10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2014

or

oTRANSITION 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	Smaller reporting company o
(Do not check if a smaller reporting company)

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

Number of shares of common stock, $0.01 par value, outstanding as of May 9, 2014  97,125,345

ATHLON ENERGY INC.

INDEX

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets as of March 31, 2014 and December 31, 2013	1
	Consolidated Statements of Operations for the three months ended March 31, 2014 and 2013	2
	Consolidated Statement of Changes in Equity for the three months ended March 31, 2014	3
	Consolidated Statements of Cash Flows for the three months ended March 31, 2014 and 2013	4
	Notes to Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	28
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 6.	Exhibits	29

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 “Item 1A. Risk Factors” and elsewhere in our 2013 Annual Report on Form 10-K and in our other filings with the SEC.  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

ATHLON ENERGY INC.

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.

·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.

·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.

·Mcf/d.  One thousand cubic feet of natural gas per day.

·MMcf.  One million cubic feet of natural gas.

·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.

·NYMEX.  The New York Mercantile Exchange.

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

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

ii

·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).

·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).

·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.

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

·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)

	March 31,			December 31,
	2014			2013
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	5,514		$	113,025
Accounts receivable	63,434			48,238
Inventory	853			928
Deferred taxes	739			380
Other	1,797			1,166
Total current assets	72,337			163,737
Properties and equipment, at cost - full cost method:
Evaluated properties, including wells and related equipment	1,431,200			1,244,178
Unevaluated properties	139,502			89,859
Accumulated depletion, depreciation, and amortization	(188,798		)	(160,779		)
	1,381,904			1,173,258
Derivatives, at fair value	1,505			2,330
Debt issuance costs	14,110			14,679
Acquisition deposits	4,400			—
Other	1,364			1,447
Total assets	$	1,475,620		$	1,355,451
LIABILITIES AND EQUITY
Current liabilities:
Trade accounts payable	$	2,180		$	459
Accrued liabilities:
Lease operating	6,625			6,563
Production, severance, and ad valorem taxes	3,825			2,550
Development capital	83,427			68,059
Interest	17,049			7,790
Derivatives, at fair value	14,013			8,354
Revenue payable	23,400			20,513
Other	4,884			4,035
Total current liabilities	155,403			118,323
Asset retirement obligations, net of current portion	7,795			6,795
Long-term debt	549,000			500,000
Deferred taxes	102,094			92,397
Other	99			101
Total liabilities	814,391			717,616
Commitments and contingencies
Equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized, none issued and outstanding	—			—
Common stock, $0.01 par value, 500,000,000 shares authorized, 82,129,089 issued and outstanding	821			821
Additional paid-in capital	597,900			593,943
Retained earnings	51,058			32,283
Total stockholders’ equity	649,779			627,047
Noncontrolling interest	11,450			10,788
Total equity	661,229			637,835
Total liabilities and equity	$	1,475,620		$	1,355,451

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 March 31,
	2014			2013
Revenues:
Oil	$	87,082		$	45,659
Natural gas	7,425			3,367
Natural gas liquids	11,162			5,720
Total revenues	105,669			54,746
Expenses:
Production:
Lease operating	10,736			7,237
Production, severance, and ad valorem taxes	6,752			3,739
Depletion, depreciation, and amortization	28,076			18,053
General and administrative	8,965			3,282
Acquisition costs	618			57
Derivative fair value loss	11,180			6,849
Accretion of discount on asset retirement obligations	195			149
Total expenses	66,522			39,366
Operating income	39,147			15,380
Other income (expenses):
Interest	(9,178		)	(4,474		)
Other	3			—
Total other expenses	(9,175		)	(4,474		)
Income before income taxes	29,972			10,906
Income tax provision	10,535			27
Consolidated net income	19,437			10,879
Less: net income attributable to noncontrolling interest	662			—
Net income attributable to stockholders	$	18,775		$	10,879
Net income per common share:
Basic	$	0.23		$	0.16
Diluted	$	0.23		$	0.16
Weighted average common shares outstanding:
Basic	82,129			66,340
Diluted	82,129			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
	Common	Common		Paid-in		Retained		Stockholders’		Noncontrolling		Total
	Stock	Stock		Capital		Earnings		Equity		Interest		Equity
Balance at December 31, 2013	82,129	$	821	$	593,943	$	32,283	$	627,047	$	10,788	$	637,835
Equity-based compensation	—	—		3,957		—		3,957		—		3,957
Consolidated net income	—	—		—		18,775		18,775		662		19,437
Balance at March 31, 2014	82,129	$	821	$	597,900	$	51,058	$	649,779	$	11,450	$	661,229

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

3

ATHLON ENERGY INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Three months ended March 31,
	2014			2013
Cash flows from operating activities:
Consolidated net income	$	19,437		$	10,879
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Depletion, depreciation, and amortization	28,076			18,053
Deferred taxes	9,338			27
Non-cash derivative loss	6,484			6,708
Equity-based compensation	3,703			48
Other	829			438
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable	(14,992		)	(8,648		)
Other current assets	(117		)	219
Accounts payable	1,654			(2,253		)
Accrued interest	9,258			185
Revenue payable	2,887			3,010
Other current liabilities	2,172			1,731
Net cash provided by operating activities	68,729			30,397
Cash flows from investing activities:
Acquisitions of oil and natural gas properties	(98,667		)	(8,819		)
Acquisition deposits	(4,400		)	—
Development of oil and natural gas properties	(122,132		)	(81,605		)
Other	(41		)	(136		)
Net cash used in investing activities	(225,240		)	(90,560		)
Cash flows from financing activities:
Proceeds from long-term debt, net of issuance costs	56,000			53,271
Payments on long-term debt	(7,000		)	—
Other	—			1,400
Net cash provided by financing activities	49,000			54,671
Decrease in cash and cash equivalents	(107,511		)	(5,492		)
Cash and cash equivalents, beginning of period	113,025			8,871
Cash and cash equivalents, end of period	$	5,514		$	3,379

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.

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”) and Holdings’ management team and certain employees owned all of the Class A limited partner interests in Holdings and 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 did not exchange 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 $295.7 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”.  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.  Please read “Note 12. Related Party Transactions” for additional discussion.  All other New Holdings Units are held by Athlon.

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 March 31, 2014 and results of operations and cash flows for the three months ended March 31, 2014 and 2013.  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.  Therefore, these unaudited consolidated financial statements should be read in conjunction with Athlon’s audited consolidated financial statements and related notes thereto included in Athlon’s 2013 Annual Report on Form 10-K.

Noncontrolling Interest

As of March 31, 2014 and December 31, 2013, management and certain 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.

5

ATHLON ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

(unaudited)

As presented in the accompanying Consolidated Balance Sheets, “Noncontrolling interest” as of March 31, 2014 and December 31, 2013 of approximately $11.5 million and $10.8 million, respectively, represents management and certain 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 attributable to noncontrolling interest” for the three months ended March 31, 2014 of approximately $0.7 million represents the net income of Holdings attributable to management and certain employees.

New Accounting Pronouncements

No new accounting pronouncements issued or effective from January 1, 2014 through the date of this Report, had or are expected to have a material impact on Athlon’s unaudited consolidated financial statements.

Note 3.   Acquisitions

On February 6, 2014, Athlon acquired certain oil and natural gas properties and related assets in the Midland Basin of West Texas for approximately $92.5 million in cash, which was financed with cash on hand and borrowings under Athlon’s credit agreement. The operations of these properties have been included with those of Athlon from the date of acquisition.

Note 4.   Evaluated Properties

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

	March 31,		December 31,
	2014		2013
	(in thousands)
Evaluated leasehold costs	$	494,809	$	448,689
Wells and related equipment - completed	887,884		748,900
Wells and related equipment - in process	48,507		46,589
Total evaluated	$	1,431,200	$	1,244,178

Note 5.   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 March 31, 2014, the fair value of the senior notes was approximately $534.1 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 Athlon’s 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” 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

6

ATHLON ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

(unaudited)

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, which provide a fixed price for a notional amount of sales volumes.  The following table summarizes Athlon’s open commodity derivative contracts as of March 31, 2014:

Period	Average Daily Swap Volume	Weighted- Average Swap Price		Asset (Liability) Fair Market Value
	(Bbl)	(per Bbl)		(in thousands)
Q2 2014	8,950	$	92.71
Q3 2014	9,950	92.52
Q4 2014	9,950	92.52
Q2-Q4 2014	9,619	92.58		$	(13,213	)
Q1 2015	6,800	91.21
Q2 2015	6,800	91.21
Q3 2015	1,300	93.18
Q4 2015	1,300	93.18
2015	4,027	91.53		705
				$	(12,508	)

Counterparty Risk. At March 31, 2014, 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	$	293

Athlon does not require collateral from its counterparties for entering into derivative instruments, so in order to mitigate the credit risk associated with such derivative instruments, Athlon enters into an International Swap Dealers Association Master Agreement (“ISDA Agreement”) with each of its counterparties.  The ISDA Agreement is a standardized, bilateral contract between a given counterparty and Athlon.  Instead of treating each derivative transaction between the counterparty and Athlon separately, the termination provision of the ISDA Agreement enables the counterparty and Athlon to aggregate all trades under such agreement 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 trade can trigger rights to terminate all trades with such counterparty that are subject to the ISDA Agreement; 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.

7

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 March 31, 2014
Assets
Derivatives - current	$	358		$	(358	)	$	—
Derivatives - noncurrent	1,623			(118		)	1,505
Total assets	1,981			(476		)	1,505
Liabilities
Derivatives - current	(14,371		)	358			(14,013		)
Derivatives - noncurrent	(118		)	118			—
Total liabilities	(14,489		)	476			(14,013		)
Net liabilities	$	(12,508	)	$	—		$	(12,508	)
As of December 31, 2013
Assets
Derivatives - current	$	143		$	(143	)	$	—
Derivatives - noncurrent	2,330			—			2,330
Total assets	2,473			(143		)	2,330
Liabilities
Derivatives - current	(8,497		)	143			(8,354		)
Derivatives - noncurrent	—			—			—
Total liabilities	(8,497		)	143			(8,354		)
Net assets	$	(6,024	)	$	—		$	(6,024	)

(a)Represents counterparty netting under ISDA 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:

		Amount of Loss Recognized in Income
	Location of Loss	Three months ended March 31,
Derivatives Not Designated as Hedges	Recognized in Income	2014		2013
		(in thousands)
Commodity derivative contracts	Derivative fair value loss	$	11,180	$	6,849

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.

8

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.  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; (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 $164,000 and $39,000 as of March 31, 2014 and December 31, 2013, respectively.

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	Net Liability			(Level 1)		(Level 2)			(Level 3)
				(in thousands)
As of March 31, 2014
Oil derivative contracts - swaps	$	(12,508	)	$	—	$	(12,508	)	$	—
As of December 31, 2013
Oil derivative contracts - swaps	$	(6,024	)	$	—	$	(6,024	)	$	—

9

ATHLON ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

(unaudited)

Note 6.   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 three months ended March 31, 2014 (in thousands):

Balance at January 1	$	6,855
Liabilities assumed in acquisitions	277
Liabilities incurred from new wells	330
Liabilities settled	(61		)
Accretion of discount	195
Revisions of previous estimates	250
Balance at March 31	7,846
Less: current portion	51
Asset retirement obligations - long-term	$	7,795

Note 7.   Long-Term Debt

Senior Notes

In April 2013, Holdings issued $500 million aggregate principal amount of 73/8% senior notes due 2021 (the “2021 Notes”).  Athlon is an unconditional guarantor of the 2021 Notes.  The indenture governing the 2021 Notes contains covenants, including, among other things, covenants that restrict Athlon’s ability to:

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

·incur additional indebtedness if Athlon’s 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, Athlon will be able to redeem some or all of the 2021 Notes at a premium that will decrease over time, plus accrued and unpaid interest to the date of redemption.  Prior to April 15, 2016, Athlon will be able, at its option, to redeem up to 35% of the aggregate principal amount of the 2021 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 Athlon’s option, prior to April 15, 2016, Athlon may redeem some or all of the 2021 Notes at a redemption price equal to 100% of the principal amount of the 2021 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, Athlon may redeem all, but not less than all, of the 2021 Notes at 110% of the principal amount thereof plus accrued and unpaid interest to, but not including, the redemption date.  Certain asset dispositions or a change of control that occurs after July 15, 2014 will be triggering events that may require Athlon to repurchase all or any part of a noteholder’s 2021 Notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, up to but excluding the date of repurchase.  Interest on the 2021 Notes is payable in cash semi-annually in arrears, commencing on October 15, 2013, through maturity.

Credit Agreement

Athlon is a party to an amended and restated credit agreement dated March 19, 2013 (the “Credit Agreement”), which matures on March 19, 2018.  The Credit Agreement provides for revolving credit loans to be made to Athlon from time to time and letters of credit to be issued from time to time for the account of Athlon or any of its restricted subsidiaries.  The aggregate amount of the commitments of the lenders under the Credit Agreement is $1.0 billion.  Availability under the Credit Agreement is subject to a borrowing base, which is redetermined semi-annually and upon requested special redeterminations. As of March 31, 2014, the borrowing base was $525 million and there were $49 million outstanding borrowings, $476 million of borrowings capacity, and no outstanding letters of credit under the Credit Agreement.

10

ATHLON ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

(unaudited)

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

Loans under the 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 Credit Agreement bear interest at the Eurodollar rate plus the applicable margin indicated in the following table, and base rate loans under the Credit Agreement bear interest at the base rate plus the applicable margin indicated in the following table.  Athlon also incurs a quarterly commitment fee on the unused portion of the 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 Athlon) 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 Credit Agreement.  Borrowings under the Credit Agreement may be repaid from time to time without penalty.

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

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

·a restriction on creating liens on Athlon’s 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 Athlon maintain a ratio of consolidated total debt to EBITDAX (as defined in the 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 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 Credit Agreement to be immediately due and payable.

11

ATHLON ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

(unaudited)

Note 8.   Income Taxes

As a result of the corporate reorganization on April 26, 2013, Athlon (a C-corporation) obtained substantially all of the interests in Holdings.  Prior to April 26, 2013, Holdings, Athlon’s accounting predecessor, was a limited partnership not subject to federal income taxes.

The components of income tax provision were as follows for the periods indicated:

	Three months ended
	March 31,
	2014		2013
	(in thousands)
Federal:
Current	$	1,050	$	—
Deferred	9,212		—
Total federal	10,262		—
State, net of federal benefit:
Current	147		—
Deferred	126		27
Total state	273		27
Income tax provision	$	10,535	$	27

The following table reconciles income tax provision with income tax at the Federal statutory rate for the periods indicated:

	Three months ended March 31,
	2014			2013
	(in thousands)
Income before income taxes	$	29,972		$	10,906
Less: net income attributable to noncontrolling interest	(662		)	—
Income before income taxes and noncontrolling interest	$	29,310		$	10,906
Income taxes at the Federal statutory rate	$	10,259		$	—
State income taxes, net of federal benefit	273			27
Permanent and other	3			—
Income tax provision	$	10,535		$	27

As of March 31, 2014 and December 31, 2013, all of Athlon’s tax positions met the “more-likely-than-not” threshold.  As a result, no additional tax expense, interest, or penalties have been accrued.  During the three months ended March 31, 2014 and 2013, Athlon did not have any interest assessed by the taxing authorities or incur any penalties related to income taxes.

Note 9.   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 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.

12

ATHLON ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

(unaudited)

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

	Three months ended March 31,
	2014			2013
	(in thousands, except per share amounts)
Basic EPS
Numerator:
Undistributed net income attributable to stockholders	$	18,775		$	10,879
Participation rights of unvested restricted stock in undistributed earnings	(194		)	—
Basic undistributed net income attributable to stockholders	$	18,581		$	10,879
Denominator:
Basic weighted average shares outstanding	82,129			66,340
Basic EPS attributable to stockholders	$	0.23		$	0.16
Diluted EPS
Numerator:
Undistributed net income attributable to stockholders	$	18,775		$	10,879
Participation rights of unvested restricted stock in undistributed earnings	(194		)	—
Effect of conversion of New Holdings Units to shares of Athlon’s common stock (a)	—			—
Diluted undistributed net income attributable to stockholders	$	18,581		$	10,879
Denominator:
Basic weighted average shares outstanding	82,129			66,340
Effect of conversion of New Holdings Units to shares of Athlon’s common stock (a)	—			1,856
Diluted weighted average shares outstanding	82,129			68,196
Diluted EPS attributable to stockholders	$	0.23		$	0.16

(a)For the three months ended March 31, 2014, 1,855,563 New Holdings Units were outstanding but excluded from the EPS calculations because their effect would have been antidilutive.

Note 10.    Incentive Stock Plans

In August 2013, Athlon adopted the Athlon Energy Inc. 2013 Incentive Award Plan (the “Plan”).  The principal purpose of the Plan is 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 the 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, performance awards, stock appreciation rights, and other equity-based and cash-based awards, or any combination thereof.

The initial aggregate number of shares of common stock reserved for issuance pursuant to awards granted under the Plan is 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.

On January 1, 2014, the aggregate number of shares of common stock reserved for issuance pursuant to awards granted under the Plan increased to 11,759,386.  As of March 31, 2014, there were 10,954,012 shares available for issuance under the Plan.

The Plan does not provide for individual limits on awards that may be granted to any individual participant under the Plan. 

13

ATHLON ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

(unaudited)

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.

During the three months ended March 31, 2014, Athlon recorded non-cash stock-based compensation expense related to the Plan of $3.7 million, 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 three months ended March 31, 2014, Athlon capitalized $255,000 of non-cash stock-based compensation expense related to the Plan as a component of “Evaluated, including wells and related equipment” in the accompanying Consolidated Balance Sheets.

Restricted stock awards are scheduled to vest over three years. Certain awards granted to Athlon’s management team vest subject to the relative performance of Athlon’s stock to that of a designated peer group. The following table summarizes the changes in Athlon’s unvested restricted stock for the three months ended March 31, 2014 (presented at the target level):

			Weighted -
			Average
	Number of		Grant Date
	Shares		Fair Value
Outstanding at January 1	638,913		$	34.88
Granted	175,193		35.53
Vested	—		—
Forfeited	(8,732	)	30.06
Outstanding at March 31	805,374		35.08

As of March 31, 2014, there were 577,874 unvested restricted stock, 175,193 of which were granted during 2014, in which the vesting is dependent only on the passage of time and continued employment.  Additionally, as of March 31, 2014, there were 227,500 unvested restricted stock, none of which were granted during 2014, in which the vesting is dependent not only on the passage of time and continued employment, but also on the relative performance of Athlon’s stock to that of a designated peer group.

None of Athlon’s unvested restricted stock is subject to variable accounting.  As of March 31, 2014, Athlon had approximately $18.2 million of total unrecognized compensation cost related to unvested restricted stock, which is expected to be recognized over a weighted-average period of approximately 2.5 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 the 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.  During the three months ended March 31, 2013, Athlon recorded approximately $48,000 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 three months ended March 31, 2013, Athlon capitalized approximately $26,000 of non-cash stock-based compensation expense related to Class B interests as a component of “Evaluated, including wells and related equipment” in the accompanying Consolidated Balance Sheets.

Note 11. 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.

14

ATHLON ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

(unaudited)

Note 12. Related Party Transactions

Services Agreement

Athlon was a party to a Services Agreement, dated August 23, 2010, which required it to compensate Apollo for consulting and advisory services equal to the higher of (i) 1% of earnings before interest, income taxes, depreciation, depletion, and amortization, 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 three months ended March 31, 2013, Athlon incurred approximately $405,000 of Advisory Fees, which are included in “General and administrative expenses” in the accompanying Consolidated Statements of Operations.

Exchange Agreement

Upon the consummation of its IPO, Athlon entered into an exchange agreement with its management team and certain employees who hold New Holdings Units.  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 its management team and certain employees who hold New Holdings Units that provides for the payment from time to time by Athlon to such unitholders of Holdings of 85% of the amount of the tax 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 regular federal income tax paying position, net of available tax credit and loss carryforwards, for the foreseeable future.  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.

15

ATHLON ENERGY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

(unaudited)

Note 13. Subsequent Events

Subsequent to March 31, 2014, Athlon entered into additional oil swaps.  The following table summarizes Athlon’s open commodity derivative contracts as of May 9, 2014:

Period	Average Daily Swap Volume	Weighted- Average Swap Price
	(Bbl)	(per Bbl)
Q2 2014	8,950	$	92.71
Q3 2014	9,950	92.52
Q4 2014	10,961	92.31
Q2-Q4 2014	9,957	92.50
Q1 2015	9,800	90.90
Q2 2015	9,800	90.90
Q3 2015	4,300	91.11
Q4 2015	4,300	91.11
2015	7,027	90.97

On April 8, 2014, Athlon entered into multiple purchase and sale agreements with separate, unrelated third parties to acquire certain oil and natural gas properties and related assets in the Midland Basin of West Texas for a combined purchase price of $873 million, subject to customary purchase price adjustments (the “Acquisitions”).  The Acquisitions are expected to close by or before June 2014, subject to customary closing conditions.

On April 11, 2014, lenders under the Credit Agreement completed their redetermination of the borrowing base, resulting in an increase from $525 million to $1.0 billion, which was subsequently reduced to $837.5 million as a result of the completion of a private placement of 6% senior notes due 2022 as discussed below.

On April 23, 2014, Athlon completed a public offering of 14,806,250 shares of its common stock at $40.00 per share and received net proceeds of approximately $570.5 million, after deducting underwriting discounts and commissions and estimated offering expenses.  Athlon plans to use the net proceeds from the offering to fund a portion of the purchase price of the Acquisitions.  Apollo Global Securities, LLC was an underwriter in the offering and received a portion of the discounts and commissions paid to the underwriters of approximately $1.0 million.

On May 1, 2014, Holdings completed a private placement of $650 million aggregate principal amount of 6% senior notes due 2022 (the “2022 Notes”) and received net proceeds of approximately $638.0 million, after deducting initial purchasers’ discounts and estimated debt issuance costs.  Athlon plans to use the net proceeds from the 2022 Notes to fund a portion of the purchase price of the Acquisitions.  Apollo Global Securities, LLC received a portion of the gross spread as an initial purchaser of the 2022 Notes of approximately $0.5 million. 

Athlon is an unconditional guarantor of the 2022 Notes.  The indenture governing the 2022 Notes contains covenants, including, among other things, covenants that restrict Athlon’s ability to:

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

·      incur additional indebtedness if Athlon’s 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 May 1, 2017, Athlon will be able to redeem some or all of the 2022 Notes at a premium that will decrease over time, plus accrued and unpaid interest to the date of redemption.  Prior to May 1, 2017, Athlon will be able, at its option, to redeem up to 35% of the aggregate principal amount of the 2022 Notes at a price of 106% 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 Athlon’s option, prior to May 1, 2017, Athlon may redeem some or all of the 2022 Notes at a redemption price equal to 100% of the principal amount of the 2022 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, 2015, Athlon may redeem all, but not less than all, of the 2022 Notes at 110% of the principal amount thereof plus accrued and unpaid interest to, but not including, the redemption date.  Certain asset dispositions or a change of control that occurs after July 15, 2015 will be triggering events that may require Athlon to repurchase all or any part of a noteholder’s 2022 Notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, up to but excluding the date of repurchase.

If certain of the Acquisitions (the “Triggering Acquisitions”) are not consummated by July 2, 2014 or if all of the applicable purchase agreements are terminated at any time prior to the consummation of the Acquisitions, Athlon will be required to redeem $250 million of the 2022 Notes in cash at a redemption price equal to the initial offer price, plus accrued and unpaid interest to, but not including, the date of redemption. Additionally, if Athlon determines it is reasonably likely that the Triggering Acquisitions will not close on or prior to July 2, 2014, or all of the applicable purchase agreements will be terminated at any time prior to the consummation of the Triggering Acquisitions, Athlon may, at its option, redeem $250 million of the 2022 Notes then outstanding in cash at a redemption price equal to the initial offer price, plus accrued and unpaid interest to, but not including, the date of redemption.

Interest on the 2022 Notes is payable in cash semi-annually in arrears, commencing on November 1, 2014, through maturity.

16

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 set forth under “Item 1A. Risk Factors” and elsewhere in our 2013 Annual Report on Form 10-K.

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 Clearfork, Spraberry, Wolfcamp, Cline, Strawn, Atoka, and Mississippian formations, which we refer to collectively as the Wolfberry play, and horizontal development of the Wolfcamp.  We are a returns-focused organization and have targeted the Wolfberry play and horizontal development 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 over 20 years of industry experience and over 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 $295.7 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”.  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.

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 capital expenditures.  Below are highlights of our financial and operating results for the first quarter of 2014:

·Our oil, natural gas, and NGLs revenues increased 93% to $105.7 million in the first quarter of 2014 as compared to $54.7 million in the first quarter of 2013.

·Our average daily production volumes increased 71% to 16,987 BOE/D in the first quarter of 2014 as compared to 9,959 BOE/D in the first quarter of 2013.  Oil and NGLs represented approximately 82% of our total production volumes in the first quarter of 2014.

·Our average realized oil price increased 11% to $93.45 per Bbl in the first quarter of 2014 as compared to $84.23 per Bbl in the first quarter of 2013, our average realized natural gas price increased 38% to $4.51 per Mcf in the first quarter of 2014 as compared to $3.27 per Mcf in the first quarter of 2013, and our average realized NGL price increased 10% to $34.61 per Bbl in the first quarter of 2014 as compared to $31.34 per Bbl in the first quarter of 2013.

·Our production margin increased 101% to $88.2 million in the first quarter of 2014 as compared to $43.8 million in the first quarter of 2013.  Total wellhead revenues per BOE increased 13% and total production expenses per BOE decreased 7%.  On a per BOE basis, our production margin increased 18% to $57.68 per BOE in the first quarter of 2014 as compared to $48.84 per BOE in the first quarter of 2013.

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·We invested $236.7 million in oil and natural gas activities, of which $137.8 million was invested in development and exploration activities and $98.9 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.

Results of Operations

Comparison of Quarter Ended March 31, 2014 to Quarter Ended March 31, 2013

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 March 31,				Increase / (Decrease)
	2014		2013		$		%
Revenues (in thousands):
Oil	$	87,082	$	45,659	$	41,423	91	%
Natural gas	7,425		3,367		4,058		121	%
NGLs	11,162		5,720		5,442		95	%
Total revenues	$	105,669	$	54,746	$	50,923	93	%
Average realized prices:
Oil ($/Bbl) (before impact of cash settled derivatives)	$	93.45	$	84.23	$	9.22	11	%
Oil ($/Bbl) (after impact of cash settled derivatives)	$	88.26	$	83.65	$	4.61	6	%
Natural gas ($/Mcf)	$	4.51	$	3.27	$	1.24	38	%
NGLs ($/Bbl)	$	34.61	$	31.34	$	3.27	10	%
Combined ($/BOE) (before impact of cash settled derivatives)	$	69.12	$	61.08	$	8.04	13	%
Combined ($/BOE) (after impact of cash settled derivatives)	$	65.95	$	60.73	$	5.22	9	%
Total production volumes:
Oil (MBbls)	932		542		390		72	%
Natural gas (MMcf)	1,647		1,030		617		60	%
NGLs (MBbls)	322		183		139		76	%
Combined (MBOE)	1,529		896		633		71	%
Average daily production volumes:
Oil (Bbls/D)	10,354		6,023		4,331		72	%
Natural gas (Mcf/D)	18,300		11,446		6,854		60	%
NGLs (Bbls/D)	3,583		2,028		1,555		77	%
Combined (BOE/D)	16,987		9,959		7,028		71	%

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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 March 31,
	2014			2013
Average realized oil price ($/Bbl)	$	93.45		$	84.23
Average NYMEX WTI ($/Bbl)	$	98.61		$	94.34
Differential to NYMEX WTI	$	(5.16	)	$	(10.11	)
Average realized oil price to NYMEX WTI percentage	95		%	89		%
Average realized natural gas price ($/Mcf)	$	4.51		$	3.27
Average NYMEX Henry Hub ($/Mcf)	$	4.92		$	3.34
Differential to NYMEX Henry Hub	$	(0.41	)	$	(0.07	)
Average realized natural gas price to NYMEX Henry Hub percentage	92		%	98		%

Our average oil differential to NYMEX WTI tightened to $5.16 per Bbl for the first quarter of 2014 as compared to 89% for the first quarter of 2013, primarily due to a relative improvement of intermittent capacity constraints between the Midland Basin, Cushing, Oklahoma, and Gulf Coast refineries.  Our average natural gas differential to NYMEX Henry Hub widened to $0.41 per Mcf for the first quarter of 2014 as compared to $0.07 per Mcf for the first quarter of 2013, primarily due to increased transportation fees to move our natural gas production out of the Midland Basin.

Oil revenues increased 91% to $87.1 million in the first quarter of 2014 from $45.7 million in the first quarter of 2013 as a result of an increase in our oil production volumes of 390 MBbls and a $9.22 per Bbl increase in our average realized oil price.  Our higher oil production increased oil revenues by $32.8 million and was primarily the result of our development program.  Our higher average realized oil price increased oil revenues by $8.6 million and was primarily due to a higher average NYMEX price, which increased to $98.61 per Bbl in the first quarter of 2014 from $94.34 per Bbl in the first quarter of 2013, and the tightening of our oil differentials as previously discussed.

Natural gas revenues increased 121% to $7.4 million in the first quarter of 2014 from $3.4 million in the first quarter of 2013 as a result of an increase in our natural gas production volumes of 617 MMcf and a $1.24 per Mcf increase in our average realized natural gas price.  Our higher average realized natural gas price increased natural gas revenues by $2.0 million and was primarily due to a higher average NYMEX price, which increased to $4.92 per Mcf in the first quarter of 2014 from $3.34 per Mcf in the first quarter of 2013.  Our higher natural gas production increased natural gas revenues by $2.0 million and was primarily the result of our development program, 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.  We may flare additional gas from time to time.

NGL revenues increased 95% to $11.2 million in the first quarter of 2014 from $5.7 million in the first quarter of 2013 as a result of an increase in our NGL production volumes of 139 MBbls and a $3.27 per Bbl increase in our average realized NGL price.  Our higher NGL production increased NGL revenues by $4.4 million and was primarily the result of our development program, partially offset by flaring as described above.  Our higher average realized NGL price increased NGL revenues by $1.1 million.

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

	Three months ended March 31,				Increase / (Decrease)
	2014		2013		$			%
Expenses (in thousands):
Production:
Lease operating (a)	$	10,736	$	7,237	$	3,499		48	%
Production, severance, and ad valorem taxes	6,752		3,739		3,013			81	%
Total production expenses	17,488		10,976		6,512			59	%
Other:
Depletion, depreciation, and amortization	28,076		18,053		10,023			56	%
General and administrative (b)	8,965		3,282		5,683			173	%
Acquisition costs	618		57		561			984	%
Derivative fair value loss	11,180		6,849		4,331			63	%
Accretion of discount on asset retirement obligations	195		149		46			31	%
Total operating	66,522		39,366		27,156			69	%
Interest	9,178		4,474		4,704			105	%
Income tax provision	10,535		27		10,508			N/A
Total expenses	$	86,235	$	43,867	$	42,368		97	%
Expenses (per BOE):
Production:
Lease operating (a)	$	7.02	$	8.07	$	(1.05	)	-13	%
Production, severance, and ad valorem taxes	4.42		4.17		0.25			6	%
Total production expenses	11.44		12.24		(0.80		)	-7	%
Other:
Depletion, depreciation, and amortization	18.36		20.14		(1.78		)	-9	%
General and administrative (b)	5.86		3.67		2.19			60	%
Acquisition costs	0.40		0.06		0.34			567	%
Derivative fair value loss	7.31		7.64		(0.33		)	-4	%
Accretion of discount on asset retirement obligations	0.13		0.17		(0.04		)	-24	%
Total operating	43.50		43.92		(0.42		)	-1	%
Interest	6.00		4.99		1.01			20	%
Income tax provision	6.89		0.03		6.86			N/A
Total expenses	$	56.39	$	48.94	$	7.45		15	%

(a)Includes non-cash equity-based compensation of $264,000 ($0.17 per BOE) and $8,000 ($0.01 per BOE) for the first quarter of 2014 and 2013, respectively.

(b)Includes non-cash equity-based compensation of $3.4 million ($2.25 per BOE) and $41,000 ($0.05 per BOE) for the first quarter of 2014 and 2013, respectively.

Production expenses.  LOE increased 48% to $10.7 million in the first quarter of 2014 from $7.2 million in the first quarter of 2013 as a result of an increase in production volumes from wells drilled, which contributed $5.1 million of additional LOE, partially offset by a $1.05 decrease in the average per BOE rate, which would have reduced LOE by $1.6 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 the past year where we are experiencing strong production rates and economies of scale from our drilling program.

Production, severance, and ad valorem taxes increased 81% to $6.8 million in the first quarter of 2014 from $3.7 million in the first quarter of 2013 primarily due to higher wellhead revenues resulting from increased production from our drilling activity and higher average realized prices.  As a percentage of wellhead revenues, production, severance, and ad valorem taxes remained relatively consistent at 6.4% in the first quarter of 2014 as compared to 6.8% in the first quarter of 2013.  Ad valorem taxes are paid based on prior year commodity prices and valuations of oil and natural gas properties, whereas production taxes are based on current year commodity prices and production volumes.

Depreciation, depletion, and amortization (“DD&A”).  DD&A expense increased 56% to $28.1 million in the first quarter of 2014 from $18.1 million in the first quarter of 2013 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.

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General and administrative expense (“G&A”).  G&A expense, excluding non-cash equity-based compensation, increased 70% to $5.5 million in the first quarter of 2014 from $3.2 million in the first quarter of 2013 primarily due to (i) higher payroll and payroll-related costs as we continue to add employees in order to manage our growing asset base, (ii) additional expenses related to being a public company, and (iii) $0.8 million of nonrecurring offering costs.  Non-cash equity-based compensation allocated to G&A expense increased to $3.4 million in the first quarter of 2014 from $41,000 in the first quarter of 2013 primarily due to restricted stock awards granted to employees as part of our incentive program.

Derivative fair value loss.  During the first quarter of 2014, we recorded an $11.2 million derivative fair value loss as compared to $6.8 million in the first quarter of 2013.  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 of $4.8 million during the first quarter of 2014 as compared to $0.3 million during the first quarter of 2013.

Interest expense.  Interest expense increased 105% to $9.2 million in the first quarter of 2014 from $4.5 million in the first quarter of 2013 due to higher long-term debt balances and higher borrowing costs in the first quarter of 2014 when compared to the first quarter of 2013.  Our weighted-average total debt was $518.3 million for the first quarter of 2014 as compared to $397.0 million for the first quarter of 2013.  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) various acquisitions of oil and natural gas properties.

Our weighted-average interest rate, net of capitalized interest, increased to 7.1% for the first quarter of 2014 as compared to 4.4% for the first quarter of 2013.  This increase in borrowing cost is primarily due to the issuance of our senior notes in April 2013, a portion of the net proceeds from which were used to substantially pay down outstanding borrowings under our credit agreement that were subject to lower interest rates than our senior notes.

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

	Three months ended March 31,						Increase /
	2014			2013			(Decrease)
				(in thousands)
Credit agreement	$	573		$	1,923		$	(1,350	)
Former second lien term loan	—			2,350			(2,350		)
Senior notes	9,250			—			9,250
Amortization of debt issuance costs	569			243			326
Less: interest capitalized	(1,214		)	(42		)	(1,172		)
Total	$	9,178		$	4,474		$	4,704

Income taxes.  In the first quarter of 2014, we recorded an income tax provision of $10.5 million as compared to $27,000 in the first quarter of 2013.  In the first quarter of 2014, we had income before income taxes and noncontrolling interest of $30.0 million as compared to $10.9 million in the first quarter of 2013.  Our effective tax rate increased to 35.1% in the first quarter of 2014 as compared to 0.2% in the first quarter of 2013 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.

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.

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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 March 31,
	2014		2013
	(in thousands)
Development (a)	$	61,378	$	49,238
Exploration (b)	76,412		22,553
Total	$	137,790	$	71,791

(a)Includes asset retirement obligations incurred of $182,000 and $159,000 during the first quarter of 2014 and 2013, respectively.

(b)Includes asset retirement obligations incurred of $148,000 and $94,000 during the first quarter of 2014 and 2013, 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 exploration expenditures primarily relate to the drilling of exploratory wells, seismic costs, delay rentals, and geological and geophysical costs.

Our development and exploration activities in the first quarter of 2014 were higher than in the first quarter of 2013 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 2014, we expect our drilling capital expenditures to be $700 million, plus an additional $25 million for leasing, infrastructure, capital workovers, and capitalized interest.

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 March 31,
	2014		2013
	(in thousands)
Acquisitions of evaluated properties (a)	$	41,270	$	2,602
Acquisitions of unevaluated properties	57,674		6,482
Total	$	98,944	$	9,084

(a)Includes asset retirement obligations incurred of $277,000 and $265,000 during the first quarter of 2014 and 2013, respectively.

Funding of working capital.  As of March 31, 2014 and December 31, 2013, our working capital (defined as total current assets less total current liabilities) was an $83.1 million deficit and a $45.4 million surplus, respectively.  The decrease in working capital was due to our acquisition and development of oil and natural gas properties.  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 2014, we expect to continue to have a working capital deficit primarily due to amounts accrued related to our extensive development activities.  We expect that our cash flows from operating activities and availability under our credit agreement will be sufficient to fund our working capital needs, drilling 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.  We have 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.  Neither the amounts nor the terms of any other commitments or contingent obligations have changed significantly from the year-end amounts reflected in our 2013 Annual Report on Form 10-K.  Our commodity derivative contracts, which are recorded at fair value in our consolidated balance sheets, are discussed in Note 5 of Notes to Consolidated Financial Statements included in “Item 1. Financial Statements” and “Item 3. Quantitative and Qualitative Disclosures About Market Risk”.

Please read “Capital Commitments, Capital Resources, and Liquidity—Capital commitments—Contractual obligations” included in

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“Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2013 Annual Report on Form 10-K for additional information regarding our commitments and obligations.

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:

	Three months ended March 31,
	2014			2013			Change
				(in thousands)
Net cash provided by operating activities	$	68,729		$	30,397		$	38,332
Net cash used in investing activities	(225,240		)	(90,560		)	(134,680		)
Net cash provided by financing activities	49,000			54,671			(5,671		)
Net decrease in cash	$	(107,511	)	$	(5,492	)	$	(102,019	)

Cash flows from operating activities.  Cash provided by operating activities increased $38.3 million to $68.7 million in the first quarter of 2014 from $30.4 million in the first quarter of 2013, primarily due to an increase in our production margin due to higher average realized prices and a 71% 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 quarter of 2014 as compared to the first quarter of 2013.

Cash flows used in investing activities.  Cash used in investing activities increased $134.7 million to $225.2 million in the first quarter of 2014 from $90.6 million in the first quarter of 2013, primarily due to a $40.5 million increase in amounts paid to develop oil and natural gas properties and a $94.2 million increase in amounts paid to acquire oil and natural gas properties.  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 consist primarily of proceeds from and payments on long-term debt and issuance of shares of our common stock.  We periodically draw on our credit agreement to fund acquisitions and other capital commitments.

During the first quarter of 2014, we received net cash of $49 million from financing activities, consisting entirely of net borrowings under our credit agreement, which increased the outstanding borrowings under our credit agreement from none at December 31, 2013 to $49 million at March 31, 2014.  During the first quarter of 2013, we received net cash of $54.7 million from financing activities, including net borrowings of $54.4 million under our credit agreement, which were used primarily to finance the first quarter of 2013 development activities.  We were able to draw less on our credit agreement in the first quarter of 2014 when compared to the first quarter of 2013 due to cash on hand from our IPO and improved cash flow from operations.

Liquidity

Our primary sources of liquidity are internally generated cash flows and the borrowing capacity under our credit agreement.  Since we operate a majority of our wells, we have the ability to adjust our capital expenditures.  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 drilling 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.

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In 2014, we expect our drilling capital expenditures to be $700 million, plus an additional $25 million for leasing, infrastructure, capital workovers, and capitalized interest.  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 flows 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 quarter of 2014, our average realized oil, natural gas, and NGL prices increased by 11%, 38%, and 10% respectively, as compared to the first quarter of 2013.  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 oil swaps that will provide stable cash flows on a portion of our oil production.  Currently, we have the following oil swaps:

Period	Average Daily Swap Volume	Weighted- Average Swap Price
	(Bbl)	(per Bbl)
Q2 2014	8,950	$	92.71
Q3 2014	9,950	92.52
Q4 2014	9,950	92.52
Q2-Q4 2014	9,281	92.58
Q1 2015	6,800	91.21
Q2 2015	6,800	91.21
Q3 2015	1,300	93.18
Q4 2015	1,300	93.18
2015	4,027	91.53

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.

Credit agreement.  We are a party to an amended and restated credit agreement dated March 19, 2013, 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.  As of March 31, 2014, the borrowing base was $525 million and there were $49 million outstanding borrowings, $476 million of borrowings capacity, and no outstanding letters of credit under our credit agreement.  On April 11, 2014, lenders under our credit agreement completed their redetermination of the borrowing base, resulting in an increase from $525 million to $1.0 billion, which was subsequently reduced to $837.5 million as a result of the completion of a private placement of 6.0% Senior Notes due 2022 on May 1, 2014.

Obligations under our credit agreement are secured by a first-priority security interest in substantially all of Holdings’ proved reserves.  In addition, obligations under our credit agreement are guaranteed by us.

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:

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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 additional 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.

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, Holdings issued $500 million aggregate principal amount of 73/8% senior notes due 2021.  We are an unconditional guarantor of the senior 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

25

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 or a change of control that occurs after July 15, 2014 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, up 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 March 31, 2014, we had total assets of $1.5 billion and total capitalization of $1.2 billion, of which 55% was represented by equity and 45% by long-term debt.  At December 31, 2013, we had total assets of $1.4 billion and total capitalization of $1.1 billion, of which 56% was represented by equity and 44% 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.

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 March 31,				Increase
	2014		2013		$		%
Average realized prices:
Oil ($/Bbl) (before impact of cash settled derivatives)	$	93.45	$	84.23	$	9.22	11	%
Oil ($/Bbl) (after impact of cash settled derivatives)	88.26		83.65		4.61		6	%
Natural gas ($/Mcf)	4.51		3.27		1.24		38	%
NGLs ($/Bbl)	34.61		31.34		3.27		10	%
Combined ($/BOE) (before impact of cash settled derivatives)	69.19		61.08		8.11		13	%
Combined ($/BOE) (after impact of cash settled derivatives)	65.95		60.73		5.22		9	%

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 “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in our 2013 Annual Report on Form 10-K for information regarding our critical accounting policies and estimates.

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.

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 occasionally 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

26

in lower net cash inflows in times of higher oil prices, management believes that the resulting reduced volatility of cash flow resulting from use of derivatives is beneficial.

Counterparties

At March 31, 2014, 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	$	293

We do not require collateral from our counterparties for entering into derivative instruments, so in order to mitigate the credit risk associated with such derivative instruments, we enter into an International Swap Dealers Association Master Agreement (“ISDA Agreement”) with each of our counterparties.  The ISDA Agreement is a standardized, bilateral contract between a given counterparty and us.  Instead of treating each derivative transaction between the counterparty and us separately, the ISDA Agreement enables the counterparty and us to aggregate all trades under such agreement 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 trade can trigger rights to terminate all trades with such counterparty that are subject to the ISDA Agreement; 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 nine institutions, all of which are rated A- or better by Standard & Poor’s and Baa2 or better by Moody’s and eight 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, which provide a fixed price for a notional amount of sales volumes.  The following table summarizes our open commodity derivative contracts as of March 31, 2014:

Period	Average Daily Swap Volume	Weighted- Average Swap Price		Asset (Liability) Fair Market Value
	(Bbl)	(per Bbl)		(in thousands)
Q2 2014	8,950	$	92.71
Q3 2014	9,950	92.52
Q4 2014	9,950	92.52
Q2-Q4 2014	9,619	92.58		$	(13,213	)
Q1 2015	6,800	91.21
Q2 2015	6,800	91.21
Q3 2015	1,300	93.18
Q4 2015	1,300	93.18
2015	4,027	91.53		705
				$	(12,508	)

As of March 31, 2014, the fair market value of our oil derivative contracts was a net liability of $12.5 million.  Based on our open commodity derivative positions at March 31, 2014, a 10% increase in the NYMEX WTI price would increase our net commodity derivative liability by approximately $38.2 million, while a 10% decrease in the NYMEX WTI price would change our net commodity derivative liability to a net commodity derivative asset of approximately $25.7 million.

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Interest rate sensitivity

At March 31, 2014, we had outstanding debt of $549 million, $500 million of which bears interest at a fixed rate of 73/8% and $49 million of which consisted of outstanding borrowings under our credit agreement and is subject to floating market rates of interest that are linked to the Eurodollar rate.  At this level of floating rate debt, if the Eurodollar rate increased 10%, we would incur an additional $81,000 of interest expense per year, and if the Eurodollar rate decreased 10%, we would incur $81,000 less.  At March 31, 2014, the fair value of our senior notes was approximately $534.1 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 March 31, 2014 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 be required to make our first assessment of internal control over financial reporting under Section 404 for our 2014 Annual Report on Form 10-K.

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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 “Item 1A. Risk Factors” and elsewhere in our 2013 Annual Report on Form 10-K, which could materially affect our business, financial condition, and/or future results.  The risks described in our 2013 Annual Report on Form 10-K 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 6.  Exhibits

Exhibit No.	Description
3.1	Amended and Restated Certificate of Incorporation of Athlon Energy Inc. (incorporated by reference to 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 to 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	Indenture between Wells Fargo Bank, N.A., as trustee, Athlon Holdings LP and Athlon Finance Corp., as issuers, and Athlon Energy Inc., as guarantor, dated May 1, 2014 relating to the 6.000% Senior Notes due 2022 (including form of Note) (incorporated by reference to Exhibit 4.1 of Athlon’s Current Report on Form 8-K, filed with the SEC on May 2, 2014).
10.1	First Amendment to Amended and Restated Credit Agreement and Borrowing Base Redetermination, dated as of November 13, 2013 by and among Athlon Holdings LP, Bank of America, N.A., as Administrative Agent and L/C Issuer, and the lenders party thereto (incorporated by reference to Exhibit 10.3 of Athlon’s Annual Report on Form 10-K for the year ended December 31, 2013, filed with the SEC on March 7, 2014).
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.

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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: May 9, 2014

30

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: May 9, 2014	/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: May 9, 2014	/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 March 31, 2014 as filed with the Securities and Exchange Commission (“SEC”) on the date hereof (the “Report”), I, Robert C. Reeves, Chief Executive 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: May 9, 2014	/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 March 31, 2014 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: May 9, 2014	/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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Asset Retirement Obligations (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013
Asset retirement obligations
Balance at the beginning of the period	$ 6,855
Liabilities assumed in acquisitions	277
Liabilities incurred from new wells	330
Liabilities settled	(61)
Accretion of discount	195	149
Revisions of previous estimates	250
Balance at the end of the period	7,846
Less: current portion	51
Asset retirement obligations - long-term	$ 7,795		$ 6,795

XML

Fair Value Measurements (Details) (Level 1 input, USD $) In Millions, unless otherwise specified	Mar. 31, 2014
Level 1 input
Fair value measurements
Senior notes	$ 534.1

XML

Income Taxes (Tables)

3 Months Ended

Mar. 31, 2014

Income Taxes

Schedule of the components of income tax provision

	Three months ended
	March 31,
	2014		2013
	(in thousands)
Federal:
Current	$	1,050	$	—
Deferred	9,212		—
Total federal	10,262		—
State, net of federal benefit:
Current	147		—
Deferred	126		27
Total state	273		27
Income tax provision	$	10,535	$	27

Schedule of reconciliation of income tax provision with income tax at the Federal statutory rate

	Three months ended March 31,
	2014			2013
	(in thousands)
Income before income taxes	$	29,972		$	10,906
Less: net income attributable to noncontrolling interest	(662		)	—
Income before income taxes and noncontrolling interest	$	29,310		$	10,906
Income taxes at the Federal statutory rate	$	10,259		$	—
State income taxes, net of federal benefit	273			27
Permanent and other	3			—
Income tax provision	$	10,535		$	27

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Earnings Per Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	0 Months Ended		3 Months Ended
	Aug. 07, 2013	Apr. 30, 2013	Mar. 31, 2014	Mar. 31, 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
Outstanding common stock shares prior to closing of IPO	66,339,615
Conversion of units into common stock (in units)		1
Numerator:
Undistributed net income attributable to stockholders			$ 18,775	$ 10,879
Participation rights of unvested restricted stock in undistributed earnings			(194)
Basic undistributed net income attributable to stockholders			18,581	10,879
Denominator:
Basic weighted average shares outstanding			82,129,000	66,340,000
Basic EPS attributable to stockholders (in dollars per share)			$ 0.23	$ 0.16
Numerator:
Undistributed net income attributable to stockholders			18,775	10,879
Participation rights of unvested restricted stock in undistributed earnings			(194)
Diluted undistributed net income attributable to stockholders			$ 18,581	$ 10,879
Denominator:
Basic weighted average shares outstanding			82,129,000	66,340,000
Effect of conversion of New Holdings Units to shares of Athlon's common stock				1,856,000
Diluted weighted average shares outstanding			82,129,000	68,196,000
Diluted EPS attributable to stockholders (in dollars per share)			$ 0.23	$ 0.16
Antidilutive New Holdings Units excluded from EPS calculations (in shares)			1,855,563

XML

Fair Value Measurements (Details 5) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Fair value measurements
Amount of Loss Recognized in Income	$ 11,180	$ 6,849
Derivative instruments not designated as hedges | Commodity contracts | Derivative fair value loss
Fair value measurements
Amount of Loss Recognized in Income	$ 11,180	$ 6,849

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Acquisitions

3 Months Ended

Mar. 31, 2014

Acquisitions

Acquisitions

Note 3.   Acquisitions

On February 6, 2014, Athlon acquired certain oil and natural gas properties and related assets in the Midland Basin of West Texas for approximately $92.5 million in cash, which was financed with cash on hand and borrowings under Athlon’s credit agreement. The operations of these properties have been included with those of Athlon from the date of acquisition.

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Incentive Stock Plans (Details) (USD $)	3 Months Ended				3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Mar. 31, 2014 2013 Incentive Award Plan	Aug. 07, 2013 2013 Incentive Award Plan	Mar. 31, 2014 2013 Incentive Award Plan Restricted stock	Mar. 31, 2014 2013 Incentive Award Plan Restricted stock Vesting of awards subject to time and continued employment condition	Mar. 31, 2014 2013 Incentive Award Plan Restricted stock Vesting of awards subject to time, continued employment and performance condition	Mar. 31, 2014 Maximum 2013 Incentive Award Plan	Mar. 31, 2014 Maximum 2013 Incentive Award Plan Non-employee directors	Mar. 31, 2013 Holdings Class B limited partners
Incentive stock plans
Aggregate shares of common stock available for issuance under the 2013 stock incentive plan			11,759,386	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			10,954,012
Non-cash equity-based compensation expense	3,703,000	48,000	3,700,000							48,000
Capitalized non-cash equity-based compensation expense			255,000							26,000
Vesting period of restricted stock awards					3 years
Unvested restricted stock
Outstanding at beginning of the period (in shares)					638,913
Granted (in shares)					175,193	175,193	0
Forfeited (in shares)					(8,732)
Outstanding at end of the period (in shares)					805,374
Weighted - Average Grant Date Fair Value
Outstanding at beginning of period (in dollars per share)					$ 34.88
Granted (in dollars per share)					$ 35.53
Forfeited (in dollars per share)					$ 30.06
Outstanding at end of the period (in dollars per share)					$ 35.08
Additional disclosure
Unvested restricted stock granted, vesting of which is dependent on passage of specified time and continued employment condition (in shares)						577,874
Unvested restricted stock granted, vesting of which is dependent on passage of specified time and continued employment and also on performance condition (in shares)							227,500
Unvested restricted stock subject to variable accounting (in shares)					0
Total unrecognized compensation cost related to unvested restricted stock					$ 18,200,000
Weighted-average period for recognition of unrecognized compensation cost					2 years 6 months

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Formation of the Company and Description of Business (Details) (USD $) In Millions, except Share data, unless otherwise specified	0 Months Ended			3 Months Ended
	Aug. 07, 2013	Apr. 30, 2013	Aug. 07, 2013 Holdings Class A limited partners	Mar. 31, 2014 Holdings Class A limited partners
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)	$ 295.7
Total number of New Holdings Units exchangeable for common stock			1,855,563
Number of common stock exchangeable against each New Holdings Unit		1		1

XML

Subsequent Events (Tables)

3 Months Ended

Mar. 31, 2014

Subsequent events

Summary of open commodity derivative contracts

Period	Average Daily Swap Volume	Weighted- Average Swap Price		Asset (Liability) Fair Market Value
	(Bbl)	(per Bbl)		(in thousands)
Q2 2014	8,950	$	92.71
Q3 2014	9,950	92.52
Q4 2014	9,950	92.52
Q2-Q4 2014	9,619	92.58		$	(13,213	)
Q1 2015	6,800	91.21
Q2 2015	6,800	91.21
Q3 2015	1,300	93.18
Q4 2015	1,300	93.18
2015	4,027	91.53		705
				$	(12,508	)

Subsequent event

Subsequent events

Summary of open commodity derivative contracts

Period	Average Daily Swap Volume	Weighted- Average Swap Price
	(Bbl)	(per Bbl)
Q2 2014	8,950	$	92.71
Q3 2014	9,950	92.52
Q4 2014	10,961	92.31
Q2-Q4 2014	9,957	92.50
Q1 2015	9,800	90.90
Q2 2015	9,800	90.90
Q3 2015	4,300	91.11
Q4 2015	4,300	91.11
2015	7,027	90.97

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Related Party Transactions (Details) (USD $)	0 Months Ended	3 Months Ended
	Apr. 30, 2013	Mar. 31, 2014	Mar. 31, 2014 Apollo	Mar. 31, 2013 Apollo	Mar. 31, 2014 Management team and certain employees
Related party transactions
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				$ 405,000
Number of common stock exchangeable against each New Holdings Unit	1				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			0 Months Ended	3 Months Ended
	Apr. 30, 2013	Mar. 31, 2014	Dec. 31, 2013	Mar. 31, 2014 Athlon Holdings GP LLC	Aug. 07, 2013 Holdings Class A limited partners	Mar. 31, 2014 Holdings Class A limited partners	Dec. 31, 2013 Holdings Class A limited partners
Noncontrolling interest
Percentage of ownership interest of management and certain employees						2.20%	2.20%
Ownership interest in general partner of Holdings (as a percent)				100.00%
Noncontrolling interest		$ 11,450	$ 10,788
Total number of New Holdings Units exchangeable for common stock					1,855,563
Number of common stock exchangeable against each New Holdings Unit	1					1
Net income attributable to noncontrolling interest		$ 662

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Acquisitions (Details) (Midland Basin, USD $) In Millions, unless otherwise specified	0 Months Ended
	Feb. 06, 2014
Midland Basin
Acquisitions
Cash paid for acquisition	$ 92.5

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Basis of Presentation

3 Months Ended

Mar. 31, 2014

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 March 31, 2014 and results of operations and cash flows for the three months ended March 31, 2014 and 2013.  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.  Therefore, these unaudited consolidated financial statements should be read in conjunction with Athlon’s audited consolidated financial statements and related notes thereto included in Athlon’s 2013 Annual Report on Form 10-K.

Noncontrolling Interest

As of March 31, 2014 and December 31, 2013, management and certain 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 March 31, 2014 and December 31, 2013 of approximately $11.5 million and $10.8 million, respectively, represents management and certain 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 attributable to noncontrolling interest” for the three months ended March 31, 2014 of approximately $0.7 million represents the net income of Holdings attributable to management and certain employees.

New Accounting Pronouncements

No new accounting pronouncements issued or effective from January 1, 2014 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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Evaluated Properties (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Evaluated, including wells and related equipment
Evaluated leasehold costs	$ 494,809	$ 448,689
Wells and related equipment - completed	887,884	748,900
Wells and related equipment - in process	48,507	46,589
Total evaluated	$ 1,431,200	$ 1,244,178

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Long-Term Debt (Details) (USD $) In Millions, unless otherwise specified		3 Months Ended					3 Months Ended			3 Months Ended
	Apr. 30, 2013 2021 Notes	Mar. 31, 2014 2021 Notes Upon assets disposition triggering events	Mar. 31, 2014 2021 Notes Prior to April 15, 2016	Mar. 31, 2014 2021 Notes Prior to April 15, 2016 Redemption from proceeds of certain equity offerings	Mar. 31, 2014 2021 Notes On or prior to July 15, 2014 Redemption of debt instrument upon change of control	Mar. 31, 2014 2021 Notes Maximum	Mar. 31, 2014 2021 Notes Maximum Prior to April 15, 2016 Redemption from proceeds of certain equity offerings	Mar. 31, 2014 Credit agreement	Mar. 19, 2013 Credit agreement	Mar. 31, 2014 Credit agreement Applicable Margin for Eurodollar Loans Eurodollar rate	Mar. 31, 2014 Credit agreement Applicable Margin for Eurodollar Loans LIBOR	Mar. 31, 2014 Credit agreement Applicable Margin for Base Rate Loans Eurodollar rate	Mar. 31, 2014 Credit agreement Applicable Margin for Base Rate Loans LIBOR	Mar. 31, 2014 Credit agreement Applicable Margin for Base Rate Loans Base Rate	Mar. 31, 2014 Credit agreement Applicable Margin for Base Rate Loans Prime rate	Mar. 31, 2014 Credit agreement Applicable Margin for Base Rate Loans Federal funds rate	Mar. 31, 2014 Credit agreement Less than or equal to .30 to 1	Mar. 31, 2014 Credit agreement Less than or equal to .30 to 1 Applicable Margin for Eurodollar Loans	Mar. 31, 2014 Credit agreement Less than or equal to .30 to 1 Applicable Margin for Base Rate Loans	Mar. 31, 2014 Credit agreement Greater than .30 to 1 but less than or equal to .60 to 1	Mar. 31, 2014 Credit agreement Greater than .30 to 1 but less than or equal to .60 to 1 Applicable Margin for Eurodollar Loans	Mar. 31, 2014 Credit agreement Greater than .30 to 1 but less than or equal to .60 to 1 Applicable Margin for Base Rate Loans	Mar. 31, 2014 Credit agreement Greater than .60 to 1 but less than or equal to .80 to 1	Mar. 31, 2014 Credit agreement Greater than .60 to 1 but less than or equal to .80 to 1 Applicable Margin for Eurodollar Loans	Mar. 31, 2014 Credit agreement Greater than .60 to 1 but less than or equal to .80 to 1 Applicable Margin for Base Rate Loans	Mar. 31, 2014 Credit agreement Greater than .80 to 1 but less than or equal to .90 to 1	Mar. 31, 2014 Credit agreement Greater than .80 to 1 but less than or equal to .90 to 1 Applicable Margin for Eurodollar Loans	Mar. 31, 2014 Credit agreement Greater than .80 to 1 but less than or equal to .90 to 1 Applicable Margin for Base Rate Loans	Mar. 31, 2014 Credit agreement Greater than .90 to 1	Mar. 31, 2014 Credit agreement Greater than .90 to 1 Applicable Margin for Eurodollar Loans	Mar. 31, 2014 Credit agreement Greater than .90 to 1 Applicable Margin for Base Rate Loans	Mar. 31, 2014 Credit agreement Maximum Less than or equal to .30 to 1	Mar. 31, 2014 Credit agreement Maximum Greater than .30 to 1 but less than or equal to .60 to 1	Mar. 31, 2014 Credit agreement Maximum Greater than .60 to 1 but less than or equal to .80 to 1	Mar. 31, 2014 Credit agreement Maximum Greater than .80 to 1 but less than or equal to .90 to 1	Mar. 31, 2014 Credit agreement Minimum Greater than .30 to 1 but less than or equal to .60 to 1	Mar. 31, 2014 Credit agreement Minimum Greater than .60 to 1 but less than or equal to .80 to 1	Mar. 31, 2014 Credit agreement Minimum Greater than .80 to 1 but less than or equal to .90 to 1	Mar. 31, 2014 Credit agreement Minimum Greater than .90 to 1
Long-term debt
Aggregate principal amount of notes issued	$ 500
Interest rate (as a percent)	7.375%
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%
Maximum amount committed by lender									1,000.0
Current borrowing base								525
Outstanding borrowings								49
Remaining borrowing capacity								476
Outstanding letters of credit								$ 0
Ratio of Outstanding Borrowings to Borrowing Base																																0.30	0.60	0.80	0.90	0.30	0.60	0.80	0.90
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 (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Current assets:
Cash and cash equivalents	$ 5,514	$ 113,025
Accounts receivable	63,434	48,238
Inventory	853	928
Deferred taxes	739	380
Other	1,797	1,166
Total current assets	72,337	163,737
Properties and equipment, at cost - full cost method:
Evaluated properties, including wells and related equipment	1,431,200	1,244,178
Unevaluated properties	139,502	89,859
Accumulated depletion, depreciation, and amortization	(188,798)	(160,779)
Oil and natural gas properties and equipment, net	1,381,904	1,173,258
Derivatives, at fair value	1,505	2,330
Debt issuance costs	14,110	14,679
Acquisition deposits	4,400
Other	1,364	1,447
Total assets	1,475,620	1,355,451
Current liabilities:
Trade accounts payable	2,180	459
Accrued liabilities:
Lease operating	6,625	6,563
Production, severance, and ad valorem taxes	3,825	2,550
Development capital	83,427	68,059
Interest	17,049	7,790
Derivatives, at fair value	14,013	8,354
Revenue payable	23,400	20,513
Other	4,884	4,035
Total current liabilities	155,403	118,323
Asset retirement obligations, net of current portion	7,795	6,795
Long-term debt	549,000	500,000
Deferred taxes	102,094	92,397
Other	99	101
Total liabilities	814,391	717,616
Commitments and contingencies
Equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized, none issued and outstanding
Common stock, $0.01 par value, 500,000,000 shares authorized, 82,129,089 issued and outstanding	821	821
Additional paid-in capital	597,900	593,943
Retained earnings	51,058	32,283
Total stockholders' equity	649,779	627,047
Noncontrolling interest	11,450	10,788
Total equity	661,229	637,835
Total liabilities and equity	$ 1,475,620	$ 1,355,451

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Subsequent Events (Details) (USD $) In Millions, except Share data, unless otherwise specified	0 Months Ended											0 Months Ended													0 Months Ended
	Aug. 07, 2013	Mar. 19, 2013 Credit agreement	Mar. 31, 2014 Commodity derivative contracts with swap price Q2 2014 bbl	Mar. 31, 2014 Commodity derivative contracts with swap price Q3 2014 bbl	Mar. 31, 2014 Commodity derivative contracts with swap price Q4 2014 bbl	Mar. 31, 2014 Commodity derivative contracts with swap price Q2-Q4 2014 bbl	Mar. 31, 2014 Commodity derivative contracts with swap price Q1 2015 bbl	Mar. 31, 2014 Commodity derivative contracts with swap price Q2 2015 bbl	Mar. 31, 2014 Commodity derivative contracts with swap price Q3 2015 bbl	Mar. 31, 2014 Commodity derivative contracts with swap price Q4 2015 bbl	Mar. 31, 2014 Commodity derivative contracts with swap price 2015 bbl	Apr. 23, 2014 Subsequent event	Apr. 23, 2014 Subsequent event Apollo Global Securities, LLC	May 01, 2014 Subsequent event 2022 Notes	May 01, 2014 Subsequent event 2022 Notes Prior to May 1, 2017	May 01, 2014 Subsequent event 2022 Notes Prior to May 1, 2017 Redemption from proceeds of certain equity offerings	May 01, 2014 Subsequent event 2022 Notes Prior to May 1, 2017 Redemption from proceeds of certain equity offerings Maximum	May 01, 2014 Subsequent event 2022 Notes On or prior to July 15, 2015 Redemption of debt instrument upon change of control	May 01, 2014 Subsequent event 2022 Notes On or prior to July 15, 2015 Upon assets disposition triggering events	May 01, 2014 Subsequent event 2022 Notes On or prior to July 2, 2014 If triggering acquisitions are not consummated or applicable purchase agreements are terminated	May 01, 2014 Subsequent event 2022 Notes Apollo Global Securities, LLC	May 01, 2014 Subsequent event Credit agreement	Apr. 11, 2014 Subsequent event Credit agreement	Mar. 31, 2014 Subsequent event Credit agreement	Apr. 08, 2014 Subsequent event Midland Basin	May 09, 2014 Subsequent event Commodity derivative contracts with swap price Q2 2014 bbl	May 09, 2014 Subsequent event Commodity derivative contracts with swap price Q3 2014 bbl	May 09, 2014 Subsequent event Commodity derivative contracts with swap price Q4 2014 bbl	May 09, 2014 Subsequent event Commodity derivative contracts with swap price Q2-Q4 2014 bbl	May 09, 2014 Subsequent event Commodity derivative contracts with swap price Q1 2015 bbl	May 09, 2014 Subsequent event Commodity derivative contracts with swap price Q2 2015 bbl	May 09, 2014 Subsequent event Commodity derivative contracts with swap price Q3 2015 bbl	May 09, 2014 Subsequent event Commodity derivative contracts with swap price Q4 2015 bbl	May 09, 2014 Subsequent event Commodity derivative contracts with swap price 2015 bbl
Subsequent events
Average Daily Swap Volume			8,950	9,950	9,950	9,619	6,800	6,800	1,300	1,300	4,027															8,950	9,950	10,961	9,957	9,800	9,800	4,300	4,300	7,027
Weighted-Average Swap Price			92.71	92.52	92.52	92.58	91.21	91.21	93.18	93.18	91.53															92.71	92.52	92.31	92.50	90.90	90.90	91.11	91.11	90.97
Purchase price																									$ 873
Maximum amount committed by lender		1,000.0																				837.5	1,000.0	525.0
Interest rate (as a percent)														6.00%
Shares of common stock issued	15,789,474											14,806,250
Per share price (in dollars per share)	$ 20.00											$ 40.00
Net proceeds from public offering, after deducting underwriting discounts and commissions and offering expenses (in dollars)												570.5
Payment of discounts and commissions to underwriters													1.0
Aggregate principal amount of notes issued														650
Proceeds from long-term debt, net of issuance costs														638.0
Proceeds from gross spread																					0.5
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)															100.00%	106.00%		110.00%	101.00%
Principal amount of debt that will be required to be redeemed																				$ 250

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Cash flows from operating activities:
Consolidated net income	$ 19,437	$ 10,879
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Depletion, depreciation, and amortization	28,076	18,053
Deferred taxes	9,338	27
Non-cash derivative loss	6,484	6,708
Equity-based compensation	3,703	48
Other	829	438
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable	(14,992)	(8,648)
Other current assets	(117)	219
Accounts payable	1,654	(2,253)
Accrued interest	9,258	185
Revenue payable	2,887	3,010
Other current liabilities	2,172	1,731
Net cash provided by operating activities	68,729	30,397
Cash flows from investing activities:
Acquisitions of oil and natural gas properties	(98,667)	(8,819)
Acquisition deposits	(4,400)
Development of oil and natural gas properties	(122,132)	(81,605)
Other	(41)	(136)
Net cash used in investing activities	(225,240)	(90,560)
Cash flows from financing activities:
Proceeds from long-term debt, net of issuance costs	56,000	53,271
Payments on long-term debt	(7,000)
Other		1,400
Net cash provided by financing activities	49,000	54,671
Decrease in cash and cash equivalents	(107,511)	(5,492)
Cash and cash equivalents, beginning of period	113,025	8,871
Cash and cash equivalents, end of period	$ 5,514	$ 3,379

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Fair Value Measurements (Details 3) (ISDA agreements, BNP Paribas, USD $) In Thousands, unless otherwise specified	Mar. 31, 2014
ISDA agreements | BNP Paribas
Counterparty risk
Fair Market Value of Oil Derivative Contracts Committed	$ 293

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2014

Fair Value Measurements

Summary of open commodity derivative contracts

Period	Average Daily Swap Volume	Weighted- Average Swap Price		Asset (Liability) Fair Market Value
	(Bbl)	(per Bbl)		(in thousands)
Q2 2014	8,950	$	92.71
Q3 2014	9,950	92.52
Q4 2014	9,950	92.52
Q2-Q4 2014	9,619	92.58		$	(13,213	)
Q1 2015	6,800	91.21
Q2 2015	6,800	91.21
Q3 2015	1,300	93.18
Q4 2015	1,300	93.18
2015	4,027	91.53		705
				$	(12,508	)

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	$	293

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 March 31, 2014
Assets
Derivatives - current	$	358		$	(358	)	$	—
Derivatives - noncurrent	1,623			(118		)	1,505
Total assets	1,981			(476		)	1,505
Liabilities
Derivatives - current	(14,371		)	358			(14,013		)
Derivatives - noncurrent	(118		)	118			—
Total liabilities	(14,489		)	476			(14,013		)
Net liabilities	$	(12,508	)	$	—		$	(12,508	)
As of December 31, 2013
Assets
Derivatives - current	$	143		$	(143	)	$	—
Derivatives - noncurrent	2,330			—			2,330
Total assets	2,473			(143		)	2,330
Liabilities
Derivatives - current	(8,497		)	143			(8,354		)
Derivatives - noncurrent	—			—			—
Total liabilities	(8,497		)	143			(8,354		)
Net assets	$	(6,024	)	$	—		$	(6,024	)

(a) Represents counterparty netting under ISDA 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

		Amount of Loss Recognized in Income
	Location of Loss	Three months ended March 31,
Derivatives Not Designated as Hedges	Recognized in Income	2014		2013
		(in thousands)
Commodity derivative contracts	Derivative fair value loss	$	11,180	$	6,849

Schedule of assets and liabilities that were 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	Net Liability			(Level 1)		(Level 2)			(Level 3)
				(in thousands)
As of March 31, 2014
Oil derivative contracts - swaps	$	(12,508	)	$	—	$	(12,508	)	$	—
As of December 31, 2013
Oil derivative contracts - swaps	$	(6,024	)	$	—	$	(6,024	)	$	—

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Fair Value Measurements (Details 4) (Commodity contracts, USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Liabilities
Net assets (liabilities)	$ (12,508)	$ (6,024)
Derivative instruments not designated as hedging instruments | Oil
Assets
Oil Commodity Derivatives, assets	1,981	2,473
Commodity Derivatives Netting, assets	(476)	(143)
Total Commodity Derivatives	1,505	2,330
Liabilities
Oil Commodity Derivatives, liabilities	(14,489)	(8,497)
Commodity Derivatives Netting, liabilities	476	143
Total Commodity Derivatives	(14,013)	(8,354)
Net assets (liabilities)	(12,508)	(6,024)
Derivative instruments not designated as hedging instruments | Oil | Derivative assets - current
Assets
Oil Commodity Derivatives, assets	358	143
Commodity Derivatives Netting, assets	(358)	(143)
Derivative instruments not designated as hedging instruments | Oil | Derivative assets - noncurrent
Assets
Oil Commodity Derivatives, assets	1,623	2,330
Commodity Derivatives Netting, assets	(118)
Total Commodity Derivatives	1,505	2,330
Derivative instruments not designated as hedging instruments | Oil | Derivative liabilities - current
Liabilities
Oil Commodity Derivatives, liabilities	(14,371)	(8,497)
Commodity Derivatives Netting, liabilities	358	143
Total Commodity Derivatives	(14,013)	(8,354)
Derivative instruments not designated as hedging instruments | Oil | Derivative liabilities - noncurrent
Liabilities
Oil Commodity Derivatives, liabilities	(118)
Commodity Derivatives Netting, liabilities	$ 118

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Long-Term Debt (Tables)

3 Months Ended

Mar. 31, 2014

Long-Term Debt.

Schedule of quarterly commitment fee on unused portion of the 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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Formation of the Company and Description of Business

3 Months Ended

Mar. 31, 2014

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.

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”) and Holdings’ management team and certain employees owned all of the Class A limited partner interests in Holdings and 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 did not exchange 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 $295.7 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”.  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.  Please read “Note 12. Related Party Transactions” for additional discussion.  All other New Holdings Units are held by Athlon.

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Mar. 31, 2014	Dec. 31, 2013
CONSOLIDATED BALANCE SHEETS
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	50,000,000	50,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	500,000,000	500,000,000
Common stock, shares issued	82,129,089	82,129,089
Common stock, shares outstanding	82,129,089	82,129,089

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2014

Commitments and Contingencies

Commitments and Contingencies

Note 11. 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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Document and Entity Information	3 Months Ended
	Mar. 31, 2014	May 09, 2014
Document and Entity Information
Entity Registrant Name	Athlon Energy Inc.
Entity Central Index Key	0001574648
Document Type	10-Q
Document Period End Date	Mar. 31, 2014
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		97,125,345
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q1

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Related Party Transactions

3 Months Ended

Mar. 31, 2014

Related Party Transactions

Related Party Transactions

Note 12. Related Party Transactions

Services Agreement

Athlon was a party to a Services Agreement, dated August 23, 2010, which required it to compensate Apollo for consulting and advisory services equal to the higher of (i) 1% of earnings before interest, income taxes, depreciation, depletion, and amortization, 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 three months ended March 31, 2013, Athlon incurred approximately $405,000 of Advisory Fees, which are included in “General and administrative expenses” in the accompanying Consolidated Statements of Operations.

Exchange Agreement

Upon the consummation of its IPO, Athlon entered into an exchange agreement with its management team and certain employees who hold New Holdings Units.  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 its management team and certain employees who hold New Holdings Units that provides for the payment from time to time by Athlon to such unitholders of Holdings of 85% of the amount of the tax 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 regular federal income tax paying position, net of available tax credit and loss carryforwards, for the foreseeable future.  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
	Mar. 31, 2014	Mar. 31, 2013
Revenues:
Oil	$ 87,082	$ 45,659
Natural gas	7,425	3,367
Natural gas liquids	11,162	5,720
Total revenues	105,669	54,746
Production:
Lease operating	10,736	7,237
Production, severance, and ad valorem taxes	6,752	3,739
Depletion, depreciation, and amortization	28,076	18,053
General and administrative	8,965	3,282
Acquisition costs	618	57
Derivative fair value loss	11,180	6,849
Accretion of discount on asset retirement obligations	195	149
Total expenses	66,522	39,366
Operating income	39,147	15,380
Other income (expenses):
Interest	(9,178)	(4,474)
Other	3
Total other expenses	(9,175)	(4,474)
Income before income taxes	29,972	10,906
Income tax provision	10,535	27
Consolidated net income	19,437	10,879
Less: net income attributable to noncontrolling interest	662
Net income attributable to stockholders	$ 18,775	$ 10,879
Net income per common share:
Basic (in dollars per share)	$ 0.23	$ 0.16
Diluted (in dollars per share)	$ 0.23	$ 0.16
Weighted average common shares outstanding:
Basic (in shares)	82,129	66,340
Diluted (in shares)	82,129	68,196

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Asset Retirement Obligations

3 Months Ended

Mar. 31, 2014

Asset Retirement Obligations

Asset Retirement Obligations

Note 6.   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 three months ended March 31, 2014 (in thousands):

Balance at January 1	$	6,855
Liabilities assumed in acquisitions	277
Liabilities incurred from new wells	330
Liabilities settled	(61		)
Accretion of discount	195
Revisions of previous estimates	250
Balance at March 31	7,846
Less: current portion	51
Asset retirement obligations - long-term	$	7,795

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Fair Value Measurements

3 Months Ended

Mar. 31, 2014

Fair Value Measurements

Fair Value Measurements

Note 5.  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 March 31, 2014, the fair value of the senior notes was approximately $534.1 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 Athlon’s 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” 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, which provide a fixed price for a notional amount of sales volumes.  The following table summarizes Athlon’s open commodity derivative contracts as of March 31, 2014:

Period	Average Daily Swap Volume	Weighted- Average Swap Price		Asset (Liability) Fair Market Value
	(Bbl)	(per Bbl)		(in thousands)
Q2 2014	8,950	$	92.71
Q3 2014	9,950	92.52
Q4 2014	9,950	92.52
Q2-Q4 2014	9,619	92.58		$	(13,213	)
Q1 2015	6,800	91.21
Q2 2015	6,800	91.21
Q3 2015	1,300	93.18
Q4 2015	1,300	93.18
2015	4,027	91.53		705
				$	(12,508	)

Counterparty Risk. At March 31, 2014, 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	$	293

Athlon does not require collateral from its counterparties for entering into derivative instruments, so in order to mitigate the credit risk associated with such derivative instruments, Athlon enters into an International Swap Dealers Association Master Agreement (“ISDA Agreement”) with each of its counterparties.  The ISDA Agreement is a standardized, bilateral contract between a given counterparty and Athlon.  Instead of treating each derivative transaction between the counterparty and Athlon separately, the termination provision of the ISDA Agreement enables the counterparty and Athlon to aggregate all trades under such agreement 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 trade can trigger rights to terminate all trades with such counterparty that are subject to the ISDA Agreement; 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 March 31, 2014
Assets
Derivatives - current	$	358		$	(358	)	$	—
Derivatives - noncurrent	1,623			(118		)	1,505
Total assets	1,981			(476		)	1,505
Liabilities
Derivatives - current	(14,371		)	358			(14,013		)
Derivatives - noncurrent	(118		)	118			—
Total liabilities	(14,489		)	476			(14,013		)
Net liabilities	$	(12,508	)	$	—		$	(12,508	)
As of December 31, 2013
Assets
Derivatives - current	$	143		$	(143	)	$	—
Derivatives - noncurrent	2,330			—			2,330
Total assets	2,473			(143		)	2,330
Liabilities
Derivatives - current	(8,497		)	143			(8,354		)
Derivatives - noncurrent	—			—			—
Total liabilities	(8,497		)	143			(8,354		)
Net assets	$	(6,024	)	$	—		$	(6,024	)

(a) Represents counterparty netting under ISDA 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:

		Amount of Loss Recognized in Income
	Location of Loss	Three months ended March 31,
Derivatives Not Designated as Hedges	Recognized in Income	2014		2013
		(in thousands)
Commodity derivative contracts	Derivative fair value loss	$	11,180	$	6,849

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.  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; (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 $164,000 and $39,000 as of March 31, 2014 and December 31, 2013, respectively.

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	Net Liability			(Level 1)		(Level 2)			(Level 3)
				(in thousands)
As of March 31, 2014
Oil derivative contracts - swaps	$	(12,508	)	$	—	$	(12,508	)	$	—
As of December 31, 2013
Oil derivative contracts - swaps	$	(6,024	)	$	—	$	(6,024	)	$	—

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Asset Retirement Obligations (Tables)

3 Months Ended

Mar. 31, 2014

Asset Retirement Obligations

Summary of changes in asset retirement obligations

The following table summarizes the changes in Athlon’s asset retirement obligations for the three months ended March 31, 2014 (in thousands):

Balance at January 1	$	6,855
Liabilities assumed in acquisitions	277
Liabilities incurred from new wells	330
Liabilities settled	(61		)
Accretion of discount	195
Revisions of previous estimates	250
Balance at March 31	7,846
Less: current portion	51
Asset retirement obligations - long-term	$	7,795

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Subsequent Events

3 Months Ended

Mar. 31, 2014

Subsequent Events

Subsequent Events

Note 13. Subsequent Events

Subsequent to March 31, 2014, Athlon entered into additional oil swaps.  The following table summarizes Athlon’s open commodity derivative contracts as of May 9, 2014:

Period	Average Daily Swap Volume	Weighted- Average Swap Price
	(Bbl)	(per Bbl)
Q2 2014	8,950	$	92.71
Q3 2014	9,950	92.52
Q4 2014	10,961	92.31
Q2-Q4 2014	9,957	92.50
Q1 2015	9,800	90.90
Q2 2015	9,800	90.90
Q3 2015	4,300	91.11
Q4 2015	4,300	91.11
2015	7,027	90.97

On April 8, 2014, Athlon entered into multiple purchase and sale agreements with separate, unrelated third parties to acquire certain oil and natural gas properties and related assets in the Midland Basin of West Texas for a combined purchase price of $873 million, subject to customary purchase price adjustments (the “Acquisitions”).  The Acquisitions are expected to close by or before June 2014, subject to customary closing conditions.

On April 11, 2014, lenders under the Credit Agreement completed their redetermination of the borrowing base, resulting in an increase from $525 million to $1.0 billion, which was subsequently reduced to $837.5 million as a result of the completion of a private placement of 6% senior notes due 2022 as discussed below.

On April 23, 2014, Athlon completed a public offering of 14,806,250 shares of its common stock at $40.00 per share and received net proceeds of approximately $570.5 million, after deducting underwriting discounts and commissions and estimated offering expenses.  Athlon plans to use the net proceeds from the offering to fund a portion of the purchase price of the Acquisitions.  Apollo Global Securities, LLC was an underwriter in the offering and received a portion of the discounts and commissions paid to the underwriters of approximately $1.0 million.

On May 1, 2014, Holdings completed a private placement of $650 million aggregate principal amount of 6% senior notes due 2022 (the “2022 Notes”) and received net proceeds of approximately $638.0 million, after deducting initial purchasers’ discounts and estimated debt issuance costs.  Athlon plans to use the net proceeds from the 2022 Notes to fund a portion of the purchase price of the Acquisitions.  Apollo Global Securities, LLC received a portion of the gross spread as an initial purchaser of the 2022 Notes of approximately $0.5 million. 

Athlon is an unconditional guarantor of the 2022 Notes.  The indenture governing the 2022 Notes contains covenants, including, among other things, covenants that restrict Athlon’s ability to:

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

·      incur additional indebtedness if Athlon’s 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 May 1, 2017, Athlon will be able to redeem some or all of the 2022 Notes at a premium that will decrease over time, plus accrued and unpaid interest to the date of redemption.  Prior to May 1, 2017, Athlon will be able, at its option, to redeem up to 35% of the aggregate principal amount of the 2022 Notes at a price of 106% 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 Athlon’s option, prior to May 1, 2017, Athlon may redeem some or all of the 2022 Notes at a redemption price equal to 100% of the principal amount of the 2022 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, 2015, Athlon may redeem all, but not less than all, of the 2022 Notes at 110% of the principal amount thereof plus accrued and unpaid interest to, but not including, the redemption date.  Certain asset dispositions or a change of control that occurs after July 15, 2015 will be triggering events that may require Athlon to repurchase all or any part of a noteholder’s 2022 Notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, up to but excluding the date of repurchase.

If certain of the Acquisitions (the “Triggering Acquisitions”) are not consummated by July 2, 2014 or if all of the applicable purchase agreements are terminated at any time prior to the consummation of the Acquisitions, Athlon will be required to redeem $250 million of the 2022 Notes in cash at a redemption price equal to the initial offer price, plus accrued and unpaid interest to, but not including, the date of redemption. Additionally, if Athlon determines it is reasonably likely that the Triggering Acquisitions will not close on or prior to July 2, 2014, or all of the applicable purchase agreements will be terminated at any time prior to the consummation of the Triggering Acquisitions, Athlon may, at its option, redeem $250 million of the 2022 Notes then outstanding in cash at a redemption price equal to the initial offer price, plus accrued and unpaid interest to, but not including, the date of redemption.

Interest on the 2022 Notes is payable in cash semi-annually in arrears, commencing on November 1, 2014, through maturity.

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Earnings Per Share

3 Months Ended

Mar. 31, 2014

Earnings Per Share

Earnings Per Share

Note 9.   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 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 to common stockholders and EPS computations for the periods indicated:

	Three months ended March 31,
	2014			2013
	(in thousands, except per share amounts)
Basic EPS
Numerator:
Undistributed net income attributable to stockholders	$	18,775		$	10,879
Participation rights of unvested restricted stock in undistributed earnings	(194		)	—
Basic undistributed net income attributable to stockholders	$	18,581		$	10,879
Denominator:
Basic weighted average shares outstanding	82,129			66,340
Basic EPS attributable to stockholders	$	0.23		$	0.16
Diluted EPS
Numerator:
Undistributed net income attributable to stockholders	$	18,775		$	10,879
Participation rights of unvested restricted stock in undistributed earnings	(194		)	—
Effect of conversion of New Holdings Units to shares of Athlon’s common stock (a)	—			—
Diluted undistributed net income attributable to stockholders	$	18,581		$	10,879
Denominator:
Basic weighted average shares outstanding	82,129			66,340
Effect of conversion of New Holdings Units to shares of Athlon’s common stock (a)	—			1,856
Diluted weighted average shares outstanding	82,129			68,196
Diluted EPS attributable to stockholders	$	0.23		$	0.16

(a) For the three months ended March 31, 2014, 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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Long-Term Debt

3 Months Ended

Mar. 31, 2014

Long-Term Debt.

Long-Term Debt

Note 7.   Long-Term Debt

Senior Notes

In April 2013, Holdings issued $500 million aggregate principal amount of 73/8% senior notes due 2021 (the “2021 Notes”).  Athlon is an unconditional guarantor of the 2021 Notes.  The indenture governing the 2021 Notes contains covenants, including, among other things, covenants that restrict Athlon’s ability to:

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

· incur additional indebtedness if Athlon’s 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, Athlon will be able to redeem some or all of the 2021 Notes at a premium that will decrease over time, plus accrued and unpaid interest to the date of redemption.  Prior to April 15, 2016, Athlon will be able, at its option, to redeem up to 35% of the aggregate principal amount of the 2021 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 Athlon’s option, prior to April 15, 2016, Athlon may redeem some or all of the 2021 Notes at a redemption price equal to 100% of the principal amount of the 2021 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, Athlon may redeem all, but not less than all, of the 2021 Notes at 110% of the principal amount thereof plus accrued and unpaid interest to, but not including, the redemption date.  Certain asset dispositions or a change of control that occurs after July 15, 2014 will be triggering events that may require Athlon to repurchase all or any part of a noteholder’s 2021 Notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, up to but excluding the date of repurchase.  Interest on the 2021 Notes is payable in cash semi-annually in arrears, commencing on October 15, 2013, through maturity.

Credit Agreement

Athlon is a party to an amended and restated credit agreement dated March 19, 2013 (the “Credit Agreement”), which matures on March 19, 2018.  The Credit Agreement provides for revolving credit loans to be made to Athlon from time to time and letters of credit to be issued from time to time for the account of Athlon or any of its restricted subsidiaries.  The aggregate amount of the commitments of the lenders under the Credit Agreement is $1.0 billion.  Availability under the Credit Agreement is subject to a borrowing base, which is redetermined semi-annually and upon requested special redeterminations. As of March 31, 2014, the borrowing base was $525 million and there were $49 million outstanding borrowings, $476 million of borrowings capacity, and no outstanding letters of credit under the Credit Agreement.

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

Loans under the 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 Credit Agreement bear interest at the Eurodollar rate plus the applicable margin indicated in the following table, and base rate loans under the Credit Agreement bear interest at the base rate plus the applicable margin indicated in the following table.  Athlon also incurs a quarterly commitment fee on the unused portion of the 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 Athlon) 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 Credit Agreement.  Borrowings under the Credit Agreement may be repaid from time to time without penalty.

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

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

· a restriction on creating liens on Athlon’s 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 Athlon maintain a ratio of consolidated total debt to EBITDAX (as defined in the 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 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 Credit Agreement to be immediately due and payable.

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Income Taxes

3 Months Ended

Mar. 31, 2014

Income Taxes

Income Taxes

Note 8.   Income Taxes

As a result of the corporate reorganization on April 26, 2013, Athlon (a C-corporation) obtained substantially all of the interests in Holdings.  Prior to April 26, 2013, Holdings, Athlon’s accounting predecessor, was a limited partnership not subject to federal income taxes.

The components of income tax provision were as follows for the periods indicated:

	Three months ended
	March 31,
	2014		2013
	(in thousands)
Federal:
Current	$	1,050	$	—
Deferred	9,212		—
Total federal	10,262		—
State, net of federal benefit:
Current	147		—
Deferred	126		27
Total state	273		27
Income tax provision	$	10,535	$	27

The following table reconciles income tax provision with income tax at the Federal statutory rate for the periods indicated:

	Three months ended March 31,
	2014			2013
	(in thousands)
Income before income taxes	$	29,972		$	10,906
Less: net income attributable to noncontrolling interest	(662		)	—
Income before income taxes and noncontrolling interest	$	29,310		$	10,906
Income taxes at the Federal statutory rate	$	10,259		$	—
State income taxes, net of federal benefit	273			27
Permanent and other	3			—
Income tax provision	$	10,535		$	27

As of March 31, 2014 and December 31, 2013, all of Athlon’s tax positions met the “more-likely-than-not” threshold.  As a result, no additional tax expense, interest, or penalties have been accrued.  During the three months ended March 31, 2014 and 2013, Athlon did not have any interest assessed by the taxing authorities or incur any penalties related to income taxes.

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Incentive Stock Plans

3 Months Ended

Mar. 31, 2014

Incentive Stock Plans

Incentive Stock Plans

Note 10. Incentive Stock Plans

In August 2013, Athlon adopted the Athlon Energy Inc. 2013 Incentive Award Plan (the “Plan”).  The principal purpose of the Plan is 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 the 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, performance awards, stock appreciation rights, and other equity-based and cash-based awards, or any combination thereof.

The initial aggregate number of shares of common stock reserved for issuance pursuant to awards granted under the Plan is 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.

On January 1, 2014, the aggregate number of shares of common stock reserved for issuance pursuant to awards granted under the Plan increased to 11,759,386.  As of March 31, 2014, there were 10,954,012 shares available for issuance under the Plan.

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.

During the three months ended March 31, 2014, Athlon recorded non-cash stock-based compensation expense related to the Plan of $3.7 million, 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 three months ended March 31, 2014, Athlon capitalized $255,000 of non-cash stock-based compensation expense related to the Plan as a component of “Evaluated, including wells and related equipment” in the accompanying Consolidated Balance Sheets.

Restricted stock awards are scheduled to vest over three years. Certain awards granted to Athlon’s management team vest subject to the relative performance of Athlon’s stock to that of a designated peer group. The following table summarizes the changes in Athlon’s unvested restricted stock for the three months ended March 31, 2014 (presented at the target level):

			Weighted -
			Average
	Number of		Grant Date
	Shares		Fair Value
Outstanding at January 1	638,913		$	34.88
Granted	175,193		35.53
Vested	—		—
Forfeited	(8,732	)	30.06
Outstanding at March 31	805,374		35.08

As of March 31, 2014, there were 577,874 unvested restricted stock, 175,193 of which were granted during 2014, in which the vesting is dependent only on the passage of time and continued employment.  Additionally, as of March 31, 2014, there were 227,500 unvested restricted stock, none of which were granted during 2014, in which the vesting is dependent not only on the passage of time and continued employment, but also on the relative performance of Athlon’s stock to that of a designated peer group.

None of Athlon’s unvested restricted stock is subject to variable accounting.  As of March 31, 2014, Athlon had approximately $18.2 million of total unrecognized compensation cost related to unvested restricted stock, which is expected to be recognized over a weighted-average period of approximately 2.5 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 the 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.  During the three months ended March 31, 2013, Athlon recorded approximately $48,000 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 three months ended March 31, 2013, Athlon capitalized approximately $26,000 of non-cash stock-based compensation expense related to Class B interests as a component of “Evaluated, including wells and related equipment” in the accompanying Consolidated Balance Sheets.

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Fair Value Measurements (Details 2) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Open commodity derivative contracts
Summary of open commodity derivative contracts
Asset (Liability) Fair Market Value	$ (12,508)	$ (6,024)
Open commodity derivative contracts | Q2-Q4 2014
Summary of open commodity derivative contracts
Asset (Liability) Fair Market Value	(13,213)
Open commodity derivative contracts | 2015
Summary of open commodity derivative contracts
Asset (Liability) Fair Market Value	$ 705
Commodity derivative contracts with swap price | Q2 2014
Summary of open commodity derivative contracts
Average Daily Swap Volume	8,950
Weighted-Average Swap Price	92.71
Commodity derivative contracts with swap price | Q3 2014
Summary of open commodity derivative contracts
Average Daily Swap Volume	9,950
Weighted-Average Swap Price	92.52
Commodity derivative contracts with swap price | Q4 2014
Summary of open commodity derivative contracts
Average Daily Swap Volume	9,950
Weighted-Average Swap Price	92.52
Commodity derivative contracts with swap price | Q2-Q4 2014
Summary of open commodity derivative contracts
Average Daily Swap Volume	9,619
Weighted-Average Swap Price	92.58
Commodity derivative contracts with swap price | Q1 2015
Summary of open commodity derivative contracts
Average Daily Swap Volume	6,800
Weighted-Average Swap Price	91.21
Commodity derivative contracts with swap price | Q2 2015
Summary of open commodity derivative contracts
Average Daily Swap Volume	6,800
Weighted-Average Swap Price	91.21
Commodity derivative contracts with swap price | Q3 2015
Summary of open commodity derivative contracts
Average Daily Swap Volume	1,300
Weighted-Average Swap Price	93.18
Commodity derivative contracts with swap price | Q4 2015
Summary of open commodity derivative contracts
Average Daily Swap Volume	1,300
Weighted-Average Swap Price	93.18
Commodity derivative contracts with swap price | 2015
Summary of open commodity derivative contracts
Average Daily Swap Volume	4,027
Weighted-Average Swap Price	91.53

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Evaluated Properties (Tables)

3 Months Ended

Mar. 31, 2014

Evaluated Properties

Schedule of evaluated properties, including wells and related equipment

	March 31,		December 31,
	2014		2013
	(in thousands)
Evaluated leasehold costs	$	494,809	$	448,689
Wells and related equipment - completed	887,884		748,900
Wells and related equipment - in process	48,507		46,589
Total evaluated	$	1,431,200	$	1,244,178

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Earnings Per Share (Tables)

3 Months Ended

Mar. 31, 2014

Earnings Per Share

Schedule of allocation of net income attributable to common stockholders and EPS computations

	Three months ended March 31,
	2014			2013
	(in thousands, except per share amounts)
Basic EPS
Numerator:
Undistributed net income attributable to stockholders	$	18,775		$	10,879
Participation rights of unvested restricted stock in undistributed earnings	(194		)	—
Basic undistributed net income attributable to stockholders	$	18,581		$	10,879
Denominator:
Basic weighted average shares outstanding	82,129			66,340
Basic EPS attributable to stockholders	$	0.23		$	0.16
Diluted EPS
Numerator:
Undistributed net income attributable to stockholders	$	18,775		$	10,879
Participation rights of unvested restricted stock in undistributed earnings	(194		)	—
Effect of conversion of New Holdings Units to shares of Athlon’s common stock (a)	—			—
Diluted undistributed net income attributable to stockholders	$	18,581		$	10,879
Denominator:
Basic weighted average shares outstanding	82,129			66,340
Effect of conversion of New Holdings Units to shares of Athlon’s common stock (a)	—			1,856
Diluted weighted average shares outstanding	82,129			68,196
Diluted EPS attributable to stockholders	$	0.23		$	0.16

(a) For the three months ended March 31, 2014, 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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Income Taxes (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Federal:
Current	$ 1,050
Deferred	9,212
Total federal	10,262
State, net of federal benefit:
Current	147
Deferred	126	27
Total state	273	27
Income tax provision	10,535	27
Reconciliation of income tax provision with income tax at the Federal statutory rate
Income before income taxes	29,972	10,906
Less: net income attributable to noncontrolling interest	(662)
Income before income taxes and noncontrolling interest	29,310	10,906
Income taxes at the Federal statutory rate	10,259
State income taxes, net of federal benefit	273	27
Permanent and other	3
Income tax provision	10,535	27
Additional tax expense, interest, or penalties accrued	$ 0	$ 0

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (USD $) In Thousands, except Share data, unless otherwise specified	Total	Total Stockholders' Equity	Common Stock	Additional Paid-in Capital	Retained Earnings	Noncontrolling Interest
Balance at Dec. 31, 2013	$ 637,835	$ 627,047	$ 821	$ 593,943	$ 32,283	$ 10,788
Balance (in shares) at Dec. 31, 2013	82,129,089		82,129,000
Increase (Decrease) in Equity
Equity-based compensation	3,957	3,957		3,957
Consolidated net income	19,437	18,775			18,775	662
Balance at Mar. 31, 2014	$ 661,229	$ 649,779	$ 821	$ 597,900	$ 51,058	$ 11,450
Balance (in shares) at Mar. 31, 2014	82,129,089		82,129,000

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Evaluated Properties

3 Months Ended

Mar. 31, 2014

Evaluated Properties

Evaluated Properties

Note 4.   Evaluated Properties

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

	March 31,		December 31,
	2014		2013
	(in thousands)
Evaluated leasehold costs	$	494,809	$	448,689
Wells and related equipment - completed	887,884		748,900
Wells and related equipment - in process	48,507		46,589
Total evaluated	$	1,431,200	$	1,244,178

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Incentive Stock Plans (Tables)

3 Months Ended

Mar. 31, 2014

Incentive Stock Plans

Summary of changes in unvested restricted stock

			Weighted -
			Average
	Number of		Grant Date
	Shares		Fair Value
Outstanding at January 1	638,913		$	34.88
Granted	175,193		35.53
Vested	—		—
Forfeited	(8,732	)	30.06
Outstanding at March 31	805,374		35.08

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Fair Value Measurements (Details 6) (Commodity contracts, USD $)	Mar. 31, 2014	Dec. 31, 2013
Fair Value Hierarchy
Decrease in net commodity derivative liabilities	$ 164,000	$ 39,000
Recurring | Net Liability | Oil | Swaps
Fair Value Hierarchy
Total	(12,508,000)	(6,024,000)
Recurring | Significant Other Observable Inputs (Level 2) | Oil | Swaps
Fair Value Hierarchy
Total	$ (12,508,000)	$ (6,024,000)

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Basis of Presentation (Policies)

3 Months Ended

Mar. 31, 2014

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 March 31, 2014 and results of operations and cash flows for the three months ended March 31, 2014 and 2013.  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.  Therefore, these unaudited consolidated financial statements should be read in conjunction with Athlon’s audited consolidated financial statements and related notes thereto included in Athlon’s 2013 Annual Report on Form 10-K.

Noncontrolling Interest

Noncontrolling Interest

As of March 31, 2014 and December 31, 2013, management and certain 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 March 31, 2014 and December 31, 2013 of approximately $11.5 million and $10.8 million, respectively, represents management and certain 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 attributable to noncontrolling interest” for the three months ended March 31, 2014 of approximately $0.7 million represents the net income of Holdings attributable to management and certain employees.

New Accounting Pronouncements

New Accounting Pronouncements

No new accounting pronouncements issued or effective from January 1, 2014 through the date of this Report, had or are expected to have a material impact on Athlon’s unaudited consolidated financial statements.