Legacy Reserves LP Announces First Quarter 2013 Results

Legacy Reserves LP Announces First Quarter 2013 Results

MIDLAND, Texas, May 6, 2013 (GLOBE NEWSWIRE) -- Legacy Reserves LP ("Legacy")
(Nasdaq: LGCY) today announced first quarter results for 2013. Financial
results contained herein are preliminary and subject to the final, unaudited
financial statements included in Legacy's Form 10-Q to be filed on or about
May 8, 2013.

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


                             Three Months Ended
                             March 31,       December 31,      March 31,
                             2013            2012              2012
                             (dollars in millions)
Production (Boe/d)            19,711         15,729           14,440
Revenue                       $108.9          $90.5             $92.6
Adjusted EBITDA (*)           $64.4           $51.6             $55.6
Distributable Cash Flow (*)   $34.9           $24.7             $36.9
* 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.

Q1 2013 highlights include:

  *Our production increased 25% to a record 19,711 Boe/d primarily due to a
    full quarter of production from our $502.6 million Permian Basin
    acquisition from Concho Resources Inc. ("2012 COG Acquisition") that
    closed on December 20, 2012.This increased production was partially
    offset by lower than expected natural gas and NGL production due to
    continuing third-party gathering system and processing plant issues that
    impacted our Permian Basin and Texas Panhandle production.
    
  *We generated $108.9 million of revenue and a record $64.4 million of
    EBITDA, representing 20% and 25% respective increases over results in the
    prior quarter.
    
  *After deducting $17.0 million of maintenance capital expenditures, we
    generated $34.9 million of Distributable Cash Flow or $0.61 per unit,
    covering our first quarter distribution by 1.06 times.
    
  *We announced our tenth consecutive increase in our quarterly distribution,
    starting the year at $0.575 per unit which represents 3.6% year-over-year
    growth.

Cary D. Brown, Chairman, President and Chief Executive Officer of Legacy
Reserves GP, LLC, the general partner of Legacy, commented:"Legacy started
2013 with some of the best quarterly results in our history despite record
crude oil differentials and natural gas infrastructure issues. Our
integration of the Concho assets is going very smoothly, as first quarter
acquired production of approximately 5,250 Boe/d met our initial Q1 production
estimate of 5,238 Boe/d despite unforeseen infrastructure issues that
curtailed some of our production.These outstanding initial results are the
product of a lot of hard work from our employees. 

"Company-wide, we generated record quarterly production of over 19,700 Boe/d
and Adjusted EBITDA of $64.4 million, which were both up 25% compared to our
fourth quarter 2012 results.We achieved these results despite third-party
gathering system and processing plant issues that impacted our production in
both the Permian Basin and Texas Panhandle, along with record crude oil
differentials in the Permian Basin and high differentials in the Rockies.Due
to several refineries returning to production as well as additional takeaway
capacity coming online, the Midland-to-Cushing differential has fallen
significantly over the past several weeks.We expect the Midland-to-Cushing
differential to be at reasonable levels for most of the remainder of 2013, and
we expect our Rockies differentials to moderate as well. 

"While our primary focus during the first quarter was on the integration of
the largest acquisition in our history, we continued to make several small
bolt-on acquisitions and evaluated a broad variety of larger opportunities.We
are pleased with our current pipeline of potential acquisitions in all of our
core areas.Based on our strong operation of existing wells and new capital
work, we generated $34.9 million of Distributable Cash Flow or $0.61 per unit
and increased our distribution for the tenth consecutive quarter to $0.575 per
unit, resulting in 1.06 times coverage."

Dan Westcott, Executive Vice President and Chief Financial Officer, commented,
"We are very pleased with our integration efforts of the Concho assets and our
strong financial and operational results during the first quarter.On March
26, our 20-member bank group reaffirmed our borrowing base at $800 million.As
of May 6, we had $475 million of debt outstanding under our revolving credit
facility, giving us approximately $325 million of current availability.With
plenty of availability under our credit facility and favorable capital markets
conditions, we are confident in our ability to finance our 2013 growth
initiatives."

Financial and Operating Results – First Quarter 2013 Compared to Fourth
Quarter 2012

  *Production increased by 25% to a record 19,711 Boe/d from 15,729 Boe/d in
    the fourth quarter of 2012 primarily due to a full quarter of production
    from the 2012 COG Acquisition.In the first quarter, we generated
    approximately 5,250 Boe/d of production from the 2012 COG Acquisition
    compared to approximately 640 Boe/d in the fourth quarter, in which we
    only realized twelve days of production.This increased production was
    partially offset by lower than expected natural gas and NGL production due
    to continuing third-party gathering system and processing plant issues
    that impacted our Permian Basin and Texas Panhandle production.
    
  *Average realized prices, excluding commodity derivatives settlements, were
    $61.37 per Boe in the first quarter, down 2% from $62.51 per Boe in the
    fourth quarter.Average realized oil prices increased 1% to $81.11 per Bbl
    in the first quarter from $80.69 per Bbl in the fourth quarter.This
    increase was attributable to an estimated 7% increase in average West
    Texas Intermediate ("WTI") crude oil prices that was almost entirely
    offset by a significant increase (approximately $5.90 per barrel) in our
    company-wide oil differential, as our Permian Basin differentials reached
    record levels and our Rockies differentials increased significantly.Most
    notably, the Midland-to-Cushing/WTI differential increased to
    approximately $7.70 per barrel in the first quarter from $3.71 per barrel
    in the fourth quarter.Over the past several weeks, the Midland-to-Cushing
    differential has fallen significantly, as several refineries have returned
    to production and additional takeaway capacity has come online.Average
    realized natural gas prices decreased 9% to $4.28 per Mcf in the first
    quarter from $4.71 per Mcf in the fourth quarter primarily due to a
    smaller, positive differential to Henry Hub prices in the first quarter
    that primarily reflects the curtailment of a portion of our NGL-rich
    natural gas production in the Permian Basin.Since NGLs are embedded in
    the value of our Permian Basin natural gas, the inclusion of a lower
    amount of such NGLs had a negative effect on our average realized natural
    gas price.Average realized prices on our separately reported NGLs
    increased 10% to $1.16 per gallon in the first quarter from $1.05 per
    gallon in the fourth quarter.These NGL volumes, almost all of which are
    from our Mid-Continent assets, are heavier on average than NGLs in our
    Permian Basin natural gas and have benefitted from the much more favorable
    pricing associated with heavier NGLs.
    
  *Production expenses, excluding taxes, per Boe decreased 7% to $18.26 per
    Boe in the first quarter from $19.59 per Boe in the fourth quarter
    primarily attributable to the lower cost per Boe properties added in the
    2012 COG Acquisition and lower workover and various other
    expenses.Production expenses, excluding taxes, increased to $32.4 million
    in the first quarter from $28.3 million in the fourth quarter.
    
  *Legacy's general and administrative expenses excluding unit-based/LTIP
    compensation expense totaled $5.3 million during the first quarter
    compared to $6.0 million in the fourth quarter. This decrease was mostly
    attributable to acquisition-related expenses in the fourth quarter that
    were not incurred in the first quarter.Furthermore, while we have hired
    all of the necessary field personnel to manage the 2012 COG assets, we are
    still in the process of hiring additional personnel to help us more
    efficiently manage our larger asset base.Legacy's total general and
    administrative expenses were $6.3 million during the first quarter
    compared to $5.9 million during the fourth quarter.LTIP expense increased
    to a $1.0 million expense in the first quarter compared to a $0.1 million
    benefit in the fourth quarter primarily due to fluctuations in our unit
    price.
    
  *Cash settlements received on our commodity derivatives during the first
    quarter were $2.6 million compared to $3.9 million received during the
    fourth quarter.The increase in WTI crude oil prices between December and
    March resulted in a positive one-month lag effect on our crude oil hedges,
    with our cash settlements received being approximately $1.1 million higher
    during the first quarter.In contrast, this lag effect caused our cash
    settlements received on our oil hedges to be approximately $1.4 million
    lower during the fourth quarter due to falling oil prices during that
    period.
    
  *Total development capital expenditures were flat at $19.7 million in the
    first quarter compared to $19.7 million in the fourth quarter.Our
    development capital expenditures in the first quarter were primarily
    focused on our Wolfberry drilling program, where we continue to see
    positive results.Other activity included attractive non-operated drilling
    projects in the Permian Basin (approximately 29% of total development
    capital expenditures for the quarter) and various other development
    projects mostly in the Permian Basin but in our other core areas as well.

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 May 6, 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 April 2013
through December 2017:

Crude Oil (WTI):

                                 Average       Price
Calendar Year       Volumes (Bbls) Price per Bbl Range per Bbl
April-December 2013 1,610,855     $91.00        $80.10 - $106.23
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:

                                 Average Short Average Long Average Short
Calendar Year       Volumes (Bbls) Put Price     Put Price    Call Price
April-December 2013 908,670       $66.13        $91.51       $107.36
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:

                                 Average       Price
Time Period         Volumes (Bbls) Price per Bbl Range per Bbl
April-December 2013 2,200,000     ($1.47)       $(1.25) - $(1.75)

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

                                  Average         Price
Calendar Year       Volumes (MMBtu) Price per MMBtu Range per MMBtu
April-December 2013 7,657,903      $4.28           $3.23 - $6.89
2014                8,271,254      $4.32           $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 or natural gas index price.

Quarterly Report on Form 10-Q

Our consolidated financial statements and related footnotes will be available
in our Form 10-Q for the quarter ended March 31, 2013, which will be filed on
or about May 8, 2013.

Conference Call

As announced on April 22, 2013, Legacy will host an investor conference call
to discuss Legacy's results on Tuesday, May 7, 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 Tuesday, May 14,
2013, by dialing 855-859-2056 or 404-537-3406 and entering replay code
43840115.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.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 a master 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.

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
                                         March 31,   December 31,  March 31,
                                         2013        2012          2012
                                         (In thousands, except per unit data)
Revenues:                                                         
Oil sales                                 $90,357   $74,157     $76,137
Natural gas liquids (NGL) sales           3,342      3,850        3,726
Natural gas sales                         15,180     12,448       12,784
                                                                 
Total revenues                            108,879    90,455       92,647
                                                                 
Expenses:                                                         
Oil and natural gas production            35,351     30,929       24,888
Production and other taxes                6,927      5,737        5,217
General and administrative                6,281      5,922        6,450
Depletion, depreciation, amortization and 41,652     29,102       22,839
accretion
Impairment of long-lived assets           1,743      14,510       1,301
(Gain) loss on disposal of assets         (219)      568          (3,011)
                                                                 
Total expenses                            91,735     86,768       57,684
                                                                 
Operating income                          17,144     3,687        34,963
                                                                 
Other income (expense):                                           
Interest income                           8          5            4
Interest expense                          (10,692)   (6,003)      (4,336)
Equity in income of equity method         44         23           26
investees
Realized and unrealized net gains                                 
(losses) on
commodity derivatives                     (13,005)   4,409        (23,089)
Other                                     7          (31)         32
Income (loss) before income taxes         (6,494)    2,090        7,600
                                                                 
Income tax expense                        (211)      (218)        (211)
                                                                 
Net income (loss)                         $(6,705)  $1,872      $7,389
                                                                 
Income (loss) per unit -                                          
basic and diluted                         $(0.12)   $0.04       $0.15
                                                                 
Weighted average number of units used in                         
computing net income (loss) per unit -                            
Basic                                     57,077     52,416       47,802
                                                                 
Diluted                                   57,077     52,454       47,848


LEGACY RESERVES LP
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(dollars in thousands)
                                                                
                                                    March 31,    December 31,
                                                    2013         2012
ASSETS                                                            
Current assets:                                                  
Cash and cash equivalents                            $2,341     $3,509
Accounts receivable, net:                                        
Oil and natural gas                                  47,611      37,547
Joint interest owners                                32,197      27,851
Other                                                411         551
Fair value of derivatives                            4,030       15,158
Prepaid expenses and other current assets            3,158       3,294
                                                                
Total current assets                                 89,748      87,910
                                                                
Oil and natural gas properties, at cost:                         
Proved oil and natural gas properties using the                  
successful efforts
method of accounting                                 2,079,971   2,078,961
Unproved properties                                  69,624      65,968
Accumulated depletion, depreciation, amortization    (601,957)   (573,003)
and impairment
                                                                
                                                    1,547,638   1,571,926
Other property and equipment, net of accumulated                 
depreciation and
amortization of $4,944 and $4,618, respectively      2,607       2,646
Operating rights, net of amortization of $3,654 and  3,362       3,486
$3,531, respectively
Fair value of derivatives                            18,036      15,834
Other assets, net of amortization of $8,426 and      19,189      7,804
$7,909, respectively
Investments in equity method investees               4,334       393
                                                                
Total assets                                         $1,684,914 $1,689,999
                                                                
LIABILITIES AND UNITHOLDERS' EQUITY                               
Current liabilities:                                             
Accounts payable                                     $10,446    $1,822
Accrued oil and natural gas liabilities              60,523      50,162
Fair value of derivatives                            17,410      10,801
Asset retirement obligation                          29,646      29,501
Other                                                14,513      11,437
                                                                
Total current liabilities                            132,538     103,723
Long-term debt                                       778,087     775,838
Asset retirement obligation                          132,574     132,682
Fair value of derivatives                            4,249       5,590
Other long-term liabilities                          1,833       1,886
                                                                
Total liabilities                                    1,049,281   1,019,719
Commitments and contingencies                                    
Unitholders' equity:                                             
Limited partners' equity - 57,193,842 and 57,038,942             
units issued and
outstanding at March 31, 2013 and December 31, 2012, 635,549     670,183
respectively
General partner's equity (approximately 0.03%)       84          97
                                                                
Total unitholders' equity                            635,633     670,280
                                                                
Total liabilities and unitholders' equity            $1,684,914 $1,689,999


LEGACY RESERVES LP
SELECTED FINANCIAL AND OPERATING DATA
                                                                 
                                         Three Months Ended
                                         March 31,   December 31,  March 31,
                                         2013        2012          2012
                                         (In thousands, except per unit data)
Revenues:                                                         
Oil sales                                 $90,357   $74,157     $76,137
Natural gas liquids (NGL) sales           3,342      3,850        3,726
Natural gas sales                         15,180     12,448       12,784
                                                                 
Total revenues                            $108,879  $90,455     $92,647
                                                                 
Expenses:                                                         
Oil and natural gas production            $32,385   $28,343     $22,983
Ad valorem taxes                          2,966      2,586        1,905
                                                                 
Total oil and natural gas production      $35,351   $30,929     $24,888
including ad valorem taxes
                                                                 
Production and other taxes                $6,927    $5,737      $5,217
                                                                 
General and administrative excluding LTIP $5,295    $6,046      $4,893
LTIP expense (benefit)                    986        (124)        1,557
                                                                 
Total general and administrative          $6,281    $5,922      $6,450
                                                                 
Depletion, depreciation, amortization and $41,652   $29,102     $22,839
accretion
                                                                 
Realized commodity derivative                                     
settlements:
Realized gains (losses) on oil            $229      $738        $(6,203)
derivatives
Realized gains on natural gas derivatives $2,406    $3,146      $4,150
                                                                 
Production:                                                       
Oil (MBbls)                               1,114      919          788
Natural gas liquids (MGal)                2,893      3,670        3,490
Natural gas (MMcf)                        3,546      2,643        2,658
Total (MBoe)                              1,774      1,447        1,314
Average daily production (Boe/d)          19,711     15,729       14,440
                                                                 
Average sales price per unit (excluding                           
commodity derivatives):
Oil price (per Bbl)                       $81.11    $80.69      $96.62
Natural gas liquids price (per Gal)       $1.16     $1.05       $1.07
Natural gas price (per Mcf)               $4.28     $4.71       $4.81
Combined (per Boe)                        $61.37    $62.51      $70.51
                                                                 
Average sales price per unit (including
realized commodity derivative                                     
gains/losses):
Oil price (per Bbl)                       $81.32    $81.50      $88.75
Natural gas liquids price (per Gal)       $1.16     $1.05       $1.07
Natural gas price (per Mcf)               $4.96     $5.90       $6.37
Combined (per Boe)                        $62.86    $65.20      $68.95
                                                                 
NYMEX oil index prices per Bbl:                                   
Beginning of Period                       $91.82    $92.19      $98.83
End of Period                             $97.23    $91.82      $103.02
                                                                 
NYMEX gas index prices per Mcf:                                   
Beginning of Period                       $3.35     $3.32       $2.99
End of Period                             $4.02     $3.35       $2.13
                                                                 
Average unit costs per Boe:                                       
Oil and natural gas production            $18.26    $19.59      $17.49
Ad valorem taxes                          $1.67     $1.79       $1.45
Production and other taxes                $3.90     $3.96       $3.97
General and administrative excluding LTIP $2.98     $4.18       $3.72
Total general and administrative          $3.54     $4.09       $4.91
Depletion, depreciation, amortization and $23.48    $20.11      $17.38
accretion

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 equity method investees;
  *Unit-based compensation expense (benefit) related to LTIP unit awards
    accounted for under the equity or liability methods;
  *Minimum payments earned in excess of overriding royalty interest; 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
  *Maintenance capital expenditures.

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


                                   Three MonthsEnded
                                   March 31,     December 31,    March 31,
                                   2013          2012            2012
                                   (dollars in thousands)
Net income (loss)                   $(6,705)    $1,872        $7,389
Plus:                                                           
Interest expense                   10,692       6,003          4,336
Income tax expense                  211          218            211
Depletion, depreciation,            41,652       29,102         22,839
amortization and accretion
Impairment of long-lived assets     1,743        14,510         1,301
(Gain) loss on sale of assets       (219)        568            (3,011)
Equity in income of equity method   (44)         (23)           (26)
investees
Unit-based compensation expense     986          (124)          1,557
(benefit)
Minimum payments earned in excess   400          --            --
of overriding royalty interest ^(1)
Unrealized (gains) losses on oil    15,640       (525)          21,036
and natural gas derivatives
Adjusted EBITDA                     $64,356     $51,601       $55,632
                                                               
Less:                                                           
Cash interest expense               11,578       6,991          4,254
Cash settlements of LTIP unit       858          184            2,268
awards
Maintenance capital expenditures    17,000                      
^(2)
Total development capital                        19,693         12,200
expenditures
Distributable Cash Flow             $34,920     $24,733       $36,910
(1) Minimum payments earned in excess of overriding royalties earned under a
contractual agreement expiring December 31, 2019.
(2) Beginning in the first quarter of 2013, Legacy began deducting only
maintenance capital expenditures instead of
total development capital expenditures in the computation and presentation of
Distributable Cash Flow, which results
in the measure of Distributable Cash Flow not being comparable to those during
any prior periods.

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

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