NOTE 3 - ACQUISITIONS

Partnership Acquisitions

Effective October 1, 2011, we completed our acquisition of the Transferred Properties for an aggregate purchase price of $578.8 million. The net assets were recorded by the Partnership using carryover book value of the Fund as the acquisition is a transaction between entities under common control. Our historical financial statements were revised to include the results attributable to the Transferred Properties as if we owned the properties for all periods we have presented in our consolidated financial statements. See Note 2 for further disclosures regarding this transaction.

The Partnership's Allocation of Melrose Acquisition by the Predecessor

A portion of the Transferred Properties includes the Predecessor's Melrose Acquisition, on December 22, 2010 subsequent to our IPO, which qualifies as a business combination. The following table summarizes our allocated share of the consideration paid by the Predecessor for Melrose and our allocated share of the final fair value of the assets acquired and liabilities assumed as of December 22, 2010.

Allocated cost of Predecessor's acquisition	$	77,763
Oil and gas properties	$	82,781
Asset retirement obligations		(5,018	)
Total identifiable net assets	$	77,763

Predecessor Third Party Acquisitions

Predecessor Acquisition of Denbury Properties

On May 14, 2010, the Predecessor completed an acquisition to acquire certain oil and natural gas properties from Denbury Resources, Inc. (“Denbury”) for $893 million (the “Denbury Properties”). The Denbury Properties are located in the Permian Basin, Mid Continent and East Texas. Total proved reserves of the acquired properties were estimated to be 77 MMBoe as of May 14, 2010.

The acquisition qualifies as a business combination, and as such, the Predecessor estimated the fair value of these properties as of the acquisition date. The fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). Fair value measurements also utilize assumptions of market participants.

The Predecessor estimated that the fair value of the Denbury net assets acquired was approximately $918 million, with an associated ARO of $24.9 million, which the Predecessor considered to be representative of the price paid by a typical market participant. This measurement resulted in neither goodwill nor a bargain purchase gain. The acquisition related costs related to the Denbury acquisition were approximately $1.2 million and are recorded as acquisition evaluation costs during 2010.

The following table summarizes the consideration paid by the Predecessor for the Denbury Properties and the final fair value of the assets acquired and liabilities assumed as of May 14, 2010.

Consideration given to Denbury:
Cash	$	888,785
Preferential rights (Not yet paid at December 31, 2010)		4,058
Total consideration	$	892,843
Recognized amounts of identifiable assets acquired and liabilities assumed:
Inventory (including hydrocarbons of $1,863)	$	6,384
Proved developed properties (1)		788,829
Proved undeveloped properties (1)		84,000
Unproved properties (1)		43,000
Suspended revenues payable		(4,521	)
Asset retirement obligations		(24,849	)
Total identifiable net assets	$	892,843

(1)

The Predecessor used a discounted cash flow model and made market assumptions as to future commodity prices, projections of estimated quantities of oil and natural gas reserves, expectations for timing and amount of future development and operating costs, projections of future rates of production, expected recovery rates and risk adjusted discount rates.

Summarized below are the consolidated results of operations for 2010 and 2009 for the Predecessor, on an unaudited basis, as if the acquisition had occurred on January 1 of each of the years presented. The unaudited pro forma financial information was derived from the Predecessor's historical consolidated statement of operations and the statement of revenues and direct operating expenses for the Denbury Properties, which were derived from the historical accounting records of the seller. The unaudited pro forma financial information does not purport to be indicative of results of operations that would have occurred had the transaction occurred on the basis assumed above, nor is such information indicative of the Predecessor's our expected future results of operations.

	2010				2009
	Actual		Pro Forma		Actual			Pro Forma
Revenues	$	253,386	$	343,190	$	72,801		$	233,778
Net Income (Loss)	$	31,913	$	98,455	$	(115,414	)	$	(94,962	)

Predecessor Acquisition of Jay Field Properties

The Predecessor signed and closed a purchase agreement on March 31, 2010 to acquire land within the Jay field from International Paper Company for $3.1 million.

Predecessor Acquisition of Shongaloo Properties

On January 28, 2009, the Predecessor completed an acquisition of 80 producing gas wells located in Arkansas and Louisiana (the “Shongaloo Properties”) for approximately $48.7 million from El Paso E&P Company, L.P. (“El Paso”). The acquisition was funded through cash calls to partners combined with borrowings under the Partnership's credit facility. Total proved reserves of the acquired properties were estimated at 4.2 million barrels of oil equivalent at the date of acquisition.

The following table summarizes the consideration paid for the Shongaloo Properties and the fair value of the assets acquired and liabilities assumed as of January 28, 2009.

Consideration given to El Paso:
Cash	$	48,700
Recognized amounts of identifiable assets acquired and liabilities assumed:
Proved developed properties (1)	$	51,600
Asset retirement obligations		(1,700	)
Bargain purchase		(1,200	)
Total identifiable net assets	$	48,700

(1)

Summarized below are the consolidated results of operations for the years ended December 31, 2009, on an unaudited pro forma basis, as if the acquisition had occurred on January 1 of each of the periods presented. The unaudited pro forma financial information was derived from the historical consolidated statement of operations of the Predecessor and the statement of revenues and direct operating expenses for the Shongaloo Properties, which were derived from the historical accounting records of the seller. The unaudited pro forma financial information does not purport to be indicative of results of operations that would have occurred had the transaction occurred on the basis assumed above, nor is such information indicative of the Predecessor's expected future results of operations.

	2009
	Actual			Pro Forma
Revenues	$	72,801		$	73,713
Net Loss	$	(115,414	)	$	(117,858	)

Predecessor 2009 Acquisition Pro Forma

Summarized below are the Predecessor's consolidated results of operations for the year ended December 31, 2009, on an unaudited pro forma basis, as if the acquisitions of both the Denbury Properties and Shongaloo Properties had occurred on January 1, 2009. The unaudited pro forma financial information was derived from the Predecessor's historical consolidated statement of operations and the statements of revenues and direct operating expenses for the Denbury Properties and Shongaloo Properties, which were derived from the historical accounting records of the sellers. The unaudited pro forma financial information does not purport to be indicative of results of operations that would have occurred had the transaction occurred on the basis assumed above, nor is such information indicative of the Predecessor's expected future results of operations.

	2009
				Pro Forma Adjustments
	Actual			Denbury		Shongaloo			Pro Forma
Revenues	$	72,801			160,977		912		$	234,690
Net Loss	$	(115,414	)		20,452		(2,444	)	$	(97,406	)