Summary of LEGACY RESERVES LP

Item 8.01. Other Events
Non-GAAP Financial Measures
The management of Legacy Reserves LP uses Adjusted EBITDA and Distributable Cash Flow as a tool to provide additional information and metrics relative to the performance of Legacy's business, such as the cash distributions Legacy expects to pay to its unitholders, as well as its ability to meet debt covenant compliance tests. Legacy's management believes that these financial measures indicate to investors whether or not cash flow is being generated at a level that can sustain or support an increase in quarterly distribution rates. Adjusted EBITDA and Distributable Cash Flow may not be comparable to a similarly titled measure of other publicly traded limited partnerships or limited liability companies because all companies may not calculate Adjusted EBITDA in the same manner.
The following presents a reconciliation of "Adjusted EBITDA" and "Distributable Cash Flow," both of which are non-GAAP measures, to their nearest comparable GAAP measure. "Adjusted EBITDA" and "Distributable Cash Flow" should not be considered as alternatives to GAAP measures, such as net income, operating income or any other GAAP measure of liquidity or financial performance.
Adjusted EBITDA is defined in Legacy's revolving credit facility as net income
(loss) plus:
Х Interest expense;

Х Income taxes;

Х Depletion, depreciation, amortization and accretion;

Х Impairment of long-lived assets;

Х (Gain) loss on sale of partnership investment;

Х (Gain) loss on disposal of assets;

Х Unit-based compensation expense related to LTIP unit awards accounted for under the equity or liability methods;

Х Unrealized (gain) loss on oil and natural gas derivatives; and

Х Equity in (income) loss of partnerships.

Distributable Cash Flow is defined as Adjusted EBITDA less:
Х Cash interest expense;

Х Cash income taxes;

Х Cash settlements of LTIP unit awards; and

Х Development capital expenditures.

The following table presents a reconciliation of Legacy's consolidated net income (loss) to Adjusted EBITDA and Distributable Cash Flow for the three months ended June 30, 2009 and March 31, 2009 and the six months ended June 30, 2009 and June 30, 2008:

                                                   Three Months Ended                   Six Months Ended
                                               June 30,          March 31,         June 30,          June 30,
                                                 2009              2009              2009              2008
                                                                      ($ in thousands)

Net income (loss)                             $  (56,992 )      $     3,489        $ (53,503 )      $ (196,881 )
Plus:
Interest expense (income)                         (1,761 )            4,259            2,498             2,966
Income taxes                                         160                111              270               507
Depletion, depreciation, amortization
and accretion                                     13,549             16,621           30,170            20,140

                                                   Three Months Ended                   Six Months Ended
                                               June 30,          March 31,         June 30,         June 30,
                                                 2009              2009              2009             2008
                                                                      ($ in thousands)
Impairment of long-lived assets                      452              1,156            1,608              108
(Gain) loss on disposal of assets                      -                (60 )            (60 )         (4,942 )
Equity in (income) loss of partnership                 -                  2                3              (87 )
Unit-based compensation expense                      817               (281 )            536            1,477
Unrealized (gain) loss on oil and
natural gas derivatives                           75,827               (526 )         75,300          235,352

Adjusted EBITDA                               $   32,052        $    24,771        $  56,822        $  58,640

Less:
Cash interest expense                              4,655              4,955            9,610            3,786
Cash settlements of LTIP unit awards                  59                176              235               34
Development capital expenditures                   2,647              4,769            7,416            7,364

Distributable Cash Flow                       $   24,691        $    14,871        $  39,561        $  47,456

Capital Expenditures
Excluding acquisitions, we expect to make capital expenditures of approximately $15 million during the year ending December 31, 2009, including drilling 12 gross (6.8 net) development wells and executing 21 gross (12.2 net) re-completions and re-fracture stimulations. This is an increase from Legacy's previously reported capital expenditure budget of $10.7 million for the year ending December 31, 2009. Legacy's planned capital expenditures predominantly consist of drilling, re-completion and re-fracture stimulation projects.