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AAII Philadelphia Chapter October 26, 2010

VNR Investor Relations Presentation

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VNR Investor Relations Presentation October 25, 2010

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  • AAII

    Philadelphia Chapter

    October 26, 2010

  • Forward Looking StatementsStatements made by representatives of Vanguard Natural Resources, LLCduring the course of this presentation that are not historical facts are forwardlooking statements. These statements are based on certain assumptions andexpectations made by the Company which reflect managements experience,estimates and perception of historical trends, current conditions, anticipatedfuture developments and other factors believed to be appropriate. Suchstatements are subject to a number of assumptions, risks and uncertainties,many of which are beyond the control of the Company, which may causeactual results to differ materially from those implied or anticipated in theforward looking statements. These include risks relating to financialperformance and results, our indebtedness under our revolving credit facility,availability of sufficient cash to pay our distributions and execute our businessplan, prices and demand for gas, oil and natural gas liquids, our ability toreplace reserves and efficiently develop our reserves, our ability to makeacquisitions on economically acceptable terms, and other important factorsthat could cause actual results to differ materially from those anticipated orimplied in the forward looking statements. See Risk Factors: in theCompanys 10-K Annual Report for 2009, Registration Statements on FormS-1 and Form S-3 and the related prospectuses, Form 10-Qs for 2009 and2010 and any other public filings and press releases. Vanguard NaturalResources, LLC undertakes no obligation to publicly update any forwardlooking statements, whether as a result of new information or future events.This presentation has been prepared as of October 25, 2010.

    2

  • Comparable Company Distribution Yields

    CURRENT DISTRIBUTION YIELDS OF PEER GROUP

    *Pipe Average Yield of Large Pipeline Companies (BWP, EEP, EPB, EPD, ETP, OKS, SEP, TCLP, TPP)

    *G&P Average Yield of Gathering & Processing Companies (APL, DPM, CPNO, EROC, HLND, KGS, MWE, NGLS, RGNC, WES, WPZ, XTEK)

    *USRT Average Yield of U.S. Royalty Trusts (CRT, HGT, MTR, PBT, SBR and SJT)

    Yield calculated using the closing unit price on 10/25/10.

    5.8% 6.2%6.8% 7.2%

    7.7% 7.8% 7.9%8.3%

    0%1%2%3%4%5%6%7%8%9%

    10%

    *Pipe *G&P *USRT PSE LINE LGCY BBEP EVEP VNR

    $2.00 $2.52 $2.20$2.33

    3

    $2.08 $3.02$1.53

    8.6%

  • Price Performance Since 2009

    Note: Market data as of 10/21/2010. (1) US Royalty Trust Index includes: CRT, HGT, MTR, PBT, SBR and SJT.(2) E&P MLP Index includes: BBEP, CEP, EVEP, LGCY, LINE and VNR.

    0%

    100%

    200%

    300%

    400%

    500%

    01/01/09 05/12/09 09/21/09 01/30/10 06/11/10 10/21/10

    US Royalty Trust E&P MLPs S&P 500 Alerian Index VNR

    VNR: 332%

    E&P MLPs: 135%

    Alerian Index: 98%

    S&P 500: 31%US Royalty Trust: 10%

    (1) (2)

    The results have been good. VNR has outperformed US Royalty Trusts, C-Corps and other E&P MLPs. The strategy works.

    4

  • Unit Price History Since IPO

    $0.425$0.445

    $0.50

    $0.525$0.55

    5

    Distribution Increases with Acquisition Growth

  • 0%

    10%

    20%

    30%

    40%

    50%

    Dec-04 Dec-05 Dec-06 Nov-07 Nov-08 Nov-09 Oct-10

    Liquids T&S Natural Gas T&S Natural Gas G&P Propane Shipping Upstream

    16.3%

    8.3% 6.8%

    6.2% 6.3%

    5.8%

    Yield Compression Continues?

    Note: Market data as of 10/21/2010.Liquids T&S (BPL, GEL, GLP, HEP, KMP, NS, MMP, PAA, SXL, TLP, TPP)Natural Gas T&S (BWP, EEP, EPB, EPD, ETP, OKS, SEP, TCLP, WMZ)Natural Gas G&P (APL, DPM, CPNO, EROC, HLND, KGS, MWE, NGLS, RGNC, WES, WPZ, XTEX)Propane (APU, FGP, NRGY, SPH)Shipping (CPLP, KSP, NMM, OSP, TGP, TOO)Upstream (BBEP, ENP, EVEP, LGCY, LINE, PSE, VNR)6

    Average Yield2004 2005 2006 2007 2008 2009 YTD Current

    Liquids T&S 6.5% 6.2% 6.8% 6.1% 8.3% 8.2% 6.8% 6.3%Natural Gas T&S 6.8 6.4 6.7 6.1 7.8 8.1 6.5 5.8Natural Gas G&P 6.8 5.9 6.2 5.5 12.1 12.4 7.4 6.2Propane 8.3 8.1 8.2 7.5 9.8 9.3 7.4 6.8Shipping 6.8 5.6 5.8 5.6 12.2 15.3 13.8 16.3Upstream NA NA 6.6 6.2 12.4 12.5 9.4 8.3

  • Acquisitions Drive Growth

    Reserves (Bcfe) *

    7

    12/31/2007 12/31/2008 12/31/2009

    12/31/2007 12/31/2008 12/31/2009 6/30/2010*

    * Based on Internal Engineer Reserve Report as of 6/30/10

  • VNR-Acquisitions Fuel Distribution Growth

    8

    $2.08

    Note: As of 10/6/2010. Source: IHS Herold.Peer group includes: ENP, EVEP, LGCY, LINE and PSE.(1) Annual distribution growth reflects the % increase / (decrease) in announced quarterly distribution over the year.(2) Weighted average of peer distribution growth.

    +18%

    Yield Growth

    +14%

    +2%

    +5%

    -1%

  • Profitable Growth Through Accretive Acquisitions

    9

    *Annualized quarterly distributions**Based on current distribution rate of .55 and Q1 2010 distribution of .525

    $1.70*

    $2.18**

    $2.00

    $1.82

    12/31/2007 12/31/2008 12/31/2009 12/31/2010(E)

  • Overview of Vanguard Natural Resources

    Upstream Energy LLC, headquartered in Houston Initial Public Offering VNR - October 2007Five strategic acquisitions totaling ~350MM expanded geographic profile and commodity diversityIncreased distributions 29% since IPO

    Diverse portfolio of mature, long life gas and oil properties, combined with multi-year hedging program provide stable cash flow and support distributions

    173 Bcfe total proved reserves, 66% proved developed,16 yr R/P * 49% gas / 39% oil / 12% NGLsApproximately 82% of expected natural gas production hedged through 2011 at floor price of $7.81 per MMbtuApproximately 48% of expected oil production hedged through 2013 at floor price of $87.69 per barrel

    10

    * Based on Internal Engineer Reserve Report as of 6/30/10

  • Company Profile

    Company ProfileEQUITY MARKET CAP (1) $690 million TOTAL DEBT 54 million LESS CASH 3 millionENTERPRISE VALUE $741 million

    (1) Market pricing as of October 25, 2010; includes 420m Class B units

    Positive Cash Distribution CoverageAnnualized distribution of $2.20 yields approximately 8.6% at current priceExpect approximately 1.25x to 1.30x coverage for 2010

    Diverse asset base in mature basinsAppalachian Basin SE Kentucky and NE Tennessee South Texas Webb and LaSalle CountyPermian Basin W Texas, SE New Mexico Mississippi Jones County and Jasper County

    11

  • Advantages of Vanguards LLC Structure

    LLC Partnership structure results in lower cost of capitalNo entity level income tax is competitive advantage in A&D market

    No Incentive Distribution Rights (IDRs)Investors share equally in all cash flows no management or general partner double-dipping

    Tax Shield minimum 60% of distributions through 2012 expected to be tax deferred

    Unit holders benefit from favorable tax treatment compared to alternative yield products while having upside exposure through unit price appreciation

    Fair governance all unit holders vote (no general partner)

    Vanguards management aligned with public unit holders significant portion of compensation from unit ownership

    12

  • Multiple Operating Areas

    Permian Basin

    Appalachia

    South Texas -Dos Hermanos and Sun TSH Fields

    Proved Reserves: 52.7 Bcfe (1) 98% gas+ngl; 61% PDP 8.1 MMcfe/d current net production

    Proved Reserves: 7.1 MMboe (1) 84% oil and 67% PDP 1.3 Mboe/d current net production

    Proved Reserves: 50.4 Bcfe(1) 93% Gas, 67% PDP 9.9 MMcfe/d current net production

    (1) Internal engineer reserve estimates as of 6/30/10

    13

    Parker Creek

    Proved Reserves: 4.7 MMboe (1) 96% oil and 61% PDP 850 Boe/d current net production

  • 2009 - Growth in South Texas

    Proved Reserves: 35.4 Bcfe (1)97% Gas/NGLs; 62% PDP 5.7 MMcfe/d current net production

    (1) Based on Internal Engineer Reserve Estimates as of 6/30/10

    ACQUISITION SUMMARY - SUN TSH

    Acquisition from Lewis Energy, closed August 2009 for $52.3 million, cash funded with proceeds of equity offeringLewis to operate and conduct PUD drilling program through 2015 (7 wells per year)Drop-down opportunities possible as Lewis monetizes mature assets to focus on Eagle Ford Shale development

    Largest operator in the Olmos trend ~1,100 operated producing wells~ 100,000 Mcfe/d of net production

    Swaps/Collars on 90% of PDP through 2011, floor pricing of Nymex $7.52/MMbtu

    La Salle County, TX

    14

  • 2009 - Growth in Permian BasinAcquisition of producing assets in Ward County closed December 2009 for $55 million cash funded with equity proceedsIncreased net oil production from the Permian by more than 100%High margin assets with inventory of PUD locations to be developed through 2013Hedged ~90% of PDP production through 2013 at a weighted average price of $86.35/bbl

    ACQUISITION SUMMARYProved Reserves: 3.5 MMboe (1)81% Oil and 44% PDP96% average working interest

    (1) Based on Internal Engineer Reserve Estimates as of 6/30/10

    15

    Ward County, TX

    PUDProbable

    DrillingPUD

  • 2010 Mississippi Acquisition

    MS, TX AND NM RESERVESMajor Producing Fields

    Indian Wells

    NE Collins Parker Creek

    Acquisition of producing assets in Mississippi, Texas and New Mexico closed May 2010 for $113.1 million cash funded with equity proceedsInventory of infill PUD locations to develop oil reserves with drilling plan in place for the next 3-4 years designed to maintain production rateVery low operating costs (sub $5/bbl) and development costs ($6.90/bbl) equates to high marginsHedged ~56% of PDP production through 2013 at a weighted average price of $91.70/bbl

    Proved Reserves: 4.7 MMboe (1)96% Oil; 61% PDP

    (1) Based on Internal Engineer Reserve Estimates as of 6/30/10

    Jones and Jasper Counties, MS

    16

  • 67.1 , 100%

    Appalachia

    65.3 , 98%

    1.5 , 2%

    GAS, BCF

    OIL, BCFE

    Asset and Location Diversification12/31/07*: OIL, GAS AND NGL 6/30/10**: OIL, GAS AND NGL

    * Outside engineer reserve report based on $92.50/Bbl WTI and $6.79/MMBtu Henry Hub

    ** Internal engineer reserve estimates as of 6/30/1017

    12/31/07*: BCFE BY AREA 6/30/10**: BCFE BY AREA

    GAS, BCFE

    OIL, BCFE

    NGL, BCFE

    21.4, 12%

    84.8, 49%66.6, 39%

    Appalachia

    Permian Basin

    South Texas and Texas Gulf Coast

    Mississippi

    26.5, 15%

    42.2, 25%

    53.3, 31%

    50.7, 29%

  • FINANCIAL OVERVIEW

    18

  • Hedges Mitigate Distribution RiskApproximately 82% of expected natural gas production (total proved) through 2011 is hedged via a combination of swaps and collars at a weighted average floor price of $7.81 per MMBtu:

    4th Qtr 2010 2011

    % Hedged 93% 80%

    Swaps 60%/$8.70 50%/$7.83

    Collars 33%/$7.67-$8.94 30%/$7.34-$8.44

    Approximately 48% of expected crude oil production (total proved) through 2013 is hedged via swaps and a collar at a weighted average floor price of $87.69 per barrel:

    4th Qtr 2010 2011 2012 2013

    % Hedged 68% 51% 45% 42%

    Swaps 45%/$86.68 51%/$87.94 40%/$90.03 36%/$89.84

    Collars 23%/$70-$80 N/A 5%/$80-$100.25 6%/$80-$100.25

    19

  • Hedged Cash Flow=Stable Distribution Coverage

    $2.00 $3.00 $4.00 $5.00 $6.00

    $50.00 1.22x 1.21x 1.19x 1.18x 1.17x

    $60.00 1.25x 1.24x 1.23x 1.21x 1.20x

    $70.00 1.28x 1.27x 1.26x 1.25x 1.23x

    $80.00 1.33x 1.31x 1.30x 1.29x 1.28x

    $90.00 1.36x 1.35x 1.33x 1.32x 1.31x

    2010 Natural Gas Prices ($/MMBtu)

    2010

    Cru

    de O

    il Pr

    ices

    WTI

    ($

    /Bar

    rel)

    Existing oil and gas hedges support the distributions in a period of volatile commodity prices

    20

  • Conservative Balance Sheet($ in millions)

    June 30, 2009 June 30,2010Facility Size $ 400 $400Borrowing Base $ 154 $240Amount Outstanding $ 133 $172Borrowing Availability $ 22 $68

    Maturity Date March 31, 2011 October 1, 2012

    Interest Rate Pricing Grid (a):Borrowing Base Utilization of:less than 33% going to less than 50% L + 150 bps L + 225 bps33% to 66% going to 50% to 75% L + 175 bps L + 250 bps66% to 85% going to 75% to 90% L + 200 bps L + 275 bpsgreater than 85% going to greater than 90% L + 213 bps L + 300 bps

    Interest Rate Hedges AmountWeighted Average Fixed LIBOR Rate

    Expiring December 2010 through January 2013 $100 2.43%

    Debt Covenants As of 6/30/10

    Adjusted EBITDA / Interest Expense 2.5x Min 9.1xTotal Debt / Adjusted EBITDA 3.5x Max 2.6xCurrent Assets / Current Liabilities 1.0x Min 9.0xPercentage Drawn on Facility 90% threshold 72%

    21

  • Major Taxation Points

    All investors receive a partnership K-1 at the end of the year

    K-1 allocates the partnerships income and expenses to individual investors based on their percentage ownership of the partnership

    Quarterly distributions received are not taxed as dividends.

    Distributions lower the investors tax basis in the units which affects the capital gain calculation upon the sale of the unit.

    Deferred portion of taxes are due upon the sale of the unit

    Depreciation/Depletion expenses are recaptured and taxed at ordinary income rates

    Attractive estate planning tool as heirs get a step-up in cost basis of units

    22

  • Key Investor Considerations

    High quality, long lived reserves

    Asset base generates stable cash flow

    Multi-year hedge program mitigates commodity risk

    Geographic and commodity diversity

    LLC structure gives unitholders a voice

    Management and unitholders are well aligned

    Attractive distribution yield

    Profitably grow company and increase distribution

    23

    AAIIPhiladelphia ChapterForward Looking StatementsComparable Company Distribution YieldsPrice Performance Since 2009Unit Price History Since IPOYield Compression Continues?Acquisitions Drive GrowthVNR-Acquisitions Fuel Distribution GrowthProfitable Growth Through Accretive AcquisitionsOverview of Vanguard Natural ResourcesCompany ProfileAdvantages of Vanguards LLC StructureMultiple Operating Areas 2009 - Growth in South Texas2009 - Growth in Permian Basin2010 Mississippi AcquisitionAsset and Location DiversificationSlide Number 18Hedges Mitigate Distribution RiskHedged Cash Flow=Stable Distribution CoverageConservative Balance SheetMajor Taxation PointsKey Investor Considerations

    AAII

    Philadelphia Chapter

    October 26, 2010

    Forward Looking Statements

    Statements made by representatives of Vanguard Natural Resources, LLC during the course of this presentation that are not historical facts are forward looking statements. These statements are based on certain assumptions and expectations made by the Company which reflect managements experience, estimates and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or anticipated in the forward looking statements. These include risks relating to financial performance and results, our indebtedness under our revolving credit facility, availability of sufficient cash to pay our distributions and execute our business plan, prices and demand for gas, oil and natural gas liquids, our ability to replace reserves and efficiently develop our reserves, our ability to make acquisitions on economically acceptable terms, and other important factors that could cause actual results to differ materially from those anticipated or implied in the forward looking statements. See Risk Factors: in the Companys 10-K Annual Report for 2009, Registration Statements on Form S-1 and Form S-3 and the related prospectuses, Form 10-Qs for 2009 and 2010 and any other public filings and press releases. Vanguard Natural Resources, LLC undertakes no obligation to publicly update any forward looking statements, whether as a result of new information or future events. This presentation has been prepared as of October 25, 2010.

    2

    Comparable Company Distribution Yields

    CURRENT DISTRIBUTION YIELDS OF PEER GROUP

    *Pipe Average Yield of Large Pipeline Companies (BWP, EEP, EPB, EPD, ETP, OKS, SEP, TCLP, TPP)*G&P Average Yield of Gathering & Processing Companies (APL, DPM, CPNO, EROC, HLND, KGS, MWE, NGLS, RGNC, WES, WPZ, XTEK)*USRT Average Yield of U.S. Royalty Trusts (CRT, HGT, MTR, PBT, SBR and SJT)Yield calculated using the closing unit price on 10/25/10.

    3

    $2.08

    $3.02

    $1.53

    8.6%

    Price Performance Since 2009

    Note: Market data as of 10/21/2010. US Royalty Trust Index includes: CRT, HGT, MTR, PBT, SBR and SJT.E&P MLP Index includes: BBEP, CEP, EVEP, LGCY, LINE and VNR.

    (1)

    (2)

    The results have been good. VNR has outperformed US Royalty Trusts, C-Corps and other E&P MLPs. The strategy works.

    4

    Unit Price History Since IPO

    $0.425

    $0.445

    $0.50

    $0.525

    $0.55

    5

    Distribution Increases with Acquisition Growth

    Yield Compression Continues?

    Note: Market data as of 10/21/2010.Liquids T&S (BPL, GEL, GLP, HEP, KMP, NS, MMP, PAA, SXL, TLP, TPP)Natural Gas T&S (BWP, EEP, EPB, EPD, ETP, OKS, SEP, TCLP, WMZ)Natural Gas G&P (APL, DPM, CPNO, EROC, HLND, KGS, MWE, NGLS, RGNC, WES, WPZ, XTEX)Propane (APU, FGP, NRGY, SPH)Shipping (CPLP, KSP, NMM, OSP, TGP, TOO)Upstream (BBEP, ENP, EVEP, LGCY, LINE, PSE, VNR)

    6

    Acquisitions Drive Growth

    Reserves (Bcfe) *

    7

    12/31/2007 12/31/2008 12/31/2009

    12/31/2007 12/31/2008 12/31/2009 6/30/2010*

    * Based on Internal Engineer Reserve Report as of 6/30/10

    Chart1

    67

    109

    143

    173

    258% Reserve Growth Since IPO

    Series 1

    Sheet1

    Series 1

    67

    109

    143

    173

    To resize chart data range, drag lower right corner of range.

    VNR-Acquisitions Fuel Distribution Growth

    8

    $2.08

    Note: As of 10/6/2010. Source: IHS Herold.Peer group includes: ENP, EVEP, LGCY, LINE and PSE.Annual distribution growth reflects the % increase / (decrease) in announced quarterly distribution over the year.Weighted average of peer distribution growth.

    +18%

    Yield Growth

    +14%

    +2%

    +5%

    -1%

    Chart1

    5391

    108195

    115297

    +5%

    VNR

    Peer Acquisition Average

    Sheet1

    VNRPeer Acquisition Average

    2008$53$91

    2009$108$195

    2010$115$297

    To resize chart data range, drag lower right corner of range.

    Profitable Growth Through Accretive Acquisitions

    9

    *Annualized quarterly distributions**Based on current distribution rate of .55 and Q1 2010 distribution of .525

    $1.70*

    $2.18**

    $2.00

    $1.82

    12/31/2007 12/31/2008 12/31/2009 12/31/2010(E)

    Chart1

    30.437

    48.8135

    56.2130

    82165

    Adjusted EBITDA

    Debt

    Sheet1

    Adjusted EBITDADebt

    30.437

    48.8135

    56.2130

    82165

    To resize chart data range, drag lower right corner of range.

    Overview of Vanguard Natural Resources

    Upstream Energy LLC, headquartered in Houston Initial Public Offering VNR - October 2007Five strategic acquisitions totaling ~350MM expanded geographic profile and commodity diversityIncreased distributions 29% since IPODiverse portfolio of mature, long life gas and oil properties, combined with multi-year hedging program provide stable cash flow and support distributions 173 Bcfe total proved reserves, 66% proved developed,16 yr R/P * 49% gas / 39% oil / 12% NGLsApproximately 82% of expected natural gas production hedged through 2011 at floor price of $7.81 per MMbtuApproximately 48% of expected oil production hedged through 2013 at floor price of $87.69 per barrel

    10

    * Based on Internal Engineer Reserve Report as of 6/30/10

    Company Profile

    Company Profile EQUITY MARKET CAP (1) $690 million TOTAL DEBT 54 million LESS CASH 3 million ENTERPRISE VALUE $741 million(1) Market pricing as of October 25, 2010; includes 420m Class B unitsPositive Cash Distribution CoverageAnnualized distribution of $2.20 yields approximately 8.6% at current priceExpect approximately 1.25x to 1.30x coverage for 2010Diverse asset base in mature basinsAppalachian Basin SE Kentucky and NE Tennessee South Texas Webb and LaSalle CountyPermian Basin W Texas, SE New Mexico Mississippi Jones County and Jasper County

    11

    Advantages of Vanguards LLC Structure

    LLC Partnership structure results in lower cost of capitalNo entity level income tax is competitive advantage in A&D market No Incentive Distribution Rights (IDRs)Investors share equally in all cash flows no management or general partner double-dippingTax Shield minimum 60% of distributions through 2012 expected to be tax deferred Unit holders benefit from favorable tax treatment compared to alternative yield products while having upside exposure through unit price appreciationFair governance all unit holders vote (no general partner)Vanguards management aligned with public unit holders significant portion of compensation from unit ownership

    12

    Multiple Operating Areas

    Permian Basin

    Appalachia

    South Texas -Dos Hermanos and Sun TSH Fields

    Proved Reserves: 52.7 Bcfe (1) 98% gas+ngl; 61% PDP 8.1 MMcfe/d current net production

    Proved Reserves: 7.1 MMboe (1) 84% oil and 67% PDP 1.3 Mboe/d current net production

    Proved Reserves: 50.4 Bcfe(1) 93% Gas, 67% PDP 9.9 MMcfe/d current net production

    (1) Internal engineer reserve estimates as of 6/30/10

    13

    Parker Creek

    Proved Reserves: 4.7 MMboe (1) 96% oil and 61% PDP 850 Boe/d current net production

    2009 - Growth in South Texas

    Proved Reserves: 35.4 Bcfe (1)97% Gas/NGLs; 62% PDP 5.7 MMcfe/d current net production

    (1) Based on Internal Engineer Reserve Estimates as of 6/30/10

    ACQUISITION SUMMARY - SUN TSH

    Acquisition from Lewis Energy, closed August 2009 for $52.3 million, cash funded with proceeds of equity offeringLewis to operate and conduct PUD drilling program through 2015 (7 wells per year)Drop-down opportunities possible as Lewis monetizes mature assets to focus on Eagle Ford Shale developmentLargest operator in the Olmos trend ~1,100 operated producing wells ~ 100,000 Mcfe/d of net production Swaps/Collars on 90% of PDP through 2011, floor pricing of Nymex $7.52/MMbtu

    La Salle County, TX

    14

    2009 - Growth in Permian Basin

    Acquisition of producing assets in Ward County closed December 2009 for $55 million cash funded with equity proceedsIncreased net oil production from the Permian by more than 100%High margin assets with inventory of PUD locations to be developed through 2013Hedged ~90% of PDP production through 2013 at a weighted average price of $86.35/bbl

    ACQUISITION SUMMARY

    Proved Reserves: 3.5 MMboe (1)81% Oil and 44% PDP96% average working interest

    (1) Based on Internal Engineer Reserve Estimates as of 6/30/10

    15

    Ward County, TX

    PUDProbable

    DrillingPUD

    2010 Mississippi Acquisition

    MS, TX AND NM RESERVES

    Major Producing Fields

    Indian Wells

    NE Collins

    Parker Creek

    Acquisition of producing assets in Mississippi, Texas and New Mexico closed May 2010 for $113.1 million cash funded with equity proceedsInventory of infill PUD locations to develop oil reserves with drilling plan in place for the next 3-4 years designed to maintain production rateVery low operating costs (sub $5/bbl) and development costs ($6.90/bbl) equates to high marginsHedged ~56% of PDP production through 2013 at a weighted average price of $91.70/bbl

    Proved Reserves: 4.7 MMboe (1)96% Oil; 61% PDP

    (1) Based on Internal Engineer Reserve Estimates as of 6/30/10

    Jones and Jasper Counties, MS

    16

    Asset and Location Diversification

    12/31/07*: OIL, GAS AND NGL 6/30/10**: OIL, GAS AND NGL

    * Outside engineer reserve report based on $92.50/Bbl WTI and $6.79/MMBtu Henry Hub** Internal engineer reserve estimates as of 6/30/10

    17

    12/31/07*: BCFE BY AREA 6/30/10**: BCFE BY AREA

    FINANCIAL OVERVIEW

    18

    Hedges Mitigate Distribution Risk

    Approximately 82% of expected natural gas production (total proved) through 2011 is hedged via a combination of swaps and collars at a weighted average floor price of $7.81 per MMBtu:

    Approximately 48% of expected crude oil production (total proved) through 2013 is hedged via swaps and a collar at a weighted average floor price of $87.69 per barrel:

    19

    4th Qtr 20102011

    % Hedged93%80%

    Swaps60%/$8.7050%/$7.83

    Collars33%/$7.67-$8.9430%/$7.34-$8.44

    4th Qtr 2010201120122013

    % Hedged68%51%45%42%

    Swaps45%/$86.6851%/$87.9440%/$90.0336%/$89.84

    Collars23%/$70-$80N/A5%/$80-$100.256%/$80-$100.25

    Hedged Cash Flow=Stable Distribution Coverage

    2010 Natural Gas Prices ($/MMBtu)

    2010 Crude Oil Prices WTI ($/Barrel)

    Existing oil and gas hedges support the distributions in a period of volatile commodity prices

    20

    $2.00$3.00$4.00$5.00$6.00

    $50.001.22x1.21x1.19x 1.18x 1.17x

    $60.001.25x1.24x 1.23x 1.21x 1.20x

    $70.001.28x1.27x 1.26x 1.25x 1.23x

    $80.001.33x1.31x 1.30x 1.29x 1.28x

    $90.001.36x1.35x 1.33x 1.32x 1.31x

    Conservative Balance Sheet

    21

    ($ in millions)

    June 30, 2009June 30,2010

    Facility Size$ 400$400

    Borrowing Base$ 154$240

    Amount Outstanding$ 133$172

    Borrowing Availability $ 22 $68

    Maturity DateMarch 31, 2011October 1, 2012

    Interest Rate Pricing Grid (a):

    Borrowing Base Utilization of:

    less than 33% going to less than 50%L + 150 bpsL + 225 bps

    33% to 66% going to 50% to 75%L + 175 bpsL + 250 bps

    66% to 85% going to 75% to 90%L + 200 bpsL + 275 bps

    greater than 85% going to greater than 90%L + 213 bpsL + 300 bps

    Interest Rate HedgesAmountWeighted Average Fixed LIBOR Rate

    Expiring December 2010 through January 2013 $1002.43%

    Debt Covenants As of 6/30/10

    Adjusted EBITDA / Interest Expense2.5x Min9.1x

    Total Debt / Adjusted EBITDA 3.5x Max 2.6x

    Current Assets / Current Liabilities1.0x Min9.0x

    Percentage Drawn on Facility90% threshold 72%

    Major Taxation Points

    All investors receive a partnership K-1 at the end of the yearK-1 allocates the partnerships income and expenses to individual investors based on their percentage ownership of the partnership Quarterly distributions received are not taxed as dividends. Distributions lower the investors tax basis in the units which affects the capital gain calculation upon the sale of the unit.Deferred portion of taxes are due upon the sale of the unitDepreciation/Depletion expenses are recaptured and taxed at ordinary income ratesAttractive estate planning tool as heirs get a step-up in cost basis of units

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    Key Investor Considerations

    High quality, long lived reserves Asset base generates stable cash flowMulti-year hedge program mitigates commodity riskGeographic and commodity diversityLLC structure gives unitholders a voice Management and unitholders are well alignedAttractive distribution yieldProfitably grow company and increase distribution

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    26,922,499 shares outstanding (includes the 420,000 B)

    22,086,173 units at a September 1st close price of $24.30