnership at or after the time of the IPO arising from the use of the proceeds of the IPO, or any other contribution to the capital of the Partnership, to fund or repay liabilities.

“Share of Liabilities”, as to any Unit at the time of an Exchange, means the sum of (i) the Unit’s Share of Base Liabilities and (ii) the Unit’s Share of Excess Liabilities, if any.

“Specified Assets” means the assets held by the Partnership, or by any of its direct or indirect Subsidiaries treated as a partnership or disregarded entity for purposes of the applicable Tax, at the time of the Exchange.

“Subsidiaries” means, with respect to any Person, as of any date of determination, any other Person as to which such Person owns, directly or indirectly, or otherwise controls more than 50% of the voting shares or other similar interests of such Person or the sole general partner interest or managing member or similar interest of such Person.

“Tax Benefit Payment” is defined in Section 3.01(b) of this Agreement.

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“Tax Benefit Schedule” is defined in Section 2.03 of this Agreement.

“Tax Return” means any return, declaration, report or similar statement required to be filed with respect to Taxes (including any attached schedules), including, without limitation, any information return, claim for refund, amended return and declaration of estimated Tax.

“Taxable Year” means a taxable year of the Corporation as defined in Section 441(b) of the Code or comparable section of state, local or foreign Tax law, as applicable (and, therefore, for the avoidance of doubt, may include a period of less than 12 months for which a Tax Return is prepared), ending on or after the IPO Date.

“Tax” or “Taxes” means any and all United States federal, state, local and foreign taxes, assessments or similar charges that are based on or measured with respect to net income or profits, whether as an exclusive or on an alternative basis, and any interest related to such Tax.

“Taxing Authority” means any domestic, foreign, federal, national, state, county or municipal or other local government, any subdivision, agency, commission or authority thereof, or any quasi-governmental body exercising any taxing authority or any other authority exercising Tax regulatory authority.

“Treasury Regulations” means the final, temporary and proposed regulations under the Code promulgated from time to time (including corresponding provisions and succeeding provisions) as in effect for the relevant taxable period.

“Units” is defined in the Recitals of this Agreement.

“Valuation Assumptions” means, as of an Early Termination Date, the assumptions that (1) in each Taxable Year ending on or after such Early Termination Date, the Corporation will have taxable income sufficient to fully use the deductions arising from the Basis Adjustment or the Imputed Interest during such Taxable Year, (2) the federal income tax rates and state, local and foreign income tax rates that will be in effect for each such Taxable Year will be those specified for each such Taxable Year by the Code and other law as in effect on the Early Termination Date, (3) any loss carryovers generated by the Basis Adjustment or the Imputed Interest and available as of the date of the Early Termination Schedule will be used by the Corporation on a pro rata basis from the date of the Early Termination Schedule through the scheduled expiration date of such loss carryovers, (4) any non-amortizable assets will be disposed of on the 15th anniversary of the earlier of the Basis Adjustment and the Early Termination Date, provided, that in the event of a Change of Control, non-amortizable assets shall be deemed disposed of at the earlier of (i) the time of sale of the relevant asset or (ii) as generally provided in this Valuation Assumption (4), and (5) if, at the Early Termination Date, there are Units that have not been Exchanged, then each such Unit shall be deemed to be Exchanged for the Market Value of the Common Stock and the amount of cash that would be transferred if the Exchange occurred on the Early Termination Date.

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ARTICLE II
DETERMINATION OF CUMULATIVE REALIZED TAX BENEFIT

Section 2.01Basis Adjustment.  The Corporation and the Partners acknowledge that as a result of:

(a)an Exchange and pursuant to applicable law, the Corporation’s tax basis in the Specified Assets shall be increased by the excess, if any, of (i) the sum of (x) the Amount Realized by the Exchanging Partner in the Exchange, plus (y) the amount of payments made pursuant to this Agreement with respect to such Exchange (other than payments attributable to Imputed Interest), over (ii) the Corporation’s share of the Partnership’s Tax basis for such Specified Assets immediately after the Exchange, attributable to the Units Exchanged, determined as if (x) the Partnership remains in existence as an entity for tax purposes, and (y) the Partnership had not made the election provided by Section 754 of the Code.  For the avoidance of doubt, the Corporation’s share of the Partnership’s Tax basis for such Specified Assets that is attributable to the Units Exchanged shall be considered to be an amount of the Tax basis of the Specified Assets, without regard to any Basis Adjustment, proportionate to the ratio that the number of Units Exchanged bears to the number of outstanding Units immediately prior to such Exchange.  For purposes of this Agreement, in computing the effect of the Basis Adjustment on the Tax liability of the Corporation:

(1)the actual basis adjustment to each Specified Asset under Section 732 or Section 743(b) of the Code shall be recovered by the Corporation in accordance with its actual recovery for purposes of the applicable Tax; and

(2)the portion of the Basis Adjustment for each Specified Asset described in this Section 2.01(a) that exceeds the actual basis adjustment to such Specified Asset under Section 732 or Section 743(b) of the Code shall be deemed to be amortized by the Corporation on a straight line basis over the 10 years following the Exchange;

(b)a Section 734(b) Distribution and pursuant to applicable law, the Partnership’s basis in the Specified Assets shall be increased by (i) the gain, if any, recognized by the Partner pursuant to Section 731(a)(1) of the Code (or any similar provision of state, local or foreign tax law) and in the case of distributed property to which Section 732(a)(2) or (b) of the Code applies, (ii) the excess, if any, of (w) the Partnership’s adjusted basis in property distributed to the Partner (as adjusted by Section 732(d) of the Code, if applicable) immediately prior to the distribution over (x) the adjusted basis of such property in the hands of the Partner as determined under Section 732 of the Code; and

(c)an actual or deemed liquidation of the Partnership or other transaction pursuant to which the tax basis of Specified Assets is determined in whole or in part pursuant to Section 732 of the Code (a “Section 732 Event”), the tax basis of such Specified Assets shall be adjusted to equal the distributee’s tax basis in the applicable interest in the Partnership.

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To the extent that the adjustment to the Partnership’s basis with respect to the Corporation, in any of the Partnership’s assets, that is expected to result from an Exchange is limited because of a change in law, the Basis Adjustment shall be correspondingly limited.  For the avoidance of doubt, payments made under this Agreement shall not be treated as resulting in a Basis Adjustment to the extent such payments are treated as Imputed Interest.  The Corporation and the Partners hereby agree to treat any payments made under this Agreement (other than the portion thereof that is treated as Imputed Interest) as additional consideration for the applicable Exchanged Units.

Section 2.02Exchange Basis Schedule.  Within 90 calendar days after the end of the Taxable Year in which an Exchange or a Section 732 Event occurs, and in any event at least 90 calendar days prior to the filing of the United States federal income tax return of the Corporation for each Taxable Year in which any Exchange or Section 732 Event has been effected, the Corporation shall deliver to each Exchanging Partner a schedule (an “Exchange Basis Schedule”) that shows, in reasonable detail, for purposes of Taxes, the information required under Sections 732, 734(b), 743(b) and 755 of the Code, and the Treasury Regulations thereunder, to calculate the Basis Adjustment with respect to such Exchange or Section 732 Event, including, without limitation, (i) the actual unadjusted Tax basis of the Specified Assets as of each applicable Exchange Date, (ii) with respect to each class of the Specified Assets, the Basis Adjustment as a result of the Exchanges or Section 732 Events effected in such Taxable Year calculated in the aggregate, (iii) the period or periods, if any, over which the Specified Assets are amortizable and/or depreciable,  (iv) the period or periods, if any, over which each Basis Adjustment is amortizable and/or depreciable (which, for non-amortizable assets shall be based on the Valuation Assumptions) and (v) all supporting information (including work papers and valuation reports, if any) reasonably necessary to support the calculation of the Basis Adjustment with respect to such Exchange, Section 732 Event or Section 734(b) Distribution.

Section 2.03Tax Benefit Schedule.  Within 45 calendar days after the filing of the United States federal income tax return of the Corporation for any Taxable Year in which there is a Realized Tax Benefit or Realized Tax Detriment, the Corporation shall provide to each Exchanging Partner a schedule showing, in reasonable detail, the calculation of the Realized Tax Benefit or Realized Tax Detriment for such Taxable Year and the calculation of any payment to be made to the Partner pursuant to Article III with respect to such Taxable Year (a “Tax Benefit Schedule”).  The Schedule will become final as provided in Section 2.04(a) and may be amended as provided in Section 2.04(b) (subject to the procedures set forth in Section 2.04(b)).

Section 2.04Procedures, Amendments.

(a)Procedure.  Every time the Corporation delivers to an Exchanging Partner an applicable Schedule under this Agreement, including any Amended Schedule delivered pursuant to Section 2.04(b), but excluding any Early Termination Schedule or amended Early Termination Schedule, the Corporation shall also (x) deliver to the Exchanging Partner schedules and work papers providing reasonable detail regarding the preparation of the Schedule and an Advisory Firm Letter supporting such Schedule and (y) allow the Exchanging Partner reasonable access at no cost to the appropriate representatives at the Corporation and the Advisory Firm in connection with a review of such Schedule.  The applicable Schedule shall become final and binding on all parties

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unless the Exchanging Partner, within 30 calendar days after receiving an Exchange Basis Schedule or amendment thereto or a Tax Benefit Schedule or amendment thereto, provides the Corporation with notice of a material objection to such Schedule (“Objection Notice”).  If the parties, for any reason, are unable to successfully resolve the issues raised in such notice within 30 calendar days of receipt by the Corporation of an Objection Notice, if with respect to an Exchange Basis Schedule or a Tax Benefit Schedule, the Corporation and the Exchanging Partner shall employ the reconciliation procedures as described in Section 7.09 of this Agreement (the “Reconciliation Procedures”).

(b)Amended Schedule.  The applicable Schedule for any Taxable Year may be amended from time to time by the Corporation (i) in connection with a Determination affecting such Schedule, (ii) to correct material inaccuracies in the Schedule identified as a result of the receipt of additional factual information relating to a Taxable Year, (iii) to comply with the Expert’s determination under the Reconciliation Procedures, (iv) to reflect a material change in the Realized Tax Benefit or Realized Tax Detriment for such Taxable Year attributable to a carryback or carryforward of a loss or other tax item to such Taxable Year, (v) to reflect a material change in the Realized Tax Benefit or Realized Tax Detriment for such Taxable Year attributable to an amended Tax Return filed for such Taxable Year or (vi) to adjust the Exchange Basis Schedule to take into account payments made pursuant to this Agreement (such Schedule, an “Amended Schedule”).  The Corporation shall provide any Amended Schedule to the Exchanging Partner within 30 calendar days of the occurrence of an event referred to in clauses (i) through (vi) of the preceding sentence, and any such Amended Schedule shall be subject to approval procedures similar to those described in Section 2.04(a).

ARTICLE III
TAX BENEFIT PAYMENTS

Section 3.01Payments.

(a)Payments.  Within five calendar days after a Tax Benefit Schedule that was delivered to an Exchanging Partner becomes final in accordance with Section 2.04(a), the Corporation shall pay to such Exchanging Partner for such Taxable Year the Tax Benefit Payment determined pursuant to Section 3.01(b).  Each such Tax Benefit Payment shall be made by wire transfer of immediately available funds to a bank account of the Exchanging Partner previously designated by such Partner to the Corporation.  For the avoidance of doubt, no Tax Benefit Payment shall be made in respect of estimated tax payments, including, without limitation, federal income tax payments.

(b)A “Tax Benefit Payment” means an amount, not less than zero, equal to the sum of the Net Tax Benefit and the Interest Amount.  The “Net Tax Benefit” for each Taxable Year shall be an amount equal to the excess, if any, of 85% of the Cumulative Net Realized Tax Benefit as of the end of such Taxable Year over the total amount of payments previously made under this Section 3.01, excluding payments attributable to an Interest Amount; provided, however, that for the avoidance of doubt, no Partner shall be

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required to return any portion of any previously made Tax Benefit Payment.  The “Interest Amount” for a given Taxable Year shall equal the interest on the Net Tax Benefit for such Taxable Year calculated at the Agreed Rate from the due date (without extensions) for filing the Corporation Return with respect to Taxes for the most recently ended Taxable Year until the Payment Date.  Notwithstanding the foregoing, for each Taxable Year ending on or after the date of a Change of Control, all Tax Benefit Payments, whether paid with respect to Units that were Exchanged (i) prior to the date of such Change of Control or (ii) on or after the date of such Change of Control, shall be calculated by using Valuation Assumptions (1), (2), (3), and (4), substituting in each case the terms “the date on which a Change of Control becomes effective” for an “Early Termination Date.”  The Net Tax Benefit and the Interest Amount shall be determined separately with respect to each separate Exchange, on a Unit-by-Unit basis by reference to the Amount Realized by the Exchanging Partner on the Exchange of a Unit and the resulting Basis Adjustment to the Corporation.

Section 3.02No Duplicative Payments.  Notwithstanding anything in this Agreement to the contrary, it is intended that the provisions of this Agreement will not result in duplicative payment of any amount (including interest) required under this Agreement.  It is also intended that the provisions of this Agreement will result in 85% of the Corporation’s Cumulative Net Realized Tax Benefit, and the Interest Amount thereon, being paid to the Partners pursuant to this Agreement.  The provisions of this Agreement shall be construed in the appropriate manner so that these fundamental results are achieved.

Section 3.03Pro Rata Payments.  For the avoidance of doubt, to the extent that (i) the Corporation’s deductions with respect to any Basis Adjustment is limited in a particular Taxable Year or (ii) the Corporation lacks sufficient funds to satisfy its obligations to make all Tax Benefit Payments due in a particular taxable year, the limitation on the deduction, or the Tax Benefit Payments that may be made, as the case may be, shall be taken into account or made for the Exchanging Partner in the same proportion as Tax Benefit Payments would have been made absent the limitations in clauses (i) and (ii) of this paragraph, as applicable.

ARTICLE IV
TERMINATION AND PUT RIGHT

Section 4.01Early Termination and Breach of Agreement.

(a)The Corporation may terminate this Agreement with respect to all of the Units held (or previously held and Exchanged) by all Partners at any time by paying to the Partners the Early Termination Payment; provided, however, that this Agreement shall only terminate upon the receipt of the Early Termination Payment by all Partners, and provided, further, that the Corporation may withdraw any notice to execute its termination rights under this Section 4.01(a) prior to the time of any Early Termination Payment.  Upon payment of the Early Termination Payments by the Corporation, neither the Partners nor the Corporation shall have any further payment obligations under this Agreement, other than for any (a) Tax Benefit Payment agreed to by the Corporation and the Partner as due and payable but unpaid as of the Early Termination Notice and (b) Tax Benefit Payment due for the Taxable Year ending with or including the date of the Early

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Termination Notice (except to the extent that the amount described in clause (b) is included in the Early Termination Payment).  For the avoidance of doubt, if an Exchange occurs after the Corporation makes the Early Termination Payments with respect to all Partners, the Corporation shall have no obligations under this Agreement with respect to such Exchange, and its only obligations under this Agreement in such case shall be its obligations to all Partners under Section 4.03(a).

(b)In the event that the Corporation breaches any of its material obligations under this Agreement, whether as a result of failure to make any payment when due, failure to honor any other material obligation required hereunder or by operation of law as a result of the rejection of this Agreement in a case commenced under the U.S. Bankruptcy Code or otherwise, then all obligations hereunder shall be accelerated and such obligations shall be calculated as if an Early Termination Notice had been delivered on the date of such breach and shall include, but shall not be limited to, (1) the Early Termination Payment calculated as if an Early Termination Notice had been delivered on the date of a breach, (2) any Tax Benefit Payment agreed to by the Corporation and any Partners as due and payable but unpaid as of the date of a breach and (3) any Tax Benefit Payment due for the Taxable Year ending with or including the date of a breach.  Notwithstanding the foregoing, in the event that the Corporation breaches this Agreement, the Partners shall be entitled to elect to receive the amounts set forth in clauses (1), (2) and (3) above or to seek specific performance of the terms hereof.  The parties agree that the failure to make any payment due pursuant to this Agreement within three months of the date such payment is due shall be deemed to be a breach of a material obligation under this Agreement for all purposes of this Agreement, and that it will not be considered to be a breach of a material obligation under this Agreement to make a payment due pursuant to this Agreement within three months of the date such payment is due.

(c)The Corporation, the Partnership and each of the Partners hereby acknowledge that, as of the date of this Agreement, the aggregate value of the Tax Benefit Payments cannot reasonably be ascertained for United States federal income tax or other applicable Tax purposes.

Section 4.02Early Termination Notice.  If the Corporation chooses to exercise its right of early termination under Section 4.01 above, the Corporation shall deliver to each present or former Partner notice of such intention to exercise such right (“Early Termination Notice”) and a schedule (the “Early Termination Schedule”) showing in reasonable detail the calculation of the Early Termination Payment for that Partner.  The Corporation shall also (x) deliver to the Partner schedules and work papers providing reasonable detail regarding the preparation of the Schedule and an Advisory Firm Letter supporting such Schedule and (y) allow the Partner reasonable access at no cost to the appropriate representatives at the Corporation and the Advisory Firm in connection with a review of such Schedule.  The Early Termination Schedule shall become final and binding on all parties unless the Partner, within 30 calendar days after receiving the Early Termination Schedule, provides the Corporation with notice of a material objection to such Schedule (“Material Objection Notice”).  If the parties, for any reason, are unable to successfully resolve the issues raised in such notice within 30 calendar days after receipt by the Corporation

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of the Material Objection Notice, the Corporation and the Partner shall employ the Reconciliation Procedures as described in Section 7.09 of this Agreement.

Section 4.03Payment upon Early Termination.

(a)Within three calendar days after agreement between the Partner and the Corporation of the Early Termination Schedule, the Corporation shall pay to the Partner an amount equal to the Early Termination Payment.  Such payment shall be made by wire transfer of immediately available funds to a bank account designated by the Partner.

(b)The “Early Termination Payment” as of the date of the delivery of an Early Termination Schedule shall equal with respect to any Partner the sum of the present value, discounted at the Early Termination Rate as of such date, of all Tax Benefit Payments that would be required to be paid by the Corporation to the Partner beginning from the Early Termination Date and assuming that the Valuation Assumptions are applied.

Section 4.04Early Payment Right.  Each Partner shall have the right (the “Early Payment Right”) to terminate this Agreement with respect to all, but not less than all, of the Units held (or previously held and Exchanged) by such Partner upon notice in writing to the Corporation.  Within 30 calendar days of a Partner notifying the Corporation in writing of its exercise the Early Payment Right, the Corporation shall provide such Partner with the information required by Section 4.02 of this Agreement as if the Corporation had exercised its termination right under Section 4.01 of this Agreement, including, without limitation, an Early Termination Schedule containing the Early Termination Payment with respect to such Partner.  The Early Termination Schedule shall become final and binding on all parties unless the Partner, within 30 calendar days after receiving the Early Termination Schedule, provides the Corporation with a Material Objection Notice.  If the parties, for any reason, are unable to successfully resolve the issues raised in such notice within 30 calendar days after receipt by the Corporation of the Material Objection Notice, the Corporation and the Partner shall employ the Reconciliation Procedures as described in Section 7.09 of this Agreement.  Within three calendar days after agreement between the Partner and the Corporation of the Early Termination Schedule, the Corporation shall make the Early Termination Payment to such Partner on the terms and within the time period required by Section 4.03 of this Agreement.

ARTICLE V
SUBORDINATION AND LATE PAYMENTS

Section 5.01Subordination.  Notwithstanding any other provision of this Agreement to the contrary, any Tax Benefit Payment or Early Termination Payment required to be made by the Corporation to the Partners under this Agreement (an “Exchange Payment”) shall rank subordinate and junior in right of payment to any principal, interest or other amounts due and payable in respect of any obligations in respect of indebtedness for borrowed money of the Corporation and its Subsidiaries (“Senior Obligations”) and shall rank pari passu with all current or future unsecured obligations of the Corporation that are not Senior Obligations.

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Section 5.02Late Payments by the Corporation.  The amount of all or any portion of any Exchange Payment not made to any Partner when due under the terms of this Agreement shall be payable together with any interest thereon, computed at the Default Rate and commencing from the date on which such Exchange Payment was due and payable.

ARTICLE VI
NO DISPUTES; CONSISTENCY; COOPERATION

Section 6.01Original Partner Participation in the Corporation’s and the Partnership’s Tax Matters.  Except as otherwise provided herein, the Corporation shall have full responsibility for, and sole discretion over, all Tax matters concerning the Corporation and the Partnership, including without limitation the preparation, filing or amending of any Tax Return and defending, contesting or settling any issue pertaining to Taxes.  Notwithstanding the foregoing, the Corporation shall notify the applicable Original Partner of, and keep the applicable Original Partner reasonably informed with respect to, the portion of any audit of the Corporation and the Partnership by a Taxing Authority the outcome of which is reasonably expected to affect the applicable Original Partner’s rights and obligations under this Agreement, and shall provide to the applicable Original Partner reasonable opportunity to provide information and other input to the Corporation, the Partnership and their respective advisors concerning the conduct of any such portion of such audit; provided, however, that the Corporation and the Partnership shall not be required to take any action that is inconsistent with any provision of the LP Agreement.

Section 6.02Consistency.  Except upon the written advice of an Advisory Firm, and except for items that are explicitly described as “deemed” or in similar manner by the terms of this Agreement, the Corporation and the Exchanging Partner agree to report and cause to be reported for all purposes, including federal, state, local and foreign Tax purposes and financial reporting purposes, all Tax-related items (including without limitation the Basis Adjustment and each Tax Benefit Payment) in a manner consistent with that specified by the Corporation in any Schedule required to be provided by or on behalf of the Corporation under this Agreement.  Any dispute concerning such advice shall be subject to the terms of Section 7.09; provided, however, that only an Original Partner shall have the right to object to such advice pursuant to this Section 6.02.  In the event that an Advisory Firm is replaced with another firm acceptable to the Corporation and the Exchanging Partner, such replacement Advisory Firm shall be required to perform its services under this Agreement using procedures and methodologies consistent with the previous Advisory Firm, unless otherwise required by law or the Corporation and the Exchanging Partner agree to the use of other procedures and methodologies.

Section 6.03Cooperation.  The Exchanging Partner shall (a) furnish to the Corporation in a timely manner such information, documents and other materials as the Corporation may reasonably request for purposes of making any determination or computation necessary or appropriate under this Agreement, preparing any tax return or contesting or defending any audit, examination or controversy with any Taxing Authority, (b) make itself available to the Corporation and its representatives to provide explanations of documents and materials and such other information as the Corporation or its representatives may reasonably request in connection with any of the matters described in clause (a) above and (c) reasonably cooperate in connection with any such matter, and the Corporation shall reimburse the Exchanging Partner for any reasonable third-party costs and expenses incurred pursuant to this Section.

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ARTICLE VII
MISCELLANEOUS

Section 7.01Notices.  All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be deemed duly given and received (a) on the date of delivery if delivered personally, or by facsimile upon confirmation of transmission by the sender’s facsimile machine if sent on a Business Day (or otherwise on the next Business Day) or (b) on the first Business Day following the date of dispatch if delivered by a recognized next-day courier service.  All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice:

if to the Corporation, to:

Athlon Energy Inc.
420 Throckmorton Street
Suite 1200
Fort Worth, Texas 76102
Attention: Chief Financial Officer
Facsimile: (817) 984-8217

with a copy (which shall not constitute notice to the Corporation) to:

Latham & Watkins LLP
811 Main Street
Suite 3700
Houston, Texas 77002
Attention: Sean T. Wheeler
Facsimile: (713) 546-5401

if to the Partnership, to:

Athlon Holdings LP
420 Throckmorton Street
Suite 1200
Fort Worth, Texas 76102
Attention: Chief Financial Officer
Facsimile: (817) 984-8217

with a copy (which shall not constitute notice to the Corporation) to:

Latham & Watkins LLP
811 Main Street
Suite 3700
Houston, Texas 77002
Attention: Sean T. Wheeler
Facsimile: (713) 546-5401

If to the Exchanging Partner, to:

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The address and facsimile number set forth in the records of the Partnership.

Any party may change its address or facsimile number by giving the other party written notice of its new address or facsimile number in the manner set forth above.

Section 7.02Counterparts.  This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart.  Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Agreement.

Section 7.03Entire Agreement; No Third Party Beneficiaries.  This Agreement constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof.  This Agreement shall be binding upon and inure solely to the benefit of each party hereto and their respective successors and permitted assigns, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

Section 7.04Governing Law.  This Agreement shall be governed by, and construed in accordance with, the law of the State of Delaware, without regard to the conflicts of laws principles thereof that would mandate the application of the laws of another jurisdiction.

Section 7.05Severability.  If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party.  Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible.

Section 7.06Successors; Assignment; Amendments; Waivers.  No Partner may assign this Agreement to any person without the prior written consent of the Corporation; provided, however, that (i) to the extent Units are effectively transferred in accordance with the terms of the LP Agreement, the transferring Partner shall have the option to assign to the transferee of such Units the transferring Partner’s rights under this Agreement with respect to such transferred Units, as long as such transferee has executed and delivered, or, in connection with such transfer, executes and delivers, a joinder to this Agreement, in form and substance reasonably satisfactory to the Corporation, agreeing to become a “Partner” for all purposes of this Agreement, except as otherwise provided in such joinder, and (ii) once an Exchange has occurred, any and all payments that may become payable to a Partner pursuant to this Agreement with respect to the Exchanged Units may be assigned to any Person or Persons, including a liquidating trust, as long as any such Person has executed and delivered, or, in connection with such assignment, executes and delivers, a joinder to this Agreement, in form and substance reasonably satisfactory to the

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Corporation, agreeing to be bound by Section 7.12 and acknowledging specifically the terms of the next paragraph.  For the avoidance of doubt, if a Person transfers Units (regardless of whether the transferee is a “Permitted Transferee” under the terms of the LP Agreement) but does not assign to the transferee of such Units such Person’s rights, if any, under this Agreement with respect to such transferred Units, such Person shall be entitled to receive the Tax Benefit Payments, if any, due hereunder with respect to, including any Tax Benefit Payments arising in respect of a subsequent Exchange of, such Units.

Notwithstanding the foregoing provisions of this Section 7.06, no transferee described in clause (i) of the immediately preceding paragraph shall have the right to enforce the provisions of Section 2.04, 4.02, 6.01 or 6.02 of this Agreement, and no assignee described in clause (ii) of the immediately preceding paragraph shall have any rights under this Agreement except for the right to enforce its right to receive payments under this Agreement.

No provision of this Agreement may be amended unless such amendment is approved in writing by each of the Corporation and the Partnership and by Original Partners who would be entitled to receive at least two-thirds of the Early Termination Payments payable to all Original Partners hereunder if the Corporation had exercised its right of early termination on the date of the most recent Exchange prior to such amendment (excluding, for purposes of this sentence, all payments made to any Original Partner pursuant to this Agreement since the date of such most recent Exchange); provided, that no such amendment shall be effective if such amendment will have a disproportionate effect on the payments certain Partners will or may receive under this Agreement unless all such Partners disproportionately affected consent in writing to such amendment.  No provision of this Agreement may be waived unless such waiver is in writing and signed by the party against whom the waiver is to be effective.

All of the terms and provisions of this Agreement shall be binding upon, shall inure to the benefit of and shall be enforceable by the parties hereto and their respective successors, assigns, heirs, executors, administrators and legal representatives.  The Corporation shall require and cause any direct or indirect successor (whether by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Corporation, by written agreement, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform if no such succession had taken place.  Notwithstanding anything to the contrary herein, in the event an Original Partner transfers his Units to a Permitted Transferee (as defined in the LP Agreement), excluding any other Original Partner, such Original Partner shall have the right, on behalf of such transferee, to enforce the provisions of Sections 2.04, 4.02 or 6.01 with respect to such transferred Units.

Section 7.07Titles and Subtitles.  The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.

Section 7.08Resolution of Disputes.

(a)Any and all disputes which are not governed by Section 7.09, including but not limited to any ancillary claims of any party, arising out of, relating to or in connection with the validity, negotiation, execution, interpretation, performance or non-

19

performance of this Agreement (including the validity, scope and enforceability of this arbitration provision) (each a “Dispute”) shall be finally settled by arbitration conducted by a single arbitrator in Fort Worth, Texas in accordance with the then-existing Rules of Arbitration of the International Chamber of Commerce.  If the parties to the Dispute fail to agree on the selection of an arbitrator within ten calendar days of the receipt of the request for arbitration, the International Chamber of Commerce shall make the appointment.  The arbitrator shall be a lawyer admitted to the practice of law in the State of Texas and shall conduct the proceedings in the English language.  Performance under this Agreement shall continue if reasonably possible during any arbitration proceedings.  In addition to monetary damages, the arbitrator shall be empowered to award equitable relief, including, but not limited to an injunction and specific performance of any obligation under this Agreement.  The arbitrator is not empowered to award damages in excess of compensatory damages, and each party hereby irrevocably waives any right to recover punitive, exemplary or similar damages with respect to any Dispute.  The award shall be final and binding upon the parties as from the date rendered, and shall be the sole and exclusive remedy between the parties regarding any claims, counterclaims, issues, or accounting presented to the arbitral tribunal.  Judgment upon any award may be entered and enforced in any court having jurisdiction over a party or any of its assets.

(b)Notwithstanding the provisions of paragraph (a), the Corporation may bring an action or special proceeding in any court of competent jurisdiction for the purpose of compelling a party to arbitrate, seeking temporary or preliminary relief in aid of an arbitration hereunder, and/or enforcing an arbitration award and, for the purposes of this paragraph (b), each Partner (i) expressly consents to the application of paragraph (c) of this Section 7.08 to any such action or proceeding, (ii) agrees that proof shall not be required that monetary damages for breach of the provisions of this Agreement would be difficult to calculate and that remedies at law would be inadequate, and (iii) irrevocably appoints the Corporation as such Partner’s agent for service of process in connection with any such action or proceeding and agrees that service of process upon such agent, who shall promptly advise such Partner of any such service of process, shall be deemed in every respect effective service of process upon the Partner in any such action or proceeding.

(c)(i)EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF COURTS LOCATED IN FORT WORTH, TEXAS FOR THE PURPOSE OF ANY JUDICIAL PROCEEDING BROUGHT IN ACCORDANCE WITH THE PROVISIONS OF PARAGRAPH (B) OF THIS SECTION 7.08, OR ANY JUDICIAL PROCEEDING ANCILLARY TO AN ARBITRATION OR CONTEMPLATED ARBITRATION ARISING OUT OF OR RELATING TO OR CONCERNING THIS AGREEMENT.  Such ancillary judicial proceedings include any suit, action or proceeding to compel arbitration, to obtain temporary or preliminary judicial relief in aid of arbitration, or to confirm an arbitration award.  The parties acknowledge that the fora designated by this paragraph (c) have a reasonable relation to this Agreement, and to the parties’ relationship with one another; and

(ii)The parties hereby waive, to the fullest extent permitted by applicable law, any objection which they now or hereafter may have to personal

20

jurisdiction or to the laying of venue of any such ancillary suit, action or proceeding brought in any court referred to in paragraph (c)(i) of this Section 7.08 and such parties agree not to plead or claim the same.

Section 7.09Reconciliation.  In the event that the Corporation and the Exchanging Partner are unable to resolve a disagreement with respect to the matters governed by Sections 2.04, 4.02 and 6.02 within the relevant period designated in this Agreement (“Reconciliation Dispute”), the Reconciliation Dispute shall be submitted for determination to a nationally recognized expert (the “Expert”) in the particular area of disagreement mutually acceptable to both parties.  The Expert shall be a partner in a nationally recognized accounting firm or a law firm (other than the Advisory Firm), and the Expert shall not, and the firm that employs the Expert shall not, have any material relationship with either the Corporation or the Exchanging Partner or other actual or potential conflict of interest.  If the parties are unable to agree on an Expert within 15 calendar days of receipt by the respondent(s) of written notice of a Reconciliation Dispute, the Expert shall be appointed by the International Chamber of Commerce Centre for Expertise.  The Expert shall resolve any matter relating to the Exchange Basis Schedule or an amendment thereto or the Early Termination Schedule or an amendment thereto within 30 calendar days and shall resolve any matter relating to a Tax Benefit Schedule or an amendment thereto within 15 calendar days or as soon thereafter as is reasonably practicable, in each case after the matter has been submitted to the Expert for resolution.  Notwithstanding the preceding sentence, if the matter is not resolved before any payment that is the subject of a disagreement would be due (in the absence of such disagreement) or any Tax Return reflecting the subject of a disagreement is due, the undisputed amount shall be paid on such date and such Tax Return may be filed as prepared by the Corporation, subject to adjustment or amendment upon resolution.  The costs and expenses relating to the engagement of such Expert or amending any Tax Return shall be borne by the Corporation except as provided in the next sentence.  The Corporation and each Exchanging Partner shall bear their own costs and expenses of such proceeding, unless an Exchanging Partner has a prevailing position that is more than 10% of the payment at issue, in which case the Corporation shall reimburse such Exchanging Partner for any reasonable out-of-pocket costs and expenses in such proceeding.  Any dispute as to whether a dispute is a Reconciliation Dispute within the meaning of this Section 7.09 shall be decided by the Expert.  The Expert shall finally determine any Reconciliation Dispute and the determinations of the Expert pursuant to this Section 7.09 shall be binding on the Corporation and the Exchanging Partner and may be entered and enforced in any court having jurisdiction.

Section 7.10Withholding.  The Corporation shall be entitled to deduct and withhold from any payment payable pursuant to this Agreement such amounts as the Corporation is required to deduct and withhold with respect to the making of such payment under the Code or any provision of state, local or foreign tax law.  To the extent that amounts are so withheld and paid over to the appropriate Taxing Authority by the Corporation, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Exchanging Partner.

Section 7.11Admission of the Corporation into a Consolidated Group; Transfers of Corporate Assets.

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(a)If the Corporation becomes a member of an affiliated or consolidated group of corporations that files a consolidated income tax return pursuant to Sections 1501 et seq. of the Code or any corresponding provisions of state, local or foreign law, then: (i) the provisions of this Agreement shall be applied with respect to the group as a whole; and (ii) Tax Benefit Payments, Early Termination Payments and other applicable items hereunder shall be computed with reference to the consolidated taxable income of the group as a whole.

(b)If any entity that is obligated to make an Exchange Payment hereunder transfers one or more assets to a corporation with which such entity does not file a consolidated tax return pursuant to Section 1501 of the Code, such entity, for purposes of calculating the amount of any Exchange Payment (e.g., calculating the gross income of the entity and determining the Realized Tax Benefit of such entity) due hereunder, shall be treated as having disposed of such asset in a fully taxable transaction on the date of such contribution.  The consideration deemed to be received by such entity shall be equal to the fair market value of the contributed asset, plus (i) the amount of debt to which such asset is subject, in the case of a contribution of an encumbered asset or (ii) the amount of debt allocated to such asset, in the case of a contribution of a partnership interest.

Section 7.12Confidentiality.  Each Partner and assignee acknowledges and agrees that the information of the Corporation is confidential and, except in the course of performing any duties as necessary for the Corporation and its Affiliates, as required by law or legal process or to enforce the terms of this Agreement, such Person shall keep and retain in the strictest confidence and not disclose to any Person any confidential matters, acquired pursuant to this Agreement, of the Corporation and its Affiliates and successors, concerning the Partnership and its Affiliates and successors or the other Partners, learned by the Partner heretofore or hereafter.  This clause 7.12 shall not apply to (i) any information that has been made publicly available by the Corporation or any of its Affiliates and successors, becomes public knowledge (except as a result of an act of such Partner in violation of this Agreement) or is generally known to the business community and (ii) the disclosure of information to the extent necessary for a Partner to prepare and file his or her Tax returns, to respond to any inquiries regarding the same from any Taxing Authority or to prosecute or defend any action, proceeding or audit by any Taxing Authority with respect to such returns.  Notwithstanding anything to the contrary herein, each Partner and assignee (and each employee, representative or other agent of such Partner or assignee, as applicable) may disclose to any and all Persons, without limitation of any kind, the tax treatment and tax structure of the Corporation, the Partnership, the Partners and their Affiliates, and any of their transactions, and all materials of any kind (including opinions or other tax analyses) that are provided to the Partners relating to such tax treatment and tax structure.

If a Partner or assignee commits a breach, or threatens to commit a breach, of any of the provisions of this Section 7.12, the Corporation shall have the right and remedy to have the provisions of this Section 7.12 specifically enforced by injunctive relief or otherwise by any court of competent jurisdiction without the need to post any bond or other security, it being acknowledged and agreed that any such breach or threatened breach shall cause irreparable injury to the Corporation or any of its Subsidiaries or the other Partners and the accounts and funds managed by the Corporation and that money damages alone shall not provide an adequate

22

remedy to such Persons.  Such rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available at law or in equity.

Section 7.13LP Agreement.  This Agreement shall be treated as part of the partnership agreement of the Partnership as described in Section 761(c) of the Code and Sections 1.704-1(b)(2)(ii)(h) and 1.761-1(c) of the Treasury Regulations.

Section 7.14Partnerships.  The Corporation hereby agrees that, to the extent it acquires a general partnership interest, managing member interest or similar interest in any Person after the date hereof, it shall cause such Person to execute and deliver a joinder to this Agreement and such Person shall be treated as a “partnership” for all purposes of this Agreement.

[remainder of this page intentionally left blank]

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IN WITNESS WHEREOF, the Corporation, the Partnership and each Partner have duly executed this Agreement as of the date first written above.

ATHLON ENERGY INC.
By:	/s/ Robert C. Reeves
	Name:	Robert C. Reeves
	Title:	President and Chief Executive Officer
ATHLON HOLDINGS LP
By:	/s/ Robert C. Reeves
	Name:	Robert C. Reeves
	Title:	President and Chief Executive Officer

IN WITNESS WHEREOF, the Corporation, the Partnership and each Partner have duly executed this Agreement as of the date first written above.

PARTNERS

/s/ Robert C. Reeves

Robert C. Reeves

/s/ Nelson K. Treadway

Nelson K. Treadway

/s/ William B. D. Butler

William B. D. Butler

/s/ Bud W. Holmes

Bud W. Holmes

/s/ Jennifer L. Palko

Jennifer L. Palko

/s/ David B. McClelland

David B. McClelland

/s/ James R. Plemons

James R. Plemons

/s/ Melvyn E. Foster, Jr.

Melvyn E. Foster, Jr.

/s/ Matt Cashion

Matt Cashion

/s/ Janis F. Gould

Janis F. Gould

/s/ Juan Coronado

Juan Coronado

/s/ Sharon Braddy

Sharon Braddy

IN WITNESS WHEREOF, the Corporation, the Partnership and each Partner have duly executed this Agreement as of the date first written above.

PARTNERS

/s/ John Souders

John Souders

/s/ Sheryl Turner

Sheryl Turner

/s/ Lauryl Ellis

Lauryl Ellis

/s/ Robert Lange

Robert Lange

/s/ Dallas Rysavy

Dallas Rysavy

/s/ J.W. Reddin

J.W. Reddin

/s/ Dustin Cummings

Dustin Cummings

/s/ Margie Pellerin

Margie Pellerin

/s/ Joey Bernard

Joey Bernard

/s/ Ian Bowersock

Ian Bowersock

/s/ Cristan C. Erdelac

Cristan C. Erdelac

JOINDER

This JOINDER (this “Joinder”) to the Tax Receivable Agreement, dated as of [        ], by and among Athlon Energy Inc., a Delaware corporation (the “Corporation”), Athlon Holdings LP, a Delaware limited partnership (the “Partnership”), and  [        ] (“Permitted Transferee”).

WHEREAS, on [        ], Permitted Transferee acquired (the “Acquisition”) [        ] Units in the Partnership (“Units” and, together with all other Units hereinafter acquired by Permitted Transferee from Transferor and its Permitted Transferees (as defined in the Tax Receivable Agreement), the “Acquired Units”) from [        ] (“Transferor”); and

WHEREAS, Transferor, in connection with the Acquisition, has required Permitted Transferee to execute and deliver this Joinder pursuant to Section 7.06 of the Tax Receivable Agreement.

NOW, THEREFORE, in consideration of the foregoing and the agreements contained herein, Permitted Transferee hereby agrees as follows:

Section 1.1.  Definitions.  To the extent capitalized words used in this Joinder are not defined in this Joinder, such words shall have the meaning set forth in the Tax Receivable Agreement.

Section 1.2.  Joinder.  Permitted Transferee hereby acknowledges and agrees to become a “Partner” (as defined in the Tax Receivable Agreement) for all purposes of the Tax Receivable Agreement, including but not limited to, being bound by Sections 7.12, 2.04, 4.02, 6.01 and 6.02 of the Tax Receivable Agreement, with respect to the Acquired Units, and any other Units Permitted Transferee acquires hereafter.

Section 1.3.  Notice.  All notices, requests, consents and other communications hereunder to Permitted Transferee shall be deemed to be sufficient if contained in a written instrument delivered in person or sent by facsimile (provided a copy is thereafter promptly delivered as provided in this Section 1.3) or nationally recognized overnight courier, addressed to Permitted Transferee at the address or facsimile number set forth below or such other address or facsimile number as may hereafter be designated in writing by Permitted Transferee:

Section 1.4.  Governing Law.  THIS JOINDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES THEREOF.

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A-1

IN WITNESS WHEREOF, this Joinder has been duly executed and delivered by Permitted Transferee as of the date first above written.

By:
	Name:
	Title:

A-2

EX-10.8

Exhibit 10.8

Execution Version

EXCHANGE AGREEMENT

This EXCHANGE AGREEMENT (this “Agreement”), dated as of August 7, 2013, is entered into by and among Athlon Energy Inc., a Delaware corporation (the “Corporation”), and each of the Partners (as defined herein).

RECITALS

WHEREAS, the parties desire to provide for the exchange of limited partner interests (“Units”) in Athlon Holdings LP, a Delaware limited partnership (the “Partnership”), for shares of Common Stock, par value $0.01 per share (the “Common Stock”), of the Corporation, on the terms and subject to the conditions set forth herein;

NOW, THEREFORE, in consideration of the mutual covenants and undertakings contained herein and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

ARTICLE I
DEFINITIONS

Section 1.1Definitions.  As used in this Agreement, the terms set forth in this Article I shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined).

“Affiliate” means, with respect to any Person, any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such first Person.

“Agreement” is defined in the Preamble of this Agreement.

“Board” means the board of directors of the Corporation.

“Business Day” means Monday through Friday of each week, except that a legal holiday recognized as such by the government of the United States of America or the State of Texas shall not be regarded as a Business Day.

“Change of Control” means the occurrence of either of the following events:

(i)the sale, lease or transfer (other than by way of merger or consolidation, including any merger or consolidation involving an Affiliate of the Corporation solely for the purpose of reorganizing the Corporation in another jurisdiction to realize tax or other benefits), in one or a series of related transactions, of all or substantially all the assets of the Corporation and its Subsidiaries, taken as a whole, to a Person other than any of the Permitted Holders; or

(ii)the Corporation becomes aware (by way of a report or any other filing pursuant to Section 13(d) of the Exchange Act, proxy, vote, written notice or otherwise)

of the acquisition by any Person or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision), including any group acting for the purpose of acquiring, holding or disposing of securities (within the meaning of Rule 13d-5(b)(1) under the Exchange Act), other than any of the Permitted Holders, in a single transaction or in a related series of transactions, by way of merger, consolidation, amalgamation or other business combination or purchase of Beneficial Ownership, of more than 50% of the total capital stock of the Corporation that is entitled to vote in the election of the Board.

Notwithstanding the foregoing, a “Change of Control” shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which the record holders of the shares of the Corporation immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of the Corporation immediately following such transaction or series of transactions.

“Code” means the Internal Revenue Code of 1986, as amended.

“Common Stock” is defined in the Recitals to this Agreement.

“Control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.

“Corporation” is defined in the Preamble of this Agreement.

“Delaware Arbitration Act” is defined in Section 4.8(d) of this Agreement.

“Exchange” is defined in Section 2.1(a) of this Agreement, and “Exchanged” and “Exchanging” shall have correlative meanings.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Exchange Rate” means the number of shares of Common Stock for which a Unit is entitled to be Exchanged.  On the date of this Agreement, the Exchange Rate shall be 1 for 1, subject to adjustment pursuant to Section 2.2 of this Agreement.

“IPO” means the initial public offering of Common Stock by the Corporation.

“LP Agreement” means the Amended and Restated Limited Partnership Agreement of the Partnership, dated on or about the date hereof, as such agreement may be amended from time to time.

“Management Group” means the group consisting of the directors, executive officers and other management personnel of the Corporation or any direct or indirect parent of the Corporation, as the case may be, on the date hereof together with (1) any new directors whose election by the Board or whose nomination for election by the equity holders of the Corporation or any direct or indirect parent of the Corporation, as applicable, was approved by a vote of a

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majority of the directors of the Corporation or any direct or indirect parent of the Corporation, as applicable, then still in office who are directors on the date hereof or whose election or nomination was previously so approved and (2) executive officers and other management personnel of the Corporation or any direct or indirect parent of the Corporation, as applicable, hired at a time when the directors on the date hereof together with the directors so approved constituted a majority of the directors of the Corporation or any direct or indirect parent of the Corporation, as applicable.

“Partners” means the parties hereto, other than the Corporation, and each other Person who from time to time executes a Joinder Agreement in the form attached hereto as Exhibit B.

“Partnership” is defined in the Recitals to this Agreement.

“Permitted Holders” means, at any time, each of

(i)Apollo Investment Fund VII, L.P. and its parallel funds (the “Apollo Funds”), Apollo Global Management, LLC and any of their respective Affiliates other than any portfolio companies (collectively, the “Equity Investor”) and any Person that forms a group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision) with the Equity Investor; provided that the Equity Investor (x) owns a majority of the voting power and (y) controls a majority of the Board,

(ii)the Management Group,

(iii)any Person that has no material assets other than the capital stock of the Corporation and, directly or indirectly, holds or acquires 100% of the capital stock of the Corporation that is entitled to vote in the election of the Board, and of which no other Person or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision), other than any of the other Permitted Holders specified in clauses (i) and (ii) above, holds more than 50% of the total voting power of the capital stock of such Person that is entitled to vote in the election of the board of directors of such Person and (iv) any group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision) the members of which include any of the Permitted Holders specified in clauses (i) and (ii) above and that, directly or indirectly, hold or acquire Beneficial Ownership of the total capital stock of the Corporation that is entitled to vote in the election of the Board (a “Permitted Holder Group”), so long as (1) each member of the Permitted Holder Group has voting rights proportional to the percentage of ownership interests held or acquired by such member and (2) no Person or other “group” (other than Permitted Holders specified in clauses (i) and (ii) above) Beneficially Owns more than 50% on a fully diluted basis of the total capital stock of the Corporation that is entitled to vote in the election of the Board held by the Permitted Holder Group.

“Permitted Transferee” has the meaning given to such term in Section 4.1 of this Agreement.

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“Person” means any individual, corporation, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, governmental entity or other entity.

“Subsidiaries” means, with respect to any Person, as of any date of determination, any other Person as to which such Person owns, directly or indirectly, or otherwise controls more than 50% of the voting shares or other similar interests of such Person or the sole general partner interest or managing member or similar interest of such Person.

“Takeover Laws” is defined in Section 3.1 of this Agreement.

“Units” is defined in the Recitals to this Agreement.

“Unitholder” is a Partner or Permitted Transferee who holds a Unit.

ARTICLE II

Section 2.1Exchange of Units for Common Stock.

(a)(i) Subject to Section 2.1(a)(ii) hereof, from and after the first anniversary of the IPO, each Unitholder shall be entitled at any time and from time to time, upon the terms and subject to the conditions hereof, to transfer Units to the Corporation in exchange for the delivery by the Corporation of a number of shares of Common Stock that is equal to the product of the number of Units transferred multiplied by the Exchange Rate (such exchange, an “Exchange”).

(ii)Notwithstanding anything to the contrary herein, upon the occurrence of a Change in Control, each Unitholder shall be entitled, upon the terms and subject to the conditions hereof, to elect to Exchange Units for shares of Common Stock; provided, that any such Exchange pursuant to this sentence shall be effective immediately prior to the consummation of the Change in Control (and, for the avoidance of doubt, shall not be effective if such Change of Control is not consummated); and provided further, that any such election pursuant to this Section 2.1(a)(ii) may be withdrawn by the Unitholder who submitted such election by providing written notice to the Corporation not less than four business days prior to the consummation of the Change in Control.

(b)A Unitholder shall exercise the right to Exchange Units as set forth in Section 2.1(a) above by delivering to the Corporation a written election of exchange in respect of the Units to be Exchanged substantially in the form of Exhibit A hereto, duly executed by such Unitholder or such Unitholder’s duly authorized attorney, in each case delivered during normal business hours at the principal executive offices of the Corporation.  Subject to Section 2.1(a)(ii), as promptly as practicable following the delivery of such a written election of Exchange, and in any event within three Business Days, the Corporation shall deliver or cause to be delivered at the offices of the then-acting registrar and transfer agent of the Common Stock or, if there is no then-acting registrar and transfer agent of the Common Stock, at the principal executive offices of the Corporation, the number of shares of Common Stock deliverable upon such Exchange,

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registered in the name of the relevant Exchanging Unitholder.  To the extent the Common Stock is settled through the facilities of The Depository Trust Company, the Corporation will, subject to Section 2.1(c) below, upon the written instruction of an Exchanging Unitholder, use its reasonable best efforts to deliver the shares of Common Stock deliverable to such Exchanging Unitholder through the facilities of The Depository Trust Company to the account of the participant of The Depository Trust Company designated by such Exchanging Unitholder.

(c)The Corporation and each Unitholder shall bear their own expenses in connection with the consummation of any Exchange, whether or not any such Exchange is ultimately consummated, except that the Corporation shall bear any transfer taxes, stamp taxes or duties, or other similar taxes in connection with, or arising by reason of, any Exchange; provided, however, that if any shares of Common Stock are to be delivered in a name other than that of the Unitholder that requested the Exchange, then such Unitholder and/or the Person in whose name such shares are to be delivered shall pay to the Corporation the amount of any transfer taxes, stamp taxes or duties, or other similar taxes in connection with, or arising by reason of, such Exchange or shall establish to the reasonable satisfaction of the Corporation that such tax has been paid or is not payable.

(d)The Corporation covenants and agrees that, prior to taking or causing to be taken any action that would cause interests in the Partnership to not meet the requirements of Treasury Regulation section 1.7704-1(h), including, without limitation, issuing any Units in a transaction required to be registered with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended, it will provide at least 15 Business Days advance written notice describing the proposed action in reasonable detail to the Unitholders and provide each Unitholder with the opportunity to effect an Exchange of all such Unitholder’s Units in accordance with the terms of this Agreement; provided, however, that in no event will the Corporation take or cause to be taken any action that would cause interests in Partnership to not meet the requirements of Treasury Regulation section 1.7704-1(h) prior to the first anniversary of the IPO.  Provided that the notice and opportunity to Exchange contemplated by the previous sentence has been provided the Unitholders, then, notwithstanding anything to the contrary herein, if the Board, after consultation with its outside legal counsel and tax advisor, shall determine in good faith that interests in the Partnership do not meet the requirements of Treasury Regulation section 1.7704-1(h), the Corporation may impose such restrictions on Exchange as the Corporation may reasonably determine to be necessary or advisable so that the Partnership is not treated as a “publicly traded partnership” under Section 7704 of the Code.

(e)For the avoidance of doubt, and notwithstanding anything to the contrary herein, a Unitholder shall not be entitled to Exchange Units to the extent the Corporation reasonably determines in good faith that such Exchange (i) would be prohibited by law or regulation or (ii) would not be permitted under any other agreement with the Corporation or its Subsidiaries to which such Unitholder is then subject or any written policies of the Corporation relating to insider trading then applicable to such Unitholder.  For avoidance of doubt, no Exchange shall be deemed to be prohibited by any law or regulation

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pertaining to the registration of securities if such securities have been so registered or if any exemption from such registration requirements is reasonably available.

Section 2.2Adjustment.  The Exchange Rate shall be adjusted accordingly if there is: (a) any subdivision (by any unit split, unit distribution, reclassification, reorganization, recapitalization or otherwise) or combination (by reverse unit split, reclassification, reorganization, recapitalization or otherwise) of the Units that is not accompanied by an identical subdivision or combination of the Common Stock; or (b) any subdivision (by any stock split, stock dividend or distribution, reclassification, reorganization, recapitalization or otherwise) or combination (by reverse stock split, reclassification, reorganization, recapitalization or otherwise) of the Common Stock that is not accompanied by an identical subdivision or combination of the Units.  If there is any reclassification, reorganization, recapitalization or other similar transaction in which the Common Stock are converted or changed into another security, securities or other property, then upon any subsequent Exchange, an exchanging Unitholder shall be entitled to receive the amount of such security, securities or other property that such exchanging Unitholder would have received if such Exchange had occurred immediately prior to the effective date of such reclassification, reorganization, recapitalization or other similar transaction, taking into account any adjustment as a result of any subdivision (by any split, distribution or dividend, reclassification, reorganization, recapitalization or otherwise) or combination (by reverse split, reclassification, recapitalization or otherwise) of such security, securities or other property that occurs after the effective time of such reclassification, reorganization, recapitalization or other similar transaction.  For the avoidance of doubt, if there is any reclassification, reorganization, recapitalization or other similar transaction in which the Common Stock are converted or changed into another security, securities or other property, this Section 2.2 shall continue to be applicable, mutatis mutandis, with respect to such security or other property.  This Agreement shall apply to the Units held by the Unitholders and their Permitted Transferees as of the date hereof, as well as any Units hereafter acquired by a Unitholder and his or her or its Permitted Transferees.  This Agreement shall apply to, mutatis mutandis, and all references to “Units” shall be deemed to include, any security, securities or other property of the Partnership which may be issued in respect of, in exchange for, or in substitution of Units by reason of any distribution or dividend, split, reverse split, combination, reclassification, reorganization, recapitalization, merger, exchange (other than an Exchange) or other transaction.

Section 2.3Common Stock to be Issued.

(a)The Corporation covenants and agrees to deliver shares of Common Stock that have been registered under the Securities Act with respect to any Exchange to the extent that a registration statement is effective and available for such shares.  In the event that any Exchange in accordance with this Agreement is to be effected at a time when any registration has not become effective or otherwise is unavailable, upon the request and with the reasonable cooperation of the Unitholder requesting such Exchange, the Corporation shall use its reasonable best efforts to promptly facilitate such Exchange pursuant to any reasonably available exemption from such registration requirements.  The Corporation shall use its reasonable best efforts to list the Common Stock required to be delivered upon Exchange prior to such delivery upon each national securities exchange or inter-dealer quotation system upon which the Common Stock may be listed or traded at

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the time of such delivery.  Nothing contained herein shall be construed to preclude the Corporation or Partnership from satisfying their obligations in respect of the Exchange by delivery of shares of Common Stock which are held in the treasury of the Corporation or the Partnership or any of their Subsidiaries.

(b)The Corporation shall at all times reserve and keep available such number of shares of Common Stock, out of its authorized but unissued Common Stock, and solely for the purpose of issuance upon an Exchange, as shall be deliverable upon any such Exchange; provided that nothing contained herein shall be construed to preclude the Corporation from satisfying its obligations in respect of any such Exchange by delivery of purchased shares of Common Stock (which may or may not be held in the treasury of the Corporation, the Partnership or any Subsidiary thereof).

(c)Prior to the date of this Agreement, the Corporation has taken all such steps as may be required to cause to qualify for exemption under Rule 16b-3(d) or (e), as applicable, under the Exchange Act, and be exempt for purposes of Section 16(b) under the Exchange Act, any acquisitions or dispositions of equity securities of the Corporation (including derivative securities with respect thereto) and any securities which may be deemed to be equity securities or derivative securities of the Corporation for such purposes that result from the transactions contemplated by this Agreement, by each director or officer of the Corporation who may reasonably be expected to be subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to the Corporation upon the registration of any class of equity security of the Corporation pursuant to Section 12 of the Exchange Act (with the authorizing resolutions specifying the name of each such officer or director whose acquisition or disposition of securities is to be exempted and the number of securities that may be acquired and disposed of by each such Person pursuant to this Agreement).

(d)If any Takeover Law or other similar law or regulation becomes or is deemed to become applicable to the this Agreement or any of the transactions contemplated hereby, the Corporation shall use its reasonable best efforts to render such law or regulation inapplicable to all of the foregoing.

(e)The Corporation covenants that all Common Stock issued upon an Exchange will, upon issuance, be validly issued, fully paid and non-assessable and not subject to any preemptive right of stockholders of the Corporation or to any right of first refusal or other right in favor of any Person.

ARTICLE III

Section 3.1Representations and Warranties of the Corporation.  The Corporation represents and warrants that (i) it is a corporation duly incorporated and is existing in good standing under the laws of the State of Delaware, (ii) it has all requisite corporate power and authority to enter into and perform this Agreement and to consummate the transactions contemplated hereby and to issue the Common Stock in accordance with the terms hereof, (iii) the execution and delivery of this Agreement by the Corporation and the consummation by it of the transactions contemplated hereby (including, without limitation, the issuance of the

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Common Stock) have been duly authorized by all necessary corporate action on the part of the Corporation, including, but not limited to, all actions necessary to ensure that the acquisition of shares of Common Stock pursuant to the transactions contemplated hereby, to the fullest extent of the Board’s power and authority and, to the extent permitted by law, shall not be subject to any “moratorium,” “control share acquisition,” “business combination,” “fair price” or other form of “anti-takeover laws and regulations” of any jurisdiction that may purport to be applicable to this Agreement or the transactions contemplated hereby (collectively, “Takeover Laws”), (iv) this Agreement constitutes a legal, valid and binding obligation of the Corporation enforceable against the Corporation in accordance with its terms, except as enforcement may be limited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or limiting creditors’ rights generally, and (v) the execution, delivery and performance of this Agreement by the Corporation and the consummation by the Corporation of the transactions contemplated hereby will not: (A) result in a violation of the Amended and Restated Certificate of Incorporation of the Corporation or the Amended and Restated Bylaws of the Corporation, in each case as the same may be amended after the date of this Agreement; or (B) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture, or instrument to which the Corporation is a party; or (C) result in a violation of any law, rule, regulation, order, judgment or decree applicable to the Corporation or by which any property or asset of the Corporation is bound or affected, except with respect to clauses (B) or (C) for any conflicts, defaults, accelerations, terminations, cancellations or violations, that would not reasonably be expected to have a material adverse effect on the Corporation or its business, financial condition or results of operations.

Section 3.2Representations and Warranties of each Unitholder.  Each Unitholder, severally and not jointly, represents and warrants that (i) if it is not a natural person, that it is duly incorporated or formed and, to the extent such concept exists in its jurisdiction of organization, is in good standing under the laws of such jurisdiction, (ii) it has all requisite legal capacity and authority to enter into and perform this Agreement and to consummate the transactions contemplated hereby, (iii) if it is not a natural person, the execution and delivery of this Agreement by it of the transactions contemplated hereby have been duly authorized by all necessary corporate or other entity action on the part of such Unitholder, (iv) this Agreement constitutes a legal, valid and binding obligation of such Unitholder enforceable against it in accordance with its terms, except as enforcement may be limited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or limiting creditors’ rights generally, and (v) the execution, delivery and performance of this Agreement by such Unitholder and the consummation by such Unitholder of the transactions contemplated hereby will not: (A) if it is not a natural person, result in a violation of the Certificate of Incorporation and Bylaws or other organizational documents of such Unitholder or (B) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which such Unitholder is a party, or (C) result in a violation of any law, rule, regulation, order, judgment or decree applicable such Unitholder, except with respect to clauses (B) or (C) for any conflicts, defaults, accelerations, terminations, cancellations or violations, that would not in any material respect result in the unenforceability against such Unitholder of this Agreement.

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ARTICLE IV

Section 4.1Additional Unitholders.  To the extent a Unitholder validly transfers any or all of such holder’s Units to another Person in a transaction in accordance with, and not in contravention of, the LP Agreement, then such transferee (each, a “Permitted Transferee”) shall have the right to execute and deliver a joinder to this Agreement, substantially in the form of Exhibit B hereto, whereupon such Permitted Transferee shall become a Unitholder hereunder.  To the extent the Partnership issues Units in the future, then the holder of such Units shall have the right to execute and deliver a joinder to this Agreement, substantially in the form of Exhibit B hereto, whereupon such holder shall become a Unitholder hereunder.

Section 4.2Addresses and Notices.  All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by courier service, by facsimile, by electronic mail (delivery receipt requested) or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be as specified in a notice given in accordance with this Section 4.2):

(a)If to the Corporation, to:

420 Throckmorton Street,

Suite 1200

Fort Worth, Texas 76102

Attention: Chief Financial Officer

Facsimile: (817) 984-8217

with a copy (which shall not constitute notice to the Corporation) to:

Latham &Watkins LLP

811 Main Street

Suite 3700

Houston, Texas 77002

Attention: Sean T. Wheeler

Facsimile: (713) 546-5401

Section 4.3If to any Unitholder, to the address and other contact information set forth in the records of the Partnership from time to time.

Section 4.4Further Action.  The parties shall execute and deliver all documents, provide all information and take or refrain from taking action as may be necessary or appropriate to achieve the purposes of this Agreement.

Section 4.5Entire Agreement; No Third Party Beneficiaries.  This Agreement constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof.  This Agreement shall be binding upon and inure solely to the benefit of each party hereto and their respective successors and permitted assigns, and nothing in this Agreement, express or implied, is intended

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to or shall confer upon any other Person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

Section 4.6Governing Law.  This Agreement shall be governed by, and construed in accordance with, the law of the State of Delaware, without regard to the conflicts of laws principles thereof that would mandate the application of the laws of another jurisdiction.

Section 4.7Severability.  If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party.  Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible.

Section 4.7.  Amendment.  The provisions of this Agreement may be amended only by the affirmative vote or written consent of each of: (i) the Corporation; and (ii) Unitholders holding at least two thirds of the then outstanding Units (excluding Units held by the Corporation).

Section 4.8Waiver.  No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute waiver of any such breach of any other covenant, duty, agreement or condition.

Section 4.9Submission to Jurisdiction; Waiver of Jury Trial.

(a)Any and all disputes which cannot be settled amicably, including any ancillary claims of any party, arising out of, relating to, or in connection with the validity, negotiation, execution, interpretation, performance, or non-performance of this Agreement (including the validity, scope and enforceability of this arbitration provision) shall be finally settled by arbitration conducted by a single arbitrator in Fort Worth, Texas in accordance with the then-existing Rules of Arbitration of the International Chamber of Commerce.  If the parties to the dispute fail to agree on the selection of an arbitrator within 30 calendar days of the receipt of the request for arbitration, the International Chamber of Commerce shall make the appointment.  The arbitrator shall be a lawyer and shall conduct the proceedings in the English language.  Performance under this Agreement shall continue if reasonably possible during any arbitration proceedings.

(b)Notwithstanding the provisions of paragraph (a), the parties hereto may bring an action or special proceeding in any court of competent jurisdiction for the purpose of compelling a party to arbitrate, seeking temporary or preliminary relief in aid of an arbitration hereunder, and/or enforcing an arbitration award and, for the purposes of this paragraph (b), each party hereto: (i) expressly consents to the application of paragraph (c) of this Section 4.8 to any such action or proceeding; and (ii) agrees that

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proof shall not be required that monetary damages for breach of the provisions of this Agreement would be difficult to calculate and that remedies at law would be inadequate.

(c)(i) EACH PARTY HERETO IRREVOCABLY SUBMITS TO THE JURISDICTION OF COURTS LOCATED IN FORT WORTH, TEXAS FOR THE PURPOSE OF ANY JUDICIAL PROCEEDING BROUGHT IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION 4.8, OR ANY JUDICIAL PROCEEDING ANCILLARY TO AN ARBITRATION OR CONTEMPLATED ARBITRATION ARISING OUT OF OR RELATING TO OR CONCERNING THIS AGREEMENT.  Such ancillary judicial proceedings include any suit, action or proceeding to compel arbitration, to obtain temporary or preliminary judicial relief in aid of arbitration, or to confirm an arbitration award.  The parties acknowledge that the for a designated by this paragraph (c) have a reasonable relation to this Agreement, and to the parties’ relationship with one another; and

(ii)The parties hereby waive, to the fullest extent permitted by applicable law, any objection which they now or hereafter may have to personal jurisdiction or to the laying of venue of any such ancillary suit, action, or proceeding brought in any court referred to in the preceding paragraph of this Section 4.8 and such parties agree not to plead or claim the same.

(d)Notwithstanding any provision of this Agreement to the contrary, this Section 4.8 shall be construed to the maximum extent possible to comply with the laws of the State of Delaware, including the Delaware Uniform Arbitration Act (10 Del. C. § 5701 et seq.) (the “Delaware Arbitration Act”).  If, nevertheless, it shall be determined by a court of competent jurisdiction that any provision or wording of this Section 4.8, including any rules of the International Chamber of Commerce, shall be invalid or unenforceable under the Delaware Arbitration Act, or other applicable law, such invalidity shall not invalidate all of this Section 4.8.  In that case, this Section 4.8 shall be construed so as to limit any term or provision so as to make it valid or enforceable within the requirements of the Delaware Arbitration Act or other applicable law, and, in the event such term or provision cannot be so limited, this Section 4.8 shall be construed to omit such invalid or unenforceable provision.

Section 4.10Counterparts.  This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart.  Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Agreement.

Section 4.11Tax Treatment.  This Agreement shall be treated as part of the partnership agreement of the Partnership as described in Section 761(c) of the Code and Sections 1.704-1(b)(2)(ii)(h) and 1.761-1(c) of the Treasury Regulations promulgated thereunder.

Section 4.12Specific Performance.  The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in

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accordance with their specific terms or were otherwise breached.  It is accordingly agreed that the parties shall be entitled to specific performance of the terms and provisions hereof, in addition to any other remedy to which they are entitled at law or in equity.

Section 4.13Independent Nature of Unitholders’ Rights and Obligations.  The obligations of each Unitholder hereunder are several and not joint with the obligations of any other Unitholder, and no  Unitholder shall be responsible in any way for the performance of the obligations of any other Unitholder under hereunder.  The decision of each Unitholder to enter into to this Agreement has been made by such Unitholder independently of any other Unitholder.  Nothing contained herein, and no action taken by any Unitholder pursuant hereto, shall be deemed to constitute the Unitholders as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Unitholders are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated hereby and the Corporation acknowledges that the Unitholders are not acting in concert or as a group, and the Corporation will not assert any such claim, with respect to such obligations or the transactions contemplated hereby.

[Signature Page to Follow]

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IN WITNESS WHEREOF, the Corporation and each Partner have duly executed this Agreement as of the date first written above.

ATHLON ENERGY INC.
By:	/s/ Robert C. Reeves
	Name:	Robert C. Reeves
	Title:	President and Chief Executive Officer
	PARTNERS
	/s/ Robert C. Reeves
	Robert C. Reeves
	/s/ Nelson K. Treadway
	Nelson K. Treadway
	/s/ William B. D. Butler
	William B. D. Butler
	/s/ Bud W. Holmes
	Bud W. Holmes
	/s/ Jennifer L. Palko
	Jennifer L. Palko
	/s/ David B. McClelland
	David B. McClelland
	/s/ James R. Plemons
	James R. Plemons
	/s/ Melvyn E. Foster, Jr.
	Melvyn E. Foster, Jr.

Exchange Agreement Signature Page

IN WITNESS WHEREOF, the Corporation and each Partner have duly executed this Agreement as of the date first written above.

PARTNERS

/s/ Matt Cashion

Matt Cashion

/s/ Janis F. Gould

Janis F. Gould

/s/ Juan Coronado

Juan Coronado

/s/ Sharon Braddy

Sharon Braddy

/s/ John Souders

John Souders

/s/ Sheryl Turner

Sheryl Turner

/s/ Lauryl Ellis

Lauryl Ellis

/s/ Robert Lange

Robert Lange

/s/ Dallas Rysavy

Dallas Rysavy

/s/ J.W. Reddin

J.W. Reddin

/s/ Dustin Cummings

Dustin Cummings

Exchange Agreement Signature Page

IN WITNESS WHEREOF, the Corporation and each Partner have duly executed this Agreement as of the date first written above.

PARTNERS

/s/ Margie Pellerin

Margie Pellerin

/s/ Joey Bernard

Joey Bernard

/s/ Ian Bowersock

Ian Bowersock

/s/ Cristan C. Erdelac

Cristan C. Erdelac

Exchange Agreement Signature Page

EXHIBIT A

[FORM OF]
ELECTION OF EXCHANGE

Athlon Energy Inc.

420 Throckmorton Street

Suite 1200

Fort Worth, Texas 76102

Attention: Robert C. Reeves

Reference is hereby made to the Exchange Agreement, dated as of August 7, 2013 (the “Exchange Agreement”), among Athlon Energy Inc., a Delaware corporation (the “Corporation”), and the Unitholders from time to time party thereto.  Capitalized terms used but not defined herein shall have the meanings given to them in the Exchange Agreement.

The undersigned Unitholder hereby transfers to the Corporation the number of Units set forth below in Exchange for shares of Common Stock to be issued in its name as set forth below, as set forth in the Exchange Agreement.

Legal Name of Unitholder:

Address:

Number of Units to be Exchanged:

The undersigned hereby represents and warrants that (i) the undersigned has full legal capacity to execute and deliver this Election of Exchange and to perform the undersigned’s obligations hereunder; (ii) this Election of Exchange has been duly executed and delivered by the undersigned and is the legal, valid and binding obligation of the undersigned enforceable against it in accordance with the terms thereof or hereof, as the case may be, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally and the availability of equitable remedies; (iii) the Units subject to this Election of Exchange are being transferred to the Corporation free and clear of any pledge, lien, security interest, encumbrance, equities or claim; and (iv) no consent, approval, authorization, order, registration or qualification of any third party or with any court or governmental agency or body having jurisdiction over the undersigned or the Units subject to this Election of Exchange is required to be obtained by the undersigned for the transfer of such Units to the Corporation.

The undersigned hereby irrevocably constitutes and appoints any officer of the Corporation as the attorney of the undersigned, with full power of substitution and resubstitution in the premises, to do any and all things and to take any and all actions that may be necessary to transfer to the Corporation the Units subject to this Election of Exchange and to deliver to the undersigned the shares of Common Stock to be delivered in Exchange therefor.

IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Election of Exchange to be executed and delivered by the undersigned or by its duly authorized attorney.

Name:

Date:

EXHIBIT B

[FORM OF]
JOINDER AGREEMENT

This Joinder Agreement (“Joinder Agreement”) is a joinder to the Exchange Agreement, dated as of August 7, 2013 (the “Agreement”), among Athlon Energy Inc., a Delaware corporation (the “Corporation”), and each of the Unitholders from time to time party thereto.  Capitalized terms used but not defined in this Joinder Agreement shall have their meanings given to them in the Agreement.  This Joinder Agreement shall be governed by, and construed in accordance with, the law of the State of Delaware.  In the event of any conflict between this Joinder Agreement and the Agreement, the terms of this Joinder Agreement shall control.

The undersigned hereby joins and enters into the Agreement having acquired Units in the Partnership.  By signing and returning this Joinder Agreement to the Corporation, the undersigned (i) accepts and agrees to be bound by and subject to all of the terms and conditions of and agreements of a Unitholder contained in the Agreement, with all attendant rights, duties and obligations of a Unitholder thereunder and (ii) makes each of the representations and warranties of a Unitholder set forth in Section 3.2 of the Agreement as fully as if such representations and warranties were set forth herein.  The parties to the Agreement shall treat the execution and delivery hereof by the undersigned as the execution and delivery of the Agreement by the undersigned and, upon receipt of this Joinder Agreement by the Corporation, the signature of the undersigned set forth below shall constitute a counterpart signature to the signature page of the Agreement.

Name:

Address for Notices:

With copies to:

EX-10.9

Exhibit 10.9

Execution Version

STOCKHOLDERS AGREEMENT

STOCKHOLDERS AGREEMENT (this “Agreement”), dated as of August 7, 2013, by and among ATHLON ENERGY INC., a Delaware corporation (the “Corporation”), and those stockholders of the Corporation listed on Schedule A hereto.

WHEREAS, the Corporation, the Apollo Entities (as defined below) and the Employee Stockholders (as defined below), as the holders of the majority shares of Stock (as defined below) owned by the stockholders of the Corporation listed on Schedule A hereto wish to enter into this Agreement in accordance with the terms set forth herein.

NOW, THEREFORE, in consideration of the promises and of the mutual consents and obligations hereinafter set forth, the parties hereto hereby agree as follows:

Section 1Definitions; Interpretation.

(a)Definitions.  As used herein, the following terms shall have the following respective meanings:

“Adoption” has the meaning set forth in Exhibit A.

“Affiliate” means (a) as to any Person, other than an individual, any other Person or entity who directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such Person and (b) as to any individual, in addition to any Person in clause (a), (i) any member of the immediate family of an individual Stockholder, including parents, siblings, spouse and children (including those by adoption), the parents, siblings, spouse, or children (including those by adoption) of such immediate family member, and, in any such case, any trust whose primary beneficiary is such individual Stockholder or one or more members of such immediate family and/or such Stockholder’s lineal descendants, (ii) the legal representative or guardian of such individual Stockholder or of any such immediate family member in the event such individual Stockholder or any such immediate family member becomes mentally incompetent and (iii) any Person controlling, controlled by or under common control with a Stockholder; provided that the term “Affiliate” shall not include at any time any portfolio companies of Apollo. As used in this definition, the term “control,” including the correlative terms “controlling,” “controlled by” and “under common control with,” means possession, directly or indirectly, of the power to direct or cause the direction of management or policies (whether through ownership of securities or any partnership or other ownership interest, by contract or otherwise) of a Person.

“Agreement” has the meaning set forth in the Preamble.

“Apollo” means, collectively, Apollo Investment Fund VII, L.P. and its parallel funds.

“Apollo Demand Notice” has the meaning set forth in Section 3(a).

“Apollo Entities” means Apollo, Apollo Athlon Holdings, L.P., AP Overseas VII (Athlon FC) Holdings, L.P. and each of their respective Affiliates.

“Apollo Registration Demand” has the meaning set forth in Section 3(a).

“Apollo Stockholder” means any Apollo Entity that owns any shares of Stock in the Corporation.

“Board” means the board of directors of the Corporation.

“Business Day” means a day that is not a Saturday, Sunday or day on which banking institutions in the city to which the notice or communication is to be sent are not required to be open.

“Common Stock” means the common stock, par value $0.01 per share, of the Corporation and any stock into which such Stock may hereafter be changed or for which such Common Stock may be exchanged, and shall also include any Common Stock of the Corporation of any class hereafter authorized.

“Control Disposition” means a Disposition by the Apollo Entities that would have the effect of transferring to a Person or Group that is not an Affiliate of the Apollo Entities or a portfolio company of one or more Apollo Entities or Affiliates thereof a number of shares of Common Stock such that, following the consummation of such Disposition, such Person or Group possesses the voting power to elect a majority of the Board (whether by merger, consolidation, sale or transfer of Common Stock or otherwise) or a majority of the board of directors (or similar body) of any successor entity.

“Corporation” has the meaning set forth in the Preamble.

“Corporation Registration” has the meaning set forth in Section 4(a).

“Corporation Securities” has the meaning set forth in Section 4(c)(i).

“Demand Notice” has the meaning set forth in Section 3(b).

“Disposition” (including, with correlative meaning, the term “Dispose”) means (a) any direct or indirect transfer, assignment, sale, gift, pledge, hypothecation or other encumbrance, or any other disposition, of Common Stock (or any interest therein or right thereto) or of all or part of the voting power (other than the granting of a revocable proxy) associated with the Common Stock (or any interest therein) whatsoever, or any other transfer of beneficial ownership of Common Stock, whether voluntary or involuntary.

“Employee Stockholder” means each of the Stockholders who is executing this Agreement, who is at the time of such execution an employee of, or who serves at the time of such execution as a consultant to or director of, the Corporation or its Subsidiaries or Affiliates.

“Employee Stockholder Registration Demand” has the meaning set forth in Section 3(a).

“Exchange Agreement” means that Exchange Agreement, dated August 7, 2013, among the Partnership, the Corporation and certain holders of limited partner interests in the Partnership.

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“Group” has the meaning set forth in Section 13(d)(3) of the Securities Exchange Act.

“Indemnified Party” has the meaning set forth in Section 5(c).

“Indemnifying Party” has the meaning set forth in Section 5(c).

“IPO” means an initial public offering of the shares of Common Stock in a firm commitment underwriting effected by the Corporation pursuant to a Registration Statement.

“Losses” has the meaning set forth in Section 5(a).

“Partnership” means Athlon Holdings LP, a Delaware limited partnership.

“Person” means any natural person, corporation, partnership, limited liability company, firm, association, trust, government, governmental agency or other entity, whether acting in an individual, fiduciary or other capacity.

“Registrable Securities” means shares of Common Stock and any shares of Common Stock which were acquired by a Stockholder as of the date of this Agreement; provided that any Registrable Security will cease to be a Registrable Security when (a) a Registration Statement covering such Registrable Security has been declared effective by the SEC and such Registrable Security has been disposed of pursuant to such effective Registration Statement, (b) it is sold under circumstances in which all of the applicable conditions of Rule 144 (or any similar provisions then in force) under the Securities Act are met or it is eligible for sale under such Rule 144, not taking into account any volume limitations or (c) it shall have been otherwise transferred and a new certificate for it not bearing a legend restricting further transfer under the Securities Act shall have been delivered by the Corporation; provided, further, that any security that has ceased to be a Registrable Security shall not thereafter become a Registrable Security and any security that is issued or distributed in respect of securities that have ceased to be Registrable Securities is not a Registrable Security.

“Registration Expenses” means all expenses incurred by the Corporation in complying with Section 4, including, without limitation, all registration and filing fees, printing expenses, road show expenses, fees and disbursements of counsel and independent public accountants for the Corporation, fees and expenses (including counsel fees) incurred in connection with complying with state securities or “blue sky” laws, fees of the Financial Industry Regulatory Authority, Inc., transfer taxes, fees of transfer agents and registrars, and the reasonable fees and disbursements of one counsel for the selling holders of Registrable Securities, but excluding any underwriting discounts and selling commissions only to the extent applicable on a per share basis to Registrable Securities of the selling holders.

“Registration Statement” means any registration statement of the Corporation filed or to be filed with the SEC under the rules and regulations promulgated under the Securities Act, including the related prospectus, amendments and supplements to such registration statement, and including pre- and post-effective amendments, and all exhibits and all material incorporated by reference in such registration statement.

“Representative” has the meaning set forth in Section 9(a).

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“SEC” means the Securities and Exchange Commission or any successor governmental agency.

“Section 4(c) Sale Number” has the meaning set forth in Section 4(c).

“Section 4(d) Sale Number” has the meaning set forth in Section 4(d).

“Securities Act” means the Securities Act of 1933, as amended, or any successor federal statute, and the rules and regulations of the SEC thereunder, all as the same shall be in effect at the time.

“Securities Exchange Act” means the Securities Exchange Act of 1934, as amended, or any successor federal statute, and the rules and regulations of the SEC thereunder, all as the same shall be in effect at the time.

“Senior Management” has the meaning set forth in Section 9(a).

“Stock” means (i) the outstanding shares of Common Stock of the Corporation, (ii) any additional shares of Common Stock of the Corporation that may be issued in the future and (iii) any shares of capital stock of the Corporation into which such shares may be converted or for which they may be exchanged.

“Stockholder Registration” has the meaning set forth in Section 4(a).

“Stockholders” means those Persons identified on the signature pages hereto as the Stockholders and shall include any other Person who agrees in writing with the parties hereto to be bound by and to comply with all the provisions of this Agreement applicable to a Stockholder, including any Person who becomes a party to this Agreement by executing an Adoption Agreement substantially in the form of Exhibit A or in such other form as is reasonably satisfactory to the Corporation.

“Subsidiary” means, with respect to any Person, any corporation, limited liability company, partnership, joint venture or other legal entity of which such Person (either above or through or together with any other Subsidiary) owns, directly or indirectly, more than 50% of the stock or other equity interests the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity.

“Underwritten Offering” means a sale of shares of Common Stock to an underwriter for reoffering to the public.

Any capitalized term used in any Section of this Agreement that is not defined in this Section 1 shall have the meaning ascribed to it in such other Section.

(b)Rules of Construction.  For all purposes of this Agreement, unless otherwise expressly provided:

(i)“own,” “ownership,” “held” and “holding” refer to ownership or holding as record holder or record owner;

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(ii)the headings and captions of this Agreement are for convenience of reference only and shall not define, limit or otherwise affect any of the terms hereof; and

(iii)whenever the context requires, the gender of all words used herein shall include the masculine, feminine and neuter, and the number of all words shall include the singular and plural.

Section 2Securities Restrictions; Apollo Transfers.

(a)Securities Restrictions.

(i)Notwithstanding any other provision of this Agreement, no shares of Common Stock covered by this Agreement shall be transferable except upon the conditions specified in this Section 2(a), which conditions are intended to ensure compliance with the provisions of the Securities Act.

(ii)Each certificate or book-entry notation representing shares of Common Stock covered by this Agreement shall (unless otherwise permitted by the provisions of paragraph (iv) of this Section 2(a)) be stamped or otherwise imprinted with a legend in substantially the form provided in Section 12.

(iii)The holder of any shares of Common Stock covered by this Agreement agrees, prior to any transfer of any such shares, to give written notice to the Corporation of such holder’s intention to effect such transfer and to comply in all other respects with the provisions of this Section 2(a).  Each such notice shall describe the manner and circumstances of the proposed transfer.  Upon request by the Corporation, the holder delivering such notice shall deliver a written opinion, addressed to the Corporation, of counsel for the holder of such shares, stating that in the opinion of such counsel (which opinion and counsel shall be reasonably satisfactory to the Corporation) such proposed transfer does not involve a transaction requiring registration or qualification of such shares under the Securities Act.  Such holder of such shares shall be entitled to transfer such shares in accordance with the terms of the notice delivered to the Corporation, if the Corporation does not reasonably object to such transfer and request such opinion within fourteen (14) Business Days after delivery of such notice, or, if it requests such opinion, does not reasonably object to such transfer within fourteen (14) Business Days after delivery of such opinion.  Subject to paragraph (iv) of this Section 2(a), each certificate or other instrument evidencing any such transferred shares of Common Stock shall bear the legend required by paragraph (ii) of this Section 2(a) unless (A) such opinion of counsel to the holder of such shares (which opinion and counsel shall be reasonably acceptable to the Corporation) states that registration of any future transfer is not required by the applicable provisions of the Securities Act or (B) the Corporation shall have waived the requirement of such legend, which waiver may or may not be given in the Corporation’s absolute discretion.

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(iv)Notwithstanding the foregoing provisions of this Section 2(a), the restrictions imposed by this Section 2(a) upon the transferability of any shares of Common Stock covered by this Agreement shall cease and terminate when (A) any such shares are sold or otherwise disposed of pursuant to an effective Registration Statement under the Securities Act or (B) the holder of such shares has met the requirements for transfer of such shares pursuant to Rule 144 under the Securities Act.  Whenever the restrictions imposed by this Section 2(a) shall terminate, the holder of any shares as to which such restrictions have terminated shall be entitled to receive from the Corporation, without expense, a new certificate (or book-entry notation) not bearing the restrictive legend set forth in Section 12 and not containing any other reference to the restrictions imposed by this Section 2(a).

(b)Apollo Transfers.  In the event that any Person that is an Affiliate of the Apollo Entities acquires shares of Common Stock from the Apollo Stockholders or any other Affiliate of the Apollo Entities, such Person shall be subject to and have the benefit of any and all rights, obligations and restrictions of the Apollo Entities hereunder, as if such Person were an Apollo Entity.

Section 3Demand Registration Rights.

(a)Apollo Registration Rights.  Subject to the provisions of this Section 3, at any time and from time to time after the date of this Agreement, Apollo may make one or more written demands (each, an “Apollo Registration Demand”) to the Corporation requiring the Corporation to register, under and in accordance with the provisions of the Securities Act, all or part of the Apollo Stockholders’ shares of Common Stock.  All Apollo Registration Demands made pursuant to this Section 3 will specify the aggregate amount of shares of Common Stock to be registered, the intended methods of disposition thereof (including whether the offering is to be an Underwritten Offering) and the registration procedures to be undertaken by the Corporation in connection therewith (an “Apollo Demand Notice”).  Subject to Section 3(b), promptly upon receipt of any such Apollo Demand Notice, the Corporation will file the applicable Registration Statement as soon as reasonably practicable and will use its best efforts to, in accordance with the terms set forth in the Apollo Demand Notice, effect within one hundred eighty (180) days of the filing of such Registration Statement the registration under the Securities Act (including, without limitation, appropriate qualification under applicable blue sky or other state securities laws and appropriate compliance with the applicable regulations promulgated under the Securities Act) of the shares of Common Stock that the Corporation has been so required to register.

(b)Employee Stockholder Registration Rights.  Subject to the provisions of this Section 3 and the Contribution and Exchange Agreement, dated as of April 26, 2013, by and among the Class B limited partners of the Partnership and the Corporation, at any time and from time to time after the date of this Agreement, so long as the Employee Stockholders collectively own at least 1% of the outstanding Common Stock, the Employee Stockholders may make one or more written demands (each, an “Employee Stockholder Registration Demand” and, together with an Apollo Registration Demand, a

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“Registration Demand”) to the Corporation requiring the Corporation to register, under and in accordance with the provisions of the Securities Act, all or part of the Employee Stockholders’ shares of Common Stock.  All Employee Stockholder Registration Demands made pursuant to this Section 3 will specify the aggregate amount of shares of Common Stock to be registered, the intended methods of disposition thereof (including whether the offering is to be an Underwritten Offering) and the registration procedures to be undertaken by the Corporation in connection therewith (an “Employee Stockholder Demand Notice” and, together with an Apollo Demand Notice, a “Demand Notice”).  Subject to Section 3(c), promptly upon receipt of any such Employee Stockholder Demand Notice, the Corporation will file the applicable Registration Statement as soon as reasonably practicable and will use its best efforts to, in accordance with the terms set forth in the Employee Stockholder Demand Notice, effect within one hundred eighty (180) days of the filing of such Registration Statement the registration under the Securities Act (including, without limitation, appropriate qualification under applicable blue sky or other state securities laws and appropriate compliance with the applicable regulations promulgated under the Securities Act) of the shares of Common Stock that the Corporation has been so required to register.

(c)Registration Obligations and Procedures.

(i)If the Corporation receives a Registration Demand and the Corporation furnishes to Apollo or the Employee Stockholders (each, a “Requesting Stockholder”) a copy of a resolution of the Board certified by the secretary of the Corporation stating that in the good faith judgment of the Board it would be materially adverse to the Corporation for a Registration Statement to be filed on or before the date such filing would otherwise be required hereunder, the Corporation shall have the right to defer such filing for a period of not more than sixty (60) days after receipt of the Demand Notice for such registration from the Requesting Stockholder. The Corporation shall not be permitted to provide such notice more than twice in any three hundred sixty (360) day period.  If the Corporation shall so postpone the filing of a Registration Statement, the Requesting Stockholder may withdraw the Registration Demand by so advising the Corporation in writing within thirty (30) days after receipt of the notice of postponement.  In addition, if the Corporation receives a Registration Demand and the Corporation is then in the process of preparing to engage in a public offering, the Corporation shall inform the Requesting Stockholder of the Corporation’s intent to engage in a public offering and may require the Requesting Stockholder to withdraw such Registration Demand for a period of up to one hundred twenty (120) days so that the Corporation may complete its public offering.  In the event that the Corporation ceases to pursue such public offering, it shall promptly inform the Requesting Stockholder, and the Requesting Stockholder shall be permitted to submit a new Registration Demand.  For the avoidance of doubt, the Requesting Stockholders shall have the right to participate in the Corporation’s public offering as provided in Section 4.

(ii)Registrations under this Section 3 shall be on such appropriate registration form of the SEC (A) as shall be selected by the Corporation and as

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shall be reasonably acceptable to the Requesting Stockholder, and (B) as shall permit the disposition of such shares in accordance with the intended method or methods of disposition specified in the Demand Notice.  If, in connection with any registration under this Section 3 that is proposed by the Corporation to be on Form S-3 or any successor form, the managing underwriter, if any, shall advise the Corporation in writing that in its opinion the use of another permitted form is of material importance to the success of the offering, then such registration shall be on such other permitted form.

(iii)The Corporation shall use its best efforts to keep any Registration Statement filed in response to a Registration Demand effective for as long as is necessary for the Requesting Stockholders to dispose of the covered securities.

(iv)In the case of an Underwritten Offering in connection with a Registration Demand, the Requesting Stockholders shall select the underwriters, provided that the managing underwriter shall be a nationally recognized investment banking firm.  The Requesting Stockholders shall determine the pricing of the Registrable Securities offered pursuant to any such Registration Statement in connection with a Registration Demand, the applicable underwriting discount and other financial terms (including the material terms of the applicable underwriting agreement) and determine the timing of any such registration and sale, subject to Section 3(c)(i), and the Requesting Stockholders shall be solely responsible for all such discounts and fees payable to such underwriters in such Underwritten Offering.

(d)No Inconsistent Agreements.  The Corporation represents and warrants that it has not granted and is not a party to any proxy, voting trust or other agreement that is inconsistent with or conflicts with this Section 3.  Other than the underwriting agreement entered into in connection with the IPO, the Corporation shall not hereafter enter into any agreement with respect to its securities that is inconsistent with or conflicts with the rights granted under this Section 3.

Section 4Piggyback Registration Rights.

(a)Piggyback Rights.  Subject to Section 4(c), and except in connection with the IPO (for which this Section 4(a) shall not apply), if the Corporation at any time proposes to register any Stock for its own account (a “Corporation Registration”) or for the account of any Stockholder possessing demand rights (including, for the avoidance of doubt, in connection with a Registration Demand) (a “Stockholder Registration”) under the Securities Act by registration on Form S-1 or Form S-3 or any successor or similar form(s) (except registrations on any such Form or similar form(s) solely for registration of securities in connection with an employee benefit plan, a dividend reinvestment plan or a merger or consolidation, or incidental to an issuance of securities under Rule 144A under the Securities Act), it will at such time give prompt written notice to the Stockholders of its intention to do so, including the anticipated filing date of the Registration Statement and, if known, the number of shares of Stock that are proposed to be included in such Registration Statement, and of the Stockholders’ rights under this

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Section 4. Upon the written request of a Stockholder (which request shall specify the maximum number of Registrable Securities intended to be disposed of by such Stockholder and such other information as is reasonably required to effect the registration of such shares of Stock), made as promptly as practicable and in any event within fourteen (14) Business Days after the receipt of any such notice (five (5) Business Days if the Corporation states in such written notice or gives telephonic notice to such Stockholder, with written confirmation to follow promptly thereafter, stating that (i) such registration will be on Form S-3 and (ii) such shorter period of time is required because of a planned filing date), the Corporation, subject to Section 4(c), shall use its commercially reasonable efforts to effect the registration under the Securities Act of all Registrable Securities which the Corporation has been so requested to register by the Stockholders; provided, however, that if, at any time after giving written notice of its intention to register any securities and prior to the effective date of the Registration Statement filed in connection with such registration, the Corporation shall determine for any reason not to register or to delay registration of such securities, the Corporation shall give written notice of such determination to the Stockholders requesting registration under this Section 4 (which such Stockholders will hold in strict confidence) and (i) in the case of a determination not to register, shall be relieved of its obligation to register any Registrable Securities in connection with such registration (but not from any obligation of the Corporation to pay the Registration Expenses in connection therewith), and (ii) in the case of a determination to delay registering, shall be permitted to delay registering any Registrable Securities, for the same period as the delay in registering such other securities.

(b)Stockholder Withdrawal.  Each Stockholder shall have the right to withdraw its request for inclusion of its Registrable Securities in any Registration Statement pursuant to this Section 4 at any time prior to the execution of an underwriting agreement with respect thereto by giving written notice to the Corporation of its request to withdraw.

(c)Corporation Registration Underwriters’ Cutback.  In the case of a Corporation Registration, if the managing underwriter of any underwritten offering shall inform the Corporation by letter of its belief that the number of Registrable Securities requested to be included in such registration pursuant to this Section 4, when added to the number of other securities to be offered in such registration by the Corporation, would materially adversely affect such offering, then the Corporation shall include in such registration, to the extent of the total number of securities which the Corporation is so advised can be sold in (or during the time of) such offering without so materially adversely affecting such offering (the “Section 4(c) Sale Number”), securities in the following priority:

(i)First, all Common Stock or securities convertible into, or exchangeable or exercisable for, Common Stock that the Corporation proposes to register for its own account (the “Corporation Securities”); and

(ii)Second, to the extent that the number of Corporation Securities to be included is less than the Section 4(c) Sale Number, the Registrable Securities

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requested to be included by the Stockholders; the securities requested to be included pursuant to this Section 4(c)(ii) shall be included on a pro rata basis based on the number of Registrable Securities subject to registration rights owned by each holder requesting inclusion in relation to the number of Registrable Securities then owned by all holders requesting inclusion, provided that the number of Registrable Securities owned by such Stockholders shall not include shares underlying any unvested options.

(d)Stockholder Registration Underwriters’ Cutback.  In the case of a Stockholder Registration, if the managing underwriter of any underwritten offering shall inform the Corporation by letter of its belief that the number of shares of Common Stock and Registrable Securities requested to be included in such registration would materially adversely affect such offering, then the Corporation shall include in such registration, to the extent of the total number of securities which the Corporation is so advised can be sold in (or during the time of) such offering without so materially adversely affecting such offering (subject to the last paragraph of this Section 4(d), the “Section 4(d) Sale Number”), securities in the following priority:

(i)First, the Registrable Securities requested to be included by the Persons exercising demand rights in connection with such Stockholder Registration; and

(ii)Second, to the extent that the number of securities to be included in the registration pursuant to Section 4(d)(i) is less than the Section 4(d) Sale Number, the Registrable Securities requested to be included by the Stockholders exercising piggyback rights pursuant to this Section 4; the securities requested to be included pursuant to this Section 4(d)(ii) shall be included on a pro rata basis based on the number of Registrable Securities subject to registration rights owned by each holder requesting inclusion in relation to the number of Registrable Securities then owned by all holders requesting inclusion, provided that the number of Registrable Securities owned by such Stockholders shall not include any shares underlying options.

Notwithstanding anything to the contrary set forth in this Section 4(d), in connection with a Stockholder Registration pursuant to an Apollo Registration Demand, Apollo shall be entitled to determine, in its sole discretion, the Section 4(d) Sale Number applicable to such registration.

(e)Participation in Underwritten Offerings.

(i)Any participation by the Stockholders in a registration by the Corporation shall be in accordance with the plan of distribution of the Corporation (subject, in the case of a Stockholder Registration pursuant to an Apollo Registration Demand, to the rights of Apollo in Section 3(a)).  Except as provided in Section 3(c), in all Underwritten Offerings, the Corporation shall have sole discretion to select the underwriters.

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(ii)           If the Corporation at any time shall register shares of Stock for its own account under the Securities Act for sale to the public, no Employee Stockholder shall sell publicly, make any short sale of, grant any option for the purchase of or otherwise dispose publicly of any capital stock of the Corporation without the prior written consent of the Corporation for the period of time in which the Apollo Stockholders have similarly agreed not to sell publicly, make any short sale of, grant any option for the purchase of or otherwise dispose publicly of any capital stock of the Corporation.

(iii)          In connection with any proposed registered offering of securities of the Corporation in which any Stockholder has the right to include Registrable Securities pursuant to this Section 4, such Stockholder agrees (A) to supply any information reasonably requested by the Corporation in connection with the preparation of a Registration Statement and/or any other documents relating to such registered offering and (B) to execute and deliver any agreements and instruments being executed by all holders on substantially the same terms reasonably requested by the Corporation to effectuate such registered offering, including, without limitation, underwriting agreements, custody agreements, lock-ups, “hold back” agreements pursuant to which such Stockholder agrees not to sell or purchase any securities of the Corporation for the same period of time following the registered offering as is agreed to by the other participating holders, powers of attorney and questionnaires.

(iv)          If the Corporation requests that the Stockholders take any of the actions referred to in paragraph (iii) of this Section 4(e), the Stockholders shall take such action promptly but in any event within three (3) Business Days following the date of such request.  Furthermore, the Corporation agrees that it shall use commercially reasonably efforts to obtain any waivers to the restrictive sale and purchase provisions of any “hold back” agreement that are reasonably requested by a Stockholder.

(f)            Copies of Registration Statements.  The Corporation will, if requested, prior to filing any Registration Statement pursuant to this Section 4 or any amendment or supplement thereto, furnish to the Stockholders, and thereafter furnish to the Stockholders, such number of copies of such Registration Statement, amendment and supplement thereto (in each case including all exhibits thereto and documents incorporated by reference therein) and the prospectus included in such Registration Statement (including each preliminary prospectus) as the Stockholders may reasonably request in order to facilitate the sale of the Registrable Securities by the Stockholders.

(g)           Expenses.  The Corporation shall pay all Registration Expenses in connection with a Corporation Registration or any Stockholder Registration, provided that each Stockholder shall pay all applicable underwriting fees, discounts and similar charges.

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Section 5               Indemnification and Contribution.

(a)           The Corporation agrees to indemnify and hold harmless, to the fullest extent permitted by law, each Stockholder, its officers, directors, employees, controlling persons, fiduciaries, stockholders, and general or limited partners (and the officers, directors, employees and stockholders or general or limited partners thereof) and representatives from and against any and all losses, claims, damages, liabilities, costs and expenses (including attorneys’ fees) (“Losses”) caused by, arising out of, resulting from or related to (i) any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or prospectus relating to the Registrable Securities (as amended or supplemented if the Corporation shall have furnished any amendments or supplements thereto) or any preliminary prospectus, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided, however, that such indemnity shall not apply to that portion of such Losses caused by, or arising out of, any untrue statement, or alleged untrue statement or any such omission or alleged omission, to the extent such statement or omission was made in reliance upon and in conformity with information furnished in writing to the Corporation by or on behalf of such Stockholder expressly for use therein, and (ii) any violation by the Corporation of any federal, state or common law rule, regulation or law applicable to the Corporation and relating to action required of or inaction by the Corporation in connection with any registration or offering of securities. Notwithstanding the preceding sentence, the Corporation shall not be liable in any such case to the extent that any such Loss arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission (x) made in any preliminary prospectus if (A) such selling Stockholder failed to deliver or cause to be delivered a copy of the prospectus to the Person asserting such Loss after the Corporation has furnished such selling Stockholder with a sufficient number of copies of the same and (B) the prospectus completely corrected in a timely manner such untrue statement or omission, or (y) in the prospectus, if such untrue statement or alleged untrue statement or omission or alleged omission is completely corrected in an amendment or supplement to the prospectus and the selling Stockholder thereafter fails to deliver such prospectus as so amended or supplemented prior to or concurrently with the sale of the securities to the Person asserting such Loss after the Corporation had furnished such selling Stockholder with a sufficient number of copies of the same. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of any Stockholder or representative of such Stockholder and shall survive the transfer of securities by such Stockholder.

(b)           Each Stockholder agrees to indemnify and hold harmless the Corporation, its officers and directors and each Person (if any) that controls the Corporation within the meaning of either Section 15 of the Securities Act or Section 20 of the Securities Exchange Act from and against any and all Losses caused by, arising out of, resulting from or related to any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or prospectus relating to Registrable Securities (as amended or supplemented if the Corporation shall have furnished any amendments or supplements thereto) or any preliminary prospectus, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the

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statements therein not misleading, only to the extent such statement or omission (i) was made in reliance upon and in conformity with information furnished in writing by or on behalf of such Stockholder expressly for use in any Registration Statement or prospectus relating to the Registrable Securities, or any amendment or supplement thereto, or any preliminary prospectus and (ii) has not been corrected in a subsequent writing prior to or concurrently with the sale of the securities to the Person asserting such Loss. The selling Stockholders also will indemnify underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, their officers and directors and each Person who controls such Persons (within the meaning of the Securities Act) to the same extent as provided above with respect to the indemnification of the Corporation, its officers and directors and each Person (if any) that controls the Corporation, if requested.  The Corporation and the selling Stockholders shall be entitled to receive indemnities from underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, to the same extent as provided above with respect to information so furnished in writing by such Persons specifically for inclusion in any prospectus or Registration Statement.

(c)           In case any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to Section 5(a) or Section 5(b), such Person (the “Indemnified Party”) shall promptly notify the Person against whom such indemnity may be sought (the “Indemnifying Party”) in writing (provided that the failure of the Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Section 5, except to the extent the Indemnifying Party is actually prejudiced by such failure to give notice), and the Indemnifying Party shall be entitled to participate in such proceeding and, unless in the reasonable opinion of outside counsel to the Indemnified Party a conflict of interest between the Indemnified Party and Indemnifying Party may exist in respect of such claim, to assume the defense thereof jointly with any other Indemnifying Party similarly notified, to the extent that it chooses, with counsel reasonably satisfactory to such Indemnified Party, and after notice from the Indemnifying Party to such Indemnified Party that it so chooses, the Indemnifying Party shall not be liable to such Indemnified Party for any legal or other expenses subsequently incurred by such Indemnified Party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that (i) if the Indemnifying Party fails to take reasonable steps necessary to defend diligently the action or proceeding within twenty (20) days after receiving notice from such Indemnified Party that the Indemnified Party believes it has failed to do so, (ii) if such Indemnified Party who is a defendant in any action or proceeding which is also brought against the Indemnifying Party reasonably shall have concluded that there may be one or more legal defenses available to such Indemnified Party which are not available to the Indemnifying Party or (iii) if representation of both parties by the same counsel is otherwise inappropriate under applicable standards of professional conduct then, in any such case, the Indemnified Party shall have the right to assume or continue its own defense as set forth above (but with no more than one firm of counsel for all Indemnified Parties in each jurisdiction, except to the extent any Indemnified Party or Parties reasonably shall have concluded that there may be legal defenses available to such party or parties which are not available to the other Indemnified Parties or to the extent representation of all Indemnified Parties by the

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same counsel is otherwise inappropriate under applicable standards of professional conduct) and the Indemnifying Party shall be liable for any expenses therefor. No Indemnifying Party shall, without the written consent of the Indemnified Party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the Indemnified Party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (A) includes an unconditional release of the Indemnified Party from all liability arising out of such action or claim and (B) does not include a statement as to, or an admission of, fault, culpability or a failure to act, by or on behalf of any Indemnified Party.

(d)           If the indemnification provided for in this Section 5 is unavailable to an Indemnified Party in respect of any losses, claims, damages or liabilities in respect of which indemnity is to be provided hereunder, then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall to the fullest extent permitted by law contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages or liabilities in such proportion as is appropriate to reflect the relative fault of such party in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative fault of the Corporation (on the one hand) and a Stockholder (on the other hand) shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

(e)           The Corporation and each Stockholder agree that it would not be just and equitable if contribution pursuant to this Section 5 were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in Section 5(d).  The amount paid or payable by an Indemnified Party as a result of the losses, claims, damages or liabilities referred to in Section 5(d) shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim.  Notwithstanding the provisions of this Section 5, no Stockholder shall be liable for indemnification or contribution pursuant to this Section 5 for any amount in excess of the net proceeds of the offering received by such Stockholder, less the amount of any damages which such Stockholder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.  No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

Section 6               Rule 144.

The Corporation covenants that so long as the Common Stock is registered pursuant to Section 12(b), Section 12(g) or Section 15(d) of the Securities Exchange Act, it will file any and all reports required to be filed by it under the Securities Act and the Securities Exchange Act (or,

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if the Corporation is not required to file such reports, it will make publicly available such necessary information for so long as necessary to permit sales pursuant to Rule 144, Rule 144A or Regulation S under the Securities Act) and that it will take such further action as the Stockholders may reasonably request, all to the extent required from time to time to enable the Stockholders to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144, Rule 144A or Regulation S under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC. Upon the written request of any Stockholder, the Corporation will deliver to such Stockholder a written statement as to whether it has complied with such requirements.

Section 7               Board of Directors.

(a)           Nomination of Directors.  The Apollo Entities shall have the right to nominate for election to the Board:

(i)            no fewer than that number of directors that would constitute a majority of the number of directors that the Corporation would have if there were no vacancies on the Board, so long as the Apollo Entities collectively beneficially own at least 50% of the outstanding Stock of the Corporation; provided that nothing in this paragraph (i) of this Section 7(a) shall be construed to limit the right of the Apollo Entities to nominate directors to a number of such directors that is less than the number directors the Apollo Entities would be entitled to nominate pursuant to applicable law and the Corporation’s certificate of incorporation and bylaws;

(ii)           up to three (3) directors, so long as the Apollo Entities collectively beneficially own at least 30% of the outstanding Stock of the Corporation but less than 50% of the outstanding Stock of the Corporation;

(iii)          up to two (2) directors, so long as the Apollo Entities collectively beneficially own at least 20% of the outstanding Stock of the Corporation but less than 30% of the outstanding Stock of the Corporation; and

(iv)          up to one (1) directors, so long as the Apollo Entities collectively beneficially own at least 10% of the outstanding Stock of the Corporation but less than 20% of the outstanding Stock of the Corporation.

In the event the size of the Board is increased or decreased at any time to other than seven (7) directors, the Apollo Entities’ nomination rights under this Section 7(a) shall be proportionately increased or decreased, respectively, rounded up to the nearest whole number.

(b)           Election of Directors.  The Corporation shall take all action within its power to cause all nominees nominated pursuant to Section 7(a) to be included in the slate of nominees recommended by the Board to the Corporation’s stockholders for election as directors at each annual meeting of the stockholders of the Corporation (and/or in connection with any election by written consent) and the Corporation shall use

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all reasonable best efforts to cause the election of each such nominee, including soliciting proxies in favor of the election of such nominees.

(c)           Replacement of Directors.  In the event that a vacancy is created at any time by the death, disability, retirement, resignation or removal (with or without cause) of a director nominated pursuant to Section 7(a) or designated pursuant to this Section 7(c), or in the event of the failure of any such nominee to be elected, the Apollo Entities shall have the right to designate a replacement to fill such vacancy.  The Corporation shall take all action within its power to cause such vacancy to be filled by the replacement so designated, and the Board shall promptly elect such designee to the Board.  Upon the written request of the Apollo Entities, the Corporation shall take all actions necessary to remove, with or without cause, any director previously nominated pursuant to Section 7(a) or designated pursuant to this Section 7(c), and to elect any replacement director designated by the Apollo Entities as provided in the first sentence of this Section 7(c).

(d)           Committees.  So long as the Apollo Entities collectively beneficially own at least 30% of the outstanding Stock of the Corporation, the Corporation shall take all action within its power to cause any committee of the Board to include in its membership at least one of the Apollo Entities’ nominees, except to the extent that such membership would violate applicable securities laws or stock exchange or stock market rules.

(e)           No Limitation.  The provisions of this Section 7 are intended to provide the Apollo Entities with the minimum Board representation rights set forth herein.  Nothing in this Agreement shall prevent the Corporation from having a greater number of nominees or designees of the Apollo Entities on the Board than otherwise provided herein.

(f)            Laws and Regulations.  Nothing in this Section 7 shall be deemed to require that any party hereto, or any Affiliate thereof, act or be in violation of any applicable provision of law, regulation, legal duty or requirement or stock exchange or stock market rule.

Section 8               Directors’ and Officers’ Insurance.

The Corporation shall maintain directors’ and officers’ liability insurance (including Side A coverage) covering the Corporation’s and its Subsidiaries’ directors and officers and issued by reputable insurers, with appropriate policy limits, terms and conditions (including “tail” insurance if necessary or appropriate).  The provisions of this Section 8 are intended to be for the benefit of, and will be enforceable by, each indemnified party, his or her heirs and his or her representatives and are in addition to, and not in substitution for, any other rights to indemnification or contribution that any such Person may have by contract or otherwise.

Section 9               Information.

For so long as the Apollo Entities collectively own 33 1/3% or greater of the outstanding Common Stock, Apollo will be entitled to the following contractual management rights with respect to the Corporation and its Subsidiaries:

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(a)           Apollo shall be entitled to routinely consult with and advise senior management of the Corporation (defined as the Corporation’s Chief Executive Officer, Chief Financial Officer and Senior Vice President — Business Development and Land and above and, collectively, “Senior Management”) with respect to the Corporation’s business and financial matters, including management’s proposed annual operating plans, and, upon request, members of Senior Management will meet regularly (on a quarterly basis) during each year with representatives of Apollo (each such representative, a “Representative”) at the Corporation’s and/or its Subsidiaries’ facilities (or such other locations as the Corporation may designate) at mutually agreeable times for such consultation and advice, including to review progress in achieving said plans. The Corporation agrees to give due consideration to the advice given and any proposals made by Apollo;

(b)           Apollo may inspect all books and records and facilities and properties of the Corporation at reasonable times and intervals.  The Corporation shall furnish Apollo with such available financial and operating data and other information with respect to the business and properties of the Corporation and its Subsidiaries as Apollo may reasonably request and at Apollo’s expense.  The Corporation shall permit the Representatives to discuss the affairs, finances and accounts of the Corporation and its Subsidiaries with, and to make proposals and furnish advice to, Senior Management; and

(c)           The Corporation shall, after receiving notice from Apollo as to the identity of any Representative:  (i) permit such Representative to attend all meetings of the Board as an observer, (ii) provide such Representative advance notice of each such meeting, including such meeting’s time and place, at the same time and in the same manner as such notice is provided to the members of the Board, (iii) provide, with Apollo’s consent, the Representative with copies of all materials, including notices, minutes, consents and regularly compiled financial and operating data distributed to the members of the Board at the same time as such materials are distributed to such Board, and shall permit the Representative to have the same access to information concerning the business and operations of the Corporation, and (iv) permit the Representative to discuss the affairs, finances and accounts of the Corporation with, and to make proposals and furnish advice with respect thereto to, the Board, without voting, and the Board and the Corporation’s officers shall give due consideration thereto (recognizing that the ultimate discretion with respect to all such matters shall be retained by the Board).

The Corporation agrees to consider, in good faith, the recommendations of Apollo in connection with the matters on which it is consulted as described above, recognizing that the ultimate discretion with respect to all such matters shall be retained by the Corporation.

Section 10             Certain Actions.

(a)           Subject to the provisions of Section 10(b), without the approval of a majority the Board as provided for in the bylaws of the Corporation, which must include the approval of a majority of the directors nominated by Apollo Stockholders voting on such matter, the Corporation shall not, and (to the extent applicable) shall not permit any Subsidiary of the Corporation to:

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(i)            amend, modify or repeal any provision of the certificate of incorporation and bylaws or similar organizational documents of the Corporation in a manner that adversely affects the Apollo Entities;

(ii)           issue additional equity interests of the Corporation, other than (A) any award under any stockholder approved equity compensation plan, (B) any intra-company issuance among the Corporation and its Subsidiaries or (C) any issuance of equity interests pursuant to the Exchange Agreement;

(iii)          merge or consolidate with or into any other entity, or transfer (by lease, assignment, sale or otherwise) all or substantially all of the Corporation’s and its Subsidiaries’ assets, taken as a whole, to another entity, or enter into or agree to undertake any transaction that would constitute a “Change of Control” as defined in the Corporation’s or its Subsidiaries’ principal credit facilities or note indentures;

(iv)          any (A) acquisition by the Corporation or any Subsidiary of the equity interests or assets of any Person, or the acquiring by the Corporation or any Subsidiary by any other manner of any business, properties, assets, or Persons, in one transaction or a series of related transactions or (B) disposition of assets of the Corporation or any Subsidiary or the shares or other equity interests of any Subsidiary, in each case where the amount of consideration for any such acquisition or disposition exceeds $100 million in any single transaction, or an aggregate amount of $200 million in any series of transactions during a calendar year;

(v)           the incurrence of indebtedness for borrowed money (including through capital leases, the issuance of debt securities or the guarantee of indebtedness of another Person) that would result in the Company’s total net indebtedness to adjusted EBITDA for the trailing twelve month period exceeding 2.50:1.0;

(vi)          terminate the Chief Executive Officer or designate a new Chief Executive Officer of the Corporation; or

(vii)         change the size of the Board.

(b)           The approval rights set forth in Section 10(a) shall terminate at such time as the Apollo Stockholders no longer collectively beneficially own at least 33 1/3% of the total number of shares of Common Stock outstanding at any time.

Section 11             Limitations.

Anything contained herein to the contrary notwithstanding, the Corporation’s obligations hereunder shall in all respects be subject to the terms and provisions of any lending or financing agreements to which the Corporation is a party with third persons who are not Affiliates of the Corporation or the Apollo Entities, provided that such terms and provisions apply ratably to all Stockholders.

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Section 12             Legend on Stock Certificates.

Each certificate or book-entry notation representing shares of Stock owned by the Stockholders shall bear the following legend as and to the extent required under Section 2:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES OR BLUE SKY LAWS.  THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR LAWS.  THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO A STOCKHOLDERS AGREEMENT DATED AS OF AUGUST 7, 2013, AMONG THE ISSUER OF SUCH SECURITIES AND THE OTHER PARTIES NAMED THEREIN.  THE TERMS OF SUCH STOCKHOLDERS AGREEMENT INCLUDE, AMONG OTHER THINGS, RESTRICTIONS ON TRANSFER.  A COPY OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF ATHLON ENERGY INC.

Section 13             Duration of Agreement.

This Agreement shall terminate automatically upon:  (i) the dissolution of the Corporation (unless the Corporation continues to exist after such dissolution as a limited liability company or in another form, whether incorporated in Delaware or another jurisdiction) or (ii) the consummation of a Control Disposition; provided, however, that (A) for so long as the Apollo Stockholders collectively own any Registrable Securities, Sections 3 and 4 may not be terminated without the prior written consent of Apollo, (B) for so long as the Apollo Stockholders collectively own at least 33 1/3% of the outstanding Common Stock, Sections 7, 9 and 10 may not be terminated without the prior written consent of Apollo and (C) the indemnification provisions of Section 5 and the covenants in Section 9 shall survive any termination. Any Stockholder who disposes of all of his, her or its Common Stock in conformity with the terms of this Agreement shall cease to be a party to this Agreement and shall have no further rights hereunder.

Section 14             Severability.

If any provision of this Agreement shall be determined to be illegal and unenforceable by any court of law, the remaining provisions shall be severable and enforceable in accordance with their terms.

Section 15             Governing Law; Jurisdiction.

(a)           This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, without giving effect to its choice or conflict of law provisions or rules.

(b)           The parties to this Agreement agree that jurisdiction and venue in any action brought by any party hereto pursuant to this Agreement shall exclusively and properly lie in the federal courts of the United States of America located in the City and

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County of New York, Borough of Manhattan, or the courts of the State of New York located in the City and County of New York, Borough of Manhattan.  By execution and delivery of this Agreement each party hereto irrevocably submits to the jurisdiction of such courts for himself and in respect of his property with respect to such action.  The parties hereto irrevocably agree that venue for such action would be proper in such court and hereby waive any objection that such court is an improper or inconvenient forum for the resolution of such action.  The parties further agree that the mailing by certified or registered mail, return receipt requested, of any process required by any such court shall constitute valid and lawful service of process against them, without necessity for service by any other means provided by statute or rule of court.

Section 16             JURY TRIAL.

BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS.  THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND/OR ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHT OR REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS ENTERED INTO IN CONNECTION WITH THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN.

Section 17             Stock Dividends, Etc.

The provisions of this Agreement shall apply to any and all shares of capital stock of the Corporation or any successor or assignee of the Corporation (whether by merger, consolidation, sale of assets or otherwise) which may be issued in respect of, in exchange for or in substitution for the shares of Stock, by reason of any stock dividend, split, reverse split, combination, recapitalization, reclassification, merger, consolidation or otherwise in such a manner and with such appropriate adjustments as to reflect the intent and meaning of the provisions hereof and so that the rights, privileges, duties and obligations hereunder shall continue with respect to the capital stock of the Corporation as so changed.

Section 18             Benefits of Agreement.

This Agreement shall be binding upon and inure to the benefit of the Corporation and its successors and assigns and each Stockholder and any spouse of each individual Employee Stockholder and their permitted assigns, legal representatives, heirs and beneficiaries.  Notwithstanding anything to the contrary contained herein, but subject to Section 2(b), the Apollo Entities may assign their rights or obligations, in whole or in part, under this Agreement to one or more of their Affiliates and may assign their registration rights and obligations under Sections 3 and 4, in whole or in part, to any party to whom they transfer any shares of Stock.  Except as otherwise expressly provided herein, no Person not a party to this Agreement, as a

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third-party beneficiary or otherwise, shall be entitled to enforce any rights or remedies under this Agreement.

Section 19             Notices.

All notices or other communications which are required or permitted hereunder shall be in writing and shall be deemed to have been given if (a) personally delivered or sent by telecopier, (b) sent by nationally recognized overnight courier or (c) sent by registered or certified mail, postage prepaid, return receipt requested, addressed as follows:

(i)            If to the Corporation, to:

Athlon Energy Inc.
420 Throckmorton Street, Suite 1200
Fort Worth, Texas 76102
Attention:  Robert C. Reeves
Telecopier:  (817) 984-8217

with copies to:

Latham & Watkins LLP
811 Main Street, Suite 3700
Houston, Texas 77002
Attn:  Sean T. Wheeler
Fax:  (713) 546-5401

(ii)           If to Apollo, to:

Apollo Management VII, L.P. 
9 West 57th Street
New York, New York 10019
Attn:  Rakesh Wilson and Laurie D. Medley
Fax:  (212) 515-3251

with copies to:

Latham & Watkins LLP
811 Main Street, Suite 3700
Houston, Texas 77002
Attn:  Sean T. Wheeler
Fax:  (713) 546-5401

(iii)          If to the Stockholders, to their respective addresses set forth on Schedule A or to such other address as the party to whom notice is to be given may have furnished to such other party in writing in accordance herewith.  Any such communication shall be deemed to have been received (a) when delivered, if personally delivered or sent by telecopier, (b) the next Business Day after delivery, if sent by nationally recognized, overnight courier and (c) on the third

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(3rd) Business Day following the date on which the piece of mail containing such communication is posted, if sent by first-class mail.

Section 20             Modification; Waiver.

This Agreement may be amended, modified or supplemented only by a written instrument duly executed by (a) the Corporation and (b) (i) for so long as the Apollo Entities collectively own at least 33 1/3% of the Stock, the vote of the shares of Stock owned by the Apollo Entities, and (ii) only for matters that adversely affect the rights or obligations of the Employee Stockholders under this Agreement, a majority of the shares of Stock owned by the Employee Stockholders as of the date the vote is taken; provided that (A) for so long as the Apollo Stockholders own any Registrable Securities, Sections 3, 4 and 20 may not be amended without the prior written consent of Apollo, (B) Section 8 may not be amended without the prior written consent of Apollo and (iii) for so long as the Apollo Stockholders collectively own at least 33 1/3% of the outstanding Common Stock, Sections 7, 9 and 10 may not be amended without the prior written consent of Apollo. No course of dealing between the Corporation or its Subsidiaries and the Stockholders (or any of them) or any delay in exercising any rights hereunder will operate as a waiver of any rights of any party to this Agreement.  The failure of any party to enforce any of the provisions of this Agreement will in no way be construed as a waiver of such provisions and will not affect the right of such party thereafter to enforce each and every provision of this Agreement in accordance with its terms.

Section 21             Entire Agreement.

Except as otherwise expressly provided herein, this Agreement constitutes the entire agreement among the parties pertaining to the subject matter hereof and supersedes all prior and contemporaneous agreements and understandings of the parties in connection therewith, from and after the completion of the IPO.  Unless otherwise provided herein, any consent required by the Corporation may be withheld by the Corporation in its sole discretion.

Section 22             Inconsistent Arrangements and Dispositions.

No Stockholder shall enter into any stockholder agreements or arrangements of any kind with any Person with respect to any Stock on terms inconsistent with the provisions of this Agreement (whether or not such agreements or arrangements are with other Stockholders or with Persons that are not parties to this Agreement), including agreements or arrangements with respect to the acquisition or disposition of any Stock in a manner inconsistent with this Agreement.  Any Disposition or attempted Disposition in breach of this Agreement shall be void ab initio and of no effect.  In connection with any attempted Disposition in breach of this Agreement, the Corporation may hold and refuse to transfer any Stock or any certificate therefor, in addition to and without prejudice to any and all other rights or remedies which may be available to it or the Stockholders.  Each party to this Agreement acknowledges that a remedy at law for any breach or attempted breach of this Agreement will be inadequate, agrees that each other party to this Agreement shall be entitled to specific performance and injunctive and other equitable relief in case of any such breach or attempted breach, and further agrees to waive (to the extent legally permissible) any legal conditions required to be met for the obtaining of any

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such injunctive or other equitable relief (including posting any bond in order to obtain equitable relief).

Section 23             Counterparts.

This Agreement may be executed in any number of counterparts, and each such counterpart shall be deemed to be an original instrument, but all such counterparts taken together shall constitute but one agreement.  The failure of any Stockholder to execute this Agreement does not make it invalid as against any other Stockholder.

Section 24             Further Assurances.

Each party hereto shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments and other documents as any other party hereto reasonably may request in order to carry out the provisions of this Agreement and the consummation of the transactions contemplated hereby.

Section 25             Director and Officer Actions.

No director or officer of the Corporation shall be personally liable to the Corporation or any Stockholder as a result of any acts or omissions taken under this Agreement in good faith.

Section 26             Certain Certificates.

Each Stockholder that is an entity that was formed for the sole purpose of acquiring shares of Stock or that has no substantial assets other than shares of Stock or interests in shares of Stock agrees that (i) certificates of shares of its common stock or other instruments reflecting equity interests in such entity (and the certificates for shares of common stock or other equity interests in any similar entities controlling such entity) will note the restrictions contained in this Agreement on the transfer of Stock as if such common stock or other equity interests were shares of Stock and (ii) no such shares of common stock or other equity interests may be transferred to any Person other than in accordance with the terms and provisions of this Agreement as if such shares or equity interests were shares of Stock.

Section 27             Apollo Stockholder Parties.

In the event that any Apollo Entity that is not an Apollo Stockholder as of the time this Agreement becomes effective thereafter becomes an Apollo Stockholder, such Apollo Entity shall automatically become party to this Agreement and this Agreement shall be amended and restated to provide that the Apollo Entities or a designee of the Apollo Entities shall have all of the rights and obligations of the Apollo Entities hereunder.

[Signature Page to Follow]

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The parties have signed this agreement as of the date first written above.

ATHLON ENERGY INC.
By:	/s/ Robert C. Reeves
	Robert C. Reeves
	Chief Executive Officer
STOCKHOLDERS:
APOLLO ATHLON HOLDINGS, L.P.
By:	Apollo Advisors VII (APO DC), L.P.,
	its general partner
By:	Apollo Advisors VII (APO DC-GP), LLC,
	its general partner
By:	/s/ Laurie D. Medley
	Name:	Laurie D. Medley
	Title:	Vice President
AP OVERSEAS VII (ATHLON FC) HOLDINGS, L.P.
By:	Apollo Advisors VII (APO DC), L.P.,
	its general partner
By:	Apollo Advisors VII (APO DC-GP), LLC,
	its general partner
By:	/s/ Laurie D. Medley
	Name:	Laurie D. Medley
	Title:	Vice President

The parties have signed this agreement as of the date first written above.

/s/ Robert C. Reeves

Robert C. Reeves

 /s/ Nelson K. Treadway

Nelson K. Treadway

 /s/ Bud W. Holmes

Bud W. Holmes

 /s/ Jennifer L. Palko

Jennifer L. Palko

EXHIBIT A

ADOPTION AGREEMENT

This Adoption Agreement (“Adoption”) is executed pursuant to the terms of the Stockholders Agreement, dated as of August 7, 2013 (as amended from time to time, the “Stockholders Agreement”), by the transferee (“Transferee”) executing this Adoption.  By the execution of this Adoption, the Transferee agrees as follows (terms used but not defined in this Adoption have the meanings set forth in the Stockholders Agreement):

1.Acknowledgement.  Transferee acknowledges that Transferee is acquiring certain shares of Common Stock of the Corporation, subject to the terms and conditions of Stockholders Agreement, among the Corporation and the Stockholders party thereto.

2.Agreement.  Transferee (i) agrees that the shares of Common Stock acquired by Transferee, and certain other shares of Common Stock that may be acquired by Transferee in the future, shall be bound by and subject to the terms of the Stockholders Agreement, pursuant to the terms thereof, and (ii) hereby adopts the Stockholders Agreement with the same force and effect as if he, she or it were originally a party thereto.

3.Notice.  Any notice required as permitted by the Stockholders Agreement shall be given to Transferee at the address listed beside Transferee’s signature below.

4.Joinder.  The spouse of the undersigned Transferee, if applicable, executes this Adoption to acknowledge its fairness and that it is in such spouse’s best interest, and to bind such spouse’s community interest, if any, in the shares of Common Stock and other securities referred to above and in the Stockholders Agreement, to the terms of the Stockholders Agreement.

Signature:

Address:

SCHEDULE A

STOCKHOLDERS

APOLLO ATHLON HOLDINGS, L.P.

AP OVERSEAS VII (ATHLON FC) HOLDINGS, L.P.

ROBERT C. REEVES

NELSON K. TREADWAY

BUD W. HOLMES

JENNIFER L. PALKO

EX-10.10

Exhibit 10.10

Execution Version

ADVISORY SERVICES AND TRANSACTION FEE TERMINATION AGREEMENT

This Advisory Services and Transaction Fee Termination Agreement (this “Agreement”) is made as of this 7th day of August, 2013, by and among Athlon Holdings LP, a Delaware Limited Partnership (the “Partnership”) (as assignee of Athlon Energy LP, a Delaware limited partnership), Apollo Management VII, L.P., a Delaware limited partnership (“Management VII”) and Apollo Global Securities, LLC, a Delaware limited liability company (“AGS”).

WHEREAS, the Partnership and Management VII previously entered into that certain Services Agreement, dated as of August 23, 2010 (the “Services Agreement”), pursuant to which Management VII agreed to make its expertise available to the Partnership and its subsidiaries from time to time in rendering certain consulting and investment advisory services related to the business and affairs of the Partnership and its subsidiaries and affiliates and the review and analysis of certain financial and other transactions (the “Advisory Services”);

WHEREAS, in consideration of the provision by Management VII of the Advisory Services, and pursuant to Section 4 of the Services Agreement, the Partnership agreed to pay to Management VII, within 30 days of the end of each calendar quarter, a fee equal to the higher of (i) 1.00% of earnings before interest, income taxes, depletion, depreciation, and amortization, and exploration expense for the preceding quarter and (ii) $62,500 (the “Consulting Fee”) beginning on the date of the Services Agreement and terminating on the tenth anniversary thereof;

WHEREAS, the Partnership and AGS (as assignee of Management VII) previously entered into that certain Transaction Fee Agreement, dated as of August 23, 2010 (the “Fee Agreement”), pursuant to which AGS agreed to make its expertise available to the Partnership and its subsidiaries from time to time in rendering certain consulting and investment advisory services related to the Partnership’s (i) investment in an entity, (ii) merger, or (iii) acquisition of equity and/or assets of an entity (the “Transactions”) in exchange for a fee equal to 2.00% of the total equity invested by the Partnership pursuant to said Transactions (the “Transaction Fee”);

WHEREAS, Athlon Energy Inc., a Delaware corporation and holder of a majority of the limited partner interests of the Partnership, plans to commence an initial public offering of its common stock (the “IPO”) and has filed a registration statement on Form S-1;

WHEREAS, pursuant to Section 2 of the Services Agreement, the Services Agreement may be terminated at such time as is mutually agreed upon by the Partnership and Management VII; and

WHEREAS, pursuant to Section 4 of the Fee Agreement, the Fee Agreement may be terminated at such time as is mutually agreed upon by the Partnership and AGS.

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

Section 1.              Termination of Advisory Services and Services Agreement. Effective immediately upon consummation of the IPO (the “Closing”) and without any further action by the Partnership or Management VII, each of the Partnership and Management VII shall be released from any and all obligations and liabilities (other than pursuant to Section 5 of the Services Agreement relating to indemnification) with respect to provision of the Advisory Services and payment of the Consulting Fee or any other fees pursuant to the Services Agreement (other than (i) the Termination Fee (as defined below) and (ii) the Deferred Amount (as defined below)), and the Services Agreement (other than Section 5 thereof) shall have no further force or effect.

Section 2.              Payment of Termination Fee. In consideration of the termination provided in Section 1 above, the Partnership shall pay to Management VII, via wire transfer of immediately available funds payable immediately upon the Closing, a lump-sum amount equal to the sum of (i) $2.5 million (the “Termination Fee”) and (ii) the Deferred Amount. For the avoidance of doubt, each of the Partnership and Management VII agrees that the payment of the Termination Fee shall be deemed to be in full satisfaction of any and all obligations by the Partnership to terminate the Services Agreement. “Deferred Amount” means, as of the Closing, any unreimbursed expenses of Management VII owing and payable pursuant to Section 4(d) of the Services Agreement.

Section 3.              Waiver of Consulting Fee.  In consideration of the termination provided in Section 1 above and payment of the Termination Fee as provided in Section 2 above, Management VII hereby waives payment of the Consulting Fee for the quarter ended June 30, 2013.

Section 4.              Termination of Transaction Fee Agreement. Effective immediately upon the Closing and without any further action by the Partnership or AGS, each of the Partnership and AGS shall be released from any and all obligations and liabilities with respect to the provision of services rendered pursuant to a Transaction and payment of a Transaction Fee, and the Fee Agreement shall have no further force or effect.

Section 5.              Miscellaneous.

(a)           Effect of Agreement. Upon the payment of the Termination Fee and the Deferred Amount, the Services Agreement shall be terminated and of no further force and effect and no party shall have any further rights or obligations under the Services Agreement (other than Section 5 thereof). Upon Closing, the Fee Agreement shall be terminated and of no further force and effect and no party shall have any further rights or obligations under the Fee Agreement.

(b)           Entire Agreement; Amendments. This Agreement contains the entire understanding of the parties with respect to its subject matter and supersedes any and all prior agreements, and neither it nor any part of it may in any way be altered, amended, extended, waived, discharged or terminated except by a written agreement signed by each of the parties hereto.

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(c)           Assignment. This Agreement shall be binding upon and shall inure to the benefit of the successors and assigns of each of the Partnership, Management VII, and AGS.

(d)           Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York (without giving effect to principles of conflicts of laws).

(e)           Headings. Section headings are used for convenience only and shall in no way affect the construction of this Agreement.

(f)            Counterparts. This Agreement may be executed in counterparts, and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement.

[remainder of this page intentionally left blank]

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IN WITNESS WHEREOF, the undersigned have duly executed this Advisory Services and Transaction Fee Termination Agreement as of the date first above written.

ATHLON HOLDINGS LP
By:	/s/ Robert C. Reeves
	Name:	Robert C. Reeves
	Title:	President and Chief Executive Officer
APOLLO MANAGEMENT VII, L.P.
By:	AIF VII Management, LLC
	Its general partner
By:	/s/ Laurie D. Medley
	Name:	Laurie D. Medley
	Title:	Vice President
APOLLO GLOBAL SECURITIES, LLC
By:	/s/ Barry Cohen
	Name:	Barry Cohen
	Title:	President

[Signature page to Advisory Services and Transaction Fee Termination Agreement]

EX-10.11

Exhibit 10.11

Execution Version

AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT

OF

ATHLON HOLDINGS LP

A Delaware Limited Partnership

Dated as of August 7, 2013

AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
ATHLON HOLDINGS LP

TABLE OF CONTENTS

ARTICLE I DEFINITIONS	1
Section 1.1. Definitions	1
Section 1.2. Other Definitions	7
Section 1.3. Directly or Indirectly	7
Section 1.4. Construction	7
ARTICLE II ORGANIZATION	7
Section 2.1. Prior Organization and Recapitalization	7
Section 2.2. Name	8
Section 2.3. Registered Office; Registered Agent; Principal Office in the United States; Other Offices	8
Section 2.4. Purpose	8
Section 2.5. Foreign Qualification	8
Section 2.6. Term	8
ARTICLE III PARTNERS; PARTNERSHIP UNITS	9
Section 3.1. Partners	9
Section 3.2. Partnership Interests; Issuances of Additional Units	9
Section 3.3. Register	9
Section 3.4. Transfer of a Limited Partner Interest	10
Section 3.5. Substituted Limited Partners	11
Section 3.6. No Publicly Traded Partnership	12
Section 3.7. Splits, Distributions and Reclassifications	12
Section 3.8. Cancellation of Common Stock and Units	12
Section 3.9. Incentive Plans	12
Section 3.10. Offerings of Common Stock	13
ARTICLE IV CAPITAL COMMITMENTS	13
Section 4.1. Capital Accounts	13
Section 4.2. Return of Contributions	15
Section 4.3. Advances by Partners	15
ARTICLE V ALLOCATIONS AND DISTRIBUTIONS	15
Section 5.1. Allocations for Capital Account Purposes	15
Section 5.2. Allocations for Tax Purposes	18
Section 5.3. Distributions	20

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ARTICLE VI MANAGEMENT AND OPERATIONS OF THE PARTNERSHIP	20
Section 6.1. Management Generally	20
Section 6.2. Reserved	20
Section 6.3. The Board of Supervisors	20
Section 6.4. Officers	21
Section 6.5. Reserved	22
Section 6.6. Resolution of Conflicts of Interest by the Board of Supervisors	22
Section 6.7. Other Matters Concerning the Board of Supervisors	23
Section 6.8. Reliance by Third Parties	23
Section 6.9. Reserved	24
Section 6.10. Reserved	24
Section 6.11. Reserved	24
Section 6.12. Grant of Authority	24
Section 6.13. Costs and Expenses and Compensation	24
ARTICLE VII RIGHTS OF PARTNERS	25
Section 7.1. Access to Information	25
Section 7.2. Reserved	25
Section 7.3. Confidentiality	25
Section 7.4. Liability to Third Parties	26
ARTICLE VIII TAXES	26
Section 8.1. Tax Returns	26
Section 8.2. Tax Elections	26
Section 8.3. Tax Matters Partner	27
Section 8.4. Tax Matters	27
Section 8.5. Withholding Taxes	27
ARTICLE IX BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS	28
Section 9.1. Maintenance of Books	28
Section 9.2. Bank Accounts	28
ARTICLE X WITHDRAWAL OF GENERAL PARTNER	28
Section 10.1. Withdrawal of General Partner	28
ARTICLE XI DISSOLUTION, MERGER, LIQUIDATION AND TERMINATION	28
Section 11.1. Dissolution	28
Section 11.2. Merger or Sale of All of the Assets	29
Section 11.3. Liquidation and Termination	29
Section 11.4. Cancellation of Filing	30
ARTICLE XII GENERAL PROVISIONS	30

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Section 12.1. Offset	30
Section 12.2. Notices	30
Section 12.3. Entire Agreement; Supersedure	30
Section 12.4. Effect of Waiver or Consent	31
Section 12.5. Amendment or Modification	31
Section 12.6. Binding Effect	31
Section 12.7. Governing Law; Jurisdiction; Waiver of Jury Trial	32
Section 12.8. Severability	33
Section 12.9. Further Assurances	33
Section 12.10. Counterparts	33
Schedule A — Schedule of Limited Partners and Capital Contributions
Exhibit A — Adoption Agreement
Exhibit B — Adoption Agreement for Family Members
Exhibit C — Consent of Spouse

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AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
ATHLON HOLDINGS LP

This AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT (this “Agreement”) of ATHLON HOLDINGS LP (the “Partnership”) is entered into by and among Athlon Holdings GP LLC, as the sole general partner (the “General Partner”), and the Limited Partners (as defined below) set forth on Schedule A hereto, as of August 7, 2013 (the “Effective Date”).

WHEREAS, the General Partner has formed a limited partnership under the Act (as defined below) by filing the Certificate of Limited Partnership with the Secretary of State of the State of Delaware on July 22, 2011.

WHEREAS, on April 26, 2013, certain Limited Partners exchanged their Class A limited partner interests and Class B limited partner interests in the Partnership for shares of common stock, par value $0.01 per share (“Common Stock”) of Athlon Energy Inc., a Delaware corporation (“Athlon Energy”), whereupon (a) Athlon Energy became a Limited Partner and (b) the Limited Partners (other than Athlon Energy) continued to hold Class A limited partner interests.

WHEREAS, Athlon Energy intends to make an initial public offering (the “IPO”) of shares of its Common Stock.

WHEREAS, the General Partner and the Limited Partners desire to amend and restate the limited partnership agreement of the Partnership, dated as of July 22, 2011, pursuant to which the Limited Partners’ limited partner interests will convert into Units (as defined below) and such Limited Partners (other than Athlon Energy) shall have the right to exchange their Units for shares of Common Stock of Athlon Energy.

WHEREAS, in consideration of the mutual covenants, rights and obligations set forth in this Agreement, the benefits to be derived therefrom, and other good and valuable consideration, the receipt and the sufficiency of which each Partner acknowledges and confesses, the Partners agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1. Definitions.  As used in this Agreement, the following terms have the following meanings:

“Act” means the Delaware Revised Uniform Limited Partnership Act, 6 Del. Code §17-101 et seq., and any successor statute, as amended from time to time.

“Adjusted Capital Account” means the Capital Account maintained for each Partner, (i) increased by any amounts that such Partner is obligated to restore or is treated as obligated to restore under Treasury Regulation Sections 1.704-1(b)(2)(ii)(c) and (d), 1.704-2(g)(1) and 1.704-2(i)(5), including the amount of Partnership liabilities (other than Partner Nonrecourse Liabilities) allocable to such Partner under Section 752 of the Code with respect to which such Partner bears the Economic Risk of Loss and (ii) reduced by amounts described in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).

“Adoption Agreement” means an agreement of a newly admitted Limited Partner substantially in the form of Exhibit A.

“Adoption Agreement for Family Members” means an agreement of a Family Member of a Partner substantially in the form of Exhibit B.

“Affiliate” means, with respect to any Person, any other Person Controlling, Controlled by, or under common Control with such first Person.

“Agreed Allocation” means any allocation, other than a Required Allocation, of an item of income, gain, loss or deduction pursuant to the provisions of Section 5.1, including, without limitation, a Curative Allocation (if appropriate to the context in which the term “Agreed Allocation” is used).

“Agreement” means this Amended and Restated Limited Partnership Agreement, as the same may be amended, modified or supplemented from time to time.

“Assign” means to sell, transfer, assign, exchange pledge, hypothecate, mortgage or otherwise dispose of a Partnership Interest, whether voluntarily or by operation of law.  “Assignor,” “Assignee,” “Assigning” and “Assignment” have meanings corresponding to the foregoing.

“Athlon Energy” is defined in the recitals to this Agreement.

“Board of Supervisors” shall mean the board of supervisors of the Partnership composed of not less than two (2) members appointed by the General Partner and to whom the General Partner irrevocably delegates, and in which is vested, pursuant to Section 6.1, the power to manage the business and activities of the Partnership (other than the General Partner’s duties as “tax matters partner” under Section 8.3 hereof).  The Board of Supervisors shall constitute a committee within the meaning of Section 17-303(b)(7) of the Act.

“Book Value” means, with respect to any property, such property’s adjusted basis for federal income tax purposes, except (i) the Book Value of any property contributed by a Partner to the Partnership shall be the fair market value of such property as determined by the Board of Supervisors reduced (but not below zero) by all depreciation, amortization and cost recovery charged to the Capital Accounts in respect of such property, and (ii) the Book Values of any property adjusted pursuant to Sections 4.1(c)(i) or (ii) shall be so adjusted and thereafter shall be reduced (but not below zero) by all depreciation, amortization and cost recovery charged to the Partners’ Capital Accounts in respect of such property.  The Book Value of each oil and gas

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property of the Partnership shall be reduced by the Simulated Depletion attributable to such property.

“Capital Account” means the capital account maintained for a Partner pursuant to Section 4.1.

“Capital Contribution” means any contribution by a Limited Partner to the capital of the Partnership.

“Certificate” is defined in Section 2.1.

“Code” means the Internal Revenue Code of 1986 and any successor statute, as amended from time to time.

“Common Stock” is defined in the recitals to this Agreement.

“Control” (or variations thereof) means the possession, directly or indirectly, through one or more intermediaries, of the following:  (i) in the case of a corporation, more than 50% of the voting power of the outstanding voting securities thereof; (ii) in the case of a limited liability company, partnership, limited partnership or venture, the right to more than 50% of the distributions therefrom (including liquidating distributions); (iii) in the case of a trust or estate, more than 50% of the beneficial interest therein; (iv) in the case of any other Entity, more than 50% of the economic or beneficial interest therein; or (v) in the case of any Entity, the power or authority, through ownership of voting securities, by contract or otherwise, to direct the management, activities or policies of the Entity.

“Covered Matters” is defined in Section 12.7(b).

“Curative Allocation” means any allocation of an item of income, gain, deduction, loss or credit pursuant to the provisions of Section 5.1(b)(ix).

“Depreciation” means, for each taxable year, an amount equal to the depreciation, amortization or other cost recovery deduction allowable for Federal income tax purposes with respect to property for such taxable year, except that (i) with respect to any property the Book Value of which differs from its adjusted tax basis for Federal income tax purposes and which difference is being eliminated by use of the “remedial method” pursuant to Treasury Regulation Section 1.704-3(d), Depreciation for such taxable year shall be the amount of book basis recovered for such taxable year under the rules prescribed by Treasury Regulation Section 1.704-3(d)(2), and (ii) with respect to any other property the Book Value of which differs from its adjusted tax basis at the beginning of such taxable year, Depreciation shall be an amount which bears the same ratio to such beginning Book Value as the Federal income tax depreciation, amortization, or other cost recovery deduction for such taxable year bears to such beginning adjusted tax basis; provided that if the adjusted tax basis of any property at the beginning of such taxable year is zero, Depreciation with respect to such property shall be determined with reference to such beginning value using any reasonable method selected by the Board of Supervisors.

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“Dispose,” “Disposing” or “Disposition” means a sale, assignment, transfer, exchange, pledge, grant of a security interest, or other disposition or encumbrance, or the acts thereof.

“Economic Risk of Loss” has the meaning set forth in Treasury Regulation Section 1.752-2(a).

“Effective Date” is defined in the introductory paragraph of this Agreement.

“Entity” means any corporation, limited liability company, general partnership, limited partnership, venture, trust, business trust, estate or other entity.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Exchange Agreement” means the Exchange Agreement, dated as of the Effective Date, by and among Athlon Energy and the Limited Partners.

“Exchange Transaction” means the exchange of Units for shares of Common Stock, pursuant to, and in accordance with, the Exchange Agreement.

“Family Member” means, for any Partner who is an individual, a spouse, lineal ancestor, lineal descendant, legally adopted child, brother or sister of such Partner, or lineal descendant or legally adopted child of a brother or sister of such Partner.

“General Partner” means Athlon Holdings GP LLC, a Delaware limited liability company, and its successors and permitted assigns as general partner of the Partnership.  The General Partner has no obligation to make Capital Contributions or right to receive distributions under this Agreement.

“Incentive Plan” means the Athlon Energy Inc. 2013 Incentive Award Plan and any other equity incentive plan of Athlon Energy.

“IPO” is defined in the recitals to this Agreement.

“Legal Action” is defined in Section 12.7(b).

“Limited Partner” means any Person (i) executing this Agreement or any other writing evidencing the interest of such Person to become a limited partner of the Partnership, (ii) complying with the conditions for becoming a limited partner of the Partnership as set forth in this Agreement or any other writing and requesting (orally, in writing or by other action such as payment for a Partnership Interest) that the records of the Partnership reflect such admission, and (iii) hereafter admitted to the Partnership as a limited partner as herein provided; but shall not include any Person who has ceased to be a limited partner of the Partnership.

“Net Income” or “Net Loss” means, for each taxable year, an amount equal to the Partnership’s taxable income or loss, respectively, for such taxable year, determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss, or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments (without duplication):

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(i)            Any income of the Partnership that is exempt from federal income tax and not otherwise taken into account in computing Net Income or Net Loss pursuant to this definition of “Net Income” or “Net Loss” shall be added to such taxable income or loss;

(ii)           Any expenditures of the Partnership described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Net Income or Net Loss pursuant to this definition of “Net Income” and “Net Loss” shall be subtracted from such taxable income or loss;

(iii)          In the event the Book Value of any partnership property is adjusted pursuant to Section 4.1(c), the amount of any Unrealized Gain or Unrealized Loss attributable to such property shall be taken into account for purposes of computing Net Income or Net Loss;

(iv)          Gain or loss resulting from any disposition of property with respect to which gain or loss is recognized for Federal income tax purposes shall be computed by reference to the Book Value of the property disposed of, notwithstanding that the adjusted tax basis of such property differs from its Book Value;

(v)           In lieu of the depreciation, amortization, and other cost recovery deductions taken into account in computing such taxable income or loss, there shall be taken into account Depreciation and Simulated Depletion for such taxable year.

(vi)          To the extent an adjustment to the adjusted tax basis of any asset pursuant to Code Section 734(b) is required, pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital Account balances as a result of a distribution other than in liquidation of a Partner’s interest in the Partnership, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the basis of the asset) or an item of loss (if the adjustment decreases such basis) from the disposition of such asset and shall be taken into account for purposes of computing Net Income or Net Loss; and

(vii)         Any items that are allocated pursuant to Sections 5.1(b), 5.1(c) or 5.1(d) shall not be taken into account in computing Net Income and Net Loss.

“Officer” means any Person designated as an officer of the Partnership pursuant to Section 6.4.

“Partner” means any General Partner or Limited Partner.

“Partner Minimum Gain” has the meaning assigned to that term in Treasury Regulation Section 1.704-2(i).

“Partner Nonrecourse Debt” has the meaning assigned to that term in Treasury Regulation Section 1.704-2(b)(4).

“Partner Nonrecourse Deductions” has the meaning assigned to that term in Treasury Regulation Section 1.704-2(i)(1).

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“Partnership” is defined in the recitals to this Agreement.

“Partnership Interest” means all of the interest of a Partner in the Partnership, including, without limitation, rights to distributions (liquidating or otherwise), if any, allocations, information, and, if applicable, to consent or approve.

“Partnership Minimum Gain” has the meaning assigned to that term in Treasury Regulation Section 1.704-2(d).

“Partnership Nonrecourse Deductions” has the meaning assigned to that term in Treasury Regulation Section 1.704-2(c).

“Partnership Nonrecourse Liabilities” has the meaning assigned to the term “nonrecourse liability” in Treasury Regulation Section 1.752-1(a)(2).

“Person” means any natural person or Entity.

“Percentage Interest” means, with respect to any Partner, the quotient obtained by dividing the number of Units then owned by such Partner by the number of Units then owned by all Partners.

“Recapture Income” means the amount of gain realized upon the sale or other taxable disposition of a Partnership asset, if any, that is required to be treated as ordinary income under Sections 1245 or 1250 of the Code.

“Required Allocations” means any allocation (or limitation imposed on any allocation) of an item of income, gain, deduction or loss pursuant to Sections 5.1(b)(i), 5.1(b)(ii), 5.1(b)(iii), 5.1(b)(iv), 5.1(b)(v), 5.1(b)(vi) and 5.1(b)(viii), such allocations (or limitations thereon) being directly or indirectly required by the Treasury Regulations promulgated under Section 704(b) of the Code.

“Securities Act” means the Securities Act of 1933, as amended.

“Simulated Basis” shall mean the Book Value of any oil and gas property.

“Simulated Depletion” shall mean, with respect to each oil and gas property, a depletion allowance computed in accordance with federal income tax principles (as if the Book Value of the property were its adjusted tax basis) and in the manner specified in Treasury Regulation Section 1.704-1(b)(2)(iv)(k)(2).  For purposes of computing Simulated Depletion with respect to any property, the basis of such property shall be deemed to be the Book Value of such property, and in no event shall such allowance, in the aggregate, exceed such Book Value.

“Substituted Limited Partner” means a Person who is admitted as a Limited Partner to the Partnership pursuant to Section 3.5(b) in place of and with all the rights of a Limited Partner and who is shown as a Limited Partner on the books and records of the Partnership.

“Tax Receivable Agreement” means the Tax Receivable Agreement, dated as of the Effective Date, by and among Athlon Energy, the Partnership and the Limited Partners.

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“Treasury Regulations” or “Treas. Reg.” means U.S. Federal income tax regulations under the Code as such Treasury Regulations are amended from time to time.  All references herein to specific sections of the Treasury Regulations shall be deemed also to refer to any corresponding provisions of succeeding Treasury Regulations.

“Units” means units and any other interests in the Partnership denominated as “Units” that is established in accordance with this Agreement, which shall constitute limited partner interests in the Partnership as provided in this Agreement and under the Act, entitling the holders thereof to the relative rights, title and interests in the profits, losses, deductions and credits of the Partnership at any particular time as set forth in this Agreement, and any and all other benefits to which a holder thereof may be entitled as a Partner as provided in this Agreement, together with the obligations of such Partner to comply with all terms and provisions of this Agreement.

“Unrealized Gain” attributable to any item of Partnership property means, as of any date of determination, the excess, if any, of (i) the fair market value of such property as of such date (as determined by the Board of Supervisors in its good faith discretion using any reasonable method it may adopt) over (ii) the Book Value of such property as of such date (prior to any adjustment to be made pursuant to Section 4.1(c) as of such date).

“Unrealized Loss” attributable to any item of Partnership property means, as of any date of determination, the excess, if any, of (i) the Book Value of such property as of such date (prior to any adjustment to be made pursuant to Section 4.1(c) as of such date) over (ii) the fair market value of such property as of such date (as determined by the Board of Supervisors in its good faith discretion using any reasonable method it may adopt).

Section 1.2. Other Definitions.  Other terms defined herein have the meanings so given them.

Section 1.3. Directly or Indirectly.  Where any provision in this Agreement refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person, including actions taken by or on behalf of any Affiliate of such Person.

Section 1.4. Construction.  Whenever the context requires, the gender of all words used in this Agreement includes the masculine, feminine, and neuter.  All references to Articles and Sections refer to articles and sections of this Agreement, all references to “including” shall be construed as meaning “including without limitation” and all references to Exhibits are to Exhibits attached to this Agreement, each of which is made a part for all purposes.

ARTICLE II

ORGANIZATION

Section 2.1. Prior Organization and Recapitalization. The Partnership was organized as a Delaware limited partnership by the filing of a certificate of limited partnership in the office of the Secretary of State of the State of Delaware (the “Certificate”) on July 22, 2011.  On the date hereof, the Partnership Interest of each Partner will be exchanged for, and formally denominated as, the number of “Units” as set forth on Schedule A hereto.  On the closing of the IPO, Athlon

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Energy will contribute the net proceeds from the primary offering of newly issued shares of Common Stock in the IPO in exchange for a number of Units equal to the number of shares of Common Stock issued in such offering in accordance with Section 3.10, and the Board of Supervisors shall amend Schedule A to reflect the Units of each Partner after giving effect to the IPO.

Section 2.2. Name.  From July 22, 2011, the name of the Partnership is “Athlon Holdings LP,” and all Partnership business must be conducted in such name or such other names that comply with applicable law as the Board of Supervisors may select from time to time.

Section 2.3. Registered Office; Registered Agent; Principal Office in the United States; Other Offices.  The registered office of the Partnership in the State of Delaware shall be the initial registered office designated in the Certificate or such other office (which need not be a place of business of the Partnership) as the Board of Supervisors may designate from time to time in the manner provided by law.  The registered agent of the Partnership in the State of Delaware shall be the initial registered agent designated in the Certificate or such other Person or Persons as the Board of Supervisors may designate from time to time in the manner provided by law.  The registered office of the Partnership in the United States shall be at the place specified in the Certificate of Limited Partnership of the Partnership, or such other place(s) as the Board of Supervisors may designate from time to time.  The Partnership may have such other offices as the Board of Supervisors may determine appropriate.

Section 2.4. Purpose.  The purpose of the Partnership will be to engage directly and indirectly in the acquisition, exploration, exploitation and development of oil and natural gas assets, the acquisition of leases and other real property in connection therewith, and to engage in such other activities as are permitted hereby or are incidental or ancillary thereto as the Board of Supervisors deems necessary or advisable, all upon the terms and conditions set forth in this Agreement.

Section 2.5. Foreign Qualification.  Prior to conducting business in any jurisdiction other than the State of Delaware, the Board of Supervisors shall cause the Partnership to comply, to the extent procedures are available, with all requirements necessary to qualify the Partnership as a foreign limited partnership in such jurisdiction.  Each Partner shall execute, acknowledge, swear to and deliver all certificates and other instruments conforming to this Agreement that are necessary or appropriate to qualify, or, as appropriate, to continue or terminate such qualification of, the Partnership as a foreign limited partnership in all such jurisdictions in which the Partnership may conduct business.

Section 2.6. Term.  The term of the Partnership commenced upon the filing of the Certificate in accordance with the Act and shall continue until the dissolution of the Partnership in accordance with the provisions of Article XI. The existence of the Partnership as a separate legal entity shall continue until the cancellation of the Certificate as provided in the Act.

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ARTICLE III

PARTNERS; PARTNERSHIP UNITS

Section 3.1. Partners.  The Limited Partners and the General Partner are the sole Partners of the Partnership as of the date hereof.

Section 3.2. Partnership Interests; Issuances of Additional Units.  Interests in the Partnership shall be represented by Units or such other Partnership securities as the Board of Supervisors may establish in its sole discretion in accordance with the terms hereof.  In addition to the Units, the Board of Supervisors may create other equity interests in the Partnership or other Partnership securities from time to time in accordance with such procedures and subject to such conditions and restrictions and with such rights, obligations, powers, designations, preferences and other terms, which may be senior to the Units, any then existing or future equity interests in the Partnership or other Partnership securities, as the Board of Supervisors shall determine from time to time in its sole discretion, without the vote or consent of any Limited Partner or any other Person, including (i) the right of such Units, other equity interests or other Partnership securities to share in Net Income and Net Loss or items thereof; (ii) the right of such Units, other equity interests or other Partnership securities to share in Partnership distributions; (iii) the rights of such Units, other equity interests or other Partnership securities upon dissolution and liquidation of the Partnership; (iv) whether, and the terms and conditions upon which, the Partnership may or shall be required to redeem such Units or other equity interests or other Partnership securities (including sinking fund provisions); (v) whether such Units, other equity interests or other Partnership securities are issued with the privilege of conversion or exchange and, if so, the terms and conditions of such conversion or exchange; (vi) the terms and conditions upon which such Units, other equity interests or other Partnership securities will be issued, evidenced by certificates and assigned or transferred; (vii) the method for determining the total Percentage Interest as to such Units or other equity interests or other Partnership securities; (viii) the terms and conditions of the issuance of such Units, other equity interests or other Partnership securities; and (ix) the right, if any, of the holder of such Units, other equity interests or other Partnership securities to vote on Partnership matters, including matters relating to the relative designations, preferences, rights, powers and duties of such Units, other equity interests or other Partnership securities. The Board of Supervisors, without the vote or consent of any Limited Partner or any other Person, is authorized to amend this Agreement to reflect the issuance of Units or the creation of any other equity interests or other Partnership securities, and the admission of any Person as a Limited Partner which has received Units or other equity interests or Partnership securities, in accordance with Section 3.4.  All Units shall have identical rights in all respects as all other Units, except in each case as otherwise specified in this Agreement.

Section 3.3. Register.  The register of the Partnership shall be the definitive record of ownership of each Unit and all relevant information with respect to each Partner. Unless the Board of Supervisors shall determine otherwise, Units shall be uncertificated and recorded in the books and records of the Partnership.

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Section 3.4. Transfer of a Limited Partner Interest.

(a)           Except as part of a division of property under a court order, no Limited Partner may Assign all or any part of its Partnership Interests in the Partnership without the approval of the Board of Supervisors, acting in its sole discretion.

(b)           Notwithstanding clause (a) above, any Limited Partner who is an individual may transfer by way of gift all or any portion of its Partnership Interest to a Family Member of such Partner or to a trust or other entity whose sole and exclusive beneficiaries are such Partner and/or Family Members of such Partner, but only to the extent (A) such transferee executes and delivers to the Partnership an Adoption Agreement for Family Members in the form attached as Exhibit B hereto, and (B) the Board of Supervisors consents to such transfer, which consent shall not be unreasonably withheld.

(c)           Notwithstanding clause (a) above, (i) each Limited Partner (other than Athlon Energy) may transfer its Units or any portion thereof for shares of Common Stock in an Exchange Transaction.

(d)           The Limited Partners agree, upon request of the Board of Supervisors, to execute such certificates or other documents and perform such acts as the Board of Supervisors reasonably deems appropriate to preserve the status of the Partnership as a limited partnership, after the completion of any permitted transfer of an interest in the Partnership, under the laws of the State of Delaware.

(e)           All Net Income and Net Loss of the Partnership attributable to any Partnership Interest acquired by reason of any transfer of such Partnership Interest shall be allocated among the transferor and transferee as if the books of the Partnership were closed on the date of the transfer and (i) in respect of the period ending on or before the date of the transfer, to the transferor and (ii) in respect of the period beginning the day after the date of transfer, to the transferee. All distributions on or before the date of such transfer shall be made to transferor, and all distributions thereafter shall be made to the transferee. The effective date of any transfer permitted under this Agreement shall be the close of business on the day the Partnership is notified of the Transfer.

(f)            The death, retirement, incompetence, bankruptcy, insolvency, liquidation, removal, expulsion or withdrawal of a Limited Partner shall not cause (in and of itself) a dissolution of the Partnership, but the rights of such a Limited Partner to share in the Net Income and Net Loss of the Partnership, to receive distributions and to assign its Partnership Interest pursuant to this Section 3.4, on the happening of such an event, shall devolve on its beneficiary or other successor, executor, administrator, guardian or other legal representative for the purpose of settling its estate or administering its property, and the Partnership shall continue as a limited partnership. Such successor or personal representative, however, shall become a Substituted Limited Partner only upon compliance with the requirements of Article III hereof with respect to a transferee of a Partnership Interest. The estate of a bankrupt Limited Partner shall be liable for all the obligations of the Limited Partner.

(g)           Notwithstanding any contrary provision in this Agreement, in no event may any transfer of a Unit or other Partnership Interest be made by any Limited Partner or assignee or transferee if: (i) such transfer is made to any Person who lacks the legal right, power

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or capacity to own such Unit or other Partnership Interest; or (ii) such transfer would require the registration of such transferred Unit or other Partnership Interest pursuant to any applicable United States federal or state securities laws (including, without limitation, the Securities Act or the Exchange Act) or other foreign securities laws or would constitute a non-exempt distribution pursuant to applicable state securities laws.

(h)           Spouses.

(i)            As a condition to becoming or remaining a Limited Partner, each Limited Partner that is an individual and is or becomes married, shall cause his or her spouse to execute an agreement in the form of Exhibit C hereof.  If an existing Limited Partner fails to have his or her spouse execute such agreement the Limited Partner shall thereafter lose all their rights hereunder except for the rights of a mere assignee and the Board of Supervisors shall thereafter have all voting rights with respect to his or her interest.

(ii)           Any Partnership Interest held by an individual who has failed to get his or her spouse to execute an agreement in the form of Exhibit C and any Partnership Interest held by a person who is an Assignee other than an approved Family Member (currently in compliance with all conditions of transfer to such Family Member) shall be subject to the option of the Partnership to acquire the Partnership Interest at any time, in whole not in part, for a cash payment in the amount of its fair market value as determined by the Board of Supervisors in its sole discretion.

(iii)          In the event of a property settlement or separation agreement between a Partner and his or her spouse, such Partner shall use his best efforts to assign to his or her spouse only the right to share in profits and losses, to receive distributions, and to receive allocations of income, gain, loss, deduction or credit or similar item to which the Partner was entitled, to the extent assigned.

(iv)          If a spouse or former spouse of a Partner acquires a Partnership Interest in the Partnership as a result of any such proposed settlement or separation agreement, such spouse or former spouse hereby grants, as evidenced by Exhibit C, an irrevocable power of attorney (which shall be coupled with an interest) to the original Partner who held such Partnership Interest to vote or to give or withhold such approval as such original Partner shall himself or herself vote or approve with respect to such matter and without the necessity of the taking of any action by any such spouse or former spouse.  Such power of attorney shall not be affected by the subsequent disability or incapacity of the spouse or former spouse granting such power of attorney.  Furthermore, such spouse or former spouse agrees that the Partnership shall have the option at any time to purchase all, but not less than all, of such Partnership Interest for its fair market value as determined by the Board of Supervisors in its sole discretion.

Section 3.5. Substituted Limited Partners.

(a)           Unless an Assignee becomes a Substituted Limited Partner in accordance with Section 3.5(b), such Assignee shall not be entitled to any of the rights granted to a Limited

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Partner hereunder, other than the right to receive allocations of income, gain, loss, deduction, credit and similar items and distributions to which the Assigning Limited Partner would otherwise be entitled, to the extent such items are Assigned.

(b)           An Assignee of all or part of a Partnership Interest shall become a Substituted Limited Partner entitled to all the rights of a Limited Partner (relating to the Assigned portion of the Partnership Interest), respectively, if, and only if, (i) the Assigning Limited Partner requests the Assignee be granted such right, (ii) the Board of Supervisors determines to grant such rights, (iii) the Assignee has paid any fees and reimbursed the Partnership for any expenses paid by the Partnership in connection with such transfer and assignment and (iii) the Assignee executes and delivers such instruments (including Exhibit A or Exhibit B, as applicable) in form and substance satisfactory to the Board of Supervisors, as the Board of Supervisors may deem necessary or desirable to effect such substitution.  The Partnership shall be entitled to treat the record owner of any Partnership Interest as the absolute owner thereof in all respects and shall incur no liability for distributions of cash or other property made to such owner until such time as an Assignment of such interest that complies with the terms of this Agreement has been effected.

Section 3.6. No Publicly Traded Partnership.  Notwithstanding the foregoing, without the prior consent of the Board of Supervisors, no Partner shall Dispose of all or any part of its Partnership Interest in such a manner that, after the Disposition, the Partnership would become taxable as a corporation for U.S. federal income tax purposes.

Section 3.7. Splits, Distributions and Reclassifications.  The Partnership shall not in any manner subdivide (by any Unit split, Unit distribution, reclassification, recapitalization or otherwise) or combine (by reverse Unit split, reclassification, recapitalization or otherwise) the outstanding Units unless an identical event is occurring with respect to the Common Stock, in which event the Units shall be subdivided or combined concurrently with and in the same manner as the Common Stock.

Section 3.8. Cancellation of Common Stock and Units.  At any time a share of Common Stock is redeemed, repurchased, acquired, cancelled or terminated by Athlon Energy, one (1) Unit registered in the name of Athlon Energy will automatically be cancelled for no consideration by the Partnership so that the aggregate number of Units held by Athlon Energy at all times equals the number of shares of Common Stock outstanding.

Section 3.9. Incentive Plans.  At any time Athlon Energy issues a share of Common Stock pursuant to an Incentive Plan (whether pursuant to the exercise of a stock option or the grant of a restricted share award or otherwise, provided however that the issuance of a share of Common Stock in connection with a restricted share award shall not be deemed to occur for purposes of this Section 3.9 until such share becomes vested), the following shall occur: (a) Athlon Energy shall be deemed to contribute to the capital of the Partnership an amount of cash equal to the current per share market price of a share of Common Stock on the date such share is issued (or, if earlier, the date the related award under the Incentive Plan is exercised) and the Capital Account of Athlon Energy shall be adjusted accordingly; (b) the Partnership shall be deemed to purchase from Athlon Energy a share of Common Stock for an amount of cash equal to the amount of cash deemed contributed by Athlon Energy to the Partnership in clause (a)

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above (and such share is deemed delivered to its owner under the Incentive Plan); (c) the net proceeds (including the amount of any payments made on a loan with respect to an Incentive Plan award) received by Athlon Energy with respect to such share, if any, shall be concurrently transferred and paid to the Partnership (and such net proceeds so transferred shall not constitute a capital contribution); and (d) the Partnership shall issue to Athlon Energy one (1) Unit registered in the name of Athlon Energy.

Section 3.10. Offerings of Common Stock.  At any time Athlon Energy issues a share of Common Stock other than pursuant to an Incentive Plan or an Exchange Transaction, the net proceeds or other consideration received by Athlon Energy with respect to such share, if any, shall be concurrently contributed to the Partnership and the Partnership shall issue to Athlon Energy one (1) Unit registered in the name of Athlon Energy; provided, that unless otherwise determined by the Board of Supervisors in its sole discretion, this Section 3.10 shall not apply to any shares of Common Stock issued by Athlon Energy in connection with (a) any direct or indirect business combination or acquisition transaction involving Athlon Energy, (b) any joint venture or strategic partnership entered into by Athlon Energy or (c) to financial institutions, commercial lenders, brokers/finders or any similar party, or to respective designees, in connection with the incurrence or guarantee of indebtedness by Athlon Energy or any of its subsidiaries.  In the event of an issuance of Common Stock, and the contribution of the net proceeds or other consideration from such issuance to the Partnership, the Partnership shall pay Athlon Energy’s expenses associated with such issuance, including any underwriting discounts or commissions (it being understood that payment of some or all of such expenses may be made by Athlon Energy on behalf of the Partnership out of the gross proceeds of such issuance prior to the contribution of such net proceeds or other consideration by Athlon Energy to the Partnership).

ARTICLE IV

CAPITAL COMMITMENTS

Section 4.1. Capital Accounts.

(a)           A Capital Account shall be established and maintained for each Partner in accordance with the provisions of Treasury Regulations Section 1.704-1(b)(2)(iv).  Each Partner has made a capital contribution to the Partnership and owns Units in the amount and designation set forth for such Partner on Schedule A, as the same may be amended from time to time by the Board of Supervisors to the extent necessary to reflect accurately sales, exchanges, conversions or other Transfers, redemptions, capital contributions, the issuance of additional Units or similar events having an effect on a Partner’s ownership of Units.  Except as provided by laws or in Sections 3.10, 8.5 and 11.3, the Partners shall have no obligations or right to make any additional capital contributions or loans to the Partnership.

(b)           Such Capital Account shall be (i) increased by (A) the amount of money contributed by that Partner to the Partnership, (B) the fair market value as of the date of contribution (as determined by the Board of Supervisors) of property contributed by that Partner to the Partnership (net of liabilities secured by the contributed property that the Partnership is considered to assume or take subject to under Code Section 752) and (C) all items of Partnership

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income and gain (including, without limitation, income and gain exempt from tax) and allocated with respect to such Partnership Interest pursuant to Section 5.1, and (ii) decreased by (A) the amount of money distributed to that Partner by the Partnership, (B) the fair market value as of the date of distribution (as determined by the Board of Supervisors) of property distributed to that Partner by the Partnership (net of liabilities secured by the distributed property that the Partner is considered to assume or take subject to under Code Section 752), and (C) all items of Partnership deduction and loss and allocated with respect to such Partnership Interest pursuant to Section 5.1.  A transferee of a Partnership Interest shall succeed to a pro rata portion of the Capital Account of the transferor relating to the Partnership Interest so transferred.

(c)           The Book Value of Partnership property and the Capital Accounts of the Partners shall be adjusted in the following circumstances:

(i)            Consistent with the provisions of Treasury Regulations Section 1.704-1(b)(2)(iv)(f), upon (A) an issuance of additional Partnership Interests as consideration for cash or contributed property (other than a de minimis amount) following the Effective Date, (B) the distribution by the Partnership to a Partner of more than a de minimis amount of property as consideration for a Partnership Interest following the Effective Date or (C) the issuance of additional Partnership Interests (other than a de minimis interest) as consideration for the provision of services to or for the benefit of the Partnership by an existing Partner acting in a partner capacity, or by a new Partner acting in a partner capacity or in anticipation of being a Partner, the Capital Accounts of all Partners and the Book Value of each Partnership property immediately prior to such issuance shall be adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss attributable to such Partnership property, as if such Unrealized Gain or Unrealized Loss had been recognized on an actual sale of each such property immediately prior to such issuance or distribution and had been allocated to the Partners at such time pursuant to Section 5.1; provided, that adjustment pursuant to clauses (A), (B) and (C) above shall be made only if the Board of Supervisors reasonably determines that such adjustments are necessary or appropriate to reflect the relative economic interests of the Partners.

(ii)           In accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(f), immediately prior to any actual or deemed distribution to a Partner of any Partnership property following the Effective Date (other than a distribution solely of cash that is not in redemption or retirement of a Partnership Interest), the Capital Accounts of all Partners and the Book Value of such Partnership property shall be adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss attributable to such Partnership property, as if such Unrealized Gain or Unrealized Loss had been recognized in a sale of such property immediately prior to such distribution for an amount equal to its fair market value, and had been allocated to the Partners, at such time, pursuant to Section 5.1.

(d)           Capital Accounts shall be adjusted, in a manner consistent with this Section 4.1, to reflect any adjustments in items of the Partnership’s income, gain, loss or deduction that result from amended returns filed by the Partnership or pursuant to an agreement by the Partnership with the Internal Revenue Service or a final court decision.

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Section 4.2. Return of Contributions.  An unrepaid Capital Contribution is not a liability of the Partnership or of any other Partner.  A Partner is not required to contribute or to lend any cash or property to the Partnership to enable the Partnership to return any other Partner’s Capital Contributions.

Section 4.3. Advances by Partners.  If the Partnership does not have sufficient cash to pay its obligations, with the approval of the Board of Supervisors, the General Partner or any of the Limited Partners may (but shall have no obligation to) advance all or part of the needed funds to or on behalf of the Partnership, which advance shall constitute a loan from such Partner to the Partnership, shall bear interest at the rate determined by the Board of Supervisors in this sole discretion from the date of the advance until the date of payment, and shall not be a Capital Contribution.  Any advance made by the General Partner or any of the Limited Partners shall be repaid by the Partnership prior to any distributions under Sections 5.3.

ARTICLE V

ALLOCATIONS AND DISTRIBUTIONS

Section 5.1. Allocations for Capital Account Purposes.  For purposes of maintaining the Capital Accounts and in determining the rights of the Partners among themselves, the Partnership’s items of income, gain, loss and deduction shall be allocated among the Partners in each taxable year (or portion thereof) as provided hereinbelow.

(a)           Net Income and Net Loss.  After giving effect to the special allocations set forth in Section 5.1(b), Net Income and Net Loss for each taxable period (and all items of income, gain, loss and deduction taken into account in computing Net Income or Net Loss for such taxable period) shall be allocated to the Partners as follows:

(i)            Net Income for each taxable period shall be allocated as follows:

(A)          First, to the General Partner until the aggregate Net Income allocated to the General Partner pursuant to this Section 5.1(a)(i)(A) for the current and each prior taxable year is equal to the Net Loss allocated to the General Partner pursuant to Section 5.1(a)(ii)(B) during all prior periods; and

(B)          Second, to the Partners in accordance with their Percentage Interests.

(ii)           Net Loss for each taxable period shall be allocated as follows:

(A)          First, to the Partners in accordance with their Percentage Interests until the Adjusted Capital Account of each Partner is reduced to zero; and

(B)          Second, 100% to the General Partner.

(b)           Special Allocations.  Notwithstanding any other provision of this Section 5.1, the following special allocations shall be made for such taxable period:

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(i)            Partnership Minimum Gain Chargeback.  Notwithstanding any other provision of this Section 5.1, if there is a net decrease in Partnership Minimum Gain during any Partnership taxable period, each Partner shall be allocated items of Partnership income and gain for such period (and, if necessary, subsequent periods) in the manner and amounts provided in Treasury Regulations Sections 1.704-2(f)(6), 1.704-2(g)(2) and 1.704-2(j)(2)(i).  For purposes of this Section 5.1(b), each Partner’s Adjusted Capital Account balance shall be determined, and the allocation of income or gain required hereunder shall be effected, prior to the application of any other allocations pursuant to this Section 5.1(b) with respect to such taxable period (other than allocations pursuant to Sections 5.1(b)(v) and 5.1(b)(vi)).  This Section 5.1(b)(i) is intended to comply with the “partnership minimum gain chargeback” requirement in Treasury Regulations Section 1.704-2(f) and shall be interpreted consistently therewith

(ii)           Chargeback of Partner Nonrecourse Debt Minimum Gain.  Notwithstanding the other provisions of this Section 5.1 (other than Section 5.1(b)(i)), except as provided in Treasury Regulations Section 1.704-2(i)(4), if there is a net decrease in Partner Minimum Gain during any Partnership taxable period, any Partner with a share of such Partner Minimum Gain at the beginning of such taxable period shall be allocated items of Partnership income and gain for such period (and, if necessary, subsequent periods) in the manner and amounts provided in Treasury Regulations Sections 1.704-2(i)(4) and 1.704-2(j)(2)(ii).  For purposes of this Section 5.1(b), each Partner’s Adjusted Capital Account balance shall be determined, and the allocation of income or gain required hereunder shall be effected, prior to the application of any other allocations pursuant to this Section 5.1(b), other than Sections 5.1(b)(i), 5.1(b)(v) and 5.1(b)(vi), with respect to such taxable period.  This Section 5.1(b)(ii) is intended to comply with the chargeback of items of income and gain requirement in Treasury Regulations Section 1.704-2(i)(4) and shall be interpreted consistently therewith.

(iii)          Qualified Income Offset.  In the event any Partner unexpectedly receives any adjustments, allocations or distributions described in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), items of Partnership income and gain shall be specially allocated to such Partner in an amount and manner sufficient to eliminate, to the extent required by the Treasury Regulations promulgated under Section 704(b) of the Code, the deficit balance, if any, in its Adjusted Capital Account created by such adjustments, allocations or distributions as quickly as possible unless such deficit balance is otherwise eliminated pursuant to Sections 5.1(b)(i) or (ii); provided that an allocation pursuant to this Section 5.1(b)(iii) shall be made only if and to the extent that such Partner would have a deficit balance in its Adjusted Capital Account after all other allocations provided for in this Section 5.1 have been tentatively made as if this Section 5.1(b)(iii) were not in this Agreement.

(iv)          Gross Income Allocations.  In the event any Partner has a deficit balance in its Adjusted Capital Account (determined without regard to Subdivision (ii) of the definition of Adjusted Capital Account) at the end of any Partnership taxable period, such Partner shall be specially allocated items of Partnership gross income and gain in the amount of such excess as quickly as possible; provided, that an allocation pursuant to this Section 5.1(b)(iv) shall be made only if and to the extent that such Partner would have a

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deficit balance in its Adjusted Capital Account (as so determined) after all other allocations provided for in this Section 5.1 have been tentatively made as if this Section 5.1(b)(iv) and Section 5.1(b)(iii) were not in this Agreement.

(v)           Partnership Nonrecourse Deductions.  Partnership Nonrecourse Deductions for any taxable period shall be allocated to the Partners in accordance with their respective Percentage Interests.

(vi)          Partner Nonrecourse Deductions.  Partner Nonrecourse Deductions for any taxable period shall be allocated 100% to the Partner that bears the Economic Risk of Loss with respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable in accordance with Treasury Regulations Section 1.704-2(i).  If more than one Partner bears the Economic Risk of Loss with respect to a Partner Nonrecourse Debt, such Partner Nonrecourse Deductions attributable thereto shall be allocated between or among such Partners in accordance with the ratios in which they share such Economic Risk of Loss.

(vii)         Partnership Nonrecourse Liabilities.  For purposes of Treasury Regulations Section 1.752-3(a)(3), Partnership Nonrecourse Liabilities shall be allocated among the Partners in accordance with their respective Percentage Interests.

(viii)        Limitations on Deductions.  Notwithstanding the provisions of paragraph (a) above, no allocation of Net Loss or item of loss or deduction (other than an allocation of Partner Nonrecourse Deductions or Partnership Nonrecourse Deductions) shall be made to a Limited Partner to the extent such allocation would cause or increase a deficit balance in such Partner’s capital account.  Such loss or deduction instead shall be allocated to the General Partner.  For purposes of this paragraph the capital accounts of the Partners shall be reduced for any adjustment, allocation or distribution described in Treas. Reg. § 1.704-1(b)(2)(ii)(d)(4), (5) or (6).

(ix)          Curative Allocation

(A)          The Required Allocations shall be taken into account in making the Agreed Allocations so that, to the extent possible, the net amount of items of income, gain, loss and deduction allocated to each Partner pursuant to the Required Allocations and the Agreed Allocations, together, shall be equal to the net amount of such items that would have been allocated to each such Partner under the Agreed Allocations had the Required Allocations and the related Curative Allocation not otherwise been provided in this Section 5.1.  Allocations pursuant to this Section 5.1(b)(ix)(A) shall only be made with respect to Required Allocations to the extent the Board of Supervisors reasonably determines that such allocations will otherwise be inconsistent with the economic agreement among the Partners.

(B)          The Board of Supervisors shall have reasonable discretion, with respect to each taxable period, to (1) apply the provisions of Section 5.1(b)(ix)(A) in whatever order is most likely to minimize the economic

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distortions that might otherwise result from the Required Allocations and (2) divide all allocations pursuant to Section 5.1(b)(ix)(A) among the Partners in a manner that is likely to minimize such economic distortions.

(x)           Code Section 754 Adjustments.  To the extent an adjustment to the adjusted tax basis of any Partnership asset pursuant to Section 734(b) or 743(b) of the Code is required, pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset), or loss (if the adjustment decreases such basis), and such item of gain or loss shall be specially allocated to the Partners in a manner consistent with the manner in which their Capital Accounts are required to be adjusted pursuant to such Section of the Treasury Regulations.

(c)           Simulated Depletion with respect to each separate oil and gas property shall be allocated to the Partners in the same proportion that the Partners (or their predecessors in interest) were allocated the adjusted tax basis of such property under Section 5.2(b).

(d)           Special Rules.  It is intended that (i) the Capital Accounts be maintained at all times in accordance with Section 704 of the Code and applicable Regulations, (ii) the Capital Accounts shall be increased or decreased by any items required by the Regulations under section 704(b) of the Code to increase or decrease, respectively, a Partner’s Capital Account, and (iii) the provisions hereof relating to the Capital Accounts be interpreted in a manner consistent therewith.  The Board of Supervisors shall be authorized to make appropriate amendments to the allocations of items pursuant to this Section 5.1 if necessary in order to comply with Section 704 of the Code or applicable Regulations thereunder or to effect the terms, purposes and conditions of this Agreement; provided, however, that no such change shall have a material adverse effect upon the amount distributable to any Partner hereunder.

Section 5.2. Allocations for Tax Purposes.

(a)           Except as otherwise provided herein, for federal income tax purposes, (i) each item of income, gain, loss and deduction shall be allocated among the Partners in the same manner as its correlative item of “book” income, gain, loss or deduction is allocated pursuant to Section 5.1, and (ii) each tax credit shall be allocated to the Partners in the same manner as the receipt or expenditure giving rise to such credit is allocated pursuant to Section 5.1.

(b)           The deduction for depletion with respect to each separate oil and gas property (as defined in Section 614 of the Code) shall, in accordance with Section 613A(c)(7)(D) of the Code, be computed for federal income tax purposes separately by the Partners rather than the Partnership.  Except as provided in Section 5.2(d), for purposes of such computation, the proportionate share of the adjusted tax basis of each oil and gas property shall be allocated among the Partners in accordance with their Percentage Interests.  Each Partner, with the assistance of the Board of Supervisors, shall separately keep records of its share of the adjusted tax basis in each separate oil and gas property, adjust such share of the adjusted tax basis for any cost or percentage depletion allowable with respect to such property and use such adjusted tax basis in the computation of its cost depletion or in the computation of its gain or loss on the

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disposition of such property by the Partnership.  Upon the request of the Board of Supervisors, each Limited Partner shall advise the Board of Supervisors of its adjusted tax basis in each separate oil and gas property and any depletion computed with respect thereto, both as computed in accordance with the provisions of this subsection.  The Board of Supervisors may rely on such information and, if it is not provided by the Limited Partner, may make such reasonable assumptions as it shall determine with respect thereto.

(c)           Except as provided in Section 5.2(d), for the purposes of the separate computation of gain or loss by each Partner on the sale or disposition of each separate oil and gas property (as defined in Section 614 of the Code), the Partnership’s allocable share of the “amount realized” (as such term is defined in Section 1001(b) of the Code) from such sale or disposition shall be allocated for federal income tax purposes among the Partners as follows:

(i)            first, to the extent such amount realized constitutes a recovery of the Simulated Basis of the property, to the Partners in the same percentages as the depletable basis of such property was allocated to the Partners pursuant to Section 5.2(b);

(ii)           second, the remainder of such amount realized, if any, to the Partners so that, to the maximum extent possible, the total amount realized allocated to each Partner under this Section 5.2(c) will equal such Partner’s share of the proceeds derived by the Partnership from such sale or disposition.

(d)           In accordance with Section 704(c) of the Code and the applicable Treasury Regulations thereunder, income, gain, loss, and deduction with respect to any property contributed to the Partnership shall, solely for tax purposes, be allocated among the Partners so as to take account of any variation between the adjusted basis of such property to the Partnership for federal income tax purposes and its initial Book Value.  In the event the Book Value of any property is adjusted pursuant to Section 4.1(c), subsequent allocations of income, gain, loss, and deduction with respect to such property shall take account of any variation between the adjusted basis of such property for federal income tax purposes and its Book Value in the same manner as under Code Section 704(c) and the applicable Regulations thereunder.  For purposes of this applying this Section 5.2(d), the Board of Supervisors shall apply any reasonable method under Treasury Regulation Section 1.704-3.

(e)           Any gain allocated to the Partners upon the sale or other taxable disposition of any Partnership asset shall, to the extent possible, after taking into account other required allocations of gain pursuant to this Section 5.2, be characterized as Recapture Income in the same proportions and to the same extent as such Partners (or their predecessors in interest) have been allocated any deductions directly or indirectly giving rise to the treatment of such gains as Recapture Income.

(f)            All items of income, gain, loss, deduction and credit recognized by the Partnership for federal income tax purposes and allocated to the Partners in accordance with the provisions hereof shall be determined without regard to any election under Section 754 of the Code which may be made by the Partnership; provided, however, that such allocations, once made, shall be adjusted as necessary or appropriate to take into account those adjustments permitted or required by Sections 734 and 743 of the Code.

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Section 5.3. Distributions.  The Partnership will distribute such amounts as may be determined from time-to-time by the Board of Supervisors in its sole discretion.  Notwithstanding the foregoing, the Partnership shall make quarterly distributions of available cash, if any, to the Limited Partners in such amounts as the Board of Supervisors determines in its sole discretion are sufficient to satisfy each Limited Partner’s projected deemed income tax liability with respect to its Partnership Interests.  The Board of Supervisors will make its determination as to each Partner individually.

ARTICLE VI

MANAGEMENT AND OPERATIONS OF THE PARTNERSHIP

Section 6.1. Management Generally.  In order to enable the Board of Supervisors to manage the business and affairs of the Partnership, the General Partner hereby irrevocably delegates to the Board of Supervisors all management powers over the business and affairs of the Partnership that it may now or hereafter possess under applicable law (other than its obligations as “tax matters partner” under Section 8.3 of this Agreement) as permitted under Section 17-403(c) of the Act.  The General Partner further agrees to take any and all action necessary and appropriate, in the sole discretion of the Board of Supervisors, to effect any duly authorized actions by the Board of Supervisors or any Officer, including executing or filing any agreements, instruments or certificates, delivering all documents, providing all information and taking or refraining from taking action as may be necessary or appropriate to achieve all the effective delegation of power described in this Section.  Each of the Partners and Assignees and each Person who may acquire an interest in a Partnership Interest hereby approves, consents to, ratifies and confirms such delegation.  The delegation by the General Partner to the Board of Supervisors of management powers over the business and affairs of the Partnership pursuant to the provisions of this Agreement shall not cause the General Partner to cease to be a general partner of the Partnership nor shall it cause the Board of Supervisors or any member thereof to be a general partner of the Partnership or to have or be subject to the liabilities of a general partner of the Partnership.  Except as provided in Section 8.3 of this Agreement relating to the General Partner’s duties as “tax matters partner” and except as otherwise provided in this Agreement, the management of the Partnership shall be vested exclusively in the Board of Supervisors and, subject to the direction of the Board of Supervisors, the Officers.  Neither the General Partner nor any of the Limited Partners in their capacities as such shall have any part in the management of the Partnership (except, with respect to the General Partner, as provided in Section 8.3 of this Agreement relating to its duties as “tax matters partner”) and shall have no authority or right to act on behalf of the Partnership or deal with any third parties on behalf of the Partnership in connection with any matter, except as requested or authorized by the Board of Supervisors.

Section 6.2. Reserved.

Section 6.3. The Board of Supervisors.

(a)           Composition.  The Board of Supervisors shall consist of not less than two (2) individuals appointed by the General Partner.  Members of the Board of Supervisors shall

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serve until they resign or are removed by the General Partner.  Any vacancies shall be filled by appointment by the General Partner.

(b)           Voting; Quorum.  Each member of the Board of Supervisors shall have one vote.  Unless otherwise specified in this Agreement, the vote of the majority of the members of the Board of Supervisors present at a meeting in which a quorum is present shall be the act of the Board of Supervisors.  A majority of the number of members of the Board of Supervisors then in office shall constitute a quorum for the transaction of business at any meeting of the Board of Supervisors, but if less than a quorum is present at a meeting, a majority of the members of the Board of Supervisors present at such meeting may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.

(c)           Meetings.  Regular meetings of the Board of Supervisors shall be held at such times and places as shall be designated from time to time by resolution of the Board of Supervisors.  Special meetings of the Board of Supervisors may be called by request of any member of the Board of Supervisors or by the General Partner.  Members of the Board of Supervisors may participate in and hold a meeting by means of conference telephone, video conference or similar communications equipment by means of which all Supervisors participating in the meeting can hear each other, and participation in such meetings shall constitute presence in person at the meeting.

(d)           Proxies.  A member of the Board of Supervisors may vote at any meeting by a written proxy executed by such member and delivered to another member.  A proxy shall be revocable unless it is stated to be irrevocable.

(e)           Action Without a Meeting.  Any action required or permitted to be taken at a meeting of the Board of Supervisors, may be taken without a meeting and without a vote if a consent or consents in writing, setting forth the action so taken, is signed by members of the Board of Supervisors having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all members of the Board of Supervisors entitled to vote thereon were present and voted.

(f)            Compensation.  Members of the Board of Supervisors shall receive no compensation.

Section 6.4. Officers.

(a)           Generally.  The Board of Supervisors shall appoint such agents of the Partnership, referred to as “Officers” of the Partnership, as are desired.  An Officer may but need not be a member of the Board of Supervisors.  Any number of offices may be held by the same person.  The election or appointment of an Officer shall not of itself create contractual rights.

(b)           Authority.  Officers shall have the powers and duties defined in the resolutions appointing them including, to the extent so provided, the authority to exercise the power of the Board of Supervisors in the management of the Partnership.

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(c)           Removal.  The Board of Supervisors may, in its sole discretion, remove any Officer with or without cause at any time.

(d)           Delegation of Authority.  Unless otherwise provided by resolution of the Board of Supervisors, no Officer shall have the power or authority to delegate to any Person such Officer’s rights and powers as an Officer to manage the business and affairs of the Partnership.

(e)           Compensation.  The Officers shall receive such compensation for their services as may be approved by the Board of Supervisors.

(f)            Powers of Attorney.  The Partnership may grant powers of attorney or other authority as appropriate to establish and evidence the authority of the Officers and other Persons.

Section 6.5. Reserved.

Section 6.6. Resolution of Conflicts of Interest by the Board of Supervisors.

(a)           Unless otherwise expressly provided in this Agreement, whenever a potential conflict of interest exists or arises between the General Partner or any of its Affiliates, or any Officer or member of the Board of Supervisors, on the one hand, and the Partnership, any Partner or any Assignee, on the other hand, any resolution or course of action in respect of such conflict of interest shall be permitted and deemed approved by all Partners, and shall not constitute a breach of this Agreement, of any agreement contemplated herein, or of any standard of care or duty stated or implied by law or equity, if the resolution or course of action is or, by operation of this Agreement is deemed to be, fair and reasonable to the Partnership.  Any conflict of interest and any resolution of such conflict of interest shall be conclusively deemed fair and reasonable to the Partnership if such conflict of interest or resolution is (i) on terms no less favorable to the Partnership than those generally being provided to or available from unrelated third parties or (ii) fair to the Partnership, taking into account the totality of the relationships between the parties involved (including other transactions that may be particularly favorable or advantageous to the Partnership).  The Board of Supervisors shall be authorized in connection with its determination of what is “fair and reasonable” to the Partnership and in connection with its resolution of any conflict of interest to consider (i) the relative interests of any party to such conflict, agreement, transaction or situation and the benefits and burdens relating to such interest; (ii) any customary or accepted industry practices and any customary or historical dealings with a particular Person; (iii) any applicable generally accepted accounting or engineering practices or principles; and (iv) such additional factors as the Board of Supervisors determines in its sole discretion to be relevant, reasonable or appropriate under the circumstances.  Nothing contained in this Agreement, however, is intended to nor shall it be construed to require the Board of Supervisors to consider the interest of any Person other than the Partnership.  In the absence of bad faith by the Board of Supervisors, the resolution, action or terms so made, taken or provided by the Board of Supervisors with respect to such matter shall not constitute a breach of this Agreement or any other agreement contemplated herein or a breach of any standard of care or duty stated or implied by law or equity.

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(b)           Whenever this Agreement or any other agreement contemplated hereby provides that the Board of Supervisors is permitted or required to make a decision (i) in its “sole discretion” or “discretion,” that it deems “necessary or appropriate” or under a grant of similar authority or latitude, the Board of Supervisors shall be entitled to consider only such interests and factors as it desires and shall have no duty or obligation to give any consideration to any interest of, or factors affecting, the Partnership, any Partner or any Assignee, (ii) it will make such decision in good faith unless another express standard is provided for, or (iii) in “good faith” or under another express standard, the Board of Supervisors shall act under such express standard and shall not be subject to any other or different standards imposed by this Agreement or any other agreement contemplated hereby or under the Act or any other law, rule or regulation.

(c)           Whenever a particular transaction, arrangement or resolution of a conflict of interest is required under this Agreement to be “fair and reasonable” to any Person, the fair and reasonable nature of such transaction, arrangement or resolution shall be considered in the context of all similar or related transactions.

(d)           Notwithstanding the foregoing, the Exchange Agreement and the Tax Receivable Agreement shall be deemed permitted under this Section 6.6.

Section 6.7. Other Matters Concerning the Board of Supervisors.

(a)           The Board of Supervisors may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties.

(b)           The Board of Supervisors may consult with legal counsel, accountants, appraisers, management consultants, investment bankers and other consultants and advisers selected by it, and any act taken or omitted to be taken in reliance upon the opinion (including, without limitation, an opinion of counsel) of such Persons as to matters that such Board of Supervisors reasonably believes to be within such Person’s professional or expert competence shall be conclusively presumed to have been done or omitted in good faith and in accordance with such opinion.

(c)           Any standard of care and any duty imposed by this Agreement or stated or implied by law or equity shall be modified, waived or limited as required to permit the Board of Supervisors to act under this Agreement or any other agreement contemplated by this Agreement and to make any decision pursuant to the authority prescribed in this Agreement so long as such action is reasonably believed by the Board of Supervisors to be in, or not inconsistent with, the best interests of the Partnership.

Section 6.8. Reliance by Third Parties.  Notwithstanding anything to the contrary in this Agreement, Persons dealing with the Partnership are entitled to rely conclusively upon the power and authority of the Board of Supervisors.  Any Officer of the Partnership authorized by the Board of Supervisors to act on behalf and in the name of the Partnership with respect to the relevant matter shall have full power and authority to encumber, sell or otherwise use in any

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manner any and all assets of the Partnership and to enter into any contracts on behalf of the Partnership.  Any Person dealing with the Partnership shall be entitled to deal with the Board of Supervisors or any Officer of the Partnership authorized by the Board of Supervisors to act on behalf and in the name of the Partnership with respect to the relevant matter as if it were the Partnership’s sole party in interest, both legally and beneficially.  Each and every certificate, document or other instrument executed on behalf of the Partnership by the Board of Supervisors or any Officer of the Partnership authorized by the Board of Supervisors to act on behalf and in the name of the Partnership with respect to such matter shall be conclusive evidence in favor of any and every Person relying thereon that (a) at the time of the execution and delivery of such certificate, document or instrument, this Agreement was in full force and effect and (b) such certificate, document or instrument was duly executed and delivered in accordance with the terms and provisions of this Agreement and is binding upon the Partnership.

Section 6.9. Reserved.

Section 6.10. Reserved.

Section 6.11. Reserved.

Section 6.12. Grant of Authority.  Each Partner hereby irrevocably constitutes and appoints each member of the Board of Supervisors with full power of substitution, each as its true and lawful attorney and agent, in its name, place and stead to make, execute, acknowledge and, if necessary, to file and record:

(a)           any certificates or other instruments or amendments thereof which the Partnership may be required to file under the Act or any other laws of the State of Delaware or pursuant to the requirements of any governmental authority having jurisdiction over the Partnership or which the Board of Supervisors shall deem it advisable to file, including, without limitation, this Agreement, any amended Agreement or certificate of cancellation;

(b)           any certificates or other instruments (including counterparts of this Agreement with such changes as may be required by the law of other jurisdictions) and all amendments thereto which the Board of Supervisors deems appropriate or necessary to qualify, or continue the qualification of, the Partnership as a limited partnership;

(c)           any certificates or other instruments which may be required in order to effectuate the dissolution and termination of the Partnership pursuant to Article XI; and

(d)           any amendment to any certificate or to this Agreement necessary to reflect any other changes made pursuant to the exercise of the powers of attorney contained in this Section 6.12 or pursuant to this Agreement.

Section 6.13. Costs and Expenses and Compensation.  The Partnership shall (i) pay or cause to be paid all reasonable costs and expenses of the Partnership incurred in pursuing and conducting, or otherwise related to, the business of the Partnership, including in connection with the IPO and any subsequent action taken by the General Partner with respect to the business of the Partnership, and (ii) reimburse the General Partner for any reasonable out-of-pocket costs and expenses reasonably incurred by it in connection therewith (including, without limitation, in the

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performance of its duties as tax matters partner). The General Partner shall be entitled to reimbursement of all of its expenses attributable to the performance of its obligations hereunder. Subject to the Act, no amount so paid shall be deemed to be a distribution of Partnership assets for purposes of this Agreement. Except for reimbursement of expenses, the General Partner shall not receive any compensation for its services as such.

ARTICLE VII

RIGHTS OF PARTNERS

Section 7.1. Access to Information.  In addition to the other rights specifically set forth in this Agreement, each Limited Partner shall have access to all information to which a Partner is entitled to have access pursuant to Section 17-305(a) of the Act.

Section 7.2. Reserved.

Section 7.3. Confidentiality.  The Partnership agrees to provide the Partners valuable confidential and proprietary information of the Partnership, of other Partners and their Affiliates and of third parties who have supplied such information to the Partnership.  In consideration of such confidential information and other valuable consideration provided hereunder, each of the Partners agrees to abide by this Section 7.3.  Unless the Board of Supervisors agrees otherwise, each Partner shall hold in strict confidence any information such Partner receives regarding the Partnership, the General Partner, any other Partner, or their respective Affiliates, whether such information is received from the Partnership, its Affiliates, the other Partners or their respective Affiliates or another Person; provided, however, that such restrictions shall not apply to (a) information that is or becomes available to the public generally without breach of this Section 7.3; (b) disclosures required to be made by applicable laws and regulations or stock exchange requirements or requirements of the Financial Industry Regulatory Authority; (c) disclosures required to be made pursuant to an order, subpoena or other legal process; (d) disclosures to officers, directors or Affiliates of such Partner (and the officers and directors of such Affiliates), to auditors, counsel, and other professional advisors to or potential financing sources of such Persons or the Partnership and to Persons who are direct or indirect beneficial owners of interests in the Partnership and their representatives (provided, however, that such Persons have been informed of the confidential nature of the information, and, in any event, the Partner disclosing such information shall be liable for any failure by such Persons to abide by the provisions of this Section 7.3); (e) disclosures in connection with any litigation or dispute among the Partners and/or the Partnership; or (f) disclosures made by a Partner acting in accordance with the provision regarding confidentiality of certain information of an applicable employment agreement that is then in effect; provided further that any disclosure pursuant to clause (b), (c), (d), (e) or (f) of this sentence shall be made only subject to such procedures as the Partner making such disclosure determines in good faith are reasonable and appropriate in the circumstances, taking into account the need to maintain the confidentiality of such information and the availability, if any, of procedures under laws, regulations, orders, subpoenas, or other legal processes.  Each Partner shall notify the General Partner immediately upon becoming aware of any order, subpoena, or other legal process providing for the disclosure or production of information subject to the provisions of the immediately preceding sentence and, to the extent not prohibited by applicable law, immediately shall supply the General Partner with a copy of

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any such order, subpoena, or other legal process.  In addition, each Partner shall notify the General Partner prior to disclosing or producing any information subject to the provisions of the two immediately preceding sentences and, to the extent not prohibited by applicable law, shall permit the General Partner to seek a protective order protecting the confidentiality of such information.  The obligations of a Partner pursuant to this Section 7.3 shall continue following the time such Person ceases to be a Partner, but thereafter such Person shall not have the right to enforce the provisions of this Agreement.  Each Partner acknowledges that disclosure of information in violation of the provisions of this Section 7.3 may cause irreparable injury to the Partnership and the Partners for which monetary damages are inadequate, difficult to compute, or both.  Accordingly, each Partner agrees that its obligations under this Section 7.3 may be enforced by specific performance and that breaches or prospective breaches of this Section 7.3 may be enjoined.

Section 7.4. Liability to Third Parties.  No Limited Partner or member of the Board of Supervisors shall have any personal liability for any obligations or liabilities of the Partnership, whether such obligations or liabilities arise in contract, tort or otherwise, except to the extent that any such obligations or liabilities are expressly assumed in writing by such Limited Partner or member of the Board of Supervisors and except as otherwise provided in this Agreement.  Any action taken by any member of the Board of Supervisors who is also a Limited Partner shall not be deemed to be participation in the control of the business of the Partnership by a limited partner of the Partnership within the meaning of Section 17-303(a) of the Act and shall not affect, impair or eliminate the limitations on the liability of Limited Partners or Assignees under this Agreement.

ARTICLE VIII

TAXES

Section 8.1. Tax Returns.  The Board of Supervisors shall cause to be prepared and filed all necessary federal and state income tax returns for the Partnership, including making the elections described in Section 8.2.  Each other Partner shall furnish to the Board of Supervisors all pertinent information in its possession relating to Partnership operations that is necessary to enable the Partnership’s income tax returns to be prepared and filed.  The Board of Supervisors shall prepare all federal and state tax returns on a timely basis.  The Board of Supervisors shall furnish to each Partner copies of all returns that are actually filed promptly after their filing.

Section 8.2. Tax Elections.  The Partnership shall make the following elections on the appropriate tax returns:

(a)           to adopt the calendar year as the Partnership’s fiscal year, unless otherwise required by the Code;

(b)           to adopt the cash or accrual method of accounting, as determined by the Board of Supervisors, and to keep the Partnership’s books and records on the income-tax method;

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(c)           if a distribution of Partnership property as described in Section 734 of the Code occurs or if a transfer of a Partnership Interest as described in Section 743 of the Code occurs, on request by notice from the Limited Partners, to elect, pursuant to Section 754 of the Code, to adjust the basis of Partnership properties;

(d)           to elect to amortize the start-up expenses of the Partnership ratably over a period of 180 months as permitted by Section 709(b) of the Code; and

(e)           any other election the Board of Supervisors may deem appropriate and in the best interests of the Partners.

It is the intent of the Partners that the Partnership be treated as a partnership for federal income tax purposes and, to the extent permitted by applicable law, for state and local franchise and income tax purposes.  Neither the Partnership nor any Partner may make an election for the Partnership to be excluded from the application of the provisions of subchapter K of chapter 1 of subtitle A of the Code or any similar provisions of applicable state or local law, and no provision of this Agreement shall be construed to sanction or approve such an election.

Section 8.3. Tax Matters Partner.  The General Partner shall be the “tax matters partner” of the Partnership pursuant to Section 6231(a)(7) of the Code.  The tax matters partner shall take such action as may be necessary to cause each other Partner to become a “notice partner” within the meaning of Section 6231(a)(8) of the Code.  The tax matters partner may not take any action contemplated by Sections 6222 through 6231 of the Code without the consent of the Limited Partners representing a majority of the Percentage Interests, but this sentence does not authorize the tax matters partner to take any action left to the determination of an individual Limited Partner under Sections 6222 through 6231 of the Code; provided, however, that the tax matters partner shall not consent to an extension of the statute of limitations for a Partnership taxable year without the consent of the Board of Supervisors.

Section 8.4. Tax Matters.  In exercising their discretion pursuant to this Article VIII or otherwise in regard to matters pertaining to taxes, the Partnership (through the Board of Supervisors) and the General Partner shall fairly take into account the interests of all Partners, and shall not be obligated to take into account the specific interests or circumstances of any particular partner or group of partners.

Section 8.5. Withholding Taxes.

(a)           Notwithstanding any other provision of this Agreement, (i) each Partner hereby authorizes the Partnership to withhold and to pay over, or otherwise pay, any withholding or other taxes payable by the Partnership or any of its Affiliates with respect to such Partner or as a result of such Partner’s participation in the Partnership and (ii) if and to the extent that the Partnership shall be required to withhold or pay any such taxes (including any amounts withheld from amounts payable to the Partnership to the extent attributable, in the judgment of the Board of Supervisors, to the interest of such Partner in the Partnership), such Partner shall be deemed for all purposes of this Agreement to have received a payment from the Partnership as of the time such withholding or tax is required to be paid, which payment shall be deemed to be a distribution with respect to such Partner’s interest in the Partnership.  To the extent that the

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aggregate of such payments to a Partner for any period exceeds the distributions to which such Partner is entitled for such period, such Partner shall make a prompt payment to the Partnership of such amount.

(b)           If the Partnership makes a distribution in kind and such distribution is subject to withholding or other taxes payable by the Partnership on behalf of any Partner, such Partner shall make a prompt payment to the Partnership of the amount of such withholding or other taxes by wire transfer.

ARTICLE IX

BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS

Section 9.1. Maintenance of Books.  The books of account for the Partnership shall be located at the principal office of the Partnership or such other place as the Board of Supervisors may deem appropriate, and shall be maintained on an accrual basis in accordance with the terms of this Agreement, except that the capital accounts of the Partners shall be maintained in accordance with Article IV.  The calendar year shall be the accounting year of the Partnership.

Section 9.2. Bank Accounts.  The Board of Supervisors shall cause the Partnership to establish and maintain one or more separate bank and investment accounts for Partnership funds in the Partnership name with such financial institutions and firms as the Board of Supervisors may select and designate signatories thereon.

ARTICLE X

WITHDRAWAL OF GENERAL PARTNER

Section 10.1. Withdrawal of General Partner.  Except as required by law or pursuant to dissolution of the Partnership pursuant to Section 11.1, merger or sale of all of the assets of the Partnership pursuant to Section 11.2 or liquidation or termination of the Partnership pursuant to Section 11.3, the General Partner agrees not to resign or withdraw from the Partnership.

ARTICLE XI

DISSOLUTION, MERGER, LIQUIDATION AND TERMINATION

Section 11.1. Dissolution.  Except as provided in Section 11.3 hereof, the Partnership shall dissolve and its affairs shall be wound up upon the first to occur of either (a) the written determination by the Board of Supervisors or (b) the occurrence of any other event causing dissolution of the Partnership under the Act.

Notwithstanding the foregoing, upon dissolution pursuant to subsection (b) of this Section 11.1, Limited Partners representing a majority of the Percentage Interests may elect to continue the business of the Partnership by adopting a resolution to that effect within 90 days of the occurrence of the event causing such dissolution, and, if necessary, appoint a new general partner of the Partnership.

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Section 11.2. Merger or Sale of All of the Assets.  A merger or sale of all of the assets of the Partnership must be approved by the Board of Supervisors.

Section 11.3. Liquidation and Termination.  On dissolution of the Partnership, the Board of Supervisors shall act as liquidator or may appoint one or more other Persons as liquidator(s).  The liquidator shall proceed diligently to wind up the affairs of the Partnership and make final distributions as provided herein.  The costs of liquidation shall be borne as a Partnership expense.  Until final distribution, the liquidator shall continue to operate the Partnership properties with all of the power and authority of the Board of Supervisors.  The steps to be accomplished by the liquidator are as follows:

(a)           as promptly as possible after dissolution and again after final liquidation, the liquidator shall cause a proper accounting to be made by a recognized firm of certified public accountants of the Partnership’s assets, liabilities, and operations through the last day of the calendar month in which the dissolution occurs or the final liquidation is completed, as applicable;

(b)           the liquidator shall pay from Partnership funds all of the debts and liabilities of the Partnership (including, without limitation, all expenses incurred in liquidation and any advances described in Section 4.3) or otherwise make adequate provision therefor (including, without limitation, the establishment of a cash escrow fund for contingent liabilities in such amount and for such term as the liquidator may reasonably determine); and

(c)           all remaining assets of the Partnership shall be distributed to the Partners as follows:

(i)            the liquidator may sell any or all Partnership property, including to Partners, and any resulting gain or loss from each sale shall be computed and allocated to the Capital Accounts;

(ii)           with respect to all Partnership property that has not been sold, the fair market value of that property shall be determined and the Capital Accounts shall be adjusted to reflect the manner in which the unrealized income, gain, loss, and deduction inherent in property that has not been reflected in the Capital Accounts previously would be allocated among the Partners if there were a taxable disposition of that property for the fair market value of that property on the date of distribution; and

(iii)          All remaining assets shall be distributed to the Partners in accordance with Section 5.3.  If such distributions do not correspond to the positive capital account balances of the Partners immediately prior to such distributions, then income, gain, loss and deduction for the fiscal year in which the liquidation occurs shall be reallocated among the Partners to cause, to the extent possible, the Partners’ positive capital account balances immediately prior to such distribution to correspond to such amounts, and in the event the income, gain, loss and deduction for the fiscal year in which the liquidation occurs is not sufficient to achieve this result then the income, gain, loss and deduction for prior fiscal years shall be reallocated to achieve such result and the

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income tax returns of the Partnership which may be amended for this purpose shall be amended and filed as appropriate.

All distributions in kind to the Partners shall be made subject to the liability of each distributee for its allocable share of costs, expenses, and liabilities theretofore incurred or for which the Partnership has committed prior to the date of termination and those costs, expenses, and liabilities shall be allocated to the distributee pursuant to this Section 11.3.  The distribution of cash and/or property to a Partner in accordance with the provisions of this Section 11.3 constitutes a complete return to the Partner of its Capital Contributions and a complete distribution to the Partner of its Partnership Interest and all the Partnership’s property.

Section 11.4. Cancellation of Filing.  On completion of the distribution of Partnership assets as provided herein, the Partnership is terminated, and the Partners (or such other Person or Persons as may be required) shall cause the cancellation of any other filings made as provided in Section 2.6 and shall take such other actions as may be necessary to terminate the Partnership.

ARTICLE XII

GENERAL PROVISIONS

Section 12.1. Offset.  Whenever the Partnership is to pay any sum to any Partner in such Person’s capacity as a Partner, any amounts such Partner owes the Partnership in such Person’s capacity as a Partner may be deducted from that sum before payment.

Section 12.2. Notices.  All notices, requests, or consents provided for or permitted to be given under this Agreement shall be in writing and shall be given either by depositing that writing in the United States mail, addressed to the recipient, postage paid, and certified with return receipt requested, or by depositing that writing with a reputable overnight courier for next day delivery, or by delivering that writing to the recipient in person or by courier or by facsimile transmission.  Unless otherwise provided for herein, a notice, request, or consent given under this Agreement is effective on receipt by the Person to receive it.  All notices, requests, and consents to be sent to a Partner must be sent to or made at the addresses given for that Partner on Schedule A, in the relevant Adoption Agreement or Adoption Agreement for Family Members or such other address as that Partner may specify by notice to the other Partners.  Any notice, request, or consent to the Partnership shall be given to the Board of Supervisors at its address on Schedule A and to the following address:

Athlon Holdings LP
Attn: Robert C. Reeves
420 Throckmorton St, Ste 1200
Fort Worth, TX 76102

Section 12.3. Entire Agreement; Supersedure.  Except as otherwise stated herein, this Agreement constitutes the entire agreement of the Partners relating to the Partnership and supersedes all prior contracts or agreements with respect to the Partnership, whether oral or written.

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Section 12.4. Effect of Waiver or Consent.  A waiver or consent, express or implied, to or of any breach or default by any Person in the performance by that Person of its obligations with respect to the Partnership is not a consent or waiver to or of any other breach or default in the performance by that Person of the same or any other obligations of that Person with respect to the Partnership.  Failure on the part of a Person to complain of any act of any Person or to declare any Person in default with respect to the Partnership, irrespective of how long that failure continues, does not constitute a waiver by that Person of its rights with respect to that default until the applicable limitations period has expired.

Section 12.5. Amendment or Modification.

(a)           This Agreement may be amended, modified, waived or supplemented by the Board of Supervisors; provided, that except as expressly provided in this Agreement, no amendment, modification, waiver or supplement of this Agreement shall, without the consent of the affected Partner, (i) alter the provisions which govern such Partner’s entitlement to distributions and income allocations or (ii) decrease the interest in the Partnership of such Partner (including the provisions providing for allocation of debits and credits to such Partner’s Capital Account provided for in this Agreement).

(b)           Notwithstanding the first proviso in Section 12.5(a), no consent of any Limited Partner will be required for the Board of Supervisors to make an amendment (i) necessitated by a merger agreement or similar document provided that all consideration from such transaction is allocated among the Partners as provided in this Agreement and any Partnership Interests issued in such transaction are issued in accordance with the terms of this Agreement, (ii) necessary or advisable to reflect, account for and deal with appropriately the formation by the Partnership of, or investment by the Partnership in, any corporation, partnership, joint venture, limited liability company or other entity, (iii) necessary or advisable to effect or continue the irrevocable delegation by the General Partner to the Board of Supervisors of all management powers over the business and affairs of the Partnership, (iv) necessary or advisable to prevent the Partnership, any Partner or any member of the Board of Supervisors from being subjected to the Investment Company Act of 1940 or the Investment Advisers Act of 1940, as amended, (iv) necessary or advisable to satisfy any requirements, conditions or guidelines contained in any opinion, directive, order, ruling or regulation of any federal or state agency or judicial authority or contained in any federal or state statute, or (v) necessary or advisable to qualify or continue the qualification of the Partnership as a limited partnership or a partnership in which the Limited Partners have limited liability under the laws of any state or to ensure that the Partnership will not be treated as an association taxable as a corporation or otherwise taxed as an entity for federal income tax purposes.

(c)           Notwithstanding either proviso in Section 12.5(a), no consent of any Limited Partner will be required for the Board of Supervisors to make an amendment in connection with (i) the admission, substitution, withdrawal or removal of Partners in accordance with this Agreement or (ii) the issuance, repurchase, forfeiture or re-issuance of any class or series of securities of the Partnership in accordance with this Agreement.

Section 12.6. Binding Effect.  Subject to the restrictions on Dispositions set forth in this Agreement, this Agreement is binding on and inures to the benefit of the Partners.  This

31

Agreement is for the sole benefit of the Partners, and no other Person shall have any rights, benefits or remedies by reason of this Agreement, nor shall any Partner owe any duty or obligation whatsoever to any such Person (other than the Partners) by virtue of this Agreement.

Section 12.7. Governing Law; Jurisdiction; Waiver of Jury Trial.

(a)           This Agreement shall be governed by and construed in accordance with the applicable laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflict of law hereof.

(b)           The parties hereto, on their behalf and on behalf of their respective Affiliates, irrevocably submit to the exclusive jurisdiction of the Court of Chancery of the State of Delaware (or, if such Court or the Delaware Supreme Court determines that the Court of Chancery does not have or should not exercise subject matter jurisdiction over such matter, the Superior Court of the State of Delaware) and the federal courts of the United States of America located in the State of Delaware (and of the appropriate appellate courts therefrom) in connection with any dispute arising out of, in connection with, in respect of, or in any way relating to:

(i)            the negotiation, execution and performance of this Agreement,

(ii)           the interpretation and enforcement of the provisions of this Agreement, or

(iii)          any actions of or omissions by any Covered Party in any way connected with, related to or giving rise to any of the foregoing matters,

(the foregoing clauses (i), (ii) and (iii) collectively, the “Covered Matters”), and hereby waive, and agree not to assert as a defense in any actions, suits or proceedings (each, a “Legal Action”) with regard to or involving a Covered Matter, that such Legal Action may not be brought or is not maintainable in said courts or that venue thereof may not be appropriate or that this Agreement or any such document may not be enforced in or by such courts, and the parties hereto, on their behalf and on behalf of their respective Affiliates, irrevocably agree that all claims with respect to such Legal Action shall be heard and determined exclusively by such a Delaware state or federal court.  The parties hereto, on their behalf and on behalf of their respective Affiliates, hereby consent to and grant any such court jurisdiction over the Person of such parties and over the subject matter of such dispute and agree that mailing of process or other papers in connection with such Legal Action in the manner provided in Section 12.2 or in such other manner as may be permitted by law shall be valid and sufficient service thereof.

(c)           In addition, by entering into this Agreement, each party hereto, on their behalf and, to the fullest extent permissible by applicable law, on behalf of their respective unitholders, partners, members, directors, Affiliates, officers or agents, as the case may be, covenants, agrees and acknowledges, that it shall not bring any Legal Action (regardless of the legal theory or claim involved or the procedural nature of any such Legal Action) with regard to any Covered Matter against any Covered Party, other than the parties hereto.

(d)           The parties hereto acknowledge and agree that (i) the agreements contained in this Section 12.7 are an integral part of this Agreement and the transactions

32

contemplated hereby, and that, without these agreements, the parties would not enter into this Agreement, (ii) any breach of this Section 12.7 would result in irreparable harm and that monetary damages would not a sufficient remedy for any such breach and (iii) that any breach of this Section 12.7 will be deemed a material breach of this Agreement.  Accordingly, each Covered Party shall be entitled to equitable relief, including injunction and specific performance, as a remedy for any such breach by a party (or any affiliate of such party) and in case of any such breach, the non-breaching party shall be excused from its performance obligations under this Agreement. For the purposes of this Section 12.7, “Covered Party” shall mean (i) any party hereto, and (ii) any such parties’ officers, directors, agents, employees, or Affiliates, all of whom are intended third party beneficiaries of this Section 12.7.

(e)           EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING BETWEEN THE PARTIES HERETO ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

Section 12.8. Severability.  If any provision of this Agreement or its application to any Person or circumstance is held invalid or unenforceable to any extent, the remainder of this Agreement and the application of such provision to other Persons or circumstances is not affected and such provision shall be enforced to the greatest extent permitted by law.

Section 12.9. Further Assurances.  In connection with this Agreement and the transactions contemplated hereby, each Partner shall execute and deliver any additional documents and instruments and perform any additional acts that may be necessary or appropriate to effectuate and perform the provisions of this Agreement and such transactions.

Section 12.10. Counterparts.  This Agreement may be executed in any number of counterparts with the same effect as if all signatories had signed the same document.  All counterparts shall be construed together and constitute the same instrument.

[Signature Pages Follow]

33

Executed effective as of the date first set forth above.

GENERAL PARTNER:
ATHLON HOLDINGS GP LLC
By:	/s/ Robert C. Reeves
	Name:	Robert C. Reeves
	Title:	Manager
LIMITED PARTNERS:
ATHLON ENERGY INC.
By:	/s/ Robert C. Reeves
	Name:	Robert C. Reeves
	Title:	President and Chief Executive Officer

LIMITED PARTNERS (CONT’D):
By:	/s/ Robert C. Reeves
	Robert C. Reeves
By:	/s/ Nelson K. Treadway
	Nelson K. Treadway
By:	/s/ William B. D. Butler
	William B. D. Butler
By:	/s/ Jennifer L. Palko
	Jennifer L. Palko
By:	/s/ Bud W. Holmes
	Bud W. Holmes
By:	/s/ David B. McClelland
	David B. McClelland
By:	/s/ James R. Plemons
	James R. Plemons
By:	/s/ Melvyn E. Foster, Jr.
	Melvyn E. Foster, Jr.
By:	/s/ Matt Cashion
	Matt Cashion
By:	/s/ Janis F. Gould
	Janis F. Gould
By:	/s/ Juan Coronado
	Juan Coronado
By:	/s/ Sharon Braddy
	Sharon Braddy

By:	/s/ John Souders
	John Souders
By:	/s/ Sheryl Turner
	Sheryl Turner
By:	/s/ Lauryl Ellis
	Lauryl Ellis
By:	/s/ Robert Lange
	Robert Lange
By:	/s/ Dallas Rysavy
	Dallas Rysavy
By:	/s/ Dustin Cummings
	Dustin Cummings
By:	/s/ J.W. Reddin
	J.W. Reddin
By:	/s/ Margie Pellerin
	Margie Pellerin
By:	/s/ Ian Bowersock
	Ian Bowersock
By:	/s/ Joey Bernard
	Joey Bernard
By:	/s/ Cristan C. Erdelac
	Cristan C. Erdelac

EXHIBIT A

ADOPTION AGREEMENT

This Adoption Agreement is executed by the undersigned pursuant to the Amended and Restated Limited Partnership Agreement of Athlon Holdings LP (the “Partnership”), dated as of [             ], 2013, as amended from time to time, a copy of which is attached hereto and is incorporated herein by reference (the “Agreement”).  By the execution of this Adoption Agreement the undersigned agrees as follows:

1.             Acknowledgment.  The undersigned acknowledges that he/she is acquiring a Partnership Interest as a Limited Partner, subject to the terms and conditions of the Agreement (including the Exhibits thereto), as amended from time to time.  Capitalized terms used herein without definition are defined in the Agreement and are used herein with the same meanings set forth therein.

2.             Agreement.  The undersigned hereby joins in, and agrees to be bound by, and subject to, the Agreement (including the Exhibits thereto), as amended from time to time, with the same force and effect as if he/she were originally a party thereto.

3.             Representations and Warranties

(a)           The Partnership Interests will be acquired in a transaction pursuant to Rule 506 of Regulation D of the Securities Act of 1933, as amended (the “Act”) and have the status of securities acquired in a transaction under Section 4(2) of the Act.  The Partnership Interests have not been registered under the Act and cannot be resold without registration under the Act or an exemption therefrom.

(b)           The undersigned is not an underwriter within the meaning of Section 2(11) of the Act.  Pursuant to Section 2(11) of the Act, the term “underwriter” means “any person who has purchased from an issuer with a view to, or offers or sells for an issuer in connection with, the distribution of any security, or participates or has a direct or indirect participation in any such undertaking, or participates or has a participation in the direct or indirect underwriting of any such undertaking; but such term shall not include a person whose interest is limited to a commission from an underwriter or dealer not in excess of the usual and customary distributors’ or sellers’ commission.”

4.             Notice.  Any notice required or permitted by the Agreement shall be given to the undersigned at the address listed below.

EXECUTED AND DATED on this            day of                                          , 20          .

[name]

Notice Address:

Facsimile:

EXHIBIT B

ADOPTION AGREEMENT FOR FAMILY MEMBERS

This Adoption Agreement is executed by the undersigned pursuant to the Amended and Restated Limited Partnership Agreement of Athlon Holdings LP (the “Partnership”), dated as of [                            ], 2013, as amended from time to time, a copy of which is attached hereto and is incorporated herein by reference (the “Agreement”).  By the execution of this Adoption Agreement for Family Members, the undersigned agrees as follows:

1.             Acknowledgment.  The undersigned acknowledges that he is acquiring a Partnership Interest as a Limited Partner and is subject to the terms and conditions of the Agreement (including the Exhibits thereto), as amended from time to time.  Capitalized terms used herein without definition are defined in the Agreement and are used herein with the same meanings set forth therein.

2.             Agreement.  The undersigned hereby joins in, and agrees to be bound by, and subject to, the Agreement (including the Exhibits thereto), as amended from time to time, with the same force and effect as if he were originally a party thereto.  The undersigned is a successor and assign of [Insert Assignor’s Name] for all purposes of the Agreement, including, without limitation Article IV.

3.             Representation and Warranty.  The undersigned represents and warrants that the Assignment from [name of Limited Partner] is made pursuant to Section 3.4(b) of the Agreement.

4.             Notice.  Any notice required or permitted by the Agreement shall be given to the undersigned at the address listed below.

EXECUTED AND DATED on this            day of                                          , 20          .

[name]

Notice Address:

Facsimile:

EXHIBIT C

CONSENT OF SPOUSE

The undersigned, the spouse of                                                     , a Partner of Athlon Holdings LP (the “Partnership”) named in the Amended and Restated Limited Partnership Agreement of the Partnership (the “Agreement”) acknowledges that I have read the Agreement and that I understand its contents including Sections 3.4 and 7.5.  I hereby consent to and approve of the provisions of the Agreement, as it may be amended from time to time in accordance with its terms, and agree that the Partnership Interest held by my spouse and my interest in such Partnership Interest are subject to such provisions.  I agree that I will take no action at any time to hinder the operations of the Partnership.

Dated:        , 20    

Name:

Address:

EX-31.1

Exhibit 31.1

Rule 13a-14(a)/15d-14(a) Certification

I, Robert C. Reeves, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Athlon Energy Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2013	/s/ Robert C. Reeves
	Robert C. Reeves
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Rule 13a-14(a)/15d-14(a) Certification

I, William B. D. Butler, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Athlon Energy Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2013	/s/ William B. D. Butler
	William B. D. Butler
	Vice President—Chief Financial Officer

EX-32.1

Exhibit 32.1

Section 1350 Certification

In connection with the Quarterly Report of Athlon Energy Inc. (“Athlon”) on Form 10-Q for the period ended September 30, 2013 as filed with the Securities and Exchange Commission (“SEC”) on the date hereof (the “Report”), I, Robert C. Reeves, Chief Executive Officer Athlon, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934;

and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Athlon.

Date: November 14, 2013	/s/ Robert C. Reeves
	Robert C. Reeves
	President and Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to Athlon and will be retained by Athlon and furnished to the SEC or its staff upon request.

Note:  The certification of the registrant furnished in this exhibit is not deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that Section.  Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

EX-32.2

Exhibit 32.2

Section 1350 Certification

In connection with the Quarterly Report of Athlon Energy Inc. (“Athlon”) on Form 10-Q for the period ended September 30, 2013 as filed with the Securities and Exchange Commission (“SEC”) on the date hereof (the “Report”), I, William B. D. Butler, Chief Financial Officer of Athlon, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934;

and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Athlon.

Date: November 14, 2013	/s/ William B. D. Butler
	William B. D. Butler
	Vice President—Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to Athlon and will be retained by Athlon and furnished to the SEC or its staff upon request.

Note:  The certification of the registrant furnished in this exhibit is not deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that Section.  Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

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Related Party Transactions

9 Months Ended

Sep. 30, 2013

Related Party Transactions

Related Party Transactions

Note 11. Related Party Transactions

Transaction Fee Agreement

Holdings was a party to a Transaction Fee Agreement, dated August 23, 2010, which required Holdings to pay a fee to Apollo equal to 2% of the total equity contributed to Holdings, as defined in the agreement, in exchange for consulting and advisory services provided by Apollo.  In October 2012, Apollo assigned its rights and obligations under the Transaction Fee Agreement to an affiliate, Apollo Global Securities, LLC.  Upon the consummation of Athlon’s IPO, Holdings terminated the Transaction Fee Agreement.  Since Holdings’ inception through the termination of the Transaction Fee Agreement, it incurred transaction fees under the Transaction Fee Agreement of approximately $7.5 million in total.

Services Agreement

Holdings was a party to a Services Agreement, dated August 23, 2010, which required Holdings to compensate Apollo for consulting and advisory services equal to the higher of (i) 1% of earnings before interest, income taxes, DD&A, and exploration expense per quarter and (ii) $62,500 per quarter (the “Advisory Fee”); provided, however, that such Advisory Fee for any calendar year shall not exceed $500,000.  The Services Agreement also provided for reimbursement to Apollo for any reasonable out-of-pocket expenses incurred while performing services under the Services Agreement.  During the nine months ended September 30, 2013 and 2012, Holdings incurred approximately $500,000 and $493,000, respectively, of Advisory Fees.  All fees incurred under the Services Agreement are included in “General and administrative expenses” in the accompanying Consolidated Statements of Operations.

Upon the consummation of Athlon’s IPO, Holdings terminated the Services Agreement and, in connection with the termination, Holdings paid $2.4 million (plus $132,000 of unreimbursed fees) to Apollo.  Such payment corresponded to the present value as of the date of termination of the aggregate annual fees that would have been payable during the remainder of the term of the Services Agreement (assuming a term ending on August 23, 2020).  Under the Services Agreement, Holdings also agreed to indemnify Apollo and its affiliates and their respective limited partners, general partners, directors, members, officers, managers, employees, agents, advisors, their directors, officers, and representatives for potential losses relating to the services contemplated under the Services Agreement.

Participation of Apollo Global Securities, LLC in Senior Notes Offering and IPO

Apollo Global Securities, LLC is an affiliate of the Apollo Funds and received a portion of the gross spread as an initial purchaser of the Notes of $0.5 million.  Apollo Global Securities, LLC was also an underwriter in Athlon’s IPO and received a portion of the discounts and commissions paid to the underwriters in the IPO of approximately $0.9 million.

Distribution

Holdings used a portion of the net proceeds from the Notes to make a distribution to its Class A limited partners, including the Apollo Funds and its management team and employees.  The Apollo Funds received approximately $73 million of the distribution and the remaining Class A limited partners received approximately $2 million, in the aggregate.

Exchange Agreement

Upon the consummation of its IPO, Athlon entered into an exchange agreement with certain members of its management team and employees who hold New Holdings Units after the closing of the IPO.  Under the exchange agreement, each such holder (and certain permitted transferees thereof) may, under certain circumstances after the date of the closing of the IPO (subject to the terms of the exchange agreement), exchange their New Holdings Units for shares of Athlon’s common stock on a one-for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends, and reclassifications.  As a holder exchanges its New Holdings Units, Athlon’s interest in Holdings will be correspondingly increased.

Tax Receivable Agreement

Upon the consummation of its IPO, Athlon entered into a tax receivable agreement with certain members of its management team and employees who hold New Holdings Units after the closing of the IPO that provides for the payment from time to time by Athlon to such unitholders of Holdings of 85% of the amount of the benefits, if any, that Athlon is deemed to realize as a result of increases in tax basis and certain other tax benefits related to exchanges of New Holdings Units pursuant to the exchange agreement, including tax benefits attributable to payments under the tax receivable agreement.  These payment obligations are obligations of Athlon and not of Holdings.  For purposes of the tax receivable agreement, the benefit deemed realized by Athlon will be computed by comparing its actual income tax liability (calculated with certain assumptions) to the amount of such taxes that Athlon would have been required to pay had there been no increase to the tax basis of the assets of Holdings as a result of the exchanges and had Athlon not entered into the tax receivable agreement.

The step-up in basis will depend on the fair value of the New Holdings Units at conversion.  There is no intent of the holders of New Holdings Units to exchange their units for shares of Athlon’s common stock in the foreseeable future.  In addition, Athlon does not expect to be in a tax paying position before 2019.  Therefore, Athlon cannot presently estimate what the benefit or payments under the tax receivable agreement will be on a factually supportable basis, and accordingly not recognized as a liability.

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CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Revenues:
Oil	$ 75,666	$ 34,357	$ 175,934	$ 91,407
Natural gas	4,164	2,383	11,894	5,323
Natural gas liquids	8,595	5,346	20,508	14,379
Total revenues	88,425	42,086	208,336	111,109
Production:
Lease operating	8,762	7,205	23,774	17,846
Production, severance, and ad valorem taxes	5,439	2,806	13,380	7,617
Processing, gathering, and overhead	59	29	169	55
Depletion, depreciation, and amortization	23,611	15,091	62,022	37,770
General and administrative	6,725	2,134	13,723	7,212
Contract termination fee	2,408		2,408
Derivative fair value loss (gain)	27,037	14,268	21,331	(9,590)
Accretion of discount on asset retirement obligations	174	123	485	343
Total expenses	74,215	41,656	137,292	61,253
Operating income	14,210	430	71,044	49,856
Other income (expenses):
Interest	(10,039)	(2,602)	(26,595)	(5,804)
Other	30		30	2
Total other expenses	(10,009)	(2,602)	(26,565)	(5,802)
Income (loss) before income taxes	4,201	(2,172)	44,479	44,054
Income tax provision (benefit)	1,934	(76)	6,805	1,546
Consolidated net income (loss)	2,267	(2,096)	37,674	42,508
Less: net income (loss) attributable to noncontrolling interest	(215)		616
Net income (loss) attributable to stockholders	$ 2,482	$ (2,096)	$ 37,058	$ 42,508
Net income (loss) per common share:
Basic (in dollars per share)	$ 0.03	$ (0.03)	$ 0.53	$ 0.64
Diluted (in dollars per share)	$ 0.03	$ (0.03)	$ 0.53	$ 0.62
Weighted average common shares outstanding:
Basic (in shares)	76,637	66,340	69,810	66,340
Diluted (in shares)	78,493	66,340	71,666	68,196

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Fair Value Measurements

9 Months Ended

Sep. 30, 2013

Fair Value Measurements

Fair Value Measurements

Note 4.  Fair Value Measurements

The book values of cash and cash equivalents, accounts receivable, and accounts payable approximate fair value due to the short-term nature of these instruments.  Commodity derivative contracts are marked-to-market each quarter and are thus stated at fair value in the accompanying Consolidated Balance Sheets.  As of September 30, 2013, the fair value of the senior notes was approximately $515.6 million using open market quotes (“Level 1” input).

Derivative Policy

Athlon uses various financial instruments for non-trading purposes to manage and reduce price volatility and other market risks associated with its oil production.  These arrangements are structured to reduce Athlon’s exposure to commodity price decreases, but they can also limit the benefit Athlon might otherwise receive from commodity price increases.  Athlon’s risk management activity is generally accomplished through over-the-counter commodity derivative contracts with large financial institutions, most of which are lenders underwriting Holdings’ credit agreement.

Athlon applies the provisions of the “Derivatives and Hedging” topic of the Accounting Standards Codification, which requires each derivative instrument to be recorded in the accompanying Consolidated Balance Sheets at fair value.  If a derivative has not been designated as a hedge or does not otherwise qualify for hedge accounting, it must be adjusted to fair value through earnings.  Athlon elected not to designate its current portfolio of commodity derivative contracts as hedges for accounting purposes.  Therefore, changes in fair value of these derivative instruments are recognized in earnings and included in “Derivative fair value loss (gain)” in the accompanying Consolidated Statements of Operations.

Athlon enters into commodity derivative contracts for the purpose of economically fixing the price of its anticipated oil production even though Athlon does not designate the derivatives as hedges for accounting purposes.  Athlon classifies cash flows related to derivative contracts based on the nature and purpose of the derivative.  As the derivative cash flows are considered an integral part of Athlon’s oil and natural gas operations, they are classified as cash flows from operating activities in the accompanying Consolidated Statements of Cash Flows.

Commodity Derivative Contracts

Commodity prices are often subject to significant volatility due to many factors that are beyond Athlon’s control, including but not limited to: prevailing economic conditions, supply and demand of hydrocarbons in the marketplace, actions by speculators, and geopolitical events such as wars or natural disasters.  Athlon manages oil price risk with swaps and collars.  Swaps provide a fixed price for a notional amount of sales volumes.  Collars provide a floor price on a notional amount of sales volumes while allowing some additional price participation if the relevant index price closes above the floor price.  This participation is limited by a ceiling price specified in the contract.

The following table summarizes Athlon’s open commodity derivative contracts as of September 30, 2013:

	Average	Weighted -		Average	Weighted -		Average	Weighted -		Asset
	Daily	Average		Daily	Average		Daily	Average		(Liability)
	Floor	Floor		Cap	Cap		Swap	Swap		Fair Market
Period	Volume	Price		Volume	Price		Volume	Price		Value
	(Bbl)	(per Bbl)		(Bbl)	(per Bbl)		(Bbl)	(per Bbl)		(in thousands)
Oct. - Dec. 2013	150	$	75.00	150	$	105.95	7,000	$	95.01	$	(4,205	)
2014	—	—		—	—		7,950	92.67		(7,532		)
2015	—	—		—	—		1,300	93.18		2,101
										$	(9,636	)

Athlon is also a party to Midland-Cushing basis differential swaps for 5,000 Bbls/D at $1.20/Bbl for the fourth quarter of 2013.  At September 30, 2013, the fair value of these contracts was a liability of approximately $0.3 million.

Counterparty Risk.  At September 30, 2013, Athlon had committed 10% or greater (in terms of fair market value) of its oil derivative contracts in asset positions from the following counterparties, or their affiliates:

	Fair Market Value of
	Oil Derivative
	Contracts
Counterparty	Committed
	(in thousands)
BNP Paribas	$	458

Athlon does not require collateral from its counterparties for entering into financial instruments, so in order to mitigate the credit risk associated with financial instruments, Athlon enters into master netting agreements with its counterparties.  The master netting agreement is a standardized, bilateral contract between a given counterparty and Athlon.  Instead of treating each financial transaction between the counterparty and Athlon separately, the master netting agreement enables the counterparty and Athlon to aggregate all financial trades and treat them as a single agreement.  This arrangement is intended to benefit Athlon in two ways: (i) default by a counterparty under a single financial trade can trigger rights to terminate all financial trades with such counterparty; and (ii) netting of settlement amounts reduces Athlon’s credit exposure to a given counterparty in the event of close-out.  Athlon’s accounting policy is to not offset fair value amounts between different counterparties for derivative instruments in the accompanying Consolidated Balance Sheets.

Tabular Disclosures of Fair Value Measurements

The following table summarizes the fair value of Athlon’s derivative instruments not designated as hedging instruments as of the dates indicated:

	Oil			Commodity			Total
Balance Sheet	Commodity			Derivatives			Commodity
Location	Derivatives			Netting (a)			Derivatives
	(in thousands)
As of September 30, 2013
Assets
Derivatives - current	$	162		$	(162	)	$	—
Derivatives - noncurrent	2,149			(938		)	1,211
Total assets	2,311			(1,100		)	1,211
Liabilities
Derivatives - current	(10,347		)	162			(10,185		)
Derivatives - noncurrent	(1,930		)	938			(992		)
Total liabilities	(12,277		)	1,100			(11,177		)
Net liabilities	$	(9,966	)	$	—		$	(9,966	)
As of December 31, 2012
Assets
Derivatives - current	$	3,386		$	(1,140	)	$	2,246
Derivatives - noncurrent	3,265			(411		)	2,854
Total assets	6,651			(1,551		)	5,100
Liabilities
Derivatives - current	(1,732		)	1,140			(592		)
Derivatives - noncurrent	(930		)	411			(519		)
Total liabilities	(2,662		)	1,551			(1,111		)
Net assets	$	3,989		$	—		$	3,989

(a) Represents counterparty netting under master netting agreements, which allow for netting of commodity derivative contracts.  These derivative instruments are reflected net on the accompanying Consolidated Balance Sheets.

The following table summarizes the effect of derivative instruments not designated as hedges on the accompanying Consolidated Statements of Operations for the periods indicated (in thousands):

		Amount of Loss (Gain) Recognized in Income
	Location of Loss (Gain)	Three months ended September 30,				Nine months ended September 30,
Derivatives Not Designated as Hedges	Recognized in Income	2013		2012		2013		2012
Commodity derivative contracts	Derivative fair value loss (gain)	$	27,037	$	14,268	$	21,331	$	(9,590	)

Fair Value Hierarchy

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  Accounting principles generally accepted in the United States (“GAAP”) establishes a three-tier fair value hierarchy, which prioritizes the inputs used to measure fair value.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).  The three levels of the fair value hierarchy are defined as follows:

· Level 1 — Inputs such as unadjusted, quoted prices that are available in active markets for identical assets or liabilities.

· Level 2 — Inputs, other than quoted prices within Level 1, that are either directly or indirectly observable, such as quoted prices for similar assets and liabilities or quoted prices in inactive markets.

· Level 3 — Inputs that are unobservable for use when little or no market data exists requiring the use of valuation methodologies that result in management’s best estimate of fair value.

As required by GAAP, Athlon utilizes the most observable inputs available for the valuation technique used.  The financial assets and liabilities are classified in their entirety based on the lowest level of input that is of significance to the fair value measurement.  Athlon’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the financial assets and liabilities and their placement within the fair value hierarchy levels.  The following methods and assumptions were used to estimate the fair values of Athlon’s assets and liabilities that are accounted for at fair value on a recurring basis:

· Level 2 — Fair values of swaps are estimated using a combined income-based and market-based valuation methodology based upon forward commodity price curves obtained from independent pricing services.  Athlon’s collars are average value options.  Settlement is determined by the average underlying price over a predetermined period of time.  Athlon uses observable inputs in an option pricing valuation model to determine fair value such as: (i) current market and contractual prices for the underlying instruments; (ii) quoted forward prices for oil and natural gas; (iii) interest rates, such as a LIBOR curve for a term similar to the commodity derivative contract; and (iv) appropriate volatilities.

Athlon adjusts the valuations from the valuation model for nonperformance risk.  For commodity derivative contracts which are in an asset position, Athlon adds the counterparty’s credit default swap spread to the risk-free rate.  If a counterparty does not have a credit default swap spread, Athlon uses other companies with similar credit ratings to determine the applicable spread.  For commodity derivative contracts which are in a liability position, Athlon uses the yield on its senior notes less the risk-free rate.  All fair values have been adjusted for nonperformance risk resulting in a decrease in the net commodity derivative liability of approximately $136,000 as of September 30, 2013 and an increase in the net commodity derivative asset of approximately $125,000 as of December 31, 2012.

The following table sets forth Athlon’s assets and liabilities that were accounted for at fair value on a recurring basis as of the dates indicated:

				Fair Value Measurements at Reporting Date Using
				Quoted Prices in
				Active Markets for		Significant Other			Significant
				Identical Assets		Observable Inputs			Unobservable Inputs
Description	Asset (liability), net			(Level 1)		(Level 2)			(Level 3)
	(in thousands)
As of September 30, 2013
Oil derivative contracts - swaps	$	(9,622	)	$	—	$	(9,622	)	$	—
Oil derivative contracts - basis differential swaps	(330		)	—		(330		)	—
Oil derivative contracts - collars	(14		)	—		(14		)	—
Total	$	(9,966	)	$	—	$	(9,966	)	$	—
As of December 31, 2012
Oil derivative contracts - swaps	$	4,069		$	—	$	4,069		$	—
Oil derivative contracts - collars	(80		)	—		(80		)	—
Total	$	3,989		$	—	$	3,989		$	—

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Long-Term Debt (Tables)

9 Months Ended

Sep. 30, 2013

Long-Term Debt

Schedule of quarterly commitment fee on unused portion of the Holdings Credit Agreement and applicable margin for Eurodollar and base rate loans

Ratio of Outstanding Borrowings to Borrowing Base	Unused Commitment Fee		Applicable Margin for Eurodollar Loans		Applicable Margin for Base Rate Loans
Less than or equal to .30 to 1	0.375	%	1.50	%	0.50	%
Greater than .30 to 1 but less than or equal to .60 to 1	0.375	%	1.75	%	0.75	%
Greater than .60 to 1 but less than or equal to .80 to 1	0.50	%	2.00	%	1.00	%
Greater than .80 to 1 but less than or equal to .90 to 1	0.50	%	2.25	%	1.25	%
Greater than .90 to 1	0.50	%	2.50	%	1.50	%

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Subsequent Events

9 Months Ended

Sep. 30, 2013

Subsequent Events

Subsequent Events

Note 12. Subsequent Events

In November 2013, Holdings amended the Holdings Credit Agreement to, among other things, increase the borrowing base to $525 million.  As of November 14, 2013, there were no of outstanding borrowings under the Holdings Credit Agreement.

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Stockholders' Equity (Details) (USD $)	0 Months Ended			3 Months Ended	9 Months Ended
	Aug. 07, 2013	Apr. 26, 2013	Apr. 02, 2013	Sep. 30, 2013	Sep. 30, 2013
Stockholders' Equity
Common stock issued at incorporation (in shares)			1,000
Aggregate purchase price of common stock issued at incorporation (in dollars)			$ 10.00		$ 295,631,000
Common stock issued in connection with reorganization transaction to holders of Class A limited partner interest and Class B interests of certain holdings (in shares)		960,907
Issue price of IPO (in dollars per share)	$ 20.00
Stock split ratio	65.266				65.266
Outstanding common stock shares prior to closing of IPO	66,339,615
Shares of common stock issued in IPO	15,789,474
Net proceeds from IPO, after deducting underwriting discounts and commissions and offering expenses (in dollars)	295,600,000				296,044,000
Stockholders' equity
Reclassification from "Retained earnings" to "Additional paid-in capital"				$ 12,500,000
Decrease in net income attributable to noncontrolling interest				400000
Holdings
Stockholders' equity
Percentage of ownership noncontrolling interest	3.20%			2.20%	2.20%

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Formation of the Company and Description of Business (Details) (USD $)	0 Months Ended	9 Months Ended
	Aug. 07, 2013	Sep. 30, 2013	Apr. 26, 2013
Formation of the Company and Description of Business
Tax impact of corporate reorganization			$ 73,200,000
Initial public offering
Shares of common stock issued in IPO	15,789,474
Per share price (in dollars per share)	$ 20.00
Net proceeds from IPO, after deducting underwriting discounts and commissions and offering expenses (in dollars)	$ 295,600,000	$ 296,044,000
Holdings
Initial public offering
Number of common stock exchangeable against each unit		1
Holdings | Class A limited partners
Initial public offering
Exchange Agreement Number of New Units Exchangeable Against Limited Partner Interest	1,855,563

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Incentive Stock Plans (Tables)

9 Months Ended

Sep. 30, 2013

Incentive Stock Plans

Summary of changes in unvested RSUs

		Weighted -
		Average
	Number of	Grant Date
	Shares	Fair Value
Outstanding at January 1	—	$	—
Granted	623,913	32.21
Vested	—	—
Forfeited	—	—
Outstanding at September 30	623,913	32.21

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Fair Value Measurements (Details 5) (Derivative instruments not designated as hedges, Commodity contracts, Derivative fair value loss (gain), USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Derivative instruments not designated as hedges | Commodity contracts | Derivative fair value loss (gain)
Fair value measurements
Amount of Loss (Gain) Recognized in Income	$ 27,037	$ 14,268	$ 21,331	$ (9,590)

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Incentive Stock Plans (Details) (USD $)	9 Months Ended									0 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013 RSUs	Sep. 30, 2013 2013 Incentive Award Plan	Sep. 30, 2013 2013 Incentive Award Plan RSUs	Sep. 30, 2013 Maximum 2013 Incentive Award Plan	Sep. 30, 2013 Maximum 2013 Incentive Award Plan Non-employee directors	Sep. 30, 2013 Class B limited partners	Sep. 30, 2012 Class B limited partners	Aug. 07, 2013 Holdings
Incentive stock plans
Aggregate shares of common stock available for issuance under the 2013 stock incentive plan				8,400,000
Aggregate shares of common stock available for issuance under the 2013 stock incentive plan at January 1, 2014 under first condition						12,000,000
Percentage increase to shares of common stock available for issuance under the 2013 stock incentive plan at January 1, 2014 under second condition						4.00%
Grant date fair value of awards							$ 700,000
Remaining shares available for grant				7,776,087
Non-cash equity-based compensation expense	1,799,000	118,000		492,000				1,300,000	186,000	1,500,000
Capitalized non-cash equity-based compensation expense				37,000				421,000	68,000
Vesting period of RSU's					3 years
Unvested RSUs
Granted (in shares)					623,913
Outstanding at ending of period					623,913
Weighted - Average Grant Date Fair Value
Granted (in dollars per share)					$ 32.21
Outstanding at the end of the period					$ 32.21
Additional disclosure
Unvested RSUs granted, vesting of which is dependent on passage of specified time and continued employment condition (in shares)					396,413
Unvested RSUs granted, vesting of which is dependent on passage of specified time and continued employment and also on performance condition (in shares)					227,500
Unvested RSUs subject to variable accounting (in shares)			0
Total unrecognized compensation cost related to unvested RSU's					$ 17,900,000
Weighted-average period for recognition of unrecognized compensation cost					2 years 9 months 18 days

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Fair Value Measurements (Details 2) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Open commodity derivative contracts
Summary of open commodity derivative contracts
Asset (Liability) Fair Market Value	$ 9,636	$ 3,989
Open commodity derivative contracts | Oct. - Dec. 2013
Summary of open commodity derivative contracts
Asset (Liability) Fair Market Value	(4,205)
Open commodity derivative contracts | 2014
Summary of open commodity derivative contracts
Asset (Liability) Fair Market Value	(7,532)
Open commodity derivative contracts | 2015
Summary of open commodity derivative contracts
Asset (Liability) Fair Market Value	2,101
Commodity derivative contracts with floor price | Oct. - Dec. 2013
Summary of open commodity derivative contracts
Average Daily Volume	150
Weighted-Average Floor Price	75.00
Commodity derivative contracts with cap price | Oct. - Dec. 2013
Summary of open commodity derivative contracts
Average Daily Volume	150
Weighted-Average Cap Price	105.95
Commodity derivative contracts with swap price | Oct. - Dec. 2013
Summary of open commodity derivative contracts
Average Daily Volume	7,000
Weighted-Average Swap Price	95.01
Commodity derivative contracts with swap price | 2014
Summary of open commodity derivative contracts
Average Daily Volume	7,950
Weighted-Average Swap Price	92.67
Commodity derivative contracts with swap price | 2015
Summary of open commodity derivative contracts
Average Daily Volume	1,300
Weighted-Average Swap Price	93.18
Midland-Cushing basis differential swaps | Oct. - Dec. 2013
Summary of open commodity derivative contracts
Fair value of derivative liability	$ 300
Midland-Cushing basis differential swaps | Fourth quarter of 2013
Summary of open commodity derivative contracts
Average Daily Volume	5,000
Weighted-Average Swap Price	1.20

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Earnings Per Share (Tables)

9 Months Ended

Sep. 30, 2013

Earnings Per Share

Schedule of allocation of net income (loss) to common stockholders and earnings per share (EPS) computations

	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013			2012
	(in thousands, except per share amounts)
Basic EPS
Numerator:
Undistributed net income (loss) attributable to stockholders	$	2,482		$	(2,096	)	$	37,058		$	42,508
Participation rights of unvested RSUs in undistributed earnings	(6		)	—			(6		)	—
Basic undistributed net income (loss) attributable to stockholders	$	2,476		$	(2,096	)	$	37,052		$	42,508
Denominator:
Basic weighted average shares outstanding	76,637			66,340			69,810			66,340
Basic EPS attributable to stockholders	$	0.03		$	(0.03	)	$	0.53		$	0.64
Diluted EPS
Numerator:
Undistributed net income (loss) attributable to stockholders	$	2,482		$	(2,096	)	$	37,058		$	42,508
Participation rights of unvested RSUs in undistributed earnings	(6		)	—			(6		)	—
Effect of conversion of New Holdings Units to shares of Athlon’s common stock	(215		)	—			616			—
Diluted undistributed net income (loss) attributable to stockholders	$	2,261		$	(2,096	)	$	37,668		$	42,508
Denominator:
Basic weighted average shares outstanding	76,637			66,340			69,810			66,340
Effect of conversion of New Holdings Units to shares of Athlon’s common stock (a)	1,856			—			1,856			1,856
Diluted weighted average shares outstanding	78,493			66,340			71,666			68,196
Diluted EPS attributable to stockholders	$	0.03		$	(0.03	)	$	0.53		$	0.62

(a) For the three months ended September 30, 2012, 1,855,563 New Holdings Units were outstanding but excluded from the EPS calculations because their effect would have been antidilutive.

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Cash flows from operating activities:
Consolidated net income	$ 37,674	$ 42,508
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Depletion, depreciation, and amortization	62,022	37,770
Deferred taxes	6,805	1,546
Non-cash derivative loss (gain)	13,955	(11,760)
Equity-based compensation	1,799	118
Other	4,756	952
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable	(21,350)	(7,390)
Other current assets	(155)	(975)
Accounts payable	(702)	(461)
Accrued interest	15,968	478
Revenue payable	9,718	3,317
Other current liabilities	6,285	(3,349)
Net cash provided by operating activities	136,775	62,754
Cash flows from investing activities:
Acquisitions of oil and natural gas properties	(36,533)	(3,290)
Development of oil and natural gas properties	(257,984)	(183,327)
Other	(486)	(283)
Net cash used in investing activities	(295,003)	(186,900)
Cash flows from financing activities:
Proceeds from long-term debt, net of issuance costs	629,627	425,684
Payments on long-term debt	(505,926)	(325,000)
Distributions to Athlon Holdings LP's Class A limited partners	(75,000)
Shares of common stock sold in initial public offering, net of offering costs	296,044
Other	1,500	166
Net cash provided by financing activities	346,245	100,850
Increase (decrease) in cash and cash equivalents	188,017	(23,296)
Cash and cash equivalents, beginning of period	8,871	32,030
Cash and cash equivalents, end of period	$ 196,888	$ 8,734

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Basis of Presentation

9 Months Ended

Sep. 30, 2013

Basis of Presentation

Basis of Presentation

Note 2. Basis of Presentation

Athlon’s consolidated financial statements include the accounts of its wholly owned and majority-owned subsidiaries.  All material intercompany balances and transactions have been eliminated in consolidation.

In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments necessary to present fairly, in all material respects, Athlon’s financial position as of September 30, 2013, results of operations for the three and nine months ended September 30, 2013 and 2012, and cash flows for the nine months ended September 30, 2013 and 2012.  All adjustments are of a normal recurring nature.  These interim results are not necessarily indicative of results for an entire year.

Certain amounts and disclosures have been condensed and omitted from the unaudited consolidated financial statements pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”).  Therefore, these unaudited consolidated financial statements should be read in conjunction with Holdings’ audited consolidated financial statements and related notes thereto included in Athlon’s final prospectus dated August 1, 2013 and filed with the SEC pursuant to Rule 424(b)(4) of the Securities Act of 1933, as amended, on August 5, 2013.

Income Taxes

Athlon accounts for income taxes using the asset and liability method.  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.  Deferred tax assets and liabilities are measured using enacted tax laws and rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

Athlon periodically assesses whether it is more likely than not that it will generate sufficient taxable income to realize its deferred income tax assets, including net operating losses.  In making this determination, Athlon considers all available positive and negative evidence and makes certain assumptions.  Athlon considers, among other things, its deferred tax liabilities, the overall business environment, its historical earnings and losses, current industry trends, and its outlook for future years.  Athlon believes it is more likely than not that certain net operating losses can be carried forward and utilized.

In April 2013, Athlon had a corporate reorganization to effectuate its IPO.  Holdings, Athlon’s accounting predecessor, is a partnership not subject to federal income tax.  Pursuant to the steps of the corporate reorganization, certain Class A limited partners and the Class B limited partners of Holdings exchanged their interests for shares of Athlon’s common stock.  Athlon’s operations are now subject to federal income tax.  The tax implications of the corporate reorganization and the tax impact of the conversion to operating as a taxable entity have been reflected in the accompanying consolidated financial statements.

Noncontrolling Interest

As of September 30, 2013, management and employees owned approximately 2.2% of Holdings.  Athlon owns 100% of Athlon Holdings GP LLC, which is Holdings’ general partner.  Considering the presumption of control, Athlon has fully consolidated the financial position, results of operations, and cash flows of Holdings.

As presented in the accompanying Consolidated Balance Sheets, “Noncontrolling interest” as of September 30, 2013 of approximately $10.0 million represents management and employees’ 1,855,563 New Holdings Units that are exchangeable for shares of Athlon’s common stock on a one-for-one basis.  As presented in the accompanying Consolidated Statements of Operations, “Net income (loss) attributable to noncontrolling interest” for the three and nine months ended September 30, 2013 of approximately $(0.2) million and $0.6 million, respectively, represents the net income of Holdings attributable to management and employees since April 26, 2013.

The following table summarizes the effects of changes in Athlon’s partnership interest in Holdings on Athlon’s equity for the periods indicated:

	Three months ended September 30, 2013		Nine months ended September 30, 2013
	(in thousands)
Net income attributable to stockholders	$	2,482	$	37,058
Transfer from noncontrolling interest:
Increase in Athlon’s paid-in capital for corporate reorganization	—		290,950
Increase in Athlon’s paid-in capital for issuance of 15,789,474 shares of common stock in initial public offering	295,473		295,473
Net transfer from noncontrolling interest	295,473		586,423
Change from net income attributable to stockholders and transfers from (to) noncontrolling interest	$	297,955	$	623,481

New Accounting Pronouncements

In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2011-11, “Disclosures about Offsetting Assets and Liabilities” and in January 2013 issued ASU 2013-01, “Clarifying the Scope of Disclosures About Offsetting Assets and Liabilities”.  These ASUs created new disclosure requirements regarding the nature of an entity’s rights of setoff and related arrangements associated with its derivative instruments, repurchase agreements, and securities lending transactions.  Certain disclosures of the amounts of certain instruments subject to enforceable master netting arrangements are required, irrespective of whether the entity has elected to offset those instruments in the statement of financial position.  These ASUs were effective retrospectively for annual reporting periods beginning on or after January 1, 2013.  The adoption of these ASUs did not impact Athlon’s financial position, results of operations, or liquidity.

No other new accounting pronouncements issued or effective from January 1, 2013 through the date of this Report, had or are expected to have a material impact on Athlon’s unaudited consolidated financial statements.

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Asset Retirement Obligations

9 Months Ended

Sep. 30, 2013

Asset Retirement Obligations

Asset Retirement Obligations

Note 5. Asset Retirement Obligations

Asset retirement obligations relate to future plugging and abandonment expenses on oil and natural gas properties and related facilities disposal.  The following table summarizes the changes in Athlon’s asset retirement obligations for the nine months ended September 30, 2013 (in thousands):

Balance at January 1	$	5,049
Liabilities assumed in acquisitions	335
Liabilities incurred from new wells	735
Liabilities settled	(108		)
Accretion of discount	485
Revisions of previous estimates	3
Balance at September 30	6,499
Less: current portion	60
Asset retirement obligations - long-term	$	6,439

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Proved Properties

9 Months Ended

Sep. 30, 2013

Proved Properties

Proved Properties

Note 3. Proved Properties

Amounts shown in the accompanying Consolidated Balance Sheets as “Proved properties, including wells and related equipment” consisted of the following as of the dates indicated:

	September 30,		December 31,
	2013		2012
	(in thousands)
Proved leasehold costs	$	411,657	$	376,271
Wells and related equipment - Completed	634,980		379,036
Wells and related equipment - In process	38,244		33,264
Total proved properties	$	1,084,881	$	788,571

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Related Party Transactions (Details) (USD $)	3 Months Ended	9 Months Ended					35 Months Ended	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2013	Sep. 30, 2013 Apollo Global Securities, LLC	Sep. 30, 2013 Holdings	Sep. 30, 2013 Holdings Apollo	Sep. 30, 2012 Holdings Apollo	Aug. 07, 2013 Holdings Apollo	Sep. 30, 2013 Holdings Apollo funds	Sep. 30, 2013 Holdings Other Class A limited partners
Related party transactions
Transaction fee as a percentage of total equity contributed					2.00%
Transaction fees							$ 7,500,000
Consulting and advisory fee as percentage of EBITDAX under first condition					1.00%
Advisory fee per quarter under second condition					62,500
Maximum advisory fee per calendar year					500,000
Advisory fee					500,000	493,000
Termination charges	2,408,000	2,408,000			2,400,000
Unreimbursed fee on termination of the service agreement					132,000
Proceeds from gross spread			500,000
Payment of discounts and commissions to underwriters in IPO			900,000
Distribution payment to Class A limited partners		$ 75,000,000						$ 73,000,000	$ 2,000,000
Number of common stock exchangeable against each unit				1
Percentage of income tax benefits distributable to holders of New Holdings Units				85.00%

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Basis of Presentation (Details) (USD $) In Thousands, except Share data, unless otherwise specified	0 Months Ended	3 Months Ended		9 Months Ended
	Aug. 07, 2013	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Noncontrolling interest
Noncontrolling interest		$ 10,045		$ 10,045
Net income (loss) attributable to noncontrolling interest		(215)		616
Effects of changes in Athlon's partnership interest in Holdings on Athlon's equity
Net income attributable to stockholders		2,476	(2,096)	37,052	42,508
Transfer from noncontrolling interest:
Shares of common stock in public offering	15,789,474
Athlon Holdings GP LLC
Noncontrolling interest
Ownership interest in general partner of Holdings		100.00%		100.00%
Holdings
Noncontrolling interest
Percentage of ownership interest of management and employees	3.20%	2.20%		2.20%
Number of common stock exchangeable against each unit				1
Holdings | Athlon Holdings GP LLC
Effects of changes in Athlon's partnership interest in Holdings on Athlon's equity
Net income attributable to stockholders		2,482		37,058
Transfer from noncontrolling interest:
Increase in Athlon's paid-in capital for corporate reorganization				290,950
Increase in Athlon's paid-in capital for issuance of 15,789,474 shares of common stock in initial public offering		295,473		295,473
Shares of common stock in public offering				15,789,474
Net transfer from noncontrolling interest		295,473		586,423
Change from net income attributable to stockholders and transfers from (to) noncontrolling interest		$ 297,955		$ 623,481
Holdings | Class A limited partners
Noncontrolling interest
Exchange Agreement Number of New Units Exchangeable Against Limited Partner Interest	1,855,563

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Fair Value Measurements (Details 3) (Master netting agreements, BNP Paribas, USD $) In Thousands, unless otherwise specified	Sep. 30, 2013
Master netting agreements | BNP Paribas
Counterparty risk
Fair Market Value of Oil Derivative Contracts Committed	$ 458

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Long-Term Debt (Details) (USD $)	9 Months Ended	1 Months Ended	9 Months Ended					9 Months Ended	3 Months Ended	9 Months Ended			9 Months Ended
	Sep. 30, 2013	Apr. 30, 2013 Holdings Senior notes	Sep. 30, 2013 Holdings Senior notes Upon assets disposition triggering events	Sep. 30, 2013 Holdings Senior notes Prior to April 15, 2016	Sep. 30, 2013 Holdings Senior notes Prior to April 15, 2016 Redemption from proceeds of certain equity offerings	Sep. 30, 2013 Holdings Senior notes On or prior to July 15, 2014 Redemption of debt instrument upon change of control	Sep. 30, 2013 Holdings Senior notes Maximum	Sep. 30, 2013 Holdings Senior notes Maximum Prior to April 15, 2016 Redemption from proceeds of certain equity offerings	Sep. 30, 2013 Holdings Credit agreement	Sep. 30, 2013 Holdings Credit agreement	May 31, 2013 Holdings Credit agreement	Apr. 30, 2013 Holdings Credit agreement	Sep. 30, 2013 Holdings Credit agreement Applicable Margin for Eurodollar Loans Eurodollar rate	Sep. 30, 2013 Holdings Credit agreement Applicable Margin for Eurodollar Loans LIBOR	Sep. 30, 2013 Holdings Credit agreement Applicable Margin for Base Rate Loans Eurodollar rate	Sep. 30, 2013 Holdings Credit agreement Applicable Margin for Base Rate Loans LIBOR	Sep. 30, 2013 Holdings Credit agreement Applicable Margin for Base Rate Loans Base Rate	Sep. 30, 2013 Holdings Credit agreement Applicable Margin for Base Rate Loans Prime rate	Sep. 30, 2013 Holdings Credit agreement Applicable Margin for Base Rate Loans Federal funds rate	Sep. 30, 2013 Holdings Credit agreement Less than or equal to .30 to 1	Sep. 30, 2013 Holdings Credit agreement Less than or equal to .30 to 1 Applicable Margin for Eurodollar Loans	Sep. 30, 2013 Holdings Credit agreement Less than or equal to .30 to 1 Applicable Margin for Base Rate Loans	Sep. 30, 2013 Holdings Credit agreement Greater than .30 to 1 but less than or equal to .60 to 1	Sep. 30, 2013 Holdings Credit agreement Greater than .30 to 1 but less than or equal to .60 to 1 Applicable Margin for Eurodollar Loans	Sep. 30, 2013 Holdings Credit agreement Greater than .30 to 1 but less than or equal to .60 to 1 Applicable Margin for Base Rate Loans	Sep. 30, 2013 Holdings Credit agreement Greater than .60 to 1 but less than or equal to .80 to 1	Sep. 30, 2013 Holdings Credit agreement Greater than .60 to 1 but less than or equal to .80 to 1 Applicable Margin for Eurodollar Loans	Sep. 30, 2013 Holdings Credit agreement Greater than .60 to 1 but less than or equal to .80 to 1 Applicable Margin for Base Rate Loans	Sep. 30, 2013 Holdings Credit agreement Greater than .80 to 1 but less than or equal to .90 to 1	Sep. 30, 2013 Holdings Credit agreement Greater than .80 to 1 but less than or equal to .90 to 1 Applicable Margin for Eurodollar Loans	Sep. 30, 2013 Holdings Credit agreement Greater than .80 to 1 but less than or equal to .90 to 1 Applicable Margin for Base Rate Loans	Sep. 30, 2013 Holdings Credit agreement Greater than .90 to 1	Sep. 30, 2013 Holdings Credit agreement Greater than .90 to 1 Applicable Margin for Eurodollar Loans	Sep. 30, 2013 Holdings Credit agreement Greater than .90 to 1 Applicable Margin for Base Rate Loans	Sep. 30, 2013 Holdings Credit agreement Maximum Less than or equal to .30 to 1	Sep. 30, 2013 Holdings Credit agreement Maximum Greater than .30 to 1 but less than or equal to .60 to 1	Sep. 30, 2013 Holdings Credit agreement Maximum Greater than .60 to 1 but less than or equal to .80 to 1	Sep. 30, 2013 Holdings Credit agreement Maximum Greater than .80 to 1 but less than or equal to .90 to 1	Sep. 30, 2013 Holdings Credit agreement Maximum Greater than .90 to 1	Sep. 30, 2013 Holdings Credit agreement Minimum Greater than .30 to 1 but less than or equal to .60 to 1	Sep. 30, 2013 Holdings Credit agreement Minimum Greater than .60 to 1 but less than or equal to .80 to 1	Sep. 30, 2013 Holdings Credit agreement Minimum Greater than .80 to 1 but less than or equal to .90 to 1	Sep. 30, 2013 Holdings Former second lien term loan
Long-term debt
Aggregate principal amount of notes issued		$ 500,000,000
Interest rate (as a percent)		7.375%
Distribution paid to Class A limited partners	75,000,000	75,000,000
Fixed charge coverage ratio							2.0
Percentage of aggregate principal amount of notes that can be redeemed								35.00%
Redemption price of debt instrument (as a percent)			101.00%	100.00%	107.375%	110.00%
Write off of unamortized debt issuance costs																																											2,800,000
Maximum amount committed by lender									1,000,000,000	1,000,000,000
Current borrowing base									320,000,000	320,000,000	320,000,000	267,500,000
Outstanding borrowings									0	0
Outstanding letters of credit									$ 0	$ 0
Ratio of Outstanding Borrowings to Borrowing Base																																			0.30	0.60	0.80	0.90	0.90	0.30	0.60	0.80
Unused Commitment Fee (as a percent)																				0.375%			0.375%			0.50%			0.50%			0.50%
Applicable Margin (as a percent)															1.00%				0.50%		1.50%	0.50%		1.75%	0.75%		2.00%	1.00%		2.25%	1.25%		2.50%	1.50%
Variable interest rate base													Eurodollar rate	LIBOR	Eurodollar rate	LIBOR	Base Rate	prime rate	Federal fund
Ratio of consolidated total debt to EBITDAX beginning with quarter ended June 30, 2013									4.75
Ratio of consolidated total debt to EBITDAX beginning with quarter ended June 30, 2014										4.5
Maximum projected production that can be hedged (as a percent)										85.00%
Period over which hedging limitation requirement of the projected production from proved reserve is required to be maintained										66 months

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Sep. 30, 2013
CONSOLIDATED BALANCE SHEETS
Preferred stock, par value (in dollars per share)	$ 0.01
Preferred stock, shares authorized	50,000,000
Preferred stock, shares issued	0
Preferred stock, shares outstanding	0
Common stock, par value (in dollars per share)	$ 0.01
Common stock, shares authorized	500,000,000
Common stock, shares issued	82,189,089
Common stock, shares outstanding	82,189,089

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Earnings Per Share

9 Months Ended

Sep. 30, 2013

Earnings Per Share

Earnings Per Share

Note 8. Earnings Per Share

Prior to the consummation of Athlon’s IPO, Athlon had 960,907 shares of outstanding common stock.  In conjunction with the closing of the IPO, certain Class A limited partners and Class B limited partners of Holdings that exchanged their interests for shares of Athlon’s common stock were subject to an adjustment based on Athlon’s IPO price of $20.00 per share and an actual 65.266-for-1 stock split.  Following this adjustment and stock split, the number of outstanding shares of Athlon’s common stock increased from 960,907 shares to 66,339,615 shares.  The one-to-one conversion of the Holdings interests in April 2013 to 960,907 shares of Athlon common stock that occurred in connection with the IPO is akin to a stock split and has been treated as such in Athlon’s earnings per share (“EPS”) calculations.  Accordingly, Athlon assumes that 66,339,615 shares of common stock were outstanding during periods prior to Athlon’s IPO for purposes of calculating EPS.

The following table reflects the allocation of net income (loss) to common stockholders and EPS computations for the periods indicated:

	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013			2012
	(in thousands, except per share amounts)
Basic EPS
Numerator:
Undistributed net income (loss) attributable to stockholders	$	2,482		$	(2,096	)	$	37,058		$	42,508
Participation rights of unvested RSUs in undistributed earnings	(6		)	—			(6		)	—
Basic undistributed net income (loss) attributable to stockholders	$	2,476		$	(2,096	)	$	37,052		$	42,508
Denominator:
Basic weighted average shares outstanding	76,637			66,340			69,810			66,340
Basic EPS attributable to stockholders	$	0.03		$	(0.03	)	$	0.53		$	0.64
Diluted EPS
Numerator:
Undistributed net income (loss) attributable to stockholders	$	2,482		$	(2,096	)	$	37,058		$	42,508
Participation rights of unvested RSUs in undistributed earnings	(6		)	—			(6		)	—
Effect of conversion of New Holdings Units to shares of Athlon’s common stock	(215		)	—			616			—
Diluted undistributed net income (loss) attributable to stockholders	$	2,261		$	(2,096	)	$	37,668		$	42,508
Denominator:
Basic weighted average shares outstanding	76,637			66,340			69,810			66,340
Effect of conversion of New Holdings Units to shares of Athlon’s common stock (a)	1,856			—			1,856			1,856
Diluted weighted average shares outstanding	78,493			66,340			71,666			68,196
Diluted EPS attributable to stockholders	$	0.03		$	(0.03	)	$	0.53		$	0.62

(a) For the three months ended September 30, 2012, 1,855,563 New Holdings Units were outstanding but excluded from the EPS calculations because their effect would have been antidilutive.

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (USD $)	Total	Total Stockholders' Equity	Partners' Equity	Common Stock	Additional Paid-in Capital	Retained Earnings	Noncontrolling Interest
Balance at Dec. 31, 2012	$ 420,877,000		$ 420,877,000
Balance at Dec. 31, 2012	420,877,000
Increase (Decrease) in Equity
Capital contributions	1,500,000		1,500,000
Equity-based compensation prior to corporate reorganization	89,000		89,000
Net income prior to corporate reorganization	26,780,000		26,780,000
Distributions to Athlon Holdings LP's Class A limited partners	(75,000,000)		(75,000,000)
Common stock issued in corporate reorganization		364,817,000	(374,246,000)	663,000	364,154,000		9,429,000
Common stock issued in corporate reorganization (in shares)				66,340,000
Tax impact of corporate reorganization	(73,204,000)	(73,204,000)			(73,204,000)
Equity-based compensation subsequent to corporate reorganization	2,160,000	2,160,000			2,160,000
Shares of common stock sold in initial public offering, net of offering costs	295,631,000	295,631,000		158,000	295,473,000
Shares of common stock sold in initial public offering, net of offering costs (in shares)				15,789,000
Consolidated net income subsequent to corporate reorganization	10,894,000	10,278,000				10,278,000	616,000
Balance at Sep. 30, 2013	$ 609,727,000	$ 599,682,000		$ 821,000	$ 588,583,000	$ 10,278,000	$ 10,045,000
Balance (in shares) at Sep. 30, 2013	82,189,089			82,129,000

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CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Current assets:
Cash and cash equivalents	$ 196,888	$ 8,871
Accounts receivable	45,851	24,501
Derivatives, at fair value		2,246
Inventory	972	1,022
Other	1,205	2,486
Total current assets	244,916	39,126
Properties and equipment, at cost - full cost method:
Proved properties, including wells and related equipment	1,084,881	788,571
Unproved properties	110,095	89,860
Accumulated depletion, depreciation, and amortization	(135,689)	(73,824)
Properties and equipment, net	1,059,287	804,607
Derivatives, at fair value	1,211	2,854
Debt issuance costs	14,603	4,418
Other	1,400	1,293
Total assets	1,321,417	852,298
Accounts payable:
Trade	2,338	3,170
Affiliate	2	935
Accrued liabilities:
Lease operating	5,391	3,858
Production, severance, and ad valorem taxes	5,362	1,307
Development capital	60,092	39,483
Interest	16,802	834
Derivatives, at fair value	10,185	592
Revenue payable	19,550	9,330
Deferred taxes	14,529	58
Other	2,021	1,808
Total current liabilities	136,272	61,375
Derivatives, at fair value	992	519
Asset retirement obligations, net of current portion	6,439	5,049
Long-term debt	500,000	362,000
Deferred taxes	67,878	2,340
Other	109	138
Total liabilities	711,690	431,421
Commitments and contingencies
Equity:
Partners' equity		420,877
Preferred stock, $.01 par value, at September 30, 2013, 50,000,000 shares authorized, none issued and outstanding
Common stock, $.01 par value, at September 30, 2013, 500,000,000 shares authorized, 82,189,089 issued and outstanding	821
Additional paid-in capital	588,583
Retained earnings	10,278
Total stockholders' equity	599,682
Noncontrolling interest	10,045
Total equity	609,727	420,877
Total liabilities and equity	$ 1,321,417	$ 852,298

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Proved Properties (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Proved Properties
Proved leasehold costs	$ 411,657	$ 376,271
Wells and related equipment - Completed	634,980	379,036
Wells and related equipment - In process	38,244	33,264
Total proved properties	$ 1,084,881	$ 788,571

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Asset Retirement Obligations (Tables)

9 Months Ended

Sep. 30, 2013

Asset Retirement Obligations

Summary of changes in asset retirement obligations

The following table summarizes the changes in Athlon’s asset retirement obligations for the nine months ended September 30, 2013 (in thousands):

Balance at January 1	$	5,049
Liabilities assumed in acquisitions	335
Liabilities incurred from new wells	735
Liabilities settled	(108		)
Accretion of discount	485
Revisions of previous estimates	3
Balance at September 30	6,499
Less: current portion	60
Asset retirement obligations - long-term	$	6,439

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Earnings Per Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	0 Months Ended	3 Months Ended		9 Months Ended
	Aug. 07, 2013	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Apr. 30, 2013
Earnings Per Share
Outstanding common stock prior to consummation of IPO (in shares)						960,907
Issue price of IPO (in dollars per share)	$ 20.00
Stock split ratio	65.266			65.266
Outstanding common stock shares prior to closing of IPO	66,339,615
Numerator:
Undistributed net income (loss) attributable to stockholders		$ 2,482	$ (2,096)	$ 37,058	$ 42,508
Participation rights of unvested RSUs in undistributed earnings		(6)		(6)
Basic undistributed net income (loss) attributable to stockholders		2,476	(2,096)	37,052	42,508
Denominator:
Basic weighted average shares outstanding		76,637,000	66,340,000	69,810,000	66,340,000
Basic EPS attributable to stockholders (in dollars per share)		$ 0.03	$ (0.03)	$ 0.53	$ 0.64
Numerator:
Undisributed net income (loss) attributable to stockholders		2,482	(2,096)	37,058	42,508
Participation rights of unvested RSUs in undistributed earnings		(6)		(6)
Effect of conversion of New Holdings Units to shares of Athlon's common stock		(215)		616
Diluted undistributed net income (loss) attributable to stockholders		$ 2,261	$ (2,096)	$ 37,668	$ 42,508
Denominator:
Basic weighted average shares outstanding		76,637,000	66,340,000	69,810,000	66,340,000
Effect of conversion of New Holdings Units to shares of Athlon's common stock		1,856,000		1,856,000	1,856,000
Diluted weighted average shares outstanding		78,493,000	66,340,000	71,666,000	68,196,000
Diluted EPS attributable to stockholders (in dollars per share)		$ 0.03	$ (0.03)	$ 0.53	$ 0.62
Antidilutive New Holdings Units excluded from EPS calculations (in shares)			1,855,563

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Fair Value Measurements (Details 6) (Commodity contracts, USD $)	9 Months Ended	12 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
Fair Value Hierarchy
Increase (decrease) in net commodity derivative asset	$ 136,000	$ 125,000
Recurring | Asset (Liability), net | Oil
Fair Value Hierarchy
Total	(9,966,000)	3,989,000
Recurring | Asset (Liability), net | Oil | Swaps
Fair Value Hierarchy
Total	(9,622,000)	4,069,000
Recurring | Asset (Liability), net | Oil | Basis differential swaps
Fair Value Hierarchy
Total	(330,000)
Recurring | Asset (Liability), net | Oil | Collars
Fair Value Hierarchy
Total	(14,000)	(80,000)
Recurring | Significant Other Observable Inputs (Level 2) | Oil
Fair Value Hierarchy
Total	(9,966,000)	3,989,000
Recurring | Significant Other Observable Inputs (Level 2) | Oil | Swaps
Fair Value Hierarchy
Total	(9,622,000)	4,069,000
Recurring | Significant Other Observable Inputs (Level 2) | Oil | Basis differential swaps
Fair Value Hierarchy
Total	(330,000)
Recurring | Significant Other Observable Inputs (Level 2) | Oil | Collars
Fair Value Hierarchy
Total	$ (14,000)	$ (80,000)

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Asset Retirement Obligations (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
Asset retirement obligations
Balance at the beginning of the period			$ 5,049
Liabilities incurred from new wells			735
Liabilities assumed in acquisitions			335
Liabilities settled			(108)
Accretion of discount	174	123	485	343
Revisions of previous estimates			3
Balance at the end of the period	6,499		6,499
Less: current portion	60		60
Asset retirement obligations - long-term	$ 6,439		$ 6,439		$ 5,049

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Stockholders' Equity

9 Months Ended

Sep. 30, 2013

Stockholders' Equity

Stockholders' Equity

Note 7. Stockholders’ Equity

In connection with Athlon’s incorporation on April 1, 2013 under the laws of the State of Delaware, it issued 1,000 shares of its common stock to Athlon Holdings GP LLC for an aggregate purchase price of $10.00.  On April 26, 2013, in connection with Athlon’s reorganization transactions, certain holders of limited partner interests in Holdings exchanged their Class A interests and Class B interests for an aggregate of 960,907 shares of Athlon’s common stock.  In connection with the effectiveness of Athlon’s IPO, these shares were subject to an adjustment based on Athlon’s IPO price of $20.00 per share and an actual 65.266-for-1 stock split resulting in 66,339,615 shares of Athlon’s common stock to be outstanding prior to the closing of the IPO.

As discussed in “Note 1. Formation of the Company and Description of Business”, on August 7, 2013, Athlon completed its IPO of 15,789,474 shares of its common stock at $20.00 per share and received net proceeds of approximately $295.6 million, after deducting underwriting discounts and commissions and offering expenses.  Athlon used the net proceeds from the IPO to purchase New Holdings Units from Holdings.  Holdings used the proceeds it received as a result of Athlon’s purchase of New Holdings Units (i) to reduce outstanding borrowings under the Holdings Credit Agreement, (ii) to provide additional liquidity for use in its drilling program, and (iii) for general corporate purposes, including potential acquisitions.  Upon consummation of the IPO, Athlon’s ownership percentage of Holdings increased, resulting in a decrease in the noncontrolling interest from approximately 3.2% to approximately 2.2%.

During the third quarter of 2013, Athlon recorded a reclassification of approximately $12.5 million from “Retained earnings” to “Additional paid-in capital” on the accompanying Consolidated Statement of Changes in Equity related to derivative activity that occurred prior to Athlon’s corporate reorganization on April 26, 2013.  This resulted in a decrease in “Net income attributable to noncontrolling interest” on the accompanying Consolidated Statements of Operations of approximately $0.4 million during the third quarter of 2013.

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Fair Value Measurements (Details) (Level 1 input, USD $) In Millions, unless otherwise specified	Sep. 30, 2013
Level 1 input
Fair value measurements
Senior notes	$ 515.6

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Subsequent Events (Details) (Credit agreement, Holdings, USD $) In Millions, unless otherwise specified	Sep. 30, 2013	May 31, 2013	Apr. 30, 2013	Nov. 30, 2013 Subsequent events	Nov. 14, 2013 Subsequent events
Subsequent events
Current borrowing base	$ 320.0	$ 320.0	$ 267.5	$ 525.0
Outstanding letters of credit	$ 0				$ 0

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2013

Commitments and Contingencies

Commitments and Contingencies

Note 10. Commitments and Contingencies

From time to time, Athlon is a party to ongoing legal proceedings in the ordinary course of business, including workers’ compensation claims and employment related disputes.  Management does not believe the results of these proceedings, individually or in the aggregate, will have a material adverse effect on Athlon’s business, financial position, results of operations, or liquidity.

Additionally, Athlon has contractual obligations related to future plugging and abandonment expenses on oil and natural gas properties and related facilities disposal, long-term debt, commodity derivative contracts, operating leases, and development commitments.

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Long-Term Debt

9 Months Ended

Sep. 30, 2013

Long-Term Debt

Long-Term Debt

Note 6. Long-Term Debt

Senior Notes

In April 2013, Holdings issued $500 million aggregate principal amount of 7 3/8% senior notes due 2021 (the “Notes”).  The net proceeds from the Notes were used to repay a portion of the outstanding borrowings under Holdings’ credit agreement, to repay in full and terminate Holdings’ former second lien term loan, to make a $75 million distribution to Holdings’ Class A limited partners, and for general partnership purposes.  On August 14, 2013, Holdings entered into a supplemental indenture pursuant to which Athlon became an unconditional guarantor of the Notes.

The indenture governing the Notes contains covenants, including, among other things, covenants that restrict Holdings’ ability to:

· make distributions, investments, or other restricted payments if Holdings’ fixed charge coverage ratio is less than 2.0 to 1.0;

· incur additional indebtedness if Holdings’ fixed charge coverage ratio would be less than 2.0 to 1.0; and

· create liens, sell assets, consolidate or merge with any other person, or engage in transactions with affiliates.

These covenants are subject to a number of important qualifications, limitations, and exceptions.  In addition, the indenture contains other customary terms, including certain events of default upon the occurrence of which the senior notes may be declared immediately due and payable.

Under the indenture, starting on April 15, 2016, Holdings will be able to redeem some or all of the Notes at a premium that will decrease over time, plus accrued and unpaid interest to the date of redemption.  Prior to April 15, 2016, Holdings will be able, at its option, to redeem up to 35% of the aggregate principal amount of the Notes at a price of 107.375% of the principal thereof, plus accrued and unpaid interest to the date of redemption, with an amount equal to the net proceeds from certain equity offerings.  In addition, at Holdings’ option, prior to April 15, 2016, Holdings may redeem some or all of the Notes at a redemption price equal to 100% of the principal amount of the Notes, plus an “applicable premium”, plus accrued and unpaid interest to the date of redemption.  If a change of control occurs on or prior to July 15, 2014, Holdings may redeem all, but not less than all, of the notes at 110% of the principal amount thereof plus accrued and unpaid interest to, but not including, the redemption date.  Certain asset dispositions will be triggering events that may require Holdings to repurchase all or any part of a noteholder’s Notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to but excluding the date of repurchase.  Interest on the Notes is payable in cash semi-annually in arrears, commencing on October 15, 2013, through maturity.

As a result of the issuance of the Notes, Holdings’ former second lien term loan was paid off and retired and the borrowing base of the credit agreement was reduced resulting in a write off of unamortized debt issuance costs of approximately $2.8 million, which is included in “Interest expense” in the accompanying Consolidated Statements of Operations and “Other” in the operating activities section of the accompanying Consolidated Statements of Cash Flows for the nine months ended September 30, 2013.

Credit Agreement

Holdings is a party to an amended and restated credit agreement dated March 19, 2013 (the “Holdings Credit Agreement”), which matures on March 19, 2018.  The Holdings Credit Agreement provides for revolving credit loans to be made to Holdings from time to time and letters of credit to be issued from time to time for the account of Holdings or any of its restricted subsidiaries.  The aggregate amount of the commitments of the lenders under the Holdings Credit Agreement is $1.0 billion.  Availability under the Holdings Credit Agreement is subject to a borrowing base, which is redetermined semi-annually and upon requested special redeterminations.

In conjunction with the offering of the Notes in April 2013 as discussed above, the borrowing base under the Holdings Credit Agreement was reduced to $267.5 million.  In May 2013, Holdings amended the Holdings Credit Agreement to, among other things, increase the borrowing base to $320 million.  As of September 30, 2013, the borrowing base was $320 million and there were no outstanding borrowings and no outstanding letters of credit under the Holdings Credit Agreement.  Please see "Note 12. Subsequent Events" for discussion of Athlon's borrowing base redetermination.

Obligations under the Holdings Credit Agreement are secured by a first-priority security interest in substantially all of Holdings’ proved reserves and in the equity interests of its operating subsidiaries.  In addition, obligations under the Holdings Credit Agreement are guaranteed by Athlon and Holdings’ operating subsidiaries.

Loans under the Holdings Credit Agreement are subject to varying rates of interest based on (i) outstanding borrowings in relation to the borrowing base and (ii) whether the loan is a Eurodollar loan or a base rate loan.  Eurodollar loans under the Holdings Credit Agreement bear interest at the Eurodollar rate plus the applicable margin indicated in the following table, and base rate loans under the Holdings Credit Agreement bear interest at the base rate plus the applicable margin indicated in the following table.  Holdings also incurs a quarterly commitment fee on the unused portion of the Holdings Credit Agreement indicated in the following table:

Ratio of Outstanding Borrowings to Borrowing Base	Unused Commitment Fee		Applicable Margin for Eurodollar Loans		Applicable Margin for Base Rate Loans
Less than or equal to .30 to 1	0.375	%	1.50	%	0.50	%
Greater than .30 to 1 but less than or equal to .60 to 1	0.375	%	1.75	%	0.75	%
Greater than .60 to 1 but less than or equal to .80 to 1	0.50	%	2.00	%	1.00	%
Greater than .80 to 1 but less than or equal to .90 to 1	0.50	%	2.25	%	1.25	%
Greater than .90 to 1	0.50	%	2.50	%	1.50	%

The “Eurodollar rate” for any interest period (either one, two, three, or nine months, as selected by Holdings) is the rate equal to the British Bankers Association London Interbank Offered Rate (“LIBOR”) for deposits in dollars for a similar interest period.  The “Base Rate” is calculated as the highest of: (i) the annual rate of interest announced by Bank of America, N.A. as its “prime rate”; (ii) the federal funds effective rate plus 0.5%; or (iii) except during a “LIBOR Unavailability Period”, the Eurodollar rate (for dollar deposits for a one-month term) for such day plus 1.0%.

Any outstanding letters of credit reduce the availability under the Holdings Credit Agreement.  Borrowings under the Holdings Credit Agreement may be repaid from time to time without penalty.

The Holdings Credit Agreement contains covenants including, among others, the following:

· a prohibition against incurring debt, subject to permitted exceptions;

· a restriction on creating liens on Holdings’ assets and the assets of its operating subsidiaries, subject to permitted exceptions;

· restrictions on merging and selling assets outside the ordinary course of business;

· restrictions on use of proceeds, investments, transactions with affiliates, or change of principal business;

· a requirement that Holdings maintain a ratio of consolidated total debt to EBITDAX (as defined in the Holdings Credit Agreement) of not more than 4.75 to 1.0 (which ratio changes to 4.5 to 1.0 beginning with the quarter ending June 30, 2014); and

· a provision limiting commodity derivative contracts to a volume not exceeding 85% of projected production from proved reserves for a period not exceeding 66 months from the date the commodity derivative contract is entered into.

The Holdings Credit Agreement contains customary events of default, including our failure to comply with the financial ratios described above, which would permit the lenders to accelerate the debt if not cured within applicable grace periods.  If an event of default occurs and is continuing, lenders with a majority of the aggregate commitments may require Bank of America, N.A. to declare all amounts outstanding under the Holdings Credit Agreement to be immediately due and payable.

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Formation of the Company and Description of Business

9 Months Ended

Sep. 30, 2013

Formation of the Company and Description of Business

Formation of the Company and Description of Business

Note 1. Formation of the Company and Description of Business

Athlon Energy Inc. (together with its subsidiaries, “Athlon”), a Delaware corporation, was formed on April 1, 2013 and is an independent exploration and production company focused on the acquisition, development, and exploitation of unconventional oil and liquids-rich natural gas reserves in the Permian Basin.

On April 26, 2013, Athlon Holdings LP (together with its subsidiaries, “Holdings”), a Delaware limited partnership, underwent a corporate reorganization and as a result, Holdings became a majority-owned subsidiary of Athlon.  Holdings is considered Athlon’s accounting predecessor.  Athlon operates and controls all of the business and affairs of Holdings and consolidates its financial results.  Holdings is not subject to federal income taxes.  On the date of the corporate reorganization, a corresponding “first day” net deferred tax liability of approximately $73.2 million was recorded for differences between the tax and book basis of Athlon’s assets and liabilities.  The offset of the deferred tax liability was recorded to additional paid-in capital.

Prior to the corporate reorganization, Holdings was a party to a limited partnership agreement with its management group and Apollo Athlon Holdings, LP (“Apollo”), which is an affiliate of Apollo Global Management, LLC.  Prior to the corporate reorganization, Apollo Investment Fund VII, L.P. and its parallel funds (the “Apollo Funds”), members of Holdings’ management team, and certain employees owned all of the Class A limited partner interests in Holdings and members of Holdings’ management team and certain employees owned all of the Class B limited partner interests in Holdings.

In the corporate reorganization, the Apollo Funds entered into a number of distribution and contribution transactions pursuant to which the Apollo Funds exchanged their Class A limited partner interests in Holdings for common stock of Athlon.  The remaining holders of Class A limited partner interests in Holdings have not exchanged their interests in the reorganization transactions.  In addition, the holders of the Class B limited partner interests in Holdings exchanged their interests for common stock of Athlon subject to the same conditions and vesting terms.

Initial Public Offering

On August 7, 2013, Athlon completed its initial public offering (“IPO”) of 15,789,474 shares of its common stock at $20.00 per share and received net proceeds of approximately $295.6 million, after deducting underwriting discounts and commissions and offering expenses.  Upon closing of the IPO, the limited partnership agreement of Holdings was amended and restated to, among other things, modify Holdings’ capital structure by replacing its different classes of interests with a single new class of units, the “New Holdings Units”.  The members of Holdings’ management team and certain employees that held Class A limited partner interests now own 1,855,563 New Holdings Units and entered into an exchange agreement under which (subject to the terms of the exchange agreement) they have the right to exchange their New Holdings Units for shares of common stock of Athlon on a one-for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends, and reclassifications.  All other New Holdings Units are held by Athlon.  Athlon used the net proceeds from the IPO to purchase New Holdings Units from Holdings.  Holdings used the proceeds it received as a result of Athlon’s purchase of New Holdings Units (i) to reduce outstanding borrowings under its credit agreement, (ii) to provide additional liquidity for use in its drilling program, and (iii) for general corporate purposes, including potential acquisitions.

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Fair Value Measurements (Details 4) (Commodity contracts, USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Liabilities
Net assets (liabilities)	$ 9,636	$ 3,989
Derivative instruments not designated as hedging instruments | Oil
Assets
Oil Commodity Derivatives, assets	2,311	6,651
Commodity Derivatives Netting, assets	(1,100)	(1,551)
Total Commodity Derivatives	1,211	5,100
Liabilities
Oil Commodity Derivatives, liabilities	(12,277)	(2,662)
Commodity Derivatives Netting, liabilities	1,100	1,551
Total Commodity Derivatives	(11,177)	(1,111)
Net assets (liabilities)	(9,966)	3,989
Derivative instruments not designated as hedging instruments | Oil | Derivative assets - current
Assets
Oil Commodity Derivatives, assets	162	3,386
Commodity Derivatives Netting, assets	(162)	(1,140)
Total Commodity Derivatives		2,246
Derivative instruments not designated as hedging instruments | Oil | Derivative assets - noncurrent
Assets
Oil Commodity Derivatives, assets	2,149	3,265
Commodity Derivatives Netting, assets	(938)	(411)
Total Commodity Derivatives	1,211	2,854
Derivative instruments not designated as hedging instruments | Oil | Derivative liabilities - current
Liabilities
Oil Commodity Derivatives, liabilities	(10,347)	(1,732)
Commodity Derivatives Netting, liabilities	162	1,140
Total Commodity Derivatives	(10,185)	(592)
Derivative instruments not designated as hedging instruments | Oil | Derivative liabilities - noncurrent
Liabilities
Oil Commodity Derivatives, liabilities	(1,930)	(930)
Commodity Derivatives Netting, liabilities	938	411
Total Commodity Derivatives	$ (992)	$ (519)

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Basis of Presentation (Policies)

9 Months Ended

Sep. 30, 2013

Basis of Presentation

Consolidation

Athlon’s consolidated financial statements include the accounts of its wholly owned and majority-owned subsidiaries.  All material intercompany balances and transactions have been eliminated in consolidation.

In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments necessary to present fairly, in all material respects, Athlon’s financial position as of September 30, 2013, results of operations for the three and nine months ended September 30, 2013 and 2012, and cash flows for the nine months ended September 30, 2013 and 2012.  All adjustments are of a normal recurring nature.  These interim results are not necessarily indicative of results for an entire year.

Certain amounts and disclosures have been condensed and omitted from the unaudited consolidated financial statements pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”).  Therefore, these unaudited consolidated financial statements should be read in conjunction with Holdings’ audited consolidated financial statements and related notes thereto included in Athlon’s final prospectus dated August 1, 2013 and filed with the SEC pursuant to Rule 424(b)(4) of the Securities Act of 1933, as amended, on August 5, 2013.

Income Taxes

Income Taxes

Athlon accounts for income taxes using the asset and liability method.  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.  Deferred tax assets and liabilities are measured using enacted tax laws and rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

Athlon periodically assesses whether it is more likely than not that it will generate sufficient taxable income to realize its deferred income tax assets, including net operating losses.  In making this determination, Athlon considers all available positive and negative evidence and makes certain assumptions.  Athlon considers, among other things, its deferred tax liabilities, the overall business environment, its historical earnings and losses, current industry trends, and its outlook for future years.  Athlon believes it is more likely than not that certain net operating losses can be carried forward and utilized.

In April 2013, Athlon had a corporate reorganization to effectuate its IPO.  Holdings, Athlon’s accounting predecessor, is a partnership not subject to federal income tax.  Pursuant to the steps of the corporate reorganization, certain Class A limited partners and the Class B limited partners of Holdings exchanged their interests for shares of Athlon’s common stock.  Athlon’s operations are now subject to federal income tax.  The tax implications of the corporate reorganization and the tax impact of the conversion to operating as a taxable entity have been reflected in the accompanying consolidated financial statements.

Noncontrolling Interest

Noncontrolling Interest

As of September 30, 2013, management and employees owned approximately 2.2% of Holdings.  Athlon owns 100% of Athlon Holdings GP LLC, which is Holdings’ general partner.  Considering the presumption of control, Athlon has fully consolidated the financial position, results of operations, and cash flows of Holdings.

As presented in the accompanying Consolidated Balance Sheets, “Noncontrolling interest” as of September 30, 2013 of approximately $10.0 million represents management and employees’ 1,855,563 New Holdings Units that are exchangeable for shares of Athlon’s common stock on a one-for-one basis.  As presented in the accompanying Consolidated Statements of Operations, “Net income (loss) attributable to noncontrolling interest” for the three and nine months ended September 30, 2013 of approximately $(0.2) million and $0.6 million, respectively, represents the net income of Holdings attributable to management and employees since April 26, 2013.

The following table summarizes the effects of changes in Athlon’s partnership interest in Holdings on Athlon’s equity for the periods indicated:

	Three months ended September 30, 2013		Nine months ended September 30, 2013
	(in thousands)
Net income attributable to stockholders	$	2,482	$	37,058
Transfer from noncontrolling interest:
Increase in Athlon’s paid-in capital for corporate reorganization	—		290,950
Increase in Athlon’s paid-in capital for issuance of 15,789,474 shares of common stock in initial public offering	295,473		295,473
Net transfer from noncontrolling interest	295,473		586,423
Change from net income attributable to stockholders and transfers from (to) noncontrolling interest	$	297,955	$	623,481

New Accounting Pronouncements

New Accounting Pronouncements

In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2011-11, “Disclosures about Offsetting Assets and Liabilities” and in January 2013 issued ASU 2013-01, “Clarifying the Scope of Disclosures About Offsetting Assets and Liabilities”.  These ASUs created new disclosure requirements regarding the nature of an entity’s rights of setoff and related arrangements associated with its derivative instruments, repurchase agreements, and securities lending transactions.  Certain disclosures of the amounts of certain instruments subject to enforceable master netting arrangements are required, irrespective of whether the entity has elected to offset those instruments in the statement of financial position.  These ASUs were effective retrospectively for annual reporting periods beginning on or after January 1, 2013.  The adoption of these ASUs did not impact Athlon’s financial position, results of operations, or liquidity.

No other new accounting pronouncements issued or effective from January 1, 2013 through the date of this Report, had or are expected to have a material impact on Athlon’s unaudited consolidated financial statements.

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Incentive Stock Plans

9 Months Ended

Sep. 30, 2013

Incentive Stock Plans

Incentive Stock Plans

Note 9.  Incentive Stock Plans

In August 2013, Athlon adopted the Athlon Energy Inc. 2013 Incentive Award Plan (the “Plan”).  The principal purpose of the Plan will be to attract, retain and engage selected employees, consultants, and directors through the granting of equity and equity-based compensation awards.  Employees, consultants, and directors of Athlon and its subsidiaries are eligible to receive awards under the Plan.  The Compensation Committee will administer the Plan unless our Board of Directors assumes direct authority for administration.  The Plan provides for the grant of stock options (including non-qualified stock options and incentive stock options), restricted stock, dividend equivalents, stock payments, restricted stock units (“RSUs”), performance awards, stock appreciation rights, and other equity-based and cash-based awards, or any combination thereof.

Initially, the aggregate number of our shares of common stock available for issuance pursuant to awards granted under the Plan will be the sum of 8,400,000 shares, subject to adjustment as described below plus an annual increase on the first day of each calendar year beginning January 1, 2014 and ending on and including the last January 1 prior to the expiration date of the Plan, equal to the least of (i) 12,000,000 shares, (ii) 4% of the shares outstanding (on an as-converted basis) on the final day of the immediately preceding calendar year, and (iii) such smaller number of shares as determined by the Board of Directors.  This number will also be adjusted due to the following shares becoming eligible to be used again for grants under the Plan:

· shares subject to awards or portions of awards granted under the Plan which are forfeited, expire, or lapse for any reason, or are settled for cash without the delivery of shares, to the extent of such forfeiture, expiration, lapse or cash settlement; and

· shares that Athlon repurchases prior to vesting so that such shares are returned to Athlon.

The Plan does not provide for individual limits on awards that may be granted to any individual participant under the Plan.  Rather, the amount of awards to be granted to individual participants are determined by the Board of Directors or the Compensation Committee from time to time, as part of their compensation decision-making processes, provided, however, that the Plan does not permit awards having a grant date fair value in excess of $700,000 to be granted to Athlon’s non-employee directors in any year.

As of September 30, 2013, there were 7,776,087 shares available for issuance under the Plan.  During the nine months ended September 30, 2013, Athlon recorded non-cash stock-based compensation expense related to the Plan of $492,000, which was allocated to lease operating expense and general and administrative expense in the accompanying Consolidated Statements of Operations based on the allocation of the respective employees’ compensation.  During the nine months ended September 30, 2013, Athlon capitalized $37,000 of non-cash stock-based compensation expense related to the Plan as a component of “Proved properties, including wells and related equipment” in the accompanying Consolidated Balance Sheets.

RSUs vest over three years, subject to performance criteria for certain members of management.  The following table summarizes the changes in Athlon’s unvested RSUs for the nine months ended September 30, 2013:

		Weighted -
		Average
	Number of	Grant Date
	Shares	Fair Value
Outstanding at January 1	—	$	—
Granted	623,913	32.21
Vested	—	—
Forfeited	—	—
Outstanding at September 30	623,913	32.21

As of September 30, 2013, there were 396,413 unvested RSUs, all of which were granted during September 2013, in which the vesting is dependent only on the passage of time and continued employment.  Additionally, as of September 30, 2013, there were 227,500 unvested RSUs, all of which were granted during September 2013, in which the vesting is dependent not only on the passage of time and continued employment, but also on the achievement of certain performance criteria.

None of Athlon’s unvested RSUs are subject to variable accounting.  As of September 30, 2013, Athlon had approximately $17.9 million of total unrecognized compensation cost related to unvested RSUs, which is expected to be recognized over a weighted-average period of approximately 2.8 years.

Class B Interests

Holdings’ limited partnership agreement provided for the issuance of Class B limited partner interests.  As discussed in “Note 1. Formation of the Company and Description of Business”, in connection with Holdings’ corporate reorganization, the holders of the Class B limited partner interests in Holdings exchanged their interests for common stock of Athlon subject to the same conditions and vesting terms.  Upon the consummation of Athlon’s IPO on August 1, 2013, the remaining unvested common stock awards, which were formerly Class B interests in Holdings, vested and Athlon recognized non-cash equity-based compensation expense of approximately $1.5 million.

During the nine months ended September 30, 2013 and 2012, Athlon recorded approximately $1.3 million and $186,000, respectively, of non-cash equity-based compensation expense related to Class B interests, which was allocated to lease operating expense and general and administrative expenses in the accompanying Consolidated Statements of Operations based on the allocation of the respective employees’ compensation.  During the nine months ended September 30, 2013 and 2012, Athlon capitalized approximately $421,000 and $68,000, respectively, of non-cash stock-based compensation expense related to Class B interests as a component of “Proved properties, including wells and related equipment” in the accompanying Consolidated Balance Sheets.

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2013

Fair Value Measurements

Summary of open commodity derivative contracts

	Average	Weighted -		Average	Weighted -		Average	Weighted -		Asset
	Daily	Average		Daily	Average		Daily	Average		(Liability)
	Floor	Floor		Cap	Cap		Swap	Swap		Fair Market
Period	Volume	Price		Volume	Price		Volume	Price		Value
	(Bbl)	(per Bbl)		(Bbl)	(per Bbl)		(Bbl)	(per Bbl)		(in thousands)
Oct. - Dec. 2013	150	$	75.00	150	$	105.95	7,000	$	95.01	$	(4,205	)
2014	—	—		—	—		7,950	92.67		(7,532		)
2015	—	—		—	—		1,300	93.18		2,101
										$	(9,636	)

Schedule of committed 10% or greater (in terms of fair market value) of oil derivative contracts in asset positions from counterparties, or their affiliates

	Fair Market Value of
	Oil Derivative
	Contracts
Counterparty	Committed
	(in thousands)
BNP Paribas	$	458

Schedule of fair value of derivative instruments not designated as hedging instruments

	Oil			Commodity			Total
Balance Sheet	Commodity			Derivatives			Commodity
Location	Derivatives			Netting (a)			Derivatives
	(in thousands)
As of September 30, 2013
Assets
Derivatives - current	$	162		$	(162	)	$	—
Derivatives - noncurrent	2,149			(938		)	1,211
Total assets	2,311			(1,100		)	1,211
Liabilities
Derivatives - current	(10,347		)	162			(10,185		)
Derivatives - noncurrent	(1,930		)	938			(992		)
Total liabilities	(12,277		)	1,100			(11,177		)
Net liabilities	$	(9,966	)	$	—		$	(9,966	)
As of December 31, 2012
Assets
Derivatives - current	$	3,386		$	(1,140	)	$	2,246
Derivatives - noncurrent	3,265			(411		)	2,854
Total assets	6,651			(1,551		)	5,100
Liabilities
Derivatives - current	(1,732		)	1,140			(592		)
Derivatives - noncurrent	(930		)	411			(519		)
Total liabilities	(2,662		)	1,551			(1,111		)
Net assets	$	3,989		$	—		$	3,989

(a) Represents counterparty netting under master netting agreements, which allow for netting of commodity derivative contracts.  These derivative instruments are reflected net on the accompanying Consolidated Balance Sheets.

Schedule of effect of derivative instruments not designated as hedges on accompanying consolidated statements of operation

The following table summarizes the effect of derivative instruments not designated as hedges on the accompanying Consolidated Statements of Operations for the periods indicated (in thousands):

		Amount of Loss (Gain) Recognized in Income
	Location of Loss (Gain)	Three months ended September 30,				Nine months ended September 30,
Derivatives Not Designated as Hedges	Recognized in Income	2013		2012		2013		2012
Commodity derivative contracts	Derivative fair value loss (gain)	$	27,037	$	14,268	$	21,331	$	(9,590	)

Schedule of assets and liabilities that accounted for at fair value on a recurring basis

				Fair Value Measurements at Reporting Date Using
				Quoted Prices in
				Active Markets for		Significant Other			Significant
				Identical Assets		Observable Inputs			Unobservable Inputs
Description	Asset (liability), net			(Level 1)		(Level 2)			(Level 3)
	(in thousands)
As of September 30, 2013
Oil derivative contracts - swaps	$	(9,622	)	$	—	$	(9,622	)	$	—
Oil derivative contracts - basis differential swaps	(330		)	—		(330		)	—
Oil derivative contracts - collars	(14		)	—		(14		)	—
Total	$	(9,966	)	$	—	$	(9,966	)	$	—
As of December 31, 2012
Oil derivative contracts - swaps	$	4,069		$	—	$	4,069		$	—
Oil derivative contracts - collars	(80		)	—		(80		)	—
Total	$	3,989		$	—	$	3,989		$	—

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Basis of Presentation (Tables)

9 Months Ended

Sep. 30, 2013

Basis of Presentation

Summary of effects of changes in Athlon's partnership interest in Holdings on Athlon's equity

	Three months ended September 30, 2013		Nine months ended September 30, 2013
	(in thousands)
Net income attributable to stockholders	$	2,482	$	37,058
Transfer from noncontrolling interest:
Increase in Athlon’s paid-in capital for corporate reorganization	—		290,950
Increase in Athlon’s paid-in capital for issuance of 15,789,474 shares of common stock in initial public offering	295,473		295,473
Net transfer from noncontrolling interest	295,473		586,423
Change from net income attributable to stockholders and transfers from (to) noncontrolling interest	$	297,955	$	623,481

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Document and Entity Information	9 Months Ended
	Sep. 30, 2013	Nov. 14, 2013
Document and Entity Information
Entity Registrant Name	Athlon Energy Inc.
Entity Central Index Key	0001574648
Document Type	10-Q
Document Period End Date	Sep. 30, 2013
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		82,129,089
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q3

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Proved Properties (Tables)

9 Months Ended

Sep. 30, 2013

Proved Properties

Schedule of proved properties including wells and related equipment

	September 30,		December 31,
	2013		2012
	(in thousands)
Proved leasehold costs	$	411,657	$	376,271
Wells and related equipment - Completed	634,980		379,036
Wells and related equipment - In process	38,244		33,264
Total proved properties	$	1,084,881	$	788,571