Organization and Description of Business

6 Months Ended

Jun. 30, 2013

Organization and Description of Business

Organization and Description of Business

1. Organization and Description of Business

Jones Energy Holdings, LLC (“JEH LLC”) was organized December 16, 2009 as a Delaware limited liability company and began operations effective December 31, 2009.  On December 31, 2009, a series of transactions was undertaken by JEH LLC as follows:

· The owners of Nosley Properties, LLC (“Nosley”) and Jones Energy, Ltd. (“JEL”) contributed all their ownership interests in Nosley and JEL for Common Units plus $15.0 million for Preferred Class B Units

· Metalmark Capital contributed $135.0 million for Preferred Class A Units

· Wells Fargo Energy Capital contributed $7.5 million for Preferred Class A Units

In addition to these capital contributions, JEH LLC borrowed $175.0 million from Wells Fargo N.A., used partially to repay the debt of Nosley and JEL.  JEH LLC used the cash contributions and the balance of the Wells Fargo debt funding to acquire 100% of the equity interest of Crusader Energy Group, Inc., out of bankruptcy.  The previous owners of Nosley and JEL hold two board of director seats and Metalmark holds two board of director seats; however, Metalmark holds the majority equity interest, which gives it effective control of JEH LLC.

On December 20, 2012 the owners of Class A Preferred, Class B Preferred and Common Units contributed $56.7 million, $25.2 million and $3.1 million, respectively, for Preferred Class C Units. JEH LLC used the capital contributions, along with $170 million borrowed from Wells Fargo N.A., to fund the acquisition of certain oil and gas properties in the Texas Panhandle (see Note 3, “Acquisition of Properties”).

In March 2013, Jones Energy, Inc. was formed as a Delaware corporation for the purpose of becoming a publicly traded entity and the holding company of JEH LLC. The historical financial information contained in this report relates to periods that ended prior to the completion of the initial public offering (“the Offering”) of Jones Energy, Inc. Consequently, the unaudited consolidated financial statements and notes thereto pertain to JEH LLC. In connection with the completion of the Offering on July 29, 2013, Jones Energy, Inc. became a holding company whose sole material asset consists of units of ownership in JEH LLC. As the sole managing member of JEH LLC, Jones Energy, Inc. is responsible for all operational, management and administrative decisions relating to JEH LLC’s business and for periods subsequent to July 29, 2013, will consolidate the financial results of JEH LLC and its subsidiaries.

JEH LLC is engaged in the acquisition, exploration, and production of oil and natural gas properties in the mid-continent U.S. through undivided ownership interests or through its wholly owned subsidiaries.  JEH LLC operates in one industry segment and all of its operations are conducted in one geographic area of the United States. JEH LLC is headquartered in Austin, Texas.