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EXHIBIT 99.1
Legacy Reserves LP Announces Third Quarter 2007
Results
MIDLAND, Texas, Nov. 7, 2007 (PRIME NEWSWIRE) -- Legacy Reserves
LP ("Legacy") (Nasdaq:LGCY) today announced preliminary, unaudited
third quarter results for 2007.
Cary Brown, Chairman and Chief Executive Officer of Legacy
Reserves GP, LLC, the general partner of Legacy, said, "Our third
quarter results demonstrate the effect of our successful
development program and include a full quarter of results from our
four second quarter acquisitions and two months of results from the
acquisition closed on August 3, 2007. We look forward to a full
contribution in the fourth quarter from our two acquisitions which
closed on October 1, 2007, with an aggregate purchase price of
approximately $73.8 million. Our continuing strategy is to evaluate
acquisition opportunities with a goal to make acquisitions that are
accretive to our unitholders."
Summary of Third Quarter and Nine months Ended September 30,
2007 Results
This unaudited financial information is preliminary and is
subject to adjustments in connection with the final unaudited
financial statements to be released on or before November 14, 2007
within Legacy's Quarterly Report on Form 10-Q.
Net income (loss) for the three-month and nine-month periods
ended September 30, 2007 totaled $2.2 and ($4.8) million, or $0.08
and ($0.19) basic and diluted earnings per unit, respectively, as
compared to net income of $13.9 and $6.7 million, or $0.76 and
$0.42 basic and diluted earnings per unit for the three-month and
nine-month periods ended September 30, 2006, respectively.
Financial results for the three and nine-month periods ended
September 30, 2007 were unfavorably impacted by $6.8 million and
$24.4 million, respectively, of net unrealized losses on our oil,
natural gas liquids ("NGL") and natural gas swaps, as the fair
value of our future derivative instruments was marked to market.
Financial results for the three and nine-month periods ended
September 30, 2006 were favorably impacted by $22.7 million and
$7.7 million, respectively, of net unrealized gains on our oil and
natural gas swaps, as the fair value of these derivative
instruments was marked to market. Unrealized gains and losses
represent current period mark-to-market adjustments for commodity
derivatives which will be settled in future periods. Unrealized
gains and losses result in a non-cash impact on revenue and do not
affect our ability to make our expected cash distributions.
Adjusted EBITDA totaled $18.9 million and $44.6 million for the
quarter and nine months ended September 30, 2007, respectively.
(See "Non-GAAP Financial Measures" and the associated table for a
discussion of management's use of Adjusted EBITDA in this release
and a reconciliation of Legacy's consolidated net loss to Adjusted
EBITDA.)
Financial and Operating Results:
Legacy was formed in October 2005 to own and operate the oil and
natural gas properties it acquired from its Founding Investors in
connection with the closing of a private equity offering on March
15, 2006 ("Formation Transaction"). Inasmuch as certain assets
owned by the Founding Investors were acquired by Legacy on March
15, 2006, the results of operations and production volumes from
these acquired assets are excluded from the first 73 days of the
nine month period ended September 30, 2006.
Production
Net oil and natural gas production averaged 5,195 and 4,469 Boe
per day for the quarter and nine months ended September 30, 2007,
respectively, as compared to an average of 3,241 and 2,866 Boe per
day for the quarter and nine months ended September 30, 2006.
Legacy's increased production resulted primarily from a combination
of its acquisition of oil and natural gas properties in the
Formation Transaction, its 2006 and 2007 acquisitions of producing
oil and natural gas properties, from new wells drilled and
completed as part of its ongoing development program, and from
recompletion, restimulation, and reactivation activities completed
in the second and third quarters of 2007.
Revenues and Realized Prices
For the quarters ended September 30, 2007 and 2006, oil, NGL and
natural gas sales were $29.4 million and $17.4 million,
respectively. Revenues for the quarters ended September 30, 2007
and 2006, including net realized gains (losses) on our oil, NGL and
natural gas swaps of $0.4 million and ($4.1) million, respectively,
totaled $29.8 million and $13.3 million, respectively. Revenues
including net realized and unrealized gains and losses on our oil,
NGL and natural gas derivative contracts were $23.0 million and
$36.0 million for the quarters ended September 30, 2007 and 2006,
respectively.
For the nine months ended September 30, 2007 and 2006, oil, NGL
and natural gas sales were $68.1 million and $43.3 million,
respectively. Revenues for the nine months ended September 30, 2007
and 2006, including net realized gains (losses) on our oil, NGL and
natural gas swaps of $4.2 million and ($2.2) million, respectively,
totaled $72.3 million and $41.1 million, respectively. Revenues
including net realized and unrealized gains and losses on our oil,
NGL and natural gas derivative contracts were $47.9 million and
$48.8 million for the nine months ended September 30, 2007 and
2006, respectively.
For the quarters ended September 30, 2007 and 2006, realized oil
prices, excluding oil derivative contract settlements, were $71.83
and $65.06 per barrel, respectively. Including the effects of
realized gains on our oil swaps, realized oil prices were $69.12
and $36.49 per barrel, respectively.
For the same periods, realized natural gas prices were $6.54 and
$7.42 per Mcf excluding natural gas derivative contract
settlements. Including the effects of realized gains on our natural
gas swaps, realized natural gas prices were $8.26 and $10.34 per
Mcf for the quarters ended September 30, 2007 and 2006,
respectively.
For the quarter ended September 30, 2007, oil, NGL and natural
gas derivative contracts, all of which are in the form of swaps,
covered approximately 73% of Legacy's production at a weighted
average NYMEX price of $62.82 per Boe. Legacy's realized prices are
less than NYMEX West Texas Intermediate and Henry Hub natural gas
due to quality and location differentials. The stated results are
inclusive of natural gas basis swaps that we use to improve the
effectiveness of our natural gas swaps.
For the nine months ended September 30, 2007 and 2006, realized
oil prices, excluding oil derivative contract settlements, were
$63.15 and $62.87 per barrel, respectively. Including the effects
of realized gains on our oil swaps, realized oil prices were $64.62
and $49.50 per barrel. For the same periods, realized natural gas
prices were $6.54 and $6.77 per Mcf excluding natural gas
derivative contract settlements, respectively. Including the
effects of realized gains on our natural gas swaps, realized
natural gas prices were $8.05 and $9.72 per Mcf for the nine months
ended September 30, 2007 and 2006, respectively.
For the nine months ended September 30, 2007, oil, NGL and
natural gas derivative contracts, all of which are in the form of
swaps, covered approximately 70% of Legacy's production at a
weighted average NYMEX price of $63.86 per Boe. Legacy's realized
prices are less than NYMEX West Texas Intermediate and Henry Hub
natural gas due to quality and location differentials. The stated
results are inclusive of natural gas basis swaps that we use to
improve the effectiveness of our natural gas swaps.
Subsequent to September 30, 2007, oil futures prices have
increased significantly. These increases in oil price futures will
require us to make larger net settlement payments under commodity
swap contracts. While these payments should not significantly
affect our cash flow since payments made to counterparties to these
contracts should be more than offset by increased commodity prices
received on the sale of our production (some of which is unhedged),
the increase in oil prices, should it continue, is expected to
negatively affect the fair value of our oil and NGL swap contracts
as recorded in our balance sheet at December 31, 2007 and during
future periods and, consequently, our reported net earnings.
Changes in the recorded fair value of commodity derivatives are
marked to market through earnings and are likely to result in
substantial non-cash charges to earnings for the decrease in the
fair value of these contracts during the fourth quarter of 2007. If
oil prices continue to increase, this negative non-cash effect on
earnings will become more significant. We are currently unable to
estimate the effects on earnings for the fourth quarter of 2007,
but the effects may be substantial.
Production Costs
For the quarters ended September 30, 2007 and 2006, production
costs and ad valorem taxes, excluding production severance taxes,
totaled $7.6 million ($15.86 per Boe) and $4.2 million ($13.97 per
Boe), respectively. The increase in production costs is primarily
related to (i) $1.8 million of costs attributable to the Binger,
Ameristate, TSF, Raven Shenandoah and Raven OBO acquisitions and
(ii) $0.3 million related to increases in ad valorem tax expenses.
In addition, the increase in production costs per Boe is consistent
with industry-wide costs increases, particularly those related to
oil operations that require lifting produced oil and water or
involve enhanced recovery processes.
For the nine months ended September 30, 2007 and 2006,
production costs and ad valorem taxes, excluding production
severance taxes, totaled $18.4 million ($15.09 per Boe) and $10.2
million ($12.98 per Boe), respectively. The increase in production
costs is primarily related to (i) $2.8 million attributable to the
Binger, Ameristate, TSF, Raven Shenandoah and Raven OBO
acquisitions, (ii) $0.8 million related to increase in ad valorem
tax expenses, (iii) $1.3 million related to the exclusion of
operating results for certain assets owned by the Founding
Investors for the first 73 days of 2006 and not acquired until the
Formation Transaction and, (iv) $1.6 million attributable to the
South Justis, Farmer Field and Kinder Morgan acquisitions.
Depletion, Depreciation and Amortization (DD&A)
DD&A expense for the quarter ended September 30, 2007
totaled $7.0 million, or $14.56 per Boe, while DD&A expense was
$5.3 million, or $17.93 per Boe, for the quarter ended September
30, 2006. The increase in DD&A is primarily related to $1.7
million of DD&A related to Binger, Ameristate, TSF, Raven
Shenandoah and Raven OBO acquisitions. Our DD&A expense per Boe
decreased due to the additional reserves added by our recent
acquisitions. Under the successful efforts method of accounting,
Legacy calculates DD&A on an individual producing field basis.
Changes in reserve estimates and in the timing and amount of
abandonment cost estimates as well as changes in the timing and
amount of development projects of one or two fields can cause
variations in the aggregate DD&A rate.
DD&A expense for the nine months ended September 30, 2007
totaled $19.1 million, or $15.63 per Boe, while DD&A expense
was $12.7 million, or $16.23 per Boe, for the nine months ended
September 30, 2006. The increase in DD&A is primarily related
to (i) $2.7 million of DD&A related to recent acquisitions,
(ii) $1.1 million of DD&A related to the Legacy Formation and,
(iii) $1.6 million related to acquisitions made in the second
quarter of 2006.
General and Administrative Expenses (G&A)
G&A expenses for the quarters ended September 30, 2007 and
2006 totaled $1.4 million ($3.02 per Boe) and $1.2 million ($3.98
per Boe), respectively. The $0.2 million increase in total G&A
expenses reflects the growth of our asset base through
acquisitions. The decrease in per BOE G&A expense reflects the
growth of our asset base and related produced volumes through
acquisitions.
G&A expenses for the nine months ended September 30, 2007
and 2006 totaled $6.0 million ($4.95 per Boe) and $3.3 million
($4.17 per Boe), respectively. The increase in G&A expense per
Boe reflects both the higher costs of being a public entity and
growth of our asset base through acquisitions. In addition,
professional fees related to the filing of our tax returns and
K-1's for our limited partners amounted to approximately $0.5
million for the nine months ended September 30, 2007. Expenses
during the nine months ended September 30, 2007 for professional
fees related to the audit of our December 31, 2006 financial
statements amounted to approximately $254,000. In addition,
unit-based compensation expenses increased $0.9 million due to a
$0.6 million non-cash expense related to the change in the
estimated fair value of our unit-based compensation liability and
$0.3 million of cash payments to employees exercising unit
options.
Oil, NGL and Natural Gas Derivative Instruments
We have entered into the following fixed price swaps for oil and
natural gas to help mitigate the risk of changing commodity prices.
As of November 7, 2007, we had entered into swap agreements to
receive average NYMEX West Texas Intermediate oil and Henry Hub,
Waha and ANR-Oklahoma natural gas prices as summarized below
starting with October, 2007 through December, 2012:
Calendar Annual Average Price
Year Volumes (Bbls) Price per Bbl Range per Bbl
-------- ------------- ------------- ---------------
2007 273,578 $ 68.81 $64.15 - $75.70
2008 1,025,249 $ 68.57 $62.25 - $73.45
2009 948,013 $ 66.65 $61.05 - $71.40
2010 883,4
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