##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2008
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 001-33676
 ENCORE ENERGY PARTNERS LP
  Delaware
    
    20-8456807(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)777 Main Street, Suite 1400, Fort Worth, Texas
    
    76102(Address of principal executive offices)
    
    (Zip Code)
 (817) 877-9955  (Registrants telephone number, including area code)
 Not applicable  (Former name, former address and former fiscal year, if changed since last report)
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
 Number of common units outstanding as of May 2, 2008
    
    31,356,155




---



##### 



ENCORE ENERGY PARTNERS LP
 INDEX
 PagePART I. FINANCIAL INFORMATIONItem 1. Financial StatementsConsolidated Balance Sheets as of March 31, 2008 and December 31, 2007
    
    
    1Consolidated Statements of Operations for the three months ended
March 31, 2008 and 2007
    
    
    2Consolidated Statement of Partners Equity and Comprehensive Income
for the three months ended March 31, 2008
    
    
    3Consolidated Statements of Cash Flows for the three months ended
March 31, 2008 and 2007
    
    
    4Notes to Consolidated Financial Statements
    
    
    5Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    18Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    27Item 4. Controls and Procedures
    
    
    28PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    28Item 1A. Risk Factors
    
    
    28Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    28Item 6. Exhibits
    
    
    28Signature
    
    
    30Rule 13a-14(a)/15d-14(a) CertificationRule 13a-14(a)/15d-14(a) CertificationSection 1350 CertificationSection 1350 CertificationStatement Showing Computation of Ratio of Earnings to Fixed Charges
  CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
  i




---



##### Table of Contents



ENCORE ENERGY PARTNERS LP
 GLOSSARY
  
    
    Bbl.One stock tank barrel, or 42 U.S. gallons liquid volume, used in reference to oil
or other liquid hydrocarbons.
    
    Bbl/D. One Bbl per day.
    
    BOE.One barrel of oil equivalent, calculated by converting natural gas to oil
equivalent barrels at a ratio of six Mcf of natural gas to one Bbl of oil.
    
    BOE/D. One BOE per day.
    
    Council of Petroleum Accountants Societies (COPAS). A professional organization of
oil and gas accountants that maintains consistency in accounting procedures and
interpretations, including the procedures that are part of most joint operating agreements.
These procedures establish a drilling rate and an overhead rate to reimburse the operator
of a well for overhead costs, such as accounting and engineering.
    
    Delay Rentals. Fees paid to the lessor of an oil and natural gas lease during the
primary term of the lease prior to commencement of production from a well.
    
    Development Well. A well drilled within the proved area of an oil or natural gas
reservoir to the depth of a stratigraphic horizon known to be productive.
    
    Dry Hole. A well found to be incapable of producing hydrocarbons in sufficient
quantities such that proceeds from the sale of such production would exceed production
expenses and taxes.
    
    EAC.Encore Acquisition Company, a publicly traded Delaware corporation, together with
its subsidiaries.
    
    ENP or the Partnership. Encore Energy Partners LP, a Delaware limited partnership,
together with its subsidiaries.
    
    Exploratory Well. A well drilled to find and produce oil or natural gas in an unproved
area, to find a new reservoir in a field previously producing oil or natural gas in another
reservoir, or to extend a known reservoir.
    
    Field. An area consisting of a single reservoir or multiple reservoirs, all grouped on
or related to the same individual geological structural feature and/or stratigraphic
condition.
    
    Gross Wells.The total number of wells in which an entity owns a working interest.
    
    Lease Operations Expense (LOE).All direct and allocated indirect costs of producing
oil and natural gas after completion of drilling. Such costs include labor,
superintendence, supplies, repairs, maintenance, and direct overhead charges.
    
    LIBOR.London Interbank Offered Rate.
    
    MBbl.One thousand Bbls.
    
    MBOE.One thousand BOE.
    
    Mcf.One thousand cubic feet, used in reference to natural gas.
    
    Mcf/D.One Mcf per day.
    
    MMcf.One million cubic feet, used in reference to natural gas.
    
    Natural Gas Liquids (NGLs).The combination of ethane, propane, butane, and natural
gasolines that when removed from natural gas become liquid under various levels of higher
pressure and lower temperature.
    
    Net Production.An entitys share of crude oil and natural gas produced from a
property, less royalties paid to landowners and production quantities due others.
    
    Net Profits Interest.An interest that entitles the owner to a specified share of net
profits from production of hydrocarbons.
    
    Net Wells.Gross wells multiplied by the percentage working interest owned by an
entity.
    
    NYMEX.New York Mercantile Exchange.
    
    Oil.Crude oil, condensate, and NGLs.
    
    Operator.The entity responsible for the exploration, development, and production of an
oil or natural gas well or lease.
    
    Production Margin.Oil and natural gas revenues less LOE and production, ad valorem,
and severance taxes.
    
    Proved Developed Reserves.Proved reserves that can be expected to be recovered through
existing wells with existing equipment and operating methods.
    
    Proved Reserves.The estimated quantities of crude oil, natural gas, and NGLs which
geological and engineering data demonstrate with reasonable certainty to be recoverable in
future years from known reservoirs under existing economic and operating conditions.
    
    Proved Undeveloped Reserves.Proved reserves that are expected to be recovered from new
wells on undrilled acreage for which the existence and recoverability of such reserves can
be estimated with reasonable certainty, or from existing wells where a relatively major
expenditure is required for recompletion. Proved undeveloped reserves include unrealized
 ii




---



##### Table of Contents



ENCORE ENERGY PARTNERS LP
 production response from fluid injection and other improved recovery techniques, where such
techniques have been proved effective by actual tests in the area and in the same reservoir.
    
    Recompletion.The completion for production of an existing well bore in another
formation from that in which the well has been previously completed.
    
    Reservoir.A porous and permeable underground formation containing a natural
accumulation of producible oil and/or natural gas that is confined by impermeable rock or
water barriers and is individual and separate from other reservoirs.
    
    Royalty.An interest in an oil or natural gas lease that gives the owner of the
interest the right to receive a portion of the production from the leased acreage (or of
the proceeds of the sale of production), but does not require the owner to pay any portion
of the costs of drilling or operating the wells on the leased acreage. Royalties may be
either landowners royalties, which are reserved by the owner of the leased acreage at the
time the lease is granted, or overriding royalties, which are usually reserved by an owner
of the leasehold in connection with a transfer to a subsequent owner.
    
    Secondary Recovery.Enhanced recovery of oil or natural gas from a reservoir beyond the
oil or natural gas that can be recovered by normal flowing and pumping operations.
Secondary recovery techniques involve maintaining or enhancing reservoir pressure by
injecting water, gas, or other substances into the formation. The purpose of secondary
recovery is to maintain reservoir pressure and to displace hydrocarbons toward the
wellbore. The most common secondary recovery techniques are gas injection and
waterflooding.
    
    Successful Well.A well capable of producing oil and/or natural gas in commercial
quantities.
    
    Tertiary Recovery.An enhanced recovery operation that normally occurs after
waterflooding in which chemicals or natural gases are used as the injectant.
    
    Waterflood.A secondary recovery operation in which water is injected into the
producing formation in order to maintain reservoir pressure and force oil toward and into
the producing wells.
    
    Working Interest.An interest in an oil or natural gas lease that gives the owner of
the interest the right to drill for and produce oil and natural gas on the leased acreage
and requires the owner to pay a share of the costs of drilling and production operations.
    
    Workover.Operations on a producing well to restore or increase production.
 iii




---



##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 ENCORE ENERGY PARTNERS LP
 
 CONSOLIDATED BALANCE SHEETS
   March 31,
    
    
    December 31,2008
    
    
    2007 *ASSETSCurrent assets:Cash and cash equivalents
    
    $
    5
    
    
    $
    3Accounts receivable:Trade
    
    
    27,754
    
    
    
    21,595Affiliate
    
    
    819
    
    
    
    3,290Derivatives
    
    
    1,308
    
    
    
    3,713Other
    
    
    1,312
    
    
    
    448Total current assets
    
    
    31,198
    
    
    
    29,049Properties and equipment, at cost  successful efforts method:Proved properties, including wells and related equipment
    
    
    506,105
    
    
    
    500,470Unproved properties
    
    
    279
    
    
    
    298Accumulated depletion, depreciation, and amortization
    
    
    (72,340
    )
    
    
    (63,295
    )434,044
    
    
    
    437,473Other property and equipment
    
    
    672
    
    
    
    510Accumulated depreciation
    
    
    (108
    )
    
    
    (68
    )564
    
    
    
    442Goodwill
    
    
    2,648
    
    
    
    2,648Other intangibles, net
    
    
    3,892
    
    
    
    3,969Derivatives
    
    
    11,001
    
    
    
    21,875Other
    
    
    1,559
    
    
    
    2,263Total assets
    
    $
    484,906
    
    
    $
    497,719LIABILITIES AND PARTNERS EQUITYCurrent liabilities:Accounts payable:Trade
    
    $
    1,767
    
    
    $
    1,915Affiliate
    
    
    3,632
    
    
    
    6,709Accrued liabilities:Lease operations expense
    
    
    2,038
    
    
    
    2,903Development capital
    
    
    3,639
    
    
    
    3,012Interest
    
    
    276
    
    
    
    147Production, ad valorem, and severance taxes
    
    
    8,460
    
    
    
    6,272Natural gas purchases
    
    
    1,268
    
    
    
    1,578Derivatives
    
    
    5,047
    
    
    
    865Other
    
    
    2,154
    
    
    
    2,898Total current liabilities
    
    
    28,281
    
    
    
    26,299Derivatives
    
    
    19,116
    
    
    
    20,447Future abandonment cost, net of current portion
    
    
    8,438
    
    
    
    8,314Deferred taxes
    
    
    212
    
    
    
    130Long-term debt
    
    
    165,000
    
    
    
    47,500Other
    
    
    53
    
    
    
    16Total liabilities
    
    
    221,100
    
    
    
    102,706Commitments and contingencies (see Note 12)Partners equity:Limited partners - 31,072,455 and 24,187,679 common units issued and
outstanding, respectively
    
    
    265,354
    
    
    
    391,956General partner - 504,851 general partner units outstanding
    
    
    20
    
    
    
    3,057Accumulated other comprehensive loss
    
    
    (1,568
    )
    
    
    Total partners equity
    
    
    263,806
    
    
    
    395,013Total liabilities and partners equity
    
    $
    484,906
    
    
    $
    497,719
 
 *
    
    Recast as discussed in Note 2.  1




---



##### Table of Contents



ENCORE ENERGY PARTNERS LP
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
   Three months endedMarch 31,2008
    
    
    2007 *Revenues:Oil
    
    $
    37,195
    
    
    $
    8,160Natural gas
    
    
    7,002
    
    
    
    4,613Marketing and other
    
    
    2,859
    
    
    
    1,238Total revenues
    
    
    47,056
    
    
    
    14,011Expenses:Production:Lease operations
    
    
    6,058
    
    
    
    2,691Production, ad valorem, and severance taxes
    
    
    4,798
    
    
    
    1,475Depletion, depreciation, and amortization
    
    
    9,120
    
    
    
    3,706Exploration
    
    
    29
    
    
    
    31General and administrative
    
    
    2,922
    
    
    
    555Marketing
    
    
    2,393
    
    
    
    1,080Derivative fair value loss
    
    
    15,587
    
    
    
    3,683Other operating
    
    
    351
    
    
    
    145Total expenses
    
    
    41,258
    
    
    
    13,366Operating income
    
    
    5,798
    
    
    
    645Other income (expenses):Interest
    
    
    (1,640
    )
    
    
    (1,102
    )Other
    
    
    17
    
    
    
    Total other income (expenses)
    
    
    (1,623
    )
    
    
    (1,102
    )Income (loss) before income taxes
    
    
    4,175
    
    
    
    (457
    )Income tax provision
    
    
    (90
    )
    
    
    (32
    )Net income (loss)
    
    $
    4,085
    
    
    $
    (489
    )Net income allocation (see Note 10):Limited partners interest in net income
    
    $
    383General partners interest in net income
    
    $
    35Net income per common unit:Basic
    
    $
    0.01Diluted
    
    $
    0.01Weighted average common units outstanding:Basic
    
    
    28,273Diluted
    
    
    28,632
 
 *
    
    Recast as discussed in Note 2.  2




---



##### Table of Contents



ENCORE ENERGY PARTNERS LP
 
 CONSOLIDATED STATEMENT OF PARTNERS EQUITY AND COMPREHENSIVE INCOME
   AccumulatedOther
    
    
    TotalLimited
    
    
    General
    
    
    Comprehensive
    
    
    PartnersPartners
    
    
    Partner
    
    
    Loss
    
    
    EquityBalance at December 31, 2007 *
    
    $
    391,956
    
    
    $
    3,057
    
    
    $
    
    
    
    $
    395,013Deemed distributions to affiliates in connection with acquisition of Permian
and Williston Basin assets
    
    
    (122,003
    )
    
    
    (2,944
    )
    
    
    
    
    
    
    (124,947
    )Non-cash unit-based compensation
    
    
    1,040
    
    
    
    18
    
    
    
    
    
    
    
    1,058Cash distributions to unitholders
    
    
    (9,639
    )
    
    
    (196
    )
    
    
    
    
    
    
    (9,835
    )Components of comprehensive income:Net income attributable to affiliates related to pre-partnership
operations of the Permian and Williston Basin assets
    
    
    3,321
    
    
    
    80
    
    
    
    
    
    
    
    3,401Net income attributable to unitholders
    
    
    679
    
    
    
    5
    
    
    
    
    
    
    
    684Change in unrealized hedge loss on interest rate swap agreements
    
    
    
    
    
    
    
    
    
    
    (1,568
    )
    
    
    (1,568
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,517Balance at March 31, 2008
    
    $
    265,354
    
    
    $
    20
    
    
    $
    (1,568
    )
    
    $
    263,806
 
 *
    
    Recast as discussed in Note 2.  3




---



##### Table of Contents



ENCORE ENERGY PARTNERS LP
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
   Three months endedMarch 31,2008
    
    
    2007*Cash flows from operating activities:Net income (loss)
    
    $
    4,085
    
    
    $
    (489
    )Adjustments to reconcile net income (loss) to net cash provided
by operating activities:Depletion, depreciation, and amortization
    
    
    9,120
    
    
    
    3,706Non-cash exploration expense
    
    
    20
    
    
    
    5Non-cash unit-based compensation expense
    
    
    1,058
    
    
    
    Non-cash derivative fair value loss
    
    
    15,758
    
    
    
    3,683Deferred taxes
    
    
    38
    
    
    
    3Other
    
    
    390
    
    
    
    539Changes in operating assets and liabilities, net of effects from acquisition:Accounts receivable
    
    
    (3,233
    )
    
    
    (4,823
    )Other current assets
    
    
    (820
    )
    
    
    (20
    )Long-term derivatives
    
    
    (1,196
    )
    
    
    (2,051
    )Other assets
    
    
    766
    
    
    
    (456
    )Accounts payable
    
    
    (3,225
    )
    
    
    (817
    )Other current liabilities
    
    
    187
    
    
    
    3,605Net cash provided by operating activities
    
    
    22,948
    
    
    
    2,885Cash flows from investing activities:Purchases of other property and equipment
    
    
    (162
    )
    
    
    Acquisition of oil and natural gas properties
    
    
    
    
    
    
    (328,464
    )Development of oil and natural gas properties
    
    
    (4,858
    )
    
    
    (1,206
    )Net cash used in investing activities
    
    
    (5,020
    )
    
    
    (329,670
    )Cash flows from financing activities:Proceeds from long-term debt, net of issuance costs
    
    
    142,310
    
    
    
    245,883Payments on long-term debt
    
    
    (25,000
    )
    
    
    (8,383
    )Deemed distributions to affiliates in connection with acquisition of Permian and Williston Basin assets
    
    
    (125,401
    )
    
    
    Distributions to unitholders
    
    
    (9,835
    )
    
    
    Contribution by EAC in connection with purchase of Elk Basin assets
    
    
    
    
    
    
    93,658Distributions to owner prior to IPO
    
    
    
    
    
    
    (3,853
    )Net cash provided by (used in) financing activities
    
    
    (17,926
    )
    
    
    327,305Increase in cash and cash equivalents
    
    
    2
    
    
    
    520Cash and cash equivalents, beginning of period
    
    
    3
    
    
    
    Cash and cash equivalents, end of period
    
    $
    5
    
    
    $
    520Non-cash financing activities:Issuance of
common units in connection with acquisition of Permian and Williston Basin assets (see Note 3)
 
 *
    
    Recast as discussed in Note 2.  4




---



##### Table of Contents



ENCORE ENERGY PARTNERS LP
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Note 1. Description of Business
   Initial Public Offering and Concurrent Transactions
  (a)
    
    The Partnership entered into a contribution, conveyance and assumption agreement (the
Contribution Agreement) with the General Partner, OLLC, EAC, Encore Operating, L.P., a
Texas limited partnership and indirect wholly owned subsidiary of EAC (Encore Operating),
and Encore Partners LP Holdings LLC. The following transactions, among others, occurred
pursuant to the Contribution Agreement:
 
    
    Encore Operating transferred the Permian Basin Assets to the Partnership in
exchange for 4,043,478 common units; and
    
    EAC agreed to indemnify the Partnership for certain environmental liabilities, tax
liabilities, and title defects, as well as defects relating to retained assets and
liabilities, occurring or existing before the closing.
 These transfers and distributions were made in a series of steps outlined in the
Contribution Agreement. In connection with the issuance of the common units by the
Partnership in exchange for the Permian Basin Assets, the IPO, and the exercise of the
underwriters option to purchase additional common units, the General Partner exchanged a
certain number of common units for general partner units to enable it to maintain its then
2 percent general partner interest.(b)
    
    The Partnership entered into an amended and restated administrative services agreement
(the Administrative Services Agreement) with the General Partner, OLLC, Encore Operating,
and EAC, whereby Encore Operating performs administrative services for the Partnership,
such as accounting, corporate development, finance, land, legal, and engineering. In
addition, Encore Operating provides all personnel and any facilities, goods, and equipment
necessary to perform these services and not otherwise provided by the Partnership. Encore
Operating initially received an administrative fee of $1.75 per BOE of the Partnerships
production for such services. Encore Operating also charges the Partnership for
reimbursement of actual third-party expenses incurred on the Partnerships behalf. Encore
Operating has substantial discretion in determining which third-party expenses to incur on
the Partnerships behalf. In addition, Encore Operating is entitled to retain any COPAS
overhead charges associated with drilling and operating wells that would otherwise be paid
by non-operating interest owners to the operator of a well. Encore Operating is not liable
to the Partnership for its performance of, or failure to perform, services under the
Administrative Services Agreement unless its acts or omissions constitute gross negligence
or
willful misconduct. Effective April 1, 2008, the administrative fee per the
Administrative Services Agreement increased to $1.84 per BOE of the Partnerships
production as a result of the COPAS Wage Index Adjustment for the current year.
 5




---



##### Table of Contents



ENCORE ENERGY PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
 The Partnership reimburses EAC for any additional state income, franchise, or similar tax
paid by EAC resulting from the inclusion of the Partnership in a combined state income,
franchise, or similar tax report with EAC as required by applicable law. The amount of
any such reimbursement is limited to the tax that the Partnership would have paid had it
not been included in a combined group with EAC. See Note 13. Related Party
Transactions for additional discussion regarding the Administrative Services Agreement.(c)
    
    The Encore Energy Partners GP LLC Long-Term Incentive Plan (the ENP Incentive Plan)
was approved by the General Partner, which applies to employees, consultants, and directors
of EAC, the General Partner, and any of their affiliates who perform services for the
Partnership. See Note 11. Unit-Based Compensation Plans for additional discussion
regarding the ENP Incentive Plan.
 Note 2. Basis of Presentation
      New Accounting Pronouncements
 Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements (SFAS
157)
 Effective Date of FASB Statement No. 157
 6




---



##### Table of Contents



ENCORE ENERGY PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
  SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities  including an
amendment of FASB Statement No. 115 (SFAS 159)
  SFAS No. 141 (revised 2007), Business Combinations (SFAS 141R)
 Business
Combinations.
 SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities  an amendment of
FASB Statement No. 133 (SFAS 161)
 Accounting for
Derivative Instruments and Hedging Activities,
 Emerging Issues Task Force (EITF) Issue No. 07-4, Application of the Two-Class Method under FASB
Statement No. 128, Earnings per Share, to Master Limited Partnerships (EITF 07-4)
 Earnings per Share
 7




---



##### Table of Contents



ENCORE ENERGY PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
 Note 3. Acquisitions
 Permian and Williston Basin Assets
   Elk Basin Assets
   Calculation of total purchase price:Cash paid to Anadarko
    
    $
    329,551Transaction costs
    
    
    1,110Total purchase price
    
    $
    330,661Allocation of purchase price to the fair value of net assets acquired:Proved properties, including wells and related equipment
    
    $
    332,549Intangibles
    
    
    4,225Other property and equipment
    
    
    346Accounts receivable
    
    
    1,444Total assets acquired
    
    
    338,564Current liabilities
    
    
    (1,120
    )Future abandonment cost and assumed liabilities
    
    
    (6,783
    )Total liabilities assumed
    
    
    (7,903
    )Fair value of net assets acquired
    
    $
    330,661
  8




---



##### Table of Contents



ENCORE ENERGY PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
   Three MonthsEnded March 31,2007(in thousands)Pro forma total revenues
    
    $
    28,172Pro forma net loss
    
    $
    (2,549
    )
  Note 4. Proved Properties
  March 31,
    
    
    December 31,2008
    
    
    2007(in thousands)Proved leasehold costs
    
    $
    372,077
    
    
    $
    372,076Wells and related equipment  Completed
    
    
    129,368
    
    
    
    124,381Wells and related equipment  In process
    
    
    4,660
    
    
    
    4,013Total proved properties
    
    $
    506,105
    
    
    $
    500,470
 Note 5. Derivative Financial Instruments
 Commodity Derivative Contracts  Mark-to-Market Accounting
  9




---



##### Table of Contents



ENCORE ENERGY PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
  Oil Derivative Contracts
 Daily
    
    
    Average
    
    
    
    Daily
    
    
    Average
    
    
    
    Daily
    
    
    Average
    
    
    
    Asset (Liability)Floor
    
    
    Floor
    
    
    
    Cap
    
    
    Cap
    
    
    
    Swap
    
    
    Swap
    
    
    
    Fair MarketPeriod
    
    Volume
    
    
    Price
    
    
    
    Volume
    
    
    Price
    
    
    
    Volume
    
    
    Price
    
    
    
    Value(Bbls)
    
    
    (per Bbl)
    
    
    
    (Bbls)
    
    
    (per Bbl)
    
    
    
    (Bbls)
    
    
    (per Bbl)
    
    
    
    (in thousands)April  Dec. 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    143880
    
    
    $
    80.00
    
    
    
    
    440
    
    
    $
    107.60
    
    
    
    
    
    
    
    $
    2,000
    
    
    
    75.00
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    500
    
    
    
    65.00
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,375
    )880
    
    
    
    80.00
    
    
    
    
    440
    
    
    
    97.75
    
    
    
    
    
    
    
    
    2,250
    
    
    
    74.11
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    68.702010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,662
    )880
    
    
    
    80.00
    
    
    
    
    440
    
    
    
    93.80
    
    
    
    
    
    
    
    
    2,000
    
    
    
    75.00
    
    
    
    
    1,000
    
    
    
    77.23
    
    
    
    
    
    
    
    
    2011
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4501,880
    
    
    
    80.00
    
    
    
    
    1,440
    
    
    
    95.41
    
    
    
    
    
    
    
    
    1,000
    
    
    
    70.00
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (10,444
    )
 Natural Gas Derivative Contracts
 Daily
    
    
    Average
    
    
    
    Daily
    
    
    Average
    
    
    
    Daily
    
    
    Average
    
    
    
    Asset (Liability)Floor
    
    
    Floor
    
    
    
    Cap
    
    
    Cap
    
    
    
    Swap
    
    
    Swap
    
    
    
    Fair MarketPeriod
    
    Volume
    
    
    Price
    
    
    
    Volume
    
    
    Price
    
    
    
    Volume
    
    
    Price
    
    
    
    Value(Mcf)
    
    
    (per Mcf)
    
    
    
    (Mcf)
    
    
    (per Mcf)
    
    
    
    (Mcf)
    
    
    (per Mcf)
    
    
    
    (in thousands)April  Dec. 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (726
    )3,800
    
    
    $
    8.20
    
    
    
    
    3,800
    
    
    $
    9.83
    
    
    
    
    
    
    
    $
    3,800
    
    
    
    7.20
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (163
    )3,800
    
    
    
    8.20
    
    
    
    
    3,800
    
    
    
    9.83
    
    
    
    
    
    
    
    
    3,800
    
    
    
    7.20
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6653,800
    
    
    
    8.20
    
    
    
    
    3,800
    
    
    
    9.58
    
    
    
    
    
    
    
    
    3,800
    
    
    
    7.20
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (224
    )
 Interest Rate Swap Agreements
  Notional
    
    Fixed
    
    FloatingTerm
    
    Amount
    
    Rate
    
    Rate(in thousands)March 2008-January 2011
    
    $
    50,000
    
    
    
    3.1610
    %
    
    1 month LIBORMarch 2008-January 2011
    
    
    25,000
    
    
    
    2.9650
    %
    
    1 month LIBORMarch 2008-January 2011
    
    
    25,000
    
    
    
    2.9613
    %
    
    1 month LIBOR
  10




---



##### Table of Contents



ENCORE ENERGY PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
 Current Period Impact
  Three months ended March 31,2008
    
    
    2007(in thousands)Mark-to-market loss on commodity derivative contracts
    
    $
    14,002
    
    
    $
    3,683Premium amortization
    
    
    2,137
    
    
    
    Change in fair value of interest rate swap agreements prior to designation
    
    
    (381
    )
    
    
    Settlements on commodity derivative contracts
    
    
    (171
    )
    
    
    Total derivative fair value loss
    
    $
    15,587
    
    
    $
    3,683
 Accumulated Other Comprehensive Loss (AOCL)
  Note 6. Fair Value Measurements
    
    
    Level 1 Quoted prices are available in active markets for identical assets or
liabilities as of the reporting date. Active markets are those in which transactions
for the asset or liability occur in sufficient frequency and volume to provide pricing
information on an ongoing basis.
    
    Level 2 Pricing inputs, other than quoted prices within Level 1, that are
observable for the asset or liability, either directly or indirectly, as of the
reporting date. Level 2 includes those financial instruments that are valued using
models or other valuation methodologies. These models are primarily industry-standard
models that consider various assumptions, including quoted forward prices for
commodities, time value, volatility factors, and current market and contractual prices
for the underlying instruments, as well as other relevant economic measures.
Substantially all of these assumptions are observable in the marketplace throughout the
full term of the instrument, can be derived from observable data, or are supported by
observable levels at which transactions are executed in the marketplace.
 11




---



##### Table of Contents



ENCORE ENERGY PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
 
    
    Level3  Pricing inputs include significant unobservable inputs. These inputs may
be used with internally developed methodologies that result in managements best
estimate of fair value. At each balance sheet date, the Partnership performs an
analysis of all instruments subject to SFAS 157 and includes in Level 3 all of those
instruments whose fair value is based on significant unobservable inputs.
   Fair Value Measurements at Reporting Date UsingQuoted Prices inActive Markets for
    
    
    Significant Other
    
    
    SignificantMarch 31,
    
    
    Identical Assets
    
    
    Observable Inputs
    
    
    Unobservable Inputs2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)(in thousands)Oil derivative contracts  swaps
    
    $
    (9,364
    )
    
    $
    
    
    
    $
    (9,364
    )
    
    $
    Oil derivative contracts  floors and caps
    
    
    (1,080
    )
    
    
    
    
    
    
    
    
    
    
    (1,080
    )Natural gas derivative contracts  floors and caps
    
    
    (224
    )
    
    
    
    
    
    
    
    
    
    
    (224
    )Interest rate swap agreements
    
    
    (1,186
    )
    
    
    
    
    
    
    (1,186
    )
    
    
    Total
    
    $
    (11,854
    )
    
    $
    
    
    
    $
    (10,550
    )
    
    $
    (1,304
    )
  Fair Value Measurements Using Significant UnobservableInputs(Level 3)Oil Derivative
    
    
    Natural GasContracts - Floors
    
    
    Derivative Contractsand Caps
    
    
    - Floors and Caps
    
    
    Total(in thousands)Balance at January 1, 2008
    
    $
    6,466
    
    
    $
    4,533
    
    
    $
    10,999Total gains (losses):Included in earnings
    
    
    (8,742
    )
    
    
    (4,586
    )
    
    
    (13,328
    )Purchases, issuances, and settlements
    
    
    1,196
    
    
    
    (171
    )
    
    
    1,025Balance at March 31, 2008
    
    $
    (1,080
    )
    
    $
    (224
    )
    
    $
    (1,304
    )The amount of total losses for the period included in earnings
attributable to the change in unrealized gains or losses relating
to assets still held at the reporting date
    
    $
    (8,742
    )
    
    $
    (4,586
    )
    
    $
    (13,328
    )
   12




---



##### Table of Contents



ENCORE ENERGY PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
  Level 1 Fair Value Measurements
  Level 2 Fair Value Measurements
 Oil derivative contracts  swaps
 Interest rate swap agreements
 Level 3 Fair Value Measurements
 Oil and natural gas derivative contracts  floors and caps
 Note 7. Asset Retirement Obligations
  Future abandonment liability at January 1, 2008
    
    $
    8,704Wells drilled
    
    
    20Accretion of discount
    
    
    149Revision of previous estimates
    
    
    (98
    )Future abandonment liability at March 31, 2008
    
    $
    8,775
 Note 8. Debt
 Revolving Credit Facility
    13




---



##### Table of Contents



ENCORE ENERGY PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
   Subordinated Credit Agreement
  Note 9. Partners Equity and Distributions
   Note 10. Earnings Per Common Unit (EPU)
   14




---



##### Table of Contents



ENCORE ENERGY PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
  Net income
    
    $
    4,085Less: Net income related to pre-partnership operations of the
Permian and Williston Basin Assets
    
    
    (3,401
    )Net income attributable to unitholders
    
    $
    684Numerator:Net income attributable to unitholders
    
    $
    684Less: Net income allocation to General Partner
    
    
    (35
    )Less: Quarterly distribution to holders of management incentive units
    
    
    (266
    )Net income available to limited partners
    
    $
    383Denominator:Denominator for basic EPU:Weighted average common units outstanding
    
    
    28,273Effect of dilutive management incentive units (a)
    
    
    359Denominator for diluted EPU
    
    
    28,632Net income per common unit:Basic
    
    $
    0.01Diluted
    
    $
    0.01
 
 (a)
    
    A total of 183,333 management incentive units, which represented 286,458 common unit
equivalents as of March 31, 2008, were outstanding at March 31, 2008 but were excluded from
the above calculation of diluted EPU for the first quarter of 2008 because their effect
would be antidilutive. See additional discussion of management incentive units in Note
11. Unit-Based Compensation Plans. Note 11. Unit-Based Compensation Plans
 Management Incentive Units
  
    
    a change in control;
    
    at the option of the holder, when the Partnerships aggregate quarterly distributions to
unitholders over four consecutive quarters are at least $2.05 per unit; or
    
    the holders death or disability.
  
    
    the holders of management incentive units are not entitled to receive, in the aggregate,
common units upon conversion of the management incentive units that exceed a maximum limit
of 5.1 percent of all the Partnerships then-outstanding units; and
    
    the holders of management incentive units are not entitled to receive, in the aggregate,
distributions of the Partnerships
available cash in an amount that exceeds a maximum limit of 5.1 percent of all such
distributions to all unitholders at the time of any such distribution.
 15




---



##### Table of Contents



ENCORE ENERGY PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
   ENP Incentive Plan
  Share-Based Payment.
   Note 12. Commitments and Contingencies
   16




---



##### Table of Contents



ENCORE ENERGY PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
 Note 13. Related Party Transactions
       Note 14. Subsequent Events
    17




---



##### Table of Contents



ENCORE ENERGY PARTNERS LP
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion and analysis contains forward-looking statements, which give our
current expectations or forecasts of future events. Actual results could differ materially from
those discussed in these forward-looking statements due to many factors, including, but not limited
to, those set forth under Item 1A. Risk Factors in our 2007 Annual Report on Form 10-K . The
following discussion and analysis should be read in conjunction with the consolidated financial
statements and notes thereto included in Item 1. Financial Statements of this Report and in Item
8. Financial Statements and Supplementary Data of our 2007 Annual Report on Form 10-K .
 Introduction
  
    
    Overview of Business
    
    Results of Operations- Comparison of Quarter Ended March 31, 2008 to Quarter Ended March 31, 2007
    
    Liquidity and Capital Resources
    
    Capital Commitments and Contingencies
    
    Critical Accounting Policies and Estimates
    
    New Accounting Pronouncements
 Overview of Business
   18




---



##### Table of Contents



ENCORE ENERGY PARTNERS LP
 Results of Operations
 Comparison of Quarter Ended March 31, 2008 to Quarter Ended March 31, 2007
 Oil and natural gas revenues.
 Three months ended March 31,
    
    
    Increase / (Decrease)2008
    
    
    2007
    
    
    $
    
    
    %Revenues (in thousands):Oil
    
    $
    37,195
    
    
    $
    8,160
    
    
    $
    29,035Natural gas
    
    
    7,002
    
    
    
    4,613
    
    
    
    2,389Total combined oil and natural gas revenues
    
    $
    44,197
    
    
    $
    12,773
    
    
    $
    31,424
    
    
    
    246
    %Average realized prices:Oil ($/Bbl)
    
    $
    87.30
    
    
    $
    46.84
    
    
    $
    40.46
    
    
    
    86
    %Natural gas ($/Mcf)
    
    $
    7.88
    
    
    $
    6.93
    
    
    $
    0.95
    
    
    
    14
    %Combined ($/BOE)
    
    $
    76.99
    
    
    $
    44.80
    
    
    $
    32.19
    
    
    
    72
    %Total production volumes:Oil (MBbls)
    
    
    426
    
    
    
    174
    
    
    
    252
    
    
    
    145
    %Natural gas (MMcf)
    
    
    888
    
    
    
    665
    
    
    
    223
    
    
    
    33
    %Combined (MBOE)
    
    
    574
    
    
    
    285
    
    
    
    289
    
    
    
    101
    %Average daily production volumes:Oil (Bbls/D)
    
    
    4,682
    
    
    
    4,089
    
    
    
    593
    
    
    
    15
    %Natural gas (Mcf/D)
    
    
    9,760
    
    
    
    7,881
    
    
    
    1,879
    
    
    
    24
    %Combined (BOE/D)
    
    
    6,309
    
    
    
    5,402
    
    
    
    907
    
    
    
    17
    %Average NYMEX prices:Oil (per Bbl)
    
    $
    97.74
    
    
    $
    58.33
    
    
    $
    39.41
    
    
    
    68
    %Natural gas (per Mcf)
    
    $
    8.02
    
    
    $
    6.77
    
    
    $
    1.25
    
    
    
    18
    %
   19




---



##### Table of Contents



ENCORE ENERGY PARTNERS LP
  Three months ended March 31,2008
    
    2007Average realized oil price ($/Bbl)
    
    $
    87.30
    
    
    $
    46.84Average NYMEX ($/Bbl)
    
    $
    97.74
    
    
    $
    58.33Differential to NYMEX
    
    $
    (10.44
    )
    
    $
    (11.49
    )Average realized oil price to NYMEX percentage
    
    
    89
    %
    
    
    80
    %Average realized natural gas price ($/Mcf)
    
    $
    7.88
    
    
    $
    6.93Average NYMEX ($/Mcf)
    
    $
    8.02
    
    
    $
    6.77Differential to NYMEX
    
    $
    (0.14
    )
    
    $
    0.16Average realized natural gas price to NYMEX percentage
    
    
    98
    %
    
    
    102
    %
   Marketing revenues and expenses.
  Three Months Ended March 31,2008
    
    
    2007(in thousands, except per BOE amounts)Marketing revenues
    
    $
    2,859
    
    
    $
    1,238Marketing expenses
    
    
    (2,393
    )
    
    
    (1,080
    )Marketing, net
    
    $
    466
    
    
    $
    158Marketing revenues per BOE
    
    $
    4.98
    
    
    $
    4.34Marketing expenses per BOE
    
    
    (4.17
    )
    
    
    (3.79
    )Marketing gain, net per BOE
    
    $
    0.81
    
    
    $
    0.55
 20




---



##### Table of Contents



ENCORE ENERGY PARTNERS LP
 Expenses.
 Three months ended March 31,
    
    
    Increase / (Decrease)2008
    
    
    2007
    
    
    $
    
    
    %Expenses (in thousands):Production:Lease operations
    
    $
    6,058
    
    
    $
    2,691
    
    
    $
    3,367Production, ad valorem, and severance taxes
    
    
    4,798
    
    
    
    1,475
    
    
    
    3,323Total production expenses
    
    
    10,856
    
    
    
    4,166
    
    
    
    6,690
    
    
    
    161
    %Other:Depletion, depreciation, and amortization
    
    
    9,120
    
    
    
    3,706
    
    
    
    5,414Exploration
    
    
    29
    
    
    
    31
    
    
    
    (2
    )General and administrative
    
    
    2,922
    
    
    
    555
    
    
    
    2,367Derivative fair value loss
    
    
    15,587
    
    
    
    3,683
    
    
    
    11,904Other operating
    
    
    351
    
    
    
    145
    
    
    
    206Total operating
    
    
    38,865
    
    
    
    12,286
    
    
    
    26,579
    
    
    
    216
    %Interest
    
    
    1,640
    
    
    
    1,102
    
    
    
    538Income tax provision
    
    
    90
    
    
    
    32
    
    
    
    58Total expenses
    
    $
    40,595
    
    
    $
    13,420
    
    
    $
    27,175
    
    
    
    202
    %Expenses (per BOE):Production:Lease operations
    
    $
    10.55
    
    
    $
    9.44
    
    
    $
    1.11Production, ad valorem, and severance taxes
    
    
    8.36
    
    
    
    5.17
    
    
    
    3.19Total production expenses
    
    
    18.91
    
    
    
    14.61
    
    
    
    4.30
    
    
    
    29
    %Other:Depletion, depreciation, and amortization
    
    
    15.89
    
    
    
    13.00
    
    
    
    2.89General and administrative
    
    
    5.09
    
    
    
    1.95
    
    
    
    3.14Exploration
    
    
    0.05
    
    
    
    0.11
    
    
    
    (0.06
    )Derivative fair value loss
    
    
    27.15
    
    
    
    12.92
    
    
    
    14.23Other operating
    
    
    0.61
    
    
    
    0.51
    
    
    
    0.10Total operating
    
    
    67.70
    
    
    
    43.10
    
    
    
    24.60
    
    
    
    57
    %Interest
    
    
    2.86
    
    
    
    3.87
    
    
    
    (1.01
    )Income tax provision
    
    
    0.16
    
    
    
    0.11
    
    
    
    0.05Total expenses
    
    $
    70.72
    
    
    $
    47.08
    
    
    $
    23.64
    
    
    
    50
    %
 Production expenses.
   21




---



##### Table of Contents



ENCORE ENERGY PARTNERS LP
 Depletion, depreciation, and amortization (DD&A) expense.
 G&A
expense.
 Derivative fair value loss.
 Three months ended March 31,
    
    
    Increase /2008
    
    
    2007
    
    
    (Decrease)(in thousands)Mark-to-market loss on commodity derivative contracts
    
    $
    14,002
    
    
    $
    3,683
    
    
    $
    10,319Premium amortization
    
    
    2,137
    
    
    
    
    
    
    
    2,137Change in fair value of interest rate swap agreements prior to designation
    
    
    (381
    )
    
    
    
    
    
    
    (381
    )Settlements on commodity derivative contracts
    
    
    (171
    )
    
    
    
    
    
    
    (171
    )Total derivative fair value loss
    
    $
    15,587
    
    
    $
    3,683
    
    
    $
    11,904
 Interest expense.
 Liquidity and Capital Resources
    22




---



##### Table of Contents



ENCORE ENERGY PARTNERS LP
   Cash Flows
 Internally generated cash flows.
 Cash flows from operating activities
 Cash flows from investing activities
 Cash flows from financing activities
   Revolving Credit Facility
    23




---



##### Table of Contents



ENCORE ENERGY PARTNERS LP
   Applicable Margin for
    
    Applicable Margin forRatio of Total Outstanding Borrowings to Borrowing Base
    
    Eurodollar Loans
    
    Base Rate LoansLess than .50 to 1
    
    
    1.000
    %
    
    
    0.000
    %Greater than or equal to .50 to 1 but less than .75 to 1
    
    
    1.250
    %
    
    
    0.000
    %Greater than or equal to .75 to 1 but less than .90 to 1
    
    
    1.500
    %
    
    
    0.250
    %Greater than or equal to .90 to 1
    
    
    1.750
    %
    
    
    0.500
    %
    
    
    a prohibition against incurring debt, subject to permitted exceptions;
    
    a prohibition against purchasing or redeeming capital stock, or prepaying indebtedness,
subject to permitted exceptions;
    
    a restriction on creating liens on our assets and the assets of our subsidiaries,
subject to permitted exceptions;
    
    restrictions on merging and selling assets outside the ordinary course of business;
    
    restrictions on use of proceeds, investments, transactions with affiliates, or change of
principal business;
    
    a provision limiting oil and natural gas hedging transactions (other than puts) to a
volume not exceeding 75 percent of anticipated production from proved producing reserves;
    
    a requirement that OLLC maintain a ratio of consolidated current assets to consolidated
current liabilities of not less than 1.0 to 1.0;
    
    a requirement that OLLC maintain a ratio of consolidated EBITDA (as defined in the
credit agreement) to the sum of consolidated net interest expense plus letter of credit
fees of not less than 1.5 to 1.0;
    
    a requirement that OLLC maintain a ratio of consolidated EBITDA (as defined in the
credit agreement) to consolidated senior interest expense of not less than 2.5 to 1.0; and
    
    a requirement that OLLC maintain a ratio of consolidated funded debt (excluding certain
related party debt) to consolidated adjusted EBITDA (as defined in the credit agreement) of
not more than 3.5 to 1.0.
  24




---



##### Table of Contents



ENCORE ENERGY PARTNERS LP
  CommitmentRatio of Total Outstanding Borrowings to Borrowing Base
    
    Fee PercentageLess than .50 to 1
    
    
    0.250
    %Greater than or equal to .50 to 1 but less than .75 to 1
    
    
    0.300
    %Greater than or equal to .75 to 1 but less than .90 to 1
    
    
    0.375
    %Greater than or equal to .90 to 1
    
    
    0.375
    %
  Current capitalization.
 Capital Commitments and Contingencies
 Capital Commitments
  
    
    Distributions to unitholders;
    
    Development, exploitation, and exploration of oil and natural gas properties;
    
    Acquisitions of oil and natural gas properties;
    
    Funding of necessary working capital; and
    
    Contractual obligations.
 Distributions to unitholders.
  Development, exploitation, and exploration of oil and natural gas properties.
 Three months ended March 31,2008
    
    
    2007(in thousands)Development and exploitation
    
    $
    5,849
    
    
    $
    3,675Exploration
    
    
    9
    
    
    
    30Total
    
    $
    5,858
    
    
    $
    3,705
 25




---



##### Table of Contents



ENCORE ENERGY PARTNERS LP
   Acquisitions of oil and natural gas properties.
  Funding of necessary working capital.
 Off-balance sheet arrangements.
 Contractual obligations.
 Payments Due by PeriodNine Months EndingContractual Obligations and
    
    Total
    
    
    December 31, 2008
    
    
    2009 - 20010
    
    
    2011 - 2012
    
    
    ThereafterCommitments
    
    (in thousands)Revolving credit facility (a)
    
    $
    196,601
    
    
    $
    6,051
    
    
    $
    16,137
    
    
    $
    174,413
    
    
    $
    Commodity derivative contracts (b)
    
    
    16,104
    
    
    
    278
    
    
    
    9,910
    
    
    
    5,916
    
    
    
    Interest rate swap agreements
    
    
    1,222
    
    
    
    351
    
    
    
    871
    
    
    
    
    
    
    
    Development commitments (c)
    
    
    4,339
    
    
    
    4,339
    
    
    
    
    
    
    
    
    
    
    
    Asset retirement obligations (d)
    
    
    32,595
    
    
    
    217
    
    
    
    580
    
    
    
    580
    
    
    
    31,218Total
    
    $
    250,861
    
    
    $
    11,236
    
    
    $
    27,498
    
    
    $
    180,909
    
    
    $
    31,218
 
 (a)
    
    Amounts include principal and projected interest payments. Please read Note 8 of Notes
to Consolidated Financial Statements included in Item 1. Financial Statements for
additional information regarding our long-term debt.(b)
    
    Represents net liabilities for commodity derivative contracts that were valued as of
March 31, 2008, the ultimate settlement of which are unknown because they are subject to
continuing market risk. Please read Item 3. Quantitative and Qualitative Disclosures
about Market Risk and Note 5 of Notes to Consolidated Financial Statements included in
Item 1. Financial Statements for additional information regarding our commodity
derivative contracts.(c)
    
    Development commitments represent authorized purchases for work in process. Also at
March 31, 2008, we had $7.5 million of authorized purchases not placed to vendors
(authorized AFEs), which were not accrued and are excluded from the above table, but are
budgeted for and expected to be made unless circumstances change.(d)
    
    Asset retirement obligations represent the undiscounted future plugging and abandonment
expenses on oil and natural gas properties and related facilities disposal at the
completion of field life. Please read Note 7 of Notes to Consolidated Financial Statements
included in Item 1. Financial Statements for additional information regarding our asset
retirement obligations. Other contingencies and commitments
 26




---



##### Table of Contents



ENCORE ENERGY PARTNERS LP
   
    
    beginning on the first day of April in each year by an amount equal to the product of
the then-current administrative fee multiplied by the COPAS Wage Index Adjustment for the
current year;
    
    if we or one of our subsidiaries acquires any additional assets, Encore Operating may
propose an increase in its administrative fee that covers the provision of services for
such additional assets; however, such proposal must be approved by our General Partner
upon the recommendation of the conflicts committee of our General Partner; and
    
    otherwise as agreed upon by Encore Operating and our General Partner, with the
approval of the conflicts committee of our General Partner.
 Critical Accounting Policies and Estimates
  New Accounting Pronouncements
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
   Commodity Price Sensitivity
  Interest Rate Sensitivity
   27




---



##### Table of Contents



ENCORE ENERGY PARTNERS LP
  
 Item 4. Controls and Procedures
   
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 6. Exhibits
 Exhibits
 3.1
    
    Certificate of Limited Partnership of Encore Energy Partners LP (incorporated by reference to
Exhibit 3.1 to Form S-1 (File No. 333-142847) for Encore Energy Partners LP, filed with the
SEC on May 11, 2007).3.2
    
    Second Amended and Restated Agreement of Limited Partnership of Encore Energy Partners LP,
dated as of September 17, 2007 (incorporated by reference to Exhibit 3.1 to the Current Report
on Form 8-K, filed with the SEC on September 21, 2007).3.2.1
    
    Amendment No. 1 to Second Amended and Restated Agreement of Limited Partnership of Encore
Energy Partners LP, dated as of May 10, 2007 (incorporated by reference to Exhibit 3.1 to the
Current Report on Form 8-K, filed with the SEC on April 18, 2008).
 28




---



##### Table of Contents



ENCORE ENERGY PARTNERS LP
 10.1
    
    Purchase and Investment Agreement, dated December 27, 2007, by and among Encore Energy
Partners LP, Encore Energy Partners Operating LLC, and Encore Operating, L.P. (incorporated by
reference to Exhibit 2.1 to the Current Report on Form 8-K, filed with the SEC on January 3,
2008).31.1*
    
    Rule 13a-14(a)/15d-14(a) Certification (Principal Executive Officer of our General Partner).31.2*
    
    Rule 13a-14(a)/15d-14(a) Certification (Principal Financial Officer of our General Partner).32.1*
    
    Section 1350 Certification (Principal Executive Officer of our General Partner).32.2*
    
    Section 1350 Certification (Principal Financial Officer of our General Partner).99.1*
    
    Statement showing computation of ratio of earnings to fixed charges.
 
 *
    
    Filed herewith. 29




---



##### Table of Contents



ENCORE ENERGY PARTNERS LP
 
 SIGNATURE
  ENCORE ENERGY PARTNERS LPBy: Encore Energy Partners GP LLC, its General PartnerDate:  May 8, 2008
    
    /s/ Andrea HunterAndrea HunterVice President, Controller, and Principal Accounting Officer
 30