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**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      D.C.  20549**

**FORM      10-Q**

**x      QUARTERLY REPORT      PURSUANT TO SECTION 13 OR 15(d) OF THE**

**SECURITIES      EXCHANGE ACT OF 1934**

**For      the quarterly period ended June 30, 2007**

**OR**

**o      TRANSITION REPORT      PURSUANT TO SECTION 13 OR 15(d) OF THE**

**SECURITIES      EXCHANGE ACT OF 1934**

**For      the transition period      from                       to                       **

**Commission      file number 1-33249**

**Legacy      Reserves LP**

| **Delaware**                                                                                |   | **16-1751069**                                                    |
|---------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------|
| (State                or other jurisdiction ofincorporation                or organization) |   | (I.R.S.                EmployerIdentification                No.) |
|                                                                                        |   |                                                              |
| **303                W. Wall, Suite 1400****Midland,                Texas**                 |   | **79701**                                                         |
| (Address                of principal executive offices)                                     |   | (Zip                code)                                         |

**(432)      689-5200**

| o                Large accelerated                filer |   | o                Accelerated                filer |   | x                Non-accelerated                filer |
|---------------------------------------------------------|--------|---------------------------------------------------|--------|-------------------------------------------------------|

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**TABLE      OF CONTENTS**

|                                                |   |                                                                                                                                         |                                  |   |   | Page   |
|-----------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------|--------|--------|--------|
| **Glossary                  of Terms**              |   |                                                                                                                                         | 3                                     |
|                                                |   |                                                                                                                                         |                                  |   |   |   |
| **Part                  I - Financial Information** |   |                                                                                                                                         |                                  |
| Item                  1.                            |   | Financial                  Statements.                                                                                                       |                                  |   |   |
|                                                |   | Condensed                  Consolidated Balance Sheets as of June 30, 2007 and December 31, 2006                  (Unaudited)           |                                  | 6      |
|                                                |   | Condensed                  Consolidated Statements of Operations for the three and six months                  ended June 30, 2007 |                                  |   |
|                                                |   |                                                                                                                                         | and                  2006 (Unaudited) |   |   | 8      |
|                                                |   | Condensed                  Consolidated Statement of Unitholders' Equity for the six months                  ended June 30,        |                                  |   |
|                                                |   |                                                                                                                                         | 2007                  (Unaudited)     |   |   | 9      |
|                                                |   | Condensed                  Consolidated Statements of Cash Flows for the six months                  ended June 30, 2007 and       |                                  |   |
|                                                |   |                                                                                                                                         | 2006                  (Unaudited)     |   |   | 10     |
|                                                |   | Notes                  to Condensed Consolidated Financial Statements (Unaudited)                                                            |                                  | 12     |
| Item                  2.                            |   | Management's                  Discussion and Analysis of Financial Condition and Results of                  Operations.                     |                                  | 24     |
| Item                  3.                            |   | Quantitative                  and Qualitative Disclosures About Market Risk.                                                                 |                                  | 35     |
| Item                  4.                            |   | Controls                  and Procedures.                                                                                                    |                                  |   | 36     |
| **Part                  II - Other Information**    |   |                                                                                                                                         |                                  |
| Item                  1.                            |   | Legal                  Proceedings.                                                                                                          |                                  |   | 36     |
| Item                  1A.                           |   | Risk                  Factors.                                                                                                               |                                  |   | 36     |
| Item                  2.                            |   | Unregistered                  Sales of Equity Securities and Use of Proceeds.                                                                |                                  | 36     |
| Item                  3.                            |   | Defaults                  Upon Senior Securities.                                                                                            |                                  | 37     |
| Item                  4.                            |   | Submission                  of Matters to a Vote of Security Holders.                                                                        |                                  | 37     |
| Item                  5.                            |   | Other                  Information.                                                                                                          |                                  |   | 37     |
| Item                  6.                            |   | Exhibits.                                                                                                                                    |                                  |   | 38     |

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Table          of Contents

**GLOSSARY      OF TERMS**

*Bbl.*

*Bcf.*

*Boe.*

*Boe/d.*

*Btu.*

*Developed      acreage.*

*Development      well.*

*Dry      hole or well.*

*Exploitation.*

*Field.*

*Gross      acres or gross wells.*

*MBbls.*

*MBoe.*

*Mcf.*

*MMBbls.*

*MMBoe.*

*MMBtu.*

*MMcf.*

*Net      acres or net wells.*

*NGLs      or natural gas liquids.*

*NYMEX.*

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Table          of Contents

*Oil.*

*Productive      well.*

*Proved      developed reserves.*

*Proved      developed non-producing or PDNPs.*

*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.*

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Table          of Contents

*Reservoir.*

*Standardized      measure.*

*Undeveloped      acreage.*

*Working      interest.*

*Workover.*

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Table          of Contents

**Part      I – FINANCIAL INFORMATION**

**Item      1.  Financial Statements.**

| **LEGACY                        RESERVES LP**                                                                              |   |                                    |            |   |                                |   |
|----------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|-----------------|--------|-------------------------------------|--------|
| **CONDENSED                        CONSOLIDATED BALANCE SHEETS**                                                           |   |                                    |            |   |                                |   |
| **(UNAUDITED)**                                                                                                            |   |                                    |            |   |                                |   |
|                                                                                                                       |   |                                    |            |   |                                |   |
| **ASSETS**                                                                                                                 |   |                                    |            |   |                                |   |
|                                                                                                                       |   | **December                        31,** |            |   | **June                        30,** |   |
|                                                                                                                       |   | **2006**                                |            |   | **2007**                            |   |
|                                                                                                                       |   |                                    |            |   |                                |   |
| Current                        assets:                                                                                     |   |                                    |            |   |                                |   |
| Cash                        and cash equivalents                                                                           |   | $                                       | 1,061,852       |   |                                | $      | 5,128,787 |   |
| Accounts                        receivable, net:                                                                           |   |                                    |            |   |                                |   |   |   |
| Oil                        and natural gas                                                                                 |   |                                    | 7,599,915       |   |                                |   | 9,417,275 |   |
| Joint                        interest owners                                                                               |   |                                    | 4,345,334       |   |                                |   | 5,456,179 |   |
| Affiliated                        entities and other (Note 4)                                                              |   |                                    | 21,336          |   |                                |   | 9,293 |   |
| Fair                        value of oil and natural gas swaps (Note 6)                                                    |   |                                    | 5,102,083       |   |                                |   | 572,150 |   |
| Prepaid                        expenses and other current assets                                                           |   |                                    | 90,609          |   |                                |   | 1,158,450 |   |
|                                                                                                                       |   |                                    |            |   |                                |   |   |   |
| Total                        current assets                                                                                |   |                                    | 18,221,129      |   |                                |   | 21,742,134 |   |
|                                                                                                                       |   |                                    |            |   |                                |   |   |   |
| Oil                        and natural gas properties, at cost:                                                            |   |                                    |            |   |                                |   |   |   |
| Proved                        oil and natural gas properties, at cost, using the                                           |   |                                    |            |   |                                |   |   |   |
| successful                        efforts method of accounting:                                                            |   |                                    | 289,518,708     |   |                                |   | 377,734,338 |   |
| Unproved                        properties                                                                                 |   |                                    | 68,275          |   |                                |   | 78,025 |   |
| Accumulated                        depletion, depreciation and amortization                                                |   |                                    | (42,006,485     | )      |                                |   | (53,793,719 | ) |
|                                                                                                                       |   |                                    | 247,580,498     |   |                                |   | 324,018,644 |   |
| Other                        property and equipment, net of accumulated depreciaton and                                    |   |                                    |            |   |                                |   |   |   |
| amortization                        of $51,108 and $113,738, respectively                                                  |   |                                    | 303,750         |   |                                |   | 528,566 |   |
| Deposit                        on pending acquisition                                                                      |   |                                    | -               |   |                                |   | 12,784 |   |
| Operating                        rights, net of amortization of $295,314 and $582,754,                        respectively |   |                                    |  6,721,358 |   |                                |   |  6,433,918 |   |
| Fair                        value of oil and natural gas swaps (Note 6)                                                    |   |                                    | -               |   |                                |   | 81,152 |   |
| Other                        assets, net of amortization of $167,179 and $250,899,                        respectively     |   |                                    | 541,743         |   |                                |   | 564,120 |   |
| Investment                        in equity method investee (Note 3)                                                       |   |                                    | -               |   |                                |   | 83,941 |   |
|                              Total assets                                               |   | $                                       | 273,368,478     |   |                                | $      | 353,465,259 |   |
|                                                                                                                       |   |                                    |            |   |                                |   |   |   |
| *See                        accompanying notes to condensed consolidated financial                        statements.*     |   |                                    |            |   |                                |   |   |   |

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Table          of Contents

| **LEGACY                            RESERVES LP**                                                                              |   |                                        |              |   |                                    |    |
|--------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------|-------------------|--------|-----------------------------------------|---------|
| **CONDENSED                            CONSOLIDATED BALANCE SHEETS**                                                           |   |                                        |              |   |                                    |    |
| **(UNAUDITED)**                                                                                                                |   |                                        |              |   |                                    |    |
|                                                                                                                           |   |                                        |              |   |                                    |    |
| **LIABILITIES                              AND UNITHOLDERS' EQUITY**                                                           |   |                                        |              |   |                                    |    |
|                                                                                                                           |   | **December                            31,** |              |   | **June                            30,** |    |
|                                                                                                                           |   | **2006**                                    |              |   | **2007**                                |    |
| Current                            liabilities:                                                                                |   |                                        |              |   |                                    |    |
| Accounts                            payable                                                                                    |   | $                                           | 2,931,627         |   |                                    | $       | 694,060 |   |
| Accrued                            oil and natural gas liabilities                                                             |   |                                        | 5,881,612         |   |                                    |    | 6,672,719 |   |
| Fair                            value of oil and natural gas swaps (Note 6)                                                    |   |                                        | -                 |   |                                    |    | 2,046,628 |   |
| Asset                            retirement obligation (Note 7)                                                                |   |                                        | 553,579           |   |                                    |    | 643,262 |   |
| Other                            (Note 8)                                                                                      |   |                                        | 1,466,693         |   |                                    |    | 2,416,702 |   |
| Total                            current liabilities                                                                           |   |                                        | 10,833,511        |   |                                    |    | 12,473,371 |   |
|                                                                                                                           |   |                                        |              |   |                                    |    |   |   |
| Long-term                            debt (Note 2)                                                                             |   |                                        | 115,800,000       |   |                                    |    | 68,000,000 |   |
| Asset                            retirement obligation (Note 7)                                                                |   |                                        | 5,939,201         |   |                                    |    | 6,691,354 |   |
| Fair                            value of oil and natural gas swaps (Note 6)                                                    |   |                                        | 2,006,547         |   |                                    |    | 13,054,402 |   |
|                                                                                                                           |   |                                        |              |   |                                    |    |   |   |
|   Total                            liabilities                                                                       |   |                                        | 134,579,259       |   |                                    |    | 100,219,127 |   |
|                                                                                                                           |   |                                        |              |   |                                    |    |   |   |
| Commitments                            and contingencies (Note 5)                                                              |   |                                        |              |   |                                    |    |   |   |
| Unitholders'                            equity:                                                                                |   |                                        |              |   |                                    |    |   |   |
| Limited                            partners' equity - 18,395,233 and 26,021,518 units issued                                   |   |                                        |              |   |                                    |    |   |   |
| and                            outstanding at December 31, 2006 and June 30, 2007,                            respectively     |   |                                        | 138,653,452       |   |                                    |    | 253,133,601 |   |
| General                            partner's equity (approximately 0.1%)                                                       |   |                                        | 135,767           |   |                                    |    | 112,531 |   |
| Total                            unitholders' equity                                                                           |   |                                        | 138,789,219       |   |                                    |    | 253,246,132 |   |
|                                Total liabilities and unitholders' equity                         |   | $                                      |  273,368,478 |   |                                    | $  |  353,465,259 |   |
|                                                                                                                           |   |                                        |              |   |                                    |    |   |   |
| *See                            accompanying notes to condensed consolidated financial                            statements.* |   |                                        |              |   |                                    |    |   |   |

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Table          of Contents

| **LEGACY                                                                                                                                                                  RESERVES                                                                                                                                                                  LP**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **CONDENSED                                                                                                                                                                  CONSOLIDATED                                                                                                                                                                  STATEMENTS                                                                                                                                                                  OF                                                                                                                                                                  OPERATIONS**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| **(UNAUDITED)**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   | **Three                                                                                                                                                                  Months                                                                                                                                                                  Ended** |   |   | **Six                                                                                                                                                                  Months                                                                                                                                                                  Ended**    |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   | **June                                                                                                                                                                  30,**    |   |   | **June                                                                                                                                                                  30,**    |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   | **2006** |   |   | **2007** |   |   | **2006** |   |   | **2007** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenues:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |   |   |   |
|    Oil                                                                                                                                                                  sales                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | $ | 11,799,730 |   |   | $ | 17,725,836 |   |   | $ | 19,239,570 |   |   | $ | 30,131,648 |   |
|                                                                                                                                                                     Natural                                                                                                                                                                  gas                                                                                                                                                                  sales                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | 3,587,839 |   |   |   | 5,009,664 |   |   |   | 6,583,256 |   |   |   | 8,535,538 |   |
|                                                                                                                                                                     Realized                                                                                                                                                                  and                                                                                                                                                                  unrealized                                                                                                                                                                  loss                                                                                                                                                                  on                                                                                                                                                                  oil                                                                                                                                                                  and                                                                                                                                                                  natural                                                                                                                                                                  gas                                                                                                                                                                  swaps                                                                                                                                                                  (Note                                                                                                                                                                  6) |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | (9,175,903 | ) |   |   | (6,493,235 | ) |   |   | (13,072,085 | ) |   |   | (13,715,904 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | Total                                                                                                                                                                  revenues                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |   | 6,211,666 |   |   |   | 16,242,265 |   |   |   | 12,750,741 |   |   |   | 24,951,282 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Expenses:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                     Oil                                                                                                                                                                  and                                                                                                                                                                  natural                                                                                                                                                                  gas                                                                                                                                                                  production                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | 3,316,354 |   |   |   | 6,088,127 |   |   |   | 5,993,121 |   |   |   | 10,827,679 |   |
|                                                                                                                                                                     Production                                                                                                                                                                  and                                                                                                                                                                  other                                                                                                                                                                  taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | 942,724 |   |   |   | 1,481,186 |   |   |   | 1,680,881 |   |   |   | 2,474,759 |   |
|                                                                                                                                                                     General                                                                                                                                                                  and                                                                                                                                                                  administrative                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | 1,122,423 |   |   |   | 2,769,045 |   |   |   | 2,078,279 |   |   |   | 4,596,181 |   |
|                                                                                                                                                                     Depletion,                                                                                                                                                                  depreciation,                                                                                                                                                                  amortization                                                                                                                                                                  and                                                                                                                                                                  accretion                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | 4,967,428 |   |   |   | 6,810,657 |   |   |   | 7,355,294 |   |   |   | 12,105,713 |   |
|                                                                                                                                                                     Impairment                                                                                                                                                                  of                                                                                                                                                                  long-lived                                                                                                                                                                  assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | - |   |   |   | 189,730 |   |   |   | - |   |   |   | 279,700 |   |
|                                                                                                                                                                     Loss                                                                                                                                                                  on                                                                                                                                                                  disposal                                                                                                                                                                  of                                                                                                                                                                  assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | - |   |   |   | 231,133 |   |   |   | - |   |   |   | 231,133 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | Total                                                                                                                                                                  expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |   | 10,348,929 |   |   |   | 17,569,878 |   |   |   | 17,107,575 |   |   |   | 30,515,165 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | Operating                                                                                                                                                                  loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |   | (4,137,263 | ) |   |   | (1,327,613 | ) |   |   | (4,356,834 | ) |   |   | (5,563,883 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                                                                                                                                                                  income                                                                                                                                                                  (expense):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                     Interest                                                                                                                                                                  income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | 5,086 |   |   |   | 46,850 |   |   |   | 38,433 |   |   |   | 151,158 |   |
|                                                                                                                                                                     Interest                                                                                                                                                                  expense                                                                                                                                                                  (Note                                                                                                                                                                  2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | (1,209,586 | ) |   |   | (892,669 | ) |   |   | (2,654,348 | ) |   |   | (1,518,052 | ) |
|                                                                                                                                                                     Equity                                                                                                                                                                  in                                                                                                                                                                  income                                                                                                                                                                  (loss)                                                                                                                                                                  of                                                                                                                                                                  partnerships                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | - |   |   |   | 10,910 |   |   |   | (317,788 | ) |   |   | 10,910 |   |
|                                                                                                                                                                     Other                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   | - |   |   |   | 334 |   |   |   | 14,910 |   |   |   | 1,014 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | Net                                                                                                                                                                  loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | $ | (5,341,763 | ) |   | $ | (2,162,188 | ) |   | $ | (7,275,627 | ) |   | $ | (6,918,853 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | Net                                                                                                                                                                  loss                                                                                                                                                                  per                                                                                                                                                                  unit                                                                                                                                                                  -                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | basic                                                                                                                                                                  and                                                                                                                                                                  diluted |   | $ | (0.29 | ) |   | $ | (0.08 | ) |   | $ | (0.49 | ) |   | $ | (0.27 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | Weighted                                                                                                                                                                  average                                                                                                                                                                  number                                                                                                                                                                  of                                                                                                                                                                  units                                                                                                                                                                  used                                                                                                                                                                  in                                                                                                                                                                  computing |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | net                                                                                                                                                                  loss                                                                                                                                                                  per                                                                                                                                                                  unit                                                                                                                                                                  -                                                                                                                                                                  basic                                                                                                                                                                  and                                                                                                                                                                  diluted |   |   | 18,249,180 |   |   |   | 25,919,939 |   |   |   | 14,715,181 |   |   |   | 25,223,638 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| *See                                                                                                                                                                  accompanying                                                                                                                                                                  notes                                                                                                                                                                  to                                                                                                                                                                  condensed                                                                                                                                                                  consolidated                                                                                                                                                                  financial                                                                                                                                                                  statements.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |

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Table          of Contents

| **LEGACY                          RESERVES LP**                                                                                             |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| **CONDENSED                          CONSOLIDATED STATEMENT OF UNITHOLDERS' EQUITY**                                                                  |   |
| **FOR                          THE SIX MONTHS ENDED JUNE 30, 2007**                                                                         |   |
| **(UNAUDITED)**                                                                                                                             |   |
|                                                                                                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                               |   |   |   |   |   |   |   |   |   |   | **Total** |   |
|                                                                                                                                                                                               |   | **Number                          of** |   |   | **Limited** |   |   | **General** |   |   | **Unitholders'** |   |
|                                                                                                                                                                                               |   | **Limited                          Partner Units** |   |   | **Partner** |   |   | **Partner** |   |   | **Equity** |   |
|                                                                                                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance,                          December 31, 2006                                                                                                                                                |   |   | 18,395,233 |   |   | $ | 138,653,452 |   |   | $ | 135,767 |   |   | $ | 138,789,219 |   |
|                                                                                                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                          proceeds from initial public equity offering                                                                                                                          |   |   |  6,900,000 |   |   |   |  121,554,464 |   |   |   |  - |   |   |   |  121,554,464 |   |
| Compensation                          expense on restricted unit awards issued to employees                                                                                                        |   |   |  - |   |   |   |  170,328 |   |   |   |  - |   |   |   |  170,328 |   |
| Vesting                          of Restricted Units                                                                                                                                               |   |   | 20,038 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Units                          issued to Greg McCabe in exchange for oil and natural gas                          properties                                                                       |   |   |  95,000 |   |   |   |  2,270,500 |   |   |   |  - |   |   |   |  2,270,500 |   |
| Units                          issued to Nielson & Associates, Inc. in exchange for oil and natural                          gas properties                                                    |   |   |  611,247 |   |   |   |  15,751,835 |   |   |   |  - |   |   |   |  15,751,835 |   |
| Reclass                          prior period compensation cost on unit options granted                          to                          employees                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   to                          adjust for conversion to liability method                                                                                                                  |   |   | - |   |   |   | (115,199 | ) |   |   | (115 | ) |   |   | (115,314 | ) |
| Distributions                          to unitholders, $0.82 per unit                                                                                                                              |   |   | - |   |   |   | (18,237,791 | ) |   |   | (18,256 | ) |   |   | (18,256,047 | ) |
| Net                          loss                                                                                                                                                                  |   |   | - |   |   |   | (6,913,988 | ) |   |   | (4,865 | ) |   |   | (6,918,853 | ) |
|                                                                                                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance,                          June 30, 2007                                                                                                                                                    |   |   | 26,021,518 |   |   | $ | 253,133,601 |   |   | $ | 112,531 |   |   | $ | 253,246,132 |   |
|                                                                                                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| *See                          accompanying notes to condensed consolidated financial                          statements.*             |   |

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| **LEGACY                        RESERVES LP**                                                                                    |   |                                                 |             |    |     |    |
|----------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------|------------------|---------|----------|---------|
| **CONDENSED                        CONSOLIDATED STATEMENTS OF CASH FLOWS**                                                       |   |                                                 |             |    |     |    |
| **(UNAUDITED)**                                                                                                                  |   |                                                 |             |    |     |    |
|                                                                                                                             |   |                                                 |             |    |     |    |
|                                                                                                                             |   | **Six                        Months Ended June 30,** |             |
|                                                                                                                             |   | **2006**                                             |             |    | **2007** |    |
| Cash                        flows from operating activities:                                                                     |   |                                                 |             |    |     |    |
|                            Net loss                                                                |   | $                                               |  (7,275,627 | )  |     | $  |  (6,918,853 | )  |
| Adjustments                        to reconcile net income to net cash provided by operating                        activities:  |   |                                                 |             |    |     |
| Depletion,                        depreciation, amortization and accretion                                                       |   |                                                 | 7,355,294        |    |     |    | 12,105,713 |   |
| Amortization                        of debt issuance costs                                                                       |   |                                                 | 276,085          |    |     |    | 83,719 |   |
| Impairment                        of long-lived assets                                                                           |   |                                                 | -                |    |     |    | 279,700 |   |
| Loss                        on oil and natural gas swaps                                                                         |   |                                                 | 13,072,085       |    |     |    | 13,715,904 |   |
| Equity                        in (income) loss of partnership                                                                    |   |                                                 | 317,788          |    |     |    | (10,910 | ) |
| Amortization                        of unit-based compensation                                                                   |   |                                                 | 248,461          |    |     |    | 55,014 |   |
| Loss                        on disposal of assets                                                                                |   |                                                 | -                |    |     |    | 231,133 |   |
| Changes                      in assets and liabilities:                                                                     |   |                                                 |             |    |     |    |   |   |
| Increase                        in accounts receivable, oil and natural gas                                                      |   |                                                 | (9,398,659       | )       |     |    | (1,817,360 | ) |
| Increase                        in accounts receivable, joint interest owners                                                    |   |                                                 | (782,486         | )       |     |    | (1,110,845 | ) |
| (Increase)                        decrease in accounts receivable, other                                                         |   |                                                 | (1,708,557       | )       |     |    | 12,043 |   |
| Increase                        in other current assets                                                                          |   |                                                 | (803,956         | )       |     |    | (1,067,841 | ) |
| Increase                        (decrease) in accounts payable                                                                   |   |                                                 | 181,877          |    |     |    | (2,237,566 | ) |
| Increase                        in accrued oil and natural gas liabilities                                                       |   |                                                 | 5,059,379        |    |     |    | 791,107 |   |
| Increase                        in due to affiliates                                                                             |   |                                                 | 1,059,308        |    |     |    | - |   |
| Increase                        in other current liabilities                                                                     |   |                                                 | 1,792,949        |    |     |    | 867,355 |   |
| Total                        adjustments                                                                                         |   |                                                 | 16,669,568       |    |     |    | 21,897,166 |   |
| Net                        cash provided by operating activities                                                                 |   |                                                 | 9,393,941        |    |     |    | 14,978,313 |   |
| Cash                        flows from investing activities:                                                                     |   |                                                 |             |    |     |    |   |   |
|    Investment                        in oil and natural gas properties                                            |   |                                                 | (25,351,503      | )       |     |    | (69,757,797 | ) |
|                           Increase in deposit on pending acquisition                                                   |   |                                                 | -                |    |     |    | (12,784 | ) |
|                           Investment in other equipment                                                                |   |                                                 | (92,421          | )       |     |    | (287,447 | ) |
|    Investment                        in operating rights                                                          |   |                                                 | (7,016,672       | )       |     |    | - |   |
|                           Collection of notes receivable                                                               |   |                                                 | 924,441          |    |     |    | - |   |
|                           Net cash settlements on oil and natural gas swaps                                            |   |                                                 | 1,946,286        |    |     |    | 3,827,360 |   |
|                           Investment in equity method investee                                                         |   |                                                 | -                |    |     |    | (73,031 | ) |
| Net                        cash used in investing activities                                                                     |   |                                                 | (29,589,869      | )       |     |    | (66,303,699 | ) |
| Cash                        flows from financing activities:                                                                     |   |                                                 |             |    |     |    |   |   |
|                           Proceeds from long-term debt                                                                 |   |                                                 | 85,800,000       |    |     |    | 71,000,000 |   |
|                           Payments of long-term debt                                                                   |   |                                                 | (68,189,791      | )       |     |    | (118,800,000 | ) |
|                           Payments of debt issuance costs                                                              |   |                                                 | (288,937         | )       |     |    | (106,096 | ) |
|                           Proceeds from issuance of units, net                                                         |   |                                                 | 78,360,804       |    |     |    | 121,554,464 |   |
|                           Redemption of Founding Investors' units                                                      |   |                                                 | (69,938,000      | )       |     |    | - |   |
|                           Dividend - reimbursement of offering costs paid by MBN Management                        LLC |   |                                                 | (1,200,229       | )       |     |    | - |   |
|                           Capital contributed by owner                                                                 |   |                                                 | 19,356           |    |     |    | - |   |
|                           Cash not acquired in Legacy formation transactions                                           |   |                                                 | (3,104,304       | )       |     |    | - |   |
|                           Distributions to unitholders                                                                 |   |                                                 | (2,296,914       | )       |     |    | (18,256,047 | ) |
| Net                        cash provided by financing activities                                                                 |   |                                                 | 19,161,985       |    |     |    | 55,392,321 |   |
| Net                        increase (decrease) in cash and cash equivalents                                                      |   |                                                 | (1,033,943       | )       |     |    | 4,066,935 |   |
| Cash                        and cash equivalents, beginning of period                                                            |   |                                                 | 1,954,923        |    |     |    | 1,061,852 |   |
|                                                                                                                             |   |                                                 |             |    |     |    |   |   |
| Cash                        and cash equivalents, end of period                                                                  |   | $                                                    | 920,980          |    |     | $       | 5,128,787 |   |
|                                                                                                                             |   |                                                 |             |    |     |    |   |   |
| *See                        accompanying notes to condensed consolidated financial                        statements.*           |   |                                                 |             |    |     |    |   |   |

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| **LEGACY                                                        RESERVES LP**                                                                                                                                                                 |   |                                                                                 |        |   |     |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------|-------------|--------|----------|--------|
| **CONDENSED                                                        CONSOLIDATED STATEMENTS OF                                                        CASH FLOWS - Continued**                                                                 |   |                                                                                 |        |   |
| **(UNAUDITED)**                                                                                                                                                                                                                               |   |                                                                                 |        |   |     |   |
|                                                                                                                                                                                                                                          |   |                                                                                 |        |   |     |   |
|                                                                                                                                                                                                                                          |   | **Six                                                        Months Ended June 30,** |        |
|                                                                                                                                                                                                                                          |   | **2006**                                                                             |        |   | **2007** |   |
| Non-Cash                                                        Investing and Financing Activities:                                                                                                                                           |   |                                                                                 |        |   |     |   |
|                                                                                                                                                                                                                                          |   |                                                                                 |        |   |     |   |
| Asset                                                        retirement obligation costs                                                        and liabilities                                                                               |   | $                                                                                    | 1,467,241   |   |     | $      | - |   |
| Asset                                                        retirement obligations associated                                                        with property                                                        acquisitions       |   | $                                                                                    | 466,320     |   |     | $      | 727,004 |   |
| Non-controlling                                                        interests' share of net financing                                                        costs of MBN                                                                  |   |                                                                                 |        |   |     |   |   |   |
| Properties                                                        LP capitalized to oil and                                                        natural gas properties                                                                     |   | $                                                                                    | 164,202     |   |     | $      | - |   |
| Units                                                        issued to MBN Properties                                                        LP in exchange for the                                                                           |   |                                                                                 |        |   |     |   |   |   |
| non-controlling                                                        interests' share of oil and                                                        natural gas properties                                                              |   | $                                                                                    | 31,743,934  |   |     | $      | - |   |
| Units                                                        issued to Brothers Group                                                        in exchange for:                                                                                 |   |                                                                                 |        |   |     |   |   |   |
| Oil                                                        and natural gas properties                                                                                                                                                         |   | $                                                                                    | 105,298,794 |   |     | $      | - |   |
| Other                                                        property and equipment                                                                                                                                                           |   | $                                                                                    | 107,275     |   |     | $      | - |   |
| Units                                                        issued to H2K Holdings Ltd.                                                        in exchange for oil and                                                                       |   |                                                                                 |        |   |     |   |   |   |
| natural                                                        gas properties                                                                                                                                                                 |   | $                                                                                    | 1,419,483   |   |     | $      | - |   |
| Oil                                                        and natural gas hedge liabilities                                                        assumed from the                                                                          |   |                                                                                 |        |   |     |   |   |   |
| Brothers                                                        Group and H2K Holdings Ltd.                                                                                                                                                   |   | $                                                                                    | 3,147,152   |   |     | $      | - |   |
| Units                                                        issued in exchange for oil                                                        and                                                                                            |   |                                                                                 |        |   |     |   |   |   |
| natural                                                        gas properties                                                                                                                                                                 |   | $                                                                                    | 2,346,000   |   |     | $      | 18,022,335 |   |
| Deemed                                                        dividend to Moriah Group                                                        owners for accounts not acquired                                                                |   |                                                                                 |        |   |     |   |   |   |
| in                                                        Legacy formation transaction:                                                                                                                                                       |   |                                                                                 |        |   |     |   |   |   |
| Accounts                                                        receivable, oil and natural                                                        gas                                                                                        |   | $                                                                                    | 4,248,157   |   |     | $      | - |   |
| Accounts                                                        receivable, joint interest                                                        owners                                                                                      |   | $                                                                                    | 249,627     |   |     | $      | - |   |
| Accounts                                                        receivable, other                                                                                                                                                             |   | $                                                                                    | 539,968     |   |     | $      | - |   |
| Other                                                        assets                                                                                                                                                                           |   | $                                                                                    | 891,300     |   |     | $      | - |   |
| Accounts                                                        payable                                                                                                                                                                       |   | $                                                                                    | (213,941    | )      |     | $      | - |   |
| Accrued                                                        oil and natural gas liabilities                                                                                                                                                |   | $                                                                                    | (1,520,709  | )      |     | $      | - |   |
| Due                                                        to affiliates                                                                                                                                                                      |   | $                                                                                    | (1,254,215  | )      |     | $      | - |   |
| Other                                                        liabilities                                                                                                                                                                      |   | $                                                                                    | (2,166,276  | )      |     | $      | - |   |
|                                                                                                                                                                                                                                          |   |                                                                                 |        |   |     |   |   |   |
| *See                                                        accompanying notes to condensed                                                        consolidated financial                                                        statements.* |   |                                                                                 |        |   |     |   |   |   |

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Table          of Contents

**LEGACY      RESERVES LP**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(Unaudited)**

**(1)  Organization,      Basis of Presentation and Description of Business**

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Table          of Contents

**(2)  Credit      Facility**

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Table          of Contents

|                                                   |   | **December                        31,** |        |   | **June                        30,** |   |
|--------------------------------------------------------|--------|-----------------------------------------|-------------|--------|-------------------------------------|--------|
|                                                   |   | **2006**                                |        |   | **2007**                            |   |
|                                                   |   |                                    |        |   |                                |   |
| Legacy                        facility- due March 2010 |   | $                                       | 115,800,000 |   |                                | $      | 68,000,000 |   |
|                                                   |   |                                    |        |   |                                |   |   |   |

**(3)  Acquisitions**

***Legacy      Formation Acquisition***

|                                                              |   | **Number                of units** |       |
|-------------------------------------------------------------------|--------|------------------------------------|------------|
| MPL                                                               |   |                               | 7,334,070  |   |
| DAB                Resources, Ltd.                                |   |                               | 859,703    |   |
|   Moriah                  Group                         |   |                               | 8,193,773  |   |
| Brothers                Group                                     |   |                               | 6,200,358  |   |
| H2K                  Holdings Ltd.                                |   |                               | 83,499     |   |
| MBN                Properties LP                                  |   |                               | 3,162,438  |   |
| Other                  investors                                  |   |                               | 600,000    |   |
|   Total                units issued at Legacy Formation |   |                               | 18,240,068 |   |

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Table          of Contents

|                                                                           |   | **Number                of Units**    |      |   | **Purchase                Price**     |   |
|--------------------------------------------------------------------------------|--------|---------------------------------------|-----------|--------|---------------------------------------|--------|
|                                                                           |   | **at                $17.00 per unit** |      |   | **of                Assets Acquired** |   |
| Brothers                  Group                                                |   |                                  | 6,200,358 |   |                                  | $      | 105,406,069 |   |
| H2K                Holdings Ltd.                                               |   |                                  | 83,499    |   |                                  |   | 1,419,483 |   |
| Cash                  paid to three charitable foundations                     |   |                                  | -         |   |                                  |   | 7,682,854 |   |
|   Total                purchase price before liabilities assumed     |   |                                  |      |   |                                  |   | 114,508,406 |   |
| Plus:                                                                          |   |                                  |      |   |                                  |   |   |   |
|   Oil                and natural gas swap liabilities assumed        |   |                                  |      |   |                                  |   | 3,147,152 |   |
|   Asset                  retirement obligations incurred             |   |                                  |      |   |                                  |   | 1,467,241 |   |
| Less:                                                                          |   |                                  |      |   |                                  |   |   |   |
|   Office                  furniture, equipment and vehicles acquired |   |                                  |      |   |                                  |   | (107,275 | ) |
| Total                purchase price allocated to oil and                       |   |                                  |      |   |                                  |   |   |   |
|   natural                  gas properties acquired                   |   |                                  |      |   |                                  | $      | 119,015,524 |   |

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Table          of Contents

|                                                                                           |   | **Number                of Units**    |      |   | **Purchase                Price of** |   |
|------------------------------------------------------------------------------------------------|--------|---------------------------------------|-----------|--------|--------------------------------------|--------|
|                                                                                           |   | **at                $17.00 per unit** |      |   | **Assets                Acquired**   |   |
| Units                  issued to MBN Properties LP                                             |   |                                  | 3,162,438 |   |                                 | $      | 53,761,446 |   |
| Cash                paid to MBN Properties LP                                                  |   |                                  | -         |   |                                 |   | 65,300,000 |   |
|   Total                  purchase price before liabilities assumed                   |   |                                  |      |   |                                 |   | 119,061,446 |   |
| Plus:                                                                                          |   |                                  |      |   |                                 |   |   |   |
|   Oil                  and natural gas swap liabilities assumed                      |   |                                  |      |   |                                 |   | 2,539,625 |   |
|   ARO                liabilities assumed                                             |   |                                  |      |   |                                 |   | 453,913 |   |
| Less:                                                                                          |   |                                  |      |   |                                 |   |   |   |
|   Net                book value of other property and equipment on                   |   |                                  |      |   |                                 |   |   |   |
|     MBN                  Properties LP at March 14, 2006                   |   |                                  |      |   |                                 |   | (39,056 | ) |
|                                                                                           |   |                                  |      |   |                                 |   |  122,015,928 |   |
| Less:                                                                                          |   |                                  |      |   |                                 |   |   |   |
|   Net                book value of oil and natural gas assets on                     |   |                                  |      |   |                                 |   |   |   |
|     MBN                  Properties LP at March 14, 2006                   |   |                                  |      |   |                                 |   | (62,990,390 | ) |
| Purchase                price in excess of net book value of assets                            |   |                                  |      |   |                                 |   | 59,025,538 |   |
| Less:                                                                                          |   |                                  |      |   |                                 |   |   |   |
|   Share                already owned by Moriah via consolidation                     |   |                                  |      |   |                                 |   |   |   |
|     of                  MBN Properties LP                                  |   |                                  | 46.22     | %      |                                 |   | (27,281,604 | ) |
| Non-controlling                interest share to record                                        |   |                                  |      |   |                                 |   | 31,743,934 |   |
| Plus:                                                                                          |   |                                  |      |   |                                 |   |   |   |
|  Elimination                of deferred financing costs related to                        |   |                                  |      |   |                                 |   |   |   |
|     non-controlling                  interests' share of MBN Properties LP |   |                                  |      |   |                                 |   | 164,202 |   |
|   Reimbursement                of Brothers Group's share of  MBN           |   |                                  |      |   |                                 |   |   |   |
|     Management                  LLC losses from inception through          |   |                                  |      |   |                                 |   |   |   |
|     March                14, 2006                                          |   |                                  |      |   |                                 |   | 780,239 |   |
| MBN                  Properties LP purchase price to allocate                                  |   |                                  |      |   |                                 |   |   |   |
|   to                oil and natural gas properties                                   |   |                                  |      |   |                                 | $      | 32,688,375 |   |
| Units                  related to purchase of non-controlling interest                         |   |                                  | 1,867,290 |   |                                 |   |   |   |
| Units                related to interest previously owned by Moriah Group                      |   |                                  | 1,295,148 |   |                                 |   |   |   |
|   Total                  units issued to MBN Properties LP                           |   |                                  | 3,162,438 |   |                                 |   |   |   |

***Larron      Acquisition***

***South      Justis Unit Acquisition***

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Table          of Contents

***Kinder      Morgan Acquisition***

***Binger      Acquisition***

***Ameristate      Acquisition***

***TSF      Acquisition***

***Raven      Shenandoah Acquisition***

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Table          of Contents

***Pro      Forma Operating Results***

|                                                                                    |   | **June                                            30,**          |        |
|-----------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------|-------------|
|                                                                                    |   | **2006**                                                                        |        |   | **2007** |   |
|                                                                                    |   | **(In                                            thousands)**    |        |
| Revenues,                                            excluding hedging gains and losses |   | $                                                                               | 48,191      |   |   | $ | 45,921 |   |
|                                                                                    |   |                                                                            |        |   |   |   |   |   |
| Revenues,                                            net of hedging gains and losses    |   | $                                                                               | 33,814      |   |   | $ | 32,206 |   |
|                                                                                    |   |                                                                            |        |   |   |   |   |   |
| Net                                            loss                                     |   | $                                                                               | (3,913      | ) |   | $ | (5,763 | ) |
|                                                                                    |   |                                                                            |        |   |   |   |   |   |
| Loss per                                            unit - basic and diluted       |   | $                                                                          |  (0.21 | )  |   | $  |  (0.23 | )  |
|                                                                                    |   |                                                                            |        |   |   |   |   |   |
| Units                                            used in computing loss per unit   |   |                                                                            | 18,993,133  |   |   |   | 25,578,229 |   |
|                                                                                    |   |                                                                            |        |   |   |   |   |   |

**(4)  Related      Party Transactions**

**(5)  Commitments      and Contingencies**

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Table          of Contents

**(6)  Oil      and Natural Gas Swaps**

*Accounting for Derivative Instruments and Hedging Activities.*

|                                                                           |   | **Three                        Months Ended**         |        |   | **Six                        Months Ended**           |   |
|--------------------------------------------------------------------------------|--------|-------------------------------------------------------|-------------|--------|-------------------------------------------------------|--------|
|                                                                           |   | **June                        30,**    |        |   | **June                        30,**    |   |
|                                                                           |   | **2006**                                              |        |   | **2007**                                              |   |   | **2006** |   |   | **2007** |   |
|                                                                           |   |                                                  |        |   |                                                  |   |   |   |   |   |   |   |
| Crude                        oil derivative contract settlements               |   | $                                                     | (979,030    | )      |                                                  | $      | 801,276 |   |   | $ | (1,099,644 | ) |   | $ | 2,003,310 |   |
| Natural                        gas derivative contract settlements             |   |                                                  | 1,528,380   |   |                                                  |   | 560,307 |   |   |   | 3,045,930 |   |   |   | 1,824,050 |   |
| Unrealized                        change in fair value - oil contracts         |   |                                                  | (10,134,467 | )      |                                                  |   | (8,386,314 | ) |   |   | (18,427,945 | ) |   |   | (13,473,461 | ) |
| Unrealized                        change in fair value - natural gas contracts |   |                                                  | 409,214     |   |                                                  |   | 531,496 |   |   |   | 3,409,574 |   |   |   | (4,069,803 | ) |
|                                                                           |   | $                                                     | (9,175,903  | )      |                                                  | $      | (6,493,235 | ) |   | $ | (13,072,085 | ) |   | $ | (13,715,904 | ) |
|                                                                           |   |                                                  |        |   |                                                  |   |   |   |   |   |   |   |   |   |   |   |

|                                       |   | **Annual**                                                                                                                |   | **Average**                                                                                                        |   | **Price**                                                         |
|--------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------|
| **Calendar                          Year** |   | **Volumes                          (Bbls)**                                                                               |   | **Price                          per Bbl**                                                                         |   | **Range                          per Bbl**                        |
| 2007                                       |   |                    437,452 |   |  $                 67.46 |   | $64.15                          - $75.70                          |
| 2008                                       |   |                    809,249 |   |  $                 67.65 |   | $62.25                          - $73.45                          |
| 2009                                       |   |                    774,013 |   |  $                 65.82 |   | $61.05                          - $72.00                          |
| 2010                                       |   |                    715,445 |   |  $                 64.32 |   | $60.15                          - $71.15                          |
| 2011                                       |   |                    509,040 |   |  $                 70.58 |   | $67.33                          - $71.40                          |
| 2012                                       |   |                    399,600 |   |  $                 70.55 |   | $67.72                          -                          $71.15 |

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|                                   |   | **Annual**                                                                                                                |   | **Average**                                                                                                                   |   | **Price**                                |
|----------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------|
| **Calendar                      Year** |   | **Volumes                      (MMBtu)**                                                                                  |   | **Price                      per MMBtu**                                                                                      |   | **Range                      per MMBtu** |
| 2007                                   |   |                 1,041,725                 |   |  $                   8.87 |   | $7.35                      - $10.01      |
| 2008                                   |   |                 1,885,374                 |   |  $                   8.46 |   | $7.59                      - $10.58      |
| 2009                                   |   |                 1,736,354                 |   |  $                   8.27 |   | $7.64                      - $10.18      |
| 2010                                   |   |                 1,513,619                 |   |  $                   7.92 |   | $7.37                      - $9.73       |
| 2011                                   |   |                    274,000 |   |  $                   7.38 |   | $7.23                      - $7.51       |
| 2012                                   |   |                    132,000 |   |  $                   7.30 |   | $7.30                                    |

|                                         |   | **Annual**                                                                                                                |   | **Basis**                                           |
|----------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|
| **Calendar                            Year** |   | **Volumes                            (Mcf)**                                                                              |   | **Differential                            per Mcf** |
| 2007                                         |   |                    780,000 |   | ($0.88)                                             |
| 2008                                         |   |                 1,422,000                 |   | ($0.84)                                             |
| 2009                                         |   |                 1,320,000                 |   | ($0.68)                                             |
| 2010                                         |   |                 1,200,000                 |   | ($0.57)                                             |

|                                   |   | **Annual**                                                                                                |   | **Price**                        |
|----------------------------------------|--------|-----------------------------------------------------------------------------------------------------------|--------|----------------------------------|
| **Calendar                      Year** |   | **Volumes                      (Gal)**                                                                    |   | **per                      Gal** |
| 2007                                   |   |                 1,395,030 |   | $1.15                            |
| 2008                                   |   |                 2,509,248 |   | $1.15                            |
| 2009                                   |   |                 2,265,480 |   | $1.15                            |

**(7)  Asset      Retirement Obligation**

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Table          of Contents

|                                                                              |   | **December                        31,** |      |   | **June                        30,** |   |
|-----------------------------------------------------------------------------------|--------|-----------------------------------------|-----------|--------|-------------------------------------|--------|
|                                                                              |   | **2006**                                |      |   | **2007**                            |   |
|                                                                              |   |                                    |      |   |                                |   |
| Asset                        retirement obligation - beginning of period          |   | $                                       | 2,302,147 |   |                                | $      | 6,492,780 |   |
|                                                                              |   |                                    |      |   |                                |   |   |   |
| Liabilities                        incurred in Legacy formation                   |   |                                    | 1,467,241 |   |                                |   | - |   |
| Liabilities                        incurred with properties acquired              |   |                                    | 1,888,954 |   |                                |   | 727,004 |   |
| Liabilities                        incurred with properties drilled               |   |                                    | 22,882    |   |                                |   | - |   |
| Liabilities                        settled during the period                      |   |                                    | (213,343  | )      |                                |   | (82,654 | ) |
| Current                        period accretion                                   |   |                                    | 242,432   |   |                                |   | 197,486 |   |
| Current                        period revisions to oil and natural gas properties |   |                                    | 782,467   |   |                                |   | - |   |
|                                                                              |   |                                    |      |   |                                |   |   |   |
| Asset                        retirement obligation - end of period                |   | $                                       | 6,492,780 |   |                                | $      | 7,334,616 |   |
|                                                                              |   |                                    |      |   |                                |   |   |   |

**(8)  Unit-Based      Compensation**

***Long      Term Incentive Plan***

*Share-Based Payment*

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Table          of Contents

|                                                                  |   |      |    |   |         |   | **Weighted**    |
|-----------------------------------------------------------------------|--------|-----------|---------|--------|--------------|--------|-----------------|
|                                                                  |   |      |    |   | **Weighted** |   | **Average**     |
|                                                                  |   |      |    |   | **Average**  |   | **Remaining**   |
|                                                                  |   |      |    |   | **Exercise** |   | **Contractual** |
|                                                                  |   | **Units** |    |   | **Price**    |   | **Term**        |
| Outstanding                                  at January 1, 2007       |   |      | 260,000 |   |         | $      | 17.01           |   |   |
| Granted                                                               |   |      | 62,000  |   |         | $      | 26.05           |   |   |
| Exercised                                                             |   |      | (23,038 | )      |         | $      | 17.00           |   |   |
| Forfeited                                                             |   |      | (13,992 | )      |         | $      | 17.11           |   |   |
| Outstanding                                  at June 30, 2007         |   |      | 284,970 |   |         | $      | 18.97           |   | 4.0                                  years |
| Options                                  exercisable at June 30, 2007 |   |      | 56,454  |   |         | $      | 17.00           |   |     -                |

|                                                 |   | **Non-Vested                        Options** |    |
|------------------------------------------------------|--------|-----------------------------------------------|---------|
|                                                 |   |                                          |    |   | **Weighted-** |   |
|                                                 |   | **Number                        of**          |    |   | **Average                        Fair** |   |
|                                                 |   | **Units**                                     |    |   | **Value** |   |
| Non-vested                        at January 1, 2007 |   |                                          | 260,000 |   |   | $ | 2.62 |   |
| Granted                                              |   |                                          | 62,000  |   |   |   | 6.83 |   |
| Vested                        - Unexercised          |   |                                          | (56,454 | ) |   |   | 10.04 |   |
| Vested                        - Exercised            |   |                                          | (23,038 | ) |   |   | 10.14 |   |
| Forfeited                                            |   |                                          | (13,992 | ) |   |   | 9.96 |   |
| Non-vested                        at June 30, 2007   |   |                                          | 228,516 |   |   | $ | 9.40 |   |

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Table          of Contents

|                                                   |   | **Six                      Months Ended** |   |
|--------------------------------------------------------|--------|-------------------------------------------|--------|
|                                                   |   | **June                      30,**         |   |
|                                                   |   | **2007**                                  |   |
| Expected                      life (years)             |   |                                      | 4      |   |
| Annual                      interest rate              |   |                                      | 4.9    | % |
| Annual                      distribution rate per unit |   | $                                         | 1.64   |   |
| Volatility                                             |   |                                      | 42     | % |

**(9)  Subsequent      Events**

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Table          of Contents

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

**Cautionary      Statement Regarding Forward Looking Information**

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Table          of Contents

**Overview**

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Table          of Contents

**Production      and Operating Costs Reporting**

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Table          of Contents

**Operating        Data**

|                                                                                                                    |   | **Three                        Months Ended June 30,** |        |   | **Six                        Months Ended June 30,** |   |
|-------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------|-------------|--------|------------------------------------------------------|--------|
|                                                                                                                    |   | **2006                        (a)**                         |        |   | **2007**                                             |   |   | **2006                        (a)** |   |   | **2007** |   |
| Revenues:                                                                                                               |   |                                                        |        |   |                                                 |   |   |   |   |   |   |   |
| Oil                        sales                                                                                        |   | $                                                           | 11,799,730  |   |                                                 | $      | 17,725,836 |   |   | $ | 19,239,570 |   |   | $ | 30,131,648 |   |
| Natural                        gas sales                                                                                |   |                                                        | 3,587,839   |   |                                                 |   | 5,009,664 |   |   |   | 6,583,256 |   |   |   | 8,535,538 |   |
| Realized                        gain (loss) on oil swaps                                                                |   |                                                        | (979,079    | )      |                                                 |   | 801,277 |   |   |   | (1,099,693 | ) |   |   | 2,003,311 |   |
| Realized                        gain on natural gas swaps                                                               |   |                                                        | 1,528,380   |   |                                                 |   | 560,307 |   |   |   | 3,045,930 |   |   |   | 1,824,049 |   |
| Unrealized                        loss on oil swaps                                                                     |   |                                                        | (10,134,418 | )      |                                                 |   | (8,386,314 | ) |   |   | (18,427,896 | ) |   |   | (13,473,461 | ) |
| Unrealized                        gain (loss) on natural gas swaps                                                      |   |                                                        | 409,214     |   |                                                 |   | 531,495 |   |   |   | 3,409,574 |   |   |   | (4,069,803 | ) |
|                                                                                                                    |   |                                                        |        |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Total                        revenue                                                                                    |   | $                                                           | 6,211,666   |   |                                                 | $      | 16,242,265 |   |   | $ | 12,750,741 |   |   | $ | 24,951,282 |   |
|                                                                                                                    |   |                                                        |        |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Expenses:                                                                                                               |   |                                                        |        |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Oil                        and natural gas production                                                                   |   | $                                                           | 3,316,354   |   |                                                 | $      | 6,088,127 |   |   | $ | 5,993,121 |   |   | $ | 10,827,679 |   |
| Production                        and other taxes                                                                       |   | $                                                           | 942,724     |   |                                                 | $      | 1,481,186 |   |   | $ | 1,680,881 |   |   | $ | 2,474,759 |   |
| General                        and administrative                                                                       |   | $                                                           | 1,122,423   |   |                                                 | $      | 2,769,045 |   |   | $ | 2,078,279 |   |   | $ | 4,596,181 |   |
| Depletion,                        depreciation, amortization  and accretion                                   |   | $                                                           | 4,967,428   |   |                                                 | $      | 6,810,657 |   |   | $ | 7,355,294 |   |   | $ | 12,105,713 |   |
|                                                                                                                    |   |                                                        |        |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Production:                                                                                                             |   |                                                        |        |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Oil                        - barrels                                                                                    |   |                                                        | 184,094     |   |                                                 |   | 293,462 |   |   |   | 313,105 |   |   |   | 524,314 |   |
| Natural                        gas - Mcf                                                                                |   |                                                        | 593,703     |   |                                                 |   | 718,094 |   |   |   | 1,027,663 |   |   |   | 1,306,440 |   |
| Total                        (Boe)                                                                                      |   |                                                        | 283,045     |   |                                                 |   | 413,144 |   |   |   | 484,382 |   |   |   | 742,054 |   |
| Average                        daily production (Boe/d)                                                                 |   |                                                        | 3,110       |   |                                                 |   | 4,540 |   |   |   | 2,676 |   |   |   | 4,100 |   |
|                                                                                                                    |   |                                                        |        |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Average                        sales price per unit (including heges) (b):                                              |   |                                                        |        |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Oil                        price per barrel                                                                             |   | $                                                           | 3.73        |   |                                                 | $      | 34.56 |   |   | $ | (0.92 | ) |   | $ | 35.59 |   |
| Natural                        gas price per Mcf                                                                        |   | $                                                           | 9.31        |   |                                                 | $      | 8.50 |   |   | $ | 12.69 |   |   | $ | 4.81 |   |
| Combined                        (per Boe)                                                                               |   | $                                                           | 21.95       |   |                                                 | $      | 39.31 |   |   | $ | 26.32 |   |   | $ | 33.62 |   |
|                                                                                                                    |   |                                                        |        |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Average                        sales price per unit (including realized hedge gains/losses)                        (c): |   |                                                        |        |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Oil                        price per barrel                                                                             |   | $                                                           | 58.78       |   |                                                 | $      | 63.13 |   |   | $ | 57.94 |   |   | $ | 61.29 |   |
| Natural                        gas price per Mcf                                                                        |   | $                                                           | 8.62        |   |                                                 | $      | 7.76 |   |   | $ | 9.37 |   |   | $ | 7.93 |   |
| Combined                        (per Boe)                                                                               |   | $                                                           | 56.31       |   |                                                 | $      | 58.33 |   |   | $ | 57.33 |   |   | $ | 57.27 |   |
|                                                                                                                    |   |                                                        |        |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Average                        sales price per unit (excluding hedges):                                                 |   |                                                        |        |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Oil                        price per barrel                                                                             |   | $                                                           | 64.10       |   |                                                 | $      | 60.40 |   |   | $ | 61.45 |   |   | $ | 57.47 |   |
| Natural                        gas price per Mcf                                                                        |   | $                                                           | 6.04        |   |                                                 | $      | 6.98 |   |   | $ | 6.41 |   |   | $ | 6.53 |   |
| Combined                        (per Boe)                                                                               |   | $                                                           | 54.36       |   |                                                 | $      | 55.03 |   |   | $ | 53.31 |   |   | $ | 52.11 |   |
|                                                                                                                    |   |                                                        |        |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |
| NYMEX                        oil index prices per barrel:                                                               |   |                                                        |        |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Beginning                        of Quarter                                                                             |   | $                                                           | 66.63       |   |                                                 | $      | 65.87 |   |   | $ | 61.04 |   |   | $ | 61.05 |   |
| End                        of Quarter                                                                                   |   | $                                                           | 73.93       |   |                                                 | $      | 70.68 |   |   | $ | 73.93 |   |   | $ | 70.68 |   |
|                                                                                                                    |   |                                                        |        |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |
| NYMEX                        gas index prices per Mcf:                                                                  |   |                                                        |        |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Beginning                        of Quarter                                                                             |   | $                                                           | 7.21        |   |                                                 | $      | 7.73 |   |   | $ | 11.18 |   |   | $ | 6.30 |   |
| End                        of Quarter                                                                                   |   | $                                                           | 6.10        |   |                                                 | $      | 6.77 |   |   | $ | 6.10 |   |   | $ | 6.77 |   |
|                                                                                                                    |   |                                                        |        |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Average                        unit costs per Boe:                                                                      |   |                                                        |        |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Production                        costs, excluding production and other taxes                                           |   | $                                                           | 11.72       |   |                                                 | $      | 14.74 |   |   | $ | 12.37 |   |   | $ | 14.59 |   |
| Production                        and other taxes                                                                       |   | $                                                           | 3.33        |   |                                                 | $      | 3.59 |   |   | $ | 3.47 |   |   | $ | 3.34 |   |
| General                        and administrative                                                                       |   | $                                                           | 3.97        |   |                                                 | $      | 6.70 |   |   | $ | 4.29 |   |   | $ | 6.19 |   |
| Depletion,                        depreciation, amortization and accretion                                              |   | $                                                           | 17.55       |   |                                                 | $      | 16.48 |   |   | $ | 15.18 |   |   | $ | 16.31 |   |

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Table          of Contents

**Results      of Operations**

**Three-Month      Period Ended June  30, 2007 Compared to Three-Month Period Ended June 30,      2006**

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Table          of Contents

**Six-Month      Period Ended June  30, 2007 Compared to Six-Month Period Ended June 30,      2006**

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Table          of Contents

**Capital      Resources and Liquidity**

**Cash      Flow from Operations**

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Table          of Contents

|                                   |   | **Annual**                                                                                                                |   | **Average**                                                                                                        |   | **Price**                              |
|----------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------|
| **Calendar                      Year** |   | **Volumes                      (Bbls)**                                                                                   |   | **Price                      per Bbl**                                                                             |   | **Range                      per Bbl** |
| 2007                                   |   |                    487,452 |   |  $                 68.14 |   | $64.15                      - $75.70   |
| 2008                                   |   |                    929,249 |   |  $                 68.27 |   | $62.25                      - $73.45   |
| 2009                                   |   |                    774,013 |   |  $                 65.82 |   | $61.05                      - $72.00   |
| 2010                                   |   |                    715,445 |   |  $                 64.32 |   | $60.15                      - $71.15   |
| 2011                                   |   |                    509,040 |   |  $                 70.58 |   | $67.33                      - $71.40   |

|                                 |   | **Annual**                                                                                                                |   | **Average**                                                                                                                   |   | **Price**                              |
|--------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------|
| **Calendar                    Year** |   | **Volumes                    (MMBtu)**                                                                                    |   | **Price                    per MMBtu**                                                                                        |   | **Range                    per MMBtu** |
| 2007                                 |   |                 1,116,725                 |   |  $                   8.77 |   | $7.35                    - $10.01      |
| 2008                                 |   |                 2,053,374                 |   |  $                   8.37 |   | $7.41                    - $10.58      |
| 2009                                 |   |                 1,892,354                 |   |  $                   8.19 |   | $7.41                    - $10.18      |
| 2010                                 |   |                 1,657,619                 |   |  $                   7.88 |   | $7.37                    - $9.73       |
| 2011                                 |   |                    406,000 |   |  $                   7.39 |   | $7.23                    - $7.51       |

|                                 |   | **Annual**                                                                                                                |   | **Basis**                                   |
|--------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------|
| **Calendar                    Year** |   | **Volumes                    (Mcf)**                                                                                      |   | **Differential                    per Mcf** |
| 2007                                 |   |                    780,000 |   | ($0.88)                                     |
| 2008                                 |   |                 1,422,000                 |   | ($0.84)                                     |
| 2009                                 |   |                 1,320,000                 |   | ($0.68)                                     |
| 2010                                 |   |                 1,200,000                 |   | ($0.57)                                     |

|                                   |   | **Annual**                                                                                                |   | **Price**                        |
|----------------------------------------|--------|-----------------------------------------------------------------------------------------------------------|--------|----------------------------------|
| **Calendar                      Year** |   | **Volumes                      (Gal)**                                                                    |   | **per                      Gal** |
| 2007                                   |   |                 1,395,030 |   | $1.15                            |
| 2008                                   |   |                 2,509,248 |   | $1.15                            |
| 2009                                   |   |                 2,265,480 |   | $1.15                            |

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Table              of Contents

**Investing      Activities — Acquisitions and Capital Expenditures**

**Financing      Activities**

**Initial      Public Offering**

**Our      Revolving Credit Facility**

|   | •  | with                respect to ABR loans, the alternate base rate equals the higher of                the                prime rate or the Federal funds effective rate plus 0.50%, plus an                applicable margin between 0% and 0.375%, or |
|--------|---------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |          |
|   | •  | with                respect to any Eurodollar loans for any interest period, the London                interbank rate, or LIBOR plus an applicable margin between 1.25%                and                1.875% per annum.                            |

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Table          of Contents

|   | •  | 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;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | •  | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |

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Table          of Contents

**Off-Balance      Sheet Arrangements**

**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:*

*Assumptions/Approach      Used:*

*Effect      if Different Assumptions Used:*

*Nature      of Critical Estimate Item:*

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Table          of Contents

*Assumptions/Approach      Used:*

*Effect      if Different Assumptions Used:*

*Nature      of Critical Estimate Item:*

**Item 3.       Quantitative and Qualitative Disclosure About Market Risk.**

**Commodity      Price Risk**

**Interest      Rate Risks**

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Table          of Contents

**Item 4.       Controls and Procedures.**

**PART      II – OTHER INFORMATION**

**Item 1A.  *LEGAL      PROCEEDINGS***

**Item 1A.  *RISK      FACTORS***

**Item 2.       Unregistered Sales of Equity Securities and Use of      Proceeds.**

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Table          of Contents

| **Issuer                        Purchases of Equity Securities**          |   |
|------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                   |   |   |   |   |   |   |   | **(c                        ) Total** |   |   | **(d)                        Maximum** |   |
|                                                                                                                   |   |   |   |   |   |   |   | **Number                        of** |   |   | **Number                        (or** |   |
|                                                                                                                   |   |   |   |   |   |   |   | **Units** |   |   | **Approximate** |   |
|                                                                                                                   |   |   |   |   |   |   |   | **Purchased                        as** |   |   | **Dollar                        Value) of** |   |
|                                                                                                                   |   |   |   |   |   |   |   | **Part                        of** |   |   | **Units                        that** |   |
|                                                                                                                   |   |   |   |   |   |   |   | **Publicly** |   |   | **May                        Yet Be** |   |
|                                                                                                                   |   | **(a)                        Total** |   |   | **(b)                        Average** |   |   | **Announced** |   |   | **Purchased                        Under** |   |
|                                                                                                                   |   | **Number                        of** |   |   | **Price** |   |   | **Plans                        or** |   |   | **the                        Plans or** |   |
| **Period**                                                                                                             |   | **Units                        Purchased** |   |   | **Paid                        per Unit** |   |   | **Programs** |   |   | **Programs** |   |
| April                        2007                                                                                      |   |   | 17,256 |   |   | $ | 28.01 |   |   |   | - |   |   |   | - |   |
| May                        2007                                                                                        |   |   | 5,782 |   |   | $ | 27.96 |   |   |   | - |   |   |   | - |   |
| Total                                                                                                                  |   |   | 23,038 |   |   | $ | 28.00 |   |   |   | - |   |   |   | - |   |

**Item 3.       Defaults Upon Senior Securities.**

**Item 4.       Submission of Matters to a Vote of Security Holders.**

|                                                |             |         |        |                                          |
|-----------------------------------------------------|------------------|--------------|-------------|-----------------------------------------------|
| **Name**                                            | **For**          | **Withheld** | **Abstain** | **Broker                          Non-Votes** |
| Cary                          D. Brown              | 24,725,329       | 32,185       | -           | -                                             |
| Kyle                          A. McGraw             |  24,725,379 | 32,135       | -           | -                                             |
| Dale                          A. Brown              |  24,726,329 | 31,185       | -           | -                                             |
| G.                          Larry Lawrence          |  24,725,379 | 32,135       |  -     | -                                             |
| William                          D. (Bill) Sullivan |  24,725,329 | 32,185       | -           | -                                             |
| S.                          Wil VanLoh, Jr.         |  24,733,579 |  23,935 | -           | -                                             |
| Kyle                          D. Vann               |  24,724,379 |  33,135 | -           | -                                             |

**Item 5.       Other Information.**

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Table          of Contents

**Item 6.       Exhibits.**

| **Exhibit                Number** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|-----------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1                               | Certificate                of Limited Partnership of Legacy Reserves LP (Incorporated by reference                to                Legacy Reserves LP’s Registration Statement on Form S-1 (File                No. 333-134056) filed May 12, 2006,                Exhibit 3.1)                                                                                                                                                                      |
| 3.2                               | Amended                and Restated Limited Partnership Agreement of Legacy Reserves LP                (Incorporated by reference to Legacy Reserve LP’s Registration Statement                on Form S-1 (File No. 33-134056) filed May 12, 2006,                included as Appendix A to the Prospectus and including specimen unit                certificate for the units)                                                                     |
| 3.3                               | Certificate                of Formation of Legacy Reserves GP, LLC (Incorporated by reference                to                Legacy Reserves LP’s Registration Statement on Form S-1 (File                No. 333-134056) filed May 12, 2006,                Exhibit 3.3)                                                                                                                                                                           |
| 3.4                               | Amended                and Restated Limited Liability Company Agreement of Legacy Reserves                GP,                LLC (Incorporated by reference to Legacy Reserves LP’s Registration                Statement on Form S-1 (File No. 333-134056) filed May 12,                2006, Exhibit 3.4)                                                                                                                                           |
| 4.1                               | Registration                Rights Agreement dated as of March 15, 2006 by and among Legacy                Reserves LP, Legacy Reserves GP, LLC and Friedman, Billings,                Ramsey & Co. (Incorporated by reference to Legacy Reserves LP’s                Registration Statement on Form S-1 (File No. 333-134056) filed                May 12, 2006, Exhibit 4.1)                                                          |
| 4.2                               | Registration                Rights Agreement dated June 29, 2006 between Henry Holding LP and                Legacy Reserves LP and Legacy Reserves GP, LLC (the “Henry Registration                Rights Agreement”) (Incorporated by reference to Legacy Reserves LP’s                Registration Statement on Form S-1 (File No. 333-134056) filed                September 5, 2006, Exhibit 4.2)                               |
| 4.3                               | Registration                Rights Agreement dated March 15, 2006 by and among Legacy Reserves                LP, Legacy Reserves GP, LLC and the other parties thereto (the “Founders                Registration Rights Agreement”) (Incorporated by reference to Legacy                Reserves LP’s Registration Statement on Form S-1 (File                No. 333-134056) filed September 5, 2006,                Exhibit 4.3) |
| 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 Quarterly Report                on Form                10-Q (File No. 001-33249) filed May 14, 2007, Exhibit                4.4)                                                                                              |
| 10.1*                             | Purchase,                Sale and Contribution Agreement dated March 20, 2007, by and among                Terry                S. Fields and Legacy Reserves Operating LP                                                                                                                                                                                                                                                                                                      |
| 10.2*                             | Purchase,                Sale and Contribution Agreement dated May 3, 2007, by and among Raven                Resources, LLC and Shenandoah Petroleum Corporation and Legacy Reserves                Operating LP                                                                                                                                                                                                                                                               |
| 31.1*                             | Rule 13a-14(a)                Certifications (under Section 302 of the Sarbanes-Oxley Act of                2002)                                                                                                                                                                                                                                                                                                                                                     |
| 31.2*                             | Rule 13a-14(a)                Certifications (under Section 302 of the Sarbanes-Oxley Act of                2002)                                                                                                                                                                                                                                                                                                                                                     |
| 32.1*                             | Section 1350                Certifications (under Section 906 of the Sarbanes-Oxley Act of                2002)                                                                                                                                                                                                                                                                                                                                                       |

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