S-1/A 1 h36179a1sv1za.htm AMENDMENT TO FORM S-1 sv1za
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As filed with the Securities and Exchange Commission on September 5, 2006
Registration No. 333-134064
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Amendment No. 1
to
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
 
Legacy Reserves LP
(Exact name of registrant as specified in its charter)
         
Delaware   1311   16-1751069
(State or other jurisdiction of
incorporation or organization)		   (Primary Standard Industrial
Classification Code Number)		   (I.R.S. Employer
Identification Number)
303 W. Wall Street, Suite 1600
Midland, Texas 79701
(432) 682-2516
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Steven H. Pruett
President and Chief Financial Officer
Legacy Reserves GP, LLC
303 W. Wall Street, Suite 1600
Midland, Texas 79701
(432) 682-2516
(Name, address, including zip code, and telephone number, including area code, of agent for service)
 
Copies to:
Gislar Donnenberg
Andrews Kurth LLP
600 Travis, Suite 4200
Houston, Texas 77002
(713) 220-4200
 
Approximate date of commencement of proposed sale to the public:
From time to time after this Registration Statement becomes effective.
 
      If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.     þ
      If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.     o
      If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.     o
      If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.     o
 
      The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
 
 

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The information in this preliminary prospectus is not complete and may be changed. Securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Subject To Completion, Dated September 5, 2006
PROSPECTUS
  Legacy Reserves LP
 
  790,046 Units
 
  Representing Limited Partner Interests
(LEGACY LOGO)
        This prospectus relates to up to 790,046 units, which may be offered for sale by the selling unitholders named in this prospectus. The selling unitholders acquired the units offered by this prospectus in a private equity offering on March 15, 2006. We are registering the offer and sale of the units to satisfy registration rights we have granted. Simultaneously with this registration statement we are registering the offer and sale of up to 4,209,954 units held by other unitholders, who also acquired their units in the private equity offering on March 15, 2006, in a separate registration statement.
      We are not selling any units under this prospectus and will not receive any proceeds from the sale of units by the selling unitholders. The units to which this prospectus relates may be offered and sold from time to time directly from the selling unitholders or alternatively through underwriters or broker-dealers or agents. The units may be sold in one or more transactions, at fixed prices, at prevailing market prices at the time of sale or at negotiated prices. Because all of the units being offered under this prospectus are being offered by selling unitholders, we cannot currently determine the price or prices at which our units may be sold under this prospectus. We are aware that prior to the date of this prospectus, our units have been sold in private resale transactions. We understand that those sales have been reported to the PORTAL® Market.
      There has been no public market for our units.
      Investing in our units involves a high degree of risk. See “Risk Factors” beginning on page 22.
      These risks include the following:
  •  We may not have sufficient available cash to pay our estimated initial quarterly distribution following establishment of cash reserves and payment of fees and expenses, including payments to our general partner.
 
  •  If we are not able to acquire additional oil and natural gas reserves on economically acceptable terms, our reserves and production will decline, which would adversely affect our business, results of operations and financial condition and our ability to make cash distributions to our unitholders.
 
  •  If commodity prices decline significantly for a prolonged period, we may be forced to reduce our distribution or not be able to pay distributions at all.
 
  •  There is no existing market for our units, and a trading market that will provide our unitholders with adequate liquidity may not develop or be sustained. The price of our units may fluctuate significantly, and our unitholders could lose all or part of their investment.
 
  •  Our Founding Investors, including members of our management, own a 72% limited partner interest in us and control our general partner, which has sole responsibility for conducting our business and managing our operations. Our general partner has conflicts of interest and limited fiduciary duties, which may permit it to favor its own interests to the detriment of our unitholders.
 
  •  Unitholders have limited voting rights and are not entitled to elect our general partner, and until we have completed an initial public offering or the owners of our general partner own less than 50% of our units, our unitholders will not be entitled to elect any of its directors.
 
  •  You will experience immediate and substantial dilution of $9.16 per unit.
 
  •  Our unitholders may be required to pay taxes on their share of our income even if they do not receive any cash distributions from us.
 
      Our unitholders should rely only on the information contained in this prospectus or any prospectus supplement or amendment. We have not authorized anyone to provide you with different information. Neither we nor the selling unitholders are making an offer of these securities in any state where the offer is not permitted.
      Neither the Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of these securities or determined whether this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is           , 2006.

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 Form of Opinion and Consent of Andrews Kurth LLP
 Form of Opinion and Consent of Andrews Kurth LLP
 Consent of BDO Seidman, LLP
 Consent of Johnson, Miller & Co., CPA's PC
 Consent of LaRoche Petroleum Consultants, Ltd.
 
         
  Amended and Restated Agreement of Limited Partnership of Legacy Reserves LP   A-1
  Glossary of Terms   B-1
  Reserve Report   C-1

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SUMMARY
      This summary highlights information contained elsewhere in this prospectus. You should read the entire prospectus carefully, including the historical and pro forma consolidated financial statements and the notes to those financial statements. You should read “— Legacy Reserves LP — Summary Risk Factors” and “Risk Factors” for information about important factors to consider before buying the units. We include a glossary of some of the terms used in this prospectus in Appendix B. LaRoche Petroleum Consultants, Ltd., an independent engineering firm, provided the estimates of proved oil and natural gas reserves as of December 31, 2005 included in this prospectus. These estimates are contained in a summary prepared by LaRoche Petroleum Consultants, Ltd. of its reserve report as of December 31, 2005 relating to our properties. This summary is located at the back of this prospectus as Appendix C and is referred to in this prospectus as the “reserve report.” LaRoche Petroleum Consultants, Ltd. has also prepared estimates of proved oil and natural gas reserves as of June 30, 2006 and July 31, 2006.
      References in this prospectus to “Legacy Reserves,” “Legacy”, “we,” “our,” “us,” or like terms when used in a historical context for periods prior to March 15, 2006 refer to the oil and natural gas properties Legacy Reserves LP and its subsidiaries acquired in connection with its formation. When used in the present or future tense, those terms refer to Legacy Reserves LP and its subsidiaries.
Legacy Reserves LP
      We are an independent oil and natural gas limited partnership, headquartered in Midland, Texas, focused on the acquisition and exploitation of oil and natural gas properties primarily located in the Permian Basin of West Texas and southeast New Mexico. We were formed in October 2005 to own and operate the oil and natural gas properties that we acquired from our Founding Investors, the Moriah Group, the Brothers Group, H2K Holdings, Ltd. and MBN Properties LP, and three charitable foundations in connection with the closing of our private equity offering on March 15, 2006. Members of our management team have owned and operated the majority of these assets since 1999. Our primary business objective is to generate stable cash flows allowing us to make cash distributions to our unitholders and to increase quarterly cash distributions per unit over time through a combination of acquisitions of new and exploitation of our existing oil and natural gas properties.
      We have grown primarily through two activities: the acquisition of producing oil and natural gas properties and the exploitation of proved properties as opposed to the higher risk exploration of unproved properties.
      Based on our reserve report as of December 31, 2005 and our historical oil and natural gas production and reserve data (which excludes our recent acquisitions described below):
  •  we had proved reserves of approximately 18 MMBoe, of which approximately 69% were oil and 80% were classified as proved developed producing, 3% were proved developed nonproducing, and 17% proved undeveloped on a combined basis;
 
  •  our proved reserves had a standardized measure as of December 31, 2005 of $277.2 million;
 
  •  our average daily net production was 3,090 Boe/d for the twelve months ended December 31, 2005 and 3,061 Boe/d for the six months ended June 30, 2006, including the historical production attributable to properties purchased from the Prospective Investment and Trading Company Ltd. and its affiliates, or PITCO, of which approximately 64% was from properties we operate; and
 
  •  our proved reserves to production ratio was approximately 16 years.
      In June and July 2006, in three separate transactions, we acquired 2.6 MMBoe of reserves and related operating rights for an aggregate purchase price of approximately $36.4 million in cash and 138,000 newly issued units, each subject to post-closing adjustments. Please see “— Acquisition Activities” below.

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      After giving effect to our recent acquisitions, our pro forma oil and natural gas production and reserve data are as follows:
  •  we had proved reserves of approximately 20 MMBoe, of which 70% were oil and 80% were classified as proved developed producing, 4% were proved developed non-producing, and 16% proved undeveloped as of December 31, 2005;
 
  •  our proved reserves had a standardized measure as of December 31, 2005 of $307.8 million; and
 
  •  our average daily net production was 3,655 Boe/d for the twelve months ended December 31, 2005 and 3,624 Boe/d for the six months ended June 30, 2006, including the historical production attributable to the PITCO properties and our recent acquisitions, of which approximately 70% was from properties we operate.
      During the period of January 1, 2003 through December 31, 2005, we had acquired approximately 7.2 MMBoe of proved reserves and added approximately 6.9 MMBoe of proved reserves, 3.7 MMBoe of which was through extensions and discoveries, and 3.2 MMBoe of which was through revisions of prior estimates and improved recovery.
      Our reserves are located primarily in the Permian Basin, one of the largest and most prolific oil and natural gas producing basins in the United States. The Permian Basin extends over 100,000 square miles in West Texas and southeast New Mexico and has produced over 24 billion Bbls of oil since its discovery in 1921. The Permian Basin is characterized by oil and natural gas fields with long production histories and multiple producing formations. Our producing properties in the Permian Basin are mature fields with established decline curves predominately producing from tight oil reservoirs which are generally not subject to drainage, but are subject to pressure depletion under primary recovery. Approximately 77% of our production for the six-month period ending June 30, 2006 was from properties under primary recovery, 19% from secondary recovery (waterflood), and 4% from tertiary recovery (CO2 injection). On a proved reserve basis, 76% of our reserves are primary, 19% are secondary (waterflood), and 5% are reserves in tertiary (CO2) recovery projects.
Acquisition Activities
      Our strategy is to make accretive acquisitions of producing properties. Accordingly, we have and will continue to focus on identifying, evaluating, executing, integrating and exploiting acquisitions of oil and natural gas properties in the Permian Basin, a large basin with fragmented ownership. During July 2005, there were more than 1,700 operators in the Permian Basin according to the Texas and New Mexico oil and natural gas regulatory commissions, and the top five operators accounted for less than 40% of the total oil production during that period. We believe that our track record and structure will allow us to favorably compete in the acquisition market.
      From January 1, 1999 through July 31, 2006, we invested approximately $146 million in 29 acquisitions, which amount excludes $7.0 million allocated to operating rights. Based on reserve data prepared at the time of these acquisitions, we added a total of approximately 22.7 MMBoe of proved reserves at a reserve acquisition cost of $6.42 per Boe. These additions include our recent acquisitions described below, and our September 2005 acquisition of approximately 5.6 MMBoe of proved reserves, as evaluated by LaRoche Petroleum Consultants, Ltd. as of September 30, 2005, from PITCO for $63.9 million in cash ($64.3 million, inclusive of asset retirement obligations), representing a reserve acquisition cost of $11.49 per Boe.
Recent Acquisitions
      On June 29, 2006, we acquired certain producing properties and related operating rights in the South Justis Field located in Lea County, New Mexico for a stated purchase price of $14.0 million cash and 138,000 of newly issued units, each subject to post-closing adjustments. We acquired a 15% operated working

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interest in the South Justis Unit, a waterflood installed in 1992 that contains 113 producing wells and 97 water injection wells producing approximately 952 gross (125 net) Boe/d for the six months ended June 30, 2006. As of June 30, 2006, total net proved reserves were approximately 0.71 MMBoe, 66% of which are classified as proved developed producing, 21% are proved developed non-producing and 13% are proved undeveloped. We have allocated $8.8 million of the $15.8 million estimated net purchase price to the working interest and reserve acquisition, and the balance of $7.0 million to the related operating rights which entitle us to receive approximately $1.7 million of operating fees annually from third party owners of the properties. We expect to refracture stimulate 38 existing wells and infill drill twelve 20-acre locations over the next three years.
      Also on June 29, 2006, we closed an acquisition of additional operated leases in the Farmer Field located in Crockett and Reagan counties of West Texas, our largest field by reserve volume, from Larron Oil Corporation, for $5.6 million cash. We acquired a 100% operated interest in 49 wells producing 76 net Boe/d and net reserves as of June 30, 2006 of 0.44 MMBoe, all of which are classified as proved developed producing.
      On July 31, 2006, we closed the acquisition of properties from Kinder Morgan Production Company LP for approximately $17.3 million cash after closing adjustments. The Kinder Morgan properties contain 85 producing wells and 44 water injection wells located in nine fields in Texas and southeast New Mexico which produce approximately 300 Boe/d net. We operate over 90% of the production. As of July 31, 2006, net proved reserves were 1.4 MMBoe, all of which are proved developed producing.
      The proved reserves we acquired in our three recent acquisitions have been evaluated by LaRoche Petroleum Consultants, Ltd. as of their respective closing dates.
      We believe that our recent acquisitions will provide us with continuing opportunities to apply our operational knowledge to increase production and reserves from a variety of known producing formations since many of the acquired properties are near or in the same fields or formations as our other properties. For example, the Kinder Morgan acquisition included production in the Denton Field, which is our largest property in terms of reserve value and the Larron Farmer Field acquisition is adjacent to our existing wells in the Farmer Field, which is our largest property in terms of reserve volume, which we believe will result in operational efficiencies.
Exploitation Activities
      We have also grown reserves and production each year since 1999 through exploitation activities on our existing and acquired properties. Our exploitation activities include accessing additional productive formations in existing wellbores, formation stimulation, artificial lift equipment enhancement, infill drilling on closer well spacing, secondary (waterflood) and tertiary (CO2) recovery projects, drilling for deeper formations and completing unconventional and tight formations. From January 1, 2003 through December 31, 2005, we added approximately 6.9 MMBoe of proved reserves, 3.7 MMBoe of which was through extensions and discoveries and 3.2 MMBoe of which was through revisions of prior estimates and improved recovery. Over the same period our reserve replacement rate, or the ratio of added proved reserves to production, from exploitation activities, revisions to prior estimates and improved recovery was approximately 260%. Please read “Business — Exploitation Activities” for a discussion of our reserve replacement rate. As of June 30, 2006, we have identified 107 gross (70 net) proved undeveloped drilling locations, 50 gross (10 net) recompletion and formation stimulation projects and one tertiary (CO2) recovery expansion project on our properties, approximately 80% of which we intend to drill and execute over the next four years. Excluding acquisitions, we expect to make capital expenditures of approximately $10.7 million during the twelve months ending June 30, 2007, including drilling 14 gross (8.0 net) development wells, executing 17 gross (4.4 net) recompletions and refracture stimulations and expanding one tertiary (CO2) recovery project. We currently have rigs operating or committed to drill 100% of our expected development wells for the twelve months ending June 30, 2007.

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Hedging Activities
      Our strategy includes hedging a majority of our oil and natural gas production over a three to five-year period. We have hedged approximately 75% of our expected oil and natural gas production for the twelve months ending June 30, 2007 from total proved reserves. We have also hedged approximately 65% of our expected oil and natural gas production from total proved reserves for 2007 through 2010. All of our hedges are in the form of fixed price swaps with average NYMEX prices of at least $61.51 per Bbl of oil and $7.99 per MMBtu of natural gas. In July 2006, we entered into basis swaps to receive NYMEX prices and pay prices based on Waha, a natural gas hub in West Texas. The prices that we receive for our natural gas sales follow Waha more closely than NYMEX. The basis swaps thereby provide a better match between our natural gas sales and the settlement payments on our natural gas swaps.
Business Strategy
      The key elements of our business strategy are to:
  •  make accretive acquisitions of producing properties generally characterized by long-lived reserves with stable production and reserve exploitation potential;
 
  •  grow proved reserves and maximize cash flow and production through exploitation activities and operational efficiencies;
 
  •  focus on the Permian Basin;
 
  •  maintain financial flexibility; and
 
  •  reduce commodity price risk through hedging.
Competitive Strengths
      We believe that we are positioned to successfully execute our business strategy because of the following competitive strengths:
  •  Proven acquisition and exploitation track record.
 
  •  Predictable, long-lived reserve base.
 
  •  Diversified operations.
 
  •  Experienced management team with a vested interest in our success.
Summary of Risk Factors
      An investment in our units involves risks associated with our business, this offering and our limited partnership structure and the tax characteristics of our units. The following list of risk factors is not exhaustive. Please read carefully these and the other risks under the caption “Risk Factors.”
Risks Related to Our Business
  •  We may not have sufficient available cash to pay our estimated initial quarterly distribution following establishment of cash reserves and payment of fees and expenses, including payments to our general partner.
 
  •  If we are not able to acquire additional oil and natural gas reserves on economically acceptable terms, our reserves and production will decline, which would adversely affect our business, results of operations and financial condition and our ability to make cash distributions to our unitholders.

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  •  Because we distribute all of our available cash to our unitholders, our future growth may be limited.
 
  •  If commodity prices decline significantly for a prolonged period, we may be forced to reduce our distribution or not be able to pay distributions at all.
 
  •  If commodity prices decline significantly for a prolonged period, a significant portion of our exploitation projects may become uneconomic, which may adversely affect our ability to make distributions to our unitholders.
 
  •  Our estimated reserves are based on many assumptions that may prove inaccurate. Any material inaccuracies in these reserve estimates or underlying assumptions will materially affect the quantities and present value of our reserves.
 
  •  Our credit facility has substantial restrictions and financial covenants, and our borrowing base is subject to redetermination by our lenders which could adversely affect our business, results of operations, financial condition and our ability to make cash distributions to our unitholders.
 
  •  We have a limited operating history as a combined entity and our pro forma operating results may not be indicative of our future operating results.
 
  •  Our business depends on gathering and transportation facilities owned by others. Any limitation in the availability of those facilities would interfere with our ability to market the oil and natural gas we produce.
Risks Related to this Offering and Our Limited Partnership Structure
  •  There is no existing market for our units, and a trading market that will provide our unitholders with adequate liquidity may not develop or be sustained. The price of our units may fluctuate significantly, and our unitholders could lose all or part of their investment.
 
  •  Units eligible for future sale may have adverse effects on our unit price and the liquidity of the market for our units.
 
  •  Our Founding Investors, including members of our management, own a 72% limited partner interest in us and control our general partner, which has sole responsibility for conducting our business and managing our operations. Our general partner has conflicts of interest and limited fiduciary duties, which may permit it to favor its own interests to the detriment of our unitholders.
 
  •  Unitholders have limited voting rights and are not entitled to elect our general partner, and until we have completed an initial public offering or the owners of our general partner own less than 50% of our units, our unitholders will not be entitled to elect any of its directors.
 
  •  Even if unitholders are dissatisfied they cannot remove our general partner without the consent of unitholders owning at least 662/3% of our units, including units owned by our general partner and its affiliates.
 
  •  Our partnership agreement restricts the voting rights of those unitholders owning 20% or more of our units.
 
  •  The owners of our general partner may sell all or part of the general partner to a third party without unitholder consent, which could result in a change of our management or business strategy or both and which would result in an event of default under our revolving credit facility, unless consent of our lenders is obtained.
 
  •  Our Founding Investors and their affiliates (other than our executive officers) may compete directly with us.

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  •  Cost reimbursements due our general partner and its affiliates will reduce our cash available for distribution to our unitholders.
 
  •  Our partnership agreement limits our general partner’s fiduciary duties to our unitholders and restricts the remedies available to unitholders for actions taken by our general partner that might otherwise constitute a breach of fiduciary duty.
 
  •  Our partnership agreement permits our general partner to redeem any partnership interest held by a limited partner who is a non-citizen assignee.
 
  •  You will experience immediate and substantial dilution of $9.16 per unit.
 
  •  We may issue an unlimited number of additional units without unitholder approval, which would dilute our unitholders’ existing ownership interest in us.
Tax Risks to Unitholders
  •  Our tax treatment depends on our status as a partnership for federal income tax purposes, as well as our not being subject to entity-level taxation by individual states. If the IRS were to treat us as a corporation for federal income tax purposes or we were to become subject to entity-level taxation for state tax purposes, taxes paid, if any, will reduce our cash available for distribution to our unitholders.
 
  •  Our unitholders may be required to pay taxes on their share of our income even if they do not receive any cash distributions from us.
 
  •  A successful IRS contest of the federal income tax positions we take may adversely affect the market for our units, and the costs of any contest will reduce our cash available for distribution to our unitholders.
 
  •  Tax-exempt entities, regulated investment companies and foreign persons face unique tax issues from owning units that may result in adverse tax consequences to them.

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Formation Transactions
      We are a Delaware limited partnership formed in October 2005 by the Moriah Group, the Brothers Group, MBN Properties LP and H2K Properties, collectively our “Founding Investors,” to own and operate oil and gas properties and related assets transferred to us by our Founding Investors. Our Founding Investors are:
  •  The Moriah Group — The Moriah Group is comprised of Moriah Properties, Ltd. and DAB Resources, Ltd. Moriah Properties, Ltd. is indirectly owned and controlled by Dale A. Brown, a member of the board of directors of our general partner and Cary D. Brown, the Chief Executive Officer and Chairman of the Board of our general partner. DAB Resources, Ltd. is owned and controlled by Dale A. Brown and Rita Brown.
 
  •  The Brothers Group — The Brothers Group is comprised of Brothers Production Properties, Ltd., Brothers Production Company, Inc., Brothers Operating Company, Inc., and J&W McGraw Properties, Ltd., which entities are directly or indirectly owned and controlled by the McGraw family. Kyle A. McGraw is the Executive Vice President of Business Development and Land and a member of the board of directors of our general partner.
 
  •  MBN Properties LP — The general partner of MBN Properties is MBN Management, LLC with a 1% general partner interest. The Moriah Group, the Brothers Group, H2K Properties, Ltd. and various private investors (the “Newstone Group”) are the limited partners of MBN Properties.
 
  •  H2K Properties, Ltd. — H2K Properties, Ltd. is controlled by Paul T. Horne, our Vice President of Operations.
      In connection with the closing of our private equity offering on March 15, 2006, we acquired oil and natural gas properties and related assets for aggregate consideration of approximately $73.0 million and issued an aggregate amount of 17,640,068 units as set forth below:
  •  The following entities received units in exchange for contributing to us their respective interests in oil and natural gas producing properties:
                   
Entity   Units   Reserves
         
        (MMBoe)
Moriah Properties, Ltd. 
     7,334,070       6.08  
DAB Resources, Ltd. 
     859,703       0.71  
Brothers Production Properties, Ltd. 
     4,968,945       4.02  
Brothers Production Company, Inc. 
     264,306       0.21  
Brothers Operating Company, Inc. 
     52,861       0.04  
J&W McGraw Properties, Ltd. 
     914,246       0.74  
H2K Holdings, Ltd. 
     83,499       0.07  
             
 
Total
     14,477,630       11.87  
             
  •  MBN Properties contributed to Legacy Operating Partnership LP 143 oil and natural gas properties and 862 gross producing oil and gas wells located in the Permian Basin that it had acquired from PITCO, an unrelated third party, on September 14, 2005, for a total of 5.42 MMBoe of reserves in exchange for $65.3 million cash and 3,162,438 units;
 
  •  We purchased oil and gas properties with an aggregate of 0.65 MMBoe of reserves from Charities Support Foundation, Inc., Moriah Foundation, Inc. and the Cary Brown Family Foundation, Inc. for $7.7 million. Two of the foundations, the Moriah Foundation, Inc. and the Cary Brown Family Foundation, were established by Dale A. Brown and Cary D. Brown.
      We received net proceeds of $79.5 million from our private equity offering. With a portion of these proceeds, we redeemed an aggregate of 4,400,000 units for a total consideration of $69.9 million from the

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following entities, in the following amounts, at a price per unit of $15.81, which is equal to the price per unit received by Legacy from the purchasers in the private equity offering net of initial purchaser’s discount and placement agent’s fee:
                           
            Percentage of
        Units Owned   Currently
            Outstanding
Entity   Units Redeemed   After Redemption   Units
             
Moriah Properties, Ltd.
     1,470,527       5,863,543       31.8%  
DAB Resources, Ltd.
     344,752       514,951       2.8  
Brothers Production Properties, Ltd.
     2,045,133       2,923,812       15.8  
Brother Production Company, Inc.
     108,784       155,522       0.8  
Brothers Operating Company, Inc.
     21,757       31,104       0.2  
J&W McGraw Properties, Ltd.
     376,288       537,958       2.9  
H2K Holdings, Ltd.
     32,759       50,740       0.3  
                   
 
Total
     4,400,000       10,077,630       54.6  
                   

8

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