NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1—ORGANIZATION

We are a publicly traded (OTCQB: ATLS) Delaware limited liability company formed in October 2011.

Our operations primarily consist of our ownership interests in the following:

At June 30, 2018, we had 31,973,790 common units issued and outstanding.

NOTE 2—BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and the applicable rules and regulations of the Securities Exchange Commission regarding interim financial reporting  and include all adjustments that are necessary for a fair presentation of our consolidated results of operations, financial condition and cash flows for the periods shown, including normal, recurring accruals and other items. The consolidated results of operations for the interim periods presented are not necessarily indicative of results for the full year. The year-end condensed consolidated balance sheet was derived from audited financial statements but does not include all disclosures required by U.S. GAAP. For a more complete discussion of our accounting policies and certain other information, refer to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31 2017.

We determined that AGP is a variable interest entity (“VIE”) based on AGP’s partnership agreement; our power, as the general partner, to direct the activities that most significantly impact AGP’s economic performance; and our ownership of AGP’s incentive distribution rights. Accordingly, we consolidated the financial statements of AGP into our condensed consolidated financial statements. AGP’s operating results and asset balances are presented separately in Note 7 – Operating Segment Information. As the general partner for AGP, we have unlimited liability for the obligations of AGP except for those contractual obligations that are expressly made without recourse to the general partner. The non-controlling interest in AGP is reflected as (income) loss attributable to non-controlling interests in the condensed consolidated statements of operations and as a component of unitholders’ equity on the condensed consolidated balance sheets. All intercompany transactions have been eliminated.

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Liquidity, Capital Resources, and Ability to Continue as a Going Concern

Our primary sources of liquidity are cash distributions received with respect to our ownership interests in AGP, Lightfoot, and Titan and AGP’s annual management fee. However, neither Titan nor AGP are currently paying distributions.  In addition, Lightfoot completed a portion of its sale transaction that will result in minimal or no quarterly distributions to us.  Our primary cash requirements, in addition to normal operating expenses, are for debt service and capital expenditures, which we expect to fund through operating cash flow and cash distributions received. Accordingly, our sources of liquidity are currently not sufficient to satisfy the obligations under our credit agreements.

The significant risks and uncertainties related to our primary sources of liquidity raise substantial doubt about our ability to continue as a going concern. We continue to face significant liquidity issues and are currently considering, and are likely to make, changes to our capital structure to maintain sufficient liquidity, meet our debt obligations and manage and strengthen our balance sheet.  Without a further extension from our lenders or other significant transaction or capital infusion, we do not expect to have sufficient liquidity to repay our first lien credit agreement at September 30, 2018, and as a result, there is substantial doubt regarding our ability to continue as a going concern.

The amounts outstanding under our credit agreements were classified as current liabilities as both obligations are due within one year from the balance sheet date.  In total, we have $90.1 million of outstanding indebtedness under our credit agreements, which is net of $0.5 million of debt discounts and $0.1 million of deferred financing costs, as current portion of long term debt, net on our condensed consolidated balance sheet as of June 30, 2018.

We continually monitor capital markets and may make changes to our capital structure from time to time, with the goal of maintaining financial flexibility, preserving or improving liquidity, strengthening the balance sheet, meeting debt service obligations and/or achieving cost efficiency. For example, we could pursue options such as refinancing or reorganizing our indebtedness or capital structure or seek to raise additional capital through debt or equity financing to address our liquidity concerns and high debt levels. There is no certainty that we will be able to implement any such options, and we cannot provide any assurances that any refinancing or changes to our debt or equity capital structure would be possible or that additional equity or debt financing could be obtained on acceptable terms, if at all. Such options may result in a wide range of outcomes for our stakeholders, including cancellation of debt income (“CODI”) which would be directly allocated to our unitholders and reported on such unitholders’ separate returns. It is possible additional adjustments to our strategic plan and outlook may occur based on market conditions and our needs at that time, which could include selling assets or seeking additional partners to develop our assets.

Our condensed consolidated financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities and commitments in the normal course of business. Our condensed consolidated financial statements do not include any adjustments that might result from the outcome of the going concern uncertainty. If we cannot continue as a going concern, adjustments to the carrying values and classification of our assets and liabilities and the reported amounts of income and expenses could be required and could be material.

Use of Estimates

The preparation of our condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities that exist at the date of our condensed consolidated financial statements, as well as the reported amounts of revenue and costs and expenses during the reporting periods. Our condensed consolidated financial statements are based on a number of significant estimates, including revenue and expense accruals, depletion of gas and oil properties and the fair value of derivative instruments and our investment in Lightfoot. The oil and natural gas industry principally conducts business by processing actual transactions as many as 60 days after the month of delivery. Consequently, the most recent two months’ financial results were recorded using estimated volumes and contract market prices. Actual results may differ from those estimates.

Derivative Instruments

We enter into certain financial contracts to manage our exposure to movement in commodity prices. The derivative instruments recorded in the condensed consolidated balance sheets are measured as either an asset or liability at fair value. Changes in the fair value of derivative instruments are recognized in the current period within gain (loss) on mark-to-market derivatives in our condensed consolidated statements of operations.

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We u se a market approach fair value methodology to value the assets and liabilities for our outstanding derivative instruments. We manage and report derivative assets and liabilities on the basis of our exposure to market risks and credit risks by counterparty . Commodity derivative instruments are valued based on observable market data related to the change in price of the underlying commodity and are therefore defined as Level 2 assets and liabilities within the same class of nature and risk. These derivative values were calculated by utilizing commodity indices, quoted prices for futures and options contracts traded on open markets that coincide with the underlying commodity, expiration period, strike price (if applicable) and pricing formula utilized in the d erivative instrument.

The following table summarizes the commodity derivative activity for the period indicated (in thousands):

As of June 30, 2018, we had commodity derivatives for 36,200 barrels at an average fixed price of $52.61 which mature throughout the remainder of 2018.  The fair value of our commodity derivatives was a liability of $0.6 million as of June 30, 2018.

Revenue Recognition

On January 1, 2018, we adopted ASU No. 2014–09, Revenue from Contracts with Customers (“new revenue standard”), using the modified retrospective method applied to contracts that were not completed as of January 1, 2018. The adoption of the new revenue standard did not have a material impact on our condensed consolidated financial statements and no cumulative effect adjustment was recorded to beginning unitholder equity. As a result of adopting the new revenue standard, we disaggregated our revenues by product type on our condensed consolidated statements of operations for all periods presented.

Oil, Natural Gas, and NGL Revenues

Our revenues are derived from the sale of oil, natural gas, and NGLs, which is recognized in the period that the performance obligations are satisfied. We generally consider the delivery of each unit (Bbl or MMBtu) to be separately identifiable and the delivery of each unit represents a distinct performance obligation that is satisfied at a point-in-time once control of the product has been transferred to the customer upon delivery to an agreed upon delivery point. Transfer of control typically occurs when the products are delivered to the purchaser, and title has transferred. Revenue is recognized net of royalties due to third parties in an amount that reflects the consideration we expect to receive in exchange for those products. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, and that are collected by us from a customer, are excluded from revenue. Payment is generally received one month after the sale has occurred.

Our oil production is primarily sold under market-sensitive contracts that are typically priced at a differential to the New York Mercantile Exchange (“NYMEX”) price or at purchaser posted prices for the producing area. For oil contracts, we generally record sales based on the net amount received.

Our natural gas production is primarily sold under market-sensitive contracts that are typically priced at a differential to the published natural gas index price for the producing area due to the natural gas quality and the proximity to major consuming markets. For natural gas contracts, we generally record wet gas sales (which consists of natural gas and NGLs based on end products after processing) at the wellhead or inlet of the plant as revenues net of transportation, gathering and processing expenses if the processor is the customer and there is no redelivery of commodities to us at the tailgate of the plant. Conversely, we generally record residual natural gas and NGL sales at the tailgate of the plant on a gross basis along with the associated transportation, gathering and processing expenses if the processor is a service provider and there is redelivery of commodities to us at the tailgate of the plant. All facts and circumstances of an arrangement are considered and judgment is often required in making this determination.

Transaction Price Allocated to Remaining Performance Obligations

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A significant number of our product sales are short-term in nature with contract terms of one year or less , though generally subject to customary evergreen clauses pursuant to which these contracts typically automatically renew under the same terms and conditions . For those contracts, we have utilized the practical expedient allowed in the new revenue standard that exempts us from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less.

For product sales that have a contract term greater than one year, we have utilized the practical expedient that exempts us from disclosure of the transaction price allocated to remaining performance obligations if the variable consideration is allocated entirely to a wholly unsatisfied performance obligation. Under these sales contracts, each unit of product generally represents a separate performance obligation; therefore, future volumes are wholly unsatisfied and disclosure of the transaction price allocated to remaining performance obligations is not required. Currently, our product sales that have a contractual term greater than one year have no long-term fixed consideration.

Contract Balances

Under our sales contracts, customers are invoiced once performance obligations have been satisfied, at which point our right to payment is unconditional. Accordingly, our product sales contracts do not give rise to contract assets or liabilities. Accounts receivable attributable to our revenue contracts with customers was $1.2 million and $0.6 million at June 30, 2018 and December 31, 2017, respectively.

Equity Method Investments

Investment in Titan . Titan is a VIE based on its limited liability company agreement and the delegation of management and omnibus agreements between Titan and Titan Management, which provide us the power to direct activities that most significantly impact Titan’s economic performance, but we do not have a controlling financial interest. As a result, we do not consolidate Titan but rather apply the equity method of accounting as we have the ability to exercise significant influence over Titan’s operating and financial decisions.

At June 30, 2018, we had a 2% Series A Preferred interest in Titan.  As of June 30, 2018 and December 31, 2017, the net carrying amount of our investment in Titan was zero. During the three months ended June 30, 2018 and 2017, we recognized zero and $0.3 million, respectively, within other revenues, net on our condensed consolidated statements of operations. During the six months ended June 30, 2018 and 2017, we recognized equity income of zero and $0.5 million, respectively, within other revenues, net on our condensed consolidated statements of operations.

Investment in Lightfoot. At June 30, 2018, we had an approximate 12.0% interest in Lightfoot L.P. and an approximate 15.9% interest in Lightfoot G.P., the general partner of Lightfoot L.P. We account for our investment in Lightfoot under the equity method of accounting due to our ability to exercise significant influence over Lightfoot’s operating and financial decisions.

On August 29, 2017, Lightfoot G.P., Lightfoot L.P. and Lightfoot’s subsidiary, Arc Logistics Partners LP (NYSE: ARCX) (“Arc Logistics”), entered into a Purchase Agreement and Plan of Merger (the “Merger Agreement”) with Zenith Energy U.S., L.P. (together with its affiliates, “Zenith”), a portfolio company of Warburg Pincus, pursuant to which Zenith will acquire Arc Logistics GP LLC (“Arc GP”), the general partner of Arc Logistics (the “GP Transfer”), and all of the outstanding common units of Arc Logistics (the “Merger” and, together with the GP Transfer, the “Proposed Transaction”). Under the terms of the Merger Agreement, Lightfoot L.P. received $14.50 per common unit of Arc Logistics in cash for the approximately 5.2 million common units held by it. Lightfoot G.P. received $94.5 million for 100% of the membership interests in Arc GP.

In December 2017, Lightfoot closed on a portion of the Proposed Transaction which resulted in a net distribution to us of $21.6 million.  We used the net proceeds to pay down $21.6 million of our first lien credit agreement.

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The remaining part of the Proposed Transaction was subject to the closing of the purchase by Zenith of a 5.51646 % interest (and, subject to certain conditions, an additional 4.16154% interest) in Gulf LNG H oldings Group, LLC (“Gulf LNG”), which owns a liquefied natural gas regasification and storage facility in Pascagoula, Mississippi, from LCP LNG Holdings, LLC, a subsidiary of Lightfoot L.P. (“LCP’). In July 2018, an arbitration panel rejected a Gulf LNG c ustomer contract, and therefore Zenith will not proceed with the remaining part of the Proposed Transaction . Accordingly, we will not receive any further proceeds from the Proposed Transaction.

During the three months ended June 30, 2018 and 2017, we recognized equity method income of $5.7 million and $0.3 million, respectively, within other revenues, net on our condensed consolidated statements of operations. During the six months ended June 30, 2018 and 2017, we recognized equity method income of $5.7 million and $0.5 million, respectively, within other revenues, net on our condensed consolidated statements of operations. The $5.7 million of equity method income recognized during the three and six months ended June 30, 2018 included $5.6 million of equity method income resulting from Lightfoot’s accounting for the Proposed Transaction in the fourth quarter of 2017, which was recorded in our condensed consolidated statements of operations on a two quarter lag. During the three and six months ended June 30, 2018, we recognized $5.7 million of other than temporary impairment on our equity method investment in Lightfoot within other revenues, net on our condensed consolidated statements of operations, due to an arbitration panel rejecting a Gulf LNG customer contract, which will significantly reduce Lightfoot’s future equity method income to us. During the three months ended June 30, 2018 and 2017, we received cash distributions from Lightfoot of approximately $0.1 million and $0.4 million, respectively. During the six months ended June 30, 2018 and 2017, we received cash distributions from Lightfoot of approximately $0.1 million and $0.8 million, respectively. As of June 30, 2018 and December 31, 2017, the net carrying amount of our investment in Lightfoot was zero.

Interest in Joliet Terminal

In connection with the closing of the first portion of Lightfoot’s Proposed Transaction in December 2017, we acquired a 1.8% ownership interest in Zenith Energy Terminals Joliet Holdings, LLC (“Joliet Terminal”) for $3.3 million, which is included within other assets, net, on our condensed consolidated balance sheets as of June 30, 2018 and December 31, 2017. Our investment in Joliet Terminal is classified as a nonmarketable equity security without a readily determinable fair value and is recorded at cost, less impairment, if any, in accordance with the accounting guidance measurement alternative.  If an observable event occurs, we would estimate the fair value of our investment based on Level 2 inputs that could be derived from observable price changes of similar securities adjusted for insignificant differences in rights and obligations, and the changes in value would be recorded in other revenues, net on our condensed consolidated statement of operations.

Interest in Osprey Sponsor

At June 30, 2018, we have a membership interest in Osprey Sponsor, which is the sponsor of Osprey. We received our membership interest in recognition of potential utilization, if any, of our office space, advisory services and personnel by Osprey. On July 26, 2017, Osprey, for which certain of our executives, namely Jonathan Cohen, Edward Cohen and Daniel Herz, serve as CEO, Executive Chairman and President, respectively, consummated its initial public offering. Osprey was formed for the purpose of acquiring, through a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or other similar business transaction, one or more operating businesses or assets. The initial public offering, including the overallotment exercised by the underwriters, generated net proceeds of $275 million through the issuance of 27.5 million units, which were contributed to a trust account and are intended to be applied generally toward consummating a business combination. Our membership interest in Osprey Sponsor is an allocation of 1,250,000 founder shares, consisting of 1,250,000 shares of Class B common stock of Osprey that are automatically convertible into Class A common stock of Osprey upon the consummation of a business combination on a one-for-one basis. Additionally, another 125,000 founder shares have been allocated to our employees other than Messrs. Cohen, Cohen and Herz.

Pursuant to the Osprey Sponsor limited liability company agreement, owners of the founder shares agree to (i) vote their shares in favor of approving a business combination, (ii) waive their redemption rights in connection with the consummation of a business combination, and (iii) waive their rights to liquidating distributions from the trust account if Osprey fails to consummate a business combination. In addition, Osprey Sponsor has agreed to not to transfer, assign or sell any of the founder shares until the earlier of (i) one year after the date of the consummation of a business combination, or (ii) the date on which the last sales price of Osprey’s common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations) for any 20 trading days within any 30-trading day period commencing 150 days after a business combination, or earlier, in each case, if subsequent to a business combination, Osprey consummates a subsequent liquidation, merger, stock exchange, reorganization or other similar transaction which results in all of Osprey’s stockholders having the right to exchange their common stock for cash, securities or other property.

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On June 4, 2018, Osprey entered into a definitive agreement to acquire the assets of Royal Resources (“Royal”), an entity owned by funds mana ged by Blackstone Energy Partners and Blackstone Capital Partners (“Blackstone”), (the “Business Combination”). The acquired Royal assets represent the entirety of Blackstone’s mineral interests in the Eagle Ford Shale. The combined company will be named F alcon Minerals Corporation and will be led by Osprey’s management team .  Blackstone will retain a significant ownership stake at closing representing approximately 47% of outstanding common stock. Under the terms of the Business Combination, the obligation s of the parties to consummate the transactions are subject to a number of customary conditions, including, among others, the receipt of required approvals of Osprey’s stockholders of the Business Combination. We will recognize the fair value of our invest ment in Osprey upon closing of the Business Combination and conversion of our Osprey Sponsor founder shares into Class A shares of Osprey.

We have determined that Osprey Sponsor is a VIE based on its limited liability company agreement. Through our direct interest and indirectly through the interests of our related parties, we have certain characteristics of a controlling financial interest and the power to direct activities that most significantly impact Osprey Sponsor’s economic performance; however, we are not the primary beneficiary. As a result, we do not consolidate Osprey Sponsor but rather apply the equity method of accounting as we, through our direct interest and indirectly through the interests of our related parties, have the ability to exercise significant influence over Osprey Sponsor’s operating and financial decisions. As of June 30, 2018 and December 31, 2017, the net carrying amount of our interest in Osprey Sponsor was zero as our membership interest was received in recognition of potential utilization, if any, of our office space, advisory services and personnel by Osprey, and we have provided a nominal amount of services to Osprey as of June 30, 2018. During the three and six months ended June 30, 2018, we did not recognize any equity method income as Osprey Sponsor has no operations.

Rabbi Trust

In 2011, we established an excess 401(k) plan relating to certain executives. In connection with the plan, we established a “rabbi” trust for the contributed amounts. At June 30, 2018 and December 31, 2017, we reflected $0.2 million and $1.5 million, respectively, related to the value of the rabbi trust within other assets, net on our condensed consolidated balance sheets, and recorded corresponding liabilities of $0.2 million and $1.5 million, respectively, as of those same dates, within asset retirement obligations and other on our condensed consolidated balance sheets. During the three months ended June 30, 2018 and 2017, we distributed zero and $2.1 million, respectively, to certain executives related to the rabbi trust. During the six months ended June 30, 2018 and 2017, we distributed $1.3 million and $2.1 million, respectively, to certain executives related to the rabbi trust.

Accrued Liabilities

We had $5.1 million and $6.6 million of accrued payroll and benefit items at June 30, 2018 and December 31, 2017, respectively, which were included within accrued liabilities on our condensed consolidated balance sheets.

Net Income (Loss) Per Common Unit

Basic net income (loss) attributable to common unitholders per unit is computed by dividing net income (loss) attributable to common unitholders, which is determined after the deduction of net income attributable to participating securities and the preferred unitholders’ interests, if applicable, by the weighted average number of common units outstanding during the period.

Unvested unit-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities. A portion of our phantom unit awards, which consist of common units issuable under the terms of our long-term incentive plans and incentive compensation agreements, contain non-forfeitable rights to distribution equivalents. The participation rights result in a non-contingent transfer of value each time we declare a distribution or distribution equivalent right during the award’s vesting period. However, unless the contractual terms of the participating securities require the holders to share in the losses of the entity, net loss is not allocated to the participating securities. As such, the net income utilized in the calculation of net income (loss) per unit must be after the allocation of only net income to the phantom units on a pro-rata basis.

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The following is a reconciliat ion of net income (loss) allocated to the common unitholders for purposes of calculating net income (loss) attributable to common unitholders per unit (in thousands):

Diluted net income (loss) attributable to common unitholders per unit is calculated by dividing net income (loss) attributable to common unitholders, less income allocable to participating securities, by the sum of the weighted average number of common unitholder units outstanding and the dilutive effect of unit option awards and convertible preferred units, as calculated by the treasury stock or if converted methods, as applicable. Unit options consist of common units issuable upon payment of an exercise price by the participant under the terms of our long-term incentive plan.

The following table sets forth the reconciliation of our weighted average number of common units used to compute basic net loss attributable to common unitholders per unit with those used to compute diluted net loss attributable to common unitholders per unit (in thousands):

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Recently Issue d Accounting Standards

In February 2016, the Financial Accounting Standards Board (“FASB”) updated the accounting guidance related to leases. The updated accounting guidance requires lessees to recognize a lease asset and liability at the commencement date of all leases (with the exception of short-term leases), initially measured at the present value of the lease payments. The updated guidance is effective for us as of January 1, 2019 and requires a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest period presented. We are currently in the process of determining the impact that the updated accounting guidance will have on our condensed consolidated financial statements.

In January 2016, the FASB updated the accounting guidance related to the recognition and measurement of financial assets and financial liabilities. The updated accounting guidance, among other things, requires that all nonconsolidated equity investments, except those accounted for under the equity method, be measured at fair value and that the changes in fair value be recognized in net income. The accounting guidance requires nonmarketable equity securities to be recorded at cost and adjusted to fair value at each reporting period. However, the guidance allows for a measurement alternative, which is to record the investments at cost, less impairment, if any, and subsequently adjust for observable price changes of identical or similar investments of the same issuer. We adopted the new accounting guidance on January 1, 2018 and applied the measurement alternative to our interest in Joliet Terminal as there is not a readily determinable fair value for our investment.

During the six months ended June 30, 2018, we recognized $0.1 million of non-cash investing activities capital expenditures, which were included within the changes in accounts payable and accrued liabilities on our condensed consolidated statement of cash flows. As of June 30, 2017, we did not have any non-cash investing activity capital expenditures.

The estimated fair value of our debt at June 30, 2018 approximated its carrying value of $90.1 million, which consisted of credit agreements that bear interest at variable rates and are categorized as Level 1 values.

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Cash Interest. Cash payments for interest were $ 0.3 million and $0.2 million for the six months ended June 30 , 2018 and 2017, respectively .

Credit Agreements

First Lien Credit Agreement . Our first lien credit agreement with Riverstone Credit Partners, L.P., as administrative agent (“Riverstone”), and the lenders (the “Lenders”) from time to time party thereto (the “First Lien Credit Agreement”), was scheduled to mature on September 30, 2017.  Between September 29, 2017 and July 10, 2018, we entered into a series of amendments to extend the maturity of our First Lien Credit Agreement to September 30, 2018.  The First Lien Credit Agreement has an applicable cash interest rate margin for ABR Loans and Eurodollar Loans of 0.50% and 1.50%, respectively, and an 11% interest rate payable in-kind through an increase in the outstanding principal. As of June 30, 2018, we were not in compliance with the financial covenants required by the First Lien Credit Agreement.

Second Lien Credit Agreement. Our second lien credit agreement with Riverstone and the Lenders (the “Second Lien Credit Agreement”) matures on March 30, 2019 and has an unamortized discount of $0.5 million as of June 30, 2018, related to the 4,668,044 warrants issued in connection with the Second Lien Credit Agreement.  Borrowings under the Second Lien Credit Agreement bear interest at a rate of 30%, payable in-kind through an increase in the outstanding principal. As of June 30, 2018, we were not in compliance with the financial covenants required by the Second Lien Credit Agreement.

In connection with the First Lien Credit Agreement and Second Lien Credit Agreement, the lenders thereunder continued their syndicated participation in the underlying loans consistent with the original term loan facilities and therefore certain of the Company’s current and former officers participated in approximately 12% of the loan syndication and warrants and a foundation affiliated with a 5% or more unitholder participated in approximately 12% of the loan syndication.

The amounts outstanding under our First Lien Credit Agreement and Second Lien Credit Agreement were classified as current liabilities as both obligations are due within one year from the balance sheet date. In total, we have $90.1 million of outstanding indebtedness under our credit agreements, which is net of $0.5 million of debt discounts and $0.1 million of deferred financing costs, as current portion of long term debt, net on our condensed consolidated balance sheet as of June 30, 2018.

NOTE 5—CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Relationship with Titan . Other than its named executive officers, Titan does not directly employ any persons to manage or operate its business. These functions were provided by employees of us and/or our affiliates. On September 1, 2016, Titan entered into a Delegation of Management Agreement (the “Delegation Agreement”) with Titan Management, our wholly owned subsidiary. Pursuant to the Delegation Agreement, Titan has delegated to Titan Management all of Titan’s rights and powers to manage and control the business and affairs of Titan Energy Operating, LLC (“Titan Operating”), a wholly owned subsidiary of Titan. However, Titan’s board of directors retains management and control over certain non-delegated duties.  In addition, Titan also entered into an Omnibus Agreement (the “Omnibus Agreement”) dated September 1, 2016 with Titan Management, Atlas Energy Resource Services, Inc. (“AERS”), our wholly owned subsidiary, and Titan Operating. Pursuant to the Omnibus Agreement, Titan Management and AERS will provide Titan and Titan Operating with certain financial, legal, accounting, tax advisory, financial advisory and engineering services (including cash management services) and Titan and Titan Operating will reimburse Titan Management and AERS for their direct and allocable indirect expenses incurred in connection with the provision of the services, subject to certain approval rights in favor of Titan’s Conflicts Committee. As of June 30, 2018 and December 31, 2017, we had a net payable to Titan of $9.5 million and $9.6 million, respectively, related to the timing of funding cash accounts related to general and administrative expenses, such as payroll and benefits, which was recorded in advances from affiliates in our condensed consolidated balance sheets. The $9.5 million and $9.6 million net payables to Titan include a $15.1 million amount originating prior to Titan’s Chapter 11 Filings of which there is uncertainty regarding the timing and amount of payment, if any, to Titan.

Relationship with AGP . AGP does not directly employ any persons to manage or operate its business. These functions are provided by employees of us and/or our affiliates. Atlas Growth Partners, GP, LLC (“AGP GP”) receives an annual management fee in connection with its management of AGP equivalent to 1% of capital contributions per annum. During both of the three months ended June 30, 2018 and 2017, AGP paid a management fee of $0.6 million. During both of the six months ended June 30, 2018 and 2017, AGP paid a management fee of $1.1 million. We charge direct costs, such as salary and wages, and allocate indirect costs, such as rent for offices, to AGP based on the number of its employees who devoted their time to activities on its behalf. AGP reimburses us at cost for direct costs incurred on its behalf. AGP reimburses all necessary and reasonable indirect costs allocated by the general partner.

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Relationship with Lightfoot . Jonathan Cohen, Executive Chairman of the Company’s board of directors, is the Chairman of the board of directors of Ligh tfoot G.P. As part of the relationship, we assumed the obligations under an agreement pursuant to which Messrs. Cohen receives compensation in recognition of his role continued service as chair of Lightfoot G.P.  Pursuant to the agreement, Messrs. Cohen re ceives an amount equal to 10% of the distributions that we receive from the Lightfoot entities, excluding amounts that constitute a return of capital to us .   During the three months ended June 30 , 2018 and 2017, Messrs and Cohen received compensation in ac cordance with the above agreement of zero and $0.1 million, respectively. During the six months ended June 30, 2018 and 2017, Messrs and Cohen received compensation in accordance with the above agreement of zero and $0.1 million, respectively.

Relationship with Osprey Sponsor . We received our membership interest in Osprey Sponsor in recognition of potential utilization, if any, of our office space, advisory services and personnel by Osprey, for which we will be reimbursed at cost. We have provided a nominal amount of services to Osprey as of June 30, 2018.

AGP’s Relationship with Titan . At our direction, AGP reimburses Titan for direct costs, such as salaries and wages, charged to AGP based on our employees who incurred time to activities on AGP’s behalf and indirect costs, such as rent and other general and administrative costs, allocated to AGP based on the number of our employees who devoted their time to activities on AGP’s behalf. As of June 30, 2018 and December 31, 2017, AGP had payables to Titan of $1.4 million and $0.1 million, respectively, related to the direct costs, indirect cost allocation, and timing of funding of cash accounts for reimbursement of operating activities and capital expenditures, which were recorded in advances to/from affiliates in the condensed consolidated balance sheets.

Other Relationships. We have other related party transactions with regard to our First Lien Credit Agreement and Second Lien Credit Agreement (see Note 4) and our general partner and limited partner interest in Lightfoot (see Notes 1 and 2).

NOTE 6—COMMITMENTS AND CONTINGENCIES

Legal Proceedings

We are parties to various routine legal proceedings arising in the ordinary course of business. Our management and our subsidiaries believe that none of these actions, individually or in the aggregate, will have a material adverse effect on our financial condition or results of operations.

Environmental Matters

We are subject to various federal, state and local laws and regulations relating to the protection of the environment. We have established procedures for the ongoing evaluation of our and our subsidiaries’ operations, to identify potential environmental exposures and to comply with regulatory policies and procedures. Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations and do not contribute to current or future revenue generation are expensed. Liabilities are recorded when environmental assessments and/or clean-ups are probable, and the costs can be reasonably estimated. We maintain insurance which may cover in whole or in part certain environmental expenditures. We had no environmental matters requiring specific disclosure or requiring the recognition of a liability as of June 30, 2018 or December 31, 2017.

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NOTE 7—OPERATING SEGMENT INFORMATION

Our operations include two reportable operating segments: AGP and corporate and other. These operating segments reflected the way we managed our operations and made business decisions. Corporate and other includes our equity investments in Lightfoot (see Note 2) and Titan (see Note 2), as well as our general and administrative and interest expenses. Operating segment data for the periods indicated were as follows (in thousands):

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