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UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
      Form 10-K/A
 Amendment No. 2
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2007ORo

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

(I.R.S. Employerincorporation or
    organization)

Identification No.)303 W. Wall Street, Suite 1400

79701Midland, Texas

(Zip Code)(Address of principal executive
    offices)   Registrants telephone number, including area code:
 (432) 689-5200
  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
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 12b-2
  Large accelerated
    filer o

Accelerated
    filer o

Non-accelerated
    filer þ

Smaller reporting
    company o    Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K.




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Explanatory
    Note
  Form 10-K Original Filing Form 10-K Form 10-K/A Form 10-K
 i




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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


22ITEM 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


49ITEM 8.      FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA


49ITEM 9.       CHANGES IN AND
    DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
    DISCLOSURE


50ITEM 9A(T).  CONTROLS AND PROCEDURES


50ITEM 9B.      OTHER INFORMATION


51PART III


51ITEM 10.     DIRECTORS, EXECUTIVE
    OFFICERS AND CORPORATE GOVERNANCE


51ITEM 11.     EXECUTIVE COMPENSATION


51ITEM 12.      SECURITY OWNERSHIP
    OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
    UNITHOLDER MATTERS


51ITEM 13.      CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE


51ITEM 14.      PRINCIPAL ACCOUNTING
    FEES AND SERVICES


51PART IV


52ITEM 15.      EXHIBITS, FINANCIAL
    STATEMENT SCHEDULES


52  ii




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GLOSSARY
    OF TERMS  Bbl.
  Bcf.
  Boe.
  Boe/d.
  Btu.
  Developed acreage.
  Development Project.
  Development well.
  Dry hole or well.
  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.
 iii




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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.
  Reservoir. and/or
 iv




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Standardized measure.
  Undeveloped acreage.
  Working interest.
  Workover.
 v




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CAUTIONARY
    STATEMENT
    REGARDING FORWARD-LOOKING INFORMATION
    
    our business strategy;
    the amount of oil and natural gas we produce;
    the price at which we are able to sell our oil and natural gas
    production;
    our ability to acquire additional oil and natural gas properties
    at economically attractive prices;
    our drilling location and our ability to continue our
    development activities at economically attractive costs;
    the level of our lease operating expenses, general and
    administrative costs and finding and development costs,
    including payments to our general partner;
    the level of our capital expenditures;
    our future operating results; and
    our plans, objectives, expectations and intentions.     vi




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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
    Reserves LP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 32.1 MMBoe, of
    which 74% were oil and natural gas liquids and 87% were
    classified as proved developed producing, 3% were proved
    developed non-producing, and 10% were proved undeveloped;
    our proved reserves had a standardized measure of
    $690.5 million; and
    our proved reserves to production ratio was approximately
    14 years based on the average daily net production of 6,453
    Boe/d for the three months ended December 31, 2007.  Recent
    Developments
    Acquisition
    Activities
     1




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2




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Development
    Activities
  2
    Oil and
    Natural Gas Derivative Activities
    Business
    Strategy
    
    Make accretive acquisitions of producing properties generally
    characterized by long-lived reserves with stable production and
    reserve development potential;
    Add proved reserves and maximize cash flow and production
    through development projects and operational efficiencies;
    Maintain financial flexibility; and
    Reduce commodity price risk through derivative transactions.  Marketing
    and Major Purchasers
    2005


2006


2007Conoco Phillips


10
%


4
%


3
%Navajo Crude Oil Marketing


16
%


12
%


11
%Plains Marketing, LP


18
%


14
%


13
%Teppco Crude Oil, LP


5
%


5
%


13
%  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.
    Water Discharges.
  Air Emissions.
  National Environmental Policy Act.
 5




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OSHA and Other Laws and Regulation. and/or
  Massachusetts, et al. v. EPA
    Other
    Regulation of the Oil and Natural Gas Industry
      Drilling and Production.
  
    the location of wells;
    the method of drilling and casing wells; 6




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
    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.
    Employees
    Offices
   7




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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 development projects at
    economically attractive costs;
    the level of our lease operating expenses, general and
    administrative costs and development 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.
    Because
    we distribute all of our available cash to our unitholders, our
    future growth may be limited.
   8




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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 development projects may become
    uneconomic, which may adversely affect our ability to make
    distributions to our unitholders.
    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.
   9




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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.
            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
    development 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; 10




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
    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 development 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.
        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 development 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.
   11




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
    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.      Increases
    in interest rates could adversely affect our business, results
    of operations, cash flows from operations and financial
    condition.
    We may
    have assumed unknown liabilities in connection with the
    formation transactions and our subsequent
    acquisitions.
   12




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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.
    Our
    commodity derivative 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.
   13




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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.
    If we
    fail to 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.
     14




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Our
    operations expose us to significant costs and liabilities with
    respect to environmental and operational safety
    matters.
      Risks
    Related to Our Limited Partnership Structure
  Units
    eligible for future sale may have adverse effects on our unit
    price and the liquidity of the market for our
    units.
    
    All of our units issued in our private equity offerings were
    restricted securities within the meaning of
    Rule 144 under the Securities Act. As more of our units
    become eligible for sale under Rule 144, the volume of
    sales of our units may increase, which could reduce the market
    price of our units.
    The Founding Investors and their affiliates, including members
    of our management, own approximately 43% of our outstanding
    units. We granted the Founding Investors certain registration
    rights to have their units registered under the Securities Act.
    Upon registration, these units will be eligible for sale into
    the market. Because of the substantial size of the Founding
    Investors holdings, the sale of a significant portion of
    these units, or a perception in the market that such a sale is
    likely, could have a significant impact on the market price of
    our units.
    We granted purchasers in our private equity offerings certain
    registration rights to have the resale of their units registered
    under the Securities Act. If purchasers in our private equity
    offerings were to resell a substantial portion of their units,
    it could reduce the market price of our outstanding units.  Our
    Founding Investors, including members of our management, own a
    43% 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.
   15




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
    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.  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
 16




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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.
    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 17




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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;
    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. 18




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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 a
    material amount of additional entity-level taxation by states
    and localities. If the IRS were to treat us as a corporation or
    if we were to become subject to a material amount of additional
    entity-level taxation for state or local tax purposes, then our
    cash available for distribution to our unitholders would be
    substantially reduced.
        The
    tax treatment of publicly traded partnerships or an investment
    in our units could be subject to potential legislative, judicial
    or administrative changes and differing interpretations,
    possibly on a retroactive basis.
   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.
    We
    prorate our items of income, gain, loss and deduction between
    transferors and transferees of our units each month based upon
    the ownership of our units on the first day of each month,
    instead of on the basis of the date a particular unit is
    transferred.
    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.
    A
    unitholder whose units are loaned to a short seller
    to cover a short sale of units may be considered as having
    disposed of those units. If so, the unitholder would no longer
    be treated for tax purposes as a partner with respect to those
    units during the period of the loan may recognize gain or loss
    from the disposition.
    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.
   21




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ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS  None.
  ITEM 2.
    PROPERTIES  Form 10-K.
  As of December 31, 2007Proved Reserves


Standardized MeasureField

MMBoe


R/P(a)


% Oil and NGLs


Amount


% of Total($ in Millions)Texas Panhandle Fields


4.6



19



81
%

$
86.9



12.6
%Spraberry


3.6



14



67



84.7



12.3East Binger


3.4



13



83



77.0



11.1Denton


2.2



16



87



48.1



6.9Farmer


1.8



19



66



30.9



4.5Langlie Mattix


1.3



17



85



29.2



4.2Howard Glasscock/Iatan/Iatan East Howard


1.3



17



99



26.7



3.9Total  Top 7 fields


18.2



16



79
%

$
383.5



55.5
%All others


13.9



13



66



307.0



44.5Total


32.1



14



74
%

$
690.5



100.0
%     (a)
    
    Reserves as of December 31, 2007 divided by annual
    production volumes.  
 Summary
    of Oil and Natural Gas Properties and Projects
    Texas Panhandle Fields.
  Spraberry Field.
 22




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East Binger Field.
    Denton Field.
  Farmer Field.
  20-acre 10-acre 10-acre 10-acre 10-acre
  Langlie Mattix Field.
  40-acre 20-acre 20-acre 20-acre 20-acre
 23




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Howard Glasscock, Iatan and Iatan East Howard
    Fields.
  Oil and
    Natural Gas Data
  Proved
    Reserves
    As of December 31,2005(a)


2006


2007Reserve Data:Estimated net proved reserves:Oil (MMBbls)


8.1



13.4



19.6Natural Gas Liquids (MMBbls)










4.0Natural Gas (Bcf)


24.5



32.5



50.9Total (MMBoe)


12.2



18.8



32.1Proved developed reserves (MMBoe)


9.8



15.8



29.0Proved undeveloped reserves (MMBoe)


2.4



3.0



3.1Proved developed reserves as a percentage of total proved
    reserves


80
%


84
%


90
%Standardized measure (in millions)(b)

$
192.0


$
240.6


$
690.5Oil and Natural Gas Prices(c)Oil  NYMEX WTI per Bbl

$
57.64


$
56.73


$
91.96Natural gas  NYMEX Henry Hub per MMBtu

$
8.82


$
5.82


$
6.39     (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 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. 24




---



##### Table of Contents



25




---



##### Table of Contents



Production
    and Price History
    Year Ended December 31,2005(a)


2006(b)


2007(c)Production:Oil (MBbl)


354



749



1,179Natural gas liquids (Mgal)










5,295Gas (MMcf)


1,027



2,200



3,052Total (MBOE)


525



1,116



1,814Average daily production (BOE per day)


1,438



3,058



4,970Average sales price per unit (excluding swaps):Oil (per Bbl)

$
51.48


$
60.55


$
70.65NGL (per Gal)

$



$



$
1.42Gas (per Mcf)

$
7.13


$
6.57


$
7.02Combined (per BOE)

$
48.65


$
53.58


$
61.87Average sales price per unit (including realized swap
    gains/losses)(f):Oil (per Bbl)

$
41.51
(d)

$
51.65
(e)

$
67.58NGL (per Gal)

$



$



$
1.30Gas (per Mcf)

$
7.13


$
9.48


$
8.48Combined (per BOE)

$
41.93
(d)

$
53.35
(e)

$
61.99Average unit costs per BOE:Production costs, excluding production and other taxes

$
12.14


$
14.28


$
14.96Production and other taxes

$
3.12


$
3.36


$
4.35General and administrative

$
2.58


$
3.31


$
4.63Depletion, depreciation and amortization

$
4.36


$
16.48


$
15.66     (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)
    
    Reflects the production and operating results of the oil and
    natural gas properties acquired in the Binger, Ameristate, TSF,
    Raven Shenandoah, Raven OBO, TOC and Summit Acquisitions from
    the closing dates of such acquisitions through December 31,
    2007.(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 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 gains (losses) from Legacys oil
    and natural gas swaps. 26




---



##### Table of Contents



Productive
    Wells
    Oil


Natural GasGross


Net


Gross


NetOperated


1,184



910.07



110



103.42Non-operated


1,298



89.70



411



41.12Total


2,482



999.77



521



144.54   Developed
    and Undeveloped Acreage
    Developed


UndevelopedAcreage(a)


Acreage(b)Gross(c )


Net(d)


Gross(c )


Net(d)Total


351,618



96,605



480



226     (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.(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




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##### Table of Contents



Drilling
    Activity
    Year Ended December 31,2005


2006


2007Gross:DevelopmentProductive


12



14



29Dry






2



Total


12



16



29ExploratoryProductive










Dry


1







Total


1







Net:DevelopmentProductive


1.6



6.2



13.0Dry






1.3



Total


1.6



7.5



13.0ExploratoryProductive










Dry


0.1







Total


0.1







   Summary
    of Development Projects
    Operations
  General
   28




---



##### Table of Contents



non-operated
  Oil and
    Natural Gas Leases
    South
    Justis Unit Operating Agreement
    Derivative
    Activity
    Title to
    Properties
       29




---



##### Table of Contents



ITEM 3.
    LEGAL
    PROCEEDINGS    ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS   PART II  ITEM 5.
    MARKET
    FOR REGISTRANTS UNITS, RELATED UNITHOLDER MATTERS AND
    ISSUER PURCHASES OF EQUITY SECURITIES      Price Ranges(a)


Cash Distribution2007

High


Low


per UnitFirst Quarter

$
28.19


$
18.90


$
0.4100
(b)Second Quarter

$
30.42


$
25.14


$
0.4200
(c)Third Quarter

$
27.61


$
18.50


$
0.4300
(d)Fourth Quarter

$
24.57


$
20.15


$
0.4500   Cash Distribution2006

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

$
0.0774
(e)(f)Second Quarter

$
0.4100
(g)Third Quarter

$
0.4100
(g)Fourth Quarter

$
0.4100
(h)     (a)
    
    Our units were not traded on an established public trading
    market prior to our initial public offering in January 2007.(b)
    
    We paid total cash distributions to our general partner with
    respect to its approximately 0.1% general partner interest of
    $7,508.(c)
    
    We paid total cash distributions to our general partner with
    respect to its approximately 0.1% general partner interest of
    $7,691.(d)
    
    We paid total cash distributions to our general partner with
    respect to its approximately 0.1% general partner interest of
    $7,874.(e)
    
    Reflects a pro-rated distribution for the period from
    March 15, 2006 through March 31, 2006.(f)
    
    We paid total cash distributions to our general partner with
    respect to its approximately 0.1% general partner interest of
    $1,417.(g)
    
    We paid total cash distributions to our general partner with
    respect to its approximately 0.1% general partner interest of
    $7,508.(h)
    
    The record date of our distribution attributable to the fourth
    quarter of 2006 was January 10, 2007 and preceeded 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. 30




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##### Table of Contents



Distribution
    Policy
    Recent
    Sales of Unregistered Securities
      UnitsMoriah Group:Moriah Properties, Ltd.


7,334,070DAB Resources, Ltd.


859,703Brothers Group:Brothers 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



ITEM 6.
    SELECTED
    FINANCIAL DATA         32




---



##### Table of Contents



Form 10-K.
  Years Ended December 31,2003


2004


2005(a)


2006(b)


2007(c)(In thousands, except per unit data)Statement of Operations Data:Revenues:Oil sales

$
7,919


$
10,998


$
18,225


$
45,351


$
83,301Natural gas liquids sales


















7,502Natural gas sales


3,697



3,945



7,318



14,446



21,433Total Revenues


11,616



14,943



25,543



59,797



112,236Expenses:Oil and natural gas production


3,496



4,345



6,376



15,938



27,129Production and other taxes


661



928



1,636



3,746



7,889General and administrative


543



731



1,354



3,691



8,392Dry hole costs


1,465



1











Depletion, depreciation, amortization and accretion


766



883



2,291



18,395



28,415Impairment of long-lived assets


471











16,113



3,204Loss on disposal of assets










20



42



527Total expenses


7,402



6,888



11,677



57,925



75,556Operating income


4,214



8,055



13,866



1,872



36,680Other income (expense):Interest income


56



419



185



130



321Interest expense


(94
)


(213
)


(1,584
)


(6,645
)


(7,118
)Gain on sale of partnership investment






1,292











Equity in income (loss) of partnerships


311



183



(495
)


(318
)


77Realized gain (loss) on oil, NGL and natural gas swaps


(623
)


(74
)


(3,531
)


(262
)


211Unrealized gain (loss) on oil, NGL and natural gas swaps natural
    gas swaps


340



(559
)


(2,628
)


9,551



(85,367
)Other


3



92



45



29



(129
)Income (loss) before non-controlling interest and income taxes


4,207



9,195



5,858



4,357



(55,325
)Non-controlling interest










1







Income before income taxes


4,207



9,195



5,859



4,357



(55,325
)Income taxes


















(337
)Income (loss) from continuing operations

$
4,207


$
9,195


$
5,859


$
4,357


$
(55,662
)Earnings (loss) from continuing operations per unitBasic and fully diluted

$
0.44


$
0.97


$
0.62


$
0.26


$
(2.13
)Distributions per unit(d)

$



$



$



$
0.8974


$
1.67   33




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##### Table of Contents



Years Ended December 31,2003


2004


2005(a)


2006(b)


2007(c)(In thousands)Cash Flow Data:Net cash provided by operating activities

$
6,799


$
8,586


$
14,409


$
29,590


$
57,147Net cash provided by (used in) investing activities

$
(8,475
)

$
1,023


$
(68,965
)

$
(62,505
)

$
(196,505
)Net cash provided by (used in) financing activities

$
1,717


$
(8,958
)

$
55,742


$
32,022


$
147,900Capital expenditures

$
4,047


$
3,325


$
66,915


$
56,150


$
196,702   HistoricalYear Ended December 31,2003


2004


2005(a)


2006(b)


2007(c)(In thousands)Balance Sheet DataCash and cash equivalents

$
117


$
769


$
1,955


$
1,062


$
9,604Other current assets


7,826



5,799



6,316



17,159



23,954Oil and natural gas properties, net of accumulated depletion,
    depreciation and amortization


9,954



12,224



77,172



247,580



440,180Other assets


651







1,499



7,567



7,840Total assets

$
18,548


$
18,792


$
86,942


$
273,368


$
481,578Current liabilities

$
9,157


$
4,898


$
4,562


$
10,834


$
43,457Long term debt










52,473



115,800



110,000Other long-term liabilities


2,113



1,872



19,998



7,945



72,391Unitholders equity


7,278



12,022



9,909



138,789



255,730Total liabilities and unitholders equity

$
18,548


$
18,792


$
86,942


$
273,368


$
481,578     (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)
    
    Reflects Legacys purchase of the oil and natural gas
    properties acquired in the Binger, Ameristate, TSF, Raven
    Shenandoah, Raven OBO, TOC and Summit acquisitions as of the
    date of their acquisition. Consequently, the operations of these
    acquired properties are only included for the period from the
    closing dates of such acquisitions through December 31,
    2007.(d)
    
    Amounts not presented for years prior to 2006 since they would
    not be meaningful. 34




---



##### Table of Contents



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.
  Overview
           35




---



##### Table of Contents



2
      Production
    and Operating Costs Reporting
     36




---



##### Table of Contents



Operating
    Data
    Year Ended December 31,2005(a)


2006(b)


2007(c)(In thousands, except per unit data)Revenues:Oil sales

$
18,225


$
45,351


$
83,301Natural gas liquid sales










7,502Natural gas sales


7,318



14,446



21,433Total revenue

$
25,543


$
59,797


$
112,236Expenses:Oil and natural gas production

$
6,376


$
15,938


$
27,129Production and other taxes

$
1,636


$
3,746


$
7,889General and administrative

$
1,354


$
3,691


$
8,392Depletion, depreciation, amortization and accretion

$
2,291


$
18,395


$
28,415Realized swap settlements:Realized loss on oil swaps

$
(3,531
)

$
(6,667
)

$
(3,627
)Realized loss on natural gas liquid swaps

$



$



$
(619
)Realized gain on natural gas swaps

$



$
6,405


$
4,457Production:Oil  barrels


354



749



1,179Natural gas liquids  gallons










5,295Natural gas  Mcf


1,027



2,200



3,052Total (MBoe)


525



1,116



1,814Average daily production (Boe/d)


1,438



3,058



4,970Average sales price per unit:Oil price per barrel

$
51.48


$
60.55


$
70.65Natural gas liquid price per gallon

$



$



$
1.42Natural gas price per Mcf

$
7.13


$
6.57


$
7.02Combined (per Boe)

$
48.65


$
53.58


$
61.87Average sales price per unit (including realized swap
    settlements):Oil price per barrel

$
41.51
(d)

$
51.65
(e)

$
67.58Natural gas liquid price per gallon

$



$



$
1.30Natural gas price per Mcf

$
7.13


$
9.48


$
8.48Combined (per Boe)

$
41.93
(d)

$
53.35
(e)

$
61.99NYMEX oil index prices per barrel:Beginning of Period

$
43.45


$
61.04


$
61.05End of Period

$
61.04


$
61.05


$
95.98NYMEX gas index prices per Mcf:Beginning of Period

$
6.15


$
11.25


$
6.30End of Period

$
11.25


$
6.30


$
7.48Average unit costs per Boe:Production costs, excluding production and other taxes

$
12.14


$
14.28


$
14.96Production and other taxes

$
3.12


$
3.36


$
4.35General and administrative

$
2.58


$
3.31


$
4.63Depletion, depreciation, amortization and accretion

$
4.36


$
16.48


$
15.66     (a)
    
    Reflects the production and operating results of the PITCO
    properties from their acquisition on September 14, 2005. 37




---



##### Table of Contents



(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)
    
    Reflects the production and operating results of the oil and
    natural gas properties acquired in the Binger, Ameristate, TSF,
    Raven Shenandoah, Raven OBO, TOC and Summit Acquisitions from
    the closing dates of such acquisitions through December 31,
    2007.(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.  Results
    of Operations
  Year
    Ended December 31, 2007 Compared to Year Ended
    December 31, 2006
       38




---



##### Table of Contents



form K-1s.
            Year
    Ended December 31, 2006 Compared to Year Ended
    December 31, 2005
   39




---



##### Table of Contents



40




---



##### Table of Contents



Capital
    Resources and Liquidity
      Cash Flow
    from Operations
       41




---



##### Table of Contents



Annual


Average


PriceCalendar Year

Volumes (Bbls)


Price per Bbl


Range per Bbl2008


1,135,549


$
70.39


$
62.25 - $87.652009


1,052,413


$
68.70


$
61.05 - $87.652010


980,645


$
67.44


$
60.15 - $87.652011


755,040


$
72.22


$
67.33 - $87.652012


633,600


$
72.33


$
67.72 - $87.65   Annual


Average


PriceCalendar Year

Volumes (MMBtu)


Price per MMBtu


Range per MMBtu2008


2,725,170


$
8.09


$
6.85 - $10.582009


2,524,670


$
7.96


$
6.85 - $10.182010


2,245,955


$
7.71


$
6.85 - $ 9.732011


956,824


$
7.30


$
6.85 - $ 7.572012


651,636


$
7.25


$
6.85 - $ 7.57     Annual


BasisCalendar Year

Volumes (MMBtu)


Range per Mcf2008


1,422,000


$
(0.84
)2009


1,320,000


$
(0.68
)2010


1,200,000


$
(0.57
)    42




---



##### Table of Contents



Annual


Average


PriceCalendar Year

Volumes (Gal)


Price per Gal


Range per Gal2008


6,458,004


$
1.27


$
0.66 - $1.622009


2,265,480


$
1.15


$
1.15     Investing
    Activities  Acquisitions and Capital
    Expenditures
        Financing
    Activities
  Our
    Revolving Credit Facility
   43




---



##### Table of Contents



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
    0.25%, or
    with respect to any Eurodollar loans, the London inter-bank
    rate, or LIBOR, plus an applicable margin between 1.00% and
    1.75% 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
    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; 44




---



##### Table of Contents




    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
    Contractual
    Obligations
    Obligations Due in PeriodContractual Obligations

2008


2009-2010


2011-2012


Thereafter


TotalLong-term debt(a)

$



$
110,000,000


$



$



$
110,000,000Interest on long-term debt(b)


7,150,000



8,599,589











15,749,589Commodity derivatives(c)


26,182,579



38,279,240



17,240,613



569,068



82,271,500Interest rate derivatives(c)


259,581



1,067,310



168,871







1,495,762Management Compensation(d)


1,060,000



2,120,000



2,120,000







5,300,000Office Lease


202,156



416,645



167,237







786,038Total contractual cash obligations

$
34,854,316


$
160,482,784


$
19,696,721


$
569,068


$
215,602,889     (a)
    
    Represents amounts outstanding under our revolving credit
    facility as of December 31, 2007.(b)
    
    Based upon our interest rate of 6.50% under our revolving credit
    facility as of December 31, 2007.(c)
    
    Derivative obligations represent net liabilities for derivatives
    that were valued as of December 31, 2007, the ultimate
    settlement of which are unknown because they are subject to
    continuing market risk. Please read Item 7A.
    Quantitative and Qualitative Disclosure about Market Risk
    and Note 9 of Notes to Consolidated Financial Statements
    included in Item 8. Financial Statements and
    Supplementary Data for additional information regarding
    our derivative obligations. 45




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##### Table of Contents



(d)
    
    Does not include any liability associated with management
    compensation subsequent to the
    2011-2012
    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
  Assumptions/Approach Used:
  Effect if Different Assumptions
    Used:
  Nature of Critical Estimate Item:
 46




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##### Table of Contents



Assumptions/Approach Used:
  Effect if Different Assumptions Used:
  Nature of Critical Estimate Item:
   47




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##### Table of Contents



Consolidation
    of Variable Interest Entity
    Recently
    Issued Accounting Pronouncements
  Fair Value Measurements.
  The Fair Value Option for
    Financial Assets and Financial Liabilities  Including
    an Amendment of FASB Statement No. 115.
  FIN 39-1, Amendment of FASB Interpretation No. 39 FIN 39-1). FIN 39-1 FIN 39-1 FIN 39-1
  Business Combinations non-controlling
   48




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##### Table of Contents



ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK    Commodity
    Price Risk
          Interest
    Rate Risks
    ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA  Form 10-K page F-1.
 49




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##### Table of Contents



ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE    ITEM 9A(T).
    CONTROLS
    AND PROCEDURES  Rules 13a-15(e) 15d-15(e)
        Managements
    Annual Report on Internal Control over Financial
    Reporting
       50




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##### Table of Contents



ITEM 9B.
    OTHER
    INFORMATION   PART III  ITEM 10.
    DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE    ITEM 11.
    EXECUTIVE
    COMPENSATION    ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED UNITHOLDER MATTERS    ITEM 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE    ITEM 14.
    PRINCIPAL
    ACCOUNTANT FEES AND SERVICES   51




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##### Table of Contents



PART IV  ITEM 15.
    EXHIBITS,
    FINANCIAL STATEMENT SCHEDULES  (a)(1) and (2) Financial Statements
  Form 10-K page F-1.
  (a)(3)
    Exhibits
  Form 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 Reserves
    LPs Registration Statement on
    Form S-1
    (File
    No. 333-134056)
    filed May 12, 2006, included as Appendix A to the
    Prospectus and including specimen unit certificate for the units)3
.3



Amendment No. 1, dated December 27, 2007, to the
    Amended and Restated Agreement of Limited Partnership of Legacy
    Reserves LP (Incorporated by reference to Legacy Reserves
    LPs current report on
    Form 8-K
    filed January 2, 2008, Exhibit 3.1)3
.4



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
.5



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 Holdings 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 there to (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)4
.4



Registration Rights Agreement dated April 16, 2007 by and
    among Nielson & Associates, Inc., Legacy Reserves GP,
    LLC and Legacy Reserves LP (Incorporated by reference to Legacy
    Reserves LPs quarterly report on
    Form 10-Q
    filed May 14, 2007, Exhibit 4.4)4
.5



Registration Rights Agreement dated as of November 8, 2007
    by and among Legacy Reserves LP and the Purchasers named therein
    (Incorporated by reference to Legacy Reserves LPs current
    report on
    Form 8-K
    filed November 9, 2007, Exhibit 4.1)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) 52




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##### Table of Contents



ExhibitNumber



Description10
.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 there to (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



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)10
.7



Amended and Restated Legacy Reserves LP Long-Term Incentive Plan
    effective as of August 17, 2007 (Incorporated by reference
    to Legacy Reserves LPs current report on
    Form 8-K
    filed August 23, 2007, Exhibit 10.1)10
.8



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
.9



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
.10



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
.11



Form of Legacy Reserves LP Long-Term Incentive Plan Grant of
    Phantom Units (Incorporated by reference to Legacy Reserves
    LPs current report on
    Form 8-K
    filed February 4, 2008, Exhibit 10.1)10
.12



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
.13



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
.14



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
.15



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
.16



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
.17



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
.18



Second Amendment to Credit Agreement dated May 3, 2007
    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 current report on
    Form 8-K
    filed May 8, 2007, Exhibit 10.1)10
.19



Third Amendment to Credit Agreement dated October 24, 2007
    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 current report on
    Form 8-K
    filed October 29, 2007, Exhibit 10.1) 53




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##### Table of Contents



ExhibitNumber



Description10
.20



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
.21



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
.22



Purchase and Sale Agreement dated March 29, 2007, by and
    among Ameristate Exploration, LLC and Legacy Reserves Operating
    LP (Incorporated by reference to Legacy Reserves LPs
    current report on
    Form 8-K
    filed May 4, 2007, Exhibit 10.1)10
.23



Purchase, Sale and Contribution Agreement dated March 20,
    2007, by and among Nielson & Associates, Inc. and
    Legacy Reserves Operating LP (Incorporated by reference to
    Legacy Reserves LPs quarterly report on
    Form 10-Q
    filed May 14, 2007, Exhibit 10.1)10
.24



Purchase, Sale and Contribution Agreement dated March 20,
    2007, by and among Terry S. Fields and Legacy Reserves Operating
    LP (Incorporated by reference to Legacy Reserves LPs
    quarterly report on
    Form 10-Q
    filed August 13, 2007, Exhibit 10.1)10
.25



Purchase, Sale and Contribution Agreement dated May 3,
    2007, by and among Raven Resources, LLC and Shenandoah Petroleum
    Corporation and Legacy Reserves Operating LP (Incorporated by
    reference to Legacy Reserves LPs quarterly report on
    Form 10-Q
    filed August 13, 2007, Exhibit 10.2)10
.26



Purchase, Sale and Contribution Agreement dated July 11,
    2007, by and among Raven Resources, LLC and Legacy Reserves
    Operating LP (Incorporated by reference to Legacy Reserves
    LPs quarterly report on
    Form 10-Q
    filed November 9, 2007, Exhibit 10.1)10
.27



Purchase, Sale and Contribution Agreement dated August 28,
    2007, by and among Summit Petroleum Management Corporation and
    Legacy Reserves Operating LP (Incorporated by reference to
    Legacy Reserves LPs quarterly report on
    Form 10-Q
    filed November 9, 2007, Exhibit 10.3)10
.28



Purchase, Sale and Contribution Agreement dated August 30,
    2007, by and among The Operating Company and Legacy Reserves
    Operating LP (Incorporated by reference to Legacy Reserves
    LPs quarterly report on
    Form 10-Q
    filed November 9, 2007, Exhibit 10.4)10
.29



Unit Purchase Agreement dated as of November 7, 2007 by and
    among Legacy Reserves LP, Legacy Reserves GP, LLC and the
    Purchasers named therein (Incorporated by reference to Legacy
    Reserves LPs current report on
    Form 8-K
    filed November 9, 2007, Exhibit 10.1)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 BDO Seidman LLP23
.2*



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



Rule 13a-14(a)
    Certification of CEO (under Section 302 of the
    Sarbanes-Oxley Act of 2002)31
.2*



Rule 13a-14(a)
    Certification of CFO (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 54




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##### Table of Contents



SIGNATURES
  Form 10-K
    By:
    LEGACY RESERVES GP, LLC,    By:
    /s/  Steven
    H. Pruett   Title:
    President, Chief Financial Officer and
    Secretary (Principal Financial Officer) 55




---



##### 



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


F-2Consolidated Financial Statements:Consolidated Balance Sheets 
    December 31, 2006 and 2007


F-3Consolidated Statements of Operations 
    Years Ended December 31, 2005, 2006 and 2007


F-4Consolidated Statement of Unitholders
    Equity  Years Ended December 31, 2005, 2006 and
    2007


F-5Consolidated Statements of Cash Flows 
    Years Ended December 31, 2005, 2006 and 2007


F-6Notes to Consolidated Financial Statements


F-8EX-23.1EX-23.2EX-31.1EX-31.2EX-32.1   F-1




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##### Table of Contents



Report of
    Independent Registered Public Accounting Firm               F-2




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##### Table of Contents



LEGACY
    RESERVES LP



CONSOLIDATED
    BALANCE SHEETS

AS OF
    DECEMBER 31, 2006 AND 2007  2006


2007(Dollars in thousands)ASSETSCurrent assets:Cash and cash equivalents

$
1,062


$
9,604Accounts receivable, net:Oil and natural gas


7,600



19,025Joint interest owners


4,345



4,253Affiliated entities and other (Notes 3 and 6)


21



26Fair value of derivatives (Note 9)


5,102



310Prepaid expenses and other current assets


91



340Total current assets


18,221



33,558Oil and natural gas properties, at cost:Proved oil and natural gas properties, at cost, using the
    successful efforts method of accounting (Note 14):


289,519



512,396Unproved properties


68



78Accumulated depletion, depreciation and amortization


(42,007
)


(72,294
)247,580



440,180Other property and equipment, net of accumulated depreciation
    and amortization of $51 and $251, respectively


304



775Operating rights, net of amortization of $295 and $865,
    respectively (Note 1(k))


6,721



6,151Other assets, net of amortization of $167 and $391, respectively


542



822Investment in equity method investee (Note 5)






92$
273,368


$
481,578LIABILITIES AND UNITHOLDERS EQUITYCurrent liabilities:Accounts payable

$
2,932


$
2,320Accrued oil and natural gas liabilities


5,882



10,102Fair value of derivatives (Note 9)






26,761Asset retirement obligation (Note 11)


553



845Other (Note 13)


1,467



3,429Total current liabilities


10,834



43,457Long-term debt (Note 3)


115,800



110,000Asset retirement obligation (Note 11)


5,939



15,075Fair value of derivatives (Note 9)


2,006



57,316Total liabilities


134,579



225,848Commitments and contingencies (Note 7)Unitholders equity:Limited partners equity  18,395,233 and
    29,670,887 units issued and outstanding at
    December 31, 2006 and 2007, respectively


138,653



255,663General partners equity (approximately 0.1)%


136



67Total unitholders equity


138,789



255,730Total liabilities and unitholders equity

$
273,368


$
481,578    F-3




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##### Table of Contents



LEGACY
    RESERVES LP
    CONSOLIDATED STATEMENTS OF OPERATIONS
    FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007  2005


2006


2007(Dollars in thousands, except per unit data)Revenues:Oil sales

$
18,225


$
45,351


$
83,301Natural gas liquid sales










7,502Natural gas sales


7,318



14,446



21,433Total revenues


25,543



59,797



112,236Expenses:Oil and natural gas production


6,376



15,938



27,129Production and other taxes


1,636



3,746



7,889General and administrative


1,354



3,691



8,392Depletion, depreciation, amortization and accretion


2,291



18,395



28,415Impairment of long-lived assets






16,113



3,204Loss on disposal of assets


20



42



527Total expenses


11,677



57,925



75,556Operating income


13,866



1,872



36,680Other income (expense):Interest income


185



130



321Interest expense (Notes 3 and 9)


(1,584
)


(6,645
)


(7,118
)Equity in income (loss) of partnerships (Note 5)


(495
)


(318
)


77Realized gain (loss) on oil, NGL and natural gas swaps
    (Note 9)


(3,531
)


(262
)


211Unrealized gain (loss) on oil, NGL and natural gas swaps
    (Note 9)


(2,628
)


9,551



(85,367
)Other


45



29



(129
)Income (loss) before non-controlling interest and income taxes


5,858



4,357



(55,325
)Non-controlling interest


1







Income (loss) before income taxes


5,859



4,357



(55,325
)Income taxes










(337
)Net income (loss)

$
5,859


$
4,357


$
(55,662
)Net income (loss) per unit  basic and diluted
    (Note 12)

$
0.62


$
0.26


$
(2.13
)Weighted average number of units used in computing net income
    (loss) per unit  basic


9,488,921



16,567,287



26,155,439diluted


9,488,921



16,568,879



26,155,439    F-4




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##### Table of Contents



LEGACY
    RESERVES LP



CONSOLIDATED
    STATEMENT OF UNITHOLDERS EQUITY

FOR THE
    YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007  TotalNumber of


Limited


General


UnitholdersLimited Partner Units


Partner


Partner


Equity(Dollars in thousands)Balance December 31, 2004


9,488,921


$
12,010


$
12


$
12,022Capital contributions






144







144Deemed capital distribution






155







155Distributions to partners






(8,263
)


(8
)


(8,271
)Net income






5,853



6



5,859Balance December 31, 2005


9,488,921



9,899



10



9,909Capital contributions






19







19Net distributions to owners






(2,295
)


(2
)


(2,297
)Deemed dividend to Moriah Group owners






(3,874
)


(4
)


(3,878
)Net proceeds from private equity offering


5,000,000



76,707



77



76,784Redemption of Founding Investors units


(4,400,000
)


(69,868
)


(70
)


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


1,867,290



31,712



32



31,744Units issued to the Brothers Group in exchange for oil and
    natural gas properties and other assets


6,200,358



105,301



105



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


83,499



1,418



1



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






(1,199
)


(1
)


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


146,415



2,489







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


8,750



149







149Compensation expense on unit options granted to employees






115







115Compensation expense on restricted unit awards issued to
    employees






270







270Distributions to unitholders, $0.8974 per unit






(16,542
)


(16
)


(16,558
)Net income






4,352



4



4,356Balance, December 31, 2006


18,395,233



138,653



136



138,789Net proceeds from initial public equity offering


6,900,000



121,554







121,554Net proceeds from private placement equity offering


3,642,369



73,073







73,073Units issued to Legacy Board of Directors for services


7,000



149







149Compensation expense on restricted unit awards issued to
    employees






341







341Vesting of Restricted Units


20,038











Units issued to Greg McCabe in exchange for oil and natural gas
    properties


95,000



2,271







2,271Units issued to Nielson & Associates, Inc. in exchange
    for oil and natural gas properties


611,247



15,752







15,752Reclass prior period compensation cost on unit options granted
    to employees to adjust for conversion to liability method as
    described in
    FAS 123-R






(115
)






(115
)Distributions to unitholders, $1.67 per unit






(40,388
)


(34
)


(40,422
)Net loss






(55,627
)


(35
)


(55,662
)Balance, December 31, 2007


29,670,887


$
255,663


$
67


$
255,730    F-5




---



##### Table of Contents



LEGACY
    RESERVES LPCONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
  2005


2006


2007(Dollars in thousands)Cash flows from operating activities:Net income (loss)

$
5,859


$
4,357


$
(55,662
)Adjustments to reconcile net income (loss) to net cash provided
    by operating activities:Depletion, depreciation, amortization and accretion


2,291



18,395



28,415Amortization of debt issuance costs


94



361



224Impairment of long-lived assets






16,113



3,204(Gain) loss on derivatives


6,159



(9,289
)


86,652Equity in (income) loss of partnership


495



318



(77
)Accrued interest on subordinated notes payable 
    partners


818







Accrued interest on subordinated notes receivable 
    partners


(25
)






Amortization of unit-based compensation






534



166Non-controlling interest


(1
)






Loss on disposal of assets


21



42



527Changes in assets and liabilities:Increase in accounts receivable, oil and natural gas


(3,412
)


(5,796
)


(11,425
)(Increase) decrease in accounts receivable, joint interest owners


605



(4,481
)


92Increase in accounts receivable, other


(91
)


(458
)


(5
)Increase in prepaid expenses and other current assets


(88
)


(565
)


(250
)Increase (decrease) in accounts payable


395



2,694



(611
)Increase in accrued oil and natural gas liabilities


1,107



4,227



4,221Increase in due to affiliates


195



1,059



Increase (decrease) in other current liabilities


(13
)


2,079



1,676Total adjustments


8,550



25,233



112,809Net cash provided by operating activities


14,409



29,590



57,147Cash flows from investing activities:Investment in oil and natural gas properties


(66,910
)


(55,907
)


(196,031
)Investment in other equipment


(4
)


(243
)


(671
)Investment in operating rights






(7,017
)


Investment in notes receivable


(900
)






Collection of notes receivable


2,380



924



Net cash settlements on oil andnatural gas swaps


(3,531
)


(262
)


211Investment in equity method investee










(14
)Net cash used in investing activities


(68,965
)


(62,505
)


(196,505
)Cash flows from financing activities:Proceeds from long-term debt


56,573



121,800



183,000Payments of long-term debt


(6,100
)


(73,190
)


(188,800
)Payments of debt issuance costs


(868
)


(293
)


(505
)Proceeds from subordinated notes payable  partners


14,264







Proceeds from issuance of units, net






76,784



194,627Redemption of Founding Investors units






(69,938
)


Dividend  reimbursement of offering costs paid by MBN
    Management LLC






(1,200
)


Capital contributed by owner


144



19



Cash not acquired in Legacy formation transactions






(3,104
)


Distributions to unitholders


(8,271
)


(18,856
)


(40,422
)Net cash provided by financing activities


55,742



32,022



147,900Net increase(decrease)in cash and cash equivalents


1,186



(893
)


8,542Cash and cash equivalents, beginning of period


769



1,955



1,062Cash and cash equivalents, end of period

$
1,955


$
1,062


$
9,604 F-6




---



##### Table of Contents



LEGACY
    RESERVES LP
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS  (Continued)
  2005


2006


2007(Dollars in thousands)Non  Cash Investing and Financing Activities:Asset retirement obligation costs and liabilities

$
12


$
2,273


$
6,296Asset retirement obligations associated with property
    acquisitions

$
445


$
1,889


$
3,034Contributed offering costs

$
155


$



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

$



$
164


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

$



$
31,744


$
Units issued to Brothers Group in exchange for:Oil and natural gas properties

$



$
105,299


$
Other property and equipment

$



$
107


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

$



$
1,419


$
Oil and natural gas hedge liabilities assumed from the Brothers
    Group and H2K Holdings Ltd.

$



$
3,147


$
Units issued in exchange for oil and natural gas properties

$



$
2,489


$
18,023Deemed dividend to Moriah Group ownersfor accounts not acquired in Legacy formation transaction:Accounts receivable, oil and natural gas

$



$
4,248


$
Accounts receivable, joint interest owners

$



$
250


$
Accounts receivable, other

$



$
540


$
Other assets

$



$
891


$
Accounts payable

$



$
(214
)

$
Accrued oil and natural gas liabilities

$



$
(1,521
)

$
Due to affiliates

$



$
(1,254
)

$
Other liabilities

$



$
(2,166
)

$
    F-7




---



##### Table of Contents



LEGACY
    RESERVES LP
  NOTES TO
    CONSOLIDATED 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
    662/3 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
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        (b)
    Cash
    Equivalents    (c)
    Trade
    Accounts Receivable  account-by-account
  (d)
    Oil
    and Natural Gas Properties   F-9




---



##### Table of Contents



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




---



##### Table of Contents



LEGACY
    RESERVES LP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (f)
    Income
    Taxes          (g)
    Derivative
    Instruments and Hedging Activities  Accounting for
    Derivative Instruments and Hedging Activities
    (h)
    Use of
    Estimates   F-11




---



##### Table of Contents



LEGACY
    RESERVES LP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (i)
    Revenue
    Recognition          (j)
    Investments    (k)
    Intangible
    assets   F-12




---



##### Table of Contents



LEGACY
    RESERVES LP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  (l)
    Environmental  and/or
  (m)
    Earnings
    (Loss) Per Unit  Earnings per Share
    (n)
    Redemption
    of Units    (o)
    Segment
    Reporting    (p)
    Unit-Based
    Compensation    (q)
    Recently Issued Accounting pronouncements
  Fair Value Measurements.
 F-13




---



##### Table of Contents



LEGACY
    RESERVES LP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  The Fair Value Option for
    Financial Assets and Financial Liabilities  Including
    an Amendment of FASB Statement No. 115.
  FIN 39-1, FIN 39-1). FIN 39-1 FIN 39-1 FIN 39-1
      (r)
    Prior
    Year Financial Statement Presentation  Form 10-K.
  (2)
    Fair
    Values of Financial Instruments    Cash and cash equivalents, accounts receivable, other current
    assets, accounts payable and other current
    liabilities.
  Notes receivable.
 F-14




---



##### Table of Contents



LEGACY
    RESERVES LP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Debt.
  Commodity price derivatives.
  Interest rate derivatives.
  (3)
    Credit
    Facility       F-15




---



##### Table of Contents



LEGACY
    RESERVES LP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          December 31,2006


2007Legacy facility-due March 2010

$
115,800,000


$
110,000,000   (4)
    Acquisitions  PITCO
    Acquisition
    Legacy
    Formation Acquisition
   F-16




---



##### Table of Contents



LEGACY
    RESERVES LP
  NOTES TO
    CONSOLIDATED 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
  NOTES TO
    CONSOLIDATED 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






780,239   Number of Units


Purchase Price ofat $17.00 per unit


Assets AcquiredMBN 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  F-18




---



##### Table of Contents



LEGACY
    RESERVES LP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Larron
    Acquisition
    South
    Justis Unit Acquisition
    Kinder
    Morgan Acquisition
    Binger
    Acquisition
   F-19




---



##### Table of Contents



LEGACY
    RESERVES LP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Ameristate
    Acquisition
    TSF
    Acquisition
    Raven
    Shenandoah Acquisition
    Raven
    OBO Acquisition
    TOC
    Acquisition
    Summit
    Acquisition
   F-20




---



##### Table of Contents



LEGACY
    RESERVES LP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Pro
    Forma Operating Results
    December 31,2005


2006


2007(Dollars in thousands, except per unit data)Revenues

$
64,128


$
115,414


$
133,628Net income (loss)

$
6,295


$
12,844


$
(53,261
)Earnings per unit  basic:Income from continuing operations

$
0.34


$
0.68


$
(2.02
)Net income

$
0.34


$
0.68


$
(2.02
)Earnings per unit  diluted:Income from continuing operations

$
0.34


$
0.68


$
(2.02
)Net income

$
0.34


$
0.68


$
(2.02
)Units used in computing earnings per unit:basic


18,386,482



19,004,035



26,331,107diluted


18,386,482



19,005,627



26,331,107   (5)
    Partnership
    Investments   F-21




---



##### Table of Contents



LEGACY
    RESERVES LP
  NOTES TO
    CONSOLIDATED 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 Inception


January 1,through


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        (7)
    Commitments
    and Contingencies   F-22




---



##### Table of Contents



LEGACY
    RESERVES LP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        (8)
    Business
    and Credit Concentrations  Cash
    Revenue
    and Trade Receivables
    (9)
    Derivative
    Financial Instruments    Accounting for Derivative
    Instruments and Hedging Activities.
   F-23




---



##### Table of Contents



LEGACY
    RESERVES LP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31,2005


2006


2007Crude oil derivative contract settlements

$
(3,530,651
)

$
(6,666,755
)

$
(3,627,050
)Natural gas liquid derivative contract settlements










(619,466
)Natural gas derivative contract settlements






6,404,533



4,457,519Total derivative contract settlements


(3,530,651
)


(262,222
)


211,003Unrealized change in fair value  oil contracts


(910,738
)


4,338,459



(76,484,184
)Unrealized change in fair value  natural gas liquid
    contracts










(3,228,274
)Unrealized change in fair value  natural gas contracts


(1,717,476
)


5,212,233



(5,654,577
)Total unrealized change in fair value


(2,628,214
)


9,550,692



(85,367,035
)Total effect of derivative contracts

$
(6,158,865
)

$
9,288,470


$
(85,156,032
)         Annual


Average


PriceCalendar Year

Volumes (Bbls)


Price per Bbl


Range per Bbl2008


1,068,449


$
69.31


$
62.25 - $86.752009


986,413


$
67.43


$
61.05 - $86.752010


919,445


$
66.10


$
60.15 - $86.752011


698,640


$
70.97


$
67.33 - $86.752012


580,800


$
70.94


$
67.72 - $86.75     Annual


Average


PriceCalendar Year

Volumes (MMBtu)


Price per MMBtu


Range per MMBtu2008


2,533,770


$
8.14


$
6.85 - $10.582009


2,331,470


$
7.99


$
6.85 - $10.172010


2,065,955


$
7.73


$
6.85 - $9.732011


788,824


$
7.25


$
6.85 - $7.572012


493,236


$
7.16


$
6.85 - $7.57  F-24




---



##### Table of Contents



LEGACY
    RESERVES LP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Annual


BasisCalendar Year

Volumes (MMBtu)


Range per Mcf2008


1,422,000


$
(0.84
)2009


1,320,000


$
(0.68
)2010


1,200,000


$
(0.57
)     Annual


Average


PriceCalendar Year

Volumes (Gal)


Price per Gal


Range per Gal2008


6,458,004


$
1.27


$
0.66-$1.622009


2,265,480


$
1.15


$
1.15     Accounting for Derivative
    Instruments and Hedging Activities
    EstimatedFair Market ValueFixed


Effective


Maturity


at December 31,Notional Amount

Rate


Date


Date


2007$29,000,000


4.8200
%


10/16/2007



10/16/2011


$
(797,823
)$13,000,000


4.8100
%


11/16/2007



11/16/2011



(366,241
)$12,000,000


4.8075
%


11/28/2007



11/28/2011



(331,698
)Total Fair Market Value













$
(1,495,762
)  F-25




---



##### Table of Contents



LEGACY
    RESERVES LP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  (10)
    Sales to
    Major Customers    2005


2006


2007Conoco Phillips


10
%


4
%


3
%Navajo Crude Oil Marketing


16
%


12
%


11
%Plains Marketing, LP


18
%


14
%


13
%Teppco Crude Oil, LP


5
%


5
%


13
%     (11)
    Asset
    Retirement Obligation      December 31,2005


2006


2007Asset retirement obligation  beginning of period

$
1,952,866


$
2,302,147


$
6,492,780Liabilities incurred in Legacy formation






1,467,241



Liabilities incurred with properties acquired


446,901



1,888,954



3,033,501Liabilities incurred with properties drilled






22,882



114,317Liabilities settled during the period


(53,852
)


(213,343
)


(372,611
)Current period accretion


109,429



242,432



470,002Current period revisions to accretion expense


(163,281
)






Current period revisions to oil and natural gas properties


10,084



782,467



6,181,660Asset retirement obligation  end of period

$
2,302,147


$
6,492,780


$
15,919,649    F-26




---



##### Table of Contents



LEGACY
    RESERVES LP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  (12)
    Earnings
    (Loss) Per Unit    December 31,2005


2006


2007Income (loss) available to unitholders

$
5,859


$
4,357


$
(55,662
)Weighted average number of units outstanding


9,488,921



16,567,287



26,155,439Effect of dilutive securities:Unit options










Restricted units






1,592



Weighted average units and potential units outstanding


9,488,921



16,568,879



26,155,439Basic earnings per unit

$
0.62


$
0.26


$
(2.13
)Diluted earnings per unit

$
0.62


$
0.26


$
(2.13
)     (13)
    Unit-Based
    Compensation  Long
    Term Incentive Plan
       F-27




---



##### Table of Contents



LEGACY
    RESERVES LP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Unit
    Options and Unit Appreciation Rights
        WeightedWeighted


AverageAverage


RemainingExercise


ContractualUnits


Price


TermOutstanding at January 1, 2007


260,000


$
17.01Granted


179,116


$
23.09Exercised


(23,038
)

$
17.00Forfeited


(16,656
)

$
17.09Outstanding at December 31, 2007


399,422


$
19.73



3.6 yearsOptions exercisable at December 31, 2007


62,800


$
17.04



3.3 years     Non-Vested OptionsWeighted-Number of


Average FairUnits


ValueNon-vested at January 1, 2007


260,000


$
2.62Granted


179,116



3.40Vested  Unexercised


(62,800
)


4.65Vested  Exercised


(23,038
)


10.14Forfeited


(16,656
)


9.56Non-vested at December 31, 2007


336,622


$
4.09  F-28




---



##### Table of Contents



LEGACY
    RESERVES LP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year EndedDecember 31,2007Expected life (years)


5Annual interest rate


3.5
%Annual distribution rate per unit

$
1.80Volatility


41
%   Restricted
    and Phantom Units
           F-29




---



##### Table of Contents



LEGACY
    RESERVES LP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  (14)
    Costs
    Incurred in Oil and Natural Gas Property Acquisition and
    Development Activities    Year Ended December 31,2005


2006


2007Development costs

$
1,958,455


$
17,325,052


$
22,967,534Exploration costs










Acquisition costs:Proved properties


65,405,917



187,006,693



200,399,637Unproved properties


2,928







Total acquisition, development and exploration costs

$
67,367,300


$
204,331,745


$
223,367,171    F-30




---



##### Table of Contents



LEGACY
    RESERVES LP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  (15)
    Net
    Proved Oil and Natural Gas Reserves (Unaudited)    NaturalOil


NGL


Gas(MBbls)


(MBbls)


(MMcf)Total Proved Reserves:Balance, December 31, 2004


4,109







10,470Purchases of
    minerals-in-
    place


3,541







12,800Revisions of previous estimates due to infill drilling,
    recompletion s 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







32,533Purchases of minerals-in-place


6,367



3,971



19,417Sales of
    minerals-in-
    place


(1
)






(2
)Revisions from drilling and recompletion s


220







386Revisions of previous estimates due to price andperformance


810



180



1,578Production


(1,179
)


(126
)


(3,052
)Balance, December 31, 2007


19,589



4,025



50,860Proved Developed Reserves:December 31, 2004


4,109







10,470December 31, 2005


6,380







20,618December 31, 2006


11,132







28,126December 31, 2007


17,434



3,954



45,455     (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-31




---



##### Table of Contents



LEGACY
    RESERVES LP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   (16)
    Standardized
    Measure of Discounted Future Net Cash Flows and Changes Therein
    Relating to Proved Reserves (Unaudited)    December 31,2005(a)


2006


2007(Thousands)Future production revenues

$
684,021


$
947,914


$
2,431,492Future costs:Production


(242,796
)


(387,238
)


(925,450
)Development


(27,609
)


(43,419
)


(68,745
)Future net cash flows before income taxes


413,616



517,257



1,437,29710% annual discount for estimated timing of cash flows


(221,619
)


(276,694
)


(746,759
)Standardized measure of discounted net cash flows

$
191,997


$
240,563


$
690,538     (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 31,2005


2006


2007Oil (per Bbl)

$
57.64


$
56.73


$
91.96Natural Gas (per Mcf)

$
8.82


$
5.82


$
6.39  F-32




---



##### Table of Contents



LEGACY
    RESERVES LP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year Ended December 31,2005


2006


2007(Dollars in thousands)Increase (decrease):Sales, net of production costs

$
(17,532
)

$
(40,113
)

$
(77,260
)Net change in sales prices, net of production costs


36,574



(60,531
)


178,972Changes in estimated future development costs


(21,401
)


4,582



1,426Extensions and discoveries, net of future production and
    development costs






2,723



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


19,319



7,919



7,347Revisions of previous quantity estimates due to prices and
    performance


3,156



(12,232
)


4,273Previously estimated development costs incurred


(178
)


9,517



7,345Purchases of minerals-in place


102,289



127,009



300,907Ownership interest corrections










1,480Sales of minerals in place










(22
)Other


4,458



(2,971
)


2,093Accretion of discount


4,955



12,663



23,414Net increase


131,640



48,566



449,975Standardized measure of discounted future net cash flows:Beginning of year


60,357



191,997



240,563End of year

$
191,997


$
240,563


$
690,538    F-33




---



##### Table of Contents



LEGACY
    RESERVES LP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  (17)
    Selected
    Quarterly Financial Data (Unaudited)  For the
    three-month periods ended:
  March 31


June 30


September 30


December 312007Revenues:Oil sales

$
12,301


$
16,653


$
22,442


$
31,905Natural gas liquids sales


105



1,072



1,714



4,611Natural gas sales


3,526



5,010



5,241



7,656Total revenues


15,932



22,735



29,397



44,172Expenses:Oil and natural gas production


4,739



6,088



7,581



8,721Production and other taxes


994



1,481



1,886



3,528General and administrative


1,827



2,769



1,443



2,353Depletion, depreciation, amortization and accretion


5,295



6,811



6,960



9,349Impairment of long-lived assets


90



190



950



1,974Loss on disposal of assets






231



156



140Total expenses


12,945



17,570



18,976



26,065Operating Income


2,987



5,165



10,421



18,107Interest income


104



47



54



116Interest expense


(625
)


(893
)


(1,905
)


(3,695
)Equity in income of partnership






11



30



36Realized gain (loss) on oil, NGL and natural gas swaps


2,466



1,362



408



(4,025
)Unrealized loss on oil, NGL and natural gas swaps


(9,689
)


(7,855
)


(6,844
)


(60,979
)Other






1







(130
)Net income (loss) before income taxes


(4,757
)


(2,162
)


2,164



(50,570
)Income taxes














(337
)Net income (loss)

$
(4,757
)

$
(2,162
)

$
2,164


$
(50,907
)Net income (loss) per share  basic and diluted

$
(0.19
)

$
(0.08
)

$
0.08


$
(1.81
)Production volumes:Oil (MBbl)


228



273



312



365Natural Gas Liquids (Mgal)


104



856



1,345



2,991Natural Gas (MMcf)


588



718



801



945Total (Mboe)


329



413



478



594  F-34




---



##### Table of Contents



LEGACY
    RESERVES LP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  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



3,624Total revenues


10,435



15,388



17,443



16,531Expenses: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 disposal of assets














42Total expenses


6,759



10,349



20,303



20,514Operating Income


3,676



5,039



(2,860
)


(3,983
)Interest income


33



5



55



36Interest expense


(1,445
)


(1,210
)


(1,857
)


(2,133
)Realized gain (loss) on oil, NGL and natural gas swaps


1,398



548



(4,128
)


1,920Unrealized gain (loss) on oil, NGL and natural gas swaps


(5,294
)


(9,724
)


22,734



1,835Other


(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.  (18)
    Subsequent
    Events     F-35




---



##### Table of Contents



LEGACY
    RESERVES LP
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Swap


ContractTime Period

Volumes


Oil PriceCalendar Contracts

(Bbls.)


($/Bbl)June-Dec. 2008


90,300


$
101.472009


145,200


$
101.472010


134,400


$
101.472011


124,800


$
101.472012


116,400


$
101.47Total


611,100


$
101.47     ContractSwap


NaturalTime Period

Volumes


Gas PriceCalendar Contracts

(MMBtu)


($/MMBtu)June-Dec. 2008


253,463


$
8.702009


399,372


$
8.702010


364,404


$
8.702011


951,792


$
8.702012


719,400


$
8.70Total


2,688,431


$
8.70  F-36