----

----

| Delaware                        | 20-8456807          |
|---------------------------------|---------------------|
| (State or other jurisdiction of | (I.R.S. Employer    |
| incorporation or organization)  | Identification No.) |

| 5847 San Felipe, Suite 3000, Houston, Texas | 77057      |
|---------------------------------------------|------------|
| (Address of principal executive offices)    | (Zip Code) |

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|                                |                                                                                              |  Page                                                                                                                                                                                                    |
|-------------------------------------|---------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| PART I. FINANCIAL INFORMATION  |
| Item 1.                             | Financial Statements                                                                         |                                                                                                                                                                                                          |
|                                | Consolidated Balance Sheets                                                                       | 1                                                                                                                                                                                                        |
|                                | Consolidated Statements of Operations                                                        | 2                                                                                                                                                                                                        |
|                                | Consolidated Statement of Partners’ Equity and Comprehensive Income (Loss)             |                                   3 |
|                                | Consolidated Statements of Cash Flows                                                        | 4                                                                                                                                                                                                             |
|                                | Notes to Consolidated Financial Statements                                                   | 5                                                                                                                                                                                                             |
| Item 2.                             | Management’s Discussion and Analysis of Financial Condition and Results of Operations  | 17                                                                                                                                                                                                            |
| Item 3.                             | Quantitative and Qualitative Disclosures About Market Risk                                   | 28                                                                                                                                                                                                            |
| Item 4.                             | Controls and Procedures                                                                      | 29                                                                                                                                                                                                            |
| PART II. OTHER INFORMATION     |
| Item 1.                             | Legal Proceedings                                                                            | 29                                                                                                                                                                                                            |
| Item 1A.                            | Risk Factors                                                                                 | 29                                                                                                                                                                                                            |
| Item 2.                             | Unregistered Sales of Equity Securities and Use of Proceeds                                  | 30                                                                                                                                                                                                            |
| Item 3.                             | Defaults Upon Senior Securities                                                              | 30                                                                                                                                                                                                            |
| Item 4.                             | Removed and Reserved                                                                         | 30                                                                                                                                                                                                            |
| Item 5.                             | Other Information                                                                            | 30                                                                                                                                                                                                            |
| Item 6.                             | Exhibits                                                                                     | 30                                                                                                                                                                                                            |

----

| ·   | our ability to pay distributions at the then-current distribution rate; |
|--------------------|-------------------------------------------------------------------------|

| ·   | our operating results |
|--------------------|-----------------------|

| ·   | volatility in oil and natural gas prices; |
|--------------------|-------------------------------------------|

| ·   | our ability to protect ourselves from changes in commodity prices using commodity derivative contract positions; |
|--------------------|------------------------------------------------------------------------------------------------------------------|

| ·   | performance of counterparties to our derivative contracts; |
|--------------------|------------------------------------------------------------|

| ·   | our estimates of proved reserves; |
|--------------------|-----------------------------------|

| ·   | our ability to effectively develop our oil and natural gas reserves; |
|--------------------|----------------------------------------------------------------------|

| ·   | availability of rigs, equipment and crews to support our operations; |
|--------------------|----------------------------------------------------------------------|

| ·   | competitive conditions; |
|--------------------|-------------------------|

| ·   | our ability to acquire assets on acceptable terms; |
|--------------------|----------------------------------------------------|

| ·   | legislative or regulatory changes, including changes in environmental regulation, environmental risks and liability under federal and state environmental laws and regulations; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | 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. |
|--------------------|------------------------------------|

| ·   | Completion.  The installation of permanent equipment for the production of hydrocarbons. |
|--------------------|----------------------------------------------------------------------------------------------------|

| ·   | Council of Petroleum Accountants Societies (“COPAS”).  A professional organization of petroleum 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. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | DD&A.  Depletion, depreciation and amortization. |
|--------------------|----------------------------------------------------------------|

| ·   | 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. An exploratory, development, or extension well that proves to be incapable of producing either oil or natural gas in sufficient quantities to justify completion as an oil or natural gas well. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Denbury.  Denbury Resources Inc., a publicly traded Delaware corporation, together with its subsidiaries. |
|--------------------|---------------------------------------------------------------------------------------------------------------------|

| ·   | EAC.  Encore Acquisition Company, together with its subsidiaries.  EAC merged with and into Denbury on March 9, 2010. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | ENP.  Encore Energy Partners LP, a publicly traded Delaware limited partnership, together with its subsidiaries. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------|

| ·   | Exploratory Well.  A well drilled to find a new field or to find a new reservoir in a field previously producing oil or natural gas in another reservoir. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | FASB.  Financial Accounting Standards Board. |
|--------------------|--------------------------------------------------------|

| ·   | FASC.  FASB Accounting Standards Codification. |
|--------------------|----------------------------------------------------------|

| ·   | 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. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | GAAP.  Accounting principles generally accepted in the United States. |
|--------------------|---------------------------------------------------------------------------------|

| ·   | Gross Acres or Gross Wells. The total acres or wells, as the case may be, in which an entity owns a working interest. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------|

| ·   | Lease Operating Expense (“LOE”).  All direct and allocated indirect costs of producing hydrocarbons after the completion of drilling.  Such costs include ad valorem taxes, 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 Acres or Net Wells. Gross acres or wells, as the case may be, multiplied by the working interest percentage owned by an entity. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------|

| ·   | NYMEX. New York Mercantile Exchange. |
|--------------------|--------------------------------------|

| ·   | Oil.  Crude oil and condensate. |
|--------------------|-------------------------------------------|

| ·   | Operator.  The entity responsible for the exploration, development, and production of a well or lease. |
|--------------------|------------------------------------------------------------------------------------------------------------------|

| ·   | Production Costs.  Costs incurred to operate and maintain our wells and related equipment and facilities. For a complete definition of production costs, please refer to Regulation S-X, Rule 4-10(a)(20). |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Production Margin.  Wellhead revenues less production costs. |
|--------------------|------------------------------------------------------------------------|

| ·   | Productive Well.  A well capable of producing hydrocarbons in commercial quantities, including natural gas wells awaiting pipeline connections to commence deliveries and oil wells awaiting connection to production facilities. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Proved Developed Reserves.  Reserves of any category that can be expected to be recovered: (i) through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared to the cost of a new well; and (ii) through installed extraction equipment and infrastructure operational at the time of the reserves estimate if the extraction is by means not involving a well, is acreage that is allocated or assignable to producing wells or wells capable of production. For a complete definition of developed oil and gas reserves, refer to the SEC’s Regulation S-X, Rule 4-10(a)(6). |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Proved Reserves.  Those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible — from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations — prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time.  For a complete definition of proved oil and gas reserves, refer to the SEC’s Regulation S-X, Rule 4-10(a)(22). |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Proved Undeveloped Reserves.  Reserves of any category that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion.  For a complete definition of undeveloped oil and gas reserves, refer to the SEC’s Regulation S-X, Rule 4-10(a)(31). |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Recompletion.  The completion for production from an existing wellbore in another formation from that in which the well has been previously completed. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Reliable Technology.  A grouping of one or more technologies (including computational methods) that have been field tested and have been demonstrated to provide reasonably certain results with consistency and repeatability in the formation being evaluated or in an analogous formation. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Reserves.  Reserves are estimated remaining quantities of oil and natural gas and related substances anticipated to the economically producible, as of a given date, by application of development projects to known accumulations.  In addition, there must exist, or there must be a reasonable expectation that there will exist, the legal right to produce or a revenue interest in the production, installed means of delivering oil and gas or related substances to market, and all permits and financing required to implement the project. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Reservoir.  A porous and permeable underground formation containing a natural accumulation of producible hydrocarbons that is confined by impermeable rock or water barriers and is individual and separate from other reservoirs. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Vanguard.  Vanguard Natural Resources, LLC, a publicly traded Delaware limited liability company, together with its subsidiaries. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | VNG.  Vanguard Natural Gas, LLC, a wholly-owned subsidiary of Vanguard. |
|--------------------|-----------------------------------------------------------------------------------|

| ·   | Working Interest.  An interest in an oil or natural gas lease that gives the owner the right to drill for and produce hydrocarbons on the leased acreage and requires the owner to pay a share of the production and development costs. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Workover.  Operations on a producing well to restore or increase production. |
|--------------------|----------------------------------------------------------------------------------------|

----

PART I. FINANCIAL INFORMATION

|   | Item 1. Financial Statements |
|--------|------------------------------|

ENCORE ENERGY PARTNERS LP

CONSOLIDATED BALANCE SHEETS

|                                                                                               |   | March 31,   |     |   | December 31, |   |
|----------------------------------------------------------------------------------------------------|--------|-------------|----------|--------|--------------|--------|
|                                                                                               |   | 2011        |     |   | 2010         |   |
|                                                                                               |   | (unaudited) |     |   |         |   |
| ASSETS                                                                                             |   |
| Current assets:                                                                                    |   |        |     |   |         |   |
|    Cash and cash equivalents                                                        |   | $           | 1,488    |   |         | $      | 1,380 |   |
|    Accounts receivable - trade                                                      |   |        | 21,985   |   |         |   | 22,795 |   |
|    Derivatives                                                                      |   |        | 416      |   |         |   | 2,604 |   |
|    Other                                                                            |   |        | 2,462    |   |         |   | 470 |   |
|           Total current assets                   |   |        | 26,351   |   |         |   | 27,249 |   |
|                                                                                               |   |        |     |   |         |   |   |   |
| Properties and equipment, at cost - successful efforts method:                                     |   |        |     |   |         |   |   |   |
|    Proved properties, including wells and related equipment                         |   |        | 859,230  |   |         |   | 857,999 |   |
|    Unproved properties                                                              |   |        | 25       |   |         |   | 17 |   |
|    Accumulated depletion, depreciation, and amortization                            |   |        | (270,868 | )      |         |   | (259,575 | ) |
|                                                                                               |   |        | 588,387  |   |         |   | 598,441 |   |
|    Other property and equipment                                                     |   |        | 1,531    |   |         |   | 1,327 |   |
|    Accumulated depreciation                                                         |   |        | (671     | )      |         |   | (613 | ) |
|                                                                                               |   |        | 860      |   |         |   | 714 |   |
|                                                                                               |   |        |     |   |         |   |   |   |
| Goodwill                                                                                           |   |        | 9,290    |   |         |   | 9,290 |   |
| Other intangibles, net                                                                             |   |        | 2,936    |   |         |   | 3,012 |   |
| Derivatives                                                                                        |   |        | -        |   |         |   | 836 |   |
| Other                                                                                              |   |        | -        |   |         |   | 1,778 |   |
|           Total assets                           |   | $           | 627,824  |   |         | $      | 641,320 |   |
|                                                                                               |   |        |     |   |         |   |   |   |
| LIABILITIES AND PARTNERS' EQUITY                                                                   |   |
| Current liabilities:                                                                               |   |        |     |   |         |   |   |   |
|    Accounts payable:                                                                |   |        |     |   |         |   |   |   |
|       Trade                                                          |   | $           | 2,796    |   |         | $      | 2,103 |   |
|       Affiliate                                                      |   |        | 1,571    |   |         |   | 98 |   |
|    Accrued liabilities:                                                             |   |        |     |   |         |   |   |   |
|       Lease operating                                                |   |        | 4,298    |   |         |   | 4,550 |   |
|       Development capital                                            |   |        | 1,354    |   |         |   | 890 |   |
|       Interest                                                       |   |        | 221      |   |         |   | 298 |   |
|       Production taxes and marketing                                 |   |        | 12,061   |   |         |   | 10,109 |   |
|    Derivatives                                                                      |   |        | 19,715   |   |         |   | 3,530 |   |
|    Oil and natural gas revenues payable                                             |   |        | 1,636    |   |         |   | 1,730 |   |
|    Credit agreement                                                                 |   |        | 224,000  |   |         |   | - |   |
|    Other                                                                            |   |        | 1,442    |   |         |   | 1,278 |   |
|           Total current liabilities              |   |        | 269,094  |   |         |   | 24,586 |   |
|                                                                                               |   |        |     |   |         |   |   |   |
| Derivatives                                                                                        |   |        | 53,155   |   |         |   | 20,681 |   |
| Future abandonment cost, net of current portion                                                    |   |        | 13,198   |   |         |   | 13,080 |   |
| Deferred taxes                                                                                     |   |        | 82       |   |         |   | 11 |   |
| Credit agreement                                                                                   |   |        | -        |   |         |   | 234,000 |   |
|           Total liabilities                      |   |        | 335,529  |   |         |   | 292,358 |   |
|                                                                                               |   |        |     |   |         |   |   |   |
| Commitments and contingencies (see Note 11)                                                        |   |        |     |   |         |   |   |   |
|                                                                                               |   |        |     |   |         |   |   |   |
| Partners' equity:                                                                                  |   |        |     |   |         |   |   |   |
| Limited partners - public, 24,557,549 and 24,417,542 common units issued                           |   |        |     |   |         |
|       and outstanding, respectively                                  |   |        | 309,571  |   |         |   | 340,126 |   |
|    Limited partners - affiliates, 20,924,055 common units issued and outstanding    |   |        | (15,909  | )      |         |   | 10,125 |   |
|    General partner - 504,851 general partner units issued and outstanding           |   |        | (722     | )      |         |   | (94 | ) |
|    Accumulated other comprehensive loss                                             |   |        | (645     | )      |         |   | (1,195 | ) |
|           Total partners' equity                 |   |        | 292,295  |   |         |   | 348,962 |   |
|           Total liabilities and partners' equity |   | $           | 627,824  |   |         | $      | 641,320 |   |

----

ENCORE ENERGY PARTNERS LP

CONSOLIDATED STATEMENTS OF OPERATIONS

|                                                                                |   | 2011   |    |   | 2010   |   |
|-------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| Revenues:                                                                           |   |   |    |   |   |   |
|    Oil                                                               |   | $      | 39,020  |   |   | $      | 36,010 |   |
|    Natural gas                                                       |   |   | 5,793   |   |   |   | 8,622 |   |
|    Natural gas liquids                                               |   |   | 2,339   |   |   |   | 3,943 |   |
|    Marketing                                                         |   |   | 47      |   |   |   | 70 |   |
|    Commodity derivative fair value loss - realized                   |   |   | (3,345  | )      |   |   | (707 | ) |
|    Commodity derivative fair value gain (loss) - unrealized          |   |   | (48,125 | )      |   |   | 6,179 |   |
| Total revenues                                                                      |   |   | (4,271  | )      |   |   | 54,117 |   |
|                                                                                |   |   |    |   |   |   |   |   |
| Expenses:                                                                           |   |   |    |   |   |   |   |   |
|    Production:                                                       |   |   |    |   |   |   |   |   |
|       Lease operating                                 |   |   | 8,010   |   |   |   | 11,619 |   |
|       Production taxes and marketing                  |   |   | 4,322   |   |   |   | 5,066 |   |
|    Depletion, depreciation, and amortization                         |   |   | 11,614  |   |   |   | 12,851 |   |
|    Exploration                                                       |   |   | -       |   |   |   | 21 |   |
|    General and administrative                                        |   |   | 3,330   |   |   |   | 3,728 |   |
| Total expenses                                                                      |   |   | 27,276  |   |   |   | 33,285 |   |
|                                                                                |   |   |    |   |   |   |   |   |
| Operating income (loss)                                                             |   |   | (31,547 | )      |   |   | 20,832 |   |
|                                                                                |   |   |    |   |   |   |   |   |
| Other income (expenses):                                                            |   |   |    |   |   |   |   |   |
|    Interest                                                          |   |   | (2,170  | )      |   |   | (2,377 | ) |
|    Interest rate derivative fair value loss - realized               |   |   | (972    | )      |   |   | (982 | ) |
|    Interest rate derivative fair value gain (loss) - unrealized      |   |   | 395     |   |   |   | (59 | ) |
|    Other                                                             |   |   | 1       |   |   |   | 25 |   |
| Total other expenses                                                                |   |   | (2,746  | )      |   |   | (3,393 | ) |
|                                                                                |   |   |    |   |   |   |   |   |
| Income (loss) before income taxes                                                   |   |   | (34,293 | )      |   |   | 17,439 |   |
| Income tax provision                                                                |   |   | (112    | )      |   |   | (26 | ) |
|                                                                                |   |   |    |   |   |   |   |   |
| Net income (loss)                                                                   |   | $      | (34,405 | )      |   | $      | 17,413 |   |
|                                                                                |   |   |    |   |   |   |   |   |
| Net income (loss) allocation (see Note 8):                                          |   |   |    |   |   |   |   |   |
|       Limited partners' interest in net income (loss) |   | $      | (34,027 | )      |   | $      | 17,221 |   |
|       General partner's interest in net income (loss) |   | $      | (378    | )      |   | $      | 192 |   |
|                                                                                |   |   |    |   |   |   |   |   |
| Net income (loss) per common unit:                                                  |   |   |    |   |   |   |   |   |
|       Basic                                           |   | $      | (0.75   | )      |   | $      | 0.38 |   |
|       Diluted                                         |   | $      | (0.75   | )      |   | $      | 0.38 |   |
|                                                                                |   |   |    |   |   |   |   |   |
| Weighted average common units outstanding:                                          |   |   |    |   |   |   |   |   |
|       Basic                                           |   |   | 45,473  |   |   |   | 45,299 |   |
|       Diluted                                         |   |   | 45,473  |   |   |   | 45,324 |   |
|                                                                                |   |   |    |   |   |   |   |   |
| Cash distributions declared per common unit                                         |   | $      | 0.5000  |   |   | $      | 0.5375 |   |

----

CONSOLIDATED STATEMENT OF PARTNERS’ EQUITY AND COMPREHENSIVE 

|                                                                                                              |   |             |   |   |            |   |    |          |   |   |      |   |   | Accumulated |   |   |   |   |
|-------------------------------------------------------------------------------------------------------------------|--------|------------------|--------|--------|-----------------|--------|---------|---------------|--------|--------|-----------|--------|--------|-------------|--------|--------|--------|--------|
|                                                                                                              |   |             |   |   |            |   |    |          |   |   |      |   |   | Other       |   |   | Total  |   |
|                                                                                                              |   | Limited Partners |   |   | General Partner |   |    | Comprehensive |   |   | Partners' |   |
|                                                                                                              |   | Units            |   |   | Amount          |   |    | Units         |   |   | Amount    |   |   | Loss        |   |   | Equity |   |
|                                                                                                              |   |             |   |   |            |   |    |          |   |   |      |   |   |        |   |   |   |   |
|  Balance at January 1, 2010                                                                                  |   |             | 45,285 |   |            | $      | 409,777 |          |   |   | 505       |   |   | $           | (353   | )      |   | $      | (3,420 | ) |   | $ | 406,004 |   |
|     Net contributions from owners                                                             |   |             | -      |   |            |   | (2      | )             |   |   | -         |   |   |        | 935    |   |   |   | - |   |   |   | 933 |   |
|      Non-cash equity-based compensation                                                  |   |             | -      |   |            |   | 1,323   |          |   |   | -         |   |   |        | 8      |   |   |   | - |   |   |   | 1,331 |   |
|      Vesting of phantom units                                                            |   |             | 57     |   |            |   | -       |          |   |   | -         |   |   |        | -      |   |   |   | - |   |   |   | - |   |
|      Other                                                                               |   |             | -      |   |            |   | (216    | )             |   |   | -         |   |   |        | (3     | )      |   |   | - |   |   |   | (219 | ) |
|      Cash distributions to unitholders ($2.0375 per unit)                                |   |             | -      |   |            |   | (92,353 | )             |   |   | -         |   |   |        | (1,029 | )      |   |   | - |   |   |   | (93,382 | ) |
|      Components of comprehensive income:                                                 |   |             |   |   |            |   |    |          |   |   |      |   |   |        |   |   |   |   |   |   |   |   |   |   |
|           Net income attributable to unitholders                |   |             | -      |   |            |   | 31,722  |          |   |   | -         |   |   |        | 348    |   |   |   | - |   |   |   | 32,070 |   |
|           Change in deferred hedge loss on interest rate swaps, |   |             |   |   |            |   |    |          |   |   |      |   |   |        |   |   |   |   |   |   |   |   |   |   |
|              net of tax of $7                    |   |             | -      |   |            |   | -       |          |   |   | -         |   |   |        | -      |   |   |   | 2,225 |   |   |   | 2,225 |   |
|      Total comprehensive income                                                          |   |             |   |   |            |   |    |          |   |   |      |   |   |        |   |   |   |   |   |   |   |   | 34,295 |   |
|  Balance at December 31, 2010                                                                                |   |             | 45,342 |   |            |   | 350,251 |          |   |   | 505       |   |   |        | (94    | )      |   |   | (1,195 | ) |   |   | 348,962 |   |
|      Non-cash equity-based compensation                                                  |   |             | 140    |   |            |   | 178     |          |   |   | -         |   |   |        | 2      |   |   |   | - |   |   |   | 180 |   |
|      Cash distributions to unitholders ($.50 per unit)                                   |   |             | -      |   |            |   | (22,740 | )             |   |   | -         |   |   |        | (252   | )      |   |   | - |   |   |   | (22,992 | ) |
|      Components of comprehensive income:                                                 |   |             |   |   |            |   |    |          |   |   |      |   |   |        |   |   |   |   |   |   |   |   |   |   |
|           Net loss attributable to unitholders                  |   |             | -      |   |            |   | (34,027 | )             |   |   | -         |   |   |        | (378   | )      |   |   | - |   |   |   | (34,405 | ) |
|           Settlement of interest rate cash flow hedges in       |   |             |   |   |            |   |    |          |   |   |      |   |   |        |   |   |   |   |   |   |   |   |   |   |
|           comprehensive loss                                    |   |             | -      |   |            |   | -       |          |   |   | -         |   |   |        | -      |   |   |   | 550 |   |   |   | 550 |   |
|      Total comprehensive loss                                                            |   |             |   |   |            |   |    |          |   |   |      |   |   |        |   |   |   |   |   |   |   |   | (33,855 | ) |
|  Balance at March 31, 2011                                                                                   |   |             | 45,482 |   |            | $      | 293,662 |          |   |   | 505       |   |   | $           | (722   | )      |   | $      | (645 | ) |   | $ | 292,295 |   |

----

ENCORE ENERGY PARTNERS LP

CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                                               |   | Three months ended |    |
|----------------------------------------------------------------------------------------------------|--------|--------------------|---------|
|                                                                                               |   | March 31,          |    |
|                                                                                               |   | 2011               |    |   | 2010 |   |
| Cash flows from operating activities:                                                              |   |               |    |   |   |   |
|    Net income (loss)                                                                |   | $                  | (34,405 | ) |   | $ | 17,413 |   |
|    Adjustments to reconcile net income (loss) to net cash provided                  |   |               |    |   |   |   |   |   |
|       by operating activities:                                       |   |               |    |   |   |   |   |   |
|          Depletion, depreciation, and amortization    |   |               | 11,614  |   |   |   | 12,851 |   |
|          Deferred taxes                               |   |               | 107     |   |   |   | (11 | ) |
|          Non-cash equity-based compensation expense   |   |               | 180     |   |   |   | 906 |   |
|          Non-cash derivative loss (gain)              |   |               | 52,237  |   |   |   | (3,700 | ) |
|          Other                                        |   |               | 381     |   |   |   | 1,366 |   |
|          Changes in operating assets and liabilities: |   |               |    |   |   |   |   |   |
|             Accounts receivable        |   |               | 810     |   |   |   | 6,556 |   |
|             Other current assets       |   |               | (2,016  | ) |   |   | 141 |   |
|             Other assets               |   |               | 1,397   |   |   |   | (15 | ) |
|             Accounts payable - trade   |   |               | 693     |   |   |   | (1,153 | ) |
|             Other current liabilities  |   |               | 3,545   |   |   |   | 4,167 |   |
| Net cash provided by operating activities                                                          |   |               | 34,543  |   |   |   | 38,521 |   |
|                                                                                               |   |               |    |   |   |   |   |   |
| Cash flows from investing activities:                                                              |   |               |    |   |   |   |   |   |
|    Purchase of other property and equipment                                         |   |               | (204    | ) |   |   | - |   |
|    Acquisition of oil and natural gas properties                                    |   |               | -       |   |   |   | (292 | ) |
|    Development of oil and natural gas properties                                    |   |               | (1,239  | ) |   |   | (989 | ) |
| Net cash used in investing activities                                                              |   |               | (1,443  | ) |   |   | (1,281 | ) |
|                                                                                               |   |               |    |   |   |   |   |   |
| Cash flows from financing activities:                                                              |   |               |    |   |   |   |   |   |
|    Proceeds from credit agreement                                                   |   |               | 10,000  |   |   |   | 5,000 |   |
|    Payments of credit agreement                                                     |   |               | (20,000 | ) |   |   | (10,000 | ) |
|    Cash distributions to unitholders                                                |   |               | (22,992 | ) |   |   | (24,612 | ) |
| Net cash used in financing activities                                                              |   |               | (32,992 | ) |   |   | (29,612 | ) |
|                                                                                               |   |               |    |   |   |   |   |   |
| Increase in cash and cash equivalents                                                              |   |               | 108     |   |   |   | 7,628 |   |
| Cash and cash equivalents, beginning of period                                                     |   |               | 1,380   |   |   |   | 1,754 |   |
| Cash and cash equivalents, end of period                                                           |   | $                  | 1,488   |   |   | $ | 9,382 |   |

----

ENCORE ENERGY PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

| ·   | the Big Horn Basin in Wyoming and Montana; |
|--------------------|--------------------------------------------|

| ·   | the Permian Basin in West Texas and New Mexico; |
|--------------------|-------------------------------------------------|

| ·   | the Williston Basin in North Dakota and Montana; and |
|--------------------|------------------------------------------------------|

| ·   | the Arkoma Basin in Arkansas and Oklahoma. |
|--------------------|--------------------------------------------|

----

|                                      |   | March 31,      |    |   | December 31, |   |
|-------------------------------------------|--------|----------------|---------|--------|--------------|--------|
|                                      |   | 2011           |    |   | 2010         |   |
|                                      |   | (in thousands) |    |
| Proved leasehold costs                    |   | $              | 609,938 |   |         | $      | 609,910 |   |
| Wells and related equipment - completed   |   |           | 249,248 |   |         |   | 248,017 |   |
| Wells and related equipment - in process  |   |           | 44      |   |         |   | 72 |   |
|    Total proved properties |   | $              | 859,230 |   |         | $      | 857,999 |   |

|                           |   | March 31, 2011 |    |   | December 31, 2010 |   |
|--------------------------------|--------|----------------|---------|--------|-------------------|--------|
|                           |   | Book           |    |   | Fair              |   |   | Book |   |   | Fair |   |
|                           |   | Value          |    |   | Value             |   |   | Value |   |   | Value |   |
|                           |   | (in thousands) |    |
| Assets:                        |   |           |    |   |              |   |   |   |   |   |   |   |
| Cash and cash equivalents      |   | $              | 1,488   |   |              | $      | 1,488 |   |   | $ | 1,380 |   |   | $ | 1,380 |   |
| Accounts receivable - trade    |   |           | 21,985  |   |              |   | 21,985 |   |   |   | 22,795 |   |   |   | 22,795 |   |
| Commodity derivative contracts |   |           | 416     |   |              |   | 416 |   |   |   | 15,682 |   |   |   | 15,682 |   |
| Liabilities:                   |   |           |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Accounts payable - trade       |   |           | 2,796   |   |              |   | 2,796 |   |   |   | 2,103 |   |   |   | 2,103 |   |
| Accounts payable - affiliate   |   |           | 1,571   |   |              |   | 1,571 |   |   |   | 98 |   |   |   | 98 |   |
| Credit Agreement               |   |           | 224,000 |   |              |   | 224,000 |   |   |   | 234,000 |   |   |   | 232,517 |   |
| Commodity derivative contracts |   |           | 71,823  |   |              |   | 71,823 |   |   |   | 35,011 |   |   |   | 35,011 |   |
| Interest rate swaps            |   |           | 1,047   |   |              |   | 1,047 |   |   |   | 1,442 |   |   |   | 1,442 |   |

----

----

|                    |   | April 1, -December 31, 2011 |      |   | Year2012 |   |      | Year2013 |   |   | Year2014  |   |
|-------------------------|--------|-----------------------------|-----------|--------|----------|--------|-----------|----------|--------|--------|-----------|--------|
| Gas Positions:          |   |                        |      |   |     |   |      |     |   |   |      |   |
| Fixed Price Swaps:      |   |                        |      |   |     |   |      |     |   |   |      |   |
| Notional Volume (MMBtu) |   |                        | 2,805,550 |   |     |   | 3,367,932 |     |   |   | 2,993,000 |   |   |   | — |   |
| Fixed Price ($/MMBtu)   |   | $                           | 6.06      |   |     | $      | 5.75      |     |   | $      | 5.10      |   |   | $ | — |   |
| Puts:                   |   |                        |      |   |     |   |      |     |   |   |      |   |   |   |   |   |
| Notional Volume (MMBtu) |   |                        | 934,450   |   |     |   | 328,668   |     |   |   | —   |   |   |   | — |   |
| Fixed Price ($/MMBtu)   |   | $                           | 6.31      |   |     | $      | 6.76      |     |   | $      | —   |   |   | $ | — |   |
| Total Gas Positions:    |   |                        |      |   |     |   |      |     |   |   |      |   |   |   |   |   |
| Notional Volume (MMBtu) |   |                        | 3,740,000 |   |     |   | 3,696,600 |     |   |   | 2,993,000 |   |   |   | — |   |
| Oil Positions:          |   |                        |      |   |     |   |      |     |   |   |      |   |   |   |   |   |
| Fixed Price Swaps:      |   |                        |      |   |     |   |      |     |   |   |      |   |   |   |   |   |
| Notional Volume (Bbls)  |   |                        | 394,625   |   |     |   | 947,940   |     |   |   | 1,295,750 |   |   |   | 1,168,000 |   |
| Fixed Price ($/Bbl)     |   | $                           | 81.62     |   |     | $      | 83.29     |     |   | $      | 88.95     |   |   | $ | 88.95 |   |
| Collars:                |   |                        |      |   |     |   |      |     |   |   |      |   |   |   |   |   |
| Notional Volume (Bbls)  |   |                        | 517,000   |   |     |   | 475,800   |     |   |   | —   |   |   |   | — |   |
| Floor Price ($/Bbl)     |   | $                           | 80.00     |   |     | $      | 74.23     |     |   | $      | —   |   |   | $ | — |   |
| Ceiling Price ($/Bbl)   |   | $                           | 96.49     |   |     | $      | 90.98     |     |   | $      | —   |   |   | $ | — |   |
| Total Oil Positions:    |   |                        |      |   |     |   |      |     |   |   |      |   |   |   |   |   |
| Notional Volume (Bbls)  |   |                        | 911,625   |   |     |   | 1,423,740 |     |   |   | 1,295,750 |   |   |   | 1,168,000 |   |

|                       |   | Notional       |   |   | Fixed  |   | Floating |
|----------------------------|--------|----------------|--------|--------|--------|--------|----------|
| Term                       |   | Amount         |   |   | Rate   |   | Rate     |
|                       |   | (in thousands) |   |   |   |   |     |
| April 1, 2011 - March 2012 |   | $              | 50,000 |   |   |   | 2.4200   | % |  1-month LIBOR |

----

|                                               | Location of Gain (Loss)                                  |   | Three months ended March 31, |    |
|----------------------------------------------------|----------------------------------------------------------|--------|------------------------------|---------|
|                                               | Recognized in Income                                     |   | 2011                         |    |   | 2010 |   |
|                                               |                                                     |   | (in thousands)               |    |
| Realized gains (losses):                           |                                                     |   |                         |    |   |   |   |
|   Premium amortization                   | Commodity derivative fair value loss - realized          |   | $                            | (3,953  | ) |   | $ | (2,420 | ) |
|   Receipts, net of settlements           | Commodity derivative fair value gain - realized          |   |                         | 608     |   |   |   | 1,713 |   |
|   Receipts, net of settlements           | Interest rate derivative fair value loss - realized      |   |                         | (972    | ) |   |   | (982 | ) |
|                                               |                                                     |   | $                            | (4,317  | ) |   | $ | (1,689 | ) |
| Unrealized gains (losses):                         |                                                     |   |                         |    |   |   |   |   |   |
|   Mark-to-market gain (loss)             | Commodity derivative fair value gain (loss) - unrealized |   | $                            | (48,125 | ) |   | $ | 6,179 |   |
|   Mark-to-market gain (loss)             | Interest rate derivative fair value gain - unrealized    |   |                         | 395     |   |   |   | - |   |
|   Ineffectiveness on interest rate swaps | Interest rate derivative fair value loss - unrealized    |   |                         | -       |   |   |   | (59 | ) |
|                                               |                                                     |   | $                            | (47,730 | ) |   | $ | 6,120 |   |
| Total gains (losses):                              |                                                     |   |                         |    |   |   |   |   |   |
|   Commodity derivatives                  |                                                     |   | $                            | (51,470 | ) |   | $ | 5,472 |   |
|   Interest rate derivatives              |                                                     |   |                         | (577    | ) |   |   | (1,041 | ) |
|                                               |                                                     |   | $                            | (52,047 | ) |   | $ | 4,431 |   |

----

|                                       | Asset Derivatives              |           | Liability Derivatives |   |
|--------------------------------------------|--------------------------------|----------------|-----------------------|--------|
|                                       | Balance Sheet Location         |           | Fair Value            |   | Balance Sheet Location |   | Fair Value |   |
|                                       |                           | March 31, 2011 |                  |   | December 31, 2010 |   |   | March 31, 2011 |   |   | December 31, 2010 |   |
| Derivatives not designated as hedges       |                           |           |                  |   |   |   |   |   |   |   |   |   |
| Commodity derivative contracts             |  Derivatives - current    |           | $                     | 13,447 |   |   | $ | 10,196 |   |  Derivatives - current |   | $ | 31,699 |   |   | $ | 9,906 |   |
| Interest rate swaps                        |  Derivatives - current    |           |                  | -      |   |   |   | - |   |  Derivatives - current |   |   | 1,047 |   |   |   | - |   |
| Commodity derivative contracts             |  Derivatives - noncurrent |           |                  | 6,187  |   |   |   | 5,486 |   |  Derivatives - noncurrent |   |   | 59,342 |   |   |   | 25,105 |   |
| Total derivatives not designated as hedges |                           |           | $                     | 19,634 |   |   | $ | 15,682 |   |   |   | $ | 92,088 |   |   | $ | 35,011 |   |
|                                       |                           |           |                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Derivatives designated as hedges           |                           |           |                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest rate swaps                        |  Derivatives - current    |           | $                     | -      |   |   | $ | - |   |  Derivatives - current |   | $ | - |   |   | $ | 1,216 |   |
| Interest rate swaps                        |  Derivatives - noncurrent |           |                  | -      |   |   |   | - |   |  Derivatives - noncurrent |   |   | - |   |   |   | 226 |   |
| Total derivatives designated as hedges     |                           |           | $                     | -      |   |   | $ | - |   |   |   | $ | - |   |   | $ | 1,442 |   |
| Total derivatives                          |                           |           | $                     | 19,634 |   |   | $ | 15,682 |   |   |   | $ | 92,088 |   |   | $ | 36,453 |   |

|                             |   | Accumulated OCI (Effective Portion) |   |
|----------------------------------|--------|-------------------------------------|--------|
|                             |   | Three Months Ended March 31,        |   |
| Derivatives Designated as Hedges |   | 2011                                |   |   | 2010 |   |
| Interest rate swaps              |   | $                                   | (550   | ) |   | $ | 824 |   |

|                                                 |   | Amount of Loss Recognized    |   |
|------------------------------------------------------|--------|------------------------------|--------|
|                                                 |   | in Income as Ineffective     |   |
|                                                 |   | Three Months Ended March 31, |   |
| Location of Loss Recognized in Income as Ineffective |   | 2011                         |   |   | 2010 |   |
| Derivative fair value gain (loss)                    |   | $                            | -      |   |   | $ | (59 | ) |

| ·   | Level 1 – Unadjusted quoted prices are available in active markets for identical assets or liabilities. |
|--------------------|---------------------------------------------------------------------------------------------------------------|

| ·   | Level 2 – Pricing inputs, other than quoted prices within Level 1, that are either directly or indirectly observable. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------|

| ·   | Level 3 – Pricing inputs that are unobservable requiring the use of valuation methodologies that result in management’s best estimate of fair value. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                       |   |              |    |   | Fair Value Measurements at Reporting Date Using |   |
|--------------------------------------------|--------|-------------------|---------|--------|-------------------------------------------------|--------|
|                                       |   |              |    |   | Quoted Prices in                                |   |   |   |   |   |   |   |
|                                       |   |              |    |   | Active Markets for                              |   |   | Significant Other |   |   | Significant |   |
|                                       |   |              |    |   | Identical Assets                                |   |   | Observable Inputs |   |   | Unobservable Inputs |   |
| Description                                |   | Asset (Liability) |    |   | (Level 1)                                       |   |   | (Level 2) |   |   | (Level 3) |   |
|                                       |   | (in thousands)    |    |
| Oil derivative contracts - swaps           |   | $                 | (64,390 | )      |                                            | $      | - |   |   | $ | (64,390 | ) |   | $ | - |   |
| Oil derivative contracts - floors and caps |   |              | (16,355 | )      |                                            |   | - |   |   |   | (16,355 | ) |   |   | - |   |
| Natural gas derivative contracts - swaps   |   |              | 6,888   |   |                                            |   | - |   |   |   | 6,888 |   |   |   | - |   |
| Natural gas derivative contracts - floors  |   |              | 2,450   |   |                                            |   | - |   |   |   | 2,450 |   |   |   | - |   |
| Interest rate swaps                        |   |              | (1,047  | )      |                                            |   | - |   |   |   | (1,047 | ) |   |   | - |   |
|    Total                    |   | $                 | (72,454 | )      |                                            | $      | - |   |   | $ | (72,454 | ) |   | $ | - |   |

|                       |   | Fair Value Measurements Using Significant |   |
|----------------------------|--------|-------------------------------------------|--------|
|                       |   | Unobservable Inputs (Level 3)             |   |
|                       |   | Oil Derivative                            |   |   | Natural Gas |   |   |   |   |
|                       |   | Contracts -                               |   |   | Derivative Contracts - |   |   |   |   |
|                       |   | Floors and Caps                           |   |   | Floors and Caps |   |   | Total |   |
|                       |   | (in thousands)                            |   |
| Balance at January 1, 2011 |   | $                                         | (3,666 | ) |   | $ | 3,067 |   |   | $ | (599 | ) |
| Transfers out of level 3 * |   |                                      | 3,666  |   |   |   | (3,067 | ) |   |   | 599 |   |
| Balance at March 31, 2011  |   | $                                         | -      |   |   | $ | - |   |   | $ | - |   |

----

| Future abandonment liability at January 1, 2011          |   | $      | 13,838 |   |
|----------------------------------------------------------|--------|--------|--------|--------|
|    Accretion of discount                  |   |   | 186    |   |
| Total future abandonment costs at March 31, 2011         |   |   | 14,024 |   |
| Less: current obligations                                |   |   | (826   | )      |
| Long-term future abandonment liability at March 31, 2011 |   | $      | 13,198 |   |

|                                                     |   | Applicable Margin for |   |   | Applicable Margin for |   |
|----------------------------------------------------------|--------|-----------------------|--------|--------|-----------------------|--------|
| Ratio of Outstanding Borrowings to Borrowing Base        |   | Eurodollar Loans      |   |   | Base Rate Loans       |   |
| Less than .50 to 1                                       |   |                  | 2.250  | %      |                  |   | 1.250 | % |
| Greater than or equal to .50 to 1 but less than .75 to 1 |   |                  | 2.500  | %      |                  |   | 1.500 | % |
| Greater than or equal to .75 to 1 but less than .90 to 1 |   |                  | 2.750  | %      |                  |   | 1.750 | % |
| Greater than or equal to .90 to 1                        |   |                  | 3.000  | %      |                  |   | 2.000 | % |

----

| ·   | a prohibition against incurring debt, subject to permitted exceptions; |
|--------------------|------------------------------------------------------------------------|

| ·   | a prohibition against purchasing or redeeming partnership units, or prepaying indebtedness, subject to permitted exceptions; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------|

| ·   | a restriction on creating liens on ENP’s assets and its restricted 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 ENP maintain a ratio of consolidated current assets to consolidated current liabilities, as defined in the Credit Agreement which excludes the current portion of long term debt, of not less than 1.0 to 1.0; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | a requirement that ENP maintain a ratio of consolidated EBITDAX to the sum of consolidated net interest expense plus letter of credit fees of not less than 2.5 to 1.0; and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | a requirement that ENP maintain a ratio of consolidated funded debt to consolidated adjusted EBITDAX of not more than 3.5 to 1.0. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------|

|                             |       |   | Cash Distribution |   |      |                                           |   |           |   |   |
|----------------------------------|------------|--------|-------------------|--------|-----------|------------------------------------------------|--------|----------------|--------|--------|
|                             |  Date |   | Declared per      |   |      |                                           |   | Total          |   |   |
|                             | Declared   |   | Common Unit       |   | Date Paid |                                           |   | Distribution   |   |   |
|  2011                       |       |   |              |   |      |                                           |   | (in thousands) |   |   |
|  Quarter ended March 31     | 4/28/2011  |   | $                 | 0.4900 |      | 5/13/2011                                      | (a)    |           | $      | 22,533 |   | (a) |
|                             |       |   |              |   |      |                                           |   |           |   |   |   |   |
|  2010                       |       |   |              |   |      |                                           |   |           |   |   |   |   |
|  Quarter ended December 31  | 1/27/2011  |   | $                 | 0.5000 |      | 2/14/2011                                      |   |           | $      | 22,992 |   |   |
|  Quarter ended September 30 | 10/28/2010 |   | $                 | 0.5000 |      |       11/12/2010 |   |           | $      | 22,923 |   |   |
|  Quarter ended June 30      | 7/29/2010  |   | $                 | 0.5000 |      | 8/13/2010                                      |   |           | $      | 22,923 |   |   |
|  Quarter ended March 31     | 4/30/2010  |   | $                 | 0.5000 |      | 5/14/2010                                      |   |           | $      | 22,923 |   |   |

| (a)   | Represents the date the distribution is expected to be paid and the total amount of the distribution that is expected to be paid. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------|

----

|                                                                                                 |   | March 31,                               |    |
|------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|---------|
|                                                                                                 |   | 2011                                    |    |   | 2010 |   |
|                                                                                                 |   | (in thousands, except per unit amounts) |    |
|       Net income (loss) attributable to unitholders                    |   | $                                       | (34,405 | ) |   | $ | 17,413 |   |
|                                                                                                 |   |                                    |    |   |   |   |   |   |
| Numerator:                                                                                           |   |                                    |    |   |   |   |   |   |
|    Numerator for basic earnings per unit:                                             |   |                                    |    |   |   |   |   |   |
|       Net income (loss) attributable to unitholders                    |   | $                                       | (34,405 | ) |   | $ | 17,413 |   |
|       Less: distributions earned by participating securities           |   |                                    | (252    | ) |   |   | (252 | ) |
|       Plus: cash distributions in excess of                            |   |                                    |    |   |   |   |   |   |
|          income (loss) allocated to the general partner |   |                                    | 630     |   |   |   | 60 |   |
|       Net income (loss) allocated to limited partners                  |   | $                                       | (34,027 | ) |   | $ | 17,221 |   |
|                                                                                                 |   |                                    |    |   |   |   |   |   |
| Denominator:                                                                                         |   |                                    |    |   |   |   |   |   |
|    Denominator for basic earnings per unit:                                           |   |                                    |    |   |   |   |   |   |
|       Weighted average common units outstanding                        |   |                                    | 45,473  |   |   |   | 45,299 |   |
|       Effect of dilutive phantom units                                 |   |                                    | -       |   |   |   | 25 |   |
|    Denominator for diluted earnings per unit                                          |   |                                    | 45,473  |   |   |   | 45,324 |   |
|                                                                                                 |   |                                    |    |   |   |   |   |   |
| Net income (loss) per common unit:                                                                   |   |                                    |    |   |   |   |   |   |
|    Basic                                                                              |   | $                                       | (0.75   | ) |   | $ | 0.38 |   |
|    Diluted                                                                            |   | $                                       | (0.75   | ) |   | $ | 0.38 |   |

----

|                                                      |   | Three months ended |    |
|-----------------------------------------------------------|--------|--------------------|---------|
|                                                      |   | March 31,          |    |
|                                                      |   | 2011               |    |   | 2010 |   |
|                                                      |   | (in thousands)     |    |
| Net income (loss)                                         |   | $                  | (34,405 | ) |   | $ | 17,413 |   |
| Settlement of interest rate cash flow hedges              |   |               | 550     |   |   |   | 158 |   |
|      Comprehensive income (loss) |   | $                  | (33,855 | ) |   | $ | 17,571 |   |

----

| ·   | 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 that year; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | if ENP acquires additional assets, VNG 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 the board of directors of the General Partner upon the recommendation of its conflicts committee; and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | otherwise as agreed upon by VNG  and the General Partner, with the approval of the conflicts committee of the board of directors of the General Partner. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                 |   | Three Months Ended March 31, |   |
|----------------------|--------|------------------------------|--------|
|                 |   | 2011                         |   |   | 2010 |   |
|                 |   | (in thousands)               |   |
| Administrative fees  |   | $                            | 1,588  |   |   | $ | 1,642 |   |
| COPAS recovery       |   | $                            | 805    |   |   | $ | 667 |   |
| Third-party expenses |   | $                            | 1,855  |   |   | $ | 2,762 |   |

----

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

----

| ·  | Our average realized oil price increased eight percent to $79.64 per Bbl as compared to $73.57 per Bbl in the first quarter of 2010.  Our average realized natural gas price decreased 26 percent to $4.19 per Mcf as compared to $5.69 per Mcf in the first quarter of 2010. |
|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·  | Our oil, natural gas and natural gas liquids revenues decreased three percent to $47.2 million as compared to $48.6 million in the first quarter of 2010.  Oil represented approximately 64 percent and 60 percent of our total production in the first quarter of 2011 and 2010, respectively. |
|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·  | Our production margin increased nine percent to $34.8 million as compared to $31.9 million in the first quarter of 2010.  Total oil and natural gas wellhead revenues per BOE increased by four percent while total production expenses per BOE decreased by 21 percent.  On a per BOE basis, our production margin increased 17 percent to $45.71 per BOE as compared to $39.22 per BOE for the first quarter of 2010. |
|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·  | We invested $1.2 million in development and exploitation activities. |
|--------------|----------------------------------------------------------------------|

| ·  | Our net loss was $34.4 million ($(0.75) per common unit) as compared to a net income of $17.4 million ($0.38 per common unit) for the first quarter of 2010 primarily due to $54.3 million increase in mark-to-market losses on our commodity derivatives contracts. |
|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·  | Average daily production volumes decreased six percent on a BOE basis from 9,034 BOE/D to 8,463 BOE/D. |
|--------------|--------------------------------------------------------------------------------------------------------|

----

|   | Results of Operations |
|--------|-----------------------|

|                                                                                  |   | Three months ended March 31, |    |   | Increase / (Decrease) |   |
|---------------------------------------------------------------------------------------|--------|------------------------------|---------|--------|-----------------------|--------|
|                                                                                  |   | 2011                         |    |   | 2010                  |   |   |  $ |   |   |   |   |   |
| Revenues (in thousands):                                                              |   |                         |    |   |                  |   |   |   |   |   |   |   |   |
|   Oil                                                                       |   | $                            | 39,020  |   |                  | $      | 36,010 |   |   | $ | 3,010 |   |   |   | 8 | % |
|   Natural gas                                                               |   |                         | 5,793   |   |                  |   | 8,622 |   |   |   | (2,829 | ) |   |   | -33 | % |
|   Natural gas liquids                                                       |   |                         | 2,339   |   |                  |   | 3,943 |   |   |   | (1,604 | ) |   |   | -41 | % |
|      Total oil, natural gas and natural gas liquids revenues |   |                         | 47,152  |   |                  |   | 48,575 |   |   |   | (1,423 | ) |   |   | -3 | % |
|   Marketing                                                                 |   |                         | 47      |   |                  |   | 70 |   |   |   | (23 | ) |   |   | -33 | % |
|   Commodity derivatve fair value loss - realized                            |   |                         | (3,345  | )      |                  |   | (707 | ) |   |   | (2,638 | ) |   |   | -373 | % |
|   Commodity derivatve fair value gain (loss) - realized                     |   |                         | (48,125 | )      |                  |   | 6,179 |   |   |   | (54,304 | ) |   |   | -879 | % |
|      Total revenues                                          |   | $                            | (4,271  | )      |                  | $      | 54,117 |   |   | $ | (58,388 | ) |   |   | -108 | % |
|                                                                                  |   |                         |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Average realized prices:                                                              |   |                         |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
|   Oil ($/Bbl)                                                               |   | $                            | 79.64   |   |                  | $      | 73.57 |   |   | $ | 6.07 |   |   |   | 8 | % |
|   Natural gas ($/Mcf)                                                       |   | $                            | 4.19    |   |                  | $      | 5.69 |   |   | $ | (1.50 | ) |   |   | -26 | % |
|   Natural gas liquids ($/Bbl)                                               |   | $                            | 56.82   |   |                  | $      | 55.49 |   |   | $ | 1.33 |   |   |   | 2 | % |
|   Combined ($/BOE)                                                          |   | $                            | 61.91   |   |                  | $      | 59.75 |   |   | $ | 2.16 |   |   |   | 4 | % |
|                                                                                  |   |                         |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Total production volumes:                                                             |   |                         |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
|   Oil (MBbls)                                                               |   |                         | 490     |   |                  |   | 489 |   |   |   | 1 |   |   |   | 0 | % |
|   Natural gas (MMcf)                                                        |   |                         | 1,383   |   |                  |   | 1,515 |   |   |   | (132 | ) |   |   | -9 | % |
|   Natural gas liquids (Bbls)                                                |   |                         | 41      |   |                  |   | 71 |   |   |   | (30 | ) |   |   | -42 | % |
|   Combined (MBOE)                                                           |   |                         | 762     |   |                  |   | 813 |   |   |   | (51 | ) |   |   | -6 | % |
|                                                                                  |   |                         |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Average daily production volumes:                                                     |   |                         |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
|   Oil (Bbls/D)                                                              |   |                         | 5,444   |   |                  |   | 5,438 |   |   |   | 6 |   |   |   | 0 | % |
|   Natural gas (Mcf/D)                                                       |   |                         | 15,368  |   |                  |   | 16,834 |   |   |   | (1,466 | ) |   |   | -9 | % |
|   Natural gas liquids (Bbls/D)                                              |   |                         | 457     |   |                  |   | 790 |   |   |   | (333 | ) |   |   | -42 | % |
|   Combined (BOE/D)                                                          |   |                         | 8,463   |   |                  |   | 9,034 |   |   |   | (571 | ) |   |   | -6 | % |
|                                                                                  |   |                         |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Average NYMEX prices:                                                                 |   |                         |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
|   Oil (per Bbl)                                                             |   | $                            | 94.25   |   |                  | $      | 78.61 |   |   | $ | 15.64 |   |   |   | 20 | % |
|   Natural gas (per Mcf)                                                     |   | $                            | 4.11    |   |                  | $      | 5.36 |   |   | $ | (1.25 | ) |   |   | -23 | % |

|                                                                           |   | Three months ended March 31, |   |
|--------------------------------------------------------------------------------|--------|------------------------------|--------|
|                                                                           |   | 2011                         |   |   | 2010 |   |
| Average realized oil price ($/Bbl)                                             |   | $                            | 79.64  |   |   | $ | 73.57 |   |
| Average NYMEX ($/Bbl)                                                          |   | $                            | 94.25  |   |   | $ | 78.61 |   |
|     Differential to NYMEX                                  |   | $                            | (14.61 | ) |   | $ | (5.04 | ) |
|     Average realized oil price to NYMEX percentage         |   |                         | 84     | % |   |   | 94 | % |
|                                                                           |   |                         |   |   |   |   |   |   |
|                                                                           |   |                         |   |   |   |   |   |   |
| Average realized natural gas price ($/Mcf)                                     |   | $                            | 4.19   |   |   | $ | 5.69 |   |
| Average NYMEX ($/Mcf)                                                          |   | $                            | 4.11   |   |   | $ | 5.36 |   |
|     Differential to NYMEX                                  |   | $                            | 0.08   |   |   | $ | 0.33 |   |
|     Average realized natural gas price to NYMEX percentage |   |                         | 102    | % |   |   | 106 | % |

----

----

|                                                                     |   | Three months ended March 31, |   |   | Increase / (Decrease) |   |
|--------------------------------------------------------------------------|--------|------------------------------|--------|--------|-----------------------|--------|
|                                                                     |   | 2011                         |   |   | 2010                  |   |   |  $ |   |   |   | % |   |
| Expenses (in thousands):                                                 |   |                         |   |   |                  |   |   |   |   |   |   |   |   |
|   Production:                                                  |   |                         |   |   |                  |   |   |   |   |   |   |   |   |
|      Lease operating                            |   | $                            | 8,010  |   |                  | $      | 11,619 |   |   | $ | (3,609 | ) |   |   | -31 | % |
|      Production taxes and marketing             |   |                         | 4,322  |   |                  |   | 5,066 |   |   |   | (744 | ) |   |   | -15 | % |
|   Total production expenses                                    |   |                         | 12,332 |   |                  |   | 16,685 |   |   |   | (4,353 | ) |   |   | -26 | % |
|   Other:                                                       |   |                         |   |   |                  |   |   |   |   |   |   |   |   |   |   |   |
|      Depletion, depreciation, and amortization  |   |                         | 11,614 |   |                  |   | 12,851 |   |   |   | (1,237 | ) |   |   | -10 | % |
|      Exploration                                |   |                         | -      |   |                  |   | 21 |   |   |   | (21 | ) |   |   | -100 | % |
|      General and administrative                 |   |                         | 3,330  |   |                  |   | 3,728 |   |   |   | (398 | ) |   |   | -11 | % |
|   Total operating expenses                                     |   |                         | 27,276 |   |                  |   | 33,285 |   |   |   | (6,009 | ) |   |   | -18 | % |
|   Interest                                                     |   |                         | 2,170  |   |                  |   | 2,377 |   |   |   | (207 | ) |   |   | -9 | % |
|   Interest rate derivative fair value loss - realized          |   |                         | 972    |   |                  |   | 982 |   |   |   | (10 | ) |   |   | -1 | % |
|   Interest rate derivative fair value gain (loss) - unrealized |   |                         | (395   | )      |                  |   | 59 |   |   |   | (454 | ) |   |   | -769 | % |
|  Other                                                              |   |                         | (1     | )      |                  |   | (25 | ) |   |   | 24 |   |   |   | 96 | % |
|   Income tax provision                                         |   |                         | 112    |   |                  |   | 26 |   |   |   | 86 |   |   |   | 331 | % |
| Total expenses                                                           |   | $                            | 30,134 |   |                  | $      | 36,704 |   |   | $ | (6,570 | ) |   |   | -18 | % |
|                                                                     |   |                         |   |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Expenses (per BOE):                                                      |   |                         |   |   |                  |   |   |   |   |   |   |   |   |   |   |   |
|   Production:                                                  |   |                         |   |   |                  |   |   |   |   |   |   |   |   |   |   |   |
|      Lease operating                            |   | $                            | 10.52  |   |                  | $      | 14.29 |   |   | $ | (3.77 | ) |   |   | -26 | % |
|      Production taxes and marketing             |   |                         | 5.67   |   |                  |   | 6.23 |   |   |   | (0.56 | ) |   |   | -9 | % |
|   Total production expenses                                    |   |                         | 16.19  |   |                  |   | 20.52 |   |   |   | (4.33 | ) |   |   | -21 | % |
|   Other:                                                       |   |                         |   |   |                  |   |   |   |   |   |   |   |   |   |   |   |
|      Depletion, depreciation, and amortization  |   |                         | 15.25  |   |                  |   | 15.81 |   |   |   | (0.56 | ) |   |   | -4 | % |
|      Exploration                                |   |                         | -      |   |                  |   | 0.03 |   |   |   | (0.03 | ) |   |   | -100 | % |
|      General and administrative                 |   |                         | 4.37   |   |                  |   | 4.59 |   |   |   | (0.22 | ) |   |   | -5 | % |
|   Total operating expenses                                     |   |                         | 35.81  |   |                  |   | 40.95 |   |   |   | (5.14 | ) |   |   | -13 | % |
|   Interest                                                     |   |                         | 2.85   |   |                  |   | 2.92 |   |   |   | (0.07 | ) |   |   | -2 | % |
|   Interest rate derivative fair value loss - realized          |   |                         | 1.28   |   |                  |   | 1.21 |   |   |   | 0.07 |   |   |   | 6 | % |
|   Interest rate derivative fair value gain (loss) - unrealized |   |                         | (0.52  | )      |                  |   | 0.07 |   |   |   | (0.59 | ) |   |   | -843 | % |
|  Other                                                              |   |                         | -      |   |                  |   | (0.03 | ) |   |   | 0.03 |   |   |   | -100 | % |
|   Income tax provision                                         |   |                         | 0.15   |   |                  |   | 0.03 |   |   |   | 0.12 |   |   |   | 400 | % |
| Total expenses                                                           |   | $                            | 39.57  |   |                  | $      | 45.15 |   |   | $ | (5.58 | ) |   |   | -12 | % |

----

| ·   | Distributions to unitholders; |
|--------------------|-------------------------------|

| ·   | Development, exploitation, and exploration of oil and natural gas properties; |
|--------------------|-------------------------------------------------------------------------------|

| ·   | Acquisitions of oil and natural gas properties; |
|--------------------|-------------------------------------------------|

| ·   | Funding of working capital; and |
|--------------------|---------------------------------|

| ·   | Contractual obligations. |
|--------------------|--------------------------|

|                             |       |   | Cash Distribution |   |      |                                           |   |           |   |   |
|----------------------------------|------------|--------|-------------------|--------|-----------|------------------------------------------------|--------|----------------|--------|--------|
|                             |  Date |   | Declared per      |   |      |                                           |   | Total          |   |   |
|                             | Declared   |   | Common Unit       |   | Date Paid |                                           |   | Distribution   |   |   |
|  2011                       |       |   |              |   |      |                                           |   | (in thousands) |   |   |
|  Quarter ended March 31     | 4/28/2011  |   | $                 | 0.4900 |      | 5/13/2011                                      | (a)    |           | $      | 22,533 |   | (a) |
|                             |       |   |              |   |      |                                           |   |           |   |   |   |   |
|  2010                       |       |   |              |   |      |                                           |   |           |   |   |   |   |
|  Quarter ended December 31  | 1/27/2011  |   | $                 | 0.5000 |      | 2/14/2011                                      |   |           | $      | 22,992 |   |   |
|  Quarter ended September 30 | 10/28/2010 |   | $                 | 0.5000 |      |       11/12/2010 |   |           | $      | 22,923 |   |   |
|  Quarter ended June 30      | 7/29/2010  |   | $                 | 0.5000 |      | 8/13/2010                                      |   |           | $      | 22,923 |   |   |
|  Quarter ended March 31     | 4/30/2010  |   | $                 | 0.5000 |      | 5/14/2010                                      |   |           | $      | 22,923 |   |   |

| (a)   | Represents the date the distribution is expected to be paid and the total amount of the distribution that is expected to be paid. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------|

----

|                                                  |   | Three months ended March 31, |   |
|-------------------------------------------------------|--------|------------------------------|--------|
|                                                  |   | 2011                         |   |   | 2010 |   |
|                                                  |   | (in thousands)               |   |   |   |   |
| Development and exploitation                          |   | $                            | 1,239  |   |   | $ | 531 |   |
| Exploration                                           |   |                         | -      |   |   |   | 20 |   |
|         Total |   | $                            | 1,239  |   |   | $ | 551 |   |

----

| ·   | 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 that year; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | if we acquire any additional assets, VNG 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 the board of directors of our general partner upon the recommendation of its conflicts committee; and |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | otherwise as agreed upon by VNG and our general partner, with the approval of the conflicts committee of the board of directors of our general partner. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|                                                     |   | Applicable Margin for |   |   | Applicable Margin for |   |
|----------------------------------------------------------|--------|-----------------------|--------|--------|-----------------------|--------|
| Ratio of Outstanding Borrowings to Borrowing Base        |   | Eurodollar Loans      |   |   | Base Rate Loans       |   |
| Less than .50 to 1                                       |   |                  | 2.250  | %      |                  |   | 1.250 | % |
| Greater than or equal to .50 to 1 but less than .75 to 1 |   |                  | 2.500  | %      |                  |   | 1.500 | % |
| Greater than or equal to .75 to 1 but less than .90 to 1 |   |                  | 2.750  | %      |                  |   | 1.750 | % |
| Greater than or equal to .90 to 1                        |   |                  | 3.000  | %      |                  |   | 2.000 | % |

| ·   | a prohibition against incurring debt, subject to permitted exceptions; |
|--------------------|------------------------------------------------------------------------|

| ·   | a prohibition against purchasing or redeeming partnership units, or prepaying indebtedness, subject to permitted exceptions; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------|

| ·   | a restriction on creating liens on our assets and the assets of our restricted 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 we maintain a ratio of consolidated current assets to consolidated current liabilities, as defined in the Credit Agreement which excludes the current portion of long term debt, of not less than 1.0 to 1.0; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | a requirement that we maintain a ratio of consolidated EBITDAX to the sum of consolidated net interest expense plus letter of credit fees of not less than 2.5 to 1.0; and |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | a requirement that we maintain a ratio of consolidated funded debt to consolidated adjusted EBITDAX of not more than 3.5 to 1.0. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------|

----

|   | • | Net interest expense, including write-off of deferred financing fees and realized gains and losses on interest rate derivative contracts; |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Depletion, depreciation and amortization  (including accretion of asset retirement obligations); |
|--------|---------|-------------------------------------------------------------------------------------------------------|

|   | • | Exploration expense; |
|--------|---------|----------------------|

|   | • | Amortization of premiums paid on derivative contracts; |
|--------|---------|--------------------------------------------------------|

|   | • | Unrealized gains and losses on commodity and interest rate derivative contracts; |
|--------|---------|----------------------------------------------------------------------------------|

|   | • | income taxes; |
|--------|---------|---------------|

|   | • | Unit-based compensation expense; and |
|--------|---------|--------------------------------------|

|   | • | Non-cash debt related expense. |
|--------|---------|--------------------------------|

|                                                                             |   | Three Months EndedMarch 31, |    |
|---------------------------------------------------------------------------------------|--------|---------------------------------------|---------|
|                                                                                  |   | 2011                                  |    |   | 2010 |   |
| Net income (loss)                                                                     |   | $                                     | (34,405 | ) |   | $ | 17,413 |   |
| Plus:                                                                            |   |                                  |    |   |   |   |   |   |
| Net interest expense, including realized losses on interest rate derivative contracts |   |                                  | 3,141   |   |   |   | 3,334 |   |
| Depletion, depreciation and amortization                                         |   |                                  | 11,614  |   |   |   | 12,851 |   |
| Exploration expense                                                                   |   |                                  | -       |   |   |   | 21 |   |
| Amortization of premiums paid on derivative contracts                                 |   |                                  | 3,953   |   |   |   | 2,420 |   |
| Unrealized (gains) losses on commodity and interest rate derivative contracts         |   |                                  | 47,730  |   |   |   | (6,120 | ) |
| Income taxes                                                                          |   |                                  | 112     |   |   |   | 26 |   |
| Unit-based compensation expense                                                  |   |                                  | 180     |   |   |   | 906 |   |
| Non-cash debt related expense                                                         |   |                                  | -       |   |   |   | 938 |   |
| Adjusted EBITDAX                                                                      |   | $                                     | 32,325  |   |   | $ | 31,789 |   |

----

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

|                              |   | Bank of America |   |   | BNP Paribas |   |    | The Bank of Nova Scotia |   |   | Wells Fargo Bank, N.A. |   |   | Credit Agricole S.A. |    |   | RBC Bank |   |    |   |   |
|-----------------------------------|--------|-----------------|--------|--------|-------------|--------|---------|-------------------------|--------|--------|------------------------|--------|--------|----------------------|---------|--------|----------|--------|---------|--------|--------|
|                              |   |            | (A+)   |   |        | (AA)   |    |                    | (AA-)  |   |                   | (AA)   |   |                 | (AA-)   |   |     |   | (A-)    |   |   | Total |   |
| Current asset                     |   | $               | -      |   |        | $      | -       |                    |   | $      | -                      |   |   | $                    | -       |   |     | $      | -       |   |   | $ | 416 |   |   | $ | 416 |   |
| Current liability                 |   |            | (1,047 | )      |        |   | (8,773  | )                       |   |   | (3                     | )      |   |                 | (4,195  | )      |     |   | (5,697  | )      |   |   | - |   |   |   | (19,715 | ) |
| Long-term liability               |   |            | -      |   |        |   | (8,718  | )                       |   |   | (4,187                 | )      |   |                 | (13,807 | )      |     |   | (15,584 | )      |   |   | (10,859 | ) |   |   | (53,155 | ) |
| Total amount owed to counterparty |   | $               | (1,047 | )      |        | $      | (17,491 | )                       |   | $      | (4,190                 | )      |   | $                    | (18,002 | )      |     | $      | (21,281 | )      |   | $ | (10,443 | ) |   | $ | (72,454 | ) |

----

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 3.  Defaults Upon Senior Securities

Item 4.  Removed and Reserved

Item 5.  Other Information

Item 6.  Exhibits

| 3.1 | Certificate of Limited Partnership of Encore Energy Partners LP (incorporated by reference to Exhibit 3.1 to our Registration Statement on Form S-1 (File No. 333-142847), 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 of our 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 our Current Report on Form 8-K, filed with the SEC on April 18, 2008). |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.1 | Form of Amended and Restated Indemnification Agreement (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed with the SEC on April 7, 2011). |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.2 | Form of Indemnification Agreement (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed with the SEC on April 13, 2011). |
|------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

| 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). |
|-------|----------------------------------------------------------------------------------|

|   | ____________ |
|--------|--------------|

| * | Filed herewith. |
|---|-----------------|

----

----

| 3.1 | Certificate of Limited Partnership of Encore Energy Partners LP (incorporated by reference to Exhibit 3.1 to our Registration Statement on Form S-1 (File No. 333-142847), 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 of our 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 our Current Report on Form 8-K, filed with the SEC on April 18, 2008). |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.1 | Form of Amended and Restated Indemnification Agreement (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed with the SEC on April 7, 2011). |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.2 | Form of Indemnification Agreement (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed with the SEC on April 13, 2011). |
|------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

| 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). |
|-------|----------------------------------------------------------------------------------|

|   | ____________ |
|--------|--------------|