16. Subsidiary Guarantors

On April 1, 2014, the Issuers sold $500.0 million in aggregate principal amount of the 2022 Notes. On February 23, 2015, the Issuers sold $250.0 million in aggregate principal amount of the 2023 Notes.

The 2022 Notes and the 2023 Notes are guaranteed on a senior unsecured basis by the Company and by all of JEH's current subsidiaries (except Jones Energy Finance Corp. and two immaterial subsidiaries) and certain future subsidiaries, including any future subsidiaries that guarantee any indebtedness under the Revolver. Each subsidiary guarantor is 100% owned by JEH, and all guarantees are full and unconditional, subject to customary exceptions pursuant to the indentures governing our 2022 Notes and 2023 Notes, as discussed below, and joint and several with all other subsidiary guarantees and the parent guarantee. Any subsidiaries of JEH other than the subsidiary guarantors and Jones Energy Finance Corp. are immaterial.

Guarantees of the 2022 Notes and 2023 Notes will be released under certain circumstances, including (i) in connection with any sale or other disposition of (a) all or substantially all of the properties or assets of a guarantor (including by way of merger or consolidation) or (b) all of the capital stock of such guarantor, in each case, to a person that is not the Company or a restricted subsidiary of the Company, (ii) if the Company designates any restricted subsidiary that is a guarantor as an unrestricted subsidiary, (iii) upon legal defeasance, covenant defeasance or satisfaction and discharge of the applicable indenture, or (iv) at such time as such guarantor ceases to guarantee any other indebtedness of the Company or any other guarantor.

The Company is a holding company whose sole material asset is an equity interest in JEH. The Company is the sole managing member of JEH and is responsible for all operational, management and administrative decisions related to JEH's business. In accordance with JEH's limited liability company agreement, the Company may not be removed as the sole managing member of JEH.

As of December 31, 2015, the Company held approximately 49.4% of the economic interest in JEH, with the remaining 50.6% economic interest held by a group of investors that owned interests in JEH prior to the Company's IPO (the "Existing Owners"). The Existing Owners have no voting rights with respect to their economic interest in JEH.

The Company has two classes of common stock, Class A common stock, which was sold to investors in the IPO, and Class B common stock. Pursuant to the Company's certificate of incorporation, each share of Class A common stock is entitled to one vote per share, and the shares of Class A common stock are entitled to 100% of the economic interests in the Company. Each share of Class B common stock has no economic rights in the Company, but entitles its holder to one vote on all matters to be voted on by the Company's stockholders generally.

In connection with a reorganization that occurred immediately prior to the IPO, each Existing Owner was issued a number of shares of Class B common stock that was equal to the number of JEH Units that such Existing Owner held. Holders of the Company's Class A common stock and Class B common stock generally vote together as a single class on all matters presented to the Company's stockholders for their vote or approval. Accordingly, the Existing Owners collectively have a number of votes in the Company equal to the aggregate number of JEH Units that they hold.

The Existing Owners have the right, pursuant to the terms of an Exchange Agreement by and among the Company, JEH and each of the Existing Owners, to exchange their JEH Units (together with a corresponding number of shares of Class B common stock) for shares of Class A common stock on a one-for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications and other similar transactions. As a result, the Company expects that over time the Company will have an increasing economic interest in JEH as Class B common stock and JEH Units are exchanged for Class A common stock. Moreover, any transfers of JEH Units outside of the Exchange Agreement (other than permitted transfers to affiliates) must be approved by the Company. The Company intends to retain full voting and management control over JEH.

Jones Energy, Inc.

Condensed Consolidating Balance Sheet

December 31, 2015

(in thousands of dollars)	JEI(Parent)			Issuers		Guarantor Subsidiaries		Non- Guarantor Subsidiaries			Eliminations			Consolidated
Assets
Current assets
Cash	$	100		$	12,448	$	9,325	$	20		$	—		$	21,893
Restricted Cash		—			—		330		—			—			330
Accounts receivable, net
Oil and gas sales		—			—		19,292		—			—			19,292
Joint interest owners		—			—		11,314		—			—			11,314
Other		—			14,444		726		—			—			15,170
Commodity derivative assets		—			124,207		—		—			—			124,207
Other current assets		—			444		1,854		—			—			2,298
Intercompany receivable		12,866			1,161,997		—		—			(1,174,863	)		—

Total current assets		12,966			1,313,540		42,841		20			(1,174,863	)		194,504
Oil and gas properties, net, at cost under the successful efforts method		—			—		1,635,766		—			—			1,635,766
Other property, plant and equipment, net		—			—		3,168		705			—			3,873
Commodity derivative assets		—			93,302		—		—			—			93,302
Other assets		—			17,714		253		—			—			17,967
Investment in subsidiaries		444,362			—		—		—			(444,362	)		—

Total assets	$	457,328		$	1,424,556	$	1,682,028	$	725		$	(1,619,225	)	$	1,945,412


Liabilities and Stockholders' Equity
Current liabilities
Trade accounts payable	$	—		$	388	$	7,079	$	—		$	—		$	7,467
Oil and gas sales payable		—			—		32,408		—			—			32,408
Accrued liabilities		—			15,741		11,600		—			—			27,341
Commodity derivative liabilities		—			11		—		—			—			11
Asset retirement obligations		—			—		679		—			—			679
Intercompany payable		—			—		1,391,838		2,434			(1,394,272	)		—

Total current liabilities		—			16,140		1,443,604		2,434			(1,394,272	)		67,906
Long-term debt		—			847,912		—		—			—			847,912
Deferred revenue		—			11,417		—		—			—			11,417
Asset retirement obligations		—			—		20,301		—			—			20,301
Liability under tax receivable agreement		38,052			—		—		—			—			38,052
Deferred tax liabilities		19,280			3,692		—		—			—			22,972

Total liabilities		57,332			879,161		1,463,905		2,434			(1,394,272	)		1,008,560

Stockholders' / members' equity
Members' equity		—			545,395		218,123		(1,709	)		(761,809	)		—
Class A common stock, $0.001 par value; 30,573,509 shares issued and 30,550,907 shares outstanding		31			—		—		—			—			31
Class B common stock, $0.001 par value; 31,273,130 shares issued and outstanding		31			—		—		—			—			31
Treasury stock, at cost: 22,602 shares		(358	)		—		—		—			—			(358	)
Additional paid-in-capital		363,723			—		—		—			—			363,723
Retained earnings		36,569			—		—		—			—			36,569

Stockholders' equity		399,996			545,395		218,123		(1,709	)		(761,809	)		399,996
Non-controlling interest		—			—		—		—			536,856			536,856

Total stockholders' equity		399,996			545,395		218,123		(1,709	)		(224,953	)		936,852

Total liabilities and stockholders' equity	$	457,328		$	1,424,556	$	1,682,028	$	725		$	(1,619,225	)	$	1,945,412

Jones Energy, Inc.

Condensed Consolidating Balance Sheet

December 31, 2014

(in thousands of dollars)	JEI(Parent)			Issuers		Guarantor Subsidiaries		Non- Guarantor Subsidiaries			Eliminations			Consolidated
Assets
Current assets
Cash	$	100		$	1,000	$	12,436	$	30		$	—		$	13,566
Restricted Cash		—			—		149		—			—			149
Accounts receivable, net
Oil and gas sales		—			—		51,482		—			—			51,482
Joint interest owners		—			—		41,761		—			—			41,761
Other		102			8,788		3,622		—			—			12,512
Commodity derivative assets		—			121,519		—		—			—			121,519
Other current assets		—			451		2,923		—			—			3,374
Intercompany receivable		4,164			1,203,978		—		—			(1,208,142	)		—

Total current assets		4,366			1,335,736		112,373		30			(1,208,142	)		244,363
Oil and gas properties, net, at cost under the successful efforts method		—			—		1,638,860		—			—			1,638,860
Other property, plant and equipment, net		—			—		3,252		796			—			4,048
Commodity derivative assets		—			87,055		—		—			—			87,055
Other assets		—			20,098		254		—			—			20,352
Deferred tax assets		171			—		—		—			—			171
Investment in subsidiaries		233,908			—		—		—			(233,908	)		—

Total assets	$	238,445		$	1,442,889	$	1,754,739	$	826		$	(1,442,050	)	$	1,994,849


Liabilities and Stockholders' Equity
Current liabilities
Trade accounts payable	$	—		$	288	$	136,049	$	—		$	—		$	136,337
Oil and gas sales payable		—			—		70,469		—			—			70,469
Accrued liabilities		—			8,914		10,487		—			—			19,401
Asset retirement obligations		—			—		3,074		—			—			3,074
Intercompany payable		—			—		1,209,630		2,328			(1,211,958	)		—

Total current liabilities		—			9,202		1,429,709		2,328			(1,211,958	)		229,281
Long-term debt		—			860,000		—		—			—			860,000
Deferred revenue		—			13,377		—		—			—			13,377
Commodity derivative liabilities		—			28		—		—			—			28
Asset retirement obligations		—			—		10,536		—			—			10,536
Liability under tax receivable agreement		803			—		—		—			—			803
Deferred tax liabilities		20,237			7,237		—		—			—			27,474

Total liabilities		21,040			889,844		1,440,245		2,328			(1,211,958	)		1,141,499

Stockholders' / members' equity
Members' equity		—			553,045		314,494		(1,502	)		(866,037	)		—
Class A common stock, $0.001 par value; 12,672,260 shares issued and 12,649,658 shares outstanding		13			—		—		—			—			13
Class B common stock, $0.001 par value; 36,719,499 shares issued and outstanding		37			—		—		—			—			37
Treasury stock, at cost: 22,602 shares		(358	)		—		—		—			—			(358	)
Additional paid-in-capital		178,763			—		—		—			—			178,763
Retained earnings		38,950			—		—		—			—			38,950

Stockholders' equity		217,405			553,045		314,494		(1,502	)		(866,037	)		217,405
Non-controlling interest		—			—		—		—			635,945			635,945

Total stockholders' equity		217,405			553,045		314,494		(1,502	)		(230,092	)		853,350

Total liabilities and stockholders' equity	$	238,445		$	1,442,889	$	1,754,739	$	826		$	(1,442,050	)	$	1,994,849

Jones Energy, Inc.

Condensed Consolidating Statement of Operations

Year Ended December 31, 2015

(in thousands of dollars)	JEI (Parent)			Issuers			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenues
Oil and gas sales	$	—		$	—		$	194,555		$	—		$	—		$	194,555
Other revenues		—			1,960			884			—			—			2,844

Total operating revenues		—			1,960			195,439			—			—			197,399

Operating costs and expenses
Lease operating		—			—			41,027			—			—			41,027
Production and ad valorem taxes		—			—			12,130			—			—			12,130
Exploration		—			—			6,551			—			—			6,551
Depletion, depreciation and amortization		—			—			205,407			91			—			205,498
Accretion of ARO liability		—			—			1,087			—			—			1,087
General and administrative		—			13,565			19,707			116			—			33,388
Other operating		—			—			4,188			—			—			4,188

Total operating expenses		—			13,565			290,097			207			—			303,869

Operating income (loss)		—			(11,605	)		(94,658	)		(207	)		—			(106,470	)

Other income (expense)
Interest expense		—			(59,991	)		(1,298	)		—			—			(61,289	)
Net gain on commodity derivatives		—			158,753			—			—			—			158,753
Other income (expense)		1,984			(4,832	)		(4	)		—			—			(2,852	)

Other income (expense), net		1,984			93,930			(1,302	)		—			—			94,612

Income (loss) before income tax		1,984			82,325			(95,960	)		(207	)		—			(11,858	)
Equity interest in income		(4,728	)		—			—			—			4,728			—
Income tax provision
Current		—			113			—			—			—			113
Deferred		(363	)		(2,531	)		—			—			—			(2,894	)

Total Income tax provision (benefit)		(363	)		(2,418	)		—			—			—			(2,781	)

Net income (loss)		(2,381	)		84,743			(95,960	)		(207	)		4,728			(9,077	)

Net income (loss) attributable to non-controlling interests		—			—			—			—			(6,696	)		(6,696	)

Net income (loss) attributable to controlling interests	$	(2,381	)	$	—		$	—		$	—		$	—		$	(2,381	)

Jones Energy, Inc.

Condensed Consolidating Statement of Operations

Year Ended December 31, 2014

(in thousands of dollars)	JEI (Parent)		Issuers			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenues
Oil and gas sales	$	—	$	—		$	378,401		$	—		$	—		$	378,401
Other revenues		—		1,154			1,042			—			—			2,196

Total operating revenues		—		1,154			379,443			—			—			380,597

Operating costs and expenses
Lease operating		—		—			37,760			—			—			37,760
Production and ad valorem taxes		—		—			22,556			—			—			22,556
Exploration		—		—			3,453			—			—			3,453
Depletion, depreciation and amortization		—		—			181,578			91			—			181,669
Accretion of ARO liability		—		—			770			—			—			770
General and administrative		—		4,493			21,181			89			—			25,763
Other operating		—		—			—			—			—			—

Total operating expenses		—		4,493			267,298			180			—			271,971

Operating income (loss)		—		(3,339	)		112,145			(180	)		—			108,626

Other income (expense)
Interest expense		—		(37,295	)		(1,510	)		—			—			(38,805	)
Net gain on commodity derivatives		—		189,641			—			—			—			189,641
Other income (expense)		—		(7,921	)		297			—			—			(7,624	)

Other income (expense), net		—		144,425			(1,213	)		—			—			143,212

Income (loss) before income tax		—		141,086			110,932			(180	)		—			251,838
Equity interest in income		63,197		—			—			—			(63,197	)		—
Income tax provision
Current		53		—			—			—			—			53
Deferred		22,008		4,157			—			—			—			26,165

Total income tax provision		22,061		4,157			—			—			—			26,218

Net income (loss)		41,136		136,929			110,932			(180	)		(63,197	)		225,620

Net income (loss) attributable to non-controlling interests		—		—			—			—			184,484			184,484

Net income (loss) attributable to controlling interests	$	41,136	$	—		$	—		$	—		$	—		$	41,136

Jones Energy, Inc.

Condensed Consolidating Statement of Operations

Year Ended December 31, 2013

(in thousands of dollars)	JEI (Parent)			Issuers			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations		Consolidated
Operating revenues
Oil and gas sales	$	—		$	—		$	258,063		$	—		$	—	$	258,063
Other revenues		—			469			637			—			—		1,106

Total operating revenues		—			469			258,700			—			—		259,169

Operating costs and expenses
Lease operating		—			—			25,129			—			—		25,129
Production and ad valorem taxes		—			—			15,517			—			—		15,517
Exploration		—			—			16,125			—			—		16,125
Depletion, depreciation and amortization		—			—			114,046			90			—		114,136
Accretion of ARO liability		—			—			608			—			—		608
General and administrative		—			4,154			27,490			258			—		31,902
Other operating		—			—			—			—			—		—

Total operating expenses		—			4,154			198,915			348			—		203,417

Operating income (loss)		—			(3,685	)		59,785			(348	)		—		55,752

Other income (expense)
Interest expense		—			(26,288	)		(1,121	)		—			—		(27,409	)
Net gain on commodity derivatives		—			(2,566	)		—			—			—		(2,566	)
Other income (expense)		—			(3,365	)		41			(119	)		—		(3,443	)

Other income (expense), net		—			(32,219	)		(1,080	)		(119	)		—		(33,418	)

Income (loss) before income tax		—			(35,904	)		58,705			(467	)		—		22,334
Equity interest in income		(3,400	)		—			—			—			3,400		—
Income tax provision
Current		85			—			—			—			—		85
Deferred		(1,299	)		1,143			—			—			—		(156	)

Total income tax provision		(1,214	)		1,143			—			—			—		(71	)

Net income (loss)		(2,186	)		(37,047	)		58,705			(467	)		3,400		22,405

Net income (loss) attributable to non-controlling interests		—			—			—			—			24,591		24,591

Net income (loss) attributable to controlling interests	$	(2,186	)	$	—		$	—		$	—		$	—	$	(2,186	)

Jones Energy, Inc.
Condensed Consolidating Statement of Cash Flows
Year Ended December 31, 2015

(in thousands of dollars)	JEI (Parent)			Issuers			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities
Net income (loss)	$	(2,381	)	$	84,743		$	(95,960	)	$	(207	)	$	4,728		$	(9,077	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities		(120,398	)		(202,359	)		405,395			197			(4,728	)		78,107

Net cash (used in) / provided by operations		(122,779	)		(117,616	)		309,435			(10	)		—			69,030

Cash flows from investing activities
Additions to oil and gas properties		—			—			(311,305	)		—			—			(311,305	)
Proceeds from sales of assets		—			—			41			—			—			41
Acquisition of other property, plant and equipment		—			—			(1,101	)		—			—			(1,101	)
Current period settlements of matured derivative contracts		—			144,145			—			—			—			144,145
Change in restricted cash		—			—			(181	)		—			—			(181	)

Net cash (used in) / provided by investing		—			144,145			(312,546	)		—			—			(168,401	)

Cash flows from financing activities
Proceeds from issuance of long-term debt		—			85,000			—			—			—			85,000
Repayment under long-term debt		—			(335,000	)		—			—			—			(335,000	)
Proceeds from senior notes		—			236,475			—			—			—			236,475
Payment of debt issuance costs		—			(1,556	)		—			—			—			(1,556	)
Proceeds from sale of common stock		122,779			—			—			—			—			122,779

Net cash (used in) / provided by financing		122,779			(15,081	)		—			—			—			107,698

Net increase (decrease) in cash		—			11,448			(3,111	)		(10	)		—			8,327
Cash
Beginning of period		100			1,000			12,436			30			—			13,566

End of period	$	100		$	12,448		$	9,325		$	20		$	—		$	21,893

Jones Energy, Inc.
Condensed Consolidating Statement of Cash Flows
Year Ended December 31, 2014

(in thousands of dollars)	JEI (Parent)			Issuers			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities
Net income (loss)	$	41,136		$	136,929		$	110,932		$	(180	)	$	(63,197	)	$	225,620
Adjustments to reconcile net income (loss) to net cash provided by operating activities		(40,778	)		(326,859	)		344,103			140			63,197			39,803

Net cash (used in) / provided by operations		358			(189,930	)		455,035			(40	)		—			265,423

Cash flows from investing activities
Additions to oil and gas properties		—			—			(474,619	)		—			—			(474,619	)
Net adjustments to purchase price of properties acquired		—			—			15,709			—			—			15,709
Proceeds from sales of assets		—			—			448			—			—			448
Acquisition of other property, plant and equipment		—			—			(1,683	)		—			—			(1,683	)
Current period settlements of matured derivative contracts		—			(3,654	)		—			—			—			(3,654	)
Change in restricted cash		—			—			(104	)		—			—			(104	)

Net cash (used in) / provided by investing		—			(3,654	)		(460,249	)		—			—			(463,903	)

Cash flows from financing activities
Proceeds from issuance of long-term debt		—			170,000			—			—			—			170,000
Repayment under long-term debt		—			(468,000	)		—			—			—			(468,000	)
Proceeds from senior notes		—			500,000			—			—			—			500,000
Purchases of treasury stock		(358	)		—			—			—			—			(358	)
Payment of debt issuance costs		—			(13,416	)		—			—			—			(13,416	)
Net cash (used in) / provided by financing		(358	)		188,584			—			—			—			188,226

Net increase (decrease) in cash		—			(5,000	)		(5,214	)		(40	)		—			(10,254	)
Cash
Beginning of period		100			6,000			17,650			70			—			23,820

End of period	$	100		$	1,000		$	12,436		$	30		$	—		$	13,566

Jones Energy, Inc.
Condensed Consolidating Statement of Cash Flows
Year Ended December 31, 2013

(in thousands of dollars)	JEI (Parent)			Issuers			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities
Net income (loss)	$	(2,186	)	$	(37,047	)	$	58,705		$	(467	)	$	3,400		$	22,405
Adjustments to reconcile net income (loss) to net cash provided by operating activities		2,286			(189,393	)		315,942			733			(3,400	)		126,168

Net cash (used in) / provided by operations		100			(226,440	)		374,647			266			—			148,573

Cash flows from investing activities
Investment in subsidiary		(172,481	)		—			—			—			172,481			—
Additions to oil and gas properties		—			—			(197,618	)		—			—			(197,618	)
Acquisitions of properties		—			—			(178,173	)		—			—			(178,173	)
Proceeds from sales of assets		—			—			963			644			—			1,607
Acquisition of other property, plant and equipment		—			—			(724	)		(910	)		—			(1,634	)
Current period settlements of matured derivative contracts		—			7,586			—			—			—			7,586
Change in restricted cash		—			—			(45	)		—			—			(45	)

Net cash (used in) / provided by investing		(172,481	)		7,586			(375,597	)		(266	)		172,481			(368,277	)

Cash flows from financing activities
Proceeds from investment in JEI		—			172,481			—			—			(172,481	)		—
Proceeds from issuance of long-term debt		—			220,000			—			—			—			220,000
Repayment under long-term debt		—			(172,000	)		—			—			—			(172,000	)
Proceeds from sale of common stock		172,481			—			—			—			—			172,481
Payment of debt issuance costs		—			(683	)		—			—			—			(683	)

Net cash (used in) / provided by financing		172,481			219,798			—			—			(172,481	)		219,798

Net increase (decrease) in cash		100			944			(950	)		—			—			94
Cash
Beginning of period		—			5,056			18,600			70			—			23,726

End of period	$	100		$	6,000		$	17,650		$	70		$	—		$	23,820