##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
      Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2006ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)  OF
    THE SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file number 1-33249
      Legacy Reserves LP
 (Exact name of registrant as
    specified in its charter)
      Delaware

16-1751069(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)303 N. Wall Street,
    Suite 1600
    Midland, Texas

79701(Zip Code)(Address of principal executive
    offices)   Registrants telephone number, including area code:
 (432) 682-2516
  Securities registered pursuant to Section 12(b) of the
    Act:
 Units representing limited partner interests listed on the
    NASDAQ Stock Market LLC.
  Securities registered pursuant to 12(g) of the Act: None.
      o þ
  o þ
  o þ
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 12b-2
 o o þ
  Rule 12b-2 o þ




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##### 



LEGACY
    RESERVES LP
  Table of
    Contents
  Glossary of Terms


iiPART I


1ITEM 1.

BUSINESS


1ITEM 1A.

RISK
    FACTORS


8ITEM 1B.

UNRESOLVED STAFF
    COMMENTS


21ITEM 2.

PROPERTIES


22ITEM 3.

LEGAL
    PROCEEDINGS


30ITEM 4.

SUBMISSION OF
    MATTERS TO A VOTE OF SECURITY HOLDERS


30PART II


30ITEM 5.

MARKET FOR
    REGISTRANTS UNITS, RELATED UNITHOLDER MATTERS AND ISSUER
    PURCHASES OF EQUITY SECURITIES


30ITEM 6.

SELECTED FINANCIAL
    DATA


32ITEM 7.

MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATION


35ITEM 7A.

QUANTITATIVE AND
    QUALITATIVE DISCLOSURE ABOUT MARKET RISK


50ITEM 8.

FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA


51ITEM 9.

CHANGES IN AND
    DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
    DISCLOSURE


51ITEM 9A.

CONTROLS AND
    PROCEDURES


51ITEM 9B.

OTHER
    INFORMATION


51PART III


52ITEM 10.

DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE


52ITEM 11.

EXECUTIVE
    COMPENSATION


56ITEM 12.

SECURITY OWNERSHIP
    OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
    UNITHOLDER MATTERS


67ITEM 13.

CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE


70ITEM 14.

PRINCIPAL
    ACCOUNTING FEES AND SERVICES


74PART IV


76ITEM 15.

EXHIBITS, FINANCIAL
    STATEMENT SCHEDULES


76Consent of LaRoche Petroleum Consultants, Ltd.Rule 13a-14(a) CertificationsSection 1350 Certifications   i




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GLOSSARY
    OF TERMS  Bbl.
  Bcf.
  Boe.
  Boe/d.
  Btu.
  Developed acreage.
  Development well.
  Dry hole or well.
  Exploitation.
  Field. and/or
  Gross acres or gross wells.
  MBbls.
  MBoe.
  Mcf.
  MMBbls.
  MMBoe.
  MMBtu.
  MMcf.
  Net acres or net wells.
  NGLs.
  NYMEX.
  Oil.
  Productive well.
  Proved developed reserves.
 ii




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Proved developed non-producing or
    PDNPs.
  Proved reserves.
  Proved undeveloped drilling location.
  Proved undeveloped reserves or PUDs.
  Recompletion.
  Reserve acquisition cost.
  R/P ratio (reserve life).
  Reserve replacement.
  Reserve replacement cost.
 iii




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Reservoir. and/or
  Standardized measure.
  Undeveloped acreage.
  Working interest.
  Workover.
 iv




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CAUTIONARY
    STATEMENT
    REGARDING FORWARD-LOOKING INFORMATION
    
    business strategy;
    financial strategy;
    drilling locations;
    oil and natural gas reserves;
    technology;
    realized oil and natural gas prices;
    production volumes;
    lease operating expenses, general and administrative costs and
    finding and development costs;
    future operating results; and
    plans, objectives, expectations and intentions.      Contact Info:
 v




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PART I  ITEM 1.
    BUSINESS  References in this annual report on
    Form 10-K
    to Legacy Reserves, Legacy,
    we, our, us, or like terms
    prior to March 15, 2006 refer to the Moriah Group, Legacy
    Reserves predecessor, including the oil and natural gas
    properties we acquired in exchange for units and cash from the
    Moriah Group, the Brothers Group, H2K Holdings, MBN Properties
    (our Founding Investors) and certain charitable
    foundations in connection with our private equity offering on
    March 15, 2006. When used for periods from March 15,
    2006 forward, those terms refer to Legacy Reserves LP and its
    subsidiaries.
  Legacy
    Reserves LP
          
    we had proved reserves of approximately 18.8 MMBoe, of
    which 71% were oil and 79% were classified as proved developed
    producing, 5% were proved developed non-producing, and 16% were
    proved undeveloped;
    our proved reserves had a standardized measure of
    $240.6 million; and
    our proved reserves to production ratio was approximately
    14 years based on the average daily net production of 3,625
    Boe/d for the three months ended December 31, 2006.    Acquisition
    Activities
   1




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Acquisitions
    in 2006
  20-acre
      Proposed
    Acquisition of Oklahoma Assets
    Exploitation
    Activities
  2
  2
 2




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2
  Hedging
    Activities
    Business
    Strategy
    
    Make accretive acquisitions of producing properties generally
    characterized by long-lived reserves with stable production and
    reserve exploitation potential;
    Grow proved reserves and maximize cash flow and production
    through exploitation activities and operational efficiencies;
    Maintain financial flexibility; and
    Reduce commodity price risk through hedging.  Competitive
    Strengths
    
    Proven acquisition and exploitation track record;
    Predictable, long-lived reserve base;
    Diversified operations and operational control over
    approximately 66% of our current production; and
    Experienced management team with a vested interest in our
    success.  Marketing
    and Major Purchasers
   3




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Competition
      Seasonal
    Nature of Business
    Environmental
    Matters and Regulation
  General.
  
    require the acquisition of various permits before drilling
    commences;
    restrict the types, quantities and concentration of various
    substances that can be released into the environment in
    connection with oil and natural gas drilling and production
    activities;
    limit or prohibit drilling activities on certain lands lying
    within wilderness, wetlands and other protected areas; and
    require remedial measures to mitigate pollution from former and
    ongoing operations, such as requirements to close pits and plug
    abandoned wells.   4




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Waste Handling.
  Comprehensive Environmental Response, Compensation and
    Liability Act.
  off-site
  Water Discharges.
  Air Emissions.
  National Environmental Policy Act.
 5




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OSHA and Other Laws and Regulation. right-to-know and/or
      Other
    Regulation of the Oil and Natural Gas Industry
     6




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Drilling and Production.
  
    the location of wells;
    the method of drilling and casing wells;
    the surface use and restoration of properties upon which wells
    are drilled;
    the plugging and abandoning of wells; and
    notice to surface owners and other third parties.    Natural gas regulation.
    State regulation.
   7




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Employees
    Offices
   ITEM 1A.  RISK
    FACTORS  Risks
    Related to our Business
  We may
    not have sufficient available cash to pay the full amount of our
    current quarterly distribution or any distribution at all
    following establishment of cash reserves and payment of fees and
    expenses, including payments to our general
    partner.
    
    the amount of oil and natural gas we produce;
    the price at which we are able to sell our oil and natural gas
    production;
    whether we are able to acquire additional oil and natural gas
    properties at economically attractive prices;
    whether we are able to continue our exploitation activities at
    economically attractive costs;
    the level of our operating costs, including payments to our
    general partner;
    the level of our interest expense, which depends on the amount
    of our indebtedness and the interest payable thereon; and
    the level of our capital expenditures.  If we
    are not able to acquire additional oil and natural gas reserves
    on economically acceptable terms, our reserves and production
    will decline, which would adversely affect our business, results
    of operations and financial condition and our ability to make
    cash distributions to our unitholders.
   8




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Because
    we distribute all of our available cash to our unitholders, our
    future growth may be limited.
    If
    commodity prices decline significantly for a prolonged period,
    we may be forced to reduce our distribution or not be able to
    pay distributions at all.
    
    the domestic and foreign supply of and demand for oil and
    natural gas;
    the price and quantity of imports of crude oil and natural gas;
    overall domestic and global economic conditions;
    political and economic conditions in other oil and natural gas
    producing countries, including embargoes and continued
    hostilities in the Middle East and other sustained military
    campaigns, and acts of terrorism or sabotage;
    the ability of members of the Organization of Petroleum
    Exporting Countries to agree to and maintain oil price and
    production controls;
    the level of consumer product demand;
    weather conditions;
    the impact of the U.S. dollar exchange rates on oil and
    natural gas prices; and
    the price and availability of alternative fuels.    If
    commodity prices decline significantly for a prolonged period, a
    significant portion of our exploitation projects may become
    uneconomic, which may adversely affect our ability to make
    distributions to our unitholders.
   9




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Our
    estimated reserves are based on many assumptions that may prove
    inaccurate. Any material inaccuracies in these reserve estimates
    or underlying assumptions will materially affect the quantities
    and present value of our reserves.
    Our
    credit facility has substantial restrictions and financial
    covenants, and our borrowing base is subject to redetermination
    by our lenders which could adversely affect our business,
    results of operations, financial condition and our ability to
    make cash distributions to our unitholders.
           10




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Our
    business depends on gathering and transportation facilities
    owned by others. Any limitation in the availability of those
    facilities would interfere with our ability to market the oil
    and natural gas we produce.
    Our
    exploitation projects require substantial capital expenditures,
    which will reduce our cash available for distribution. We may be
    unable to obtain needed capital or financing on satisfactory
    terms, which could lead to a decline in our oil and natural gas
    reserves.
    
    our proved reserves;
    the level of oil and natural gas we are able to produce from
    existing wells;
    the prices at which our oil and natural gas are sold; and
    our ability to acquire, locate and produce new reserves.  and/or
  We do
    not control all of our operations and exploitation projects and
    failure of an operator of wells in which we own partial
    interests to adequately perform could adversely affect our
    business, results of operations, financial condition and our
    ability to make cash distributions to our
    unitholders.
       11




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Shortages
    of drilling rigs, equipment and crews could delay our
    operations, adversely affect our ability to increase our
    reserves and production and reduce our cash available for
    distribution to our unitholders.
    Increases
    in the cost of drilling rigs, service rigs, pumping services and
    other costs in drilling and completing wells could reduce the
    viability of certain of our exploitation projects.
    Drilling
    for and producing oil and natural gas are high risk activities
    with many uncertainties that could adversely affect our
    business, results of operations, financial condition and our
    ability to make cash distributions to our
    unitholders.
      
    the high cost, shortages or delivery delays of equipment and
    services;
    unexpected operational events;
    adverse weather conditions;
    facility or equipment malfunctions;
    title disputes;
    pipeline ruptures or spills;
    collapses of wellbore, casing or other tubulars;
    unusual or unexpected geological formations;
    loss of drilling fluid circulation;
    formations with abnormal pressures;
    fires;
    blowouts, craterings and explosions; and
    uncontrollable flows of oil, natural gas or well fluids.     12




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Increases
    in interest rates, which have recently experienced record lows,
    will reduce our cash available for distribution.
  50-year
  We may
    have assumed unknown liabilities in connection with the
    formation transactions and our subsequent
    acquisitions.
    Properties
    that we buy may not produce as projected, and we may be unable
    to determine reserve potential, identify liabilities associated
    with the properties or obtain protection from sellers against
    such liabilities.
    Our
    identified drilling location inventories are scheduled out over
    several years, making them susceptible to uncertainties that
    could materially alter the occurrence or timing of their
    drilling.
   13




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Our
    hedging activities could result in cash losses, could reduce our
    cash available for distributions and may limit potential
    gains.
      The
    inability of one or more of our customers to meet their
    obligations may adversely affect our financial condition and
    results of operations.
    We
    depend on a limited number of key personnel who would be
    difficult to replace.
    We may
    be unable to compete effectively with larger companies, which
    could have a material adverse effect on our business, results of
    operations, financial condition and our ability to make cash
    distributions to our unitholders.
   14




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If we
    fail to develop or maintain an effective system of internal
    controls, we may not be able to accurately report our financial
    results or prevent fraud. As a result, current and potential
    unitholders could lose confidence in our financial reporting,
    which would harm our business and the trading price of our
    units.
    We are
    subject to complex federal, state, local and other laws and
    regulations that could adversely affect the cost, manner or
    feasibility of conducting our operations.
      Our
    operations expose us to significant costs and liabilities with
    respect to environmental and operational safety
    matters.
     15




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Risks
    Related to Our Limited Partnership Structure
  Our
    Founding Investors, including members of our management, own a
    52% limited partner interest in us and control our general
    partner, which has sole responsibility for conducting our
    business and managing our operations. Our general partner has
    conflicts of interest and limited fiduciary duties, which may
    permit it to favor its own interests to the detriment of our
    unitholders.
    
    neither our partnership agreement nor any other agreement
    requires our Founding Investors or their affiliates, other than
    our executive officers, to pursue a business strategy that
    favors us;
    our general partner is allowed to take into account the
    interests of parties other than us, such as our Founding
    Investors, in resolving conflicts of interest, which has the
    effect of limiting its fiduciary duty to our unitholders;
    our Founding Investors and their affiliates (other than our
    executive officers and their affiliates) may engage in
    competition with us;
    our general partner has limited its liability and reduced its
    fiduciary duties under our partnership agreement and has also
    restricted the remedies available to our unitholders for actions
    that, without the limitations, might constitute breaches of
    fiduciary duty. As a result of purchasing units, unitholders
    consent to some actions and conflicts of interest that might
    otherwise constitute a breach of fiduciary or other duties under
    applicable state law;
    our general partner determines the amount and timing of asset
    purchases and sales, capital expenditures, borrowings, issuance
    of additional partnership securities, and reserves, each of
    which can affect the amount of cash that is distributed to our
    unitholders;
    our general partner determines the amount and timing of any
    capital expenditures and whether a capital expenditure is a
    maintenance capital expenditure, which reduces operating
    surplus, or a growth capital expenditure, which does not. Such
    determination can affect the amount of cash that is distributed
    to our unitholders;
    our general partner determines which costs incurred by it and
    its affiliates are reimbursable by us;
    our partnership agreement does not restrict our general partner
    from causing us to pay it or its affiliates for any services
    rendered to us or entering into additional contractual
    arrangements with any of these entities on our behalf;
    our general partner intends to limit its liability regarding our
    contractual and other obligations;
    our general partner controls the enforcement of obligations owed
    to us by it and its affiliates; and
    our general partner decides whether to retain separate counsel,
    accountants, or others to perform services for us. 16




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Unitholders
    have limited voting rights and are not entitled to elect our
    general partner on an annual or other continuing
    basis.
    Even
    if unitholders are dissatisfied they cannot remove our general
    partner without the consent of unitholders owning at least
    662/3%
    of our units, including units owned by our general partner and
    its affiliates.
  2 3
  Our
    partnership agreement restricts the voting rights of those
    unitholders owning 20% or more of our units.
    Our
    Founding Investors and their affiliates (other than our
    executive officers and their affiliates) may compete directly
    with us.
    Cost
    reimbursements due our general partner and its affiliates will
    reduce our cash available for distribution to our
    unitholders.
   17




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Our
    partnership agreement limits our general partners
    fiduciary duties to our unitholders and restricts the remedies
    available to unitholders for actions taken by our general
    partner that might otherwise constitute breaches of fiduciary
    duty.
    
    permits our general partner to make a number of decisions in its
    individual capacity, as opposed to in its capacity as our
    general partner. This entitles our general partner to consider
    only the interests and factors that it desires, and it has no
    duty or obligation to give any consideration to any interest of,
    or factors affecting, us, our affiliates or any unitholder;
    provides that our general partner will not have any liability to
    us or our unitholders for decisions made in its capacity as a
    general partner so long as it acted in good faith, meaning it
    believed the decision was in the best interests of our
    partnership;
    provides that our general partner is entitled to make other
    decisions in good faith if it believes that the
    decision is in our best interest;
    provides generally that affiliated transactions and resolutions
    of conflicts of interest not approved by the conflicts committee
    of the board of directors of our general partner and not
    involving a vote of unitholders must be on terms no less
    favorable to us than those generally being provided to or
    available from unrelated third parties or be fair and
    reasonable to us, as determined by our general partner in
    good faith, and that, in determining whether a transaction or
    resolution is fair and reasonable, our general
    partner may consider the totality of the relationships between
    the parties involved, including other transactions that may be
    particularly advantageous or beneficial to us; and
    provides that our general partner and its officers and directors
    will not be liable for monetary damages to us, our unitholders
    or assignees for any acts or omissions unless there has been a
    final and non-appealable judgment entered by a court of
    competent jurisdiction determining that the general partner or
    those other persons acted in bad faith or engaged in fraud or
    willful misconduct.  Our
    partnership agreement permits our general partner to redeem any
    partnership interests held by a limited partner who is a
    non-citizen assignee.
    We may
    issue an unlimited number of additional units without the
    approval of our unitholders, which would dilute their existing
    ownership interest in us.
    
    our unitholders proportionate ownership interests in us
    will decrease;
    the amount of cash available for distribution on each unit may
    decrease; 18




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
    the risk that a shortfall in the payment of our current
    quarterly distribution will increase;
    the relative voting strength of each previously outstanding unit
    may be diminished; and
    the market price of the units may decline.  The
    liability of our unitholders may not be limited if a court finds
    that unitholder action constitutes control of our
    business.
    
    a court or government agency determined that we were conducting
    business in a state but had not complied with that particular
    states partnership statute; or
    our unitholders right to act with other unitholders to
    take other actions under our partnership agreement that
    constitute control of our business.  Unitholders
    may have liability to repay distributions that were wrongfully
    distributed to them.
  Section 17-607
  Tax Risks
    to Unitholders
  Our
    tax treatment depends on our status as a partnership for federal
    income tax purposes, as well as our not being subject to
    entity-level taxation by individual states. If the IRS were to
    treat us as a corporation for federal income tax purposes or we
    were to become subject to entity-level taxation for state tax
    purposes, taxes paid, if any, will reduce our cash available for
    distribution to our unitholders.
     19




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Our
    unitholders may be required to pay taxes on their share of our
    income even if they do not receive any cash distributions from
    us.
    A
    successful IRS contest of the federal income tax positions we
    take may adversely affect the market for our units, and the
    costs of any contest will reduce our cash available for
    distribution to our unitholders.
    Tax-exempt
    entities and foreign persons face unique tax issues from owning
    units that may result in adverse tax consequences to
    them.
  non-U.S. persons non-U.S. persons non-U.S. persons
  Tax
    gain or loss on the disposition of our units could be more or
    less than expected because prior distributions in excess of
    allocations of income will decrease our unitholders tax basis in
    their units.
   20




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We
    will treat each purchaser of our units as having the same tax
    benefits without regard to the units purchased. The IRS may
    challenge this treatment, which could adversely affect the value
    of the units.
    Our
    unitholders may be subject to state and local taxes and return
    filing requirements in states where they do not live as a result
    of investing in our units.
    We
    will be considered to have terminated for tax purposes due to a
    sale or exchange of 50% or more of our interests within a
    twelve-month period.
  Schedule K-1s)
  ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS  None.
 21




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ITEM 2.
    PROPERTIES    As of December 31, 2006Proved Reserves


Standardized MeasureField

MMBoe


R/P(a)


% Oil


Amount


% of Total($ in Millions)Denton


1.8



11



86
%

$
22.2



9.2
%Farmer


2.0



18



66



20.1



8.4Spraberry


1.6



16



70



19.9



8.3Hobbs


1.1



17



88



15.3



6.4Lea


1.2



17



70



14.4



6.0Howard Glasscock/Iatan/Iatan East


1.1



15



99



13.7



5.7Langlie Mattix


1.2



30



92



13.2



5.5Total  Top 7 fields


10.0



16



80
%

$
118.8



49.5
%All others


8.8



13



61



121.8



50.5Total


18.8



14



71
%

$
240.6



100.0
%     (a)
    
    Reserves as of December 31, 2006 divided by production
    volumes for the year ended December 31, 2006.  Summary
    of Oil and Natural Gas Properties and Projects
    Denton Field.
    Farmer Field.
 22




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20-acre 10-acre 10-acre 10-acre 10-acre
  Spraberry Field.
  Hobbs Field. (R/P) for
  2 2
  Lea Field.
  40-acre
  Howard Glasscock, Iatan and Iatan East Howard
    Fields.
 23




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Langlie Mattix Field.
  40-acre 20-acre 20-acre 20-acre 20-acre
  Oil and
    Natural Gas Data
  Proved
    Reserves
    As of December 31, 20062004


2005(a)


2006Reserve Data:Estimated net proved reserves:Oil (MMBbls)


4.1



8.1



13.4Natural Gas (Bcf)


10.5



24.5



32.5Total (MMBoe)


5.9



12.2



18.8Proved developed reserves (MMBoe)


5.9



9.8



15.8Proved undeveloped reserves (MMBoe)






2.4



3.0Proved developed reserves as a
    percentage of total proved reserves


100
%


80
%


84
%Standardized measure (in
    millions)(b)

$
60.4


$
192.0


$
240.6Oil and Natural Gas
    Prices(c)Oil  NYMEX WTI per Bbl

$
43.4
5

$
61.0
5

$
61.0
5Natural gas  NYMEX
    Henry Hub per MMBtu

$
6.1
5

$
11.2
5

$
6.3
0     (a)
    
    Includes 3.2 MMBbls of oil, 13.0 Bcf of natural gas
    and $93.0 million of standardized measure held by MBN
    Properties LP of which 1.7 MMBbls of oil, 7.0 Bcf of
    natural gas and $50.2 million of standardized measure was
    owned by the non-controlling interest.(b)
    
    Standardized measure is the present value of estimated future
    net revenues to be generated from the production of proved
    reserves, determined in accordance with assumptions required by
    the Financial 24




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Accounting Standards Board and the Securities and Exchange
    Commission (using prices and costs in effect as of the period
    end date) without giving effect to non-property related expenses
    such as general administrative expenses and debt service or to
    depletion, depreciation and amortization and discounted using an
    annual discount rate of 10%. Because we are a limited
    partnership that allocates our taxable income to our
    unitholders, no provision for federal or state income taxes have
    been provided for in the calculation of standardized measure.
    Standardized measure does not give effect to derivative
    transactions. For a description of our derivative transactions,
    please read Managements Discussion and Analysis of
    Financial Condition and Results of Operations  Cash
    Flow from Operating Activities.(c)
    
    Oil and natural gas prices as of each date are based on NYMEX
    prices per Bbl of oil and per MMBtu of natural gas at such date,
    with these representative prices adjusted by field to arrive at
    the appropriate net price.       25




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Production
    and Price History
    Year Ended December 31,2004


2005(a)


2006(b)Production:Oil (MBbl)


286



354



749Gas (MMcf)


783



1,027



2,200Total (MBOE)


416



525



1,116Average daily production (BOE per
    day)


1,138



1,438



3,058Average sales price per unit
    (including hedges)(c):Oil (per Bbl)

$
36.24


$
38.94
(d)

$
57.44
(e)Gas (per Mcf)

$
5.04


$
5.45


$
11.85Combined (per BOE)

$
34.40


$
36.92
(d)

$
61.90
(e)Average sales price per unit
    (including realized hedge gains/losses)(f):Oil (per Bbl)

$
38.61


$
41.51
(d)

$
51.65
(e)Gas (per Mcf)

$
4.89


$
7.13


$
9.48Combined (per BOE)

$
35.74


$
41.93
(d)

$
53.35
(e)Average sales price per unit
    (excluding hedges):Oil (per Bbl)

$
38.45


$
51.48


$
60.55Gas (per Mcf)

$
5.04


$
7.13


$
6.57Combined (per BOE)

$
35.92


$
48.65


$
53.58Average unit costs per
    BOE:Production costs, excluding
    production and other taxes

$
10.44


$
12.14


$
14.28Production and other taxes

$
2.23


$
3.12


$
3.36General and administrative

$
1.76


$
2.58


$
3.31Depletion, depreciation and
    amortization

$
2.12


$
4.36


$
16.48     (a)
    
    Reflects the production and operating results of the PITCO
    properties from their acquisition on September 14, 2005.(b)
    
    Reflects the production and operating results of the oil and
    natural gas properties acquired in the March 15, 2006
    formation transactions and the South Justis, Farmer Field and
    Kinder Morgan acquisitions from the closing dates of such
    acquisitions through December 31, 2006.(c)
    
    Includes both the realized and unrealized hedge gains and losses
    from Legacys oil and natural gas swaps. Since Legacy does
    not specifically designate its commodity derivative instruments
    as cash flow hedges, current earnings reflect a
    mark-to-market
    adjustment for these instruments. Unrealized gains and losses
    represent a current period
    mark-to-market
    adjustment for commodity derivatives which will be settled in
    future periods. See Note 9 on page F-23 for details
    regarding Legacys unrealized gains and losses.(d)
    
    Includes the effects of approximately $2.0 million of
    derivative premiums for the year ended December 31, 2005 to
    cancel and reset 2006 oil swaps from $51.31 to $59.38 per
    Bbl and approximately $0.8 million of premiums paid on
    July 22, 2005 for an option to enter into a $55.00 per
    Bbl oil swap related to the PITCO acquisition that was not
    exercised.(e)
    
    Includes the effect of approximately $4.0 million of
    derivative premiums for the year ended December 31, 2006 to
    cancel and reset 2007 oil swaps from $60.00 to $65.82 per
    barrel for 372,000 barrels and for 26




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##### Table of Contents



2008 oil swaps from $60.50 to $66.44 per barrel for
    348,000 barrels, which reflected the prevailing oil swap
    market at the time of the reset.(f)
    
    Includes only the realized hedge gains (losses) from
    Legacys oil and natural gas swaps.  Productive
    Wells
    Oil


Natural GasGross


Net


Gross


NetOperated


695



519.51



49



41.62Non-operated


1,128



60.34



79



13.97Total


1,823



579.85



128



55.59   Developed
    and Undeveloped Acreage
    Developed


UndevelopedAcreage(a)


Acreage(b)Gross(c)


Net(d)


Gross(c)


Net(d)Total


183,323



52,013







     (a)
    
    Developed acres are acres spaced or assigned to productive wells
    or wells capable of production.(b)
    
    Undeveloped acres are acres which are not held by commercially
    producing wells, regardless of whether such acreage contains
    proved reserves. All of our proved undeveloped locations are
    located on acreage currently held by production. A gross acre is
    an acre in which we own a working interest. The number of gross
    acres is the total number of acres in which we own a working
    interest.(c)
    
    A gross acre is an acre in which we own a working interest. The
    number of gross acres is the total number of acres in which we
    own a working interest.(d)
    
    A net acre is deemed to exist when the sum of the fractional
    ownership working interests in gross acres equals one. The
    number of net acres is the sum of the fractional working
    interests owned in gross acres expressed as whole numbers and
    fractions thereof. 27




---



##### Table of Contents



Drilling
    Activity
    Year Ended December 31,2004


2005


2006Gross:DevelopmentProductive


12



12



14Dry










2Total


12



12



16ExploratoryProductive


2







Dry


1



1



Total


3



1



Net:DevelopmentProductive


3.0



1.6



6.2Dry










1.3Total


3.0



1.6



7.5ExploratoryProductive


0.2







Dry


0.2



0.1



Total


0.4



0.1



   Summary
    of Exploitation Projects
  2
  Operations
  General
   28




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##### Table of Contents



Oil
    and Natural Gas Leases
    South
    Justis Unit Operating Agreement
    Hedging
    Activity
    Title to
    Properties
       29




---



##### Table of Contents



rights-of-way
  ITEM 3.
    LEGAL
    PROCEEDINGS    ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF UNITHOLDERS   PART II  ITEM 5.
    MARKET
    FOR REGISTRANTS UNITS, RELATED UNITHOLDER MATTERS AND
    ISSUER PURCHASES OF EQUITY SECURITIES      Cash Distribution2006

per UnitPeriod from March 15, 2006 to
    March 31, 2006

$
0.0774
(a)(b)Second Quarter

$
0.4100
(c)Third Quarter

$
0.4100
(c)Fourth Quarter

$
0.4100
(d)     (a)
    
    Reflects a pro-rated distribution for the period from
    March 15, 2006 through March 31, 2006.(b)
    
    We paid total cash distributions to our general partner with
    respect to its approximately 0.1% general partner interest of
    $1,417.(c)
    
    We paid total cash distributions to our general partner with
    respect to its approximately 0.1% general partner interest of
    $7,508.(d)
    
    The record date of our distribution attributable to the fourth
    quarter of 2006 was January 10, 2007 per a declaration
    of Legacys board on January 3, 2007 and preceded the
    closing of our initial public offering. Accordingly, unitholders
    of units issued in our initial public offering were not entitled
    to receive a distribution attributable to the fourth quarter of
    2006 on such units.  Distribution
    Policy
   30




---



##### Table of Contents



Recent
    Sales of Unregistered Securities
      UnitsMoriah GroupMoriah Properties, Ltd.


7,334,070DAB Resources, Ltd.


859,703Brothers GroupBrothers Production Properties, Ltd


4,968,945Brothers Production Company,
    Inc.


264,306Brothers Operating Company,
    Inc.


52,861J&W McGraw Properties,
    Ltd.


914,246MBN Properties LP


3,162,438H2K Holdings, Ltd.


83,499                31




---



##### Table of Contents



Use of
    Proceeds from Registered Securities
  Form S-1 No. 333-138637)
  
    repay all of the $115.8 million of indebtedness outstanding
    under our credit facility;
    use $4.2 million for general partnership purposes.    
    fund $65.3 million of the purchase price of producing
    properties from MBN Properties LP in connection with the closing
    of our private equity offering;
    fund $13.4 million of the purchase price of producing
    properties and related operating rights in the South Justis
    Field;
    fund the $5.6 million purchase price of operated leases in
    the Farmer Field;
    fund the $17.2 million purchase price of producing
    properties acquired from Kinder Morgan;
    pay $4.0 million of derivative premiums to cancel and reset
    oil swaps; and
    for general partnership purposes.    ITEM 6.
    SELECTED
    FINANCIAL DATA     32




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##### Table of Contents



33




---



##### Table of Contents



Form 10-K.
  Year Ended December 31,2002


2003


2004


2005(a)


2006(b)(In thousands)Statement of Operations
    Data:Revenues:Oil sales

$
5,494


$
7,919


$
10,998


$
18,225


$
45,351Natural gas sales


2,204



3,697



3,945



7,318



14,446Realized and unrealized gain
    (loss) on oil and natural gas swaps


(594
)


(283
)


(633
)


(6,159
)


9,289Total Revenues


7,104



11,333



14,310



19,384



69,086Expenses:Oil and natural gas production


2,586



3,496



4,345



6,376



15,938Production and other taxes


459



661



928



1,636



3,746General and administrative


230



543



731



1,354



3,691Dry hole costs


261



1,465



1







Depletion, depreciation,
    amortization and accretion


649



766



883



2,291



18,395Impairment of long-lived assets






471











16,113Loss on sale of assets














20



42Total expenses


4,185



7,402



6,888



11,677



57,925Operating income


2,919



3,931



7,422



7,707



11,161Other income
    (expense):Interest income


14



56



419



185



130Interest expense


(50
)


(94
)


(213
)


(1,584
)


(6,645
)Gain on sale of partnership
    investment










1,292







Equity in income (loss) of
    partnerships


(44
)


311



183



(495
)


(318
)Other


4



3



92



45



29Income before non-controlling
    interest


2,843



4,207



9,195



5,858



4,357Non-controlling interest














1



Income from continuing operations

$
2,843


$
4,207


$
9,195


$
5,859


$
4,357Earnings from continuing
    operations per unitBasic and fully diluted

$
0.30


$
0.44


$
0.97


$
0.62


$
0.26Distributions per unit
    (c)

$



$



$



$



$
0.8974       34




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##### Table of Contents



Year Ended December 31,2002


2003


2004


2005(a)


2006(b)(In thousands)Cash Flow Data:Net cash provided by operating
    activities

$
3,941


$
6,799


$
8,586


$
14,409


$
29,590Net cash provided by (used in)
    investing activities

$
(1,895
)

$
(8,475
)

$
1,023


$
(68,965
)

$
(62,505
)Net cash provided by (used in)
    financing activities

$
(1,993
)

$
1,717


$
(8,958
)

$
55,742


$
32,022Capital expenditures

$
2,741


$
4,047


$
3,325


$
66,915


$
56,151   HistoricalYear Ended December 31,2002


2003


2004


2005(a)


2006(b)(In thousands)Balance Sheet DataCash and cash equivalents

$
76


$
117


$
769


$
1,955


$
1,062Other current assets


2,643



7,826



5,799



6,316



17,159Oil and natural gas properties,
    net of accumulated depletion, depreciation and amortization


7,558



9,954



12,224



77,172



247,580Other assets


497



651







1,499



7,567Total assets

$
10,774


$
18,548


$
18,792


$
86,942


$
273,368Current liabilities

$
3,925


$
9,157


$
4,898


$
4,562


$
10,834Long term debt














52,473



115,800Other long-term liabilities






2,113



1,872



19,998



7,945Unitholders equity


6,849



7,278



12,022



9,909



138,789Total liabilities and
    unitholders equity

$
10,774


$
18,548


$
18,792


$
86,942


$
273,368     (a)
    
    Reflects purchase of the PITCO properties on September 14,
    2005. Consequently, the operations of the PITCO properties are
    only included for the period following the date of acquisition.(b)
    
    Reflects Legacys purchase of the oil and natural gas
    properties acquired in the March 15, 2006 formation
    transactions and the South Justis, Farmer Field and Kinder
    Morgan acquisitions in June and July 2006. Consequently, the
    operations of these acquired properties are only included for
    the period from the closing dates of such acquisitions through
    December 31, 2006.(c)
    
    Amounts not presented for years prior to 2006 since they would
    not be meaningful.  ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATION  The following discussion and analysis should be read in
    conjunction with the Selected Historical Consolidated
    Financial Data and the accompanying financial statements
    and related notes included elsewhere in annual report on
    Form 10-K.
    The following discussion contains forward-looking statements
    that reflect our future plans, estimates, beliefs and expected
    performance. The forward-looking statements are dependent upon
    events, risks and uncertainties that may be outside our control.
    Our actual results could differ materially from those discussed
    in these forward-looking statements. Factors that could cause or
    contribute to such differences include, but are not limited to,
    market prices for natural gas, production volumes, estimates of
    proved reserves, capital expenditures, economic and competitive
    conditions, regulatory changes and other uncertainties, as well
    as those factors discussed below and elsewhere in this report,
    particularly in Risk Factors and Cautionary
    Note Regarding Forward-Looking Statements, all of
    which are difficult to predict. In light of these risks,
    uncertainties and assumptions, the forward-looking events
    discussed may not occur.
 35




---



##### Table of Contents



Overview
      period-to-period
          2
 36




---



##### Table of Contents



mark-to-market
  Production
    and Operating Costs Reporting
     37




---



##### Table of Contents



Operating
    Data
    Year Ended December 31,2004


2005(a)


2006(b)Revenues (in thousands)(c):Oil sales

$
10,998


$
18,225


$
45,351Natural gas sales


3,945



7,318



14,446Realized gain (loss) on oil swaps


46



(3,531
)


(6,667
)Realized gain (loss) on natural
    gas swaps


(120
)






6,405Unrealized gain (loss) on oil swaps


(679
)


(911
)


4,338Unrealized gain (loss) on natural
    gas swaps


120



(1,717
)


5,213Total revenue

$
14,310


$
19,384


$
69,086Expenses (in thousands):Oil and gas production expenses

$
4,345


$
6,376


$
15,938Production and other taxes

$
928


$
1,636



3,746General and administrative expenses

$
731


$
1,354



3,691Depletion, depreciation,
    amortization and accretion expense

$
883


$
2,291



18,395Production:Oil (MBbl)


286



354



749Gas (MMcf)


783



1,027



2,200Total (MBOE)


416



525



1,116Average daily production (BOE per
    day)


1,138



1,438



3,058Average sales price per unit
    (including hedges)(c):Oil (per Bbl)

$
36.24


$
38.94
(d)

$
57.44
(e)Gas (per Mcf)

$
5.04


$
5.45


$
11.85Combined (per BOE)

$
34.40


$
36.92
(d)

$
61.90
(e)Average sales price per unit
    (including realized hedge gains/losses)(f):Oil (per Bbl)

$
38.61


$
41.51
(d)

$
51.65
(e)Gas (per Mcf)

$
4.89


$
7.13


$
9.48Combined (per BOE)

$
35.74


$
41.93
(d)

$
53.35
(e)Average sales price per unit
    (excluding hedges):Oil (per Bbl)

$
38.45


$
51.48


$
60.55Gas (per Mcf)

$
5.04


$
7.13


$
6.57Combined (per BOE)

$
35.92


$
48.65


$
53.58Average unit costs per BOE:Production costs, excluding
    production and other taxes

$
10.44


$
12.14


$
14.28Production and other taxes

$
2.23


$
3.12


$
3.36General and administrative

$
1.76


$
2.58


$
3.31Depletion, depreciation and
    amortization

$
2.12


$
4.36


$
16.48     (a)
    
    Reflects the production and operating results of the PITCO
    properties from their acquisition on September 14, 2005.(b)
    
    Reflects the production and operating results of the oil and
    natural gas properties acquired in the March 15, 2006
    formation transactions and the South Justis, Farmer Field and
    Kinder Morgan acquisitions from the closing dates of such
    acquisitions through December 31, 2006. 38




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##### Table of Contents



(c)
    
    Includes both the realized and unrealized hedge gains and losses
    from Legacys oil and natural gas swaps. Since Legacy does
    not specifically designate its commodity derivative instruments
    as cash flow hedges, current earnings reflect a
    mark-to-market
    adjustment for these instruments. Unrealized gains and losses
    represent a current period
    mark-to-market
    adjustment for commodity derivatives which will be settled in
    future periods. See Note 9 on
    page F-23
    for details regarding Legacys unrealized gains and losses.(d)
    
    Includes the effects of approximately $2.0 million of
    derivative premiums for the year ended December 31, 2005 to
    cancel and reset 2006 oil swaps from $51.31 to $59.38 per
    Bbl and approximately $0.8 million of premiums paid on
    July 22, 2005 for an option to enter into a $55.00 per
    Bbl oil swap related to the PITCO acquisition that was not
    exercised.(e)
    
    Includes the effect of approximately $4.0 million of
    derivative premiums to cancel and reset 2007 oil swaps from
    $60.00 to $65.82 per barrel for 372,000 barrels and
    for 2008 oil swaps from $60.50 to $66.44 per barrel for
    348,000 barrels, which reflected the prevailing oil swap
    market at the time of the reset.(f)
    
    Includes only the realized hedge gains (losses) from
    Legacys oil and natural gas swaps.  Results
    of Operations
  Year
    Ended December 31, 2006 Compared to Year Ended
    December 31, 2005
  mark-to-market
   39




---



##### Table of Contents



Year
    Ended December 31, 2005 Compared to Year Ended
    December 31, 2004
  mark-to-market
 40




---



##### Table of Contents



Capital
    Resources and Liquidity
   41




---



##### Table of Contents



Cash Flow
    from Operations
             42




---



##### Table of Contents



Annual


Average


PriceCalendar Year

Volumes (Bbls)


Price per Bbl


Range per Bbl2007


741,097


$
67.40


$
64.15-$75.702008


715,649


$
67.23


$
62.25-$73.452009


660,613


$
64.96


$
61.05-$71.402010


575,045


$
62.94


$
60.15-$67.802011


44,640


$
67.33


$
67.33   Annual


Average


PriceCalendar Year

Volumes (Mcf)


Price per Mcf


Range per Mcf2007


1,558,504


$
9.56


$
9.02-$11.832008


1,422,732


$
8.61


$
7.98-$10.582009


1,316,354


$
8.38


$
7.77-$10.182010


1,218,899


$
7.99


$
7.37-$ 9.73     Annual


BasisCalendar Year

Volumes (Mcf)


Range per Mcf2007


1,560,000


$
(0.88
)2008


1,422,000


$
(0.84
)2009


1,320,000


$
(0.68
)2010


1,200,000


$
(0.57
)   Investing
    Activities  Acquisitions and Capital
    Expenditures
      2
 43




---



##### Table of Contents



Financing
    Activities
  Moriah
    Group Credit Agreement
    Moriah
    Group Senior Credit Facility
    Moriah
    Group Notes Advanced to MBN Properties LP and MBN
    Management, LLC
         44




---



##### Table of Contents



Our
    Revolving Credit Facility
  2 3 2 3
    
    with respect to ABR Loans, the alternate base rate equals the
    higher of the prime rate or the Federal funds effective rate
    plus 0.50%, plus an applicable margin between 0% and
    0.375%, or
    with respect to any Eurodollar loans for any interest period,
    the London interbank rate, or LIBOR plus an applicable margin
    between 1.25% and 1.875% per annum.      
    incur indebtedness;
    enter into certain leases;
    grant certain liens;
    enter into certain swaps;
    make certain loans, acquisitions, capital expenditures and
    investments;
    make distributions other than from available cash;
    merge, consolidate or allow any material change in the character
    of its business; or
    engage in certain asset dispositions, including a sale of all or
    substantially all of our assets.    
    consolidated net income plus interest expense, income taxes,
    depreciation, depletion, amortization and other similar charges
    excluding unrealized gains and losses under
    SFAS No. 133, minus all non-cash income added to
    consolidated net income, and giving pro forma effect to any
    acquisitions or capital expenditures, to interest expense of not
    less than 2.5 to 1.0; and 45




---



##### Table of Contents




    consolidated current assets, including the unused amount of the
    total commitments, to consolidated current liabilities of not
    less than 1.0 to 1.0, excluding non-cash assets and liabilities
    under SFAS No. 133, which includes the current portion
    of oil, natural gas and interest rate swaps.    
    failure to pay any principal when due or any reimbursement
    amount, interest, fees or other amount within certain grace
    periods;
    a representation or warranty is proven to be incorrect when made;
    failure to perform or otherwise comply with the covenants or
    conditions contained in the credit agreement or other loan
    documents, subject, in certain instances, to certain grace
    periods;
    default by us on the payment of any other indebtedness in excess
    of $1.0 million, or any event occurs that permits or causes
    the acceleration of the indebtedness;
    bankruptcy or insolvency events involving us or any of our
    subsidiaries;
    the loan documents cease to be in full force and effect our
    failing to create a valid lien, except in limited circumstances;
    a change of control, which will occur upon (i) the
    acquisition by any person or group of persons of beneficial
    ownership of more than 35% of the aggregate ordinary voting
    power of our equity securities, (ii) the first day on which
    a majority of the members of the board of directors of our
    general partner are not continuing directors (which is generally
    defined to mean members of our board of directors as of
    March 15, 2006 and persons who are nominated for election
    or elected to our general partners board of directors with
    the approval of a majority of the continuing directors who were
    members of such board of directors at the time of such
    nomination or election), (iii) the direct or indirect sale,
    transfer or other disposition in one or a series of related
    transactions of all or substantially all of the properties or
    assets (including equity interests of subsidiaries) of us and
    our subsidiaries to any person, (iv) the adoption of a plan
    related to our liquidation or dissolution or (v) Legacy
    Reserves GP, LLC ceasing to be our sole general partner.
    the entry of, and failure to pay, one or more adverse judgments
    in excess of $1.0 million or one or more non-monetary
    judgments that could reasonably be expected to have a material
    adverse effect and for which enforcement proceedings are brought
    or that are not stayed pending appeal; and
    specified ERISA events relating to our employee benefit plans
    that could reasonably be expected to result in liabilities in
    excess of $1,000,000 in any year.  Off-Balance
    Sheet Arrangements
   46




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##### Table of Contents



Contractual
    Obligations
    Obligations Due in PeriodContractual Cash Obligations

2007


2008-2009


2010-2011


Thereafter


TotalLong-term debt

$



$



$
115,800,000


$



$
115,800,000Interest on long-term debt(a)


8,441,820



16,883,640



1,711,492







27,036,952Management compensation(b)


915,000



1,830,000



915,000







3,660,000Office lease


134,556



327,445



370,093







832,094Total contractual cash obligations

$
9,491,376


$
19,041,085


$
118,796,585


$



$
147,329,046     (a)
    
    Based upon our interest rate of 7.29% under our revolving credit
    facility as of December 31, 2006.(b)
    
    Does not include any liability associated with management
    compensation subsequent to the
    2010-2011
    period as there is no estimated termination date of the
    employment agreements.  Critical
    Accounting Policies and Estimates
    
    it requires assumptions to be made that were uncertain at the
    time the estimate was made, and
    changes in the estimate or different estimates that could have
    been selected could have a material impact on our consolidated
    results of operations or financial condition.    Nature of Critical Estimate Item: well-by-well
 47




---



##### Table of Contents



Assumptions/Approach
    Used: Units-of-production
  Effect if Different Assumptions
    Used: Units-of-production
  Nature of Critical Estimate Item:
  Assumptions/Approach Used:
  Effect if Different Assumptions Used:
  Nature of Critical Estimate Item:
 48




---



##### Table of Contents



out-of-the mark-to-market
  mark-to-market end-of-period mark-to-market mark-to-market mark-to-market mark-to-market
  Consolidation
    of Variable Interest Entity
    Recently
    Issued Accounting Pronouncements
  Accounting for Uncertainty in Income Taxes  an
    interpretation of FASB Statement No. 109. Accounting for Income Taxes.
    Fair Value
    Measurements.
 49




---



##### Table of Contents



The Fair Value Option for
    Financial Assets and Financial Liabilities  Including
    an Amendment of FASB Statement
    No. 115. Fair Value Measurements
  ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK    Commodity
    Price Risk
          Interest
    Rate Risks
   50




---



##### Table of Contents



ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA  Form 10-K page F-1.
  ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE    ITEM 9A.
    CONTROLS
    AND PROCEDURES  Rules 13a-15(e) 15d-15(e)
          ITEM 9B.
    OTHER
    INFORMATION   51




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##### Table of Contents



PART III  ITEM 10.
    DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE  Management
    of Legacy Reserves LP
          Director
    Independence
      Section 10A-3 Regulation S-K.
 52




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##### Table of Contents



Code
    of Ethics and Business Conduct
    Directors
    and Executive Officers of our General Partner
    Name

Age

Position with Legacy Reserves GP, LLCCary D. Brown


40


Chief Executive Officer and
    Chairman of the BoardSteven H. Pruett


45


President, Chief Financial Officer
    and SecretaryKyle A. McGraw


47


Director, Executive Vice
    President  Business Development and LandPaul T. Horne


45


Vice President 
    OperationsWilliam M. Morris


54


Vice President, Chief Accounting
    Officer and ControllerDale A. Brown


64


DirectorG. Larry Lawrence


55


Director and Member of Audit,
    Conflicts and Nominating CommitteesWilliam D. Sullivan


50


Director and Member of Audit,
    Compensation, Conflicts and Nominating CommitteesS. Wil VanLoh, Jr.


36


Director and Member of Audit and
    Compensation CommitteesKyle D. Vann


59


Director and Member of
    Compensation, Conflicts and Nominating Committees     Cary D. Brown
 53




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##### Table of Contents



Steven H. Pruett
  Kyle A. McGraw
  Paul T. Horne
  William M. Morris
 54




---



##### Table of Contents



Dale A. Brown
  G. Larry Lawrence
  William D. (Bill) Sullivan
  S. Wil VanLoh, Jr.
  Kyle D. Vann
 55




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##### Table of Contents



Reimbursement
    of Expenses of Our General Partner
     ITEM 11.
    EXECUTIVE
    COMPENSATION DIRECTOR
    COMPENSATION        out-of-pocket
    Director
    Compensation for the 2006 Fiscal Year
  Change inPensionValue andFees Earned








Non-Equity


Nonqualifiedor Paid





Option


Incentive Plan


Deferred


All Otherin Cash


Unit Awards


Awards


Compensation


Compensation


Compensation


TotalName

($)


($)(a)


($)


($)


Earnings


($)


($)Dale A. Brown


(b
)

$
29,750


















$
29,750G. Larry Lawrence

$
40,000


$
29,750


















$
69,750William D. Sullivan

$
36,000


$
29,750


















$
65,750S. Wil VanLoh, Jr.


(b
)

$
29,750


















$
29,750Kyle D. Vann

$
35,000


$
29,750


















$
64,750     (a)
    
    Reflects the aggregate grant date fair value computed in
    accordance with FAS 123R. All of the units were priced at
    $17 per unit, which reflects the offering price of our
    units in our private equity offering closed March 15, 2006. 56




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##### Table of Contents



(b)
    
    While Messrs. Dale A. Brown and VanLoh opted not to receive
    the retainer and meeting fees for their service on our board in
    2006, they will each be paid the annual retainer and meeting
    fees in 2007. EXECUTIVE
    OFFICER COMPENSATION  REPORT OF
    THE COMPENSATION COMMITTEE
  Form 10-K.
        Compensation
    Discussion and Analysis
  The following discussion and analysis of compensation
    arrangements of the named executive officers of our general
    partner, Legacy Reserves GP LLC, should be read together with
    the compensation tables and related disclosures set forth
    below.
  Introduction
    .
  Corporate
    Governance
  Compensation
    Committee Authority
     57




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##### Table of Contents



Compensation
    Committee Interlocks and Insider Participation
    Role
    of Compensation Experts in Determining 2006 Executive Officer
    Compensation
    
    the qualifications, skills and experience level of the
    respective named executive officer;
    the position, role and responsibility of the respective named
    executive officer in the company; and
    the direct experience of the respective named executive officer
    in the oil industry as a whole, and specifically, the Permian
    Basin.  Executive
    Officer Compensation Strategy and Philosophy
          Components
    of Compensation
  Base
    Salaries
   58




---



##### Table of Contents



Long-Term
    Incentive Compensation
  Overview
            Unit
    grants
    Restricted
    Units and Phantom Units
   59




---



##### Table of Contents



Unit
    Options and Unit Appreciation Rights
        Unit
    Option Practices
   60




---



##### Table of Contents



Perquisites
    and Other Personal Benefits
        Unit
    Ownership Requirements
     61




---



##### Table of Contents



Summary
    Compensation Table
   Change inPensionNon-Equity


Value andIncentive


NonqualifiedUnit


Option


Plan


Deferred


All OtherName and Principal







Bonus


Awards


Awards


Compensation


Compensation


Compensation


TotalPosition

Year


Salary ($)(1)


($)


($)


($)(2)


($)


Earnings


($)


($)Cary D. Brown


2006


$
150,000










$
9,338














$
159,338Chairman of the Board, Chief
    Executive Officer and PresidentSteven H. Pruett,


2006


$
131,250


$
14,000






$
9,338










$
10,305
(3)

$
164,893President, Chief Financial
    Officer and SecretaryKyle A. McGraw,


2006


$
112,500










$
9,338














$
121,838Director Executive Vice
    President of Business Development and LandPaul T. Horne,


2006


$
112,625


$
12,000






$
9,338














$
133,963Vice President of
    OperationsWilliam M. Morris,


2006


$
111,767


$
40,000


$
158,462
(4)

$
9,338










$
31,478
(5)

$
351,045Vice President, Chief Accounting
    Officer and Controller     (1)
    
    Salaries were paid to officers beginning April 1, 2006.(2)
    
    All options granted have an exercise price equal to the market
    value of the option on the date of grant in accordance with
    FAS 123(R). The exercise price for these options was
    determined by our compensation committee based on an
    approximation of the current value of our units in relation to
    the price at which our units were (i) sold in our March
    2006 private equity offering, (ii) traded on the Portal
    Market, or (iii) the price to the public of our units sold
    in the initial public offering. The amount shown is the
    compensation expense recognized for the year ended
    December 31, 2006, which is based upon the straight-line
    amortization of the grant date fair value.(3)
    
    Reflects value of perquisites we paid for Mr. Pruetts
    travel to and from our offices in Midland from his residence.(4)
    
    Reflects the 2006 compensation expense recognized based upon the
    straight-line amortization of the grant date fair value of the
    35,077 restricted units granted to Mr. Morris on
    March 15, 2006 under his employment agreement using the
    price at which our units were sold in our March 2006 private
    equity offering.(5)
    
    Reflects the unit distributions received by Mr. Morris on
    his unvested restricted units. GRANTS OF
    PLAN-BASED AWARDS IN FISCAL YEAR 2006    All OtherEstimated Future Payouts Under Equity Incentive Plan
    Awards





Option


Exercise


GrantAll Other


Awards:


or Base


Date FairUnit


Number of


Price of


Value ofDate











Awards:


Securities


Option


Unit andGrant


Action











Number of


Underlying


Awards


OptionName

Date


Taken(1)


Threshold


Target


Maximum


Units


Options


($/Unit)


AwardsCary D. Brown


7/17/06



6/29/06



















20,000


$
17.00


$
52,400Steven H. Pruett


7/17/06



6/29/06



















20,000


$
17.00


$
52,400Kyle A. McGraw


7/17/06



6/29/06



















20,000


$
17.00


$
52,400Paul T. Horne


7/17/06



6/29/06



















20,000


$
17.00


$
52,400William M. Morris


7/17/06



6/29/06















35,077



20,000


$
17.00


$
648,709
(2)     (1)
    
    Reflects the date on which the compensation committee was deemed
    to take action in making a grant of unit options. 62




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##### Table of Contents



(2)
    
    Includes the grant date fair value of the 35,077 restricted
    units granted to Mr. Morris on March 15, 2006 under
    his employment agreement using the price at which our units were
    sold in our March 2006 private equity offering. EMPLOYMENT
    AGREEMENTS    Base
    Salaries
    Intellectual
    Property and Non-Compete Clauses
       63




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##### Table of Contents



Severance
    and Change in Control Payments
     Benefits
    Payable Upon Termination or Change in Control    Before Change in Control


After Change in Controlw/o Cause or for Good


w/o Cause or for GoodNamed Executive Officer

Benefit

Reason


ReasonCary D. Brown

Severance(a)

$
400,000


$
600,000Bonus(b)






Benefits(c)

$
22,800


$
34,200Unit Options(d)

$
52,400


$
52,400Steven H. Pruett

Severance(a)

$
350,000


$
525,000Bonus(b)

$
28,000


$
42,000Benefits(c)

$
22,800


$
34,200Unit Options(d)

$
52,400


$
52,400Kyle A. McGraw

Severance(a)

$
300,000


$
450,000Bonus(b)






Benefits(c)

$
22,800


$
34,200Unit Options(d)

$
52,400


$
52,400Paul T. Horne

Severance(a)

$
300,000


$
450,000Bonus(b)

$
24,000


$
36,000Benefits(c)

$
22,800


$
34,200Unit Options(d)

$
52,400


$
52,400William M. Morris

Severance(a)

$
300,000


$
450,000Bonus(b)

$
80,000


$
120,000Benefits(c)

$
22,800


$
34,200Units Options(d)

$
52,400


$
52,400Restricted Units(e)

$
666,463


$
666,463     (a)
    
    If terminated without cause, or executive terminates with good
    reason, executive is entitled to an amount equal to two
    years annual salary, or three years annual salary if
    termination occurs within one year of a change of control.(b)
    
    Executives are entitled to an average of bonus paid over past
    two years plus the pro-rata bonus earned in year of termination
    but unpaid at the time of termination. 64




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##### Table of Contents



(c)
    
    Executives are entitled to COBRA benefits for the shorter of the
    severance period or the time at which executive receives
    substantially similar benefits from a subsequent employer.(d)
    
    Reflects grant date fair value of the 20,000 unit options
    granted on July 17, 2006.(e)
    
    Reflects value of restricted units based on the IPO price of
    $19.00 on January 11, 2007.  Severance
    Benefits
    
    the executive officers conviction of or plea of nolo
    contendere to any felony or crime or offense causing substantial
    harm to the partnership, general partner, or its direct or
    indirect subsidiaries, or involving acts of theft, fraud,
    embezzlement, moral turpitude or similar conducts;
    the executive officers repeated intoxication by alcohol or
    drugs during the performance of his duties;
    the executive officers malfeasance in the conduct of
    executives duties including, but not limited to, willful
    and intentional misuse or diversion of any funds, embezzlement
    or fraudulent or willful an material misrepresentations or
    concealments on any written reports;
    the executive officers material failure to perform the
    duties of his employment consistent with his position, expressly
    including the provisions of the agreements or material failure
    to follow or comply with the reasonable and lawful written
    directives of the board;
    a material breach of the employment agreement; or
    a material breach by the executive officer of written policies
    of the partnership, the general partner, or any of our direct or
    indirect subsidiaries.      
    a reduction in the executive officers base salary;
    the relocation of the executive officers primary place of
    employment to a location more than twenty miles from Midland,
    Texas; or
    any material reduction in the executive officers title,
    authority or responsibilities.   65




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##### Table of Contents



Change
    in Control Benefits
    
    the acquisition by any individual or entity of beneficial
    ownership of 35% or more of either (i) the then-outstanding
    equity interests of the partnership or (ii) the combined
    voting power of the then-outstanding voting securities of the
    partnership entitled to vote generally in the election of
    directors. Indirect or direct acquisitions by the partnership,
    business combinations that do not result in a change of equity
    ownership with combined voting power of more than 50%,
    transactions where at least a majority of the members of the
    board of directors of our general partner of any entity
    resulting from a business combination were members of the board
    at the time of the execution of the initial agreement for such a
    transaction, or any acquisition arising out of or in connection
    with an initial public offering or private placement of our
    securities.
    where individuals who constitute the board at the time of the
    agreement cease to constitute at least a majority of the board,
    unless an individual becoming a director subsequent to the date
    of the agreement was approved by a vote of at least a majority
    of the directors then comprising the board, excluding any
    individual whose election occurs as a result of an actual or
    threatened election contest;
    consummation of a reorganization, merger, statutory share
    exchange or consolidation or similar corporate transaction
    involving the partnership or any of its subsidiaries, a sale or
    other disposition of all assets or equity interests of another
    entity by the partnership or any of its subsidiaries unless all
    or substantially all of the individuals and entities that were
    the beneficial owners of the outstanding equity and voting
    securities immediately prior to such transaction beneficially
    own more than 50% of the then-outstanding equity interests and
    the combined voting power of the then-outstanding voting
    securities entailed to vote after such business transaction in
    substantially the same proportions as their ownership
    immediately prior to such transaction, no person beneficially
    owns, 35% or more of the entity resulting from such transaction,
    except to the extent that such ownership existed prior to the
    transaction, or at least a majority of the members of the board
    of directors of the corporation or equivalent body of any other
    entity resulting from such transactions were members of the
    board at the time of the execution of the initial agreement or
    of the action of the board providing for such
    transaction; or
    consummation of a complete liquidation or dissolution of the
    partnership.   66




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##### Table of Contents



Outstanding
    Equity Awards at 2006 Fiscal Year-End    Option Awards


Unit AwardsEquityIncentivePlanAwards:Number of


Number of


Number of











MarketSecurities


Securities


Securities











Value ofUnderlying


Underlying


Underlying


Option





Number


Units ThatUnexercised


Unexercised


Unexercised


Exercise


Option


of Units


Have NotOptions (#)


Options (#)


Unearned


Price


Expiration


That Have Not


VestedName

Exercisable


Unexercisable


Options (#)


($)


Date


Vested (#)


($)Cary D. Brown






20,000






$
17.00



July 16, 2011(a
)






Steven H. Pruett






20,000






$
17.00



July 16, 2011(a
)






Kyle A. McGraw






20,000






$
17.00



July 16, 2011(a
)






Paul T. Horne






20,000






$
17.00



July 16, 2011(a
)






William M. Morris






20,000






$
17.00



July 16, 2011(a
)


35,077(b
)

$
666,463
(c)     (a)
    
    Options vest one-third annually commencing March 15, 2007
    and expire five years from the grant date of July 17, 2006.(b)
    
    Includes 35,077 restricted units granted on March 15, 2006
    which vest one-third annually commencing March 15, 2007.(c)
    
    Reflects value of restricted units based on the IPO price of
    $19.00 on January 11, 2007. Option
    Exercises and Units Vested in 2006    ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED UNITHOLDER MATTERS    
    each person known by us to be a beneficial owner of 5% or more
    of our outstanding units;
    each of the directors of our general partner;
    each named executive officer of our general partner; and
    all directors and executive officers of our general partner as a
    group.      67




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##### Table of Contents



Units Beneficially OwnedNumber


PercentageName of Beneficial
    OwnerMoriah Group(a)(b)


7,289,999



28.7
%Moriah Properties, Ltd.(a)


6,747,718



26.6Brothers Group(a)(c)


4,189,525



16.5Brothers Production Properties,
    Ltd.(a)


3,381,780



13.3Brothers Production Company,
    Inc.(a)(d)


3,561,661



14.0MBN Properties LP


3,162,438



12.5Newstone Group(a)


1,638,861



6.5Directors and
    OfficersDale A. Brown(a)(e)(f)


7,291,749



28.8Cary D. Brown(a)(g)(h)


6,754,398



26.6Kyle A. McGraw(h)


6,680



*S. Wil VanLoh, Jr.(a)(e)(i)(j)


917,630



3.8Kyle D. Vann(e)


1,750



*William D. Sullivan(e)


1,750



*G. Larry Lawrence(e)


4,000



*Steven H. Pruett(a)(h)(i)(k)


303,615



1.2Paul T. Horne(a)(h)(l)


128,363



*William M. Morris(h)(m)


18,372



*All directors and executive
    officers as a group (10 persons)


8,680,589



34.2     *
    
    Percentage of units beneficially owned does not exceed (1%).(a)
    
    Assumes that the units held by MBN Properties LP will be
    distributed to the partners of MBN Properties LP, including
    Moriah Properties, Ltd., Brothers Production Properties, Ltd.,
    Brothers Production Company, Inc., the Newstone Group, SHP
    Capital LP, DAB Resources, Ltd. and H2K Holdings, Ltd. as
    follows:  Entity

NumberMoriah Properties, Ltd.


884,175Brothers Production Properties,
    Ltd.


457,967Brothers Production Company,
    Inc.


24,360Brothers Operating Company,
    Inc.


4,872Newstone Group


1,447,157SHP Capital LP


191,704DAB Resources, Ltd.


27,330H2K Holdings, Ltd.


70,944J&W McGraw Properties,
    Ltd.


53,929Total


3,162,438   (b)
    
    Includes units held by Moriah Properties, Ltd. as well as
    542,281 units held by DAB Resources, Ltd., assuming that
    the units held by MBN Properties LP are distributed to partners
    of MBN Properties LP as described in footnote (a) above.(c)
    
    Includes units held by Brothers Production Properties, Ltd. and
    Brothers Production Company, Inc. as well as 35,976 units
    held by Brothers Operating Company, Inc. and 591,887 units
    held by J&W McGraw Properties, Ltd., assuming that the units
    held by MBN Properties LP are distributed to partners of MBN
    Properties LP as described in footnote (a) above. 68




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##### Table of Contents



(d)
    
    Brothers Production Company, Inc., in its capacity as general
    partner of Brothers Production Properties, Ltd. is deemed to
    beneficially own the partnership interests in us held by
    Brothers Production Properties, Ltd. as well as
    179,882 units it holds directly, assuming that the units
    held by MBN Properties LP are distributed to partners of MBN
    Properties LP as described in footnote (a) above.(e)
    
    Includes 1,750 units granted under the Legacy Reserves LP
    Long-Term Incentive Plan to each non-employee director.(f)
    
    Mr. Dale A. Brown is deemed to beneficially own the
    partnership interests in us held by Moriah Properties, Ltd. as
    well as 542,281 units held by DAB Resources, Ltd., assuming
    that the units held by MBN Properties LP are distributed to
    partners of MBN Properties LP as described in footnote
    (a) above. Mr. Dale A. Brown and Mr. Cary D.
    Brown share voting and investment power with respect to the
    partnership interests in us held by Moriah Properties, Ltd.(g)
    
    Mr. Cary D. Brown is deemed to beneficially own the
    partnership interests in us held by Moriah Properties, Ltd.
    Mr. Dale A. Brown and Mr. Cary D. Brown share voting
    and investment power with respect to the partnership interests
    in us held by Moriah Properties, Ltd.(h)
    
    Includes 6,680 units that may be acquired upon the exercise
    of vested options.(i)
    
    Assumes that the units beneficially owned by the Newstone Group
    will be distributed to the members of the Newstone Group,
    including entities controlled by Mr. VanLoh and
    Mr. Pruett as follows:  Entity

NumberBlackstone Investments I,
    Ltd.


388,458Blackstone Investments II,
    Ltd.


142,819Newstone Capital, LP


239,372SHP Capital LP


105,231Trinity Equity Partners I, LP


571,277Total


1,447,157   (j)
    
    Mr. VanLoh is deemed to beneficially own the units held by
    Newstone Capital, LP, Trinity Equity Partners I, LP and
    105,231 units held by SHP Capital, LP, assuming that the
    units held by MBN Properties LP are distributed to the partners
    of MBN Properties LP as described in footnote (a) above and
    that the units beneficially owned by the Newstone Group will be
    distributed to the members of the Newstone Group as described in
    footnote (i) above.(k)
    
    Mr. Pruett is deemed to beneficially own the
    296,935 units held by SHP Capital L.P., assuming that the
    units held by MBN Properties LP are distributed to partners of
    MBN Properties LP as described in footnote (a) above.(l)
    
    Mr. Horne is deemed to beneficially own the
    121,683 units held by H2K Holdings, Ltd., assuming that the
    units held by MBN Properties LP are distributed to partners of
    MBN Properties LP as described in footnote (a) above.(m)
    
    Includes 11,692 of the 35,077 restricted units Mr. Morris
    was granted upon the closing of our private equity offering. 69




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##### Table of Contents



Name of Beneficial Owner

Equity InterestDale A. Brown(a)(b)


55.2
%Cary D. Brown(b)(c)


51.0Kyle A. McGraw


S. Wil VanLoh, Jr.(d)


6.5Steven H. Pruett(d)


2.2Kyle D. Vann


William D. Sullivan


G. Larry Lawrence


Paul T. Horne


0.9William M. Morris


All directors and executive
    officers as a group (10 persons)


64.8     (a)
    
    Assumes that the equity interests held by MBN Properties LP will
    be distributed to the partners of MBN Properties LP, including
    Moriah Properties, Ltd., Brothers Production Properties, Ltd.,
    Brothers Production Company, Inc. and the Newstone Group.(b)
    
    Includes a 44.5% equity interest held by Moriah Properties, Ltd.
    and a 4.0% equity interest held by DAB Resources, Ltd.(c)
    
    Includes a 44.5% equity interest held by Moriah Properties, Ltd.(d)
    
    Assumes that the equity interests beneficially owned by the
    Newstone Group will be distributed to the members of the
    Newstone Group, including entities controlled by Mr. VanLoh
    and Mr. Pruett.  Securities
    Authorized for Issuance Under Equity Compensation
    Plans
    Number of Securities





Number of Securitiesto be Issued Upon





Remaining Available forExercise of


Weighted-Average


Future Issuance underOutstanding


Exercise Price of


Equity Compensation PlanOptions, Warrants


Outstanding Options,


(Excluding Securitiesand Rights


Warrants and Rights


Reflected in Column (a))Plan Category

(a)


(b)


(c)Equity compensation plans approved
    by security holders










Equity compensation plans not
    approved by security holders(1)


260,000


$
17.01



1,666,134Total


260,000


$
17.01



1,666,134     (1)
    
    Please read Executive Compensation  Long-Term
    Incentive Plan for a description of the material features
    of the plan, including the awards that may be granted under the
    plan.  ITEM 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS   70




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##### Table of Contents



Distributions
    and Payments to Our General Partner and Its Affiliates
    Distributions of available cash to
    our general partner and our Founding Investors

We will generally make cash
    distributions of approximately 99.9% to the unitholders pro
    rata, including our Founding Investors, as the holders of an
    aggregate of 13,316,184 units, and approximately 0.1% to
    our general partner.Assuming we have sufficient
    available cash to pay the full amount of our current quarterly
    distribution on all of our outstanding units for four quarters,
    our general partner would receive an annual distribution of
    approximately $30,030 on its approximate 0.1% general partner
    interest, and our Founding Investors would receive approximately
    $21.8 million on their units.Payments to our general partner

Our general partner will be
    entitled to reimbursement for all expenses it incurs on our
    behalf. The partnership agreement provides that our general
    partner will determine the expenses that are allocable to us in
    good faith. Please read The Partnership
    Agreement  Reimbursement of Expenses.Withdrawal or removal of our
    general partner

If our general partner withdraws
    or is removed, its general partner interest will either be sold
    to the new general partner for cash or converted into units, for
    an amount equal to the fair market value of that interest.
    Please read The Partnership Agreement 
    Withdrawal or Removal of the General Partner.   Distribution
    Upon Liquidation
  Liquidation

Upon our liquidation, the
    partners, including our general partner, will be entitled to
    receive liquidating distributions according to their respective
    capital account balances   Agreements
    Governing the Transactions
    Omnibus
    Agreement
    
    the contribution of assets by the Founding Investors and the
    units to be issued in exchange therefore pursuant to a
    Contribution, Conveyance and Assumption Agreement;
    the granting of registration rights to the Founding Investors
    pursuant to the Founders Registration Rights Agreement described
    below; 71




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##### Table of Contents




    the agreement of the Founding Investors to vote for two
    individuals designated by the Moriah Group, one individual
    designated by the Brothers Group, and one individual designated
    by the Newstone Group in the election of directors of our
    general partner prior to the election of the board of directors
    by our unitholders; and
    reimbursement for expenses incurred in connection with our
    formation.  Founders
    Registration Rights Agreement
    Transactions
    with Related Persons
  Formation
    Transactions
      Cash


Units(In millions)Moriash Group:Moriah Properties, Ltd.






7,334,070DAB Resources, Ltd.






859,703Brothers Group:Brothers Production Properties,
    Ltd.






4,968,945Brothers Production Company,
    Inc.






264,306Brother Operating Company,
    Inc.






52,861J&W McGraw Properties,
    Ltd.






914,246MBN Properties LP

$
65.30



3,162,438H2K Holdings, Ltd.






83,499Charities Support Foundation,
    Inc.

$
0.21



Moriah Foundation, Inc.

$
3.74



Cary Brown Family Foundation,
    Inc.

$
3.74



    72




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##### Table of Contents



Units OwnedEntity

Units Redeemed


After RedemptionMoriah Properties, Ltd.


1,470,527



5,863,543DAB Resources, Ltd.


344,752



514,951Brothers Production Properties,
    Ltd.


2,045,133



2,923,812Brother Production Company,
    Inc.


108,784



155,522Brothers Operating Company,
    Inc.


21,757



31,104J&W McGraw Properties,
    Ltd.


376,288



537,958H2K Holdings, Ltd.


32,759



50,740Total


4,400,000



10,077,630     Petroleum
    Strategies, Inc.
    Office
    Leases
        Other
   73




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##### Table of Contents



back-in-after-payout back-in-after-payout
  Director
    Independence
    ITEM 14.
    PRINCIPAL
    ACCOUNTANT FEES AND SERVICES  Form 10-K
 74




---



##### Table of Contents



Year Ended December 31,2005


2006Audit fees

$
461,180


$
668,442Audit-related fees






98,436Tax fees






All other fees






Total

$
461,180


$
766,878   Form 10-K
 75




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##### Table of Contents



PART IV  ITEM 15.
    EXHIBITS,
    FINANCIAL STATEMENT SCHEDULES  (a)(1)
    and (2) Financial Statements
  Form 10-K
  (a)(3)
    Exhibits
  10-K
  ExhibitNumber



Description3
.1



Certificate of Limited Partnership
    of Legacy Reserves LP (Incorporated by reference to Legacy
    Reserves LPs Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed May 12, 2006, Exhibit 3.1)3
.2



Amended and Restated Limited
    Partnership Agreement of Legacy Reserves LP (Incorporated by
    reference to Legacy Reserve LPs Registration Statement on
    Form S-1
    (File
    No. 33-134056)
    filed May 12, 2006, included as Appendix A to the
    Prospectus and including specimen unit certificate for the units)3
.3



Certificate of Formation of Legacy
    Reserves GP, LLC (Incorporated by reference to Legacy Reserves
    LPs Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed May 12, 2006, Exhibit 3.3)3
.4



Amended and Restated Limited
    Liability Company Agreement of Legacy Reserves GP, LLC
    (Incorporated by reference to Legacy Reserves LPs
    Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed May 12, 2006, Exhibit 3.4)4
.1



Registration Rights Agreement
    dated as of March 15, 2006 by and among Legacy Reserves LP,
    Legacy Reserves GP, LLC and Friedman, Billings,
    Ramsey & Co. (Incorporated by reference to Legacy
    Reserves LPs Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed May 12, 2006, Exhibit 4.1)4
.2



Registration Rights Agreement
    dated June 29, 2006 between Henry Holding LP and Legacy
    Reserves LP and Legacy Reserves GP, LLC (the Henry
    Registration Rights Agreement) (Incorporated by reference
    to Legacy Reserves LPs Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed September 5, 2006 Exhibit 4.2)4
.3



Registration Rights Agreement
    dated March 15, 2006 by and among Legacy Reserves LP,
    Legacy Reserves GP, LLC and the other parties thereto (the
    Founders Registration Rights Agreement)
    (Incorporated by reference to Legacy Reserves LPs
    Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed September 5, 2006 Exhibit 4.3)10
.1



Credit Agreement dated as of
    March 15, 2006, among Legacy Reserves LP, the lenders from
    time to time party thereto, and BNP Paribas, as administrative
    agent (Incorporated by reference to Legacy Reserves LPs
    Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed May 12, 2006, Exhibit 10.1)10
.2



Contribution, Conveyance and
    Assumption Agreement dated as of March 15, 2006 by and
    among Legacy Reserves LP, Legacy Reserves GP, LLC and the other
    parties thereto (Incorporated by reference to Legacy Reserves
    LPs Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed May 12, 2006, Exhibit 10.2)10
.3



Omnibus Agreement dated as of
    March 15, 2006 by and among Legacy Reserves LP, Legacy
    Reserves GP, LLC and the other parties thereto (Incorporated by
    reference to Legacy Reserves LPs Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed May 12, 2006, Exhibit 10.3)10
.4



Purchase/Placement Agreement dated
    as of March 6, 2006 by and among Legacy Reserves LP, Legacy
    Reserves GP, LLC and the other parties thereto (Incorporated by
    reference to Legacy Reserves LPs Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed May 12, 2006, Exhibit 10.4) 76




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##### Table of Contents



ExhibitNumber



Description10
.5



Legacy Reserves, LP Long-Term
    Incentive Plan (Incorporated by reference to Legacy Reserves
    LPs Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed May 12, 2006, Exhibit 10.5)10
.6



Form of Legacy Reserves LP
    Long-Term Incentive Plan Restricted Unit Grant Agreement
    (Incorporated by reference to Legacy Reserves LPs
    Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed May 12, 2006, Exhibit 10.6)10
.7



Form of Legacy Reserves LP
    Long-Term Incentive Plan Unit Option Grant Agreement
    (Incorporated by reference to Legacy Reserves LPs
    Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed September 5, 2006, Exhibit 10.7)10
.8



Form of Legacy Reserves LP
    Long-Term Incentive Plan Unit Grant Agreement (Incorporated by
    reference to Legacy Reserves LPs Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed September 5, 2006, Exhibit 10.8)10
.9



Employment Agreement dated as of
    March 15, 2006 between Cary D. Brown and Legacy Reserves
    Services, Inc. (Incorporated by reference to Legacy Reserves
    LPs Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed May 12, 2006, Exhibit 10.9)10
.10



Employment Agreement dated as of
    March 15, 2006 between Steven H. Pruett and Legacy Reserves
    Services, Inc. (Incorporated by reference to Legacy Reserves
    LPs Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed May 12, 2006, Exhibit 10.10)10
.11



Employment Agreement dated as of
    March 15, 2006 between Kyle A. McGraw and Legacy Reserves
    Services, Inc. (Incorporated by reference to Legacy Reserves
    LPs Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed May 12, 2006, Exhibit 10.11)10
.12



Employment Agreement dated as of
    March 15, 2006 between Paul T. Horne and Legacy Reserves
    Services, Inc. (Incorporated by reference to Legacy Reserves
    LPs Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed May 12, 2006, Exhibit 10.12)10
.13



Employment Agreement dated as of
    March 15, 2006 between William M. Morris and Legacy
    Reserves Services, Inc. (Incorporated by reference to Legacy
    Reserves LPs Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed May 12, 2006, Exhibit 10.13)10
.14



First Amendment to Credit
    Agreement effective as of July 7, 2006 among Legacy
    Reserves LP, the lenders from time to time party thereto, and
    BNP Paribas, as administrative agent. (Incorporated by reference
    to Legacy Reserves LPs Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed September 5, 2006, Exhibit 10.14)10
.15



Purchase and Sale Agreement dated
    June 29, 2006 between Kinder Morgan Production Company LP
    and Legacy Reserves Operating LP (Incorporated by reference to
    Legacy Reserves LPs Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed October 5, 2006, Exhibit 10.15)10
.16



Purchase and Sale Agreement dated
    June 13, 2006 between Henry Holding LP and Legacy Reserves
    Operating LP (Incorporated by reference to Legacy Reserves
    LPs Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed September 5, 2006, Exhibit 10.16)10
.17



First Amendment of Legacy Reserves
    LP to Long Term Incentive Plan dated June 16, 2006
    (Incorporated by reference to Legacy Reserves LPs
    Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed October 5, 2006, Exhibit 10.17)21
.1



List of subsidiaries of Legacy
    Reserves LP (Incorporated by reference to Legacy Reserves
    LPs Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed May 12, 2006, Exhibit 21.1)23
.1*



Consent of LaRoche Petroleum
    Consultants, Ltd.31
.1*



Rule 13a-14(a)
    Certifications (under Section 302 of the Sarbanes-Oxley Act
    of 2002)32
.1*



Section 1350 Certifications
    (under Section 906 of the Sarbanes-Oxley Act of 2002)     *
    
    Filed herewith
    
    Management contract or compensatory plan or arrangement 77




---



##### Table of Contents



SIGNATURES
  Form 10-K
    By:
    LEGACY
    RESERVES GP, LLC,    By:
    /s/  Steven
    H. Pruett   Title:
    President, Chief Financial Officer and   Form 10-K
  Signature

Title

Date/s/  Cary
    D. BrownCary
    D. Brown

Chief Executive Officer and
    Director (Principal Executive Officer)

March 28, 2007/s/  Steven
    H. PruettSteven
    H. Pruett

President, Chief Financial Officer
    and Secretary (Principal Financial Officer)

March 28, 2007/s/  William
    M. MorrisWilliam
    M. Morris

Vice President, Chief Accounting
    Officer and Controller (Principal Accounting Officer)

March 28, 2007/s/  Kyle
    A. McGrawKyle
    A. McGraw

Executive Vice President and
    Director

March 28, 2007/s/  William
    D. SullivanWilliam
    D. Sullivan

Director

March 28, 2007/s/  Wil
    VanLoh, Jr.S.
    Wil VanLoh, Jr.

Director

March 28, 2007/s/  Kyle
    D. VannKyle
    D. Vann

Director

March 28, 2007  78




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##### Table of Contents



INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
  PageReport of Independent Registered
    Public Accounting Firm


F-2Consolidated Financial Statements:Consolidated Balance Sheets
    December 31, 2005 and 2006


F-3Consolidated Statements of
    Operations Years Ended December 31, 2004, 2005 and 2006


F-4Consolidated Statement of
    Unitholders Equity Years Ended December 31, 2004,
    2005 and 2006


F-5Consolidated Statements of Cash
    Flows Years Ended December 31, 2004, 2005 and 2006


F-6Notes to Consolidated Financial
    Statements Years Ended December 31, 2004, 2005 and 2006


F-8  F-1




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm
           BDO
    SEIDMAN, LLP
     F-2




---



##### Table of Contents



LEGACY
    RESERVES LP (FORMERLY MORIAH GROUP)
  CONSOLIDATED
    BALANCE SHEETS
 AS OF
    DECEMBER 31, 2005 AND 2006
  2005


2006ASSETSCurrent assets:Cash and cash equivalents

$
1,954,923


$
1,061,852Accounts receivable, net:Oil and natural gas


6,051,802



7,599,915Joint interest owners


113,837



4,345,334Affiliated entities and other
    (Notes 3 and 6)


103,850



21,336Fair value of oil and natural gas
    swaps (Note 9)


46,675



5,102,083Prepaid expenses and other current
    assets






90,609Total current assets


8,271,087



18,221,129Oil and natural gas properties, at
    cost:Proved oil and natural gas
    properties, using the successful efforts method of accounting
    (Note 15):


85,363,482



289,518,708Unproved properties


2,928



68,275Accumulated depletion,
    depreciation and amortization


(8,194,385
)


(42,006,485
)77,172,025



247,580,498Other property and equipment, net
    of accumulated depreciation and amortization of $0 and $51,108,
    respectively


4,198



303,750Subordinated notes receivable
    (Note 5)


304,312



Operating rights, net of
    amortization of $0 and $295,314, respectively (Note 1(k))






6,721,358Other assets, net of amortization
    of $20,674 and $167,179, respectively


1,190,569



541,743$
86,942,191


$
273,368,478LIABILITIES AND
    UNITHOLDERS EQUITYCurrent liabilities:Accounts payable

$
451,652


$
2,931,627Accrued oil and natural gas
    liabilities


3,174,752



5,881,612Due to affiliates (Note 5)


194,907



Fair value of oil and natural gas
    swaps (Note 9)


199,624



Asset retirement obligation
    (Note 12)


175,944



553,579Other


365,326



1,466,693Total current liabilities


4,562,205



10,833,511Long-term debt (Note 3)


52,473,000



115,800,000Asset retirement obligation
    (Note 12)


2,126,203



5,939,201Fair value of oil and natural gas
    swaps (Note 9)


3,155,054



2,006,547Subordinated notes
    payable  partners (Note 5)


14,716,791



Total liabilities


77,033,253



134,579,259Commitments and contingencies
    (Note 7)Unitholders equity:Limited partners
    equity  9,488,921 and 18,395,233 units issued
    and outstanding at December 31, 2005 and 2006, respectively


9,899,029



138,653,452General partners equity
    (approximately 0.1%)


9,909



135,767Total unitholders equity


9,908,938



138,789,219$
86,942,191


$
273,368,478    F-3




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##### Table of Contents



LEGACY
    RESERVES LP (FORMERLY MORIAH GROUP)
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
 FOR THE
    YEARS ENDED DECEMBER 31, 2004, 2005 AND 2006
  2004


2005


2006Revenues:Oil sales

$
10,997,515


$
18,225,457


$
45,351,122Natural gas sales


3,945,400



7,317,744



14,446,193Realized and unrealized gain
    (loss) on oil and natural gas swaps (Note 9)


(632,783
)


(6,158,865
)


9,288,470Total revenues


14,310,132



19,384,336



69,085,785Expenses:Oil and natural gas production


4,345,249



6,375,613



15,938,276Production and other taxes


927,657



1,635,530



3,745,793General and administrative


731,200



1,354,213



3,691,018Dry hole costs


822







Depletion, depreciation,
    amortization and accretion


883,457



2,291,013



18,394,674Impairment of long-lived assets










16,113,300Loss on sale of assets






20,523



42,370Total expenses


6,888,385



11,676,892



57,925,431Operating income


7,421,747



7,707,444



11,160,354Other income (expense):Interest income


419,257



185,308



129,712Interest expense (Note 3)


(213,711
)


(1,584,408
)


(6,644,721
)Gain on sale of partnership
    investment


1,292,169







Equity in income (loss) of
    partnerships (Note 5)


183,474



(495,295
)


(317,788
)Other


91,483



45,321



29,328Income before non-controlling
    interest


9,194,419



5,858,370



4,356,885Non-controlling interest






538



Income from continuing operations


9,194,419



5,858,908



4,356,885Discontinued operations
    (Note 10)Income from operations


14,981







Gain on disposal


7,165







Income from discontinued operations


22,146







Net income

$
9,216,565


$
5,858,908


$
4,356,885Earnings per unit 
    basic and diluted (Note 13)Income from continuing operations

$
0.97


$
0.62


$
0.26Income from discontinued operations

$



$



$
Net income

$
0.97


$
0.62


$
0.26    F-4




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##### Table of Contents



LEGACY
    RESERVES LP (FORMERLY MORIAH GROUP)
  CONSOLIDATED
    STATEMENT OF UNITHOLDERS EQUITY
 FOR THE
    YEARS ENDED DECEMBER 31, 2004, 2005 AND 2006
  Number of








TotalCommon


General


Limited


PartnersUnits


Partner


Partner


CapitalBalance, December 31, 2003


9,488,921


$
7,277


$
7,271,067


$
7,278,344Capital contributions






60



59,467



59,527Distributions to partners






(4,532
)


(4,527,665
)


(4,532,197
)Net income






9,217



9,207,348



9,216,565Balance, December 31, 2004


9,488,921



12,022



12,010,217



12,022,239Capital contributions






144



143,546



143,690Deemed capital contribution






155



154,994



155,149Distributions to partners






(8,271
)


(8,262,777
)


(8,271,048
)Net income






5,859



5,853,049



5,858,908Balance, December 31, 2005


9,488,921



9,909



9,899,029



9,908,938Capital contributions






19



19,337



19,356Net distributions to owners






(2,297
)


(2,294,617
)


(2,296,914
)Deemed dividend to Moriah Group
    owners






(3,878
)


(3,874,337
)


(3,878,215
)Net proceeds from private equity
    offering


5,000,000



76,784



76,706,734



76,783,518Redemption of Founding
    Investors units


(4,400,000
)


(69,938
)


(69,868,062
)


(69,938,000
)Units issued to MBN Properties LP
    in exchange for the non-controlling interests share of oil
    and natural gas properties


1,867,290



31,744



31,712,190



31,743,934Units issued to the Brothers Group
    in exchange for oil and natural gas properties and other assets


6,200,358



105,406



105,300,663



105,406,069Units issued to the H2K Holdings
    Ltd. in exchange for oil and natural gas properties


83,499



1,419



1,418,064



1,419,483Dividend  reimbursement
    of offering costs paid by MBN Management LLC






(1,200
)


(1,199,029
)


(1,200,229
)Units issued to Henry Holding LP
    in exchange for oil and natural gas properties


146,415







2,489,055



2,489,055Units issued to Legacy Board of
    Directors for services


8,750







148,750



148,750Compensation expense on unit
    options granted to employees










115,316



115,316Compensation expense on restricted
    unit awards issued to employees










270,039



270,039Distributions to unitholders,
    $0.8974 per unit






(16,558
)


(16,542,208
)


(16,558,766
)Net income






4,357



4,352,528



4,356,885Balance, December 31, 2006


18,395,233


$
135,767


$
138,653,452


$
138,789,219    F-5




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##### Table of Contents



LEGACY
    RESERVES LP (FORMERLY MORIAH GROUP)
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
 FOR THE
    YEARS ENDED DECEMBER 31, 2004, 2005 AND 2006
  2004


2005


2006Cash flows from operating
    activities:Net income

$
9,216,565


$
5,858,908


$
4,356,885Adjustments to reconcile net income
    to net cash provided by operating activities:Dry hole costs


822







Depletion, depreciation,
    amortization and accretion


883,457



2,291,013



18,394,674Amortization of debt issuance costs






93,776



360,847Impairment of long-lived assets










16,113,300(Gain) loss on oil and natural gas
    swaps


558,953



6,158,865



(9,288,470
)(Gain) loss on sale of assets


(1,299,334
)


20,523



42,370Equity in (income) loss of
    partnership


(183,474
)


495,295



317,788Accrued interest on subordinated
    notes payable  partners






817,757



Accrued interest on subordinated
    notes receivable  partners






(24,797
)


Distributions from oil and gas
    partnership


103,950







Non-controlling interest






(538
)


Amortization of unit-based
    compensation










534,105Changes in assets and liabilitiesIncrease in accounts receivable,
    oil and natural gas


(762,905
)


(3,412,162
)


(5,796,270
)(Increase) decrease in accounts
    receivable, joint interest owners


505,826



605,072



(4,481,124
)Increase in accounts receivable,
    other


(30,270
)


(91,329
)


(457,454
)(Increase) decrease in other assets


7,636



(87,887
)


(565,329
)Increase (decrease) in accounts
    payable


(267,960
)


395,428



2,693,916Increase (decrease) in accrued oil
    and natural gas liabilities


(147,197
)


1,107,021



4,227,569Increase in due to affiliates






194,907



1,059,308Increase (decrease) in other
    liabilities






(13,200
)


2,078,165Total adjustments


(630,496
)


8,549,744



24,803,491Net cash provided by operating
    activities


8,586,069



14,408,652



29,590,280Cash flows from investing
    activities:Investment in oil and natural gas
    properties


(3,325,151
)


(66,910,315
)


(55,907,581
)Investment in other equipment






(4,198
)


(243,384
)Investment in operating rights










(7,016,672
)Proceeds from sale of assets


2,003,052







Investment in notes receivable


(3,330,000
)


(899,574
)


Collection of notes receivable


5,675,345



2,380,000



924,441Net cash settlements on oil and
    natural gas swaps






(3,530,651
)


(262,222
)Net cash provided by (used in)
    investing activities


1,023,246



(68,964,738
)


(62,505,418
)Cash flows from financing
    activities:Proceeds from long-term debt


12,808,708



56,573,000



121,800,000Payments of long-term debt


(17,293,708
)


(6,100,000
)


(73,189,791
)Payments of debt issuance costs






(867,756
)


(292,803
)Proceeds from subordinated notes
    payable  partners






14,264,360



Proceeds from issuance of units, net










76,783,518Redemption of Founding
    Investors units










(69,938,000
)Dividend  reimbursement
    of offering costs paid by MBN Management LLC










(1,200,229
)Capital contributed by owner


59,527



143,690



19,356Cash not acquired in Legacy
    formation transactions










(3,104,304
)Distributions of capital


(4,532,197
)


(8,271,048
)


(18,855,680
)Net cash provided by (used in)
    financing activities


(8,957,670
)


55,742,246



32,022,067Net increase (decrease) in cash and
    cash equivalents


651,645



1,186,160



(893,071
)Cash and cash equivalents,
    beginning of period


117,118



768,763



1,954,923Cash and cash equivalents, end of
    period

$
768,763


$
1,954,923


$
1,061,852    F-6




---



##### Table of Contents



LEGACY
    RESERVES LP (FORMERLY MORIAH GROUP)
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
 FOR THE
    YEARS ENDED DECEMBER 31, 2004, 2005 AND 2006
  2004


2005


2006Non-Cash Investing and Financing
    Activities:Asset retirement obligation costs
    and liabilities

$
(41,081
)

$
11,816


$
2,272,590Asset retirement obligations
    associated with property acquisitions

$



$
445,169


$
1,888,954Contributed offering costs

$



$
155,149


$
Non-controlling interests
    share of net financing costs of MBN Properties LP capitalized to
    oil and natural gas properties

$



$



$
164,202Units issued to MBN Properties LP
    in exchange for the non-controlling interests share of oil
    and natural gas properties

$



$



$
31,743,934Units issued to Brothers Group in
    exchange for:Oil and natural gas properties

$



$



$
105,298,794Other property and equipment

$



$



$
107,275Units issued to H2K Holdings Ltd.
    in exchange for oil and natural gas properties

$



$



$
1,419,483Oil and natural gas hedge
    liabilities assumed from the Brothers Group and H2K Holdings
    Ltd.

$



$



$
3,147,152Units issued to Henry Holdings LP
    in exchange for oil and natural gas properties

$



$



$
2,489,055Deemed dividend to Moriah Group
    owners for accounts not acquired in Legacy formation transaction:Accounts receivable, oil and
    natural gas

$



$



$
4,248,157Accounts receivable, joint
    interest owners

$



$



$
249,627Accounts receivable, other

$



$



$
539,968Other assets

$



$



$
891,300Accounts payable

$



$



$
(213,941
)Accrued oil and natural gas
    liabilities

$



$



$
(1,520,709
)Due to affiliates

$



$



$
(1,254,215
)Other liabilities

$



$



$
(2,166,276
)    F-7




---



##### Table of Contents



LEGACY
    RESERVES LP (FORMERLY MORIAH GROUP)
  NOTES TO
    FINANCIAL STATEMENTS
  (1)  Summary
    of Significant Accounting Policies
  (a)
    Organization,
    Basis of Presentation and Description of Business          
    Right to receive distributions of available cash within
    45 days after the end of each quarter.
    No limited partner shall have any management power over our
    business and affairs; the general partner shall conduct, direct
    and manage LRLPs activities.
    The general partner may be removed if such removal is approved
    by the unitholders holding at least
    66 2/3 percent
    of the outstanding units, including units held by LRLPs
    general partner and its affiliates.
    Right to receive information reasonably required for tax
    reporting purposes within 90 days after the close of the
    calendar year     F-8




---



##### Table of Contents



LEGACY
    RESERVES LP (FORMERLY MORIAH GROUP)
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
   sub-chapter S corporation
      (b)
    Cash
    Equivalents    (c)
    Trade
    Accounts Receivable    (d)
    Oil
    and Natural Gas Properties   F-9




---



##### Table of Contents



LEGACY
    RESERVES LP (FORMERLY MORIAH GROUP)
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
          (e)
    Oil
    and Natural Gas Reserve Quantities  well-by-well
   F-10




---



##### Table of Contents



LEGACY
    RESERVES LP (FORMERLY MORIAH GROUP)
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
      (f)
    Income
    Taxes    (g)
    Derivative
    Instruments and Hedging Activities  Accounting for Derivative
    Instruments and Hedging Activities
  mark-to-market
  (h)
    Use of
    Estimates    (i)
    Revenue
    Recognition     F-11




---



##### Table of Contents



LEGACY
    RESERVES LP (FORMERLY MORIAH GROUP)
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
        (j)
    Investments    (k)
    Intangible
    assets    (l)
    Environmental  and/or
  (m)
    Earnings
    Per Unit  arnings per Share
 F-12




---



##### Table of Contents



LEGACY
    RESERVES LP (FORMERLY MORIAH GROUP)
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
     (n)
    Redemption
    of Units    (o)
    Segment
    Reporting    (p)
    Unit-Based
    Compensation    (q)
    Recently
    Issued Accounting pronouncements  Accounting for Uncertainty in Income Taxes  an
    interpretation of FASB Statement No. 109. Accounting for Income Taxes.
    Fair Value
    Measurements.
 F-13




---



##### Table of Contents



LEGACY
    RESERVES LP (FORMERLY MORIAH GROUP)
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    The Fair Value Option for
    Financial Assets and Financial Liabilities  Including
    an Amendment of FASB Statement
    No. 115. Fair Value Measurements
  (2)  Fair
    Values of Financial Instruments
    Cash and cash equivalents, accounts receivable, other current
    assets, accounts payable and other current
    liabilities.
  Notes receivable.
  Debt.
  Commodity price derivatives.
  (3)  Credit
    Facility
     F-14




---



##### Table of Contents



LEGACY
    RESERVES LP (FORMERLY MORIAH GROUP)
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
       F-15




---



##### Table of Contents



LEGACY
    RESERVES LP (FORMERLY MORIAH GROUP)
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
     December 31,2005


2006MPL - due September 2009

$
20,723,000


$
MBN Properties LP - due
    September 2007


31,750,000



Legacy - due March 2010






115,800,000$
52,473,000


$
115,800,000   (4)  Acquisitions
  Denton
    Devonian Acquisition
    PITCO
    Acquisition
    Legacy
    Formation Acquisition
   F-16




---



##### Table of Contents



LEGACY
    RESERVES LP (FORMERLY MORIAH GROUP)
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
      Number of unitsMPL


7,334,070DAB Resources, Ltd.


859,703Moriah Group


8,193,773Brothers Group


6,200,358H2K Holdings Ltd.


83,499MBN Properties LP


3,162,438LRLP units


600,000Total units issued at Legacy
    Formation


18,240,068       Number of Units


Purchase Priceat $17.00 per unit


of Assets AcquiredBrothers Group


6,200,358


$
105,406,069H2K Holdings Ltd.


83,499



1,419,483Cash paid to three charitable
    foundations






7,682,854Total purchase price before
    liabilities assumed






114,508,406Plus:Oil and natural gas swap
    liabilities assumed






3,147,152Asset retirement obligations
    incurred






1,467,241Less:Office furniture, equipment and
    vehicles acquired






(107,275
)Total purchase price allocated to
    oil and natural gas properties acquired





$
119,015,524    F-17




---



##### Table of Contents



LEGACY
    RESERVES LP (FORMERLY MORIAH GROUP)
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  step-up
  Number of Units


Purchase Price ofat $17.00 per unit


Assets AcquiredUnits issued to MBN Properties LP


3,162,438


$
53,761,446Cash paid to MBN Properties LP






65,300,000Total purchase price before
    liabilities assumed






119,061,446Plus:Oil and natural gas swap
    liabilities assumed






2,539,625ARO liabilities assumed






453,913Less:Net book value of other property
    and equipment on MBN Properties LP at March 14, 2006






(39,056
)122,015,928Less:Net book value of oil and gas
    assets on
    MBN Properties LP at March 14, 2006






(62,990,390
)Purchase price in excess of net
    book value of assets






59,025,538Less:Share already owned by Moriah via
    consolidation 
    of MBN Properties LP


46.22
%


(27,281,604
)Non-controlling interest share to
    record(a)






31,743,934Plus:Elimination of deferred financing
    costs related to
    non-controlling interests share of MBN Properties LP






164,202Reimbursement of Brothers
    Groups share of MBN Management LLC losses from inception
    through March 14, 2006






780,239MBN Properties LP purchase price
    to allocate to oil and natural gas properties





$
32,688,375Units related to purchase of
    non-controlling interest(a)


1,867,290Units related to interest
    previously owned by Moriah Group


1,295,148Total units issued to MBN
    Properties LP


3,162,438   Larron
    Acquisition
   F-18




---



##### Table of Contents



LEGACY
    RESERVES LP (FORMERLY MORIAH GROUP)
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  South
    Justis Unit Acquisition
    Kinder
    Morgan Acquisition
    Pro
    Forma Operating Results
    December 31,2004


2005


2006(In thousands)Revenues, excluding hedging gains
    and losses

$
27,776


$
64,128


$
69,884Revenues, net of hedging gains and
    losses

$
27,143


$
53,080


$
77,868Income from continuing operations

$
8,606


$
6,295


$
4,899Net income

$
8,628


$
6,295


$
4,899Earnings per unit 
    basic and diluted:Income from continuing operations

$
0.91


$
0.34


$
0.27Net income

$
0.91


$
0.34


$
0.27Units used in computing earnings
    per unit


9,488,921



18,386,482



18,392,788  F-19




---



##### Table of Contents



LEGACY
    RESERVES LP (FORMERLY MORIAH GROUP)
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  (5)  Partnership Investments
  Accord
    Partnership
      Three MonthsEndedMarch 31,2004Oil and natural gas revenues

$
1,129,819Other operating revenues


174,517Direct lease operating expenses


(431,595
)Production taxes


(71,105
)Depletion, depreciation and
    accretion


(129,873
)Other expenses


(7,958
)Operating income


663,805Other expense


(134,298
)Partnership net income

$
529,507   MBN
    Properties LP and MBN Management LLC
   F-20




---



##### Table of Contents



LEGACY
    RESERVES LP (FORMERLY MORIAH GROUP)
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
      December 31,2005Current assets

$
1,233,338Other assets


31,899Total assets

$
1,265,237Current liabilities

$
640,727Notes payable 
    affiliated entities


1,952,753Members capital


(1,328,243
)Total liabilities and
    members capital

$
1,265,237   From InceptionThrough


January 1, 2006December 31,


to March 14,2005


2006General and administrative expenses

$
(1,278,685
)

$
(522,569
)Operating loss


(1,278,685
)


(522,569
)Other expense


(50,558
)


(21,961
)Net loss

$
(1,329,243
)

$
(544,530
)   (6)  Related
    Party Transactions
  non-controlling
     F-21




---



##### Table of Contents



LEGACY
    RESERVES LP (FORMERLY MORIAH GROUP)
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
     Distribution
    of Oil and Natural Gas Properties to Owners
    (7)  Commitments
    and Contingencies
        (8)  Business
    and Credit Concentrations
  Cash
    Revenue
    and Trade Receivables
   F-22




---



##### Table of Contents



LEGACY
    RESERVES LP (FORMERLY MORIAH GROUP)
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  (9)  Oil
    and Natural Gas Swaps
    Accounting for Derivative
    Instruments and Hedging Activities.
      December 31,2004


2005


2006Crude oil derivative contract
    settlements

$
46,020


$
(3,530,651
)

$
(6,666,755
)Natural gas derivative contract
    settlements


(119,850
)






6,404,533Unrealized change in fair
    value  oil contracts


(678,803
)


(910,738
)


4,338,459Unrealized change in fair
    value  natural gas contracts


119,850



(1,717,476
)


5,212,233$
(632,783
)

$
(6,158,865
)

$
9,288,470        F-23




---



##### Table of Contents



LEGACY
    RESERVES LP (FORMERLY MORIAH GROUP)
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
     Annual


Average


PriceCalendar Year

Volumes (Bbls)


Price per Bbl


Range per Bbl2007


671,637


$
67.62


$
64.15 - $75.702008


618,689


$
67.11


$
62.25 - $73.452009


571,453


$
64.46


$
61.05 - $71.402010


426,687


$
61.51


$
60.15 - $61.90     Annual


Average


PriceCalendar Year

Volumes (Mcf)


Price per Mcf


Range per Mcf2007


1,558,504


$
9.56


$
9.02 - $11.832008


1,422,732


$
8.61


$
7.98 - $10.582009


1,316,354


$
8.38


$
7.77 - $10.182010


1,218,899


$
7.99


$
7.37 - $  9.73     Annual


BasisCalendar Year

Volumes (Mcf)


Range per Mcf2007


1,560,000


$
(0.88
)2008


1,422,000


$
(0.84
)2009


1,320,000


$
(0.68
)2010


1,200,000


$
(0.57
)   (10)  Discontinued
    Operations
    Year EndedDecember 31,2004Oil sales

$
24,625Natural gas sales


51Oil and natural gas production
    expenses


(8,553
)Production and other taxes


(1,142
)Depreciation, depletion and
    amortization


Income from discontinued operations


14,981Gain on disposal


7,165Total income from discontinued
    operations

$
22,146  F-24




---



##### Table of Contents



LEGACY
    RESERVES LP (FORMERLY MORIAH GROUP)
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  (11)  Sales
    to Major Customers
    2004


2005


2006Conoco Phillips


9
%


10
%


4
%Navajo Crude Oil Marketing


17
%


16
%


12
%Plains Marketing, LP


20
%


18
%


14
%     (12)  Asset
    Retirement Obligation
      December 31,2005


2006Asset retirement
    obligation  beginning of period

$
1,952,866


$
2,302,147Liabilities incurred in Legacy
    formation






1,467,241Liabilities incurred with
    properties acquired


446,901



1,888,954Liabilities incurred with
    properties drilled






22,882Liabilities settled during the
    period


(53,852
)


(213,343
)Current period accretion


109,429



242,432Current period revisions to
    accretion expense


(163,281
)


Current period revisions to oil
    and natural gas properties


10,084



782,467Asset retirement
    obligation  end of period

$
2,302,147


$
6,492,780    F-25




---



##### Table of Contents



LEGACY
    RESERVES LP (FORMERLY MORIAH GROUP)
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
   (13)  Earnings
    Per Unit
    December 31,2004


2005


2006Income available to unitholders

$
9,194


$
5,859


$
4,357Weighted average units outstanding


9,488,921



9,488,921



16,567,287Effect of dilutive securities:Restricted units










1,592Weighted average units and
    potential units outstanding


9,488,921



9,488,921



16,568,879Basic earnings per unit

$
0.97


$
0.62


$
0.26Diluted earnings per unit

$
0.97


$
0.62


$
0.26     (14)  Unit-Based
    Compensation
  Long
    Term Incentive Plan
       F-26




---



##### Table of Contents



LEGACY
    RESERVES LP (FORMERLY MORIAH GROUP)
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
         WeightedWeighted


AverageAverage


RemainingExercise


ContractualShares


Price


TermOutstanding at January 1, 2006





$
Granted


273,000



17.01Exercised






Forfeited


(13,000
)


17.00Outstanding at December 31,
    2006


260,000



17.01



4.2 yearsOptions exercisable at
    December 31, 2006





$




     Non-Vested OptionsWeighted-Number of


Average FairShares


ValueNon-vested at January 1, 2006





$
Granted


273,000



2.62Vested






Forfeited


(13,000
)


2.62Non-vested at December 31,
    2006


260,000


$
2.62  F-27




---



##### Table of Contents



LEGACY
    RESERVES LP (FORMERLY MORIAH GROUP)
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  grant-date
  Year EndedDecember 31,2006Expected life (years)


6Annual Interest rate


4.9
%Annual distribution rate per unit

$
1.64Volatility


37
%   (15)  Costs
    Incurred in Oil and Natural Gas Property Acquisition and
    Development Activities
    Year Ended December 31,2004


2005


2006Development costs

$
1,636,989


$
1,958,455


$
17,325,052Exploration costs


822







Acquisition costs:Proved properties


1,645,539



65,405,917



187,006,693Unproved properties






2,928



Total acquisition, development and
    exploration costs

$
3,283,350


$
67,367,300


$
204,331,745    F-28




---



##### Table of Contents



LEGACY
    RESERVES LP (FORMERLY MORIAH GROUP)
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  (16)  Net
    Proved Oil and Natural Gas Reserves (Unaudited)
    Oil and


NaturalCondensate


Gas(MBbls)


(MMcf)Total Proved
    Reserves:Balance, December 31, 2003


3,330



10,274Purchases of
    minerals-in-place


228



256Sales of
    minerals-in-place


(5
)


(2
)Extensions and discoveries


120



467Revisions of previous estimates
    due to infill drilling, recompletions and stimulations


86



33Revisions of previous estimates
    due to prices and performance


637



225Production


(287
)


(783
)Balance, December 31, 2004


4,109



10,470Purchases of
    minerals-in-place


3,541



12,800Revisions of previous estimates
    due to infill drilling, recompletions and stimulations


794



1,258Revisions of previous estimates
    due to prices and performance


28



956Production


(354
)


(1,027
)Balance, December 31, 2005(a)


8,118



24,457Purchases of
    minerals-in-place


6,352



11,871Extensions and discoveries


75



207Revisions of previous estimates
    due to infill drilling, recompletions and stimulations


233



494Revisions of previous estimates
    due to prices and performance


(657
)


(2,296
)Production


(749
)


(2,200
)Balance, December 31, 2006


13,372



32,533Proved Developed
    Reserves:December 31, 2003


3,330



10,274December 31, 2004


4,109



10,470December 31, 2005


6,380



20,618December 31, 2006


11,132



28,126     (a)
    
    Includes 3.2 MMBls of oil and 13.0 Bcf of natural gas
    held by MBN Properties, LP of which 1.7 MMBls and 7.0 Bcf
    of natural gas was owned by the non-controlling interest. F-29




---



##### Table of Contents



LEGACY
    RESERVES LP (FORMERLY MORIAH GROUP)
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
   (17)
    Standardized
    Measure of Discounted Future Net Cash Flows and Changes Therein
    Relating to Proved Reserves (Unaudited)    December 31,2004


2005(a)


2006(Thousands)Future production revenues

$
220,989


$
684,021


$
947,914Future costs:Production


(95,780
)


(242,796
)


(387,238
)Development


(178
)


(27,609
)


(43,419
)Future net cash flows before
    income taxes


125,031



413,616



517,25710% annual discount for estimated
    timing of cash flows


(64,674
)


(221,619
)


(276,694
)Standardized measure of discounted
    net cash flows

$
60,357


$
191,997


$
240,563     (a)
    
    Includes $93.0 million of standardized measure held by MBN
    Properties LP of which $50.2 million was owned by the
    non-controlling interest.    December 31,2004


2005


2006Oil (per Bbl)

$
40.55


$
57.64


$
56.73Natural Gas (per MMBtu)

$
5.19


$
8.82


$
5.82  F-30




---



##### Table of Contents



LEGACY
    RESERVES LP (FORMERLY MORIAH GROUP)
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    Year Ended December 31,2004


2005


2006(Thousands)Increase (decrease):Sales, net of production costs

$
(9,685
)

$
(17,532
)

$
(40,113
)Net change in sales prices, net of
    production costs


10,605



36,574



(60,531
)Changes in estimated future
    development costs


(86
)


(21,401
)


4,582Extensions and discoveries, net of
    future production and development costs


2,370







2,723Revisions of previous estimates
    due to infill drilling, recompletions and stimulations


836



19,319



7,919Revisions of previous estimates
    due to prices and performance


6,959



3,156



(12,232
)Previously estimated development
    costs incurred






(178
)


9,517Purchase of minerals-in place


3,236



102,289



127,009Sales of minerals in place


(36
)






Other


1,287



4,458



(2,971
)Accretion of discount


3,486



4,955



12,663Net increase


18,972



131,640



48,566Standardized measure of discounted
    future net cash flows:Beginning of year


41,385



60,357



191,997End of year

$
60,357


$
191,997


$
240,563    F-31




---



##### Table of Contents



LEGACY
    RESERVES LP (FORMERLY MORIAH GROUP)
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
   (18)  Selected
    Quarterly Financial Data (Unaudited)
  For the three-month periods ended:
  March 31


June 30


September 30


December 312006Revenues:Oil sales

$
7,440


$
11,800


$
13,204


$
12,907Natural gas sales


2,995



3,588



4,239



3,624Realized and unrealized gain
    (loss) on oil and natural gas swaps


(3,896
)


(9,176
)


18,606



3,755Total revenues


6,539



6,212



36,049



20,286Expenses:Oil and natural gas production


2,677



3,186



4,297



5,778Production and other taxes


738



943



1,030



1,035General and administrative(a)


956



1,253



1,057



426Dry hole costs














Depletion, depreciation,
    amortization and accretion


2,388



4,967



5,346



5,693Impairment of long-lived assets










8,573



7,540Loss on sale of assets














42Total expenses


6,759



10,349



20,303



20,514Operating income (loss)


(220
)


(4,137
)


15,746



(228
)Interest income


33



5



55



36Interest expense


(1,445
)


(1,210
)


(1,857
)


(2,133
)Other income (expense)


(303
)










14Net income (loss)

$
(1,935
)

$
(5,342
)

$
13,944


$
(2,311
)Net income (loss) per
    share  basic and diluted

$
(0.17
)

$
(0.29
)

$
0.76


$
(0.13
)Production volumes:Oil (MBbl)


129



184



203



233Natural Gas (MMcf)


434



594



571



601Total (Mboe)


201



283



298



333     (a)
    
    General and administrative expenses for the quarter ended
    December 31, 2006 reflect an adjustment to reverse certain
    accruals which had been recorded during the first three quarters
    and were not deemed necessary. F-32




---



##### Table of Contents



LEGACY
    RESERVES LP (FORMERLY MORIAH GROUP)
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
   For the three-month periods ended:
  March 31


June 30


September 30


December 312005Revenues:Oil sales

$
3,010


$
3,465


$
4,944


$
6,806Natural gas sales


1,061



1,111



1,700



3,446Realized and unrealized gain
    (loss) on oil and natural gas swaps






(1,908
)


(5,741
)


1,491Total revenues


4,071



2,668



903



11,743Expenses:Oil and natural gas production


1,012



1,127



1,471



2,765Production and other taxes


321



353



467



495General and administrative


101



120



218



915Dry hole costs














Depletion, depreciation,
    amortization and accretion


169



162



404



1,556Impairment of long-lived assets














Loss on sale of assets














21Total expenses


1,603



1,762



2,560



5,752Operating income (loss)


2,468



906



(1,657
)


5,991Interest income


54



49



51



32Interest expense


(9
)


(5
)


(279
)


(1,292
)Other income (expense)


14



12



(319
)


(157
)Non-controlling interest










1



Net income (loss)

$
2,527


$
962


$
(2,203
)

$
4,574Net income (loss) per
    share  basic and diluted

$
0.27


$
0.10


$
(0.23
)

$
0.48Production volumes:Oil (MBbl)


75



78



79



122Natural Gas (MMcf)


201



195



235



396Total (Mboe)


108



111



118



188  F-33




---



##### Table of Contents



LEGACY
    RESERVES LP (FORMERLY MORIAH GROUP)
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  (19)  Subsequent
    Events
         F-34




---



##### Table of Contents



INDEX TO
    EXHIBITS
  ExhibitNumber



Description3
.1



Certificate of Limited Partnership
    of Legacy Reserves LP (Incorporated by reference to Legacy
    Reserves LPs Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed May 12, 2006, Exhibit 3.1)3
.2



Amended and Restated Limited
    Partnership Agreement of Legacy Reserves LP (Incorporated by
    reference to Legacy Reserve LPs Registration Statement on
    Form S-1
    (File
    No. 33-134056)
    filed May 12, 2006, included as Appendix A to the
    Prospectus and including specimen unit certificate for the units)3
.3



Certificate of Formation of Legacy
    Reserves GP, LLC (Incorporated by reference to Legacy Reserves
    LPs Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed May 12, 2006, Exhibit 3.3)3
.4



Amended and Restated Limited
    Liability Company Agreement of Legacy Reserves GP, LLC
    (Incorporated by reference to Legacy Reserves LPs
    Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed May 12, 2006, Exhibit 3.4)4
.1



Registration Rights Agreement
    dated as of March 15, 2006 by and among Legacy Reserves LP,
    Legacy Reserves GP, LLC and Friedman, Billings,
    Ramsey & Co. (Incorporated by reference to Legacy
    Reserves LPs Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed May 12, 2006, Exhibit 4.1)4
.2



Registration Rights Agreement
    dated June 29, 2006 between Henry Holding LP and Legacy
    Reserves LP and Legacy Reserves GP, LLC (the Henry
    Registration Rights Agreement) (Incorporated by reference
    to Legacy Reserves LPs Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed September 5, 2006 Exhibit 4.2)4
.3



Registration Rights Agreement
    dated March 15, 2006 by and among Legacy Reserves LP,
    Legacy Reserves GP, LLC and the other parties thereto (the
    Founders Registration Rights Agreement)
    (Incorporated by reference to Legacy Reserves LPs
    Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed September 5, 2006 Exhibit 4.3)10
.1



Credit Agreement dated as of
    March 15, 2006, among Legacy Reserves LP, the lenders from
    time to time party thereto, and BNP Paribas, as administrative
    agent (Incorporated by reference to Legacy Reserves LPs
    Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed May 12, 2006, Exhibit 10.1)10
.2



Contribution, Conveyance and
    Assumption Agreement dated as of March 15, 2006 by and
    among Legacy Reserves LP, Legacy Reserves GP, LLC and the other
    parties thereto (Incorporated by reference to Legacy Reserves
    LPs Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed May 12, 2006, Exhibit 10.2)10
.3



Omnibus Agreement dated as of
    March 15, 2006 by and among Legacy Reserves LP, Legacy
    Reserves GP, LLC and the other parties thereto (Incorporated by
    reference to Legacy Reserves LPs Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed May 12, 2006, Exhibit 10.3)10
.4



Purchase/Placement Agreement dated
    as of March 6, 2006 by and among Legacy Reserves LP, Legacy
    Reserves GP, LLC and the other parties thereto (Incorporated by
    reference to Legacy Reserves LPs Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed May 12, 2006, Exhibit 10.4)10
.5



Legacy Reserves, LP Long-Term
    Incentive Plan (Incorporated by reference to Legacy Reserves
    LPs Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed May 12, 2006, Exhibit 10.5)10
.6



Form of Legacy Reserves LP
    Long-Term Incentive Plan Restricted Unit Grant Agreement
    (Incorporated by reference to Legacy Reserves LPs
    Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed May 12, 2006, Exhibit 10.6)10
.7



Form of Legacy Reserves LP
    Long-Term Incentive Plan Unit Option Grant Agreement
    (Incorporated by reference to Legacy Reserves LPs
    Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed September 5, 2006, Exhibit 10.7)10
.8



Form of Legacy Reserves LP
    Long-Term Incentive Plan Unit Grant Agreement (Incorporated by
    reference to Legacy Reserves LPs Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed September 5, 2006, Exhibit 10.8)




---



##### Table of Contents



ExhibitNumber



Description10
.9



Employment Agreement dated as of
    March 15, 2006 between Cary D. Brown and Legacy Reserves
    Services, Inc. (Incorporated by reference to Legacy Reserves
    LPs Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed May 12, 2006, Exhibit 10.9)10
.10



Employment Agreement dated as of
    March 15, 2006 between Steven H. Pruett and Legacy Reserves
    Services, Inc. (Incorporated by reference to Legacy Reserves
    LPs Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed May 12, 2006, Exhibit 10.10)10
.11



Employment Agreement dated as of
    March 15, 2006 between Kyle A. McGraw and Legacy Reserves
    Services, Inc. (Incorporated by reference to Legacy Reserves
    LPs Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed May 12, 2006, Exhibit 10.11)10
.12



Employment Agreement dated as of
    March 15, 2006 between Paul T. Horne and Legacy Reserves
    Services, Inc. (Incorporated by reference to Legacy Reserves
    LPs Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed May 12, 2006, Exhibit 10.12)10
.13



Employment Agreement dated as of
    March 15, 2006 between William M. Morris and Legacy
    Reserves Services, Inc. (Incorporated by reference to Legacy
    Reserves LPs Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed May 12, 2006, Exhibit 10.13)10
.14



First Amendment to Credit
    Agreement effective as of July 7, 2006 among Legacy
    Reserves LP, the lenders from time to time party thereto, and
    BNP Paribas, as administrative agent. (Incorporated by reference
    to Legacy Reserves LPs Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed September 5, 2006, Exhibit 10.14)10
.15



Purchase and Sale Agreement dated
    June 29, 2006 between Kinder Morgan Production Company LP
    and Legacy Reserves Operating LP (Incorporated by reference to
    Legacy Reserves LPs Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed October 5, 2006, Exhibit 10.15)10
.16



Purchase and Sale Agreement dated
    June 13, 2006 between Henry Holding LP and Legacy Reserves
    Operating LP (Incorporated by reference to Legacy Reserves
    LPs Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed September 5, 2006, Exhibit 10.16)10
.17



First Amendment of Legacy Reserves
    LP to Long Term Incentive Plan dated June 16, 2006
    (Incorporated by reference to Legacy Reserves LPs
    Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed October 5, 2006, Exhibit 10.17)21
.1



List of subsidiaries of Legacy
    Reserves LP (Incorporated by reference to Legacy Reserves
    LPs Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed May 12, 2006, Exhibit 21.1)23
.1*



Consent of LaRoche Petroleum
    Consultants, Ltd.31
.1*



Rule 13a-14(a)
    Certifications (under Section 302 of the Sarbanes-Oxley Act
    of 2002)32
.1*



Section 1350 Certifications
    (under Section 906 of the Sarbanes-Oxley Act of 2002)     *
    
    Filed herewith
    
    Management contract or compensatory plan or arrangement