Legacy Reserves LP Announces Fourth Quarter 2012 Results, Annual 2012 Results and 2013 Guidance

Mon Feb 25, 2013 5:12pm EST

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MIDLAND, Texas, Feb. 25, 2013 (GLOBE NEWSWIRE) -- Legacy Reserves LP ("Legacy") (Nasdaq:LGCY)
today announced annual and fourth quarter results for 2012 as well as financial guidance for 2013.
Financial results contained herein are preliminary and subject to the audited financial statements
included in Legacy's Form 10-K to be filed on or about February 27, 2013.

A summary of selected financial information follows. For consolidated financial statements, please
see accompanying tables.

                                   Three Months Ended            Twelve Months Ended      
                                   December 31,  September 30,  December 31,             
                                   2012          2012           2012        2011        
                                   (dollars in millions)                                   
 Production (Boe/d)                15,729        14,772         14,811      13,071      
 Revenue                           $90.5         $84.2          $346.5      $336.9      
 Adjusted EBITDA (*)               $51.6         $49.5          $197.6      $201.4      
 Development capital expenditures  $19.7         $19.6          $68.2       $71.6       
 Distributable Cash Flow (*)       $24.7         $23.7          $104.5      $107.8      
 * Non-GAAP financial measure. Please see Adjusted EBITDA and Distributable Cash Flow table at the end of this press release for a reconciliation of these measures to their nearest comparable GAAP measure. 


2012 highlights include:

* 13% increase in production to 14,811 Boe/d from 13,071 Boe/d in 2011 primarily due to (i) $635.4
million of acquisitions of producing properties during 2012, which only includes twelve days of
production from our $502.6 million Permian Basin acquisition from Concho Resources Inc. ("2012 COG
Acquisition"), (ii) a full-year impact of our 2011 acquisitions, and (iii) $68.2 million of
development capital expenditures during 2012.
  
* 31% increase in year-end proved reserves to 83.2 MMBoe (88% PDP, 68% liquids) compared to 63.4
MMBoe (85% PDP, 68% liquids) as of year-end 2011 primarily driven by a 27.0 MMBoe increase from
acquisitions partially offset by a 5.4 MMBoe decrease from production and a 2.4 MMBoe decrease
from lower commodity prices.
 
* Adjusted EBITDA of $197.6 million, the second highest in our history despite lower realized
commodity prices and higher workover and other unusual well failure expenses.

Q4 2012 highlights include:

* 6% increase in production to 15,729 Boe/d from 14,772 Boe/d in the prior quarter primarily due
to $519.8 million of acquisitions during the quarter including twelve days of production
(approximately 640 Boe/d for the quarter) from our 2012 COG Acquisition, our development activity
in the Wolfberry, and an outstanding horizontal Bone Spring well that began producing in November.
 
* 4% increase in Adjusted EBITDA to $51.6 million from $49.5 million during the third quarter.
 
* Ninth consecutive increase in our quarterly distribution, ending the year at $0.57 per unit
which represents 3.6% year-over-year growth.
 
* To finance our recent acquisition and prepare for potential future acquisitions, (i) closed our
largest equity offering in November providing $218.0 million in net proceeds, (ii) gained
first-time access to the high yield market through our $300 million 8% senior notes offering, and
(iii) increased our borrowing base for the third time in 2012 to $800 million with a
newly-expanded 20-member bank group.

Cary D. Brown, Chairman, President and Chief Executive Officer of Legacy Reserves GP, LLC, the
general partner of Legacy, commented: "2012 was a landmark year for Legacy, as we closed the
largest acquisition in our history on December 20, the $502.6 million acquisition of Permian Basin
properties from Concho. These properties are in some of the most prolific fields in the Permian
Basin. With the exception of the Lower Abo, these properties provide us with a strong set of
mature PDP assets with modest production decline rates as well as a very strong portfolio of
proved and unproved drilling locations and developed, non-producing projects. Our integration of
this acquisition is going smoothly thus far, and since assuming operations on January 1, our
operations group is even more excited about the asset potential they are seeing.

"The Concho acquisition helped us set a Company record in proved reserves with 83.2 MMBoe and,
despite closing the transaction at the very end of the year, we also set annual and quarterly
production records of over 14,800 Boe/d during 2012 and over 15,700 Boe/d during the fourth
quarter. We generated Adjusted EBITDA of $197.6 million, the second highest in our history, in the
face of challenging Midland-to-Cushing crude oil differentials and unusually high well failure
expenses. A market has developed to hedge the Midland-to-Cushing differential and we have now
hedged a significant portion of our exposure during 2013. On the development front, we continue to
be pleased with our results from our Wolfberry drilling and are excited about the results from our
new horizontal Bone Spring well that began producing in November. Due to our acquisitions, strong
development results and promising outlook, we increased our distribution every quarter during
2012, resulting in year-over-year distribution growth of 3.6%. We have now increased our
distribution for the last nine consecutive quarters. For the year, assuming we had used $50.0
million of our development capital expenditures as maintenance capital expenditures (approximately
25% of our Adjusted EBITDA), our 2012 coverage ratio was 1.11 times. Using $13 million as
maintenance capital expenditures (roughly 25% of Adjusted EBITDA) and excluding the impact of the
Concho acquisition and our associated year-end capital raises, our fourth quarter distributable
cash flow per unit would have been approximately $0.64 per unit, covering our $0.57 distribution
by 1.12 times.

"Due to our recent strong drilling results and our newly-expanded development inventory, in
January our board approved a 2013 capital budget of $90 million. We consider $68 million of our
budget to be maintenance capital. With our multi-year, oil-weighted drilling inventory, our
recently closed Concho acquisition and our strong ongoing acquisition efforts, we are excited
about our opportunities in 2013 and beyond."

Dan Westcott, Executive Vice President and Chief Financial Officer, commented, "We are very
pleased with our acquisition efforts and growth in 2012. To finance the Concho acquisition, we
completed our largest equity offering and issued $300 million of senior notes during the fourth
quarter. In addition, our now 20-member bank group redetermined our borrowing base at $800
million. As of February 25, we had $500 million of debt outstanding under our revolving credit
facility, giving us approximately $300 of current availability (another Company record) for future
acquisitions and development projects. With favorable conditions in the capital markets and ample
availability under our credit facility, we look forward to another year of strong results and the
pursuit of additional acquisitions."

2013 Guidance

The following table sets forth certain assumptions being used by Legacy to estimate its
anticipated results of operations for 2013. These estimates do not include any acquisitions of
additional oil or natural gas properties. In addition, these estimates are based on, among other
things, assumptions of capital expenditure levels, current indications of supply and demand for
oil and natural gas and current operating and labor costs. The guidance set forth below does not
constitute any form of guarantee, assurance or promise that the matters indicated will actually be
achieved. The guidance below sets forth management's best estimate based on current and
anticipated market conditions and other factors. While we believe that these estimates and
assumptions are reasonable, they are inherently uncertain and are subject to, among other things,
significant business, economic, regulatory, environmental and competitive risks and uncertainties
that could cause actual results to differ materially from those we anticipate, as set forth under
"Cautionary Statement Relevant to Forward-Looking Information."

 ($ in thousands unless otherwise noted)          FY 2013E Range             
 Production:                                                               
 Oil (MBbls)                                      4,330    --     4,470    
 Natural gas liquids (MGal)                       13,300   --     13,750   
 Natural gas (MMcf)                               14,050   --     14,500   
 Total (MBoe)                                     6,988    --     7,214    
 Average daily production (Boe/d)                 19,146   --     19,765   
                                                                           
 Weighted Average NYMEX Differentials: (1)                                 
 Oil (per Bbl)                                    ($7.50)  --     ($9.00)  
 NGL realization (2)                              1.00%    --     1.15%    
 Natural gas (per Mcf)                            $1.25    --     $1.35    
                                                                           
 Expenses:                                                                 
 Oil and natural gas production expenses ($/Boe)  $18.30   --     $19.20   
 Ad valorem taxes (% of revenue)                  3.25%    --     3.50%    
 Production and other taxes (% of revenue)        6.00%    --     6.50%    
 Cash G&A expenses (3)                            $25,400  --     $26,650  
                                                                           
 (1) Based on current NYMEX strip pricing. Excludes the impact of commodity derivatives. Q1 2013 oil differentials are projected to be materially wider ($11.75--$13.50) primarily driven by recent Midland-to-Cushing differentials which have since narrowed considerably. 
                                                                              
 (2) Represents the projected percentage of WTI crude oil prices divided by 42, as we report NGLs in gallons. 
                                                                              
 (3) Consistent with our definition of Adjusted EBITDA, these figures exclude LTIP expenses. Cash settlements of LTIP (not included herein) impact Distributable Cash Flow. 


Annual Financial and Operating Results - 2012 Compared to 2011

* Production increased 13% to 14,811 Boe/d from 13,071 Boe/d primarily due to (i) $635.4 million
of acquisitions of producing properties during 2012, which only includes twelve days of production
from our 2012 COG Acquisition, (ii) a full-year impact of our $136.7 million of acquisitions of
producing properties during 2011, and (iii) $68.2 million of development capital expenditures
during 2012 which was the second highest annual total in our history and was primarily focused on
our Wolfberry locations as well as major workovers in the Permian Basin and Wyoming. By commodity,
our daily oil production increased by 13% in 2012 due to acquisitions and oil-focused development
projects. Our daily natural gas production increased by 17% in 2012 due primarily to the full-year
impact during 2012 of our 2011 acquisitions which were natural gas-weighted and, to a lesser
extent, production from our 2012 acquisitions and development activities, as the Wolfberry play
primarily produces oil but also a significant amount of casinghead natural gas, which is rich in
natural gas liquids ("NGL"). Daily NGL production was flat (+0.1%) in 2012.
 
* Average realized prices, excluding commodity derivatives settlements, were $63.91 per Boe in
2012, down 9% from $70.61 per Boe in 2011. Average realized oil prices decreased 4% to $85.78 per
Bbl in 2012 from $89.62 per Bbl in 2011. This decrease of $3.84 per Bbl is primarily attributable
to an increased weighted-average oil differential of $2.75 per Bbl as well as a slightly lower
weighted-average West Texas Intermediate ("WTI") crude oil price. This increase in our oil
differential was driven largely by the record increase in the Midland-to-Cushing/WTI differential,
which averaged approximately $2.99 per Bbl in 2012 compared to $0.50 per Bbl in 2011. In addition,
average realized natural gas prices decreased 28% to $4.38 per Mcf in 2012 from $6.05 per Mcf in
2011. Our average realized natural gas prices are favorably impacted by the NGL content in our
Permian Basin natural gas. Our lower realized natural gas price reflects a lower weighted-average
Henry Hub natural gas price, which decreased by approximately $1.24 per MMBtu in 2012, as well as
a lower, positive differential in 2012 that reflects the lower average prices of the NGL content
in our Permian Basin natural gas. Finally, our average realized NGL price decreased 23% to $1.00
per gallon in 2012 from $1.30 per gallon in 2011.
 
* Production expenses, excluding ad valorem taxes, increased 18% to $103.4 million in 2012 from
$87.6 million in 2011. On an average cost per Boe basis, production expenses increased 4% to
$19.08 per Boe in 2012 from $18.37 per Boe in 2011. Production expenses increased primarily
because of (i) $5.1 million related to increases in workover and other unusual well failure
expenses due to both increases in number of incidents as well as average cost per job, and (ii)
production expenses from our acquisitions, including $0.8 million for the twelve days of activity
related to the 2012 COG Acquisition.
 
*  Legacy's general and administrative expenses excluding Long-Term Incentive Plan ("LTIP")
compensation expense increased to $21.0 million from $19.1 million. The $1.9 million increase
stems from a $3.3 million increase from salaries due to the hiring of additional personnel
commensurate with the growth in our asset base, partially offset by lower acquisition-related
costs of $1.3 million in 2012. Legacy's total general and administrative expenses were $24.5
million and $23.1 million for 2012 and 2011, respectively. In addition to the factors above,
Legacy's unit-based/LTIP compensation was $0.5 million lower in 2012 due to decreases in our unit
price between December 31, 2011 and December 31, 2012.
 
* Cash settlements received on our commodity derivatives during 2012 were $5.9 million, as the
$16.1 million received on our natural gas hedges was partially offset by $10.2 million paid on our
oil hedges. This $5.9 million in cash settlements received compared to $0.6 million received
during 2011. Our production was 68% hedged in 2012 compared to 71% hedged in 2011.
 
* Development capital expenditures decreased to $68.2 million in 2012 from $71.6 million in 2011,
as we continued with our one-rig Wolfberry operated drilling program for most of 2012, drilled our
first new horizontal Bone Spring well in late 2012, and increased our capital workover activity in
the Permian Basin and Wyoming relative to 2011. Our non-operated capital expenditures were 23% of
our total capital expenditures in 2012 as compared to 25% in 2011.

2012 Financial and Operating Results - Fourth Quarter Compared to Third Quarter

* Production increased by 6% to 15,729 Boe/d compared to 14,772 Boe/d in the prior quarter
primarily due to recent acquisitions including twelve days of production (approximately 640 Boe/d
for the quarter) from our 2012 COG Acquisition, our development in the Wolfberry, and an
outstanding horizontal Bone Spring well that began producing in November. Production in the fourth
quarter continued to be hampered by high pressures in natural gas gathering lines in the Permian
Basin primarily due to extensive development in the area. In addition, natural gas and NGL
production was down in the Texas Panhandle in the fourth quarter due to plant downtime.
 
* Average realized prices, excluding commodity derivatives settlements, were $62.51 per Boe in the
fourth quarter, up 1% from $61.95 per Boe in the third quarter. Average realized oil prices
decreased by 3% to $80.69 per Bbl in the fourth quarter from $83.54 per Bbl in the third quarter.
This decrease was attributable to a drop in average WTI crude oil prices, as an increase in the
Midland-to-Cushing differential was offset by a significant decrease in our Rockies differentials
during the fourth quarter. In addition, average realized natural gas prices increased 15% to $4.71
per Mcf in the fourth quarter from $4.10 per Mcf in the third quarter and average realized NGL
prices increased 15% to $1.05 per gallon in the fourth quarter from $0.91 per gallon in the third
quarter.
 
* Production expenses, excluding taxes, remained flat at $28.3 million in the fourth quarter from
$28.2 million in the third quarter, as production expenses associated with recent acquisitions,
including $0.8 million associated with the twelve days of activity from the 2012 COG Acquisition,
were offset by lower workover and other well failure related expenses, which were still roughly
$1.0 million above normal levels but approximately $1.1 million lower than those expenses during
the third quarter. Production expenses per Boe decreased 6% to $19.59 per Boe in the fourth
quarter from $20.76 per Boe in the third quarter.
 
* Legacy's general and administrative expenses excluding unit-based/LTIP compensation expense
totaled $6.0 million during the fourth quarter compared to $4.9 million in the third quarter. This
increase was attributable to acquisition-related and year-end compliance and other costs. Legacy's
total general and administrative expenses were $5.9 million during the fourth quarter compared to
$7.0 million during the third quarter. LTIP expense decreased to a $0.1 million benefit in the
fourth quarter compared to a $2.1 million expense in the third quarter primarily due to
fluctuations in our unit price.
 
* Cash settlements received on our commodity derivatives during the fourth quarter were $3.9
million compared to $6.1 million received during the third quarter. The decline in WTI crude oil
prices between September and December resulted in a negative one-month lag effect on our crude oil
hedges, with our cash settlements received being approximately $1.4 million lower during the
fourth quarter. In contrast, this lag effect caused our cash settlements received on our oil
hedges to be approximately $2.7 million higher during the third quarter due to rising oil prices
during that period.
 
* Development capital expenditures were relatively flat at $19.7 million in the fourth quarter
compared to $19.6 million in the third quarter, making it the second highest quarter for
development capital expenditures in Legacy's history. Our development capital expenditures in the
fourth quarter included our Wolfberry drilling program as well as an operated horizontal Bone
Spring well that began producing in November. The results of our Wolfberry drilling program
continue to meet or exceed expectations, and the results of our horizontal Bone Spring well have
clearly exceeded expectations.

Commodity Derivatives Contracts 

We have entered into the following oil and natural gas derivatives contracts, including swaps and
three-way collars, to help mitigate the risk of changing commodity prices. As of February 25,
2013, we had entered into derivatives agreements to receive average NYMEX WTI crude oil and Waha,
ANR-Oklahoma, and CIG-Rockies natural gas prices as summarized below starting with January 2013
through December 2017:

Crude Oil (WTI):

 Calendar Year  Volumes (Bbls)  Average         Price              
                                Price per Bbl   Range per Bbl      
 2013           2,155,693       $90.92          $80.10 -- $108.65  
 2014           1,520,764       $91.54          $87.50 -- $103.75  
 2015           545,351         $91.98          $88.50 -- $100.20  
 2016           228,600         $87.94          $86.30 -- $99.85   
 2017           182,500         $84.75          $84.75             


We have also entered into multiple NYMEX WTI crude oil derivative three-way collar contracts as
follows:

 Calendar Year  Volumes (Bbls)  Average Short   Average Long   Average Short   
                                Put Price       Put Price      Call Price      
 2013           1,228,170       $65.53          $90.97         $105.85         
 2014           1,453,880       $65.54          $90.73         $110.65         
 2015           1,308,500       $64.67          $89.67         $112.21         
 2016           621,300         $63.37          $88.37         $106.40         
 2017           72,400          $60.00          $85.00         $104.20         


Additionally, we have entered into swaps for the Midland-to-Cushing/WTI crude oil differential
with the following attributes:

 Time Period   Volumes (Bbls)  Average         Price               
                               Price per Bbl   Range per Bbl       
 Q1 2013       180,000         ($1.25)         ($1.25)             
 Q2 - Q4 2013  2,200,000       ($1.47)         $(1.25) -- $(1.75)  


Natural Gas (WAHA, ANR-Oklahoma and CIG-Rockies hubs):

 Calendar Year  Volumes (MMBtu)  Average           Price             
                                 Price per MMBtu   Range per MMBtu   
 2013           9,240,654        $4.31             $3.18 -- $6.89    
 2014           7,431,254        $4.34             $3.61 -- $6.47    
 2015           1,339,300        $5.65             $5.14 -- $5.82    
 2016           219,200          $5.30             $5.30             


Location and quality differentials attributable to our properties are not reflected in the above
prices. The agreements provide for monthly settlement based on the difference between the
agreement fixed price and the actual reference oil and natural gas index prices.

Annual Report on Form 10-K

Our consolidated, audited financial statements and related footnotes will be available in our
annual 2012 Form 10-K which will be filed on or about February 27, 2013.

Conference Call

As announced on January 22, 2013, Legacy will host an investor conference call to discuss Legacy's
results on Tuesday, February 26, 2013 at 9:00 a.m. (Central Time). Those wishing to participate in
the conference call should dial 877-266-0479. A replay of the call will be available through
Saturday, March 2, 2013, by dialing 855-859-2056 or 404-537-3406 and entering replay code
92534708. Those wishing to listen to the live or archived web cast via the Internet should go to
the Investor Relations tab of our website at www.legacylp.com
http://www.globenewswire.com/newsroom/ctr?d=10022955&l=23&a=www.legacylp.com&u=http%3A%2F%2Fwww.legacylp.com
. Following our prepared remarks, we will be pleased to answer questions from securities analysts
and institutional portfolio managers and analysts; the complete call is open to all other
interested parties on a listen-only basis.

About Legacy Reserves LP

Legacy Reserves LP is an independent oil and natural gas limited partnership headquartered in
Midland, Texas, focused on the acquisition and development of oil and natural gas properties
primarily located in the Permian Basin, Mid-Continent and Rocky Mountain regions of the United
States. Additional information is available at www.legacylp.com
http://www.globenewswire.com/newsroom/ctr?d=10022955&l=25&a=www.legacylp.com&u=http%3A%2F%2Fwww.legacylp.com%2F
.

Cautionary Statement Relevant to Forward-Looking Information

This press release contains forward-looking statements relating to our operations that are based
on management's current expectations, estimates and projections about its operations. Words such
as "anticipates," "expects," "intends," "plans," "targets," "projects," "believes," "seeks,"
"schedules," "estimated," and similar expressions are intended to identify such forward-looking
statements. These statements are not guarantees of future performance and are subject to certain
risks, uncertainties and other factors, some of which are beyond our control and are difficult to
predict. Among the important factors that could cause actual results to differ materially from
those in the forward-looking statements are: realized oil and natural gas prices; production
volumes, lease operating expenses, general and administrative costs and finding and development
costs; future operating results and the factors set forth under the heading "Risk Factors" in our
annual and quarterly reports filed with the SEC. Therefore, actual outcomes and results may differ
materially from what is expressed or forecasted in such forward-looking statements. The reader
should not place undue reliance on these forward-looking statements, which speak only as of the
date of this press release. Unless legally required, Legacy undertakes no obligation to update
publicly any forward-looking statements, whether as a result of new information, future events or
otherwise.

                                                                                                                                        
                                                                                                                                        
 LEGACY RESERVES LP                                                                                                                         
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS                                                                                            
 (UNAUDITED)                                                                                                                                
                                                                                                                                        
                                                                                   Three Months Ended            Twelve Months Ended      
                                                                                   December 31,  September 30,  December 31,             
                                                                                   2012          2012           2012        2011        
                                                                                   (In thousands, except per unit data)                    
 Revenues:                                                                                                                              
 Oil sales                                                                         $ 74,157      $ 70,173       $ 286,254   $ 264,473   
 Natural gas liquids (NGL) sales                                                   3,850         3,492          14,592      18,888      
 Natural gas sales                                                                 12,448        10,531         45,614      53,524      
 Total revenues                                                                    90,455        84,196         346,460     336,885     
                                                                                                                                        
 Expenses:                                                                                                                              
 Oil and natural gas production                                                    30,929        30,728         112,951     96,914      
 Production and other taxes                                                        5,737         5,137          20,778      20,329      
 General and administrative                                                        5,922         6,993          24,526      23,084      
 Depletion, depreciation, amortization and accretion                               29,102        24,833         102,144     88,178      
 Impairment of long-lived assets                                                   14,510        7,277          37,066      24,510      
 (Gain) loss on disposal of assets                                                 568           260            (2,496)     (625)       
 Total expenses                                                                    86,768        75,228         294,969     252,390     
                                                                                                                                        
 Operating income                                                                  3,687         8,968          51,491      84,495      
                                                                                                                                        
 Other income (expense):                                                                                                                
 Interest income                                                                   5             3              16          15          
 Interest expense                                                                  (6,003)       (5,285)        (20,260)    (18,566)    
 Equity in income of partnership                                                   23            30             111         138         
 Realized and unrealized net gains (losses) on commodity derivatives               4,409         (27,177)       38,493      6,857       
 Other                                                                             (31)          (51)           (118)       152         
 Income (loss) before income taxes                                                 2,090         (23,512)       69,733      73,091      
                                                                                                                                        
 Income tax expense                                                                (218)         (54)           (1,096)     (1,030)     
                                                                                                                                        
 Net income (loss)                                                                 $ 1,872       $ (23,566)     $ 68,637    $ 72,061    
 Income (loss) per unit --                                                                                                              
 basic and diluted                                                                 $ 0.04        $ (0.49)       $ 1.40      $ 1.63      
                                                                                                                                        
 Weighted average number of units used in computing net income (loss) per unit --                               
 Basic                                                                             52,416        47,869         48,991      44,093      
 Diluted                                                                           52,454        47,869         48,991      44,112      


                                                                                                                                              
                                                                                                                                              
 LEGACY RESERVES LP                                                                                                                             
 CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)                                                                                              
 (dollars in thousands)                                                                                                                         
                                                                                                                                              
                                                                                                                    December 31,               
                                                                                                                    2012         2011         
 ASSETS                                                                                                                                       
 Current assets:                                                                                                                              
 Cash and cash equivalents                                                                                          $ 3,509      $ 3,151      
 Accounts receivable, net:                                                                                                                    
 Oil and natural gas                                                                                                37,547       35,489       
 Joint interest owners                                                                                              27,851       10,299       
 Other                                                                                                              551          204          
 Fair value of derivatives                                                                                          15,158       7,117        
 Prepaid expenses and other current assets                                                                          3,294        3,525        
 Total current assets                                                                                               87,910       59,785       
                                                                                                                                              
 Oil and natural gas properties, at cost:                                                                                                     
 Proved oil and natural gas properties using the successful efforts method of accounting                            2,078,961    1,389,326    
 Unproved properties                                                                                                65,968       20,063       
 Accumulated depletion, depreciation, amortization and impairment                                                   (573,003)    (450,060)    
                                                                                                                    1,571,926    959,329      
                                                                                                                                              
 Other property and equipment, net of accumulated depreciation and amortization of $4,618 and $3,530, respectively  2,646        3,310        
 Operating rights, net of amortization of $3,531 and $3,034, respectively                                           3,486        3,983        
 Fair value of derivatives                                                                                          15,834       10,188       
 Other assets, net of amortization of $7,909 and $6,337, respectively                                               7,804        6,611        
 Investment in equity method investee                                                                               393          282          
 Total assets                                                                                                       $ 1,689,999  $ 1,043,488  
                                                                                                                                              
 LIABILITIES AND UNITHOLDERS' EQUITY                                                                                                          
 Current liabilities:                                                                                                                         
 Accounts payable                                                                                                   $ 1,822      $ 3,286      
 Accrued oil and natural gas liabilities                                                                            50,162       45,351       
 Fair value of derivatives                                                                                          10,801       18,905       
 Asset retirement obligation                                                                                        29,501       20,262       
 Other                                                                                                              11,437       9,646        
 Total current liabilities                                                                                          103,723      97,450       
                                                                                                                                              
 Long-term debt                                                                                                     775,838      337,000      
 Asset retirement obligation                                                                                        132,682      100,012      
 Fair value of derivatives                                                                                          5,590        18,897       
 Other long-term liabilities                                                                                        1,886        1,794        
 Total liabilities                                                                                                  1,019,719    555,153      
                                                                                                                                              
 Commitments and contingencies                                                                                                                
 Unitholders' equity:                                                                                                                         
 Limited partners' equity - 57,038,942 and 47,801,682 units issued and outstanding, respectively                    670,183      488,264      
 General partner's equity (approximately 0.03% and 0.04%, respectively)                                             97           71           
 Total unitholders' equity                                                                                          670,280      488,335      
 Total liabilities and unitholders' equity                                                                          $ 1,689,999  $ 1,043,488  


                                                                                                                                                                
                                                                                                                                                                
 LEGACY RESERVES LP                                                                                                                                                 
 SELECTED FINANCIAL AND OPERATING DATA                                                                                                                              
                                                                                                                                                                
                                                                                       Three Months Ended                                Twelve Months Ended      
                                                                                       December 31,                      September 30,  December 31,             
                                                                                       2012                              2012           2012        2011        
                                                                                       (In thousands, except per unit data)                                        
 Revenues:                                                                                                                                                      
 Oil sales                                                                             $ 74,157                          $ 70,173       $ 286,254   $ 264,473   
 Natural gas liquids sales                                                             3,850                             3,492          14,592      18,888      
 Natural gas sales                                                                     12,448                            10,531         45,614      53,524      
 Total revenues                                                                        $ 90,455                          $ 84,196       $ 346,460   $ 336,885   
                                                                                                                                                                
 Expenses:                                                                                                                                                      
 Oil and natural gas production                                                        $ 28,343                          $ 28,207       $ 103,409   $ 87,626    
 Ad valorem taxes                                                                      $ 2,586                           $ 2,521        $ 9,542     $ 9,288     
 Total oil and natural gas production including ad valorem taxes                       $ 30,929                          $ 30,728       $ 112,951   $ 96,914    
 Production and other taxes                                                            $ 5,737                           $ 5,137        $ 20,778    $ 20,329    
 General and administrative excluding LTIP                                             $ 6,046                           $ 4,855        $ 20,980    $ 19,063    
 LTIP expense (benefit)                                                                $ (124)                           $ 2,138        $ 3,546     $ 4,021     
 Total general and administrative                                                      $ 5,922                           $ 6,993        $ 24,526    $ 23,084    
 Depletion, depreciation, amortization and accretion                                   $ 29,102                          $ 24,833       $ 102,144   $ 88,178    
                                                                                                                                                                
 Realized commodity derivative settlements:                                                                                                                     
 Realized gains (losses) on oil derivatives                                            $ 738                             $ 2,108        $ (10,211)  $ (11,335)  
 Realized gains on natural gas derivatives                                             $ 3,146                           $ 4,000        $ 16,113    $ 11,972    
                                                                                                                                                                
 Production:                                                                                                                                                    
 Oil (MBbls)                                                                           919                               840            3,337       2,951       
 Natural gas liquids (MGal)                                                            3,670                             3,821          14,607      14,559      
 Natural gas (MMcf)                                                                    2,643                             2,571          10,417      8,842       
 Total (MBoe)                                                                          1,447                             1,359          5,421       4,771       
 Average daily production (Boe/d)                                                      15,729                            14,772         14,811      13,071      
                                                                                                                                                                
 Average sales price per unit (excluding commodity derivatives):                                                                                                 
 Oil price (per Bbl)                                                                   $ 80.69                           $ 83.54        $ 85.78     $ 89.62     
 Natural gas liquids price (per Gal)                                                   $ 1.05                            $ 0.91         $ 1.00      $ 1.30      
 Natural gas price (per Mcf)                                                           $ 4.71                            $ 4.10         $ 4.38      $ 6.05      
 Combined (per Boe)                                                                    $ 62.51                           $ 61.95        $ 63.91     $ 70.61     
                                                                                                                                                                
 Average sales price per unit (including realized commodity derivative gains/losses):                                                               
 Oil price (per Bbl)                                                                   $ 81.50                           $ 86.05        $ 82.72     $ 85.78     
 Natural gas liquids price (per Gal)                                                   $ 1.05                            $ 0.91         $ 1.00      $ 1.30      
 Natural gas price (per Mcf)                                                           $ 5.90                            $ 5.65         $ 5.93      $ 7.41      
 Combined (per Boe)                                                                    $ 65.20                           $ 66.45        $ 65.00     $ 70.74     
                                                                                                                                                                
 NYMEX oil index prices per Bbl:                                                                                                                                
 Beginning of Period                                                                   $ 92.19                           $ 84.96        $ 98.83     $ 91.38     
 End of Period                                                                         $ 91.82                           $ 92.19        $ 91.82     $ 98.83     
                                                                                                                                                                
 NYMEX gas index prices per Mcf:                                                                                                                                
 Beginning of Period                                                                   $ 3.32                            $ 2.82         $ 2.99      $ 4.41      
 End of Period                                                                         $ 3.35                            $ 3.32         $ 3.35      $ 2.99      
                                                                                                                                                                
 Average unit costs per Boe:                                                                                                                                    
 Oil and natural gas production                                                        $ 19.59                           $ 20.76        $ 19.08     $ 18.37     
 Ad valorem taxes                                                                      $ 1.79                            $ 1.86         $ 1.76      $ 1.95      
 Production and other taxes                                                            $ 3.96                            $ 3.78         $ 3.83      $ 4.26      
 General and administrative excluding LTIP                                             $ 4.18                            $ 3.57         $ 3.87      $ 4.00      
 Total general and administrative                                                      $ 4.09                            $ 5.15         $ 4.52      $ 4.84      
 Depletion, depreciation, amortization and accretion                                   $ 20.11                           $ 18.27        $ 18.84     $ 18.48     


Non-GAAP Financial Measures

This press release, the financial tables and other supplemental information include "Adjusted
EBITDA" and "Distributable Cash Flow", both of which are non-generally accepted accounting
principles ("non-GAAP") measures which may be used periodically by management when discussing our
financial results with investors and analysts. The following presents a reconciliation of each of
these non-GAAP financial measures to their nearest comparable generally accepted accounting
principles ("GAAP") measure.

Adjusted EBITDA and Distributable Cash Flow are presented as management believes they provide
additional information and metrics relative to the performance of our business, such as the cash
distributions we expect to pay to our unitholders. Management believes that both Adjusted EBITDA
and Distributable Cash Flow are useful to investors because these measures are used by many
companies in the industry as measures of operating and financial performance, and are commonly
employed by financial analysts and others to evaluate the operating and financial performance of
the Partnership from period to period and to compare it with the performance of other publicly
traded partnerships within the industry. Adjusted EBITDA and Distributable Cash Flow may not be
comparable to a similarly titled measure of other publicly traded limited partnerships or limited
liability companies because all companies may not calculate Adjusted EBITDA in the same manner.

"Adjusted EBITDA" and "Distributable Cash Flow" should not be considered as alternatives to GAAP
measures, such as net income, operating income, cash flow from operating activities, or any other
GAAP measure of financial performance.

Adjusted EBITDA is defined as net income (loss) plus:

* Interest expense;
* Income taxes;
* Depletion, depreciation, amortization and accretion;
* Impairment of long-lived assets;
* (Gain) loss on sale of partnership investment;
* (Gain) loss on disposal of assets;
* Equity in (income) loss of partnership;
* Unit-based compensation expense (benefit) related to LTIP unit awards accounted for under the
equity or liability methods; and
* Unrealized (gains) losses on oil and natural gas derivatives.

Distributable Cash Flow is defined as Adjusted EBITDA less:

* Cash interest expense including the accrual of interest expense related to our senior notes
which is paid on a semi-annual basis;
* Cash income taxes;
* Cash settlements of LTIP unit awards; and
* Development capital expenditures (*).

* Beginning in the first quarter of 2013, Legacy intends to deduct only maintenance capital
expenditures instead of total development capital expenditures in the computation and presentation
of Distributable Cash Flow, which will result in the measure of Distributable Cash Flow not being
comparable from period to period.

The following table presents a reconciliation of our consolidated net income (loss) to Adjusted
EBITDA and Distributable Cash Flow:

                                                                                                                      
                                                               Three Months Ended            Twelve Months Ended      
                                                               December 31,  September 30,  December 31,             
                                                               2012          2012           2012        2011        
                                                               (dollars in thousands)                                  
 Net income (loss)                                             $ 1,872       $ (23,566)     $ 68,637    $ 72,061    
 Plus:                                                                                                              
 Interest expense                                              6,003         5,285          20,260      18,566      
 Income tax expense                                            218           54             1,096       1,030       
 Depletion, depreciation, amortization and accretion           29,102        24,833         102,144     88,178      
 Impairment of long-lived assets                               14,510        7,277          37,066      24,510      
 (Gain) loss on sale of assets                                 568           260            (2,496)     (625)       
 Equity in income of partnership                               (23)          (30)           (111)       (138)       
 Unit-based compensation expense (benefit)                     (124)         2,138          3,546       4,021       
 Unrealized (gains) losses on oil and natural gas derivatives  (525)         33,285         (32,591)    (6,220)     
 Adjusted EBITDA                                               $ 51,601      $ 49,536       $ 197,551   $ 201,383   
                                                                                                                    
 Less:                                                                                                              
 Cash interest expense                                         6,991         5,283          21,387      19,044      
 Cash settlements of LTIP unit awards                          184           990            3,555       2,916       
 Development capital expenditures                              19,693        19,565         68,150      71,589      
 Distributable Cash Flow                                       $ 24,733      $ 23,698       $ 104,459   $ 107,834   


CONTACT: Legacy Reserves LP
         Dan Westcott
         Executive Vice President and Chief Financial Officer
         (432) 689-5200