Legacy Reserves LP. RBC MLP Conference. November 15, 2007

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Transcription:

Legacy Reserves LP RBC MLP Conference November 15, 2007

Forward-Looking Statements Statements made by representatives of Legacy Reserves LP (the Partnership ) during the course of this presentation that are not historical facts are forward-looking statements. These statements are based on certain assumptions made by the Partnership based on management s experience and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Partnership, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. These include risks relating to financial performance and results, availability of sufficient cash flow to pay distributions and execute our business plan, prices and demand for oil and natural gas, our ability to replace reserves and efficiently exploit our current reserves, our ability to make acquisitions on economically acceptable terms, and other important factors that could cause actual results to differ materially from those anticipated or implied in the forward-looking statements. Please see the factors described in the Partnership s Annual Report on Form 10-K in Item 1A under Risk Factors. The Partnership undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information or future events. Page 2

Legacy History Brothers Brothers MBN Brothers Production Company Kyle McGraw & Cary Brown Assume Management Legacy IPO Moriah Dale Brown & Jack McGraw form Partnership Moriah Cary & Dale Brown form Moriah Other Related Entities 1981 1991 2005 Formation Transaction Through Private Placement March 2006 January 2007 Page 3

Legacy Management Team Name Title Years Experience in the Permian Basin Years Experience in the Oil & Gas Industry Cary D. Brown, CPA Chairman & CEO 15 17 Steven H. Pruett President & CFO 18 23 Kyle A. McGraw EVP, Business Development & Land 24 24 Paul T. Horne VP, Operations 21 23 William M. Morris, CPA VP, Controller & CAO 25 26 William D. Sullivan Former EVP Anadarko Petroleum Independent Board Members G. Larry Lawrence Former Controller Pure Resources Kyle D. Vann Former CEO Entergy Koch, LP Senior Management averages over 20 years of experience Page 4

Asset Overview Page 5

Legacy Base Asset Overview 32.3 MMBoe of proved reserves (1) Reserves-to-production ratio of over 15 years Diversified across over 3,000 wells 70% operated 6,100 net Boe per day (2) 74% liquids (1) Taken from reserve reports prepared by LaRoche Petroleum Consultants, Ltd. as of 12/31/06 for Legacy Reserves LP plus proved reserves from 2007 acquisitions from internal reserve reports: Binger (4.1 MMBoe), TSF/Ameristate (1.4 MMBoe), Slaughter/Rocker A (1.0 MMBoe), Raven (1.2 MMBoe), TOC (4.0 MMBoe), Summit (0.7 MMBoe) and Pan-Ellis/Mariner/SMB (0.77 MMBoe). (2) Pro forma 2007 acquisitions of Binger, TSF, Ameristate, Slaughter/Rocker A, Raven, Samson, Carlow, TOC, Summit and Pan-Ellis/Mariner/SMB. Page 6

Consolidation Opportunities in the Permian Basin Permian Basin Ownership Profile (1) 0.3% 36.1% Top 5 Operators 1,700+ Operators 63.6% Fragmented ownership provides numerous acquisition opportunities Acquisition niche large PDP component Connected in Permian Basin deal network (1) Ownership based on production. Permian Basin includes Texas Railroad Commission Districts 7C, 8, 8A and Lea and Eddy County, New Mexico. Permian Basin data as of July 31, 2005; Legacy production data as of September 30, 2006. Page 7

Legacy & Predecessor Acquisition History Acquired Reserves (1999 2007) (M M B o e ) 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 36.7 16.5 20.2 13.4 6.8 13.4 6.8 13.4 1999-2002 2003-2005 2006-2007 1999-2002 2003-2005 2006-2007 $334 million of purchases at an average cost of $9.12 per Boe of proved reserves in over 38 deals Page 8

Legacy 2007 YTD Acquisitions Closed $188 million of acquisitions in 2007 Thirteen negotiated transactions averaging: $13.61 per Boe of proved reserves 91% PDP, R/P ratio of 14.7 years $73,268 per Boepd 5.2 times cash flow Closing Seller Field Closing Purchase Consideration PDP R/P Oil Proved Reserves Current Net Prod Cash Flow Reserves Production Cash Flow Date ($MM) (%) (years) (%) (Mboe) (Boepd) ($MM) ($/Boe) ($/Boepd) Multiple 01/30/07 McCabe Various Permian $ 2.3 units 100% 7.2 17% 92 35 0.4 $ 24.67 $ 64,857 5.5 04/16/07 Nielson E Binger Unit $ 44.2 cash/units 82% 15.7 79% 4,204 734 9.2 $ 10.51 $ 60,218 4.8 04/30/07 Ameristate SE New Mexico $ 5.2 cash 76% 7.9 15% 291 101 1.2 $ 17.87 $ 51,485 4.4 05/25/07 TSF Spraberry Trend $ 14.7 cash 81% 15.4 67% 1,059 189 3.9 $ 13.88 $ 77,778 3.8 05/31/07 Raven Slaughter/Rocker A $ 13.1 cash 100% 12.5 98% 984 215 2.7 $ 13.28 $ 60,791 4.9 08/03/07 Raven Permian Non-Oper $ 18.9 cash 100% 11.0 70% 1,218 302 4.1 $ 15.52 $ 62,583 4.6 08/31/07 Samson Permian Non-Oper $ 2.0 cash 100% 14.0 0% 200 39 0.3 $ 10.00 $ 51,282 5.9 08/31/07 Carlow Spraberry Trend $ 3.9 cash 70% 20.1 73% 374 51 0.8 $ 10.32 $ 75,686 4.7 10/01/07 TOC Texas Panhandle $ 60.5 cash 100% 17.8 83% 3,945 606 8.4 $ 15.34 $ 99,835 7.2 10/01/07 Summit Spraberry Trend $ 13.5 cash 100% 13.6 70% 695 140 2.5 $ 19.42 $ 96,429 5.4 11/01/07 Pan-Ellis, Mariner,SMB Panhandle & Permian $ 10.1 cash 92% 13.4 59% 771 158 2.5 $ 13.10 $ 63,924 4.0 Total $ 188.3 91% 14.7 71% 13,833 2,570 36.0 $ 13.61 $ 73,268 5.2 Page 9

Financial Summary Page 10

Summary Financial Information Third Quarter earnings continue solid growth trend 14.4% sequential volume growth over Q2 Q3 production, revenue, distributable cash flow, and adjusted EBITDA exceeded analyst estimates Q3 does not include contribution from Panhandle, Summit and November acquisitions Financial and Operating Data Latest Twelve Months Quarter Ending Consensus Analyst ($ in millions) 12-31-06 3-31-07 6-30-07 9-30-07 Estimates - Q3 2007 Production (Boe/d) 3,625 3,655 4,540 5,195 5,083 Revenue with realized hedges $18.5 $18.4 $24.1 $29.8 $27.4 Distributable Cash Flow $1.6 $6.8 $9.5 $14.5 $12.5 Distributable Cash Flow per Unit $0.08 $0.36 $0.36 $0.56 $0.48 Adjusted EBITDA (1) $11.3 $11.1 $14.7 $18.9 $17.4 (1) Please see pages 19 and 20 Page 11

Pro Forma Capitalization ($ in millions) 9/30/2007 Acquisition PIPE Offering 9/30/2007 Actual Adjustments (1) Adjustments (2) Pro Forma (2) Cash $ 5.1 $ 6.7 $ - $ 11.8 Total Debt $ 93.0 $ 82.0 $ (75.0) $ 100.0 Partners' Equity 244.5-75.0 319.5 Total Capitalization $ 342.6 $ 88.7 $ - $ 431.3 (1) Acquisitions closed subsequent to 9/30/2007, including cash flow adjustment paid to Legacy at deal closing. (2) Excludes estimated offering expenses. Page 12

Comparable Company Trading Yields 10.0 9.0 8.0 7.5% 7.9% 7.6% 9.0% 8.1% 9.4% Yield 7.0 6.0 5.0 4.0 3.6% 6.0% 6.0% 6.3% 5.8% 6.3% 6.3% 6.6% 5.1% 3.0 2.0 1.0 0.0 Legacy Public MLP GPs(1) Coal MLPs(2) Small Cap Pipeline / Midstream MLPs(3) Large Cap Pipeline / Midstream MLPs(4) Breitburn Constellation EVEP Atlas Encore Linn Vanguard Legacy as of 11/12/07. Other Energy MLP s as of 11/8//07 As of 10/30/07: (1) Includes General Partners of Alliance, Atlas, Buckeye, Crosstex, Energy Transfer, Enterprise, Hiland, Inergy, Magellan, Markwest, NuStar, Penn Virginia. (2) Includes Alliance, Natural Resource Partners, Penn Virginia. (3) Includes Atlas, Cheniere, Copano, Crosstex, DCP, Duncan, Eagle Rock, Genesis, Global, Hiland, Holly, Quicksilver, MarkWest, Martin, Regency, Sem Group, Spectra, Sunoco, Targa, TC, Transmontaigne, Williams. (4) Includes Buckeye, Boardwalk, Enbridge, Energy Transfer, Enterprise, Kinder Morgan, Magellan, NuStar, Oneok, Plains, TEPPCO, NuStar. Page 13

Legacy Unit Returns 2007 YTD $30.00 $25.00 $20.00 27.6% $1.26 $15.00 $10.00 $19.00 $22.99 $5.00 $0.00 Jan 07 Nov 07 Note: Reflects closing price of 11/12/07 Page 14

Commodity Price Hedging Summary Over 74% of forecasted production hedged for 2007-08 and over 60% hedged through 2010. Oil (1) Natural Gas (2) (MBbl) 1,200 900 600 300 $68.81 $68.57 $70.17 $70.04 $66.65 $65.26 1,025 948 883 274 * 665 550 (MMBtu) 3,000 2,500 2,000 1,500 1,000 500 $8.63 656 * $8.32 2,403 $8.14 2,217 $7.84 1,963 $7.72 694 $7.57 404 0 2007 2008 2009 2010 2011 2012 0 2007 2008 2009 2010 2011 2012 Hedged Volume Price ($/Bbl) Hedged Volume Price ($/MMBtu) * 4 th Quarter 2007 Volumes (1) WTI oil swaps used to hedge NGL production in 2009 (85,200 Bbls), 2010 (84,600 Bbls), 2011 (78,000 Bbls) and 2012 (75,600 Bbls). (2) Includes NYMEX and Waha / ANR-OK swaps, where the latter indexes trade at a discount to NYMEX Henry Hub but better reflect what Legacy is paid for its natural gas. Page 15

Commodity Price Hedging Summary Over 74% of forecasted production hedged for 2007-08 and over 60% hedged through 2010. NGL s BOE s (Gallons) 8,000 6,000 4,000 2,000 $1.32 1,683 * $1.27 6,458 $1.15 2,265 (MBoe) 2,000 1,500 1,000 500 $63.14 * 423 $62.37 1,580 $61.13 1,372 $60.34 1,211 $66.63 781 $67.35 617 0 2007 2008 2009 0 2007 2008 2009 2010 2011 2012 Hedged Volume Price ($/Boe) Hedged Volume Price ($/Gallon) * 4 th Quarter 2007 volumes Page 16

Legacy Ownership Ticker: LGCY Exchange: NASDAQ Unit Price (11/12/07): $22.99 per unit Quarterly Distribution: $0.43 per unit Yield: 7.5% Market Capitalization: $683 million Founding Investors, Directors and Management 45% GP Interest <0.1% Public Unitholders 32.4% Note: Ownership as of 11/12/07 Sellers of Assets to Legacy 2.5% 144A & PIPE Unitholders 20% Page 17

Legacy Summary Only MLP focused on the oil-weighted Permian Basin and Mid-continent regions Experienced management team with significant equity ownership Significant organic and external growth opportunities Long-lived, diversified multi-pay properties Demonstrated reserve replacement capability Long-term hedges in place Tax advantaged yield Low level of debt MLP structure with no IDRs Page 18

Adjusted EBITDA Reconciliation This presentation, the financial tables and other supplemental information, including the reconciliations of certain non-generally accepted accounting principles ("non-gaap") measures to their nearest comparable generally accepted accounting principles ("GAAP") measures, may be used periodically by management when discussing Legacy's financial results with investors and analysts and they are also available on Legacy's website under the Investor Relations tab. Adjusted EBITDA is defined in our revolving credit facility as net income (loss) plus interest expense; depletion, depreciation, amortization and accretion; impairment of long-lived assets; (gain) loss on sale of partnership investment; (gain) loss on sale of assets; equity in (income) loss of partnerships; non-cash compensation expense and unrealized (gain) loss on oil and natural gas swaps. Adjusted EBITDA is presented as management believes it provides additional information and metrics relative to the performance of Legacy's business, such as the cash distributions we expect to pay to our unitholders, as well as our ability to meet our debt covenant compliance tests. Management believes that these financial measures indicate to investors whether or not cash flow is being generated at a level that can sustain or support an increase in our quarterly distribution rates. Adjusted EBITDA 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. Page 19

Adjusted EBITDA Reconciliation Reconciliation of Net Income to Adjusted EBITDA ($ in thousands) 12-31-06 3-31-07 6-30-07 9-30-07 LTM Net income (loss) $ (2,312) $ (4,757) $ (2,162) $ 2,164 $ (7,067) Plus: Interest expense 2,133 625 892 1,905 5,555 Depletion, depreciation, amortization and accretion 5,693 5,295 6,811 6,959 24,758 Impairment of long lived assets 7,540 90 190 950 8,770 Loss on sale of assets 42 231 156 429 Non-cash compensation expense 148 864 (124) 888 Unrealized (gain) loss on oil and natural gas swaps (1,835) 9,688 7,855 6,844 22,552 Adjusted EBITDA $ 11,261 $ 11,089 $ 14,681 $ 18,855 $ 55,886 Note: Adjusted EBITDA is a non-gaap financial measure. Page 20

Legacy Reserves LP