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Exhibit 99.1
 CONSOLIDATED BALANCE SHEET
OF EAGLE ROCK ENERGY GP, L.P.
INDEX
 PageUnaudited Condensed Consolidated Balance Sheet as of December 31, 2006
    
    
    3Notes to Consolidated Balance Sheet
    
    
    4Note 1. Organization and Description of Business
    
    
    4Note 2. Summary of Significant Accounting Policies
    
    
    4Note 3. New Accounting Pronouncements
    
    
    7Note 4. Acquisitions
    
    
    7Note 5. Fixed Assets and Asset Retirement Obligations
    
    
    8Note 6. Long-term Debt
    
    
    8Note 7. Minority Interest
    
    
    10Note 8. Members Deficit
    
    
    10Note 9. Related Party Transactions
    
    
    11Note 10. Fair Value of Financial Instruments
    
    
    11Note 11. Risk Management Activities
    
    
    11Note 12. Commitments and Contingent Liabilities
    
    
    12Note 13. Segments
    
    
    13Note 14. Employee Benefit Plan
    
    
    14Note 15. Income Taxes
    
    
    14Note 16. Equity-Based Compensation
    
    
    14Note 17. Subsequent Events
    
    
    14




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2




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EAGLE ROCK ENERGY GP, L.P.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 2006
 December 31,2006($ in thousands)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    10,582Accounts receivable
    
    
    43,567Risk management assets
    
    
    13,837Prepayments and other current assets
    
    
    2,679Total current assets
    
    
    70,665PROPERTY, PLANT AND EQUIPMENT  Net
    
    
    554,063INTANGIBLE ASSETS  Net
    
    
    130,001RISK MANAGEMENT ASSETS
    
    
    17,373OTHER ASSETS
    
    
    7,800TOTAL
    
    $
    779,902LIABILITIES AND MEMBERS DEFICITCURRENT LIABILITIES:Accounts payable
    
    $
    49,558Accrued liabilities
    
    
    7,996Risk management liabilities
    
    
    1,005Total current liabilities
    
    
    58,559LONG-TERM DEBT
    
    
    405,731ASSET RETIREMENT OBLIGATIONS
    
    
    1,819DEFERRED TAX LIABILITY
    
    
    1,229RISK MANAGEMENT LIABILITIES
    
    
    20,576MINORITY INTEREST
    
    
    292,531COMMITMENTS AND CONTINGENCIES (Note 12)
MEMBERS DEFICIT
    
    
    (543
    )TOTAL
    
    $
    779,902
  3




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EAGLE ROCK ENERGY GP, L.P.
NOTES TO CONSOLIDATED BALANCE SHEET
FOR THE YEAR ENDED DECEMBER 31, 2006
 NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESS
 Organization
  Midstream Operations
 Upstream Operations
 Basis of Presentation and Principles of Consolidation
 NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  Use of Estimates
 Cash and Cash Equivalents
 Concentration and Credit Risk
  4




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Certain Other Concentrations
 Property, Plant, and Equipment
 Pipelines and equipment
    
    20 yearsGas processing and equipment
    
    20 yearsOffice furniture and equipment
    
    5 years
   Impairment of Long-Lived Assets
 
    
    significant adverse change in legal factors or in the business climate;
    
    a current-period operating or cash flow loss combined with a history of operating or
cash flow losses or a projection or forecast which demonstrates continuing losses
associated with the use of a long-lived asset;
    
    an accumulation of costs significantly in excess of the amount originally expected for
the acquisition or construction of a long-lived asset;
    
    significant adverse changes in the extent or manner in which an asset is used or in its physical condition;
    
    a significant change in the market value of an asset; or
    
    a current expectation that, more likely than not, an asset will be sold or otherwise
disposed of before the end of its estimated useful life.
  5




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Intangible Assets
 December 31,($ in thousands)
    
    2006Rights-of-way and easements  at cost
    
    $
    66,801Less: accumulated amortization
    
    
    (7,407
    )Contracts
    
    
    80,210Less: accumulated amortization
    
    
    (9,603
    )Net Intangible assets
    
    $
    130,001
  Other Assets
 Transportation and Exchange Imbalances
 Environmental Expenditures
 Income Taxes
 Derivatives Accounting for
Derivative Instruments and Hedging Activities,
 6




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NOTE 3. NEW ACCOUNTING PRONOUNCEMENTS
 Accounting for Certain Hybrid Financial
Instruments Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,
 Fair Value Measurements.
 The Fair Value Option for Financial Assets and
Financial Liabilities
 Accounting for Uncertainty in Income
Taxes  an interpretation of FASB Statement No. 109
 NOTE 4. ACQUISITIONS
  ($ in thousands)Property, plant, and equipment
    
    $
    88,858Intangibles
    
    
    7,992Other current liabilities
    
    
    (750
    )Asset retirement obligations
    
    
    (291
    )$
    95,809
  7




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NOTE 5. FIXED ASSETS AND ASSET RETIREMENT OBLIGATIONS
  December 31,($ in thousands)
    
    2006Land
    
    $
    853Plant
    
    
    81,485Gathering and pipeline
    
    
    433,779Equipment and machinery
    
    
    37,185Vehicles and transportation equipment
    
    
    2,740Office equipment, furniture, and fixtures
    
    
    511Computer equipment and software
    
    
    4,623Corporate
    
    
    126Linefill
    
    
    3,923Construction in progress
    
    
    19,677584,902Less: accumulated depreciation
    
    
    (30,839
    )Net fixed assets
    
    $
    554,063
 Asset Retirement Obligations
  ($ in thousands)Asset retirement obligations  December 31, 2005
    
    $
    679Additions for Brookeland and MGS acquisitions
    
    
    297Purchase price allocation adjustment on Panhandle assets
    
    
    698Additional liability on newly built assets
    
    
    17Accretion expense
    
    
    128Asset retirement obligations  December 31, 2006
    
    $
    1,819
 NOTE 6. LONG-TERM DEBT
  December 31,($ in thousands)
    
    2006Revolver
    
    $
    106,481Term loan
    
    
    299,250Total debt
    
    
    405,731Less: current portion
    
    
    Total long-term debt.
    
    $
    405,731
  8




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
    
    Adjusted EBITDA (as defined) to interest expense of not less than 2.0 to 1.0 through
December 31, 2006, and 2.50 to 1.0 thereafter; and
    
    Total consolidated funded debt to Adjusted EBITDA (as defined) of not more than 6.0 to
1.0 through December 31, 2006, and 5.0 to 1.0 thereafter and 5.25 to 1.0 for the three
quarters following a material acquisition;
    9




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Principal($ in thousands)
    
    Amount2007
    
    $
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    405,731$
    405,731
  NOTE 7. MINORITY INTEREST
  Limited partners of Eagle Rock Energy Partners, L.P.:Non-affiliates of Eagle Rock Energy GP, L.P.
    
    $
    116,283Affiliates of Eagle Rock Energy GP, L.P.
    
    
    176,248$
    292,531
 NOTE 8. MEMBERS DEFICIT
    10




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NOTE 9. RELATED PARTY TRANSACTIONS
       NOTE 10. FAIR VALUE OF FINANCIAL INSTRUMENTS
   NOTE 11. RISK MANAGEMENT ACTIVITIES
  11




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($ in thousands)Fair ValueRoll Forward
    
    Expiration
    
    
    Notional
    
    
    Fixed
    
    
    December 31,Effective Date
    
    Date
    
    
    Amount
    
    
    Rate
    
    
    200601/03/2006
    
    
    01/03/2011
    
    
    $
    100,000,000
    
    
    
    4.9500
    %
    
    $
    (319
    )01/03/2006
    
    
    01/03/2011
    
    
    
    100,000,000
    
    
    
    4.9625
    
    
    
    (267
    )01/03/2006
    
    
    01/03/2011
    
    
    
    50,000,000
    
    
    
    4.8800
    
    
    
    (295
    )01/03/2006
    
    
    01/03/2011
    
    
    
    50,000,000
    
    
    
    4.8800
    
    
    
    (295
    )
    
    
    Over-the-counter NGL puts, costless collar and swap transactions for the sale of Mont
Belvieu gas liquids with a combined notional amount of 530,000 Bbls per month for a term
from January 2006 through December 2010;
    
    Condensate puts and costless collar transactions for the sale of West Texas
Intermediate crude oil with a combined notional amount of 250,000 Bbls per month for a term
from January 2006 through December 2010; and
    
    Natural gas calls for the sale of Henry Hub natural gas with a notional amount of
200,000 MMBtu per month for a term from January 2006 through December 2007.
  
    
    Costless collar transactions for West Texas Intermediate crude oil with a combined
notional amount of 50,000 Bbls per month for a term of October through December 2006; and,
60,000 Bbls per month for a term of January 2007 through December 2007.
    
    Fixed swap agreements to hedge WTS-WTI basis differential in amount of 20,000 Bbls per
month for a term of October-December 2006; and, 20,000 Bbls per month for a term of January
through December 2007.
    
    Natural gas fixed swap agreements to hedge short natural gas positions with a combined
notional amount of 100,000 MMBtu per month for the term of August 2006 through September
2006.
   12




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NOTE 12. COMMITMENTS AND CONTINGENT LIABILITIES
 Litigation
 Insurance
  Regulatory Compliance
 Environmental
 Other Commitments and Contingencies
 NOTE 13. SEGMENTS
  13




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Southeast($ in millions)
    
    
    
    
    
    Texas andYear Ended December 31, 2006
    
    Panhandle
    
    
    Louisiana
    
    
    Corporate
    
    
    TotalSegment assets
    
    $
    573.6
    
    
    $
    148.9
    
    
    $
    57.4
    
    
    $
    779.9
 NOTE 14. EMPLOYEE BENEFIT PLAN
  NOTE 15. INCOME TAXES
    NOTE 16. EQUITY-BASED COMPENSATION
   WeightedNumber of
    
    
    AverageRestricted
    
    
    Grant - DateUnits
    
    
    Fair ValueOutstanding at beginning of period
    
    
    
    
    
    $
    Granted
    
    
    124,250
    
    
    
    18.75Vested
    
    
    Forfeitures
    
    
    (1,800
    )
    
    
    18.75Outstanding at end of period
    
    
    122,450
    
    
    $
    18.75
 14




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NOTE 17. SUBSEQUENT EVENTS
         15