UNITED STATES SECURITIES AND EXCHANGE
COMMISSION


Washington,
D.C. 20549





Form 10-Q





þQUARTERLY REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934




For
the quarterly period ended September 30, 2010




OR




oTRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





Commission
File Number


001-33024





EV
Energy Partners, L.P.


(Exact
name of registrant as specified in its charter)





Delaware
                (State
      or other jurisdiction
                of
      incorporation or organization)
              
              20–4745690
                (I.R.S.
      Employer Identification No.)1001
      Fannin, Suite 800, Houston, Texas
                (Address
      of principal executive offices)
              
              77002
                (Zip
      Code)





Registrant’s
telephone number, including area code: (713) 651-1144





Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.


YES þ  NO o





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).


YES o  NO o





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See definition of “accelerated filer,” “large accelerated filer”
and “smaller reporting company” in Rule 12b–2 of the Exchange Act.  Check
one:





Large
      accelerated filer o
              
              Accelerated
      filer þ
              
              Non-accelerated
      filer o
              
              Smaller
      reporting company o





Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b–2 of the Exchange Act).


YES o NO þ





As of
November 5, 2010, the registrant had 30,510,313 common units
outstanding.










Table
of Contents





PART
      I.  FINANCIAL INFORMATIONItem
      1.
                Condensed
      Consolidated Financial Statements (unaudited)
                
                2Item
      2.
                Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                
                16Item
      3.
                Quantitative
      and Qualitative Disclosures About Market Risk
                
                23Item
      4.
                Controls
      and Procedures
                
                23PART
      II.  OTHER INFORMATIONItem
      1.
                Legal
      Proceedings
                
                24Item
      1A.
                Risk
      Factors
                
                24Item
      2.
                Unregistered
      Sales of Equity Securities and Use of Proceeds
                
                24Item
      3.
                Defaults
      Upon Senior Securities
                
                24Item
      4.
                (Removed
      and Reserved)
                
                24Item
      5.
                Other
      Information
                
                24Item
      6.
                Exhibits
                
                24Signatures
                
                
                25


1


PART
I. FINANCIAL INFORMATION





ITEM
1. FINANCIAL STATEMENTS





EV
Energy Partners, L.P.


Condensed
Consolidated Balance Sheets


(In
thousands, except number of units)


(Unaudited)





September
      30,
                    
                    
                    December
      31,2010
                    
                    
                    2009ASSETSCurrent
      assets:Cash
      and cash equivalents
                    
                    $
                    23,256
                    
                    
                    $
                    18,806Accounts
      receivable:Oil,
      natural gas and natural gas liquids revenues
                    
                    
                    15,819
                    
                    
                    
                    14,599Related
      party
                    
                    
                    6,667
                    
                    
                    
                    2,881Other
                    
                    
                    20,505
                    
                    
                    
                    1,034Derivative
      asset
                    
                    
                    59,088
                    
                    
                    
                    26,733Other
      current assets
                    
                    
                    859
                    
                    
                    
                    625Total
      current assets
                    
                    
                    126,194
                    
                    
                    
                    64,678Oil
      and natural gas properties, net of accumulated depreciation, depletion and
      amortization; September 30, 2010, $160,253; December 31, 2009,
      $121,970
                    
                    
                    1,036,234
                    
                    
                    
                    771,752Other
      property, net of accumulated depreciation and amortization; September 30,
      2010, $424; December 31, 2009, $319
                    
                    
                    1,613
                    
                    
                    
                    742Long–term
      derivative asset
                    
                    
                    69,504
                    
                    
                    
                    68,549Other
      assets
                    
                    
                    1,580
                    
                    
                    
                    1,984Total
      assets
                    
                    $
                    1,235,125
                    
                    
                    $
                    907,705LIABILITIES
      AND OWNERS’ EQUITYCurrent
      liabilities:Accounts
      payable and accrued liabilities
                    
                    $
                    14,955
                    
                    
                    $
                    10,310Derivative
      liability
                    
                    
                    788
                    
                    
                    
                    1,543Total
      current liabilities
                    
                    
                    15,743
                    
                    
                    
                    11,853Asset
      retirement obligations
                    
                    
                    69,071
                    
                    
                    
                    42,533Long–term
      debt
                    
                    
                    334,000
                    
                    
                    
                    302,000Long–term
      liabilities
                    
                    
                    2,017
                    
                    
                    
                    3,212Long–term
      derivative liability
                    
                    
                    175
                    
                    
                    
                    676Commitments
      and contingenciesOwners’
      equity:Common
      unitholders – 30,510,313 units and 23,475,471 units issued and outstanding
      as of September 30, 2010 and December 31, 2009,
    respectively
                    
                    
                    816,083
                    
                    
                    
                    548,160General
      partner interest
                    
                    
                    (1,964
                    )
                    
                    
                    (729
                    )Total
      owners’ equity
                    
                    
                    814,119
                    
                    
                    
                    547,431Total
      liabilities and owners’ equity
                    
                    $
                    1,235,125
                    
                    
                    $
                    907,705





See
accompanying notes to unaudited condensed consolidated financial
statements.


2


EV
Energy Partners, L.P.


Condensed
Consolidated Statements of Operations


(In
thousands, except per unit data)


(Unaudited)





Three Months Ended
                    September 30,
                  
                  
                  Nine Months Ended
                    September 30,2010
                  
                  
                  2009
                  
                  
                  2010
                  
                  
                  2009Revenues:Oil,
      natural gas and natural gas liquids revenues
                  
                  $
                  40,527
                  
                  
                  $
                  28,198
                  
                  
                  $
                  118,554
                  
                  
                  $
                  79,361Transportation
      and marketing–related revenues
                  
                  
                  1,498
                  
                  
                  
                  1,351
                  
                  
                  
                  4,552
                  
                  
                  
                  6,401Total
      revenues
                  
                  
                  42,025
                  
                  
                  
                  29,549
                  
                  
                  
                  123,106
                  
                  
                  
                  85,762Operating
      costs and expenses:Lease
      operating expenses
                  
                  
                  12,640
                  
                  
                  
                  10,421
                  
                  
                  
                  38,941
                  
                  
                  
                  31,075Cost
      of purchased natural gas
                  
                  
                  1,132
                  
                  
                  
                  980
                  
                  
                  
                  3,447
                  
                  
                  
                  3,431Dry
      hole and exploration costs
                  
                  
                  235
                  
                  
                  
                  –
                  
                  
                  
                  235
                  
                  
                  
                  –Production
      taxes
                  
                  
                  1,876
                  
                  
                  
                  1,500
                  
                  
                  
                  5,676
                  
                  
                  
                  4,143Asset
      retirement obligations accretion expense
                  
                  
                  770
                  
                  
                  
                  494
                  
                  
                  
                  2,044
                  
                  
                  
                  1,508Depreciation,
      depletion and amortization
                  
                  
                  13,016
                  
                  
                  
                  12,935
                  
                  
                  
                  38,536
                  
                  
                  
                  39,304General
      and administrative expenses
                  
                  
                  6,014
                  
                  
                  
                  4,519
                  
                  
                  
                  16,563
                  
                  
                  
                  12,870Gain
      on sales of oil and natural gas properties
                  
                  
                  (36,793
                  )
                  
                  
                  –
                  
                  
                  
                  (40,617
                  )
                  
                  
                  –Total
      operating costs and expenses
                  
                  
                  (1,110
                  )
                  
                  
                  30,849
                  
                  
                  
                  64,825
                  
                  
                  
                  92,331Operating
      income (loss)
                  
                  
                  43,135
                  
                  
                  
                  (1,300
                  )
                  
                  
                  58,281
                  
                  
                  
                  (6,569
                  )Other
      income (expense), net:Realized
      gains on derivatives, net
                  
                  
                  13,305
                  
                  
                  
                  18,441
                  
                  
                  
                  35,171
                  
                  
                  
                  55,201Unrealized
      gains (losses) on derivatives, net
                  
                  
                  4,064
                  
                  
                  
                  (16,572
                  )
                  
                  
                  34,566
                  
                  
                  
                  (34,404
                  )Interest
      expense
                  
                  
                  (2,319
                  )
                  
                  
                  (3,065
                  )
                  
                  
                  (7,691
                  )
                  
                  
                  (9,909
                  )Other
      income (expense), net
                  
                  
                  61
                  
                  
                  
                  (273
                  )
                  
                  
                  454
                  
                  
                  
                  (317
                  )Total
      other income (expense), net
                  
                  
                  15,111
                  
                  
                  
                  (1,469
                  )
                  
                  
                  62,500
                  
                  
                  
                  10,571Income
      (loss) before income taxes
                  
                  
                  58,246
                  
                  
                  
                  (2,769
                  )
                  
                  
                  120,781
                  
                  
                  
                  4,002Income
      taxes
                  
                  
                  (111
                  )
                  
                  
                  (64
                  )
                  
                  
                  (242
                  )
                  
                  
                  (121
                  )Net
      income (loss)
                  
                  $
                  58,135
                  
                  
                  $
                  (2,833
                  )
                  
                  $
                  120,539
                  
                  
                  $
                  3,881General
      partner’s interest in net income (loss), including incentive distribution
      rights
                  
                  $
                  3,764
                  
                  
                  $
                  1,916
                  
                  
                  $
                  9,600
                  
                  
                  $
                  5,099Limited
      partners’ interest in net income (loss)
                  
                  $
                  54,371
                  
                  
                  $
                  (4,749
                  )
                  
                  $
                  110,939
                  
                  
                  $
                  (1,218
                  )Net
      income (loss) per limited partner unit:Basic
                  
                  $
                  1.88
                  
                  
                  $
                  (0.23
                  )
                  
                  $
                  4.07
                  
                  
                  $
                  (0.07
                  )Diluted
                  
                  $
                  1.87
                  
                  
                  $
                  (0.23
                  )
                  
                  $
                  4.06
                  
                  
                  $
                  (0.07
                  )Weighted
      average limited partner units outstanding:Basic
                  
                  
                  28,935
                  
                  
                  
                  20,390
                  
                  
                  
                  27,257
                  
                  
                  
                  17,859Diluted
                  
                  
                  29,025
                  
                  
                  
                  20,390
                  
                  
                  
                  27,309
                  
                  
                  
                  17,859Distributions
      declared per unit
                  
                  $
                  0.758
                  
                  
                  $
                  0.754
                  
                  
                  $
                  2.271
                  
                  
                  $
                  2.259





See
accompanying notes to unaudited condensed consolidated financial
statements.


3


EV
Energy Partners, L.P.


Condensed
Consolidated Statements of Changes in Owners’ Equity


(In
thousands, except number of units)


(Unaudited)





Common
                    Unitholders
                  
                  
                  General
                    Partner
                    Interest
                  
                  
                  Total
                    Owners’
                    EquityBalance,
      December 31, 2009
                  
                  $
                  548,160
                  
                  
                  $
                  (729
                  )
                  
                  $
                  547,431Conversion
      of 84,842 vested phantom units
                  
                  
                  2,580
                  
                  
                  
                  –
                  
                  
                  
                  2,580Proceeds
      from public equity offerings, net of underwriters
discounts
                  
                  
                  204,965
                  
                  
                  
                  –
                  
                  
                  
                  204,965Offering
      costs
                  
                  
                  (277
                  )
                  
                  
                  –
                  
                  
                  
                  (277
                  )Contributions
      from general partner
                  
                  
                  –
                  
                  
                  
                  4,267
                  
                  
                  
                  4,267Distributions
                  
                  
                  (58,768
                  )
                  
                  
                  (7,913
                  )
                  
                  
                  (66,681
                  )Equity–based
      compensation
                  
                  
                  1,295
                  
                  
                  
                  –
                  
                  
                  
                  1,295Net
      income
                  
                  
                  118,128
                  
                  
                  
                  2,411
                  
                  
                  
                  120,539Balance,
      September 30, 2010
                  
                  $
                  816,083
                  
                  
                  $
                  (1,964
                  )
                  
                  $
                  814,119





Common
                    Unitholders
                  
                  
                  Subordinated
                    Unitholders
                  
                  
                  General
                    Partner
                    Interest
                  
                  
                  Total
                    Owners’
                    EquityBalance,
      December 31, 2008
                  
                  $
                  432,031
                  
                  
                  $
                  21,618
                  
                  
                  $
                  3,835
                  
                  
                  $
                  457,484Conversion
      of 103,409 vested phantom units
                  
                  
                  1,706
                  
                  
                  
                  –
                  
                  
                  
                  –
                  
                  
                  
                  1,706Proceeds
      from public equity offerings, net of underwriters discount
                  
                  
                  149,038
                  
                  
                  
                  –
                  
                  
                  
                  –
                  
                  
                  
                  149,038Offering
      costs
                  
                  
                  (435
                  )
                  
                  
                  –
                  
                  
                  
                  –
                  
                  
                  
                  (435
                  )Contributions
      from general partner
                  
                  
                  –
                  
                  
                  
                  –
                  
                  
                  
                  3,077
                  
                  
                  
                  3,077Distributions
                  
                  
                  (32,653
                  )
                  
                  
                  (6,994
                  )
                  
                  
                  (5,296
                  )
                  
                  
                  (44,943
                  )Equity–based
      compensation
                  
                  
                  100
                  
                  
                  
                  –
                  
                  
                  
                  –
                  
                  
                  
                  100Net
      income
                  
                  
                  2,751
                  
                  
                  
                  1,052
                  
                  
                  
                  78
                  
                  
                  
                  3,881Balance,
      September 30, 2009
                  
                  $
                  552,538
                  
                  
                  $
                  15,676
                  
                  
                  $
                  1,694
                  
                  
                  $
                  569,908





See
accompanying notes to unaudited condensed consolidated financial
statements.


4


EV
Energy Partners, L.P.


Condensed
Consolidated Statements of Cash Flows


(In
thousands)


(Unaudited)





Nine
      Months Ended
                      September
      30,2010
                    
                    
                    2009Cash
      flows from operating activities:Net
      income
                    
                    $
                    120,539
                    
                    
                    $
                    3,881Adjustments
      to reconcile net income to net cash flows provided by operating
      activities:Dry
      hole costs
                    
                    
                    69
                    
                    
                    
                    –Asset
      retirement obligations accretion expense
                    
                    
                    2,044
                    
                    
                    
                    1,508Depreciation,
      depletion and amortization
                    
                    
                    38,536
                    
                    
                    
                    39,304Equity–based
      compensation cost
                    
                    
                    3,414
                    
                    
                    
                    2,197Gain
      on sales of oil and natural gas properties
                    
                    
                    (40,617
                    )
                    
                    
                    –Unrealized
      (gains) losses on derivatives, net
                    
                    
                    (34,566
                    )
                    
                    
                    34,404Amortization
      of deferred loan costs
                    
                    
                    413
                    
                    
                    
                    662Other,
      net
                    
                    
                    (38
                    )
                    
                    
                    350Changes
      in operating assets and liabilities:Accounts
      receivable
                    
                    
                    (5,028
                    )
                    
                    
                    6,096Other
      current assets
                    
                    
                    2,514
                    
                    
                    
                    327Other
      assets
                    
                    
                    –
                    
                    
                    
                    (1
                    )Accounts
      payable and accrued liabilities
                    
                    
                    2,649
                    
                    
                    
                    (358
                    )Deferred
      revenues
                    
                    
                    –
                    
                    
                    
                    (4,120
                    )Long–term
      liabilities
                    
                    
                    (734
                    )
                    
                    
                    –Other
                    
                    
                    (229
                    )
                    
                    
                    35Net
      cash flows provided by operating activities
                    
                    
                    88,966
                    
                    
                    
                    84,285Cash
      flows from investing activities:Acquisitions
      of oil and natural gas properties
                    
                    
                    (267,683
                    )
                    
                    
                    (16,807
                    )Deposit
      on acquisition of oil and natural gas properties
                    
                    
                    –
                    
                    
                    
                    (2,500
                    )Development
      of oil and natural gas properties
                    
                    
                    (16,219
                    )
                    
                    
                    (11,506
                    )Proceeds
      from sales of oil and natural gas properties
                    
                    
                    25,120
                    
                    
                    
                    –Net
      cash flows used in investing activities
                    
                    
                    (258,782
                    )
                    
                    
                    (30,813
                    )Cash
      flows from financing activities:Long–term
      debt borrowings
                    
                    
                    258,000
                    
                    
                    
                    –Repayment
      of long–term debt borrowings
                    
                    
                    (226,000
                    )
                    
                    
                    (175,000
                    )Loan
      costs incurred
                    
                    
                    (8
                    )
                    
                    
                    (36
                    )Proceeds
      from public equity offerings, net of underwriters
discounts
                    
                    
                    204,965
                    
                    
                    
                    149,038Offering
      costs
                    
                    
                    (277
                    )
                    
                    
                    (435
                    )Contribution
      from general partner
                    
                    
                    4,267
                    
                    
                    
                    1,641Distributions
      to partners
                    
                    
                    (66,681
                    )
                    
                    
                    (44,943
                    )Net
      cash flows provided by (used in) financing activities
                    
                    
                    174,266
                    
                    
                    
                    (69,735
                    )Increase
      (decrease) in cash and cash equivalents
                    
                    
                    4,450
                    
                    
                    
                    (16,263
                    )Cash
      and cash equivalents – beginning of period
                    
                    
                    18,806
                    
                    
                    
                    41,628Cash
      and cash equivalents – end of period
                    
                    $
                    23,256
                    
                    
                    $
                    25,365





See
accompanying notes to unaudited condensed consolidated financial
statements.


5


EV
Energy Partners, L.P.


Notes
to Unaudited Condensed Consolidated Financial Statements




NOTE
1. ORGANIZATION AND NATURE OF BUSINESS





Nature
of Operations





EV Energy
Partners, L.P. (“we,” “our” or “us”) is a publicly held limited partnership that
engages in the acquisition, development and production of oil and natural gas
properties.  Our general partner is EV Energy GP, L.P. (“EV Energy GP”), a
Delaware limited partnership, and the general partner of our general partner is
EV Management, LLC (“EV Management”), a Delaware limited liability
company.  EV Management is a wholly owned subsidiary of EnerVest, Ltd.
(“EnerVest”), a Texas limited partnership.  EnerVest and its affiliates
also have a significant interest in us through their 71.25% ownership of EV
Energy GP which, in turn, owns a 2% general partner interest in us and all of
our incentive distribution rights.





Basis
of Presentation





Our
unaudited condensed consolidated financial statements included herein have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission (the “SEC”).  Accordingly, certain information and disclosures
normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted.  We believe that the presentations and disclosures
herein are adequate to make the information not misleading.  The unaudited
condensed consolidated financial statements reflect all adjustments (consisting
of normal recurring adjustments) necessary for a fair presentation of the
interim periods.  The results of operations for the interim periods are not
necessarily indicative of the results of operations to be expected for the full
year.  These interim financial statements should be read in conjunction
with our Annual Report on Form 10–K for the year ended December 31,
2009.





All
intercompany accounts and transactions have been eliminated in
consolidation.  In the Notes to Unaudited Condensed Consolidated Financial
Statements, all dollar and share amounts in tabulations are in thousands of
dollars and shares, respectively, unless otherwise indicated.





NOTE 2. EQUITY–BASED
COMPENSATION





We grant
various forms of equity–based awards to employees, consultants and directors of
EV Management and its affiliates who perform services for us.  These
equity–based awards consist primarily of phantom units and performance
units.





We
account for the phantom units issued prior to 2009 as liability awards, and the
fair value of these phantom units is remeasured at the end of each reporting
period based on the current market price of our common units until
settlement.  Prior to settlement, compensation cost is recognized for these
phantom units based on the proportionate amount of the requisite service period
that has been rendered to date.  We account for the phantom units issued
subsequent to 2008 as equity awards, and we estimate the fair value of these
phantom units using the Black–Scholes option pricing model.  We account for
the performance units as equity awards, and we estimated the fair value of these
performance units using the Monte Carlo simulation model.





The
following table presents the compensation costs recognized in our unaudited
condensed consolidated statements of operations:





Three
      Months Ended
                      September
      30,
                    
                    
                    Nine
      Months Ended
                      September
      30,2010
                    
                    
                    2009
                    
                    
                    2010
                    
                    
                    2009Liability
      awards
                    
                    $
                    843
                    
                    
                    $
                    851
                    
                    
                    $
                    2,119
                    
                    
                    $
                    2,097Equity
      awards
                    
                    
                    468
                    
                    
                    
                    46
                    
                    
                    
                    1,295
                    
                    
                    
                    100Total
                    
                    $
                    1,311
                    
                    
                    $
                    897
                    
                    
                    $
                    3,414
                    
                    
                    $
                    2,197





These
costs are included in “General and administrative expenses” in our unaudited
condensed consolidated statements of operations.


6


EV
Energy Partners, L.P.


Notes
to Unaudited Condensed Consolidated Financial Statements
(continued)





As of
September 30, 2010, total unrecognized compensation costs related to the
unvested liability awards and equity awards and the period over which they are
expected to be recognized are as follows:





Unrecognized
                      Compensation
                      Expense
                    
                    
                    Weighted
                      Average
                      Period
                      (in years)Liability
      awards
                    
                    $
                    3,700
                    
                    
                    
                    2.1Equity
      awards
                    
                    
                    6,009
                    
                    
                    
                    3.2





NOTE
3. ACQUISITIONS





On
September 29, 2010, we acquired oil and natural gas properties in the
Mid–Continent area for $119.9 million, subject to customary closing conditions
and purchase price adjustments.





On March
30, 2010 followed by a second closing on June 29, 2010, we, along with certain
institutional partnerships managed by EnerVest, acquired oil and natural gas
properties in the Appalachian Basin.  We acquired a 46.15% interest in
these properties for $145.8 million.





The
following table reflects pro forma revenues, net income and net income (loss)
per limited partner unit as if these acquisitions had taken place at the
beginning of the periods presented.  These unaudited pro forma amounts do
not purport to be indicative of the results that would have actually been
obtained during the periods presented or that may be obtained in the
future.





Three
      Months Ended
                    September
      30,
                  
                  
                  Nine
      Months Ended
                    September
      30,2010
                  
                  
                  2009
                  
                  
                  2010
                  
                  
                  2009Revenues
                  
                  $
                  49,608
                  
                  
                  $
                  42,053
                  
                  
                  $
                  153,634
                  
                  
                  $
                  121,695Net
      income (loss)
                  
                  
                  58,952
                  
                  
                  
                  (3,063
                  )
                  
                  
                  125,544
                  
                  
                  
                  2,327Net
      income (loss) per limited partner unit:Basic
                  
                  $
                  1.91
                  
                  
                  $
                  (0.24
                  )
                  
                  $
                  4.25
                  
                  
                  $
                  (0.15
                  )Diluted
                  
                  $
                  1.90
                  
                  
                  $
                  (0.24
                  )
                  
                  $
                  4.24
                  
                  
                  $
                  (0.15
                  )





On April
29, 2010, we, along with certain institutional partnerships managed by EnerVest,
acquired oil and natural gas properties in the Appalachian Basin.  We
acquired a 17.2% interest in these properties for $2.0 million.





The
recognized fair values of the identifiable assets acquired and liabilities
assumed in connection with these acquisitions are as follows:





Accounts
      receivable
                    
                    $
                    136Other
      current assets
                    
                    
                    2,748Oil
      and natural gas properties
                    
                    
                    289,754Other
      property
                    
                    
                    1,036Accounts
      payable and accrued liabilities
                    
                    
                    (79
                    )Asset
      retirement obligations
                    
                    
                    (25,912
                    )$
                    267,683





The
amounts included in the table above for the September 2010 acquisition represent
preliminary estimates of the fair values of the identifiable assets acquired and
liabilities assumed for this acquisition.  We expect to finalize these fair
values in the fourth quarter of 2010.


7


EV
Energy Partners, L.P.


Notes
to Unaudited Condensed Consolidated Financial Statements
(continued)





NOTE
4. DIVESTITURES





On March
1, 2010, we sold 14 non–core oil and natural gas wells and recorded a loss on
the sale of $0.6 million.





On June
14, 2010, we sold unproved oil and natural gas properties and recorded a gain on
the sale of $4.4 million.





On July
1, 2010, we sold unproved oil and natural gas properties for $39.9 million and
recorded a gain on the sale of $36.8 million.  We received $20.6 million on
July 1, 2010 and received $19.3 million on October 29, 2010.  The $19.3
million is included in “Accounts receivable – other” in our unaudited condensed
consolidated balance sheets.





NOTE
5. RISK MANAGEMENT





Our
business activities expose us to risks associated with changes in the market
price of oil and natural gas.  In addition, our floating rate credit
facility exposes us to risks associated with changes in interest
rates   As such, future earnings are subject to fluctuation due
to changes in the market price of oil and natural gas and interest rates. 
We use derivatives to reduce our risk of changes in the prices of oil and
natural gas and interest rates.  Our policies do not permit the use of
derivatives for speculative purposes.





We have
elected not to designate any of our derivatives as hedging instruments. 
Accordingly, changes in the fair value of our derivatives are recorded
immediately to net income (loss) as “Unrealized gains (losses) on derivatives,
net” in our unaudited condensed consolidated statements of
operations.


8


EV
Energy Partners, L.P.


Notes
to Unaudited Condensed Consolidated Financial Statements
(continued)





As of
September 30, 2010, we had entered into oil and natural gas commodity contracts
with the following terms:





Period Covered
                
                Index
                
                Hedged
                  Volume
                
                
                Weighted
                  Average
                  Fixed
                  Price
                
                
                Weighted
                  Average
                  Floor
                  Price
                
                
                Weighted
                  Average
                  Ceiling
                  PriceOil
      (MBbls):Swaps
      – 2010
                
                WTI
                
                
                242.4
                
                
                $
                86.11
                
                
                $
                
                
                $Swaps
      – 2011
                
                WTI
                
                
                310.2
                
                
                
                96.70Collar
      – 2011
                
                WTI
                
                
                401.5
                
                
                
                
                
                
                
                110.00
                
                
                
                166.45Swaps
      – 2012
                
                WTI
                
                
                287.3
                
                
                
                97.70Collar
      – 2012
                
                WTI
                
                
                366.0
                
                
                
                
                
                
                
                110.00
                
                
                
                170.85Swaps
      – 2013
                
                WTI
                
                
                511.0
                
                
                
                78.64Swap
      – January 2014 through July 2014
                
                WTI
                
                
                106.0
                
                
                
                84.60Swaps
      – January 2014 through August 2014
                
                WTI
                
                
                194.4
                
                
                
                82.28Natural
      Gas (MmmBtus):Swaps
      – 2010
                
                Dominion
      Appalachia
                
                
                614.4
                
                
                
                8.19Swap
      – 2011
                
                Dominion
      Appalachia
                
                
                912.5
                
                
                
                8.69Collar
      – 2011
                
                Dominion
      Appalachia
                
                
                1,095.0
                
                
                
                
                
                
                
                9.00
                
                
                
                12.15Collar
      – 2012
                
                Dominion
      Appalachia
                
                
                1,830.0
                
                
                
                
                
                
                
                8.95
                
                
                
                11.45Swap
      – 2010
                
                Appalachia
      Columbia
                
                
                27.8
                
                
                
                5.75Swaps
      – 2010
                
                NYMEX
                
                
                3,073.8
                
                
                
                6.54Collar
      – 2010
                
                NYMEX
                
                
                138.0
                
                
                
                
                
                
                
                7.50
                
                
                
                10.00Swaps
      – 2011
                
                NYMEX
                
                
                10,840.5
                
                
                
                6.81Collar
      – 2011
                
                NYMEX
                
                
                440.6
                
                
                
                
                
                
                
                5.85
                
                
                
                7.55Swaps
      – 2012
                
                NYMEX
                
                
                10,431.0
                
                
                
                7.22Swaps
      – 2013
                
                NYMEX
                
                
                3,285.0
                
                
                
                7.23Swaps
      – January 2014 through August 2014
                
                NYMEX
                
                
                1,215.0
                
                
                
                7.06Swap –  2010
                
                MICHCON_NB
                
                
                460.0
                
                
                
                8.34Collar
      – 2011
                
                MICHCON_NB
                
                
                1,642.5
                
                
                
                
                
                
                
                8.70
                
                
                
                11.85Collar
      – 2012
                
                MICHCON_NB
                
                
                1,647.0
                
                
                
                
                
                
                
                8.75
                
                
                
                11.05Swaps
      – 2010
                
                HOUSTON
      SC
                
                
                139.4
                
                
                
                5.78Collar
      – 2010
                
                HOUSTON
      SC
                
                
                322.0
                
                
                
                
                
                
                
                7.25
                
                
                
                9.55Collar
      – 2011
                
                HOUSTON
      SC
                
                
                1,277.5
                
                
                
                
                
                
                
                8.25
                
                
                
                11.65Collar
      – 2012
                
                HOUSTON
      SC
                
                
                1,098.0
                
                
                
                
                
                
                
                8.25
                
                
                
                11.10Swap
      – 2010
                
                EL
      PASO PERMIAN
                
                
                230.0
                
                
                
                7.68Swap
      – 2011
                
                EL
      PASO PERMIAN
                
                
                912.5
                
                
                
                9.30Swap
      – 2012
                
                EL
      PASO PERMIAN
                
                
                732.0
                
                
                
                9.21Swap
      – 2013
                
                EL
      PASO PERMIAN
                
                
                1,095.0
                
                
                
                6.77Swap
      – 2013
                
                SAN
      JUAN BASIN
                
                
                1,095.0
                
                
                
                6.66





As of
September 30, 2010, we had entered into natural gas basis swaps with the
following terms:





Period Covered
              
              Floating Index 1
              
              Floating Index 2
              
              Hedged
                Volume
                (Mmmbtus)
              
              
              Spread2010
              
              NYMEX
              
              Panhandle
      TX/OK
              
              
              184.0
              
              
              
              (0.30
              )2010
              
              NYMEX
              
              EL
      PASO PERMIAN
              
              
              92.0
              
              
              
              (0.275
              )2010
              
              NYMEX
              
              SAN
      JUAN BASIN
              
              
              414.0
              
              
              
              (0.34
              )2011
              
              NYMEX
              
              Dominion
      Appalachia
              
              
              346.0
              
              
              
              0.19752011
              
              NYMEX
              
              Appalachia
      Columbia
              
              
              94.5
              
              
              
              0.15




9


EV
Energy Partners, L.P.


Notes
to Unaudited Condensed Consolidated Financial Statements
(continued)





As of
September 30, 2010, we had entered into interest rate swaps with the following
terms:





Period Covered
              
              Notional
                Amount
              
              Floating
                Rate
              
              Fixed
                RateOctober
      2010 – July 2012
              
              $
              200,000
              
              1
      Month LIBOR
              
              
              4.163
              %October
      2010 –  September 2012
              
              
              40,000
              
              1
      Month LIBOR
              
              
              2.145
              %





The fair
value of these derivatives was as follows:





Asset Derivatives
                
                
                Liability DerivativesSeptember 30,
                  2010
                
                
                December 31,
                  2009
                
                
                September 30,
                  2010
                
                
                December 31,
                  2009Oil
      and natural gas commodity contracts
                
                $
                142,778
                
                
                $
                111,541
                
                
                $
                691
                
                
                $
                6,413Interest
      rate swaps
                
                
                –
                
                
                
                –
                
                
                
                14,458
                
                
                
                12,065Total
      fair value
                
                
                142,778
                
                
                
                111,541
                
                
                
                15,149
                
                
                
                18,478Netting
      arrangements
                
                
                (14,186
                )
                
                
                (16,259
                )
                
                
                (14,186
                )
                
                
                (16,259
                )Net
      recorded fair value
                
                $
                128,592
                
                
                $
                95,282
                
                
                $
                963
                
                
                $
                2,219Location
      of derivatives in our condensed consolidated balance
    sheets:Derivative
      asset
                
                $
                59,088
                
                
                $
                26,733
                
                
                $
                –
                
                
                $
                –Long–term
      derivative asset
                
                
                69,504
                
                
                
                68,549
                
                
                
                –
                
                
                
                –Derivative
      liability
                
                
                –
                
                
                
                –
                
                
                
                788
                
                
                
                1,543Long–term
      derivative liability
                
                
                –
                
                
                
                –
                
                
                
                175
                
                
                
                676$
                128,592
                
                
                $
                95,282
                
                
                $
                963
                
                
                $
                2,219





The
following table presents the impact of derivatives and their location within the
unaudited condensed consolidated statements of operations:





Three Months Ended
                  September 30,
                
                
                Nine Months Ended
                  September 30,2010
                
                
                2009
                
                
                2010
                
                
                2009Realized
      gains on derivatives, net:Oil
      and natural gas commodity contracts
                
                $
                15,467
                
                
                $
                20,618
                
                
                $
                41,634
                
                
                $
                61,352Interest
      rate swaps
                
                
                (2,162
                )
                
                
                (2,177
                )
                
                
                (6,463
                )
                
                
                (6,151
                )Total
                
                $
                13,305
                
                
                $
                18,441
                
                
                $
                35,171
                
                
                $
                55,201Unrealized
      gains (losses) on derivatives, net:Oil
      and natural gas commodity contracts
                
                $
                4,258
                
                
                $
                (14,911
                )
                
                $
                36,959
                
                
                $
                (37,127
                )Interest
      rate swaps
                
                
                (194
                )
                
                
                (1,661
                )
                
                
                (2,393
                )
                
                
                2,723Total
                
                $
                4,064
                
                
                $
                (16,572
                )
                
                $
                34,566
                
                
                $
                (34,404
                )




10


EV
Energy Partners, L.P.


Notes
to Unaudited Condensed Consolidated Financial Statements
(continued)





NOTE
6. FAIR VALUE MEASUREMENTS





The
following table presents the fair value hierarchy table for our assets and
liabilities that are required to be measured at fair value on a recurring
basis:





Fair Value at Reporting Date Using:September 30,
                    2010
                  
                  
                  Quoted Prices
                    in Active
                    Markets for
                    Identical
                    Assets
                    (Level 1)
                  
                  
                  Significant
                    Other
                    Observable
                    Inputs
                    (Level 2)
                  
                  
                  Significant
                    Unobservable
                    Inputs
                    (Level 3)Derivative
      assets:Oil
      and natural gas commodity contracts
                  
                  $
                  142,778
                  
                  
                  $
                  –
                  
                  
                  $
                  142,778
                  
                  
                  $
                  –Derivative
      liabilities:Oil
      and natural gas commodity contracts
                  
                  $
                  691
                  
                  
                  $
                  –
                  
                  
                  $
                  691
                  
                  
                  $
                  –Interest
      rate swaps
                  
                  
                  14,458
                  
                  
                  
                  –
                  
                  
                  
                  14,458
                  
                  
                  
                  –Total
      derivative liabilities
                  
                  $
                  15,149
                  
                  
                  $
                  –
                  
                  
                  $
                  15,149
                  
                  
                  $
                  –





Fair Value at Reporting Date
      Using:December 31, 2009
                  
                  
                  Quoted Prices
                    in Active
                    Markets for
                    Identical
                    Assets
                    (Level 1)
                  
                  
                  Significant
                    Other
                    Observable
                    Inputs
                    (Level 2)
                  
                  
                  Significant
                    Unobservable
                    Inputs
                    (Level 3)Derivative
      assets:Oil
      and natural gas commodity contracts
                  
                  $
                  111,541
                  
                  
                  $
                  –
                  
                  
                  $
                  111,541
                  
                  
                  $
                  –Derivative
      liabilities:Oil
      and natural gas commodity contracts
                  
                  $
                  6,413
                  
                  
                  $
                  –
                  
                  
                  $
                  6,413
                  
                  
                  $
                  –Interest
      rate swaps
                  
                  
                  12,065
                  
                  
                  
                  –
                  
                  
                  
                  12,065
                  
                  
                  
                  –Total
      derivative liabilities
                  
                  $
                  18,478
                  
                  
                  $
                  –
                  
                  
                  $
                  18,478
                  
                  
                  $
                  –





Our
derivatives consist of over–the–counter (“OTC”) contracts which are not traded
on a public exchange.   These derivatives are indexed to active
trading hubs for the underlying commodity, and are OTC contracts commonly used
in the energy industry and offered by a number of financial institutions and
large energy companies.





As the
fair value of these derivatives is based on inputs using market prices obtained
from independent brokers or determined using quantitative models that use as
their basis readily observable market parameters that are actively quoted and
can be validated through external sources, including third party pricing
services, brokers and market transactions, we have categorized these derivatives
as Level 2.  We value these derivatives based on observable market
data for similar instruments.  This observable data includes the
forward curve for commodity prices based on quoted market prices and prospective
volatility factors related to changes in the forward curves and yield curves
based on money market rates and interest rate swap data.  Our
estimates of fair value have been determined at discrete points in time based on
relevant market data.  These estimates involve uncertainty and cannot
be determined with precision.  There were no changes in valuation
techniques or related inputs in the nine months ended September 30,
2010.




11


EV
Energy Partners, L.P.


Notes
to Unaudited Condensed Consolidated Financial Statements
(continued)





NOTE
7. ASSET RETIREMENT OBLIGATIONS





We record
an asset retirement obligation (“ARO”) and capitalize the asset retirement cost
in oil and natural gas properties in the period in which the retirement
obligation is incurred based upon the fair value of an obligation to perform
site reclamation, dismantle facilities or plug and abandon
wells.  After recording these amounts, the ARO is accreted to its
future estimated value using an assumed cost of funds and the additional
capitalized costs are depreciated on a unit–of–production basis.  The
changes in the aggregate ARO are as follows:





Balance
      as of December 31, 2009
                  
                  $
                  43,688Liabilities
      incurred or assumed in acquisitions
                  
                  
                  25,912Sale
      of oil and natural gas properties
                  
                  
                  (292
                  )Accretion
      expense
                  
                  
                  2,044Revisions
      in estimated cash flows
                  
                  
                  (991
                  )Payments
      to settle liabilities
                  
                  
                  (261
                  )Balance
      as of September 30, 2010
                  
                  $
                  70,100





As of
September 30, 2010 and December 31, 2009, $1.0 million and $1.2 million,
respectively, of our ARO is classified as current and is included in “Accounts
payable and accrued liabilities” in our unaudited condensed consolidated balance
sheets.





NOTE
8. LONG–TERM DEBT





As of
September 30, 2010, our credit facility consists of a $700.0 million senior
secured revolving credit facility that expires in October
2012.  Borrowings under the facility are secured by a first priority
lien on substantially all of our assets and the assets of our
subsidiaries.  We may use borrowings under the facility for acquiring
and developing oil and natural gas properties, for working capital purposes, for
general corporate purposes and for funding distributions to
partners.  We also may use up to $50.0 million of available borrowing
capacity for letters of credit.  The facility requires the maintenance
of a current ratio (as defined in the facility) of greater than 1.0 and a ratio
of total debt to earnings plus interest expense, taxes, depreciation, depletion
and amortization expense and exploration expense of no greater than 4.0 to
1.0.  As of September 30, 2010, we were in compliance with these
financial covenants.





Borrowings
under the facility bear interest at a floating rate based on, at our election, a
base rate or the London Inter–Bank Offered Rate plus applicable premiums based
on the percent of the borrowing base that we have outstanding (weighted average
effective interest rate of 3.50% at September 30, 2010).





Borrowings
under the facility may not exceed a “borrowing base” determined by the lenders
under the facility based on our oil and natural gas reserves.  As of
September 30, 2010, the borrowing base under the facility was $465.0
million.  The borrowing base is subject to scheduled redeterminations
as of April 1 and October 1 of each year with an additional redetermination once
per calendar year at our request or at the request of the lenders and with one
calculation that may be made at our request during each calendar year in
connection with material acquisitions or divestitures of
properties.





We had
$334.0 million and $302.0 million outstanding under the facility at September
30, 2010 and December 31, 2009, respectively.





Effective
September 30, 2010, we entered into an amendment to our credit
facility.  This amendment provides that during the period between
September 30, 2010 and the first scheduled redetermination date thereafter
(expected to occur on or around April 1, 2011), we may issue senior debt of up
to $200.0 million other than in conjunction with an interim redetermination,
without the borrowing base then in effect on the date on which such senior debt
is issued being reduced by an amount equal to the product of 0.30 multiplied by
the stated principal amount of such senior debt up to $200.0
million.  This amendment also included a reaffirmation of our
borrowing base at $465.0 million.





NOTE
9. COMMITMENTS AND CONTINGENCIES





We are
involved in disputes or legal actions arising in the ordinary course of
business.  We do not believe the outcome of such disputes or legal
actions will have a material adverse effect on our unaudited condensed
consolidated financial statements, and no amounts have been accrued at September
30, 2010 or December 31, 2009.


12


EV
Energy Partners, L.P.


Notes
to Unaudited Condensed Consolidated Financial Statements
(continued)




NOTE
10. OWNERS’ EQUITY





Units
Outstanding





At
September 30, 2010, owner’s equity consists of 30,510,313 common units,
representing a 98% limited partnership interest in us, and a 2% general
partnership interest.





Issuance
of Units





In
January 2010, 108,971 phantom units vested at a fair value of $3.3
million.  Of these vested units, 84,842 were converted to common units
at a fair value of $2.6 million and 24,129 were settled in cash at a fair value
of $0.7 million.  In addition, 50,000 performance units vested and
were converted to common units.





On
February 12, 2010, we closed a public offering of 3.45 million of our common
units at an offering price of $28.08 per common unit.  We received net
proceeds of $94.6 million, including a contribution of $2.0 million by our
general partner to maintain its 2% interest in us.  We used these net
proceeds to repay indebtedness outstanding under our credit
facility.





On August
16, 2010, we closed a public offering of 3.45 million of our common units at an
offering price of $33.97 per common unit.  We received net proceeds of
$114.4 million, including a contribution of $2.3 million by our general partner
to maintain its 2% interest in us.  We used these net proceeds to
repay indebtedness outstanding under our credit facility.





Cash
Distributions





The
following sets forth the distributions we paid during the nine months ended
September 30, 2010:





Date Paid
              
              Period Covered
              
              Distribution
                per Unit
              
              
              Total
                DistributionFebruary
      12, 2010
              
              October
      1, 2009 – December 31, 2009
              
              $
              0.755
              
              
              $
              20,221May
      14, 2010
              
              January
      1, 2010 – March 31, 2010
              
              
              0.756
              
              
              
              23,212August
      13, 2010
              
              April
      1, 2010 – June 30, 2010
              
              
              0.757
              
              
              
              23,248$
              66,681





On
October 26, 2010, the board of directors of EV Management declared a $0.758 per
unit distribution for the third quarter of 2010 on all common
units.  The distribution of approximately $26.3 million is to be paid
on November 12, 2010 to unitholders of record at the close of business on
November 5, 2010.


13


EV
Energy Partners, L.P.


Notes
to Unaudited Condensed Consolidated Financial Statements
(continued)





NOTE
11. NET INCOME (LOSS) PER LIMITED PARTNER UNIT





The
following sets forth the calculation of net income (loss) per limited partner
unit:




Three
      Months Ended
                    September
      30,
                  
                  
                  Nine
      Months Ended
                    September
      30,2010
                  
                  
                  2009
                  
                  
                  2010
                  
                  
                  2009Net
      income (loss)
                  
                  $
                  58,135
                  
                  
                  $
                  (2,833
                  )
                  
                  $
                  120,539
                  
                  
                  $
                  3,881Less:Incentive
      distribution rights
                  
                  
                  (2,601
                  )
                  
                  
                  (1,972
                  )
                  
                  
                  (7,189
                  )
                  
                  
                  (5,021
                  )General
      partner’s 2% interest in net (income) loss
                  
                  
                  (1,163
                  )
                  
                  
                  56
                  
                  
                  
                  (2,411
                  )
                  
                  
                  (78
                  )Limited
      partners’ interest in net income (loss)
                  
                  $
                  54,371
                  
                  
                  $
                  (4,749
                  )
                  
                  $
                  110,939
                  
                  
                  $
                  (1,218
                  )Weighted
      average limited partner units outstanding:Common
      units
                  
                  
                  28,785
                  
                  
                  
                  17,190
                  
                  
                  
                  27,104
                  
                  
                  
                  14,715Subordinated
      units
                  
                  
                  –
                  
                  
                  
                  3,100
                  
                  
                  
                  –
                  
                  
                  
                  3,100Performance
      units (1)
                  
                  
                  150
                  
                  
                  
                  100
                  
                  
                  
                  153
                  
                  
                  
                  44Denominator
      for basic net income (loss) per limited partner unit
                  
                  
                  28,935
                  
                  
                  
                  20,390
                  
                  
                  
                  27,257
                  
                  
                  
                  17,859Dilutive
      phantom units
                  
                  
                  90
                  
                  
                  
                  –
                  
                  
                  
                  52
                  
                  
                  
                  –Total
                  
                  
                  29,025
                  
                  
                  
                  20,390
                  
                  
                  
                  27,309
                  
                  
                  
                  17,859Net
      income (loss) per limited partner unit (basic and diluted)Basic
                  
                  $
                  1.88
                  
                  
                  $
                  (0.23
                  )
                  
                  $
                  4.07
                  
                  
                  $
                  (0.07
                  )Diluted
                  
                  $
                  1.87
                  
                  
                  $
                  (0.23
                  )
                  
                  $
                  4.06
                  
                  
                  $
                  (0.07
                  )








(1)
            Our
      earned but unvested performance units are considered to be participating
      securities for purposes of calculating our net income (loss) per limited
      partner unit,and, accordingly, are included in the basic computation as
      such.





NOTE
12. RELATED PARTY TRANSACTIONS





Pursuant
to an omnibus agreement, we paid EnerVest $2.2 million and $1.8 million in the
three months ended September 30, 2010 and 2009, respectively, and $6.5 million
and $5.6 million in the nine months ended September 30, 2010 and 2009,
respectively, in monthly administrative fees for providing us general and
administrative services.  These fees are based on an allocation of
charges between EnerVest and us based on the estimated use of such services by
each party, and we believe that the allocation method employed by EnerVest is
reasonable and reflective of the estimated level of costs we would have incurred
on a standalone basis.  These fees are included in “General and
administrative expenses” in our unaudited condensed consolidated statements of
operations.





We have
entered into operating agreements with EnerVest whereby a wholly owned
subsidiary of EnerVest acts as contract operator of the oil and natural gas
wells and related gathering systems and production facilities in which we own an
interest.  We reimbursed EnerVest $3.5 million and $2.3 million in the
three months ended September 30, 2010 and 2009, respectively, and $9.1 million
and $7.3 million in the nine months ended September 30, 2010 and 2009,
respectively, for direct expenses incurred in the operation of our wells and
related gathering systems and production facilities and for the allocable share
of the costs of EnerVest employees who performed services on our
properties.  As the vast majority of such expenses are charged to us
on an actual basis (i.e., no mark–up or subsidy is charged or received by
EnerVest), we believe that the aforementioned services were provided to us at
fair and reasonable rates relative to the prevailing market and are
representative of what the amounts would have been on a standalone
basis.  These costs are included in “Lease operating expenses” in our
unaudited condensed consolidated statements of
operations.  Additionally, in its role as contract operator,
this EnerVest subsidiary also collects proceeds from oil and natural
gas sales and distributes them to us, other working interest owners and royalty
owners.


14





EV
Energy Partners, L.P.


Notes
to Unaudited Condensed Consolidated Financial Statements
(continued)





NOTE 13. OTHER SUPPLEMENTAL
INFORMATION





Supplemental
cash flows and non–cash transactions were as follows:





Nine Months Ended
                  September 30,2010
                
                
                2009Supplemental
      cash flows information:Cash
      paid for interest
                
                $
                6,844
                
                
                $
                9,576Cash
      paid for income taxes
                
                
                245
                
                
                
                114Non–cash
      transactions:Costs
      for development of oil and natural gas properties in accounts payable and
      accrued liabilities
                
                
                3,134
                
                
                
                1,068Proceeds
      from sale of oil and natural gas properties in accounts receivable
      –other
                
                
                19,311
                
                
                
                –General
      partner contribution in accounts receivable – related
party
                
                
                –
                
                
                
                1,437





NOTE 14. NEW ACCOUNTING
STANDARDS





In
January 2010, the Financial Accounting Standards Board (“FASB”) issued
Accounting Standards Update (“ASU”) No. 2010–06, Fair Value Measurements and
Disclosures (Topic 820), which provides amendments to Topic 820 and
requires new disclosures for (i) transfers between Levels 1, 2 and 3 and the
reasons for such transfers and (ii) activity in Level 3 fair value measurements
to show separate information about purchases, sales, issuances and
settlements.  In addition, ASU 2010–06 amends Topic 820 to clarify
existing disclosures around the disaggregation level of fair value measurements
and disclosures for the valuation techniques and inputs utilized (for Level 2
and Level 3 fair value measurements). The provisions in ASU 2010–06 are
applicable to interim and annual reporting periods beginning subsequent to
December 15, 2009, with the exception of Level 3 disclosures of purchases,
sales, issuances and settlements, which will be required in reporting periods
beginning after December 15, 2010.  The adoption of ASU 2010–06 did
not impact our operating results, financial position or cash flows, but did
impact our disclosures on fair value measurements (see Note 6).




No other
new accounting pronouncements issued or effective during the nine months ended
September 30, 2010 have had or are expected to have a material impact on our
unaudited condensed consolidated financial statements.





NOTE
15. SUBSEQUENT EVENTS





On
October 26, 2010, we announced that we, along with certain institutional
partnerships managed by EnerVest, have signed an agreement to acquire oil and
natural gas properties, including certain related commodity derivatives, in the
Barnett Shale.  We will acquire a 31.0% interest in these properties
for $300.0 million.  The acquisition is expected to close by the end
of December 2010, and is subject to customary closing conditions and purchase
price adjustments.





We
evaluated subsequent events for appropriate accounting and disclosure through
the date these condensed consolidated financial statements were
issued.


15





ITEM 2. MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS





Management’s
Discussion and Analysis of Financial Condition and Results of Operations should
be read in conjunction with our unaudited condensed consolidated financial
statements and the related notes thereto, as well as our Annual Report on Form
10–K for the year ended December 31, 2009.





OVERVIEW





We are a
Delaware limited partnership formed in April 2006 by EnerVest to acquire,
produce and develop oil and natural gas properties.  Our general partner is
EV Energy GP, a Delaware limited partnership, and the general partner of our
general partner is EV Management, a Delaware limited liability
company.





Our
properties are located in the Appalachian Basin (primarily in Ohio and West
Virginia), Michigan, the Monroe Field in Northern Louisiana, Central and East
Texas (which includes the Austin Chalk area), the Permian Basin, the San Juan
Basin and the Mid–Continent areas in Oklahoma, Texas, Kansas and
Louisiana.





RECENT
DEVELOPMENTS





In
February 2010, we closed a public offering of 3.45 million common units at an
offering price of $28.08 per common unit.  We received net proceeds of
$94.6 million, including a contribution of $2.0 million by our general partner
to maintain its 2% interest in us.





In March
2010 followed by a second closing in June 2010, we, along with certain
institutional partnerships managed by EnerVest, acquired oil and natural gas
properties in the Appalachian Basin.  We acquired a 46.15% interest in
these properties for $145.8 million.  This acquisition was primarily funded
with borrowings under our credit facility and cash on hand.





On July
1, 2010, we sold unproved oil and natural gas properties for $39.9 million and
recorded a gain on the sale of $36.8 million.  We received $20.6 million on
July 1, 2010 and received $19.3 million on October 29, 2010.





In August
2010, we closed a public offering of 3.45 million of our common units at an
offering price of $33.97 per common unit.  We received net proceeds of
$114.4 million, including a contribution of $2.3 million by our general partner
to maintain its 2% interest in us.





In
September 2010, we acquired oil and natural gas properties in the Mid–Continent
area for $119.9 million, subject to customary closing conditions and purchase
price adjustments.





In
October 2010, we announced that we, along with certain institutional
partnerships managed by EnerVest, have signed an agreement to acquire oil and
natural gas properties, including certain related commodity derivatives, in the
Barnett Shale.  We will acquire a 31.0% interest in these properties for
$300.0 million.  The acquisition is expected to close by the end of
December 2010, and is subject to customary closing conditions and purchase price
adjustments.





BUSINESS
ENVIRONMENT





Our
primary business objective is to provide stability and growth in cash
distributions per unit over time.  The amount of cash we can distribute on
our units principally depends upon the amount of cash generated from our
operations, which will fluctuate from quarter to quarter based on, among other
things:





·
            the
      prices at which we will sell our oil, natural gas liquids and natural gas
      production;





·
            our
      ability to hedge commodity prices;





·
            the
      amount of oil, natural gas liquids and natural gas we produce;
      and





·
            the
      level of our operating and administrative
costs.


16





Oil and
natural gas prices are expected to be volatile in the future.  Factors
affecting the price of oil include worldwide economic conditions, geopolitical
activities, worldwide supply disruptions, weather conditions, actions taken by
the Organization of Petroleum Exporting Countries and the value of the U.S.
dollar in international currency markets.  Factors affecting the price of
natural gas include the discovery of substantial accumulations of natural gas in
unconventional reservoirs due to technological advancements necessary to
commercially produce these unconventional reserves, North American weather
conditions, industrial and consumer demand for natural gas, storage levels of
natural gas and the availability and accessibility of natural gas deposits in
North America.





In order
to mitigate the impact of changes in oil and natural gas prices on our cash
flows, we are a party to derivatives, and we intend to enter into derivatives in
the future to reduce the impact of oil and natural gas price volatility on our
cash flows.  By removing a significant portion of this price volatility on
our future oil and natural gas production through August 2014, we have
mitigated, but not eliminated, the potential effects of changing oil and natural
gas prices on our cash flows from operations for those periods.  If
commodity prices are depressed for an extended period of time, it could alter
our acquisition and development plans, and adversely affect our growth strategy
and ability to access additional capital in the capital markets.





The
primary factors affecting our production levels are capital availability, our
ability to make accretive acquisitions, the success of our drilling program and
our inventory of drilling prospects.  In addition, we face the challenge of
natural production declines.  As initial reservoir pressures are depleted,
production from a given well decreases.  We attempt to overcome this
natural decline through a combination of drilling and acquisitions.  Our
future growth will depend on our ability to continue to add reserves through
drilling and acquisitions in excess of production.  We will maintain our
focus on the costs to add reserves through drilling and acquisitions as well as
the costs necessary to produce such reserves.  Our ability to add reserves
through drilling is dependent on our capital resources and can be limited by
many factors, including our ability to timely obtain drilling permits and
regulatory approvals.  Any delays in drilling, completion or connection to
gathering lines of our new wells will negatively impact our production, which
may have an adverse effect on our revenues and, as a result, cash available for
distribution.





We focus
our efforts on increasing oil and natural gas reserves and production while
controlling costs at a level that is appropriate for long–term operations. 
Our future cash flows from operations are dependent upon our ability to manage
our overall cost structure.


17


RESULTS
OF OPERATIONS





Three Months Ended
                  September 30,
                
                
                Nine Months Ended
                  September 30,2010
                
                
                2009
                
                
                2010
                
                
                2009Production
      data:Oil
      (MBbls)
                
                
                179
                
                
                
                132
                
                
                
                477
                
                
                
                386Natural
      gas liquids (MBbls)
                
                
                181
                
                
                
                180
                
                
                
                541
                
                
                
                580Natural
      gas (MMcf)
                
                
                4,809
                
                
                
                4,251
                
                
                
                13,528
                
                
                
                12,230Net
      production (MMcfe)
                
                
                6,973
                
                
                
                6,123
                
                
                
                19,638
                
                
                
                18,026Average
      sales price per unit:Oil
      (Bbl)
                
                $
                71.11
                
                
                $
                64.04
                
                
                $
                72.75
                
                
                $
                50.95Natural
      gas liquids (Bbl)
                
                
                38.06
                
                
                
                32.35
                
                
                
                41.29
                
                
                
                27.84Natural
      gas (Mcf)
                
                
                4.34
                
                
                
                3.28
                
                
                
                4.55
                
                
                
                3.56Mcfe
                
                
                5.81
                
                
                
                4.61
                
                
                
                6.04
                
                
                
                4.40Average
      unit cost per Mcfe:Production
      costs:Lease
      operating expenses
                
                $
                1.81
                
                
                $
                1.70
                
                
                $
                1.98
                
                
                $
                1.72Production
      taxes
                
                
                0.27
                
                
                
                0.25
                
                
                
                0.29
                
                
                
                0.23Total
                
                
                2.08
                
                
                
                1.95
                
                
                
                2.27
                
                
                
                1.95Asset
      retirement obligations accretion expense
                
                
                0.11
                
                
                
                0.08
                
                
                
                0.10
                
                
                
                0.08Depreciation,
      depletion and amortization
                
                
                1.87
                
                
                
                2.11
                
                
                
                1.96
                
                
                
                2.18General
      and administrative expenses
                
                
                0.86
                
                
                
                0.74
                
                
                
                0.84
                
                
                
                0.71





Three
Months Ended September 30, 2010 Compared with the Three Months Ended September
30, 2009





Net
income for the three months ended September 30, 2010 was $58.1 million, an
increase of $60.9 million compared with the three months ended September 30,
2009.  This increase was primarily the result of $12.5 million of higher
revenues due to increased production and higher prices for oil, natural gas and
natural gas liquids, $20.6 million related to non–cash changes in the fair value
of our derivatives and a $36.8 million gain on the sale of oil and natural gas
properties, partially offset by $2.3 million of increased lease operating
expenses, $5.1 million of lower realized gains on our derivatives and $1.5
million of increased general and administrative expenses.





Oil,
natural gas and natural gas liquids revenues for the three months ended
September 30, 2010 totaled $40.5 million, an increase of $12.3 million compared
with the three months ended September 30, 2009.  This increase was the
result of $6.4 million related to higher prices for oil, natural gas and natural
gas liquids and $5.9 million related to increased production.





Transportation
and marketing–related revenues for the three months ended September 30, 2010
increased $0.1 million compared with the three months ended September 30, 2009
primarily due to higher prices in the three months ended September 30, 2010
compared with the three months ended September 30, 2009 for the natural gas that
we transport through our gathering systems in the Monroe Field.





Lease
operating expenses for the three months ended September 30, 2010 increased $2.2
million compared with the three months ended September 30, 2009 primarily as the
result of $2.2 million ($1.70 per Mcfe) of lease operating expenses associated
with the oil and natural gas properties that we acquired in 2009 and 2010. 
Total lease operating expenses per Mcfe were $1.81 in the three months ended
September 30, 2010 compared with $1.70 in the three months ended September 30,
2009.





Production
taxes for the three months ended September 30, 2010 increased $0.4 million
compared with the three months ended September 30, 2009 primarily due to
increased oil, natural gas and natural gas liquids revenues.  Production
taxes for the three months ended September 30, 2010 were $0.27 per Mcfe compared
with $0.25 per Mcfe for the three months ended September 30,
2009.





Asset
retirement obligations accretion expense for the three months ended September
30, 2010 increased $0.3 million compared with the three months ended September
30, 2009 primarily due to the oil and natural gas properties that we acquired in
2009 and 2010.  Asset retirement obligations accretion expense for the
three months ended September 30, 2010 was $0.11 per Mcfe compared with $0.08 per
Mcfe for the three months ended September 30, 2009.


18





Depreciation,
depletion and amortization for the three months ended September 30, 2010
increased $0.1 million compared with the three months ended September 30, 2009
primarily due to an increase of $2.2 million related to the oil and natural gas
properties that we acquired in 2009 and 2010 offset by a decrease of $2.1
million related to the oil and natural gas properties that we acquired prior to
2009.  Depreciation, depletion and amortization for the three months ended
September 30, 2010 was $1.87 per Mcfe compared with $2.11 per Mcfe for the three
months ended September 30, 2009.





General
and administrative expenses include the costs of administrative employees and
related benefits, management fees paid to EnerVest, professional fees and other
costs not directly associated with field operations.  General and
administrative expenses for the three months ended September 30, 2010 totaled
$6.0 million, an increase of $1.5 million compared with the three months ended
September 30, 2009.  This increase is primarily the result of (i) $0.6
million of higher compensation costs related to our equity–based compensation,
(ii) $0.3 million of costs incurred in conjunction with the integration of the
oil and natural gas properties acquired in 2010 and (iii) $0.4 million of higher
fees paid to EnerVest under the omnibus agreement due to our acquisitions of oil
and natural gas properties in 2009 and 2010.  General and administrative
expenses were $0.86 per Mcfe in the three months ended September 30, 2010
compared with $0.74 per Mcfe in the three months ended September 30,
2009.





Gain on
sales of oil and natural properties was $36.8 million in the three ended
September 30, 2010.  We recognized this gain on the sale of unproved oil
and natural gas properties in July 2010.





Realized
gains on derivatives, net represent the monthly cash settlements with our
counterparties related to derivatives that matured during the period. 
During the three months ended September 30, 2010 and 2009, we received cash
payments of $13.3 million and $18.4 million, respectively, from our
counterparties as the contract prices for our derivatives exceeded the
underlying market price for that period.





Unrealized
gains (losses) on derivatives, net represent the change in the fair value of our
open derivatives during the period.  In the three months ended September
30, 2010, the fair value of our open derivatives increased from a net asset of
$123.6 million at June 30, 2010 to a net asset of $127.6 million at September
30, 2010.  In the three months ended September 30, 2009, the fair value of
our open derivatives decreased from a net asset of $126.9 million at June
30, 2009 to a net asset of $110.3 million at September 30,
2009.





Interest
expense for the three months ended September 30, 2010 decreased $0.7 million
compared with the three months ended September 30, 2009 primarily due to
decreases of $0.6 million from lower weighted average borrowings outstanding
under our credit facility and $0.1 million due to a lower weighted average
effective interest rate in the three months ended September 30, 2010 compared
with the three months ended September 30, 2009.





Nine
Months Ended September 30, 2010 Compared with the Nine Months Ended September
30, 2009





Net
income for the nine months ended September 30, 2010 was $120.5 million, an
increase of $116.6 million compared with the nine months ended September 30,
2009.  This increase was primarily the result of $37.3 million of higher
revenues due to increased production and higher prices for oil, natural gas and
natural gas liquids, $69.0 million related to non–cash changes in the fair value
of our derivatives and a $40.6 million gain on the sale of oil and natural gas
properties, partially offset by $20.0 million of lower realized gains on our
derivatives, $7.9 million of increased lease operating expenses and $3.7 million
of increased general and administrative expenses.





Oil,
natural gas and natural gas liquids revenues for the nine months ended September
30, 2010 totaled $118.6 million, an increase of $39.2 million compared with the
nine months ended September 30, 2009.  This increase was primarily the
result of $28.3 million related to higher prices for oil, natural gas liquids
and natural gas and $10.9 million related to increased production.





Transportation
and marketing–related revenues for the nine months ended September 30, 2010
decreased $1.8 million compared with the nine months ended September 30, 2009
primarily due to the recognition of deferred revenues of $1.8 million in the
nine months ended September 30, 2009 from the production curtailments in the
Monroe Field in 2008.





19




Lease
operating expenses for the nine months ended September 30, 2010 increased $7.9
million compared with the nine months ended September 30, 2009 primarily as the
result of $5.7 million of lease operating expenses ($1.78 per Mcfe) associated
with the oil and natural gas properties that we acquired in 2009 and 2010 and
$2.3 million ($0.12 per Mcfe) associated with oil in tanks acquired in the March
2010 acquisition that was sold in the nine months ended September 30, 2010
offset by a decrease of $0.1 million related to the oil and natural gas
properties that we acquired prior to 2009.  Lease operating expenses per
Mcfe were $1.98 in the nine months ended September 30, 2010 compared with $1.72
in the nine months ended September 30, 2009.





Production
taxes for the nine months ended September 30, 2010 increased $1.5 million
compared with the nine months ended September 30, 2009 primarily due to
increased oil, natural gas and natural gas liquids revenues.  Production
taxes for the nine months ended September 30, 2010 were $0.29 per Mcfe compared
with $0.23 per Mcfe for the nine months ended September 30,
2009.





Asset
retirement obligations accretion expense for the nine months ended September 30,
2010 increased $0.5 million compared with the nine months ended September 30,
2009 primarily due to the oil and natural gas properties that we acquired in
2009 and 2010.  Asset retirement obligations accretion expense for the nine
months ended September 30, 2010 was $0.10 per Mcfe compared with $0.08 per Mcfe
for the nine months ended September 30, 2009.





Depreciation,
depletion and amortization for the nine months ended September 30, 2010
decreased $0.8 million compared with the nine months ended September 30, 2009
primarily due to an increase of $6.2 million related to the oil and natural gas
properties that we acquired in 2009 and 2010 offset by a decrease of $7.0
million related to the oil and natural gas properties that we acquired prior to
2009.  Depreciation, depletion and amortization for the nine months ended
September 30, 2010 was $1.96 per Mcfe compared with $2.18 per Mcfe for the nine
months ended September 30, 2009.





General
and administrative expenses for the nine months ended September 30, 2010 totaled
$16.6 million, an increase of $3.7 million compared with the nine months ended
September 30, 2009.  This increase is primarily the result of (i) $1.6
million of higher compensation costs related to our equity–based compensation,
(ii) $1.0 million of costs incurred in conjunction with the integration of the
oil and natural gas properties acquired in 2010 and (iii) $0.9 million of higher
fees paid to EnerVest under the omnibus agreement due to our acquisitions of oil
and natural gas properties in 2009 and 2010.  General and administrative
expenses were $0.84 per Mcfe in the nine months ended September 30, 2010
compared with $0.71 per Mcfe in the nine months ended September 30,
2009.





Gain on
sales of oil and natural gas properties was $40.6 million in the nine months
ended September 30, 2010.  We recognized this gain on the sale of 14
non–core oil and natural gas wells in March 2010 and the sales of unproved oil
and natural gas properties in June 2010 and July 2010.





Realized
gains on derivatives, net represent the monthly cash settlements with our
counterparties related to derivatives that matured during the period. 
During the nine months ended September 30, 2010 and 2009, we received cash
payments of $35.2 million and $55.2 million, respectively, from our
counterparties as the contract prices for our derivatives exceeded the
underlying market price for that period.





Unrealized
gains (losses) on derivatives, net represent the change in the fair value of our
open derivatives during the period.  In the nine months ended September 30,
2010, the fair value of our open derivatives increased from a net asset of $93.1
million at December 31, 2009 to a net asset of $127.6 million at September 30,
2010.  In the nine months ended September 30, 2009, the fair value of our
open derivatives decreased from a net asset of $144.7 million at December
31, 2008 to a net asset of $110.3 million at September 30,
2009.





Interest
expense for the nine months ended September 30, 2010 decreased $2.2 million
compared with the nine months ended September 30, 2009 primarily due to a
decrease of $3.1 million from lower weighted average borrowings outstanding
under our credit facility offset by an increase of $0.9 million due to a higher
weighted average effective interest rate in the nine months ended September 30,
2010 compared with the nine months ended September 30, 2009.





LIQUIDITY AND CAPITAL
RESOURCES





Historically,
our primary sources of liquidity and capital have been issuances of equity
securities, borrowings under our credit facility and cash flows from operations,
and our primary uses of cash have been acquisitions of oil and natural gas
properties and related assets, development of our oil and natural gas
properties, distributions to our partners and working capital needs.  For
2010, we believe that cash on hand and net cash flows generated from operations
will be adequate to fund our capital budget and satisfy our short–term liquidity
needs.  We may also utilize various financing sources available to us,
including the issuance of equity or debt securities through public offerings or
private placements, to fund our acquisitions and long–term liquidity
needs.  Our ability to complete future offerings of equity or debt
securities and the timing of these offerings will depend upon various factors
including prevailing market conditions and our financial
condition.


20





In the
past we accessed the equity markets to finance our significant
acquisitions.  While we have been successful in accessing the public equity
markets in 2010, any disruptions in the financial markets may limit our ability
to access the public equity or debt markets in the future.





Available
Credit Facility





We have a
$700.0 million facility that expires in October 2012.  Borrowings under the
facility are secured by a first priority lien on substantially all of our assets
and the assets of our subsidiaries.  We may use borrowings under the
facility for acquiring and developing oil and natural gas properties, for
working capital purposes, for general corporate purposes and for funding
distributions to partners.  We also may use up to $50.0 million of
available borrowing capacity for letters of credit.  The facility requires
the maintenance of a current ratio (as defined in the facility) of greater than
1.0 and a ratio of total debt to earnings plus interest expense, taxes,
depreciation, depletion and amortization expense and exploration expense of no
greater than 4.0 to 1.0.  As of September 30, 2010, we were in compliance
with all of the facility’s financial covenants.





Borrowings
under the facility may not exceed a “borrowing base” determined by the lenders
based on our oil and natural gas reserves.  As of September 30, 2010, the
borrowing base was $465.0 million.  The borrowing base is subject to
scheduled redeterminations as of April 1 and October 1 of each year with an
additional redetermination once per calendar year at our request or at the
request of the lenders and with one calculation that may be made at our request
during each calendar year in connection with material acquisitions or
divestitures of properties.  The borrowing base is determined by each
lender based on the value of our proved oil and natural gas reserves using
assumptions regarding future prices, costs and other matters that may vary by
lender.





Borrowings
under the facility will bear interest at a floating rate based on, at our
election, a base rate or the London Inter–Bank Offered Rate plus applicable
premiums based on the percent of the borrowing base that we have
outstanding.





At
September 30, 2010, we had $334.0 million outstanding under the
facility.





Effective
September 30, 2010, we entered into an amendment to our credit facility. 
This amendment provides that during the period between September 30, 2010 and
the first scheduled redetermination date thereafter (expected to occur on or
around April 1, 2011), we may issue senior debt of up to $200.0 million other
than in conjunction with an interim redetermination, without the borrowing base
then in effect on the date on which such senior debt is issued being reduced by
an amount equal to the product of 0.30 multiplied by the stated principal amount
of such senior debt up to $200.0 million.  This amendment also included a
reaffirmation of our borrowing base at $465.0 million.





In order
to finance our recently announced $300.0 million acquisition in the Barnett
Shale, we will have to increase the borrowing base under our facility or arrange
permanent financing.  We expect to be able to increase our borrowing base
in an amount sufficient to finance the acquisition and provide for our liquidity
needs or arrange permanent financing prior to closing.





Cash
and Short–term Investments





At
September 30, 2010, we had $23.3 million of cash and short–term investments,
which included $15.8 million of short–term investments.  With regard to our
short–term investments, we invest in money market accounts with a major
financial institution.




Counterparty
Exposure





At
September 30, 2010, our open commodity derivative contracts were in a net
receivable position with a fair value of $142.1 million.  All of our
commodity derivative contracts are with major financial institutions who are
also lenders under our credit facility.  Should one of these financial
counterparties not perform, we may not realize the benefit of some of our
derivative instruments under lower commodity prices and we could incur a
loss.  As of September 30, 2010, all of our counterparties have performed
pursuant to their commodity derivative contracts.


21


Cash
Flows





Cash
flows provided by (used in) by type of activity were as follows:





Nine Months Ended
                      September 30,2010
                    
                    
                    2009Operating
      activities
                    
                    $
                    88,966
                    
                    
                    $
                    84,285Investing
      activities
                    
                    
                    (258,782
                    )
                    
                    
                    (30,813
                    )Financing
      activities
                    
                    
                    174,266
                    
                    
                    
                    (69,735
                    )





Operating
Activities





Cash
flows from operating activities were $89.0 million and $84.3 million in the nine
months ended September 30, 2010 and 2009, respectively.  The increase was
primarily due to higher production and prices for oil, natural gas and natural
gas liquids, partially offset by lower realized gains on derivatives and higher
operating expenses.





Investing
Activities





Our
principal recurring investing activity is the acquisition and development of oil
and natural gas properties.  During the nine months ended September 30,
2010, we spent $267.7 million on the acquisitions of oil and natural gas
properties and $16.2 million for the development of our oil and natural gas
properties.  In addition, we received $25.1 million for the sales of oil
and natural gas properties.





During
the nine months ended September 30, 2009, we spent $16.8 million on the
acquisitions of oil and natural gas properties, $2.5 million for a deposit on a
planned acquisition of oil and natural gas properties and $11.5 million for the
development of our oil and natural gas properties.





Financing
Activities





During
the nine months ended September 30, 2010, we received net proceeds of $204.7
million from our public equity offerings in February 2010 and August 2010, and
we received contributions of $4.3 million from our general partner in order to
maintain its 2% interest in us.  We borrowed $258.0 million under our
credit facility to finance our acquisitions of oil and natural gas properties
and we repaid $226.0 million of borrowings outstanding under our credit facility
with proceeds from our public equity offerings and cash flows from
operations.  In addition, we paid distributions of $66.7 million to holders
of our common units and our general partner.





During
the nine months ended September 30, 2009, we received net proceeds of $148.6
million from our public equity offerings in June 2009 and September 2009 and
$1.6 million from our general partner to maintain its 2% interest in us. 
We repaid $175.0 million of borrowings outstanding under our credit facility,
and we paid $44.9 million of distributions to our general partner and holders of
our common and subordinated units.





FORWARD–LOOKING
STATEMENTS





This Form
10–Q contains forward–looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, (each a “forward–looking
statement”).  The words “anticipate,” “believe,” “ensure,” “expect,” “if,”
“intend,” “estimate,” “project,” “forecasts,” “predict,” “outlook,” “aim,”
“will,” “could,” “should,” “would,” “may,” “likely” and similar expressions, and
the negative thereof, are intended to identify forward–looking statements. 
These statements discuss future expectations, contain projections of results of
operations or of financial condition or state other “forward–looking”
information.





All of
our forward–looking information is subject to risks and uncertainties that could
cause actual results to differ materially from the results expected. 
Although it is not possible to identify all factors, these risks and
uncertainties include the risk factors and the timing of any of those risk
factors identified in the “Risk Factors” section included in our Annual Report
on Form 10–K for the year ended December 31, 2009.  This document is
available through our web site or through the SEC’s Electronic Data Gathering
and Analysis Retrieval System at http://www.sec.gov.


22


ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK





We are
exposed to certain market risks that are inherent in our financial statements
that arise in the normal course of business.  We may enter into derivative
instruments to manage or reduce market risk, but do not enter into derivative
agreements for speculative purposes.





We do not
designate these or future derivative instruments as hedges for accounting
purposes.  Accordingly, the changes in the fair value of these instruments
are recognized currently in earnings.





Commodity
Price Risk





Our major
market risk exposure is to prices for oil, natural gas and natural gas
liquids.  These prices have historically been volatile.  As such,
future earnings are subject to change due to changes in these prices. 
Realized prices are primarily driven by the prevailing worldwide price for oil
and regional spot prices for natural gas production.  We have used, and
expect to continue to use, oil and natural gas commodity contracts to reduce our
risk of changes in the prices of oil and natural gas.  Pursuant to our risk
management policy, we engage in these activities as a hedging mechanism against
price volatility associated with pre–existing or anticipated sales of oil and
natural gas.





We have
entered into oil and natural gas commodity contracts to hedge significant
amounts of our anticipated oil and natural gas production through August
2014.  The amounts hedged represent, on an Mcfe basis, approximately 53% of
the production attributable to our estimated net proved reserves from October
2010 through August 2014, as estimated using prices, costs and other assumptions
required by SEC rules.  Our actual production will vary from the amounts
estimated in our reserve reports, perhaps materially.





The fair
value of our oil and natural gas commodity contracts and basis swaps at
September 30, 2010 was a net asset of $142.1 million.  A 10% change in oil
and natural gas prices with all other factors held constant would result in a
change in the fair value (generally correlated to our estimated future net cash
flows from such instruments) of our oil and natural gas commodity contracts and
basis swaps of approximately $24.8 million.  Please see “Item 1. Condensed
Consolidated Financial Statements (unaudited)” contained herein for additional
information.





Interest
Rate Risk





Our
floating rate credit facility also exposes us to risks associated with changes
in interest rates and as such, future earnings are subject to change due to
changes in these interest rates.  The fair value of our interest rate swaps
at September 30, 2010 was a net liability of $14.5 million.  If interest
rates on our facility increased by 1%, interest expense for the nine months
ended September 30, 2010 would have increased by approximately $2.2
million.  Please see “Item 1. Condensed Consolidated Financial Statements
(unaudited)” contained herein for additional information.





ITEM 4. CONTROLS AND
PROCEDURES





Evaluation of Disclosure Controls and
Procedures





In
accordance with Exchange Act Rule 13a–15 and 15d–15, we carried out an
evaluation, under the supervision and with the participation of management,
including our Chief Executive Officer and our Chief Financial Officer, of the
effectiveness of our disclosure controls and procedures as of the end of the
period covered by this report.  Based on that evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures were effective as of September 30, 2010 to provide
reasonable assurance that information required to be disclosed in our reports
filed or submitted under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the SEC’s rules and forms. 
Our disclosure controls and procedures include controls and procedures designed
to ensure that information required to be disclosed in reports filed or
submitted under the Exchange Act is accumulated and communicated to our
management, including our Chief Executive Officer and Chief Financial Officer,
as appropriate, to allow timely decisions regarding required
disclosure.





Change
in Internal Controls Over Financial Reporting





There
have not been any changes in our internal controls over financial reporting that
occurred during the quarterly period ended September 30, 2010 that has
materially affected, or is reasonably likely to materially affect, our internal
controls over financial reporting.


23


PART II. OTHER
INFORMATION





ITEM 1. LEGAL
PROCEEDINGS





We are
involved in disputes or legal actions arising in the ordinary course of
business.  We do not believe the outcome of such disputes or legal actions
will have a material adverse effect on our consolidated financial
statements.





ITEM 1A. RISK
FACTORS





There
have been no material changes with respect to the risk factors disclosed in our
Annual Report on Form 10–K for the year ended December 31, 2009, our Quarterly
Report on Form 10–Q for the quarter ended March 31, 2010 and our Quarterly
Report for Form 10–Q for the quarter ended June 30, 2010.





ITEM 2. UNREGISTERED SALES OF EQUITY
SECURITIES AND USE OF PROCEEDS





None.





ITEM 3. DEFAULTS UPON SENIOR
SECURITIES





None.





ITEM 4. (Removed and
Reserved)





ITEM 5. OTHER
INFORMATION





None.





ITEM
6. EXHIBITS





The
exhibits listed below are filed or furnished as part of this
report:





1.1
              Underwriting
      Agreement dated as of August 11, 2010, among EV Energy Partners, L.P., EV
      Energy GP, L.P., EV Management, LLC, EV Properties, L.P., EV Properties
      GP, LLC, Citigroup Global Markets Inc., Raymond James & Associates,
      Inc., RBC Capital Markets Corporation, Wells Fargo Securities, LLC and UBS
      Securities LLC, as representatives of the several underwriters named
      therein (Incorporated by reference from Exhibit 1.1 to EV Energy Partners
      L.P.’s current report on Form 8–K filed with the SEC on August 16,
      2010).2.1
              Purchase
      and Sale Agreement by and between Petrohawk Properties, LP, KCS Resources,
      LLC and Hawk Field Services, LLC and EV Properties, L.P. dated August 9,
      2010 (Incorporated by reference from Exhibit 2.1 to EV Energy Partners
      L.P.’s current report on Form 8–K filed with the SEC on August 10,
      2010).2.2
              Purchase
      and Sale Agreement by and between Talon Oil & Gas LLC and EnerVest
      Energy Institutional Fund XI-A, L.P., EnerVest Energy Institutional Fund
      XI-WI, L.P., EnerVest Energy Institutional Fund XII-A, L.P., EnerVest
      Energy Institutional Fund XII-WIB, L.P., EnerVest Energy Institutional
      Fund XII-WIC, L.P., EnerVest Holding, L.P. and EV Properties, L.P. dated
      October 25 (Incorporated by reference from Exhibit 2.1 to EV Energy
      Partners L.P.’s current report on Form 8–K filed with the SEC on October
      29, 2010).10.1
              Fifth
      Amendment dated September 30, 2010 to Amended and Restated Credit
      Agreement (Incorporated by reference from Exhibit 10.1 to EV Energy
      Partners L.P.’s current report on Form 8–K filed with the SEC on October
      6, 2010).+31.1
              Rule
      13a-14(a)/15d–14(a) Certification of Chief Executive
    Officer.+31.2
              Rule
      13a-14(a)/15d–14(a) Certification of Chief Financial
    Officer.+32.1
              Section
      1350 Certification of Chief Executive Officer+32.2
              Section
      1350 Certification of Chief Financial
Officer







+
            Filed
      herewith


24


SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.





EV
      Energy Partners, L.P.(Registrant)Date:  November
      8, 2010
              By:
              /s/ MICHAEL E. MERCERMichael
      E. MercerSenior
      Vice President and Chief Financial
Officer




25




EXHIBIT
INDEX
 
 1.1
                Underwriting
      Agreement dated as of August 11, 2010, among EV Energy Partners, L.P., EV
      Energy GP, L.P., EV Management, LLC, EV Properties, L.P., EV Properties
      GP, LLC, Citigroup Global Markets Inc., Raymond James & Associates,
      Inc., RBC Capital Markets Corporation, Wells Fargo Securities, LLC and UBS
      Securities LLC, as representatives of the several underwriters named
      therein (Incorporated by reference from Exhibit 1.1 to EV Energy Partners
      L.P.’s current report on Form 8–K filed with the SEC on August 16,
      2010).2.1
                Purchase
      and Sale Agreement by and between Petrohawk Properties, LP, KCS Resources,
      LLC and Hawk Field Services, LLC and EV Properties, L.P. dated August 9,
      2010 (Incorporated by reference from Exhibit 2.1 to EV Energy Partners
      L.P.’s current report on Form 8–K filed with the SEC on August 10,
      2010).2.2
                Purchase
      and Sale Agreement by and between Talon Oil & Gas LLC and EnerVest
      Energy Institutional Fund XI-A, L.P., EnerVest Energy Institutional Fund
      XI-WI, L.P., EnerVest Energy Institutional Fund XII-A, L.P., EnerVest
      Energy Institutional Fund XII-WIB, L.P., EnerVest Energy Institutional
      Fund XII-WIC, L.P., EnerVest Holding, L.P. and EV Properties, L.P. dated
      October 25 (Incorporated by reference from Exhibit 2.1 to EV Energy
      Partners L.P.’s current report on Form 8–K filed with the SEC on October
      29, 2010).10.1
                Fifth
      Amendment dated September 30, 2010 to Amended and Restated Credit
      Agreement (Incorporated by reference from Exhibit 10.1 to EV Energy
      Partners L.P.’s current report on Form 8–K filed with the SEC on October
      6, 2010).+31.1
                Rule
      13a-14(a)/15d–14(a) Certification of Chief Executive
    Officer.+31.2
                Rule
      13a-14(a)/15d–14(a) Certification of Chief Financial
    Officer.+32.1
                Section
      1350 Certification of Chief Executive Officer+32.2
                Section
      1350 Certification of Chief Financial
Officer
 
 +  Filed
herewith