Legacy Reserves LP Announces Fourth Quarter and Year End 2008 Results

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): March 4, 2009

Legacy Reserves LP

(Exact name of registrant as specified in its charter)

Delaware	1-33249	16-1751069
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

303 W. WALL ST, SUITE 1400 MIDLAND, TX	79701
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (432) 689-5200

Not Applicable

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.

On March 4, 2009 the Registrant issued a press release, a copy of which is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

The information in this report including the Exhibit attached hereto, shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act") nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, or the Exchange Act, except as specifically identified therein as being incorporated by reference.

Item 9.01. Financial Statements and Exhibits.

Exhibit 99.1. Press release dated March 4, 2009

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		Legacy Reserves LP By: Legacy Reserves GP, LLC, its general partner

March 4, 2009		/s/ STEVEN H. PRUETT Steven H. Pruett President, Chief Financial Officer and Secretary

	Exhibit Index
	99.1	Press release dated March 4, 2009

---------------------------------------------------------------------- Three Months Ended Twelve Months Ended ------------------ ------------------- Dec. 31, Sept. 30, December 31, ------------------ ------------------ 2008 2008 2008 2007 --------------------------------------------------------------------- (dollars in millions) Production (Boe/d) 8,553 7,587 7,582 4,970 Revenue $34.4 $65.6 $215.4 $112.2 Expenses $124.6 $35.8 $217.0 $75.6 Operating income (loss) ($90.2) $29.8 ($1.6) $36.7 Unrealized gain (loss) on commodity swaps $230.4 $222.1 $217.2 ($85.4) Net income (loss) $127.1 $228.0 $158.2 ($55.7) Adjusted EBITDA (*) $17.7 $23.4 $99.9 $70.2 Distributable Cash Flow (*) $0.3 $10.0 $57.5 $48.5 --------------------------------------------------------------------- * Non-GAAP financial measure, see Adjusted EBITDA table at the end of this press release

* Adjusted EBITDA decreased 24% to $17.7 million from $23.4 million due to lower commodity prices in the period and the timing of commodity swap settlements. * Production increased 13% to 8,553 Boe per day from 7,587 Boe per day due to a combination of acquisitions and development drilling. * Net income of $127.1 million, or $4.09 per unit, was supported by $230.4 million of unrealized gains on our commodity derivatives offset by $76.5 million of impairment and DD&A of $30.1 million related to the dramatic reduction in oil and natural gas prices during the fourth quarter. Net income was $228.0 million in the third quarter which included $222.1 million of unrealized gains on our commodity derivatives. * Cash settlements received on our commodity swaps were $1.4 million compared to cash payments to our counterparties of $19.8 million in the third quarter.

* Adjusted EBITDA increased 42% to $99.9 million from $70.2 million. * Production increased 53% to 7,582 Boe per day from 4,970 Boe per day. * Net income was $158.2 million for the year, or $5.17 per unit, compared to a loss of $55.7 million in 2007, or ($2.13) per unit. Unrealized gains of $217.2 million were recorded on our commodity derivatives in 2008 compared to unrealized losses of $85.4 million in 2007. * Proved reserves decreased 4% to 30.8 MMBoe from 32.1 MMBoe due to the impact of lower year-end oil, natural gas liquids ("NGLs"), and natural gas prices and elevated production and capital costs based on the average costs from 2008, resulting in an 8.1 MMBoe decrease in reserves. * Year-end standardized measure of discounted future net cash flows decreased 66% to $235.0 million from $690.5 million, with a $456.1 million reduction due to net changes in hydrocarbon sales prices net of production costs. The standardized measure does not take into account our oil, NGL and natural gas hedges. * Distributions attributable to the fourth quarter 2008 were $0.52 per unit compared to $0.45 per unit attributable to the fourth quarter 2007, a 15.6% increase.

WTI: Calendar Annual Average Price Year Volumes (Bbls) Price per Bbl Range per Bbl -------- -------------- ------------- ---------------- 2009 1,488,969 $ 82.82 $61.05 - $140.00 2010 1,397,973 $ 82.37 $60.15 - $140.00 2011 1,155,712 $ 88.07 $67.33 - $140.00 2012 969,812 $ 81.28 $67.72 - $109.20 2013 240,000 $ 82.00 $82.00 Natural Gas: Calendar Average Price Year Volumes (MMBtu) Price per MMBtu Range per MMBtu -------- --------------- ---------------- --------------- 2009 3,167,142 $ 8.06 $6.85 - $10.18 2010 2,840,859 $ 7.87 $6.85 - $9.73 2011 2,127,316 $ 8.01 $6.85 - $8.70 2012 1,579,736 $ 8.02 $6.85 - $8.70

Calendar Annual Average Average Year Volumes (Bbl) Put ($/Bbl) Call ($/Bbl) -------- ------------- ----------- ------------ 2009 75,400 $ 120.00 $ 156.30 2010 71,800 $ 120.00 $ 156.30 2011 68,300 $ 120.00 $ 156.30 2012 65,100 $ 120.00 $ 156.30

Basis Waha Basis Swaps Annual Average Differential Calendar Year Volumes (MMBtu) Basis Differential per MMBtu ------------------ --------------- ------------------ ------------ 2009 1,320,000 $ (0.68) $ (0.68) 2010 1,200,000 $ (0.57) $ (0.57)

Basis ANR-OK Basis Swaps Annual Average Differential Calendar Year Volumes (MMBtu) Basis Differential per MMBtu ------------------ --------------- ------------------ ------------ 2009 480,000 $ (1.09) $ (1.09) 2010 480,000 $ (0.87) $ (0.87)

Annual Average Price Calendar Year Volumes (Gal) Price per Gal per Gal ------------- ------------- ------------- --------- 2009 2,265,480 $ 1.15 $1.15

LEGACY RESERVES LP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended Twelve Months Ended Dec. 31, Sept. 30, December 31, --------- --------- ------------------- 2008 2008 2008 2007 --------- --------- --------- --------- (In thousands, except per unit data) Revenues: Oil sales $ 25,573 $ 47,912 $ 157,973 $ 83,301 Natural gas liquids sales (NGL) 2,548 5,031 15,862 7,502 Natural gas sales 6,296 12,668 41,589 21,433 --------- --------- --------- --------- Total revenues 34,417 65,611 215,424 112,236 --------- --------- --------- --------- Expenses: Oil and natural gas production 13,177 15,784 52,004 27,129 Production and other taxes 2,058 4,096 12,712 7,889 General and administrative 2,524 2,158 11,396 8,392 Depletion, depreciation, amortization and accretion 30,102 13,082 63,324 28,415 Impairment of long-lived assets 76,495 339 76,942 3,204 Loss on disposal of assets 211 317 602 527 --------- --------- --------- --------- Total expenses 124,567 35,776 216,980 75,556 --------- --------- --------- --------- Operating income (loss) (90,150) 29,835 (1,556) 36,680 Other income (expense): Interest income 12 11 93 321 Interest expense (13,989) (4,198) (21,153) (7,118) Equity in income (loss) of partnerships (26) 47 108 77 Realized and unrealized gain (loss) on oil, NGL and natural gas swaps and oil collar 231,816 202,388 176,943 (85,156) Other 144 (9) 116 (129) --------- --------- --------- --------- Income (loss) before income taxes 127,807 228,074 154,551 (55,325) Income taxes 581 (122) (48) (337) --------- --------- --------- --------- Income (loss) from continuing operations 128,388 227,952 154,503 (55,662) Gain (loss) on sale of discontinued operation (1,250) -- 3,704 -- Net income (loss) $ 127,138 $ 227,952 $ 158,207 $ (55,662) ========= ========= ========= ========= Income (loss) from continuing operations per unit - basic and diluted $ 4.13 $ 7.34 $ 5.05 $ (2.13) ========= ========= ========= ========= Gain (loss) on discontinued operation per unit - basic and diluted $ (0.04)$ -- $ 0.12 $ -- ========= ========= ========= ========= Net income (loss) per unit - basic and diluted $ 4.09 $ 7.34 $ 5.17 $ (2.13) ========= ========= ========= ========= Weighted average number of units used in computing net income per unit basic 31,049 31,041 30,596 26,155 ========= ========= ========= ========= diluted 31,059 31,076 30,616 26,155 ========= ========= ========= ========= LEGACY RESERVES LP CONSOLIDATED BALANCE SHEET (UNAUDITED) (dollars in thousands) December 31, 2008 --------- ASSETS Current assets: Cash and cash equivalents $ 2,500 Accounts receivable, net: Oil and natural gas 12,198 Joint interest owners 7,265 Other 60 Fair value of derivatives 54,820 Prepaid expenses and other current assets 4,094 --------- Total current assets 80,937 --------- Oil and natural gas properties, at cost: Proved oil and natural gas properties, using the successful efforts method of accounting 821,786 Unproved properties 78 Accumulated depletion, depreciation and amortization (208,832) --------- 613,032 --------- Other property and equipment, net of accumulated depreciaton and amortization of $765 and $251, respectively 1,851 Operating rights, net of amortization of $1,429 and $865, respectively 5,588 Fair value of derivatives 80,085 Other assets, net of amortization of $1,139 and $391, respectively 1,558 Investment in equity method investee 21 --------- Total assets $ 783,072 ========= LIABILITIES AND UNITHOLDERS' EQUITY Current liabilities: Accounts payable $ 5,950 Accrued oil and natural gas liabilities 17,200 Fair value of derivatives 1,691 Asset retirement obligation 25,889 Other 6,276 --------- Total current liabilities 57,006 --------- Long-term debt 282,000 Asset retirement obligation 54,535 Fair value of derivatives 8,768 Other long-term liabilities 130 --------- Total liabilities 402,439 --------- Commitments and contingencies Unitholders' equity: Limited partners' equity - 31,049,299 units issued and outstanding at December 31, 2008 380,509 General partner's equity 124 --------- Total unitholders' equity 380,633 --------- Total liabilities and unitholders' equity $ 783,072 ========= Selected Financial and Operating Data Three Months Ended Twelve Months Ended Dec. 31, Sept. 30, December 31, --------- --------- --------- --------- 2008 2008 2008 2007 --------- --------- --------- --------- (In thousands, except per unit data) Revenues: Oil sales $ 25,573 $ 47,912 $ 157,973 $ 83,301 Natural gas liquid sales 2,548 5,031 15,862 7,502 Natural gas sales 6,296 12,668 41,589 21,433 --------- --------- --------- --------- Total revenue $ 34,417 $ 65,611 $ 215,424 $ 112,236 ========= ========= ========= ========= Expenses: Oil and natural gas production $ 13,177 $ 15,784 $ 52,004 $ 27,129 Production and other taxes $ 2,058 $ 4,096 $ 12,712 $ 7,889 General and administrative $ 2,524 $ 2,158 $ 11,396 $ 8,392 Depletion, depreciation, amortization and accretion $ 30,102 $ 13,082 $ 63,324 $ 28,415 Realized swap settlements: Realized gain (loss) on oil swaps $ (1,549)$ (17,463)$ (38,185)$ (3,627) Realized gain (loss) on natural gas liquid swaps $ 67 $ (1,359)$ (3,025)$ (619) Realized gain (loss) on natural gas swaps $ 2,907 $ (928)$ 976 $ 4,458 Production: Oil - barrels 469 416 1,660 1,179 Natural gas liquids - gallons 4,134 3,301 12,977 5,295 Natural gas - Mcf 1,320 1,222 4,838 3,052 Total (MBoe) 787 698 2,775 1,814 Average daily production (Boe/d) 8,553 7,587 7,582 4,970 Average sales price per unit: Oil price per barrel $ 54.53 $ 115.17 $ 95.16 $ 70.65 Natural gas liquid price per gallon $ 0.62 $ 1.52 $ 1.22 $ 1.42 Natural gas price per Mcf $ 4.77 $ 10.37 $ 8.60 $ 7.02 Combined (per Boe) $ 43.73 $ 94.00 $ 77.63 $ 61.87 Average sales price per unit (including realized swap settlements): Oil price per barrel $ 51.22 $ 73.19 $ 72.16 $ 67.58 Natural gas liquid price per gallon $ 0.63 $ 1.11 $ 0.99 $ 1.30 Natural gas price per Mcf $ 6.97 $ 9.61 $ 8.80 $ 8.48 Combined (per Boe) $ 45.54 $ 65.70 $ 63.13 $ 61.99 NYMEX oil index prices per barrel: Beginning of Period $ 100.64 $ 140.00 $ 95.98 $ 61.05 End of Period $ 44.60 $ 100.64 $ 44.60 $ 95.98 NYMEX gas index prices per Mcf: Beginning of Period $ 7.72 $ 13.35 $ 7.48 $ 6.30 End of Period $ 5.62 $ 7.72 $ 5.62 $ 7.48 Average unit costs per Boe: Production costs, excluding production and other taxes $ 16.74 $ 22.61 $ 18.74 $ 14.96 Production and other taxes $ 2.61 $ 5.87 $ 4.58 $ 4.35 General and administrative $ 3.21 $ 3.09 $ 4.11 $ 4.63 Depletion, depreciation, amortization and accretion $ 38.25 $ 18.74 $ 22.82 $ 15.66

* 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; * Unit-based compensation expense arising from liability and equity- based awards; * Equity in (income) loss of partnerships; * Unrealized (gain) loss on oil and natural gas swaps.

-------------------------------------------------------------------- Three Three Twelve Twelve Months Months Months Months Ended Ended Ended Ended Dec. 31, Sept. 30, Dec. 31, Dec. 31, --------- --------- --------- --------- 2008 2008 2008 2007 --------- --------- --------- --------- (dollars in thousands) Net income (loss) $ 127,138 $ 227,952 $ 158,207 $ (55,662) Plus: Interest expense 13,989 4,198 21,153 7,118 Income taxes (581) 122 48 337 Depletion, depreciation, amortization and accretion 30,102 13,082 63,324 28,415 Impairment of long-lived assets 76,495 339 76,942 3,204 (Gain) loss on sale of assets 1,223 -- (3,704) 387 Equity in (income) loss of partnership 26 (47) (108) (77) Compensation expense on options and restricted units (282) (117) 1,078 1,017 Unrealized (gain) loss on oil and natural gas swaps (230,390) (222,138) (217,176) 85,367 --------- --------- --------- --------- Adjusted EBITDA $ 17,720 $ 23,391 $ 99,764 $ 70,106 Less: Cash interest expense 2,859 2,805 9,451 5,085 Options settled 52 64 150 253 Development capital expenditures 14,469 10,955 32,788 16,368 --------- --------- --------- --------- Distributable Cash Flow $ 340 $ 9,567 $ 57,375 $ 48,400 --------------------------------------------------------------------