Eagle Rock Reports Fourth Quarter and Year End 2012 Financial Results

Eagle Rock Reports Fourth Quarter and Year End 2012 Financial Results

HOUSTON, Feb. 25, 2013 (GLOBE NEWSWIRE) -- Eagle Rock Energy Partners, L.P.
("Eagle Rock" or the "Partnership") (Nasdaq:EROC) today announced its
unaudited financial results for the full year 2012 and three months ended
December 31, 2012. Financial highlights with respect to fourth quarter 2012
included the following:

  *Reported Adjusted EBITDA of $66.2 million, an increase of approximately
    12% as compared to the $59.1 million reported for the third quarter of
    2012.
  *Reported Distributable Cash Flow of $29.5 million, an increase of
    approximately 9% as compared to the $27.0 million reported for the third
    quarter of 2012.
  *Announced a quarterly distribution with respect to the fourth quarter of
    2012 of $0.22 per common unit, equal to the third quarter 2012
    distribution and a 5% increase from the distribution paid for the fourth
    quarter of 2011.
  *Reported a Net Loss of $55.2 million, driven almost entirely by
    impairments and unrealized mark-to-market losses on commodity hedges, both
    of which are non-cash charges to earnings.

Other notable financial and operational activities of the Partnership during
the fourth quarter of 2012 included the following:

  *Closed on the acquisition of BP's Texas Panhandle midstream assets (the
    "Panhandle Acquisition") on October 1, 2012, and, following the negotiated
    transition services period, assumed control of operations, marketing and
    commercial activities on January 1, 2013.
  *Completed the first phase of the emissions reduction project at the Big
    Escambia Creek (BEC) processing facility in Southern Alabama on December
    17, 2012, resulting in increased sulfur recovery and reductions in SO[2]
    emissions to levels well below the current permitted levels.
  *Increased commitments from the lending group under its existing senior
    secured credit facility from $675 million to $820 million.

For the full year 2012, Eagle Rock generated $245.8 million of Adjusted
EBITDA, an increase of 18% from the $208.2 million reported for the full year
2011, despite lower year-over-year natural gas and natural gas liquids (NGL)
prices. The increase in 2012 was primarily due to a full year contribution
from its Mid-Continent Upstream assets, which were acquired on May 3, 2011,
and a quarter of a year contribution from the Panhandle Acquisition.

"The fourth quarter marked the end of another very active year for Eagle
Rock," said Joseph A. Mills, Eagle Rock's Chairman and Chief Executive
Officer. "During 2012, we significantly expanded our Midstream position in the
Texas Panhandle through our Panhandle Acquisition and execution of a 20-year
fixed-fee gathering and processing agreement with BP. In addition, we
announced a substantial new area dedication by Anadarko Petroleum Corporation
in Western Louisiana and successfully developed a portion of our attractive
upstream drilling inventory in the SCOOP area of western Oklahoma."

Mills further commented, "As we look forward to 2013, we continue to be
excited about growing our gathering footprint around our newly-acquired assets
in the Texas Panhandle as well as realizing the full resource potential of our
Mid-Continent Upstream portfolio."

Update Regarding the Panhandle Acquisition

Eagle Rock closed the Panhandle Acquisition on October 1, 2012, and assumed
control of operations, marketing and commercial activities as scheduled on
January 1, 2013.In conjunction with assuming control, the Partnership hired
78 former BP employees, comprising essentially all of the personnel who worked
on the asset under BP, and integrated these personnel into Eagle Rock's
existing organizational structure, including in a number of key leadership
roles. The integration of the newly-acquired Panhandle assets with the
Partnership's existing Panhandle assets, including procuring right-of-way and
making various interconnects, is on schedule.

Update Regarding Construction of the Wheeler Cryogenic Processing Plant

Construction of the Wheeler 60 MMcf/d cryogenic processing plant (the "Wheeler
Plant"), located in Wheeler County, and associated gathering and compression
infrastructure, is expected to be completed in the second quarter of 2013 at a
cost of approximately $63 million, of which $40.2 million had been spent
through December 31, 2012. Upon completion of the Wheeler Plant, the
Partnership will have over 540 MMcf/d of high-efficiency processing capacity
in the Texas Panhandle to serve continued drilling activity in the Granite
Wash and surrounding geological plays.

Year-End Proved Reserves

Eagle Rock estimates its proved reserves at year-end 2012 totaled 58.3 MMBOE,
down approximately 6% from year-end 2011. Reserves were lower primarily due to
the sale of its non-core position in the Barnett Shale in December 2012, and
to negative revisions to its gas reserves as a result of lower natural gas
prices, which combined were greater than the increases to reserves related to
extensions and discoveries and positive well performance.Due to lower natural
gas prices throughout 2012, the Partnership reduced its proved reserves by
approximately 7.0 MMBOE which represents approximately 11% of its 2011
year-end total proved reserves.Total production for 2012 was 5.05 MMBOE, or
13.8 Mboe/d, an increase of 25% from total production in 2011.The Partnership
replaced 174% of its 2012 production through its drilling activity at a unit
development cost of $22.08 / Boe. Approximately 76% of the Partnership's total
proved reserves as of December 31, 2012 were classified as proved developed.

Update on Upstream Drilling Activity

During 2012, the Partnership participated in the drilling and completion of 33
total wells, of which 11 were proved undeveloped locations and 12 were
operated by the Partnership. Drilling activity was concentrated in the
Mid-Continent region, primarily in the Cana and Cana Southeast Shale plays and
Golden Trend Field of western Oklahoma. In addition, during 2012, the
Partnership participated in recompletion and workover projects on 32 wells, of
which 31 were operated by the Partnership.

Fourth Quarter 2012 Financial and Operating Results

The Midstream Business's financial results are reported in the following
segments: (i) Texas Panhandle, (ii) East Texas and Other Midstream, which
consolidates Eagle Rock's former East Texas/Louisiana, South Texas and Gulf of
Mexico segments, and (iii) Marketing and Trading, which is a new reporting
segment.The Partnership's Upstream segment and functional (Corporate)
segments remained unchanged from what had been previously reported.

The following discussion of Eagle Rock's operating income by business segment
compares the Partnership's financial results in the fourth quarter of 2012 to
those of the third quarter of 2012. The Partnership believes comparing these
periods is more illustrative of current operating trends than comparing the
current quarter to results achieved in the fourth quarter of 2011. Please
refer to the financial tables at the end of this release for further detailed
information.

Midstream Business – Operating income from continuing operations, excluding
the impact of impairments, for the Midstream Business in the fourth quarter of
2012 increased by approximately $6.5 million, or 138%, compared to the third
quarter of 2012, despite lower average realized prices for NGLs and
condensate.This increase was attributable to the additional volumes and
associated cash flows from the Panhandle Acquisition, which closed on October
1, 2012 and contributed approximately $6.8 million of EBITDA to the
Partnership in the fourth quarter of 2012, and to improved run-times and
recoveries at certain of the Partnership's processing plants.

In the Texas Panhandle, gathered volumes were up 103%, with combined equity
NGL and condensate volumes up approximately 83%, compared to the third quarter
of 2012. Gathering, NGL and condensate volumes were higher as compared to the
third quarter 2012 due primarily to the additional volumes from the Panhandle
Acquisition.

In the Partnership's East Texas and Other Midstream segment, gathered volumes
were down 12.3%, with equity NGL and condensate volumes up approximately 1%,
compared to the third quarter of 2012.The decrease in gathered volumes was
due to natural declines in the production of existing wells and loss of
production in the Gulf of Mexico due to Hurricane Isaac.Partially offsetting
the declines, gathered volumes in the Partnership's systems which service the
liquids-rich Austin Chalk play in East Texas increased approximately 2% as
compared to the third quarter of 2012, which also led to the slight increase
in combined NGL and condensate equity volumes relative to the third quarter of
2012.

As previously disclosed, the Yscloskey Plant in Louisiana, in which Eagle Rock
has a non-operated ownership interest, suffered significant damage from
Hurricane Isaac in August 2012. The Yscloskey Plant has been shut down since
that time and is expected to remain shut down for an indefinite period of
time. Gathering volumes associated with the Yscloskey Plant for the first six
months of 2012 averaged approximately 52 MMcf/d.The Yscloskey Plant
contributed approximately $0.5 million of EBITDA to the Partnership for the
first six months of 2012.

The Marketing and Trading segment includes the financial results of the
Partnership's crude oil and condensate marketing, and natural gas marketing
and trading subsidiaries. Eagle Rock's crude oil and condensate marketing
subsidiary was created in 2010 to develop and implement marketing uplift
strategies surrounding crude and condensate in Alabama and in the Texas
Panhandle. Eagle Rock's natural gas marketing and trading subsidiary was
created in 2011 to capitalize on physical and financial natural gas marketing
and trading opportunities that extend from the Partnership's upstream and
midstream assets. Operating income for the Marketing and Trading segment in
the fourth quarter of 2012, including intercompany sales and intersegment cost
of sales, increased by approximately $0.5 million compared to the third
quarter of 2012.

Upstream Business - Operating income for Eagle Rock's Upstream Business in the
fourth quarter of 2012, excluding the impact of impairments, decreased by
approximately $2.0 million, or 13%, compared to the third quarter of 2012.The
decrease was primarily due to lower production during the quarter associated
with the Partnership's scheduled turnaround at its BEC facility; lower crude
oil, NGLs and sulfur prices; and the sale of its non-core Barnett assets (for
$15 million) on December 20, 2012.Production volumes in the Upstream Business
averaged 77.9 MMcfe/d during the quarter, a decrease of approximately 10% from
the third quarter of 2012.The Partnership estimates the scheduled turnaround
negatively impacted its EBITDA during the quarter by approximately $6.0
million and its average production for the quarter by 4.2 MMcfe/d.

The Partnership, through its subsidiaries, has successfully completed the
first phase of the emissions reduction project at its BEC processing facility
in Southern Alabama. The project was initiated in December of 2011 to comply
with the required step-down in SO[2] emissions under the existing
environmental permit. The project involved adding a Superclaus reactor to the
existing sulfur recovery unit to achieve the desired reduction in SO[2]
emissions. The new unit began operations on December 17, 2012, and has
resulted in increased sulfur recovery and reductions in SO[2] emissions to
levels well below the current permitted levels. The next phase of the project
involves potential upgrades to the existing sulfur recovery unit to further
improve sulfur recoveries and further reduce SO[2] emissions. In the first of
these planned upgrades, Eagle Rock expects to replace the incinerator portion
of the sulfur recovery unit in 2014 at a cost of $15 million. The final
upgrades will be completed in 2016. Eagle Rock expects to recognize
operational cost savings and improve the overall reliability of the BEC
facility in addition to recovering more of the marketable elemental sulfur
from the well stream as a result of the emissions project.

Corporate Segment – Operating loss for the Corporate segment, excluding the
impact of unrealized derivative gains and losses, was $2.3 million for the
fourth quarter of 2012 as compared to a $4.3 million loss for the third
quarter of 2012. The lower loss was attributable to a decrease in intercompany
eliminations due to lower inventory balances at the end of the fourth quarter,
partially offset by a $2.9 million reduction in realized commodity derivative
gains and an approximate $800,000 increase in General and Administrative
expenses for the fourth quarter.

Total revenue for the fourth quarter of 2012, including the impact of Eagle
Rock's realized and unrealized commodity derivative gains and losses, was
$312.4 million, up 91% compared with the $163.4 million reported for the third
quarter of 2012.The increase in revenue was primarily due to the Panhandle
Acquisition, which closed on October 1, 2012, and to lower unrealized losses
on commodity derivatives compared to the third quarter of 2012.Eagle Rock
recorded an unrealized loss on commodity derivatives of $6.9 million in the
fourth quarter 2012, as compared to an unrealized loss on commodity
derivatives of $51.3 million in the third quarter 2012.Unrealized gain (loss)
on commodity derivatives is a non-cash, mark-to-market amount.

Revenues associated with the sale of crude oil, natural gas, NGLs, condensate
and sulfur were up 54% relative to the third quarter of 2012, driven primarily
by increased volumes from the Panhandle Acquisition and higher average
realized natural gas prices. Adjusted EBITDA was $66.2 million, up 12% from
the third quarter of 2012, and Distributable Cash Flow was $29.5 million for
thefourth quarter of 2012, up 9% as compared to the third quarter of
2012.The increase in Distributable Cash Flow was primarily attributable to
higher Adjusted EBITDA, partially offset by higher interest expense following
the senior notes issuance in July 2012 and by higher maintenance capital
spending. The Partnership recorded $18.6 million of maintenance capital in the
fourth quarter of 2012, an increase of $2.6 million as compared to the third
quarter of 2012. Of the fourth quarter 2012 maintenance capital, $6.2 million
was related to the scheduled Alabama facility upgrades discussed above.

The Partnership recorded a net loss of approximately $55.2 million for the
fourth quarter of 2012, versus a net loss of $106.9 million for the third
quarter of 2012. The net loss was driven primarily by impairment charges of
$54.2 million taken during the quarter.Net income for the quarter excluding
the impact of impairments and unrealized gains and losses was approximately
$4.8 million. The Partnership incurred impairment charges in its Upstream
Business related to its proved properties in East Texas and the Permian Basin
due to reduced cash flow resulting from lower natural gas prices and
relatively high operating costs associated with gas compression.In addition,
the Partnership recorded a loss on the sale of its non-core Barnett Shale
properties, which closed on December 20, 2012.The Partnership also incurred
impairment charges in its Midstream Business related to its Central Gathering
System in East Texas, and to reduced drilling activity in the Gulf of Mexico
impacting the Partnership's North Terrebonne processing plant, in which Eagle
Rock has a non-operated ownership interest.

Fourth Quarter Distribution

On January 28, 2013, the Partnership declared a cash distribution on common
units (including restricted common units) of $0.22 per unit for the quarter
ended December 31, 2012, equivalent to $0.88 per unit on an annualized
basis.This distribution is equal to the distribution paid for the third
quarter 2012 and represents a 5% increase from the distribution paid for the
fourth quarter of 2011.As declared, the distribution was paid on Thursday,
February 14, 2013, on units and to unitholders of record as of the close of
business on Thursday, February 7, 2013.

Full Year 2012 Financial and Operating Results

Total revenue for 2012, including the impact of Eagle Rock's realized and
unrealized derivative gains and losses, was $984.0 million, down 7% compared
with $1.1 billion reported for 2011. The largest contributor to the decrease
in total revenue was the lower average realized NGL and natural gas prices.
Revenues associated with the sale of crude oil, natural gas, NGLs, condensate
and sulfur were down 12% relative to those in 2011. Total revenue in 2012
included a realized gain on commodity derivatives of $51.3million, as
compared to a realized loss of $20.4 million in 2011. The Partnership recorded
an unrealized gain on commodity derivatives of $6.6 million in 2012, as
compared to an unrealized gain on commodity derivatives of $52.9 million in
2011.

Adjusted EBITDA was $245.8 million and Distributable Cash Flow was $129.0
million in 2012 as compared to $208.2 million and $119.3 million,
respectively, in 2011. The Partnership recorded a net loss of approximately
$150.6 million for the full year of 2012, versus net income of $73.1 million
for the full year of 2011. The net loss in 2012 was driven primarily by
impairment charges of $177.0 million taken during the year. Net income for the
year excluding the impact of impairments and unrealized gains or losses was
approximately $14.3 million.

With regard to the Partnership's Midstream Business operations, gas gathering
volumes were down 1%, and combined NGL and condensate volumes were up 5% for
the year, as compared to those in 2011.The impact of the increased NGL and
condensate volumes were offset by lower average realized prices for NGLs,
which were down 29%, as compared to NGL prices in 2011.

With regard to the Partnership's Upstream Business operations, total
production was up 25% as compared to production in 2011, primarily due to a
full year of production from the Partnership's Mid-Continent assets, which
were acquired on May 3, 2011.

Capitalization and Liquidity Update

Total debt outstanding as of December 31, 2012 was $1.15 billion, consisting
of $544.6 million of senior unsecured notes (net of an unamortized debt
discount of $5.4 million) and borrowings of $608.5 million under the
Partnership's senior secured credit facility. Total debt increased during the
fourth quarter of 2012, primarily due to borrowings to fund the Panhandle
Acquisition, the construction of the Wheeler Plant and the Partnership's
Upstream drilling program.

On December 28, 2012, the Partnership received increased commitments from its
lending group under its senior secured credit facility. Total commitments
increased from $675 million to $820 million, supported by the Partnership's
existing lenders and by the addition of Whitney Bank to the lending group.
Concurrent with the increase in commitments, the Partnership and lending group
amended the senior secured credit agreement to: (i) allow for a temporary
step-up in the Total Leverage Ratio from 4.50x to 4.75x through the third
quarter of 2013; (ii) institute a new Senior Secured Leverage Ratio of 2.85x
through the third quarter of 2013; and (iii) increase the amount of permitted
"other Investments." Total Leverage Ratio, Senior Secured Leverage Ratio, and
other Investments are each defined in the senior secured credit agreement.

The Partnership is in compliance with its financial covenants and has no
maturities under its senior secured credit facility until June
2016.Availability under the Partnership's senior secured credit facility is
subject to a borrowing base comprised of two components: the upstream
component and the midstream component.As of December 31, 2012, the
Partnership had approximately $192.5 million of availability under its senior
secured credit facility, based on its outstanding commitments, after taking
into account $608.5 million of outstanding borrowings and approximately $19.1
million of outstanding letters of credit.

The current capital budget for 2013 is approximately $208 million, which
includes $88 million allocated to the Midstream Business and $118 million
allocated to the Upstream Business (with the remainder allocated to general
corporate purposes). Approximately $70 million of the total capital budgeted
is expected to be classified as maintenance capital.

As of December 31, 2012, the Partnership had 147.3 million common units
outstanding, including unvested restricted common units issued under its
Long-Term Incentive Plan.

Hedging Update

The Partnership entered into the following commodity hedges since its last
hedging update on October 31, 2012:

Transaction Date Product / (Type) Quantity    Price ($/Bbl) Term
1/10/13          WTI Crude        40,000      $90.15        Cal. 2015
                (Swap)           Bbls/month               
2/22/13          HH Natural       200,000     $4.1575       Cal. 2014 - 2016
                Gas (Swap)       MMBtu/month              

Details of the recent hedging transactions are included in the updated
Commodity Hedging Overview presentation Eagle Rock posted today, to its
website. The latest presentation can be accessed by going to
www.eaglerockenergy.com: select Investor Relations, then select Presentations.

Fourth Quarter and Full-Year 2012 Conference Call Information

Eagle Rock will hold a conference call to discuss its fourth quarter and full
year 2012 financial and operating results on Tuesday, February 26, 2013 at
2:00 p.m. Eastern Time (1:00 p.m. Central Time).

Interested parties may listen to the earnings conference call live over the
Internet or via telephone. To listen live over the Internet, participants are
advised to log on to the Partnership's website at www.eaglerockenergy.com and
select the "Events & Presentations" sub-tab under the "Investor Relations"
tab. To participate by telephone, the call in number is 877-293-5457,
conference ID 93704871. Participants are advised to dial into the call at
least 15 minutes prior to the call. An audio replay of the conference call
will also be available for thirty days by dialing 855-859-2056, conference ID
93704871. In addition, a replay of the audio webcast will be available by
accessing the Partnership's website after the call is concluded.

About the Partnership

The Partnership is a growth-oriented master limited partnership engaged in two
businesses: a) midstream, which includes (i) gathering, compressing, treating,
processing and transporting natural gas; (ii) fractionating and transporting
natural gas liquids (NGLs); (iii) crude oil and condensate logistics and
marketing; and (iv) natural gas marketing and trading; and b) upstream, which
includes exploiting, developing, and producing hydrocarbons in oil and natural
gas properties.

Contacts:

Eagle Rock Energy Partners, L.P.

Jeff Wood, 281-408-1203
Senior Vice President and Chief Financial Officer

Adam Altsuler, 281-408-1350
Director, Corporate Finance and Investor Relations

Use of Non-GAAP Financial Measures

This news release and the accompanying schedules include the non-generally
accepted accounting principles, or non-GAAP, financial measures of Adjusted
EBITDA and Distributable Cash Flow. The accompanying non-GAAP financial
measures schedules (after the financial schedules) provide reconciliations of
these non-GAAP financial measures to their most directly comparable financial
measures calculated and presented in accordance with accounting principles
generally accepted in the United States, or GAAP. Non-GAAP financial measures
should not be considered alternatives to GAAP measures such as net income
(loss), operating income (loss), cash flows from operating activities or any
other GAAP measure of liquidity or financial performance.

Eagle Rock defines Adjusted EBITDA as net income (loss) plus or (minus) income
tax provision (benefit); interest-net, including realized interest rate risk
management instruments and other expense; depreciation, depletion and
amortization expense; impairment expense; other operating expense,
non-recurring; other non-cash operating and general and administrative
expenses, including non-cash compensation related to the Partnership's
equity-based compensation program; unrealized (gains) losses on commodity and
interest rate risk management related instruments; (gains) losses on
discontinued operations and other (income) expense.

Eagle Rock uses Adjusted EBITDA as a measure of its core profitability to
assess the financial performance of its assets. Adjusted EBITDA also is used
as a supplemental financial measure by external users of Eagle Rock's
financial statements such as investors, commercial banks and research
analysts. For example, the Partnership's lenders under its revolving credit
facility use a variant of its Adjusted EBITDA in a compliance covenant
designed to measure the viability of Eagle Rock and its ability to perform
under the terms of the revolving credit facility; Eagle Rock, therefore, uses
Adjusted EBITDA to measure its compliance with its revolving credit facility.
Eagle Rock believes that investors benefit from having access to the same
financial measures that its management uses in evaluating performance.
Adjusted EBITDA is useful in determining Eagle Rock's ability to sustain or
increase distributions. By excluding unrealized derivative gains (losses), a
non-cash, mark-to-market benefit (charge) which represents the change in fair
market value of the Partnership's executed derivative instruments and is
independent of its assets' performance or cash flow generating ability, Eagle
Rock believes Adjusted EBITDA reflects more accurately the Partnership's
ability to generate cash sufficient to pay interest costs, support its level
of indebtedness, make cash distributions to its unitholders and finance its
maintenance capital expenditures. Eagle Rock further believes that Adjusted
EBITDA also portrays more accurately the underlying performance of its
operating assets by isolating the performance of its operating assets from the
impact of an unrealized, non-cash measure designed to portray the fluctuating
inherent value of a financial asset. Similarly, by excluding the impact of
non-recurring discontinued operations, Adjusted EBITDA provides users of the
Partnership's financial statements a more accurate picture of its current
assets' cash generation ability, independently from that of assets which are
no longer a part of its operations.

Eagle Rock's Adjusted EBITDA definition may not be comparable to Adjusted
EBITDA or similarly titled measures of other entities, as other entities may
not calculate Adjusted EBITDA in the same manner as Eagle Rock. For example,
the Partnership includes in Adjusted EBITDA the actual settlement revenue
created from its commodity hedges by virtue of transactions undertaken by it
to reset commodity hedges to prices higher than those reflected in the forward
curve at the time of the transaction or to purchase puts or other similar
floors despite the fact that the Partnership excludes from Adjusted EBITDA any
charge for amortization of the cost of such commodity hedge reset transactions
or puts. Eagle Rock has reconciled Adjusted EBITDA to the GAAP financial
measure of net income (loss) at the end of this release.

Distributable Cash Flow is defined as Adjusted EBITDA minus: (i) maintenance
capital expenditures; (ii) cash interest expense; (iii) cash income taxes; and
(iv) the addition of losses or subtraction of gains relating to other
miscellaneous non-cash amounts affecting net income (loss) for the period.
Maintenance capital expenditures represent capital expenditures made to
replace partially or fully depreciated assets; to meet regulatory
requirements; to maintain the existing operating capacity of the Partnership's
gathering, processing and treating assets or to maintain the Partnership's
natural gas, NGL, crude or sulfur production.

Distributable Cash Flow is a significant performance metric used by senior
management to compare cash flows generated by the Partnership (excluding
growth capital expenditures and prior to the establishment of any retained
cash reserves by the Board of Directors) to the cash distributions expected to
be paid to unitholders. Using this metric, management can quickly compute the
coverage ratio of estimated cash flows to planned cash distributions. This
financial measure also is important to investors as an indicator of whether
the Partnership is generating cash flow at a level that can sustain or support
an increase in quarterly distribution rates. Actual distributions are set by
the Board of Directors.

The GAAP measure most directly comparable to Distributable Cash Flow is net
income (loss). Eagle Rock's Distributable Cash Flow definition may not be
comparable to Distributable Cash Flow or similarly titled measures of other
entities, as other entities may not calculate Distributable Cash Flow (and
Adjusted EBITDA, on which it builds) in the same manner as Eagle Rock. See the
example given above for Adjusted EBITDA related to amortization of costs of
commodity hedges, including costs of hedge reset transactions. Eagle Rock has
reconciled Distributable Cash Flow to the GAAP financial measure of net
income/(loss) at the end of this release.

This news release may include "forward-looking statements." All statements,
other than statements of historical facts, included in this press release that
address activities, events or developments that the Partnership expects,
believes or anticipates will or may occur in the future are forward-looking
statements and speak only as of the date on which such statement is made.
These statements are based on certain assumptions made by the Partnership
based on its experience and perception of historical trends, current
conditions, expected future developments and other factors it believes are
appropriate under the circumstances. Such statements are subject to a number
of assumptions, risks and uncertainties, many of which are beyond the control
of the Partnership. These include, but are not limited to, risks related to
volatility of commodity prices; market demand for crude oil, natural gas and
natural gas liquids; the effectiveness of the Partnership's hedging
activities; the Partnership's ability to retain key customers; the
Partnership's ability to continue to obtain new sources of crude oil and
natural gas supply; the availability of local, intrastate and interstate
transportation systems and other facilities to transport crude oil, natural
gas and natural gas liquids; competition in the oil and gas industry; the
Partnership's ability to obtain credit and access the capital markets; general
economic conditions; and the effects of government regulations and policies.
Should one or more of these risks or uncertainties occur, or should underlying
assumptions prove incorrect, the Partnership's actual results and plans could
differ materially from those implied or expressed by any forward-looking
statements. The Partnership assumes no obligation to update any
forward-looking statement as of any future date. For a detailed list of the
Partnership's risk factors, please consult the Partnership's Form 10-K, filed
with the Securities and Exchange Commission ("SEC") for the year ended
December 31, 2011 and the Partnership's Forms 10-Q filed with the SEC for
subsequent quarters, as well as any other public filings, including, when
filed, the Partnership's Form 10-K for the year ended December 31, 2012, and
press releases.


Eagle Rock Energy Partners, L.P.
Consolidated Statement of Operations
($ in thousands)
(unaudited)
                                                             
                                                                  Three
                 Three Months Ended      Twelve Months Ended     Months
                                                                  Ended
                 December 31,            December 31,            September
                                                                  30,
                 2012        2011        2012         2011       2012
REVENUE:                                                      
Natural gas,
natural gas
liquids, oil,     $284,732  $245,461  $864,884   $977,952 $184,494
condensate and
sulfur sales
Gathering,
compression,      21,265     10,654     56,831      47,770    13,604
processing and
treating fees
Unrealized
commodity         (6,864)    (33,288)   6,562       52,876    (51,305)
derivative
(losses) gains
Realized
commodity         12,904     (2,408)    51,332      (20,366)  15,802
derivative losses
Other revenue     374        270        4,350       1,676     794
Total revenue     312,411    220,689    983,959     1,059,908 163,389
                                                             
COSTS AND                                                     
EXPENSES:
Cost of natural
gas and natural   193,921    146,898    532,719     633,184   110,430
gas liquids
Operations and    38,143     26,725     119,828     93,048    27,074
maintenance
Taxes other than  4,914      6,087      19,432      19,148    4,748
income
General and       17,610     14,145     69,994      57,891    16,807
administrative
Other operating   --        --        --         (2,893)   --
income
Impairment        54,179     1,534      177,003     16,288    55,900
Depreciation,
depletion and     43,002     41,297     161,045     131,611   40,395
amortization
Total costs and   351,769    236,686    1,080,021   948,277   255,354
expenses
OPERATING(LOSS)  (39,358)   (15,997)   (96,062)    111,631   (91,965)
INCOME
OTHER INCOME                                                  
(EXPENSE):
Interest expense, (16,391)   (10,043)   (51,478)    (29,622)  (14,199)
net
Realized interest
rate derivative   (1,649)    (3,622)    (10,227)    (16,996)  (1,733)
losses
Unrealized
interest rate     1,082      3,404      5,500       5,595     615
derivative
(losses) gains
Other (expense)   6          (17)       (38)        (184)     1
income
Total other       (16,952)   (10,278)   (56,243)    (41,207)  (15,316)
income (expense)
(LOSS) INCOME
FROM CONTINUING   (56,310)   (26,275)   (152,305)   70,424    (107,281)
OPERATIONS BEFORE
INCOME TAXES
INCOME TAX        (1,147)    (622)      (1,703)     (2,432)   (386)
BENEFIT
(LOSS) INCOME
FROM CONTINUING   (55,163)   (25,653)   (150,602)   72,856    (106,895)
OPERATIONS
DISCONTINUED
OPERATIONS, NET   --        66         --         276       --
OF TAX
NET (LOSS) INCOME $(55,163) $(25,587) $(150,602) $73,132  $(106,895)



Eagle Rock Energy Partners, L.P.
Consolidated Balance Sheets
($ in thousands)
(unaudited)
                                                 
                                     December 31, December 31,
                                      2012         2011
ASSETS                                            
CURRENT ASSETS:                                   
Cash and cash equivalents             $25        $877
Accounts receivable                   138,732     97,832
Risk management assets                33,340      13,080
Prepayments and other current assets  9,867       13,739
Total current assets                  181,964     125,528
PROPERTY, PLANT AND EQUIPMENT- Net   1,968,206   1,763,674
INTANGIBLE ASSETS- Net               111,515     109,702
DEFERRED TAX ASSET                    1,656       1,432
RISK MANAGEMENT ASSETS                7,953       24,290
OTHER ASSETS                          22,922      21,062
TOTAL ASSETS                          $2,294,216 $2,045,688
                                                 
LIABILITIES AND MEMBERS' EQUITY                   
CURRENT LIABILITIES:                              
Accounts payable                      $160,473   $145,985
Accrued liabilities                   19,764      12,734
Taxes payable                         46          487
Risk management liabilities           1,231       11,649
Total current liabilities             181,514     170,855
LONG-TERM DEBT                        1,153,103   779,453
ASSET RETIREMENT OBLIGATIONS          44,814      33,303
DEFERRED TAX LIABILITY                43,000      45,216
RISK MANAGEMENT LIABILITIES           1,700       6,893
OTHER LONG TERM LIABILITIES           1,711       2,621
                                                 
MEMBERS' EQUITY                       868,374     1,007,347
TOTAL LIABILITIES AND MEMBERS' EQUITY $2,294,216 $2,045,688



Eagle Rock Energy Partners, L.P.
Segment Summary
Operating Income
($ in thousands)
(unaudited)
                                                              
                                                                   Three
                 Three Months Ended       Year Ended              Months
                                                                   Ended
                 December 31,             December 31,            September
                                                                   30,
                 2012         2011        2012        2011        2012
Midstream                                                      
Revenues:                                                      
Natural gas,
natural gas       $248,153   $198,582  $716,508  $823,521  $147,099
liquids, oil and
condensate sales
Intercompany
sales - natural   (2,325)     (4,084)    (10,134)   (5,487)    (2,846)
gas
Gathering and     21,265      10,654     56,831     47,770     13,604
treating services
Other revenue     --         --        2,864      --        --
Total revenue     267,093     205,152    766,069    865,804    157,857
Cost of natural
gas, natural gas  194,004     146,898    532,802    633,184    110,430
liquids, oil and
condensate (1)
Intersegment
elimination -
Cost of natural   11,705      11,565     44,317     41,382     8,598
gas, oil and
condensate
Operating costs                                                
and expenses:
Operations and    29,470      16,458     82,648     64,539     17,647
maintenance
Impairment        29,735      --        131,714    4,560      35,840
Depreciation,
depletion and     20,760      16,413     70,495     64,663     16,488
amortization
Total operating
costs and         79,965      32,871     284,857    133,762    69,975
expenses
Operating income
from continuing   (18,581)    13,818     (95,907)   57,476     (31,146)
operations
Discontinued      --         66         --        (128)      --
Operations (2)
Operating income  $(18,581)  $13,884   $(95,907) $57,348   $(31,146)
(loss)
                                                              
Upstream                                                       
Revenue                                                        
Oil and           $14,332    $17,775   $58,420   $51,574   $14,376
condensate sales
Intersegment
sales -           8,778       12,741     43,004     42,716     11,431
condensate
Natural gas sales 9,631       9,854      32,105     42,551     8,324
Intersegment
sales - natural   2,530       4,084      10,339     5,487      2,846
gas
Natural gas       9,771       14,278     43,831     42,553     10,979
liquids sales
Sulfur sales      2,845       4,972      14,020     17,753     3,716
Other             374         270        1,486      1,676      794
Total revenue     48,261      63,974     203,205    204,310    52,466
Operating costs                                                
and expenses:
Operations and
maintenance (2)   13,709      16,354     56,734     47,723     14,175
(3)
Impairment        24,444      1,534      45,289     11,728     20,060
Depreciation,
depletion and     21,707      24,485     88,777     65,531     23,484
amortization
Total operating
costs and         59,860      42,373     190,800    124,982    57,719
expenses
Operating income  $(11,599)  $21,601   $12,405   $79,328   $(5,253)
                                                              
Corporate and                                                  
Other
Revenues:                                                      
Unrealized
commodity         $(6,864)   $(33,288) $6,562    $52,876   $(51,305)
derivative
(losses) gains
Realized
commodity         12,904      (2,408)    51,332     (20,366)   15,802
derivative losses
Intersegment
elimination -
Sales of natural  (8,983)     (12,741)   (43,209)   (42,716)   (11,431)
gas, oil and
condensate
Total revenue     (2,943)     (48,437)   14,685     (10,206)   (46,934)
Costs and                                                      
expenses:
Intersegment
elimination -
Cost of natural   (11,788)    (11,565)   (44,400)   (41,382)   (8,598)
gas, oil and
condensate
General and       17,610      14,145     69,994     57,891     16,807
administrative
Intersegment
elimination -     (122)       --        (122)      (66)       --
Operations and
maintenance
Other operating   --         --        --        (2,893)    --
Income
Depreciation,
depletion and     535         399        1,773      1,417      423
amortization
Operating (loss)  $(9,178)   $(51,416) $(12,560) $(25,173) $(55,566)
income
                                                              
(1) Includes natural gas sales of $83 from the Upstream Segment to the
Panhandle Segment for the year ended December 31, 2012.
(2) Includes natural gas sales of $66 from the East Texas and Other Midstream
Texas Segment to the Upstream Segment for the year ended December 31, 2011.
(3) Includes natural gas sales of $122 from the Marketing and Trading Segment
to the Upstream Segment for the year ended December 31, 2012.



Eagle Rock Energy Partners, L.P.
Midstream Segment
Operating Income
($ in thousands)
(unaudited)
                                                              
                                                                   Three
                 Three Months Ended      Year Ended               Months
                                                                   Ended
                 December 31,            December 31,             September
                                                                   30,
                 2012         2011       2012          2011       2012
Texas Panhandle                                                
Revenues:                                                      
Natural gas,
natural gas       $145,065   $74,104  $334,295    $378,917 $60,213
liquids, oil and
condensate sales
Intersegment
sales - natural   33,245      33,990    105,759      60,237    28,025
gas
Gathering,
compression,      12,233      4,169     25,743       17,074    4,708
processing and
treating services
Other revenue     --         --       2,864        --       --
Total revenue     190,543     112,263   468,661      456,228   92,946
Cost of natural
gas, natural gas  143,172     80,263    332,875      327,775   67,098
liquids, oil and
condensate (1)
Operating costs                                                
and expenses:
Operations and    23,542      10,315    60,884       41,749    12,705
maintenance
Impairment        --         --       --          4,560     --
Depreciation,
depletion and     14,897      9,652     44,451       37,034    10,164
amortization
Total operating
costs and         38,439      19,967    105,335      83,343    22,869
expenses
Operating income  $8,932     $12,033  $30,451     $45,110  $2,979
                                                              
East Texas and                                                 
Other Midstream
Revenues:                                                      
Natural gas,
natural gas       $27,114    $49,888  $125,512    $243,673 $26,130
liquids, oil and
condensate sales
Intercompany      12,628      12,324    39,099       16,654    10,020
Sales
Gathering,
compression,      8,961       6,477     31,017       30,688    8,896
processing and
treating services
Total revenue     48,703      68,689    195,628      291,015   45,046
Cost of natural
gas and natural   36,290      55,440    147,493      231,642   33,145
gas liquids
Operating costs                                                
and expenses:
Operations and    5,929       6,145     21,762       22,790    4,940
maintenance
Impairment        29,735      --       131,714      --       35,840
Depreciation,
depletion and     5,737       6,761     25,771       27,629    6,232
amortization
Total operating
costs and         41,401      12,906    179,247      50,419    47,012
expenses
Operating income
(loss) from       (28,988)    343       (131,112)    8,954     (35,111)
continuing
operations
Discontinued      --         66        --          (128)     --
Operations (2)
Operating income  $(28,988)  $409     $(131,112)  $8,826   $(35,111)
(loss)
                                                              
Marketing and                                                  
Trading
Revenues:                                                      
Natural gas,
natural gas       $75,974    $74,590  $256,701    $200,931 $60,756
liquids, oil and
condensate sales
Intercompany      (48,198)    (50,398)  (154,992)    (82,378)  (40,891)
Sales
Gathering,
compression,      71          8         71           8         --
processing and
treating services
Total revenue     27,847      24,200    101,780      118,561   19,865
Cost of natural
gas and natural   14,542      11,195    52,434       73,767    10,187
gas liquids
Intersegment Cost 11,705      11,565    44,317       41,382    8,598
of Sales
Operating costs                                            
and expenses:
Operations and    (1)         (2)       2            --       2
maintenance
Depreciation,
depletion and     126         --       273          --       92
amortization
Total operating
costs and         125         (2)       275          --       94
expenses
Operating income  $1,475     $1,442   $4,754      $3,412   $986
                                                              
(1) Includes natural gas sales of $83 from the Upstream Segment to the
Panhandle Segment for the year ended December 31, 2012.
(2) Includes natural gas sales of $66 from the East Texas and Other Midstream
Texas Segment to the Upstream Segment for the year ended December 31, 2011.



Eagle Rock Energy Partners, L.P.
Midstream Operations Information
(unaudited)
                                                            
                                                                 Three
                       Three Months Ended Year Ended            Months
                                                                 Ended
                       December 31,       December 31,          September 30,
                       2012      2011     2012       2011       2012
Gas gathering volumes -                                      
(Average Mcf/d)
Texas Panhandle         372,124  158,419 212,617   155,122   183,415
East Texas and Other    217,496  286,920 255,752   319,892   248,094
Midstream
Total                   589,620  445,339 468,369   475,014   431,509
                                                            
NGLs - (Net equity                                           
Bbls)
Texas Panhandle         415,103  271,252 1,270,601 880,348   228,696
East Texas and Other    80,315   105,793 338,636   451,048   81,997
Midstream
Total                   495,418  377,045 1,609,237 1,331,396 310,693
                                                            
Condensate - (Net                                            
equity Bbls)
Texas Panhandle         302,168  238,172 801,828   962,982   164,246
East Texas and Other    9,613    10,816  38,350    46,242    7,010
Midstream
Total                   311,781  248,988 840,178   1,009,224 171,256
                                                            
Natural gas short
position - (Average                                          
MMbtu/d)
Texas Panhandle         16,114   (5,932) 547       (5,622)   (990)
East Texas and Other    1,676    1,765   1,530     1,913     392
Midstream
Total                   17,790   (4,167) 2,077     (3,709)   (598)
                                                            
Average realized NGL                                         
price - per Bbl
Texas Panhandle         $ 31.39   $ 46.25  $ 36.00    $ 52.67    $ 36.23
East Texas and Other    $ 32.04   $ 46.03  $ 37.83    $ 49.72    $ 32.24
Midstream
Weighted Average        $ 31.51  $ 46.16  $ 36.56    $ 51.42    $ 34.89
                                                            
Average realized
condensate price - per                                       
Bbl
Texas Panhandle         $ 74.32   $ 75.04  $ 82.64    $ 80.41    $ 81.08
East Texas and Other    $ 87.20   $ 98.08  $ 96.91    $ 95.08    $ 91.57
Midstream
Total                   $ 75.20   $ 76.52  $ 83.78    $ 81.56    $ 81.82
                                                            
Average realized
natural gas price - per                                      
MMbtu
Texas Panhandle         $ 3.23    $ 3.24   $ 2.63     $ 3.74     $ 2.64
East Texas and Other    $ 3.37    $ 3.42   $ 2.85     $ 4.15     $ 2.85
Midstream
Total                   $ 3.26    $ 3.31   $ 2.79     $ 3.91     $ 2.71



Eagle Rock Energy Partners, L.P.
Upstream Operations Information
(unaudited)
                                                               
                                                                    Three
                     Three Months Ended    Year Ended              Months
                                                                    Ended
                     December 31,          December 31,            September
                                                                    30,
                     2012       2011       2012        2011        2012
Upstream                                                        
Production:                                                     
Oil and condensate    283,326    345,428    1,184,200   1,117,778   310,349
(Bbl)
Gas (Mcf)             3,828,320  4,363,298  16,442,579  12,636,473  4,177,156
NGLs (Bbl)            272,476    272,136    1,120,522   805,359     301,644
Total Mcfe            7,163,132  8,068,682  30,270,911  24,175,295  7,849,114
                                                               
Sulfur (long ton)     22,892     26,862     102,002     98,372      28,414
                                                               
Realized prices,
excluding                                                       
derivatives:
Oil and condensate    $ 81.57    $ 88.34    $ 85.65     $ 84.36     $ 83.16
(per Bbl)
Gas (Mcf)             $ 3.18     $ 3.19     $ 2.58      $ 3.69      $ 2.67
NGLs (Bbl)            $ 35.86    $ 52.47    $ 39.12     $ 54.58     $ 36.40
Sulfur (long ton)     $ 124.30   $ 185.08   $ 137.46    $ 180.46    $ 130.77
                                                               
Operating statistics:                                           
Operating costs per
Mcfe (incl production $1.72    $1.86    $1.69     $1.88     $1.60
taxes) (1)
Operating costs per
Mcfe (excl production $1.22    $1.25    $1.19     $1.24     $1.11
taxes) (1)
Operating income per  $1.02    $3.39    $1.03     $3.52     $(0.67)
Mcfe
                                                               
Drilling program                                                
(gross wells):
Development wells     8          10         33          42          6
Completions           8          10         33          42          6
Workovers             2          1          21          14          10
Recompletions         4          1          11          9           4
                                                               
                                                               
(1) Excludes post-production costs of $1,410 and $5,478 for the three months
and year ended December31, 2012, respectively, $1,359 and $2,390 for the
three months and year ended December31, 2011, respectively, and $1,601 for
the three months ended September30, 2012.

Non-GAAP Financial Measures

The following tables present a reconciliation of the non-GAAP financial
measures of Adjusted EBITDA and Distributable Cash Flow to the GAAP financial
measure of net income for each of the periods indicated (in thousands).



Eagle Rock Energy Partners, L.P.
GAAP to Non-GAAP Reconciliations
($ in thousands)
(unaudited)
                                                                    
                        Three Months Ended      Year Ended              Three Months
                                                                         Ended
                        December 31,            December 31,            September
                                                                         30,
                        2012        2011        2012         2011       2012
Net (loss) income to                                                 
Adjusted EBITDA
Net (loss) income, as    $(55,163) $(25,587) $(150,602) $73,132  $(106,895)
reported
Depreciation, depletion  43,002     41,297     161,045     131,611   40,395
and amortization
Impairment               54,179     1,534      177,003     16,288    55,900
Risk management interest
related instruments -    (1,082)    (3,404)    (5,500)     (5,595)   (615)
unrealized
Risk management
commodity related
instruments -
unrealized, including    6,864      33,288     (6,562)     (52,876)  51,305
amortization of
commodity derivative
costs
Other Operating Income   --        --        --         (2,893)   --
Non-cash mark-to-market
of Upstream product      (21)       197        317         74        229
imbalances
Unrealized gains from
other derivative         (235)      (234)      192         (772)     157
activity
Restricted units
non-cash amortization    1,790      1,704      9,882       5,145     3,080
expense
Income tax (benefit)     (1,147)    (622)      (1,703)     (2,432)   (386)
provision
Interest - net including
realized risk management 18,040     13,665     61,705      46,618    15,932
instruments and other
expense
Other income             (6)        17         38          184       (1)
Discontinued operations  --        (66)       --         (276)     --
Adjusted EBITDA          $66,221   $61,789   $245,815   $208,208 $59,101
                                                                    
Net (loss) income to                                                 
Distributable Cash Flow
Net (loss) income, as    $(55,163) $(25,587) $(150,602) $73,132  $(106,895)
reported
Depreciation, depletion  43,002     41,297     161,045     131,611   40,395
and amortization expense
Impairment               54,179     1,534      177,003     16,288    55,900
Risk management interest
related                  (1,082)    (3,404)    (5,500)     (5,595)   (615)
instruments-unrealized
Risk management
commodity related
instruments -
unrealized, including    6,629      33,054     (6,370)     (53,648)  51,462
amortization of
commodity derivative
costs
Capital
expenditures-maintenance (18,593)   (12,426)   (54,417)    (40,855)  (15,982)
related
Non-cash mark-to-market
of Upstream product      (21)       197        317         74        229
imbalances
Restricted units
non-cash amortization    1,790      1,704      9,882       5,145     3,080
expense
Other Operating Income   --        --        --         (2,893)   --
Income tax (benefit)     (1,147)    (622)      (1,703)     (2,432)   (386)
provision
Other income             (6)        --        38          --       --
Cash income taxes        (75)       (489)      (737)       (1,291)   (185)
Discontinued operations  --        (66)       --         (276)     --
Distributable Cash Flow  $29,513   $35,192   $128,956   $119,260 $27,003

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