Amplify Energy (AMPYW) 8-K Memorial Production Partners LP

Exhibit 99.2

RECAST ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

MEMORIAL PRODUCTION PARTNERS LP

INDEX TO FINANCIAL STATEMENTS

	Page No.
Report of Independent Registered Public Accounting Firm		F-2
Consolidated and Combined Balance Sheets as of December 31, 2012 and 2011		F-3
Statements of Consolidated and Combined Operations for the Years Ended December  31, 2012, 2011, and 2010		F-4
Statements of Consolidated and Combined Cash Flows for the Years Ended December  31, 2012, 2011, and 2010		F-5
Statements of Consolidated and Combined Equity for the Years Ended December  31, 2012, 2011, and 2010		F-6
Notes to Consolidated and Combined Financial Statements
Note 1 – Organization and Basis of Presentation		F-7
Note 2 – Summary of Significant Accounting Policies		F-9
Note 3 – Acquisitions and Divestitures		F-14
Note 4 – Fair Value Measurements of Financial Instruments		F-18
Note 5 – Risk Management and Derivative Instruments		F-20
Note 6 – Asset Retirement Obligations		F-23
Note 7 – Restricted Investments		F-23
Note 8 – Long Term Debt		F-23
Note 9 – Income Tax		F-25
Note 10 – Equity & Distributions		F-26
Note 11 – Earnings per Unit		F-32
Note 12 – Equity-based Awards		F-32
Note 13 – Related Party Transactions		F-33
Note 14 – Commitments and Contingencies		F-37
Note 15 – Defined Contribution Plan		F-39
Note 16 – Quarterly Financial Information (Unaudited)		F-40
Note 17 – Supplemental Oil and Gas Information (Unaudited)		F-40
Note 18 – Subsidiary Guarantors		F-44
Note 19 – Subsequent Events		F-45

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of Memorial Production Partners GP LLC and

Unitholders of Memorial Production Partners LP

We have audited the accompanying consolidated and combined balance sheets of Memorial Production Partners LP and subsidiaries (the Partnership) as of December 31, 2012 and 2011, and the related consolidated and combined statements of operations, equity, and cash flows for each of the years in the three-year period ended December 31, 2012. These consolidated and combined financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these consolidated and combined financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated and combined financial statements referred to above present fairly, in all material respects, the financial position of Memorial Production Partners LP and subsidiaries as of December 31, 2012 and 2011, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2012, in conformity with U.S. generally accepted accounting principles.

As discussed in note 1 to the consolidated and combined financial statements, the balances sheets, and the related statements of operations, equity, and cash flows have been prepared on a combined basis of accounting.

/s/ KPMG LLP

Dallas, Texas

June 19, 2013

F-2

MEMORIAL PRODUCTION PARTNERS LP

CONSOLIDATED AND COMBINED BALANCE SHEETS

(In thousands, except outstanding units)

	December 31,
	2012*			2011*
ASSETS
Current assets:
Cash and cash equivalents	$	7,990		$	9,624
Accounts receivable:
Oil and natural gas sales		17,017			21,418
Joint interest owners and other		1,427			—
Affiliates		8,497			8,670
Short-term derivative instruments		23,091			37,302
Prepaid expenses and other current assets		2,111			4,581
Total current assets		60,133			81,595
Property and equipment, at cost:
Oil and natural gas properties, successful efforts method		1,038,962			862,915
Other		1,541			1,150
Accumulated depreciation, depletion and impairment		(178,135	)		(128,775	)
Oil and natural gas properties, net		862,368			735,290
Long-term derivative instruments		11,524			22,040
Restricted investments		68,024			63,619
Other long-term assets		4,141			4,292
Total assets	$	1,006,190		$	906,836
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	1,033		$	9,134
Accounts payable – affiliates		1,738			—
Revenues payable		3,108			8,312
Accrued liabilities		12,448			13,907
Short-term derivative instruments		2,635			11,308
Total current liabilities		20,962			42,661
Long-term debt		460,300			254,900
Asset retirement obligations		78,286			73,072
Long-term derivative instruments		9,578			1,822
Other long-term liabilities		2,100			2,924
Total liabilities		571,226			375,379
Commitments and contingencies (Note 14)
Equity:
Limited partners:
Common units (28,921,903 units outstanding at December 31, 2012 and 16,661,294 units outstanding at December 31, 2011)		301,204			241,034
Subordinated units (5,360,912 units outstanding at December 31, 2012 and 2011)		20,156			61,708
General partner (34,317 units outstanding at December 31, 2012 and 22,044 units outstanding at December 31, 2011)		450			426
Total partners’ equity		321,810			303,168
Noncontrolling interest		5,261			5,157
Previous owners		107,893			223,132
Total equity		434,964			531,457
Total liabilities and equity	$	1,006,190		$	906,836

See Accompanying Notes to Consolidated and Combined Financial Statements.

*See Note 1 for information regarding recast amounts and basis of financial statement presentation.

F-3

MEMORIAL PRODUCTION PARTNERS LP

STATEMENTS OF CONSOLIDATED AND COMBINED OPERATIONS

(In thousands, except per unit amounts)

	For Year Ended December 31,
	2012*			2011*			2010*
Revenues:
Oil & natural gas sales	$	172,263		$	170,411		$	89,338
Pipeline tariff income		1,468			1,379			1,332
Other income		224			825			1,433
Total revenues	$	173,955		$	172,615		$	92,103
Costs and expenses:
Lease operating		53,453			46,975			32,513
Pipeline operating		2,114			2,526			1,896
Exploration		554			417			161
Production and ad valorem taxes		9,555			6,887			2,838
Depreciation, depletion, and amortization		49,390			41,748			29,697
Impairment of proved oil and natural gas properties		—			15,141			11,800
General and administrative		18,019			15,549			10,544
Accretion of asset retirement obligations		3,755			3,549			2,924
Realized (gain) on commodity derivative instruments		(37,608	)		(8,820	)		(7,132	)
Unrealized (gain) loss on commodity derivative instruments		20,612			(38,494	)		(547	)
(Gain) on sale of properties		(426	)		(63,024	)		(1	)
Other, net		730			2,260			1,195
Total costs and expenses		120,148			24,714			85,888
Operating income		53,807			147,901			6,215
Other income (expense):
Interest expense, net		(15,043	)		(10,830	)		(3,441	)
Amortization of investment premium		(194	)		(606	)		(907	)
Total other income (expense)		(15,237	)		(11,436	)		(4,348	)
Income before income taxes		38,570			136,465			1,867
Income tax benefit (expense)		(285	)		(139	)		(218	)
Net income		38,285			136,326			1,649
Net income (loss) attributable to predecessor		—			75,740			(11,317	)
Net income attributable to previous owners		38,060			54,140			12,974
Net income (loss) attributable to noncontrolling interest		104			(146	)		(8	)
Net income attributable to partners	$	121		$	6,592		$	—
Allocation of net income attributable to partners:
Limited partners	$	121		$	6,585		$	—
General partner	$	—		$	7		$	—
Earnings per unit: (see Note 11)
Basic and diluted earnings per unit	$	0.01		$	0.30		$	—
Weighted average limited partner units outstanding:
Basic and diluted		22,880			21,756			—

See Accompanying Notes to Consolidated and Combined Financial Statements.

*See Note 1 for information regarding recast amounts and basis of financial statement presentation.

F-4

MEMORIAL PRODUCTION PARTNERS LP

STATEMENTS OF CONSOLIDATED AND COMBINED CASH FLOWS

(In thousands)

	For Year Ended December 31,
	2012*			2011*			2010*
Cash flows from operating activities:
Net income	$	38,285		$	136,326		$	1,649
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion, and amortization		49,390			41,748			29,697
Impairment of proved oil and natural gas properties		—			15,141			11,800
Unrealized loss (gain) on derivatives		23,810			(36,773	)		(252	)
Premiums paid for derivatives		—			(7,117	)		—
Premiums received for derivatives		—			2,520			—
Deferred income tax expense (benefit)		—			(36	)		216
Amortization of loan origination costs		1,426			1,077			981
Amortization of investment premium		194			606			907
Accretion of asset retirement obligations		3,755			3,549			2,924
Amortization of equity awards		1,423			—			—
Gain on sale of properties		(426	)		(63,024	)		(1	)
Exploration costs		36			56			39
Changes in operating assets and liabilities:
Accounts receivable		(3,164	)		(17,551	)		(16,865	)
Prepaid expenses and other assets		(896	)		(1,374	)		(622	)
Payables and accrued liabilities		4,067			17,287			14,256
Net cash provided by operating activities		117,900			92,435			44,729
Cash flows from investing activities:
Acquisition of oil and natural gas properties		(126,884	)		(318,714	)		(119,511	)
Additions to oil and gas properties		(51,313	)		(52,171	)		(21,768	)
Additions to restricted investments		(4,599	)		(5,261	)		(3,368	)
Additions to other property and equipment		(927	)		(555	)		(523	)
Proceeds from the sale of oil and gas properties		500			3,197			1,400
Net cash used in investing activities		(183,223	)		(373,504	)		(143,770	)
Cash flows from financing activities:
Advances on revolving credit facility		301,000			371,318			115,106
Payments on revolving credit facility		(95,600	)		(231,846	)		(61,600	)
Proceeds from borrowings of long-term debt		—			—			182
Repayment of borrowings of long-term debt		—			—			(44	)
Loan origination fees		(1,407	)		(5,278	)		(1,632	)
Predecessor capital contributions		—			48,885			44,130
Capital contributions from previous owners		—			86,570			17,817
Noncontrolling interest capital contributions		—			—			1,206
Proceeds from general partner contribution		206			419			—
Proceeds from the issuance of common units		202,572			181,659			—
Costs incurred in conjunction with issuance of common units		(8,268	)		(24,540	)		—
Distributions to partners		(34,436	)		—			—
Distribution to Memorial Resource (see Note 1)		(45,489	)		(73,557	)		—
Distribution to Rise (see Note 1)		(242,174	)		—			—
Transfer of operating subsidiary to Memorial Resource (see Note 13)		(3,751	)		—			—
Distributions made by previous owners		(8,964	)		(64,996	)		(4,385	)
Cash retained by predecessor		—			(14,977	)		—
Net cash provided by financing activities		63,689			273,657			110,780
Net change in cash and cash equivalents		(1,634	)		(7,412	)		11,739
Cash and cash equivalents, beginning of year		9,624			17,036			5,297
Cash and cash equivalents, end of year	$	7,990		$	9,624		$	17,036
Supplemental cash flows:
Cash paid for interest	$	9,437		$	7,598		$	4,309
Cash paid for taxes		22			40			—
Noncash investing and financing activities:
Additions to oil and gas properties – change in capital accruals	$	(4,184	)	$	8,926		$	—
Environmental remediation liability – net (see Note 14)		—			968			1,450
Fair value of assets acquired in excess of cash paid and net book value of properties transferred		—			68,945			—
Assumptions of asset retirement obligations related to properties acquired		482			4,853			6,371
Accrued equity offering costs		170			—			—
Distributions to partners		48			—			—

See Accompanying Notes to Consolidated and Combined Financial Statements.

*See Note 1 for information regarding recast amounts and basis of financial statement presentation.

F-5

MEMORIAL PRODUCTION PARTNERS LP

STATEMENTS OF CONSOLIDATED AND COMBINED EQUITY

(In thousands)

	Partner’s Equity
	Limited Partners						General						Previous			Noncontrolling
	Common			Subordinated			Partner			Predecessor			Owners			Interest			Total
Balance December 31, 2009	$	—		$	—		$	—		$	72,988		$	117,832		$	4,105		$	194,925
Net income (loss)		—			—			—			(11,317	)		12,974			(8	)		1,649
Contributions		—			—			—			44,130			17,817			1,206			63,153
Distributions		—			—			—			—			(4,385	)		—			(4,385	)
Balance December 31, 2010		—			—			—			105,801			144,238			5,303			255,342
Net income (loss)		4,962			1,623			7			75,740			54,140			(146	)		136,326
Contributions		—			—			419			48,885			86,570			—			135,874
Net assets retained by predecessor		—			—			—			(17,385	)		3,180			—			(14,205	)
Distributions		—			—			—			—			(64,996	)		—			(64,996	)
Exchange of predecessor interests for units (Note 1)		121,101			91,940			—			(213,041	)		—			—			—
Deferred tax liability from initial public offering		(335	)		(111	)		—			—			—			—			(446	)
Net proceeds from the issuance of common units		157,119			—			—			—			—			—			157,119
Distribution to Memorial Resource (Note 1)		(41,813	)		(31,744	)		—			—			—			—			(73,557	)
Balance December 31, 2011*		241,034			61,708			426			—			223,132			5,157			531,457
Net income (loss)		114			7			—			—			38,060			104			38,285
Net proceeds from the issuance of common units		194,134			—			—			—			—			—			194,134
Contributions		—			—			206			—			—			—			206
Distribution attributable to net assets acquired (Note 1)		(209,720	)		(77,701	)		(242	)		—			—			—			(287,663	)
Net book value of net assets acquired (Note 13)		99,972			44,269			94			—			(144,335	)		—			—
Amortization of equity awards		1,423			—			—			—			—			—			1,423
Distributions		(26,152	)		(8,298	)		(34	)		—			(8,964	)		—			(43,448	)
Deferred tax liability adjustments		335			111			—			—			—			—			446
Other		64			60			—			—			—			—			124
Balance December 31, 2012*	$	301,204		$	20,156		$	450		$	—		$	107,893		$	5,261		$	434,964

See Accompanying Notes to Consolidated and Combined Financial Statements.

*See Note 1 for information regarding recast amounts and basis of financial statement presentation.

F-6

MEMORIAL PRODUCTION PARTNERS LP

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

Note 1. Organization and Basis of Presentation

General

Memorial Production Partners LP (the “Partnership”) is a publicly traded Delaware limited partnership, the common units of which are listed on the NASDAQ Global Market (“NASDAQ”) under the symbol “MEMP.” Unless the context requires otherwise, references to “we,” “us,” “our,” or “the Partnership” are intended to mean the business and operations of Memorial Production Partners LP and its consolidated subsidiaries.

We operate in one reportable segment engaged in the acquisition, exploitation, development and production of oil and natural gas properties. Our management evaluates performance based on one reportable business segment as there are not different economic environments within the operation of our oil and natural gas properties. Our business activities are conducted through our wholly owned subsidiary Memorial Production Operating LLC (“OLLC”) and its wholly-owned subsidiaries. Our assets consist primarily of producing oil and natural gas properties and are principally located in Texas, Louisiana, and offshore Southern California. Most of our oil and natural gas properties are located in large, mature oil and natural gas reservoirs. The Partnership’s properties consist primarily of operated and non-operated working interests in producing and undeveloped leasehold acreage and working interests in identified producing wells (often referred to as wellbore assignments).

The Partnership was formed in April 2011 to own and acquire oil and natural gas properties in North America and completed its initial public offering (“IPO”) on December 14, 2011 (see Note 10). The Partnership is owned 99.9% by its limited partners and 0.1% by its general partner, Memorial Production Partners GP LLC, which is a wholly owned subsidiary of Memorial Resource Development LLC (“Memorial Resource”). Our general partner is responsible for managing all of the Partnership’s operations and activities.

Memorial Resource is a Delaware limited liability company owned and formed by Natural Gas Partners VIII, L.P. (“NGP VIII”), Natural Gas Partners IX, L.P. (“NGP IX”) and NGP IX Offshore Holdings, L.P. (“NGP IX Offshore”) (collectively, the “Funds”) to own, acquire, exploit and develop oil and natural gas properties and to own our general partner. Memorial Resource provides management, administrative, and operations personnel to us and our general partner under an omnibus agreement (see Note 13). The Funds are private equity funds managed by Natural Gas Partners (“NGP”). The Funds collectively directly own, through non-voting membership interests in our general partner, 50% of the economic interest in our incentive distribution rights (“IDRs”). The remaining economic interest in our IDRs is owned by our general partner.

References to “our predecessor” for accounting and financial reporting purposes refers collectively to: (i) BlueStone Natural Resources Holdings, LLC (“Bluestone”) and its wholly-owned subsidiaries in addition to certain carved-out oil and natural gas properties (“Classic Carve-Out”) owned by Classic Hydrocarbons Holdings, L.P. (“Classic”) for all periods prior to the closing of our IPO and (ii) certain oil and natural gas properties owned by WHT Energy Partners LLC (“WHT”) for periods after April 8, 2011 through the closing of our IPO.

References to “the previous owners” for accounting and financial reporting purposes refers collectively to: (i) certain oil and natural gas properties the Partnership acquired from Memorial Resource in April and May 2012 for periods after common control commenced through their respective date of acquisition, (ii) Rise Energy Operating, LLC and its wholly-owned subsidiaries (except for Rise Energy Operating, Inc.) (“REO”) from February 3, 2009 (inception) through the date of acquisition, and (iii) certain oil and natural gas properties and related assets in East Texas and North Louisiana that the Partnership acquired in March 2013 (the “WHT Properties”) owned by WHT from February 2, 2009 (inception) through the date of acquisition.

Both the previous owners and our predecessor operated oil and natural gas properties as one business segment: the acquisition, exploration, development and production of oil and natural gas. Performance was evaluated based on one business segment as there were not different economic environments within the operation of the oil and natural gas properties.

F-7

MEMORIAL PRODUCTION PARTNERS LP

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

In connection with our IPO, the Funds contributed to Memorial Resource their respective ownership of five separate portfolio companies (including those comprising our predecessor) and we acquired substantially all of the oil and natural gas properties and related assets owned by BlueStone, certain carved-out oil and natural gas properties and related assets owned by Classic and a 40% undivided interest in certain oil and natural gas properties and related assets (the “WHT Assets”) controlled by WHT. We distributed approximately $73.6 million in cash, 7,061,294 common units, and 5,360,912 subordinated units to Memorial Resource to acquire the net assets of our predecessor and repaid $198.3 million of our predecessor’s credit facilities concurrent with the closing of our IPO. The cash portion of this consideration was financed with borrowings under a senior securing revolving credit facility (see Note 8) and the net cash proceeds generated from our IPO. This dropdown transaction was accounted for as a combination of entities under common control; therefore, the Partnership accounted for the acquisition at historical cost in a manner similar to the pooling of interest method.

The Partnership acquired certain oil and natural gas producing properties from Memorial Resource in both April and May 2012 and March 2013. The Partnership acquired REO, which owns certain operating interests in producing and non-producing oil and gas properties offshore Southern California in December 2012 from Rise Energy Partners, LP (“Rise”). We refer to this transaction as the “Beta acquisition.” Rise is primarily owned by two of the Funds. Each of these acquisitions was accounted for as a transaction between entities under common control, similar to a pooling of interests, whereby the net assets acquired were recorded at historical cost and certain financial and other information has been retrospectively revised to give effect to such acquisitions as if the Partnership owned the assets for periods after common control commenced through their respective acquisition dates. See Note 13 for additional information.

Basis of Presentation

Our consolidated results of operations following the completion of our IPO are presented together with the combined results of operations pertaining to our predecessor and the previous owners. The combined financial statements were derived from the historical accounting records of our predecessor and the previous owners and reflect the historical financial position, results of operations and cash flows for all periods presented. Our predecessor’s combined financial statements reflect the financial statements of BlueStone and Classic Carve-Out through the closing of our IPO and the WHT Assets for periods after April 8, 2011 through December 13, 2011. The previous owners combined financial statements reflect certain oil and gas properties acquired from Memorial Resource in both April and May 2012 and March 2013 for periods after common control commenced through their respective acquisition dates on a combined basis for all periods presented and the consolidated financial statements of REO for all periods presented. The ownership interest of the noncontrolling shareholder in the San Pedro Bay Pipeline Company (“SPBPC”), an indirect majority-owned subsidiary of REO, is presented as noncontrolling interest in the financial statements.

The Classic Carve-Out amounts included in the accompanying financial statements include allocations for various expenses. Certain expenses incurred by Classic were indirectly attributable to the Classic Carve-Out as Classic owned interests in numerous other oil and natural gas properties. As a result, certain assumptions and estimates were made in order to allocate a reasonable share of such expenses to our predecessor, so that the amounts included in the combined financial statements reflect substantially all of the cost of doing business. Such allocations may or may not reflect future costs associated with the operation of the Partnership.

All material intercompany transactions and balances have been eliminated in preparation of our consolidated and combined financial statements. The accompanying consolidated and combined financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In the opinion of management, all adjustments necessary for a fair presentation of the financial statements have been made. Certain amounts in the prior year financial statements have been reclassified to conform to the presentation in the current year financial statements.

F-8

MEMORIAL PRODUCTION PARTNERS LP

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

Note 2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of consolidated and combined financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated and combined financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Significant estimates include, but are not limited to, oil and natural gas reserves; depreciation, depletion, and amortization of proved oil and natural gas properties; future cash flows from oil and natural gas properties; impairment of long-lived assets; fair value of derivatives; fair value of equity compensation; fair values of assets acquired and liabilities assumed in business combinations and asset retirement obligations.

Principles of Consolidation and Combination

Our consolidated financial statements include our accounts and those of our majority-owned subsidiaries in which we have a controlling interest, after the elimination of all intercompany accounts and transactions. Likewise, the combined financial statements include the accounts of BlueStone and the Classic Carve-Out through the closing of our IPO, the WHT Assets for periods after April 8, 2011 through December 13, 2011, certain oil and gas properties acquired from Memorial Resource in both April and May 2012 and March 2013 for periods after common control commenced through their respective acquisition dates on a combined basis, and the consolidated financial statements of REO for all periods presented. All material intercompany balances and transactions have been eliminated.

Financial statements previously filed with the United States Securities and Exchange Commission (“SEC”) on March 5, 2013 on Form 10-K and reported herein have been recast to include the financial position and results attributable to the WHT Properties acquired from Memorial Resource in March 2013 for historical periods after April 8, 2011.

Cash and Cash Equivalents

Cash and cash equivalents represent unrestricted cash on hand and all highly liquid investments with original contractual maturities of three months or less.

Concentrations of Credit Risk

Cash balances, accounts receivable, restricted investments and derivative financial instruments are financial instruments potentially subject to credit risk. Cash and cash equivalents are maintained in bank deposit accounts which, at times, may exceed the federally insured limits. Management periodically reviews and assesses the financial condition of the banks to mitigate the risk of loss. Various restricted investment accounts fund certain long-term contractual and regulatory asset retirement obligations and collateralize certain regulatory bonds associated with the offshore Southern California oil and gas properties. These restricted investments consist of money market deposit accounts, money market mutual funds, commercial paper, and U.S. Government securities, all held with credit-worthy financial institutions. Derivative financial instruments are generally executed with major financial institutions that expose us to market and credit risks and which may, at times, be concentrated with certain counterparties. The credit worthiness of the counterparties is subject to continual review. We rely upon netting arrangements with counterparties to reduce credit exposure. Neither we nor our predecessor have experienced any losses from such instruments.

Oil and natural gas are sold to a variety of purchasers, including intrastate and interstate pipelines or their marketing affiliates and independent marketing companies. Accounts receivable from joint operations are from a number of oil and natural gas companies, partnerships, individuals, and others who own interests in the properties operated by us and our predecessor. Generally, operators of crude oil and natural gas properties have the right to offset future revenues against unpaid charges related to operated wells, minimizing the credit risk associated with

F-9

MEMORIAL PRODUCTION PARTNERS LP

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

these receivables. Additionally, management believes that any credit risk imposed by a concentration in the oil and natural gas industry is mitigated by the creditworthiness of its customer base. An allowance for doubtful accounts is recorded after all reasonable efforts have been exhausted to collect or settle the amount owed. Any amounts outstanding longer than the contractual terms are considered past due. Management determined that an allowance for uncollectible accounts was unnecessary at both December 31, 2012 and 2011, respectively.

If we were to lose any one of our customers, the loss could temporarily delay production and the sale of oil and natural gas in the related producing region. If we were to lose any single customer, we believe that a substitute customer to purchase the impacted production volumes could be identified. However, if one or more of our larger customers ceased purchasing oil or natural gas altogether, the loss of such customer could have a detrimental effect on production volumes in general and on the ability to find substitute customers to purchase production volumes.

Oil and Natural Gas Properties

Oil and natural gas exploration, development and production activities are accounted for in accordance with the successful efforts method of accounting. Under this method, costs of acquiring properties, costs of drilling successful exploration wells, and development costs are capitalized. The costs of exploratory wells are initially capitalized pending a determination of whether proved reserves have been found. At the completion of drilling activities, the costs of exploratory wells remain capitalized if determination is made that proved reserves have been found. If no proved reserves have been found, the costs of each of the related exploratory wells are charged to expense. In some cases, a determination of proved reserves cannot be made at the completion of drilling, requiring additional testing and evaluation of the wells. The costs of such exploratory wells are expensed if a determination of proved reserves has not been made within a twelve-month period after drilling is complete. Exploration costs such as geological, geophysical, and seismic costs are expensed as incurred.

As exploration and development work progresses and the reserves on these properties are proven, capitalized costs attributed to the properties are subject to depreciation and depletion. Depletion of capitalized costs is provided using the units-of-production method based on proved oil and gas reserves related to the associated field.

On the sale or retirement of a complete or partial unit of a proved property or pipeline and related facilities, the cost and related accumulated depreciation, depletion, and amortization are removed from the property accounts, and any gain or loss is recognized.

The following table presents the amount of capitalized exploratory drilling costs pending evaluation at December 31 for each of the last three years and changes in those amounts during the years then ended (in thousands):

	2012		2011			2010
Balance, January 1	$	—	$	2,013		$	821
Additions to capitalized exploratory well costs pending determination of proved reserves		—		701			2,013
Capitalized exploratory well costs asset exchange (1)		—		(2,714	)		—
Reclassification to proved oil and natural gas properties based on the determination of proved reserves		—		—			(821	)
Capitalized exploratory well costs charged to expense		—		—			—
Balance, December 31	$	—	$	—		$	2,013

(1) Our predecessor acquired interest in wells located in South Texas from BP America Production Company (“BP”) in exchange for acreage and cash. Capitalized exploratory well costs were part of this exchange transaction. See Note 3 for further information regarding this transaction.

F-10

MEMORIAL PRODUCTION PARTNERS LP

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

Oil and Gas Reserves

The estimates of proved oil and natural gas reserves utilized in the preparation of the consolidated and combined financial statements are estimated in accordance with the rules established by the SEC and the Financial Accounting Standards Board (“FASB”). These rules require that reserve estimates be prepared under existing economic and operating conditions using a trailing 12-month average price with no provision for price and cost escalations in future years except by contractual arrangements. Netherland, Sewell & Associates, Inc. (“NSAI”), our independent reserve engineers, was engaged to prepare portions of our reserves estimates comprising approximately 98% of our estimated proved reserves (by volume) at December 31, 2012.

Reserve estimates are inherently imprecise. Accordingly, the estimates are expected to change as more current information becomes available. Oil and gas properties are depleted by field using the units-of-production method. Capitalized drilling and development costs of producing oil and natural gas properties are depleted over proved developed reserves and leasehold costs are depleted over total proved reserves. It is possible that, because of changes in market conditions or the inherent imprecision of reserve estimates, the estimates of future cash inflows, future gross revenues, the amount of oil and natural gas reserves, the remaining estimated lives of oil and natural gas properties, or any combination of the above may be increased or reduced. Increases in recoverable economic volumes generally reduce per unit depletion rates while decreases in recoverable economic volumes generally increase per unit depletion rates.

Other Property & Equipment

Other property and equipment is stated at historical costs and is comprised primarily of vehicles, furniture, fixtures, and computer hardware and software. Depreciation of other property and equipment is calculated using the straight-line method based on estimated useful lives of three to five years.

Restricted Investments

Various restricted investment accounts fund certain long-term contractual and regulatory asset retirement obligations and collateralize certain regulatory bonds associated with the offshore Southern California oil and gas properties. These investments are classified as held-to-maturity, and such investments are stated at amortized cost. Interest earned on these investments is included in interest expense – net in the statement of operations. The amortized cost of such investments is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion is displayed as a separate line item in the statement of operations. At December 31, 2012, these restricted investments consisted of money market deposit accounts, money market mutual funds, commercial paper, and U.S. Government securities. See Note 7 for additional information.

Debt Issuance Costs

These costs are recorded on the balance sheet and amortized over the term of the associated debt using the straight-line method which approximates the effective yield method. Amortization expense for the years ended December 31, 2012, 2011, and 2010 was approximately $1.4 million, $1.1 million, and $1.0 million, respectively. Amortization of debt issuance costs for the year ended December 31, 2012 included a $0.4 million write-off of debt issuance costs as a result of repaying and terminating REO’s credit facility in December 2012.

F-11

MEMORIAL PRODUCTION PARTNERS LP

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

Impairments

Proved oil and natural gas properties are reviewed for impairment when events and circumstances indicate a possible decline in the recoverability of the carrying value of such properties, such as a downward revision of the reserve estimates, less than expected production, drilling results, higher operating and development costs, or lower commodity prices. The estimated undiscounted future cash flows expected in connection with the property are compared to the carrying value of the property to determine if the carrying amount is recoverable. If the carrying value of the property exceeds its estimated undiscounted future cash flows, the carrying amount of the property is reduced to its estimated fair value using Level 3 inputs. The factors used to determine fair value include, but are not limited to, estimates of proved reserves, future commodity prices, the timing of future production and capital expenditures and a discount rate commensurate with the risk reflective of the lives remaining for the respective oil and gas properties. Impairment expense for the years ended December 31, 2011 and 2010 was approximately $15.1 million and $11.8 million, respectively. No impairment charges were recorded during the year ended December 31, 2012.

Asset Retirement Obligations

An asset retirement obligation associated with retiring long-lived assets is recognized as a liability on a discounted basis in the period in which the legal obligation is incurred and becomes determinable, with an equal amount capitalized as an addition to oil and natural gas properties, which is allocated to expense over the useful life of the asset. Generally, oil and gas producing companies incur such a liability upon acquiring or drilling a well. Accretion expense is recognized over time as the discounted liabilities are accreted to their expected settlement value. Upon settlement of the liability, a gain or loss is recognized as a component of exploration costs to the extent the actual costs differ from the recorded liability. See Note 6 for further discussion of asset retirement obligations.

Revenue Recognition

Revenue from the sale of oil and natural gas is recognized when title passes, net of royalties due to third parties. Oil and natural gas revenues are recorded using the sales method. Under this method, revenues are recognized based on actual volumes of oil and natural gas sold to purchasers, regardless of whether the sales are proportionate to our ownership in the property. An asset or a liability is recognized to the extent that we have an imbalance in excess of our proportionate share of the remaining recoverable reserves on the underlying properties. No significant imbalances existed at December 31, 2012 or 2011.

The following individual customers each accounted for 10% or more of total reported revenues for the period indicated:

	Years Ending December 31,
	2012			2011			2010
Major customers: (1)
Phillips 66 (2)		21	%		n/a			n/a
ConocoPhillips (2)		16	%		37	%		52	%
Dominion Gas Ventures, LP (3)		n/a			11	%		18	%
Enterprise Texas Pipeline, LLC (3)		n/a			10	%		13	%

(1) Collectively, these major customers purchased production pursuant to existing marketing agreements with terms that are currently on “evergreen” status. Evergreen contracts automatically renew on a month-to-month basis until either party gives 30 or 60 days advance written notice of non-renewal.

(2) Phillips 66 was a subsidiary of ConocoPhillips through April 30, 2012. Accordingly, any revenues generated from Phillips 66 prior to May 1, 2012 were reported under ConocoPhillips.

(3) These customers accounted for less than 10% of total revenue for the period indicated.

General and Administrative Expense

We and our general partner have entered into an omnibus agreement with Memorial Resource pursuant to which, among other things, Memorial Resource performs all operational, management and administrative services on our general partner’s and our behalf. Our partnership agreement provides that our general partner will determine in good faith the expenses that are allocated to us, including expenses incurred by our general partner and its affiliates on our behalf. During the year ended December 31, 2012, Memorial Resource allocated general and administrative costs based on the relative size of our proved and probable reserves in comparison to Memorial

F-12

MEMORIAL PRODUCTION PARTNERS LP

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

Resource’s total proved and probable reserves. Under our partnership agreement and the omnibus agreement, we reimburse Memorial Resource for all direct and indirect costs incurred on our behalf. See Note 13 for additional information in regards to the omnibus agreement.

General and administrative expenses associated with our predecessor and the previous owners included the costs of administrative employees, related benefits, office rents, professional fees and other costs not directly associated with field operations or production.

Derivative Instruments

Commodity derivative financial instruments (e.g., swaps, floors, collars, and put options) are used to reduce the impact of natural gas and oil price fluctuations. Interest rate swaps are used to manage exposure to interest rate volatility, primarily as a result of variable rate borrowings under the credit facilities. Every derivative instrument is recorded on the balance sheet as either an asset or liability measured at its fair value. Changes in the derivative’s fair value are recognized in earnings as we have not elected hedge accounting for any of our derivative positions.

Income Tax

We are organized as a pass-through entity for income tax purposes. As a result, our partners are responsible for federal income taxes on their share of our taxable income. Certain of our consolidated subsidiaries are taxed as corporations and subject to federal income taxes. We are also subject to the Texas margin tax and certain aspects of the tax make it similar to an income tax as the tax is assessed on 1% of taxable margin. Deferred taxes arise due to temporary differences between the financial statement carrying value of existing assets and liabilities and their respective tax basis.

We must recognize the tax effects of any uncertain tax positions we may adopt, if the position taken by us is more likely than not sustainable based on its technical merits. If a tax position meets such criteria, the tax effect that would be recognized by us would be the largest amount of benefit with more than a 50% chance of being realized. There were no uncertain tax positions that required recognition in the financial statements at December 31, 2012 or 2011.

See Note 9 for additional information.

Earnings Per Unit

Basic and diluted earnings per unit (“EPU”) is determined by dividing net income or loss available to the limited partners by the weighted average number of outstanding limited partner units during the period. Net income or loss available to the limited partners is determined by applying the two-class method. The two-class method of computing EPU is an earnings allocation formula that determines EPU based on distributions declared. The amount of net income or loss used in the determination of EPU is reduced (or increased) by the amount of available cash that has been or will be distributed to the limited partners for that corresponding period. The remaining undistributed earnings or excess distributions over earnings, if any, are allocated to the limited partners in accordance with the contractual terms of the partnership agreement. The total earnings allocated to the limited partners is determined by adding together the amount allocated for distributions declared and the amount allocated for the undistributed earnings or excess distributions over earnings. Basic and diluted EPU are equivalent, as all restricted common units and subordinated units participate in distributions. See Note 11 for additional information.

Equity Compensation

The fair value of equity-classified awards (e.g., restricted common unit awards) is amortized to earnings over the requisite service or vesting period. Compensation expense for liability-classified awards are recognized over the requisite service or vesting period of an award based on the fair value of the award remeasured at each reporting period. We currently have no awards subject to performance criteria; however, such awards vest when it is probable that the performance criteria will be met and the requisite service period has been met. Generally, no compensation expense is recognized for equity instruments that do not vest. See Note 12 for further information.

F-13

MEMORIAL PRODUCTION PARTNERS LP

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

Current Liabilities

Current accrued liabilities consisted of the following at the dates indicated (in thousands):

	December 31,
	2012		2011
Accrued capital expenditures	$	4,742	$	8,926
Accrued lease operating expense		3,944		1,392
Accrued general and administrative expenses		1,349		527
Accrued interest payable		618		269
Accrued environmental		623		779
Other		1,172		2,014
	$	12,448	$	13,907

New Accounting Pronouncements

Fair Value Measurements. In May 2011, the FASB issued an accounting standard update that amended previous fair value measurement and disclosure guidance. These amendments generally involve clarifications on how to measure and disclose fair value amounts recognized in the financial statements. They also expand the disclosure requirements, particularly for Level 3 fair value measurements, to include a description of the valuation processes used and an analysis of the sensitivity of the fair value measurements to changes in unobservable inputs and the interrelationships between those unobservable inputs, if any. We adopted this guidance on January 1, 2012 prospectively and it did not have a material impact on our financial statements.

Offsetting Disclosure Requirements. In December 2011, the FASB issued an accounting standard update intended to enhance current disclosure requirements on offsetting financial assets and liabilities. In January 2013, the FASB issued an accounting standard update to clarify the scope of offsetting disclosure requirements. The new disclosure requirements will require the disclosure of both gross and net information about derivatives, repurchase agreements and reverse purchase agreements, and securities borrowing and securities lending transactions eligible for offset on the balance sheet or subject to a master netting arrangement or similar agreement. Disclosure of collateral received and posted in connection with master netting agreements or similar arrangements is also required. The disclosures will be effective or annual and interim periods beginning on or after January 1, 2013, and must be applied retrospectively. We do not believe adoption of this new guidance will have a significant impact on our financial statements.

Note 3. Acquisitions and Divestitures

The third party acquisitions discussed below were accounted for under the acquisition method of accounting. Accordingly, we, our predecessor, and the previous owners conducted assessments of net assets acquired and recognized amounts for identifiable assets acquired and liabilities assumed at their estimated acquisition date fair values, while acquisition costs associated with the acquisitions were expensed as incurred. The operating revenues and expenses of acquired properties are included in the accompanying financial statements from their respective closing dates forward. The transactions were financed through capital contributions and borrowings under credit facilities.

The fair values of oil and natural gas properties are measured using valuation techniques that convert future cash flows to a single discounted amount. Significant inputs to the valuation of oil and natural properties include estimates of: (i) economic reserves; (ii) future operating and development costs; (iii) future commodity prices; and (iv) a market-based weighted average cost of capital.

Our acquisitions of oil and gas properties from Memorial Resource in both April and May 2012 and March 2013, as further discussed in Note 13, were each accounted for as a transaction between entities under common control, similar to a pooling of interests, whereby the net assets acquired were recorded at Memorial Resource’s carrying value. Likewise, our acquisition of REO from Rise in December 2012, as further discussed in Note 13, was also accounted for as a transaction between entities under common control.

F-14

MEMORIAL PRODUCTION PARTNERS LP

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

2012 Acquisitions

Third Party.On May 1, 2012, we acquired non-operating interests in certain oil and natural gas properties located in East Texas and North Louisiana from an undisclosed third party seller (“Undisclosed Seller Acquisition”) for a final net purchase price of approximately $36.5 million after customary post-closing adjustments. The effective date of this transaction was January 1, 2012. This transaction was financed with borrowings under our revolving credit facility. Because this transaction was a joint acquisition with Memorial Resource, the transaction was approved by the board of directors of our general partner (the “Board”) and by its conflicts committee, which is comprised entirely of independent directors. These properties are located primarily in Polk County, Texas and Lincoln and Claiborne Parishes, Louisiana. During the year ended December 31, 2012, approximately $4.8 million of revenue and $1.2 million of earnings were recorded in the statement of operations related to the Undisclosed Seller Acquisition subsequent to the closing date.

On September 28, 2012, we acquired certain oil and natural gas properties in East Texas from Goodrich Petroleum Corporation (“Goodrich Acquisition”), for a final net purchase price of $90.4 million after customary post-closing adjustments. The effective date of this transaction was July 1, 2012. This transaction was financed with borrowings under our revolving credit facility. These properties are located in the East Henderson field of Rusk County, Texas. During the year ended December 31, 2012, approximately $4.6 million of revenue and $2.0 million of earnings were recorded in the statement of operations related to the Goodrich Acquisition subsequent to the closing date.

The following table summarizes the fair value of the assets acquired and liabilities assumed as of each acquisition date (in thousands).

	Undisclosed Seller Acquisition			Goodrich Acquisition
Recognized amounts of identifiable assets acquired and liabilities assumed:
Oil and gas properties	$	36,865		$	91,187
Prepaid expenses and other current assets		—			425
Revenues payable		—			(875	)
Asset retirement obligations		(321	)		(161	)
Accrued liabilities		(83	)		(153	)
Total identifiable net assets	$	36,461		$	90,423

The following unaudited pro forma combined results of operations are provided for the twelve month periods ended December 31, 2012 and 2011 as though the third-party acquisitions had been completed on January 1, 2011. The unaudited pro forma financial information was derived from the historical combined statements of operations of the Partnership, our predecessor, and the previous owners and adjusted to include: (i) the revenues and direct operating expenses associated with oil and gas properties acquired, (ii) depletion expense applied to the adjusted basis of the properties acquired and (iii) interest expense on additional borrowings necessary to finance the acquisitions. The unaudited pro forma financial information does not purport to be indicative of results of operations that would have occurred had the transactions occurred on the basis assumed above, nor is such information indicative of expected future results of operations.

	For the Year Ended December 31,
	2012		2011
	(In thousands, except per unit amounts)
Revenues	$	194,968	$	210,808
Net income		47,024		154,836
Basic and diluted earnings per unit		0.37		0.33

Acquisition-related costs.Approximately $3.3 million of acquisition-related costs are included in general and administrative expense in the accompanying statements of operations for the year ended December 31, 2012. This amount includes acquisition-related costs for both related party and third party transactions.

F-15

MEMORIAL PRODUCTION PARTNERS LP

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

2011 Acquisitions

Effective January 1, 2011, our predecessor acquired BP’s interests in wells located in Duval, Jim Hogg, McMullen and Webb counties located in Texas in exchange for our predecessor’s interest in approximately 10,700 net acres located in the Nueces Field of the Eagle Ford Shale located in South Texas and $20.0 million in cash, subject to certain closing adjustments. The transaction closed on May 31, 2011 and our predecessor paid a total of approximately $12.9 million in cash consideration at closing, net of adjustments.

The purchase price allocation resulted in the acquisition date fair value of $82.6 million allocated to proved oil and gas properties, $1.2 million allocated to asset retirement obligations, $0.5 million allocated to accrued liabilities and $0.6 million to deferred tax liabilities. After taking into consideration the net book value of the Nueces Field properties exchanged to BP of $5.2 million and the $12.9 million in cash consideration paid at closing, our predecessor recorded a $62.2 million gain during the year ended December 31, 2011.

On April 8, 2011, our predecessor and the previous owners together acquired producing oil and natural gas properties in East Texas (the “Carthage Properties”) from a third party. Our predecessor and the previous owners estimated that as of April 8, 2011, the fair value of the Carthage Properties acquired was approximately $302.0 million, which was considered to be representative of the price paid by a typical market participant. The following table summarizes the fair value of the assets acquired and liabilities assumed as of April 8, 2011 (in thousands):

Recognized amounts of identifiable assets acquired and liabilities assumed:
Oil and gas properties	$	307,185
Other property and equipment		1,046
Suspense liabilities assumed		(1,659	)
Environmental liabilities assumed		(968	)
Asset retirement obligations		(3,653	)
Total identifiable net assets	$	301,951

Summarized below are the results of operations for the years ended December 31, 2011 and 2010, on an unaudited pro forma basis, as if the BP and Carthage Properties acquisitions had occurred on January 1, 2010. The unaudited pro forma financial information was derived from the historical combined statements of operations of our predecessor and the previous owners, the statements of revenues and direct operating expenses for the BP and Carthage Properties and 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 expected future results of operations.

	For the Year Ended December 31,
	2011		2010
	(In thousands)
BP and Carthage Properties:
Revenues	$	194,457	$	172,674
Net income		81,010		34,755

During the year ended December 31, 2011, approximately $8.3 million and $46.2 million of revenue and $2.3 million and $32.2 million of earnings were recorded in the statement of operations related to the BP and Carthage Properties acquisitions subsequent to their respective closing dates.

Effective July 1, 2011, our predecessor acquired producing oil and natural gas properties in Webb and Zapata counties located in South Texas. The net purchase price of $2.25 million was allocated to oil and natural gas properties. The acquisition closed on June 30, 2011.

Approximately $1.0 million of acquisition costs related to the 2011 acquisitions is included in other expense in the accompanying statements of operations for the year ended December 31, 2011.

F-16

MEMORIAL PRODUCTION PARTNERS LP

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

2010 Acquisitions

Effective January 1, 2010, our predecessor acquired producing oil and natural gas properties in East Texas from Petrohawk Properties, LP for approximately $5.8 million. The net purchase price was allocated $5.8 million to proved oil and gas properties. The acquisition closed on May 28, 2010.

Effective March 1, 2010, our predecessor acquired oil and natural gas properties in East Texas from BP for approximately $8.2 million. The net purchase price was allocated to proved oil and gas properties. This acquisition closed on March 29, 2010.

Effective April 1, 2010, our predecessor acquired Forest Oil’s interests in wells located in Webb County, Texas (the “Forest Oil Properties”) for a net purchase price of approximately $65.9 million. The net purchase price was allocated to oil and gas properties. This acquisition of properties closed on June 30, 2010. Summarized below are the results of operations for the years ended December 31, 2010 on an unaudited pro forma basis, as if this acquisition had occurred on January 1, 2009. The unaudited pro forma financial information was derived from the historical combined statement of operations of our predecessor and the previous owners as well as the statements of revenues and direct operating expenses for the Forest Oil 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 expected future results of operations.

	For the Year Ended December 31,
	2010
	(In thousands)
Forest Oil Properties:
Revenues	$	100,771
Net income		7,460

Effective May 1, 2010, our predecessor acquired Merit Energy’s (“Merit”) interest in wells located in South Texas for a net purchase price of approximately $14.1 million. The net purchase price was allocated as follows (in thousands):

Oil and gas properties	$	15,397
Prepaid assets		450
Assumed liabilities		(1,728	)
Net purchase price	$	14,119

As part of the acquisition process, an environmental review was performed and it was determined that there was environmental damage to one of the acquired properties. As such, the parties agreed to reduce the purchase price by approximately $0.5 million. Additionally, our predecessor and Merit entered into an escrow agreement whereby our predecessor agreed to pay for the initial $1.0 million of the remediation costs, with Merit paying for amounts incurred in excess of $1.0 million and up to $1.5 million. Our predecessor’s anticipated cost to remediate this area is $1.5 million. As of December 31, 2010, our predecessor recorded an accrued liability of $1.5 million for the anticipated costs to remediate this area. Merit funded an escrow account with the $0.5 million and that amount is included on the balance sheet as a prepaid asset. This acquisition closed on June 4, 2010. As of December 31, 2012, approximately $1.0 million of costs have been incurred and the approximately $0.5 million of remaining environmental accrued liability is recorded as a current liability in accrued liabilities.

Effective September 1, 2010, the previous owners acquired certain oil and gas properties in various counties in East Texas from a third party. This acquisition closed on December 16, 2010. The purchase price allocation resulted in the acquisition date fair value of $15.4 million allocated to proved oil and gas properties and $0.4 million allocated to asset retirement obligations. The Partnership purchased these properties from Memorial Resource on April 2, 2012. See Note 13 for information about the Partnership’s acquisitions of oil and gas properties from Memorial Resource in April 2012 and Note 1 for information regarding basis of presentation.

F-17

MEMORIAL PRODUCTION PARTNERS LP

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

Effective May 1, 2010, our predecessor acquired Zachry Exploration, LLC’s interest in Laredo area properties for a net purchase price of $6.5 million. The net purchase price was allocated to oil and gas properties. This acquisition closed on August 3, 2010.

Effective April 1, 2010, our predecessor acquired U.S. Enercorp, LTD’s interest in wells located in McMullen County, Texas for a net purchase price of approximately $2.6 million. The net purchase price was allocated to oil and gas properties. This acquisition closed on May 28, 2010.

Our predecessor also acquired interests in oil and gas properties in a number of individually insignificant acquisitions during 2010 which aggregated to a total of approximately $6.0 million. Approximately $0.9 million of acquisition costs related to the 2010 acquisitions is included in other expense in the accompanying statements of operations for the year ended December 31, 2010.

Divestitures

During August 2011, our predecessor sold working interests related to the deep rights under approximately 4,200 acres in Webb County located in South Texas and options related to an additional 9,000 acres of deep rights in Webb County. Total cash consideration received by our predecessor in August 2011 was approximately $2.0 million, and a $0.8 million gain on the sale of properties was recognized for the year ended December 31, 2011 in the statement of operations. In November 2011, one of the options related to a portion of the 9,000 acres of deep rights was exercised for approximately $0.4 million of cash. No significant gain or loss was recognized related to this option exercise. The transactions did not involve the sale of any existing production.

On January 20, 2010, our predecessor sold its interests in the Saner wells for net proceeds of approximately $1.4 million. There was no significant gain or loss associated with this sale. In addition, during 2010, our predecessor received a settlement of approximately $1.2 million related to a property that our predecessor had not been given the opportunity to acquire despite a preferential right to acquire the property held by our predecessor. This settlement amount has been recorded in other income for the year ended December 31, 2010.

Note 4. Fair Value Measurements of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at a specified measurement date. Fair value estimates are based on either (i) actual market data or (ii) assumptions that other market participants would use in pricing an asset or liability, including estimates of risk. A three-tier hierarchy has been established that classifies fair value amounts recognized or disclosed in the financial statements. The hierarchy considers fair value amounts based on observable inputs (Levels 1 and 2) to be more reliable and predictable than those based primarily on unobservable inputs (Level 3). The characteristics of fair value amounts classified within each level of the hierarchy are described as follows:

Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. An active market is one in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 —Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability. Substantially all of these inputs are observable in the marketplace throughout the full term of the derivative instrument, can be derived from observable data, or are supported by observable levels at which transactions are executed in the marketplace. At December 31, 2012 and 2011, all of the derivative instruments reflected on the accompanying balance sheets were considered Level 2.

Level 3 — Measure based on prices or valuation models that require inputs that are both significant to the fair value measurement and are less observable from objective sources (i.e., supported by little or no market activity).

F-18

MEMORIAL PRODUCTION PARTNERS LP

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The carrying values of cash and cash equivalents, accounts receivables, accounts payables (including accrued liabilities) and amounts outstanding under long-term debt agreements included in the accompanying balance sheets approximated fair value at December 31, 2012 and December 31, 2011. The fair value estimates are based upon observable market data and are classified within Level 2 of the fair value hierarchy. These assets and liabilities are not presented in the following tables.

The fair market values of the derivative financial instruments reflected on the balance sheets as of December 31, 2012 and December 31, 2011 were based on estimated forward commodity prices and forward interest rate yield curves. Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement in its entirety. The significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels. The following table presents the derivative assets and liabilities that are measured at fair value on a recurring basis at December 31, 2012 and December 31, 2011 for each of the fair value hierarchy levels:

	Fair Value Measurements at December 31, 2012 Using
	Quoted Prices in Active  Market (Level 1)		Significant Other Observable  Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)		Fair Value
	(In thousands)
Assets:
Commodity derivatives	$	—	$	69,303	$	—	$	69,303
Liabilities :
Commodity derivatives	$	—	$	41,814	$	—	$	41,814
Interest rate derivatives		—		5,087		—		5,087
Total liabilities	$	—	$	46,901	$	—	$	46,901

	Fair Value Measurements at December 31, 2011 Using
	Quoted Prices in Active Market (Level 1)		Significant Other Observable  Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)		Fair Value
	(In thousands)
Assets:
Commodity derivatives	$	—	$	61,825	$	—	$	61,825
Liabilities :
Commodity derivatives	$	—	$	13,724	$	—	$	13,724
Interest rate derivatives		—		1,889		—		1,889
Total liabilities	$	—	$	15,613	$	—	$	15,613

See Note 5 for additional information regarding our derivative instruments.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain assets and liabilities are reported at fair value on a nonrecurring basis as reflected on the balance sheets. The following methods and assumptions are used to estimate the fair values:

• The fair value of asset retirement obligations (“AROs”) is based on discounted cash flow projections using numerous estimates, assumptions, and judgments regarding such factors as the existence of a legal obligation for an ARO; amounts and timing of settlements; the credit-adjusted risk-free rate; and inflation rates. See Note 6 for a summary of changes in ARO’s.

F-19

MEMORIAL PRODUCTION PARTNERS LP

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

• If sufficient market data is not available, the determination of the fair values of proved and unproved properties acquired in transactions accounted for as business combinations are prepared by utilizing estimates of discounted cash flow projections. The factors to determine fair value include, but are not limited to, estimates of: (i) economic reserves; (ii) future operating and development costs; (iii) future commodity prices; and (iv) a market-based weighted average cost of capital.

Note 5. Risk Management and Derivative Instruments

Derivative instruments are utilized to manage exposure to commodity price and interest rate fluctuations and achieve a more predictable cash flow in connection with natural gas and oil sales from production and borrowing related activities. These transactions limit exposure to declines in prices or increases in interest rates, but also limit the benefits that would be realized if prices increase or interest rates decrease.

Certain inherent business risks are associated with commodity and interest derivative contracts, including market risk and credit risk. Market risk is the risk that the price of natural gas or oil will change, either favorably or unfavorably, in response to changing market conditions. Credit risk is the risk of loss from nonperformance by the counterparty to a contract. It is our policy to enter into derivative contracts, including interest rate swaps, only with counterparties that are creditworthy financial institutions deemed by management as competent and competitive market makers. Each of the counterparties to our derivative contracts is a lender in our credit agreement. While collateral is generally not required to be posted by counterparties, credit risk associated with derivative instruments is minimized by limiting exposure to any single counterparty and entering into derivative instruments only with counterparties that are large financial institutions, which management believes present minimal credit risk. Additionally, master netting agreements are used to mitigate risk of loss due to default with counterparties on derivative instruments. We have also entered into the International Swaps and Derivatives Association Master Agreements (“ISDA Agreements”) with each of our counterparties. The terms of the ISDA Agreements provide us and each of our counterparties with rights of set-off upon the occurrence of defined acts of default by either us or our counterparty to a derivative, whereby the party not in default may set-off all liabilities owed to the defaulting party against all net derivative asset receivables from the defaulting party. As a result, had certain counterparties failed completely to perform according to the terms of the existing contracts, we would have the right to offset $20.0 million against amounts outstanding under our revolving credit facility at December 31, 2012. See Note 8 for additional information in regards to our revolving credit facility.

Commodity Derivatives

A combination of commodity derivatives (e.g., floating-for-fixed swaps, collars, call spreads and basis swaps) is used to manage exposure to commodity price volatility. We enter into natural gas derivative contracts that are indexed to NYMEX Henry Hub and regional indices such as NGPL TXOK, TETCO STX, and Houston Ship Channel in proximity to the Partnership’s areas of production. We also enter into oil derivative contracts indexed to NYMEX WTI, Inter-Continental Exchange (“ICE”) Brent and California Midway-Sunset. Our NGL derivative contracts are indexed to OPIS Mont Belvieu. At December 31, 2012, we had the following open commodity positions:

F-20

MEMORIAL PRODUCTION PARTNERS LP

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

	2013			2014			2015		2016		2017		2018
Natural Gas Derivative Contracts:
Fixed price swap contracts:
Average Monthly Volume (MMBtu)		857,672			1,252,125			1,156,112		1,113,275		1,020,067		900,000
Weighted-average fixed price	$	4.30		$	4.34		$	4.28	$	4.53	$	4.30	$	4.75
Collar contracts:
Average Monthly Volume (MMBtu)		855,000			300,000			200,000		—		—		—
Weighted-average floor price	$	4.81		$	5.08		$	5.25	$	—	$	—	$	—
Weighted-average ceiling price	$	5.87		$	6.31		$	6.75	$	—	$	—	$	—
Call spreads (1):
Average Monthly Volume (MMBtu)		430,000			120,000			80,000		—		—		—
Weighted-average sold strike price	$	4.59		$	5.08		$	5.25	$	—	$	—	$	—
Weighted-average bought strike price	$	5.84		$	6.31		$	6.75	$	—	$	—	$	—
Basis swaps:
Average Monthly Volume (MMBtu)		813,432			1,318,750			—		—		—		—
Spread	$	(0.11	)	$	(0.09	)	$	—	$	—	$	—	$	—
Crude Oil Derivative Contracts:
Fixed price swap contracts:
Average Monthly Volume (Bbls)		49,632			20,102			12,031		11,013		10,000		—
Weighted-average fixed price	$	106.79		$	94.06		$	90.29	$	90.39	$	88.30	$	—
Collar contracts:
Average Monthly Volume (Bbls)		10,750			43,958			45,000		44,000		42,000		—
Weighted-average floor price	$	88.74		$	94.43		$	90.00	$	85.00	$	85.00	$	—
Weighted-average ceiling price	$	118.33		$	109.87		$	104.34	$	103.40	$	99.00	$	—
NGL Derivative Contracts:
Fixed price swap contracts:
Average Monthly Volume (Bbls)		30,805			16,300			—		—		—		—
Weighted-average fixed price	$	53.19		$	58.91		$	—	$	—	$	—	$	—

(1) These transactions were entered into for the purpose of eliminating the ceiling portion of certain collar arrangements, which effectively converted the applicable collars into swaps.

Interest Rate Swaps

Partnership. Periodically, we enter into interest rate swaps to mitigate exposure to market rate fluctuations by converting variable interest rates such as those in our credit agreement to fixed interest rates. At December 31, 2012, we had the following fixed-for-floating interest rate swap open positions whereby we receive the floating rate and pay the fixed rate:

Period Covered		Notional ($ in  thousands)		Floating Rate		Fixed Rate
1/17/2012	1/17/2013	$	100,000		1 Month LIBOR		0.600	%
1/17/2013	12/14/2016	$	100,000		1 Month LIBOR		1.305	%
5/17/2012	1/17/2013	$	50,000		1 Month LIBOR		0.600	%
1/17/2013	12/14/2016	$	50,000		1 Month LIBOR		0.970	%

F-21

MEMORIAL PRODUCTION PARTNERS LP

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

Predecessor & Previous Owners.Periodically, our predecessor and the previous owners entered into interest rate swaps to mitigate exposure to market rate fluctuations by converting variable interest rates to fixed interest rates. During the year ended December 31, 2011, our predecessor and the previous owners had the following fixed-for-floating interest rate swap open positions whereby they received the floating rate and paid the fixed rate:

Period Covered	Notional ($ in  thousands)		Floating Rate		Fixed Rate
April 2011 to April 2014 (1)	$	75,000		1 Month LIBOR		1.510	%
June 2010 to June 2012 (2)	$	50,000		1 Month LIBOR		1.000	%
February 2009 to February 2011	$	8,400		3 Month LIBOR		1.620	%

(1) These interest rate swaps were novated to the Partnership from the previous owners in March 2013 in connection with the acquisition of the WHT Properties.

(2) These interest rate swap agreements were not acquired by the Partnership at its IPO in December 2011.

Balance Sheet Presentation

The following table summarizes the gross fair value of derivative instruments by the appropriate balance sheet classification even when the derivative instruments are subject to netting arrangements and qualify for net presentation on the balance sheet and the net recorded fair value as reflected on the balance sheet at December 31:

		Asset Derivatives						Liability Derivatives
Type	Balance Sheet Location	2012			2011			2012			2011
		(In thousands)
Natural gas contracts	Short-term derivative instruments	$	22,069		$	36,681		$	961		$	7,697
Oil contracts	Short-term derivative instruments		6,453			277			4,483			2,730
NGL contracts	Short-term derivative instruments		871			454			1,124			—
Interest rate swaps	Short-term derivative instruments		—			—			2,369			991
Gross fair value			29,393			37,412			8,937			11,418
Netting arrangements	Short-term derivative instruments		(6,302	)		(110	)		(6,302	)		(110	)
Net recorded fair value	Short-term derivative instruments	$	23,091		$	37,302		$	2,635		$	11,308
Natural gas contracts	Long-term derivative instruments	$	17,435		$	21,475		$	9,352		$	3,034
Oil contracts	Long-term derivative instruments		22,471			2,938			25,360			263
NGL contracts	Long-term derivative instruments		4			—			534			—
Interest rate swaps	Long-term derivative instruments		—			—			2,718			898
Gross fair value			39,910			24,413			37,964			4,195
Netting arrangements	Long-term derivative instruments		(28,386	)		(2,373	)		(28,386	)		(2,373	)
Net recorded fair value	Long-term derivative instruments	$	11,524		$	22,040		$	9,578		$	1,822

(Gains) Losses on Derivatives

We do not designate derivative instruments as hedging instruments for financial reporting purposes and neither did our predecessor. Accordingly, all gains and losses, including unrealized gains and losses from changes in the derivative instruments’ fair values, have been recorded in the accompanying statements of operations. The following table details the unrealized and realized gains and losses related to derivative instruments for the years ending December 31, 2012, 2011 and 2010:

		Years Ended December 31,
Derivative Instruments	Statements of Operations Location	2012			2011			2010
		(In thousands)
Commodity derivative contracts	Realized (gain) loss on commodity derivatives	$	(37,608	)	$	(8,820	)	$	(7,132	)
Commodity derivative contracts	Unrealized (gain) loss on commodity derivatives		20,612			(38,894	)		(547	)
Interest rate swaps (1)	Interest expense		4,610			2,616			576

(1) Included in the amounts are net cash payments of approximately $1.4, $0.9 and $0.3 million for the years ended December 31, 2012, 2011 and 2010, respectively.

F-22

MEMORIAL PRODUCTION PARTNERS LP

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

Note 6. Asset Retirement Obligations

The Partnership’s asset retirement obligations primarily relate to the Partnership’s portion of future plugging and abandonment of wells and related facilities. The following table represents a reconciliation of the asset retirement obligations for the years ended December 31, 2012, 2011, and 2010:

	2012			2011			2010
	(In thousands)
Asset retirement obligations at beginning of year	$	73,072		$	65,552		$	55,440
Liabilities added from acquisitions or drilling		520			5,460			7,574
Liabilities removed upon sale of wells		—			(64	)		(19	)
Liabilities removed upon plugging and abandoning		(40	)		—			—
Liabilities settled		(22	)		—			—
Accretion expense		3,755			3,549			2,924
Revision of estimates		1,001			(591	)		(367	)
Liabilities retained by our predecessor		—			(834	)		—
Asset retirement obligations at end of year	$	78,286		$	73,072		$	65,552

Note 7. Restricted Investments

Various restricted investment accounts fund certain long-term contractual and regulatory asset retirement obligations and collateralize certain regulatory bonds associated with the offshore Southern California oil and gas properties. The components of the restricted investment balance are as follows at December 31:

	2012		2011
	(In thousands)
BOEM platform abandonment (See Note 14)	$	61,389	$	57,348
BOEM lease bonds		776		776
SPBPC Collateral:
Contractual pipeline and surface facilities abandonment (See Note 14)		1,959		1,595
California State Lands Commission pipeline right-of-way bond		3,000		3,000
City of Long Beach pipeline facility permit		500		500
Federal pipeline right-of-way bond		300		300
Port of Long Beach pipeline license		100		100
Restricted investments	$	68,024	$	63,619

Note 8. Long Term Debt

Partnership

Our consolidated debt obligations consisted of the following at the dates indicated:

	December 31,		December 31,
	2012		2011
	(In thousands)
$1.0 billion multi-year revolving credit facility, variable –rate, due December 2016	$	371,000	$	120,000

The revolving credit facility, which OLLC entered into at the closing of our IPO, is guaranteed by us and all of our current and future subsidiaries and had an initial borrowing base of $300.0 million. On December 3, 2012, we entered into a third amendment to our credit agreement, which among other things: (i) increased the borrowing base to $460.0 million upon closing of the Beta acquisition and (ii) provided us with the ability, if necessary, to incur certain second lien indebtedness. The borrowing base is subject to redetermination on at least a semi-annual basis based on an engineering report with respect to our estimated oil, NGL and natural gas reserves, which will take into account the prevailing oil, NGL and natural gas prices at such time, as adjusted for the impact of commodity derivative contracts. Unanimous approval by the lenders is required for any increase to the borrowing base.

F-23

MEMORIAL PRODUCTION PARTNERS LP

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

Borrowings under our revolving credit facility are secured by liens on substantially all of our properties, but in any event, not less than 80% of the total value of the our oil and natural gas properties, and all of our equity interests in OLLC and any future guarantor subsidiaries and all of our other assets including personal property. Additionally, borrowings under our revolving credit facility bear interest, at our option, at either: (i) the Alternative Base Rate defined as the greatest of (x) the prime rate as determined by the administrative agent, (y) the federal funds effective rate plus 0.50%, and (z) the one-month adjusted LIBOR plus 1.0% (adjusted upwards, if necessary, to the next 1/100th of 1%), in each case, plus a margin that varies from 0.75% to 1.75% per annum according to the borrowing base usage (which is the ratio of outstanding borrowings and letters of credit to the borrowing base then in effect), or (ii) the applicable LIBOR plus a margin that varies from 1.75% to 2.75% per annum according to the borrowing base usage. The unused portion of the borrowing base will be subject to a commitment fee that varies from 0.375% to 0.50% per annum according to the borrowing base usage.

Our revolving credit facility requires us to maintain a ratio of Consolidated EBITDAX to Consolidated Net Interest Expense or, for the periods ending on March 31, 2013, June 30, 2013, and September 30, 2013, a ratio of Annualized Consolidated EBITDAX to Annualized Consolidated Net Interest Expense (as each term is defined under our revolving credit facility), which we refer to in either case as the interest coverage ratio, of not less than 2.5 to 1.0, and a ratio of consolidated current assets to consolidated current liabilities, each as determined under our revolving credit facility, of not less than 1.0 to 1.0.

Additionally, our revolving credit facility contains various covenants and restrictive provisions that, among other things, limit our ability to incur additional debt, guarantees or liens; consolidate, merge or transfer all or substantially all of our assets; make certain investments, acquisitions or other restricted payments; modify certain material agreements; engage in certain types of transactions with affiliates; dispose of assets; incur commodity hedges exceeding a certain percentage of production; and prepay certain indebtedness.

Events of default under our revolving credit facility include the failure to make payments when due, breach of any covenants continuing beyond the cure period, default under any other material debt, change in management or change of control, bankruptcy or other insolvency event and certain material adverse effects on the business of OLLC or us.

If we fail to perform our obligations under these or any other covenants, the revolving credit commitments could be terminated and any outstanding indebtedness under our revolving credit facility, together with accrued interest, fees and other obligations under the credit agreement, could be declared immediately due and payable.

The effective weighted average interest rate for the year ended December 31, 2012 was 2.74%. The effective weighted average interest rate includes the impact of the commitment fee and excludes the impact of interest rate hedging activity. The effective weighted average interest rate for the period from December 14, 2011 through December 31, 2011 was 2.81%.

During the year ended December 31, 2012, we incurred additional financing costs in connection with borrowing base redeterminations. These additional costs have been deferred and will be amortized over the life of our revolving credit facility. Unamortized deferred financing costs associated with our revolving credit facility were at the dates indicated:

December 31, 2012		December 31, 2011
(In thousands)
$	3,359	$	2,521

During the year ended December 31, 2012, the revolving credit facility was primarily used to fund the acquisitions of oil and gas properties from both related parties and third parties. See Note 3 and 13 for additional information regarding these acquisitions.

During the year ended December 31, 2012, borrowings and repayments under our revolving credit facility were $293.0 million and $42.0 million, respectively.

F-24

MEMORIAL PRODUCTION PARTNERS LP

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

Predecessor & Previous Owners

BlueStone had a $150.0 million revolving credit facility. The weighted average interest rate for the years ended December 31, 2011 and 2010 was approximately 3.17% and 3.45%, respectively.

The Classic Carve-Out properties were burdened by debt incurred pursuant to a $150.0 million revolving credit facility extended to Classic. The weighted average interest rate for the years ended December 31, 2011 and 2010 was 3.40% and 3.11%, respectively.

On April 8, 2011, WHT entered into a $400.0 million revolving credit facility with an initial borrowing base of $230.0 million. The borrowing base as of December 31, 2012 and 2011 was $120.0 million and $135.0 million, respectively. Outstanding indebtedness under this credit facility as of December 31, 2012 and 2011 was $89.3 million and $99.9 million, respectively. The weighted average interest rate for the years ended December 31, 2012 and 2011 was 2.60% and 2.79%, respectively. On March 28, 2013, the debt balance then outstanding under the revolving credit facility of $89.3 million and all accrued interest was paid off in full and the WHT revolving credit facility was terminated.

For accounting and financial reporting purposes, the $198.3 million that was repaid concurrent with the closing of our IPO on behalf of our predecessor was netted against the net book value of the net assets that were acquired by us and reflected on our consolidated and combined cash flow statement as “Payments on revolving credit facility.”

REO had consolidated debt of $35.0 million outstanding under a $150.0 million revolving credit facility at December 31, 2011. The weighted average interest rate for the years ended December 31, 2012 and 2011 was approximately 3.40% and 3.03%, respectively.

For accounting and financial reporting purposes, the $28.5 million that was repaid concurrently with the closing of the Beta acquisition on behalf of REO was netted against the net book value of the net assets that were acquired by us and reflected on our consolidated and combined cash flow statement as “Payments on revolving credit facility.” Unamortized deferred financing costs associated with this revolving credit facility were approximately $0.4 million at December 31, 2011. The unamortized deferred financing costs associated with this revolving credit facility were written-off at the time the debt was repaid and terminated.

Note 9. Income Tax

Components of income tax expense consist of the following:

	For the Year Ended December 31,
	2012		2011			2010
	(In thousands)
Current:
Federal	$	1	$	—		$	—
State		284		175			2
Total	$	285	$	175		$	2
Deferred:
Federal		—		(147	)		(8	)
State		—		111			224
Total		—		(36	)		216
Total income tax expense	$	285	$	139		$	218

F-25

MEMORIAL PRODUCTION PARTNERS LP

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

A reconciliation of the provision for income taxes with amounts determined by applying the statutory U.S. federal income tax rate to income before income taxes is as follows:

	For Year Ended December 31,
	2012			2011			2010
Pre-Tax Net Book Income	$	38,570		$	136,465		$	1,867
State income taxes	$	153		$	216		$	147
Federal income taxes		—			(105	)		71
Other permanent differences		132			28			—
Income tax expense (benefit)	$	285		$	139		$	218
Effective income tax rate		0.74	%		0.10	%		11.67	%

The following summarizes the significant components of deferred tax assets and (liabilities):

	December 31,
	2012			2011
	(In thousands)
Current deferred tax (liabilities):
Derivatives	$	(120	)	$	(163	)
		(120	)		(163	)
Noncurrent deferred tax assets (liabilities):
Property, plant, and equipment		(1,880	)		(2,910	)
Net operating loss		494			494
Derivatives		(12	)		(45	)
Asset retirement obligations		898			487
Valuation allowance		(1,073	)		—
Other		5			3
Net deferred tax liability	$	(1,688	)	$	(2,134	)

Tax carryforwards available for use on future income tax returns at December 31, 2012, were as follows:

	Domestic		Expiration
	(In thousands)
Net operating loss—federal	$	143		2030
Net operating loss—federal	$	1,127		2031
Net operating loss—state	$	143		2030
Net operating loss—state	$	719		2031

Note 10. Equity and Distributions

2012 Public Equity Offering

On December 12, 2012, we issued 10,500,000 common units representing limited partner interests in the Partnership to the public at an offering price of $17.00 per unit generating total net proceeds of $170.0 million after deducting underwriting discounts and offering expenses. Concurrent with the closing of this equity offering, the Partnership distributed cash to Rise and repaid all amounts outstanding under REO’s credit facility as consideration for the Beta acquisition as further discussed under Notes 8 and 13. The net proceeds from this equity offering, including our general partner’s proportionate capital contribution, partially funded the Beta acquisition.

On December 21, 2012, the underwriters purchased an additional 1,475,000 common units pursuant to their over-allotment option. We used the net proceeds of approximately $24.1 million from the sale of the additional common units, including our general partner’s proportionate capital contribution, to repay indebtedness under our revolving credit facility.

F-26

MEMORIAL PRODUCTION PARTNERS LP

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

Initial Public Offering of Memorial Production Partners LP

On December 14, 2011, we completed our IPO of 9,000,000 common units representing limited partner interests in the Partnership at $19.00 per common unit for total net proceeds of approximately $146.5 million. In connection with the closing of the IPO, the Partnership distributed a combination of cash, common units, and subordinated units to Memorial Resource to acquire the net assets of our predecessor and repaid $198.3 million of our predecessor’s credit facilities concurrent with the closing of our IPO. The net cash proceeds generated from our IPO partially funded the cash portion of this consideration.

On December 22, 2011, the underwriters exercised their over-allotment option to purchase an additional 600,000 common units issued by the Partnership under the IPO terms. Total net proceeds from the exercise of the underwriters’ over-allotment option, after deducting underwriting discounts, were $10.7 million. Of this amount, $10.0 million of these net proceeds were used to repay indebtedness under our revolving credit facility.

Equity Outstanding

The following table summarizes changes in the number of outstanding units since December 31, 2011:

	Common			Subordinated		General Partner
Balance December 31, 2011		16,661,294			5,360,912		22,044
Common units issued		11,975,000			—		—
Restricted common units issued		287,943			—		—
Restricted common units forfeited		(2,334	)		—		—
General partner units issued		—			—		12,273
Balance December 31, 2012		28,921,903			5,360,912		34,317

Restricted common units are a component of common units as presented on our unaudited condensed consolidated balance sheets. See Note 12 for additional information regarding restricted common units that were granted during the year ended December 31, 2012.

As of December 31, 2012, Memorial Resource owned approximately 24.4% of the common units and 100% of the subordinated units. Memorial Resource owns all of the voting interests in our general partner and 50% of the economic interest in our incentive distribution rights. The Funds collectively directly own, through non-voting membership interests in our general partner, 50% of the remaining economic interest in our incentive distribution rights.

Common & Subordinated Units. The common units and the subordinated units are separate classes of the limited partner interest in us and have limited voting rights as set forth in our partnership agreement. The holders of units are entitled to participate in partnership distributions as discussed further below under “Cash Distribution Policy” and exercise the rights or privileges available to limited partners under our partnership agreement.

Pursuant to our partnership agreement, if at any time our general partner and its affiliates own more than 80% of the outstanding common units, our general partner has the right, but not the obligation, to purchase all of the remaining common units at a purchase price not less than the then-current market price of the common units, as calculated pursuant to the terms of our partnership agreement.

General Partner Interest. Our general partner owns a 0.1% interest in us. This interest entitles our general partner to receive distributions of available cash from operating surplus as discussed further below under “Cash Distribution Policy.” Our partnership agreement sets forth the calculation to be used to determine the amount and priority of cash distributions that the common unitholders, subordinated unitholders, and general partner will receive. The general partner has the management rights as set forth in our partnership agreement.

F-27

MEMORIAL PRODUCTION PARTNERS LP

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

Allocations of Net Income (Loss)

Net income (loss) attributable to the Partnership is allocated between our general partner and the common and subordinated unitholders in proportion to their pro rata ownership. Net income (loss) attributable to acquisitions accounted for as a transaction between entities under common control prior to their acquisition date is allocated to the previous owners. For periods prior to our IPO, net income (loss) was attributable to both our predecessor and the previous owners.

Cash Distribution Policy

We intend to make cash distributions to unitholders on a quarterly basis, although there is no assurance as to the future cash distributions since they are dependent upon future earnings, cash flows, capital requirements, financial condition and other factors. Additionally, under our revolving credit facility, we will not be able to pay distributions to unitholders in any such quarter in the event there exists a borrowing base deficiency or an event of default either before or after giving effect to such distribution or we are not in pro forma compliance with our revolving credit facility after giving effect to such distribution.

Available Cash. Our partnership agreement requires that within 45 days after the end of each quarter, beginning with the quarter ending December 31, 2011, we distribute all of our available cash (as defined in our partnership agreement) to our general partner and unitholders of record on the applicable record date. Generally, available cash refers to all cash on hand at the end of the quarter less cash reserves established by our general partner to: (i) operate our business (e.g., future capital expenditures, working capital and operating expenses); (ii) comply with applicable law, debt, and other agreements; and (iii) provide funds for distribution to our unitholders (including our general partner) for any one or more of the next four quarters. If our general partner so determines, available cash may include borrowings made after the end of the quarter.

General Partner Interest and Incentive Distribution Rights.Our general partner is entitled to 0.1% of all distributions of available cash that we make prior to our liquidation. Our general partner’s initial 0.1% interest in these distributions may be reduced if we issue additional units in the future and our general partner does not contribute a proportionate amount of capital to us to maintain its initial 0.1% general partner interest. Our general partner is not obligated to contribute a proportionate amount of capital to us to maintain its current general partner interest. Our general partner also holds the incentive distribution rights, which entitle the holder to additional increasing percentages, up to a maximum of 25.0%, of the cash we distribute in excess of $0.54625 per common unit per quarter. The maximum distribution of 25.0% includes distributions paid to our general partner on its 0.1% general partner interest and assumes that our general partner maintains its general partner interest at 0.1%.

Minimum Quarterly Distribution.During the subordination period, the common units will have the right to receive distributions of available cash from operating surplus each quarter in an amount equal to $0.4750 per common unit plus any arrearages in the payment of the minimum quarterly distribution on the common units from prior quarters, before any distributions of available cash from operating surplus may be made on the subordinated units. These units are deemed “subordinated” because for a period of time, referred to as the subordination period, the subordinated units will not be entitled to receive any distributions from operating surplus until the common units have received the minimum quarterly distribution plus any arrearages from prior quarters. Furthermore, no arrearages will be paid on the subordinated units. The practical effect of the subordinated units is to increase the likelihood that during the subordination period there will be available cash from operating surplus to be distributed on the common units.

Our partnership agreement requires that we make distributions of available cash from operating surplus for any quarter during the subordination period in the following manner:

• first, 99.9% to the common unitholders, pro rata, and 0.1% to our general partner, until we distribute for each outstanding common unit an amount equal to the minimum quarterly distribution for that quarter;

F-28

MEMORIAL PRODUCTION PARTNERS LP

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

• second, 99.9% to the common unitholders, pro rata, and 0.1% to our general partner, until we distribute for each outstanding common unit an amount equal to any arrearages in payment of the minimum quarterly distribution on the common units for any prior quarters during the subordination period;

• third, 99.9% to the subordinated unitholders, pro rata, and 0.1% to our general partner, until we distribute for each subordinated unit an amount equal to the minimum quarterly distribution for that quarter; and

• thereafter, cash in excess of the minimum quarterly distributions is distributed to the unitholders and the general partner based on the percentages in the table below.

Our general partner is entitled to incentive distributions if the amount we distribute with respect to one quarter exceeds specified target levels shown below:

	Total Quarterly Distributions Target Amount	Marginal Percentage Interest in Distributions
		Unitholders			General Partner
Minimum Quarterly Distribution	$0.4750		99.9	%		0.1	%
First Target Distribution	above $0.4750 up to $0.54625		99.9	%		0.1	%
Second Target Distribution	above $0.54625 up to $0.59375		85.0	%		15.0	%
Thereafter	above $0.59375		75.0	%		25.0	%

Our partnership agreement requires that we make distributions of available cash from operating surplus for any quarter after the subordination period in the following manner:

• first, 99.9% to all unitholders, pro rata, and 0.1% to our general partner, until we distribute for each outstanding unit an amount equal to the minimum quarterly distribution for that quarter; and

• thereafter, cash in excess of the minimum quarterly distributions is distributed to the unitholders and the general partner based on the percentages in the table above.

The subordination period will extend until the first business day after the distribution to unitholders in respect of any quarter ending on or after December 31, 2014 that each of the following tests are met:

• Distributions of available cash from operating surplus on each of the outstanding common units, subordinated units and general partner units and any other partnership interests that are senior or equal in right of distribution to the subordinated units equaled or exceeded, in the aggregate, the sum of the minimum quarterly distributions payable with respect to a period of twelve consecutive quarters immediately preceding such date;

• The “adjusted operating surplus” (as defined in our partnership agreement) generated during the period of twelve consecutive quarters immediately preceding that date equaled or exceeded, in the aggregate, the sum of the minimum quarterly distributions on all of the outstanding common units, subordinated units and general partner units and any other partnership interests that are senior or equal in right of distribution to the subordinated units that were outstanding during these periods payable with respect to such period on a fully diluted weighted average basis; and

• there are no arrearages in payment of the minimum quarterly distribution on the common units.

When the subordination period ends, each outstanding subordinated unit will convert into one common unit and will then participate pro rata with the other common units in distributions of available cash.

F-29

MEMORIAL PRODUCTION PARTNERS LP

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

In addition, if the unitholders remove our general partner other than for cause and units held by our general partner and its affiliates are not voted in favor of such removal:

• the subordination period will end and each subordinated unit will immediately convert into one common unit;

• any existing arrearages in payment of the minimum quarterly distribution on the common units will be extinguished; and

• our general partner will have the right to convert its general partner units into common units or to receive cash in exchange for such general partner units at the equivalent common unit fair market value

The subordination period will also automatically terminate, and all of the subordinated units will convert into an equal number of common units, on the first business day after the distribution to unitholders in respect of any quarter ending on or after December 31, 2012, if the following tests are met:

• distributions of available cash from operating surplus on each of the outstanding common units, subordinated units and general partner units and any other partnership interests that are senior or equal in right of distribution to the subordinated units equaled or exceeded $0.59375 (125% of the minimum quarterly distribution) per quarter for the four quarter period immediately preceding that date;

• the “adjusted operating surplus” generated during the four-quarter period immediately preceding that date equaled or exceeded the sum of a distribution of $2.3750 (125% of the annualized minimum quarterly distribution) on all of the outstanding common units, subordinated units and general partner units and any other partnership interests that are senior or equal in right of distribution to the subordinated units, in each case that were outstanding during such four quarter period on a fully diluted weighted average basis, and the corresponding distributions on the incentive distribution rights; and

• there are no arrearages in payment of the minimum quarterly distribution on the common units.

Our general partner has the right (but not the obligation), at any time when there are no subordinated units outstanding and it has received incentive distributions at the highest level to which it is entitled (25%, assuming it has maintained its 0.1% general partner interest) for each of the prior four consecutive fiscal quarters, to reset the initial target distribution levels at higher levels based on our cash distribution at the time of the exercise of the reset election.

Cash Distributions to Unitholders

The following table summarizes our declared quarterly cash distribution rates with respect to the quarter indicated (dollars in millions, except per unit amounts):

Quarter	Declaration Date	Record Date	Payable Date	Amount Per Unit  (1)		Aggregate Distribution		Distribution Received by Memorial Resource
4th Quarter 2012	January 15, 2013	February 1, 2013	February 13, 2013	$	0.5075	$	17.4	$	6.3
3rd Quarter 2012	October 19, 2012	November 1, 2012	November 12, 2012	$	0.4950	$	11.1	$	6.2
2nd Quarter 2012	July 19, 2012	August 1, 2012	August 13, 2012	$	0.4800	$	10.7	$	6.0
1st Quarter 2012	April 19, 2012	May 1, 2012	May 14, 2012	$	0.4800	$	10.7	$	6.0
4th Quarter 2011	January 26, 2012	February 6, 2012	February 13, 2012	$	0.0929	$	2.0	$	1.2

(1) The $0.0929 per unit pro-rated distribution paid on February 13, 2012 was based upon the minimum quarterly distribution of $0.4750 per unit adjusted to take into account the 18-day period of the fourth quarter of 2011 during which the Partnership was a public entity.

F-30

MEMORIAL PRODUCTION PARTNERS LP

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

Predecessor & Previous Owners Capital

BlueStone.In February 2006, BlueStone, BlueStone Natural Resources Holdings, LLC (“Holdings”) and Holdings’ members entered into a subscription and contribution agreement whereby all equity contributions made by Holdings’ members in exchange for equity units would be transferred directly to BlueStone. NGP VIII and certain members of BlueStone’s management committed equity contributions of $75.7 million and $9.0 million under this agreement and amendments thereto, respectively, all of which was contributed by December 31, 2009. In 2010, BlueStone received an equity contribution from members of Holdings of an additional $40.0 million, including equity contributions of $4.2 million from management. NGP VIII advanced certain members of management $4.2 million to fund their equity contributions in 2010 in exchange for notes payable issued by management. BlueStone did not receive any capital contributions during 2011.

Classic.In June 2006, NGP VIII and certain members of Classic’s management entered into a partnership agreement. The Classic partners agreed to contribute an aggregate $135.9 million under the partnership agreement and amendments thereto, including $35.7 million allocable to the Classic Carve-Out. NGP VIII and certain members of Classic’s management committed equity contributions of $123.0 million and $12.9 million, respectively, all of which had been contributed as of January 24, 2011. In 2010, Classic received capital contributions of $19.7 million, net of equity financing fees, from its partners, including $4.1 million allocable to Classic Carve-Out. In 2011, Classic received capital contributions of $21.9 million, net of equity financing fees, from its partners, including $4.8 million allocable to Classic Carve-Out.

WHT.In February 2011, WHT was formed by WildHorse Resources, LLC (“WildHorse”) and Tanos Energy, LLC (“Tanos”). In connection with our IPO, NGP IX and NGP IX Offshore contributed to Memorial Resource their respective ownership in WildHorse and Tanos. NGP IX and NGP IX Offshore collectively funded 100% of the cash used by WildHorse and Tanos to fund their respective capital contributions to WHT. In 2011, WildHorse and Tanos each contributed $64.7 million to WHT, of which an aggregate $51.8 million was allocable to our predecessor and $77.6 million was allocable to the previous owners. In December 2011, WHT made an $1.7 million cash distribution to its members, a $81.6 million non-cash distribution to its members and also recorded a $23.8 million deemed contribution from its members in connection with the transfer of the WHT Assets to the Partnership in conjunction with its IPO, all of which are components of amounts reflected in the Predecessor column on our equity statement.

REO.REO, a wholly-owned subsidiary of Rise, was formed in February 2009. The following table summarizes capital contributions received by REO and cash distributions paid by REO with respect to the year indicated (dollars in millions):

Year	Capital Contributions		Cash Distributions
2010	$	6.6	$	4.4
2011	$	5.0	$	65.0
2012	$	—	$	7.8

Noncontrolling Interest

The noncontrolling shareholder in the SPBPC made capital contributions of $1.2 million during the year ended December 31, 2010.

F-31

MEMORIAL PRODUCTION PARTNERS LP

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

Note 11. Earnings per Unit

The following sets forth the calculation of earnings (loss) per unit, or EPU, for the periods indicated (in thousands, except per unit amounts):

	For the Year Ended December 31,		December 14 to December 31,
	2012		2011
Net income attributable to partners	$	121	$	6,592
Less: General partner’s 0.1% interest in net income		—		7
Limited partners’ interest in net income	$	121	$	6,585
Weighted average limited partner units outstanding:
Common units		17,519		16,395
Subordinated units		5,361		5,361
Total		22,880		21,756
Basic and diluted EPU	$	0.01	$	0.30

Note 12. Equity-based Awards

Long-Term Incentive Plan

In December 2011, the Board adopted the Memorial Production Partners GP LLC Long-Term Incentive Plan (“LTIP”) for employees, officers, consultants and directors of the general partner and any of its affiliates, including Memorial Resource, who perform services for the Partnership. The LTIP consists of restricted units, phantom units, unit options, unit appreciation rights, distribution equivalent rights, other unit-based awards and unit awards. The LTIP initially limits the number of common units that may be delivered pursuant to awards under the plan to 2,142,221 common units. Common units that are cancelled, forfeited or withheld to satisfy exercise prices or tax withholding obligations will be available for delivery pursuant to other awards. The LTIP is administered by the Board or a committee thereof. During the year ended December 31, 2012, there were multiple awards of restricted common units that were granted under the LTIP to executive officers and independent directors of our general partners and other Memorial Resource employees.

The restricted common units awarded are subject to restrictions on transferability, customary forfeiture provisions and graded vesting provisions in which one-third of each award vests on the first, second, and third anniversaries of the date of grant. Award recipients have all the rights of a unitholder in the partnership with respect to the restricted common units, including the right to receive distributions thereon if and when distributions are made by the Partnership to its unitholders (except with respect to the fourth quarter 2011 distribution that was paid in February 2012). The term “restricted common unit” represents a time-vested unit. Such awards are non-vested until the required service period expires.

The aggregate fair value of the restricted common units awarded to our general partner’s executive officers and other Memorial Resource employees, which are accounted for as equity-classified awards, was $5.0 million based on the market price per unit on the date of grant. This amount net of forfeitures will be recognized as compensation cost on a straight-line basis over the requisite service period. These awards were granted in recognition of services performed in connection with the completion of our IPO and/or to provide incentive to help drive the Partnership’s future success and to share in the economic benefits of that success. The compensation costs associated with these awards are recorded as direct general and administrative expenses. During the year ended December 31, 2012, we recognized approximately $1.4 million of compensation expense associated with these awards.

The fair value of the restricted unit awards granted to the independent directors of our general partner are also recognized as compensation cost on a straight-line basis over the requisite service period. The compensation costs associated with these awards are recorded as direct general and administrative expenses. During the year ended December 31, 2012, we recognized less than $0.1 million of compensation expense associated with these awards.

F-32

MEMORIAL PRODUCTION PARTNERS LP

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

The following table summarizes information regarding restricted common unit awards for the periods presented:

	Number of Units			Weighted- Average Grant Date Fair Value per Unit (1)
Restricted common units outstanding at December 31, 2011		—		$	—
Granted (2)		287,943		$	18.07
Forfeited		(2,334	)	$	17.14
Restricted common units outstanding at December 31, 2012		285,609		$	18.08

(1) Determined by dividing the aggregate grant date fair value of awards by the number of awards issued.

(2) The aggregate grant date fair value of restricted common unit awards issued in 2012 was $5.2 million based on grant date market prices ranging from $17.14 to $18.58 unit.

The unrecognized compensation cost associated with restricted common unit awards was an aggregate $3.7 million at December 31, 2012. We expect to recognize the unrecognized compensation cost for these awards over a weighted-average period of 2.37 years.

Since the restricted common units are participating securities, any distributions received by the restricted common unitholders are included in distributions to partners as presented on our statements of consolidated and combined cash flows. During the year ended December 31, 2012, the restricted common unitholders received a distribution of approximately $0.2 million. The restricted common unitholders received a distribution of approximately $0.1 million on February 13, 2013 with respect to the quarterly cash distribution for the fourth quarter of 2012 that the Board declared in January 2013.

Subsequent Event.On January 9, 2013, our general partner’s executive officers and independent directors were granted additional awards of restricted common units. The aggregate number of restricted units granted on such date was 16,627.

Note 13. Related Party Transactions

Amounts due to (due from) Memorial Resource and certain of its subsidiaries at December 31, 2012 and December 31, 2011 are presented as “Accounts receivable–affiliates” and “Accounts payable–affiliates” in the accompanying balance sheets.

For the year ended December 31, 2012, approximately $2.6 million of related party transactions attributable to the Partnership are reflected as costs and expenses in the accompanying statements of operations. The vast majority of these costs and expenses were payments under our omnibus agreement (as discussed below) and management fees paid to affiliates for operating our assets.

The majority partner of our predecessor, NGP VIII, is an affiliate of certain directors of the entities comprising our predecessor. For the periods ended December 31, 2011 and 2010, our predecessor expensed advisory and directors’ fees of approximately $0.2 million and $0.2 million, respectively, to NGP VIII.

The WHT Assets and WHT Properties are operated by WildHorse. Under the terms of a management agreement dated April 8, 2011, WildHorse assumed certain responsibilities for the management of WHT, including the day-to-day operations of the company providing executive, administrative, land, financial, and accounting services and operating WHT’s properties. Under the terms of the agreement, WHT paid WildHorse an approximate $0.1 million monthly management fee, of which 40% was allocable to the WHT Assets and 60% was allocable to the WHT Properties. Additionally, WHT pays Tanos less than $0.1 million per month, of which 40% was allocable to the WHT Assets and 60% was allocable to the WHT Properties, for certain services that it provides WHT, primarily managing its exploration program. These amounts are payable monthly in advance on the first of each month.

F-33

MEMORIAL PRODUCTION PARTNERS LP

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

In addition to the management fees, both WildHorse and Tanos are entitled to recover from WHT certain expenditures made on its behalf that are not covered by the management fees described above. These amounts include certain payments for third-party professional services and other non-routine direct general and administrative expenses, costs incurred in the operation and development of the properties, and amounts paid to the other operators for WHT’s non-operated interests.

As the operator of the properties, WildHorse also markets WHT’s oil, gas and NGL production, collects the proceeds, pays the related production taxes and disburses amounts owed to royalty and other working interest owners. WildHorse also receives sales proceeds from the operators for the sale of non-operated production.

An affiliate of REO collected a management fee for providing administrative services to REO. These administrative services included accounting, business development, finance, legal, information technology, insurance, government regulations, communications, regulatory, environmental and human resources services. REO incurred and paid management fees of $1.6 million, $1.7 million and $0.9 million for the years ended December 31, 2012, 2011, and 2010, respectively. These management fees are presented as a component of general and administrative costs and expenses in the accompanying statements of operations.

Agreements

We have entered into agreements with Memorial Resource and our general partner pursuant to which, among other things, we will make payments to Memorial Resource. These agreements include the following:

• an omnibus agreement pursuant to which, among other things, Memorial Resource provides management, administrative and operating services for us and our general partner; and

• a tax sharing agreement pursuant to which we pay Memorial Resource (or its applicable affiliate(s)) our share of state and local income and other taxes for which our results are included in a combined or consolidated tax return filed by Memorial Resource or its applicable affiliate(s). It is possible that Memorial Resource or its applicable affiliate(s) may use its tax attributes to cause its combined or consolidated group, of which we may be a member for this purpose, to owe less or no tax. In such a situation, we would pay Memorial Resource or its applicable affiliate(s) the tax we would have owed had the tax attributes not been available or used for our benefit, even though Memorial Resource or its applicable affiliate(s) had no cash tax expense for that period. Currently, the Texas margin tax (which has a maximum effective tax rate of 0.7% of gross income apportioned to Texas) is the only tax that is included in a combined or consolidated tax return with Memorial Resource or its applicable affiliate(s).

In connection with our omnibus agreement, we recognized $1.8 million of expense during the year ended December 31, 2012.

Memorial Resource entered into separate agreements with affiliates on our behalf relating to the management, operation and administration of the properties acquired by us on December 14, 2011. Effective May 1, 2012, we record less than $0.1 million monthly for the management fees that Memorial Resource pays to its affiliates and recorded approximately $0.1 million prior to this date.

F-34

MEMORIAL PRODUCTION PARTNERS LP

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

Acquisition of the Net Assets of Our Predecessor in Connection with IPO

In connection with the closing of our IPO on December 14, 2011, the Partnership acquired the following net assets of our predecessor:

Oil and natural gas properties, net	$	399,967
Short-term derivative instruments, net		15,779
Long-term derivative instruments, net		10,772
Asset retirement obligations		(13,560	)
Credit facilities – predecessor (2)		(198,267	)
Accrued liabilities		(1,650	)
Net assets (1)	$	213,041

(1) Due to the timing of our IPO and the fact that we did not acquire working capital from our predecessor, our consolidated balance sheet as of December 31, 2011 did not include any trade receivables or payables.

(2) Although the Partnership did not legally assume the debt of its predecessor, for accounting and financial reporting purposes the $198.3 million that was repaid concurrent with the closing of our IPO on behalf of our predecessor has been netted against the net book value of the net assets that were acquired by us and reflected on our consolidated and combined cash flow statement as “Payments on revolving credit facility.”

Acquisition of Oil & Gas Producing Properties from Memorial Resource Subsequent to our IPO

On April 2, 2012, we acquired certain oil and natural gas producing properties in East Texas from an operating subsidiary of Memorial Resource with an effective date of April 1, 2012, for a final purchase price of $18.5 million after customary post-closing adjustments. This transaction was financed with borrowings under our revolving credit facility. The transaction also included the novation to the Partnership of certain commodity positions with effective dates 2012 through 2013. The transaction was approved by the Board and by its conflicts committee, which is comprised entirely of independent directors. These properties are located primarily in the Willow Springs field in Gregg County, as well as in Upshur, Rusk, Panola, Smith and Leon counties in East Texas. This acquisition was accounted for as a combination of entities under common control at historical cost in a manner similar to the pooling of interest method. See Note 1 for additional information regarding basis of presentation. The Partnership recorded the following net assets (in thousands):

Oil and natural gas properties, net	$	15,164
Short-term derivative instruments, net		715
Long-term derivative instruments, net		674
Asset retirement obligations		(466	)
Accrued liabilities		(17	)
Net assets	$	16,070

On May 14, 2012, we acquired certain oil and natural gas producing properties in East Texas from an operating subsidiary of Memorial Resource with an effective date of April 1, 2012, for a final purchase price of $27.0 million after customary post-closing adjustments. This transaction was financed with borrowings under our revolving credit facility. The transaction also included the novation to the Partnership of certain commodity derivative positions with effective dates 2012 through 2014. The transaction was approved by the Board and by its conflicts committee. These properties are located primarily in the Joaquin and Carthage fields in Panola and Shelby counties in East Texas. This acquisition was accounted for as a combination of entities under common control at historical cost in a manner similar to the pooling of interest method. See Note 1 for additional information regarding basis of presentation. The Partnership recorded the following net assets (in thousands):

Oil and natural gas properties, net	$	31,716
Accounts receivable		612
Short-term derivative instruments, net		1,017
Long-term derivative instruments, net		1,337
Asset retirement obligations		(43	)
Accrued liabilities		(70	)
Net assets	$	34,569

F-35

MEMORIAL PRODUCTION PARTNERS LP

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

On March 28, 2013, we acquired all of the outstanding equity interests in WHT from operating subsidiaries of Memorial Resource for a purchase price of $200.0 million, which included $4.0 million of working capital and other customary adjustments. This acquisition was funded with borrowings under our revolving credit facility and the net proceeds from our March 25, 2013 public offering of common units (including our general partner’s proportionate capital contribution). The effective date for this transaction was January 1, 2013. Terms of the transaction were approved by our general partner’s Board and by its conflicts committee. The WHT Properties consist of additional working interests in properties that we originally acquired in December 2011 in conjunction with our initial public offering. This acquisition was accounted for as a combination of entities under common control at historical cost in a manner similar to the pooling of interest method. See Note 1 for additional information regarding basis of presentation. The Partnership recorded the following net assets (in thousands):

Cash and cash equivalents	$	1,354
Accounts receivable		3,866
Short-term derivative instruments, net		1,206
Prepaid expenses and other current assets		98
Oil and natural gas properties, net		192,280
Long-term derivative instruments, net		3,528
Accrued liabilities		(3,494	)
Asset retirement obligations		(2,753	)
Credit facilities		(89,300	)
Other long-term liabilities		(111	)
Net assets	$	106,674

Beta Acquisition

On December 12, 2012, we acquired REO, which owns certain operating interests in producing and non-producing oil and gas properties offshore Southern California, from Rise for a purchase price of $270.6 million, which included $3.0 million of working capital and other customary adjustments. The Beta acquisition was funded with borrowings under our existing credit facility and the net proceeds generated from our December 12, 2012 public offering of common units (including our general partner’s proportionate capital contribution). The effective date for this transaction was September 1, 2012. Terms of the transaction were approved by the Board and by its conflicts committee. The acquired properties, which we refer to as the Beta properties, primarily consist of a 51.75% working interest in three Pacific Outer Continental Shelf blocks covering the Beta Field, and are located in federal waters approximately eleven miles offshore the Port of Long Beach, California. Associated facilities include three conventional wellhead and production processing platforms, a 17.5-mile pipeline and an onshore tankage and metering facility. Two of the platforms are bridge connected and stand in approximately 260 feet of water, while the third platform stands in approximately 700 feet of water. This acquisition was accounted for as a combination of entities under common control at historical cost in a manner similar to the pooling of interest method. See Note 1 for additional information regarding basis of presentation. The Partnership recorded the following net assets (in thousands):

Cash and cash equivalents	$	6,021
Accounts receivable		16,284
Short-term derivative instruments, net		2,926
Prepaid expenses and other current assets		4,521
Oil and natural gas properties, net		108,342
Restricted investments		68,009
Accounts payable		(9,092	)
Accrued liabilities		(9,140	)
Asset retirement obligations		(58,746	)
Credit facilities		(28,500	)
Deferred tax liability		(1,674	)
Noncontrolling interest		(5,255	)
Net assets	$	93,696

F-36

MEMORIAL PRODUCTION PARTNERS LP

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

On December 12, 2012, in connection with the Beta acquisition, the Partnership contributed to Memorial Resource the entity that employs those who operate and support the Beta properties in exchange for approximately $3.0 million. The net book value of the assets contributed to Memorial Resource was as follows (in thousands):

Cash and cash equivalents	$	3,751
Accounts receivable		11,125
Prepaid expenses and other current assets		3,470
Property, plant and equipment, net		416
Accounts payable		(7,898	)
Accrued liabilities		(7,864	)
Net assets	$	3,000

Memorial Resource Revolving Credit Facility

On July 13, 2012, Memorial Resource entered into a new senior secured revolving credit facility which is guaranteed by our general partner. The credit facility was amended in November 2012. The amended revolving credit facility is a four-year, $120.0 million credit facility with a borrowing base of $120.0 million subject to redetermination. Memorial Resource has pledged 7,061,294 of our common units and 5,360,912 of our subordinated units as security under the credit facility in addition to certain other assets of Memorial Resource.

Note 14. Commitments and Contingencies

Litigation & Environmental

As part of our normal business activities, we may be named as defendants in litigation and legal proceedings, including those arising from regulatory and environmental matters. Although we are insured against various risks to the extent we believe it is prudent, there is no assurance that the nature and amount of such insurance will be adequate, in every case, to indemnify us against liabilities arising from future legal proceedings. We are not aware of any litigation, pending or threatened, that we believe is reasonably likely to have a significant adverse effect on our financial position, results of operations or cash flows.

Environmental costs for remediation are accrued based on estimates of known remediation requirements. Such accruals are based on management’s best estimate of the ultimate cost to remediate a site and are adjusted as further information and circumstances develop. Those estimates may change substantially depending on information about the nature and extent of contamination, appropriate remediation technologies and regulatory approvals. Expenditures to mitigate or prevent future environmental contamination are capitalized. Ongoing environmental compliance costs are charged to expense as incurred. In accruing for environmental remediation liabilities, costs of future expenditures for environmental remediation are not discounted to their present value, unless the amount and timing of the expenditures are fixed or reliably determinable. At December 31, 2012, none of our estimated environmental remediation liabilities were discounted to present value since the ultimate amount and timing of cash payments for such liabilities were not readily determinable.

The following table presents the activity of our environmental reserves for the periods presented:

	2012			2011			2010
	(In thousands)
Balance at beginning of period	$	1,747		$	1,450		$	—
Charged to costs and expenses		(225	)		—			—
Acquisition-related additions		—			968			1,450
Payments		(471	)		(671	)		—
Balance at end of period	$	1,051		$	1,747		$	1,450	��

At December 31, 2012 and 2011, $0.6 million and $1.4 million, respectively, of our environmental reserves were classified as current liabilities in accrued liabilities.

F-37

MEMORIAL PRODUCTION PARTNERS LP

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

Sinking Fund Trust Agreement

REO assumed an obligation with a third party to make payments into a sinking fund in connection with its 2009 acquisition of the Beta properties, the purpose of which is to provide funds adequate to decommission the portion of the San Pedro Bay pipeline that lies within State waters and the surface facilities. Under the terms of the agreement, REO, as the operator of the properties, is obligated to make monthly deposits into the sinking fund account in an amount equal to $0.25 per barrel of oil and other liquid hydrocarbon produced from the acquired working interest. Interest earned in the account stays in the account. The obligation to fund ceases when the aggregate value of the account reaches $4.3 million. As of December 31, 2012, the gross account balance included in restricted investments was approximately $2.0 million. REO’s maximum remaining obligation net to its 51.75% interest under the terms of the current agreement was $1.2 million at December 31, 2012.

Supplemental Bond for Decommissioning Liabilities Trust Agreement

REO assumed an obligation with the BOEM in connection with its 2009 acquisition of the Beta properties. Under the terms of the agreement dated March 1, 2007, the seller of the Beta properties was obligated to deliver a $90.0 million U.S. Treasury Note into a trust account for the decommissioning of the offshore production facilities. At the time of acquisition, all obligations under this existing agreement had been met.

In January 2010, the BOEM issued a report that revised upward, the estimated cost of decommissioning. In June 2010, REO agreed to make additional quarterly payments to the trust account attributable to its net working interest of approximately $0.6 million beginning on June 30, 2010 until the payments and accrued interest attributable to REO equal $78.7 million by December 31, 2016. The trust account must maintain minimum balances attributable to REO’s net working interest as follows (in thousands):

June 30, 2013	$	64,170
June 30, 2014	$	68,310
June 30, 2015	$	72,450
June 30, 2016	$	76,590
December 31, 2016	$	78,660

In the event the account balance is less than the contractual amount, the working interest owners must make additional payments. Interest income earned and deposited in the trust account mitigates the likelihood that additional payments will have to be made by the working interest owners. As of December 31, 2012, the maximum remaining obligation net to REO’s interest was approximately $17.0 million.

The trust account is held by REO for the benefit of all working interest owners. The following is a summary of the gross held-to-maturity investments held in the trust account less the outside working interest owners share as of December 31, 2012 (in thousands):

Investment	Amortized Cost			Unrealized Gain (Loss)			Fair Market Value
U.S. Bank Money Market Cash Equivalent	$	73,485		$	—		$	73,485
U.S. Government Treasury Note, maturity of March 31, 2013, and 2.50% coupon		22,128			71			22,199
U.S. Government Treasury Note, maturity of March 31, 2014, and 1.75% coupon		23,013			499			23,512
Less: Outside working interest owners share		(57,237	)		(275	)		(57,512	)
	$	61,389		$	295		$	61,684

F-38

MEMORIAL PRODUCTION PARTNERS LP

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

Operating Leases

We have leases for offshore Southern California pipeline right-of-way use and office space. We also incur surface rentals related to our business operations. Our predecessor and the previous owners also leased equipment and office space under various operating leases and incurred surface rentals related to their operations.

For the year ended December 31, 2012, we recognized $1.0 million of rent expense. We recognized an immaterial amount of allocated rent expense from the closing our IPO through December 31, 2011, primarily for office space. Our predecessor and the previous owners leased equipment and office space under various operating leases. Our predecessor and the previous owners recorded rent expense of approximately $0.7 million, $1.0 million, and $0.6 million for the years ended December 31, 2012, 2011, and 2010, respectively.

Amounts shown in the following table represent minimum lease payment obligations under non-cancelable operating leases with a remaining term in excess of one year:

	Payment or Settlement due by Period
Lease Obligations	Total		2013		2014		2015		2016		2017		Thereafter
	(In thousands)
Operating leases	$	3,835	$	476	$	483	$	442	$	340	$	190	$	1,904

Note 15. Defined Contribution Plans

Memorial Resource sponsors a defined contribution plan for the benefit of substantially all employees who have attained 18 years of age. The plan allows eligible employees to make tax-deferred contributions up to 100% of their annual compensation, not to exceed annual limits established by the Internal Revenue Service. Memorial Resource makes matching contributions of 100% of employee contributions that does not exceed 6% of compensation. Employees are immediately vested in these matching contributions. This plan became effective on January 1, 2012. Memorial Resource made contributions to the plan of approximately $0.4 million for the year ended December 31, 2012. Pursuant to our omnibus agreement with Memorial Resource, a portion of this amount was allocated to the Partnership and recognized as an expense.

Effective January 1, 2012, REO assumed sponsorship of a separate defined contribution plan. This plan specifically benefits substantially all those employed by the Memorial Resource subsidiary that operates and supports the Beta properties that have attained 21 years of age. Eligible employees are permitted to make tax-deferred contributions up to 100% of their annual compensation, not to exceed annual limits established by the Internal Revenue Service. Employer matching contributions of 100% of employee contributions that does not exceed 6% of compensation are made to the plan as well. The employer matching contributions associated with this plan were subject to a three-year graded vesting schedule through February 28, 2012. Effective March 1, 2012, the plan was amended to offer immediate vesting of employer matching contributions. The plan received employer contributions of approximately $0.5 million, $0.5 million, and $0.3 million in 2012, 2011, and 2010, respectively. Approximately $0.3 million, $0.3 million, and $0.1 million associated with this plan are reflected as costs and expenses in the accompanying statements of operations for the years ended December 31, 2012, 2011, and 2010, respectively.

Our predecessor also sponsored defined contribution plans for the benefit of substantially all their employees who attained 18 years of age. Matching contributions of up to 6% of an employee’s compensation were made and additional discretionary contributions for eligible employees meeting certain plan requirements was also an option under these plans. Employer contributions of approximately $0.2 million and $0.2 million were made to these other plans in 2011 and 2010, respectively.

F-39

MEMORIAL PRODUCTION PARTNERS LP

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

Note 16. Quarterly Financial Information (Unaudited)

The following table presents selected quarterly financial data for the periods indicated. Earnings per unit are computed independently for each of the quarters presented and the sum of the quarterly earnings per unit may not necessarily equal the total for the year.

	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
	(In thousands, except per unit amounts)
For the Year Ended December 31, 2012:
Revenues	$	43,733		$	39,215		$	42,816		$	48,191
Operating income (loss)		34,019			22,608			(20,128	)		17,308
Net income (loss)		31,206			17,625			(24,145	)		13,599
Net income attributable to previous owners		10,403			17,863			1,095			8,699
Net income (loss) noncontrolling interest		(91	)		16			92			87
Net income (loss) attributable to partners		20,894			(254	)		(25,332	)		4,813
Basic and diluted earnings per unit		0.94			(0.01	)		(1.13	)		0.19
For the Year Ended December 31, 2011:
Revenues	$	28,366		$	48,012		$	49,402		$	46,835
Operating income (loss)		(2,345	)		86,998			44,620			18,628
Net income (loss)		(3,373	)		83,020			40,968			15,711
Net income (loss) attributable to predecessor		(1,983	)		63,811			14,162			(250	)
Net income attributable to previous owners		(1,272	)		19,331			26,796			9,285
Net income (loss) noncontrolling interest		(118	)		(122	)		10			84
Net income attributable to partners		—			—			—			6,592
Basic and diluted earnings per unit		—			—			—			0.30

As discussed in Note 1, we closed our IPO on December 14, 2011. We acquired additional oil and gas properties from Memorial Resource subsequent to our IPO in both April and May 2012 and March 2013 and closed the Beta Acquisition in December 2012. The quarterly financial information presented above has been retrospectively revised for common control transactions that the Partnership has consummated since its IPO. See Notes 2 and 11 for additional information regarding earnings per unit.

Note 17. Supplemental Oil and Gas Information (Unaudited)

Capitalized Costs Relating to Oil and Natural Gas Producing Activities

The total amount of capitalized costs relating to oil and natural gas producing activities and the total amount of related accumulated depreciation, depletion and amortization is as follows at the dates indicated.

	Years Ended December 31,
	2012			2011			2010
	(In thousands)
Evaluated oil and natural gas properties (1)	$	1,029,827		$	853,943		$	436,158
Unevaluated oil and natural gas properties		—			—			17,371
Accumulated depletion, depreciation, and amortization (1)		(176,548	)		(127,988	)		(107,961	)
Total	$	853,279		$	725,955		$	345,568

(1) Amounts do not include costs for SPBPC and related support equipment.

F-40

MEMORIAL PRODUCTION PARTNERS LP

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

Costs Incurred in Oil and Natural Gas Property Acquisition, Exploration and Development Activities

Costs incurred in property acquisition, exploration and development activities were as follows for the periods indicated:

	Years Ended December 31,
	2012		2011		2010
	(In thousands)
Property acquisition costs, proved	$	128,052	$	318,714	$	119,511
Exploration and extension well costs		—		16,599		7,123
Development (1)		47,799		45,911		12,577
Total	$	175,851	$	381,224	$	139,211

(1) Amounts do not include costs for SPBPC and related support equipment.

Standardized Measure of Discounted Future Net Cash Flows from Proved Reserves

As required by the FASB and SEC, the standardized measure of discounted future net cash flows presented below is computed by applying first-day-of-the-month average prices, year-end costs and legislated tax rates and a discount factor of 10 percent to proved reserves. We do not believe the standardized measure provides a reliable estimate of the Partnership’s expected future cash flows to be obtained from the development and production of its oil and gas properties or of the value of its proved oil and gas reserves. The standardized measure is prepared on the basis of certain prescribed assumptions including first-day-of-the-month average prices, which represent discrete points in time and therefore may cause significant variability in cash flows from year to year as prices change.

Oil and Natural Gas Reserves

Users of this information should be aware that the process of estimating quantities of “proved” and “proved developed” oil and natural gas reserves is very complex, requiring significant subjective decisions in the evaluation of all available geological, engineering and economic data for each reservoir. The data for a given reservoir may also change substantially over time as a result of numerous factors including, but not limited to, additional development activity, evolving production history and continual reassessment of the viability of production under varying economic conditions. As a result, revisions to existing reserve estimates may occur from time to time. Although every reasonable effort is made to ensure reserve estimates reported represent the most accurate assessments possible, the subjective decisions and variances in available data for various reservoirs make these estimates generally less precise than other estimates included in the financial statement disclosures.

Proved reserves are those quantities of oil and natural gas that by analysis of geoscience and engineering data can be estimated with reasonable certainty to be economically producible — from a given date forward, from known reservoirs, and under existing economic conditions, operating methods and government regulations — prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time.

NSAI was engaged to prepare portions of our reserves estimates comprising approximately 98% of our estimated proved reserves (by volume) at December 31, 2012. All proved reserves are located in the United States and all prices are held constant in accordance with SEC rules.

F-41

MEMORIAL PRODUCTION PARTNERS LP

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

The weighted-average benchmark product prices used for valuing the reserves are based upon the average of the first-day-of-the-month price for each month within the period January through December of each year presented:

	2012		2011		2010
Oil ($/Bbl):
West Texas Intermediate spot (1)	$	91.22	$	92.78	$	76.00
NGL ($/Bbl):
West Texas Intermediate spot (1)	$	91.27	$	93.26	$	76.95
Natural Gas ($/MMbtu):
Henry Hub spot (2)	$	2.757	$	4.118	$	4.376

(1) The weighted average West Texas Intermediate spot price was adjusted by lease for quality, transportation fees, and a regional price differential.

(2) The weighted average Henry Hub spot price was adjusted by lease for energy content, compression charges, transportation fees, and regional price differentials.

The following tables set forth estimates of the net reserves as of December 31, 2012, 2011 and 2010, respectively:

	Year Ended December 31, 2012
	Oil (MBbls)			Gas (MMcf)			NGLs (MBbls)			Equivalent (MMcfe)
Proved developed and undeveloped reserves:
Beginning of year		16,590			447,275			12,992			624,760
Extensions and discoveries		2,811			12,829			841			34,741
Purchase of minerals in place		2,594			104,461			7,095			162,595
Production		(820	)		(23,144	)		(703	)		(32,285	)
Sales of minerals in place		—			(7	)		—			(7	)
Revision of previous estimates		(177	)		(57,342	)		6,617			(18,688	)
End of year		20,998			484,072			26,842			771,116
Proved developed reserves:
Beginning of year		12,873			326,922			8,558			455,500
End of year		13,566			297,993			14,467			466,192
Proved undeveloped reserves:
Beginning of year		3,717			120,353			4,434			169,260
End of year		7,432			186,079			12,375			304,924

F-42

MEMORIAL PRODUCTION PARTNERS LP

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

	Year Ended December 31, 2011
	Oil (MBbls)			Gas (MMcf)			NGLs (MBbls)			Equivalent (MMcfe)
Proved developed and undeveloped reserves:
Beginning of year		11,548			173,126			628			246,180
Extensions and discoveries		222			26,680			1,483			36,916
Purchase of minerals in place		2,414			258,662			10,142			334,963
Production		(731	)		(19,210	)		(371	)		(25,825	)
Reserves retained by our predecessor		(23	)		(3,198	)		—			(3,335	)
Revision of previous estimates		3,160			11,215			1,110			35,861
End of year		16,590			447,275			12,992			624,760
Proved developed reserves:
Beginning of year		9,774			145,479			385			206,433
End of year		12,873			326,922			8,558			455,500
Proved undeveloped reserves:
Beginning of year		1,774			27,647			243			39,747
End of year		3,717			120,353			4,434			169,260

	Year Ended December 31, 2010
	Oil (MBbls)			Gas (MMcf)			NGLs (MBbls)			Equivalent (MMcfe)
Proved developed and undeveloped reserves:
Beginning of year		8,040			71,648			—			119,888
Extensions and discoveries		58			7,602			212			9,225
Purchase of minerals in place		326			88,125			1			90,085
Production		(639	)		(9,151	)		(69	)		(13,403	)
Revision of previous estimates		3,763			14,902			484			40,385
End of year		11,548			173,126			628			246,180
Proved developed reserves:
Beginning of year		6,122			57,805			—			94,537
End of year		9,774			145,479			385			206,433
Proved undeveloped reserves:
Beginning of year		1,918			13,843			—			25,351
End of year		1,774			27,647			243			39,747

Noteworthy amounts included in the categories of proved reserve changes for the years 2012, 2011, and 2010 in the above tables include:

• We acquired 162.6 Bcfe in multiple acquisitions, the largest being the Goodrich Acquisition of 148.9 Bcfe, during the year ended December 31, 2012.

• Our predecessor and the previous owners together acquired 335.0 Bcfe in multiple acquisitions, the largest being the Carthage Properties of 277.7 Bcfe, during the year ended December 31, 2011.

• Our predecessor and the previous owners acquired 90.1 Bcfe in multiple acquisitions, the largest being the Forest Oil properties of 47.0 Bcfe, during the year ended December 31, 2010.

See Note 3 for additional information on acquisitions.

A variety of methodologies are used to determine our proved reserve estimates. The principal methodologies employed are reservoir simulation, decline curve analysis, volumetric, material balance, advance production type curve matching, petro-physics/log analysis and analogy. Some combination of these methods is used to determine reserve estimates in substantially all of our fields.

F-43

MEMORIAL PRODUCTION PARTNERS LP

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

The standardized measure of discounted future net cash flows is as follows:

	Years Ended December 31,
	2012			2011			2010
	(In thousands)
Future cash inflows	$	4,436,141		$	4,109,530		$	1,655,343
Future production costs		(1,601,965	)		(1,412,093	)		(689,224	)
Future development costs		(465,998	)		(307,245	)		(139,979	)
Future income tax expense (1)		—			(4,420	)		(5,463	)
Future net cash flows for estimated timing of cash flows		2,368,178			2,385,772			820,677
10% annual discount for estimated timing of cash flows		(1,373,766	)		(1,360,325	)		(433,609	)
Standardized measure of discounted future net cash flows	$	994,412		$	1,025,447		$	387,068

(1) We are subject to the Texas franchise tax which has a maximum effective rate of 0.7% of gross income apportioned to Texas. Due to immateriality we have excluded the impact of this tax for the year ended December 31, 2012.

Changes in Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Reserves

The following is a summary of the changes in the standardized measure of discounted future net cash flows for the proved oil and natural gas reserves during each of the years in the three year period ended December 31, 2012:

	Years Ended December 31,
	2012			2011			2010
	(In thousands)
Beginning of year	$	1,025,447		$	387,068		$	176,241
Sale of oil and natural gas produced, net of production costs		(108,424	)		(113,400	)		(52,287	)
Purchase of minerals in place		148,098			365,832			114,595
Sale of minerals in place		(12	)		—			—
Reserves retained by predecessor		—			(1,940	)		—
Extensions and discoveries		106,466			49,767			8,526
Changes in income taxes, net		1,947			(1,947	)		(1,506	)
Changes in prices and costs		(262,947	)		178,501			44,321
Previously estimated development costs incurred		55,779			205			2,228
Net changes in future development costs		(19,561	)		(37,199	)		(1,696	)
Revisions of previous quantities		(34,351	)		126,079			98,983
Accretion of discount		102,739			60,036			17,721
Change in production rates and other		(20,769	)		12,445			(20,058	)
End of year	$	994,412		$	1,025,447		$	387,068

Note 18. Subsidiary Guarantors

The Partnership filed a registration statement on Form S-3 with the SEC to register, among other securities, debt securities. The registration statement was declared effective March 15, 2013. The subsidiaries of the Partnership (the “Subsidiaries”) are co-registrants with the Partnership, and the registration statement registered guarantees of debt securities by one or more of the Subsidiaries (other than Memorial Production Finance Corporation, which may act as co-issuer of such debt securities). The Subsidiaries are 100% owned by the Partnership and any guarantees by the Subsidiaries will be full and unconditional (subject to customary release provisions). The Partnership has no assets or operations independent of the Subsidiaries, and there are no significant restrictions upon the ability of the Subsidiaries to distribute funds to the Partnership. In the event that more than one of the Subsidiaries provide guarantees of any debt securities issued by the Partnership, such guarantees will constitute joint and several obligations.

F-44

MEMORIAL PRODUCTION PARTNERS LP

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

Note 19. Subsequent Events

On April 17, 2013, we and our wholly-owned subsidiary, Memorial Production Finance Corporation (“Finance Corp.” and collectively, the “Issuers”), completed a private placement of $300.0 million aggregate principal amount of 7.625% senior unsecured notes due 2021 (the “Senior Notes”). The Senior Notes were issued at 98.521% of par and are guaranteed by all of the Partnership’s subsidiaries (other than Finance Corp., which is co-issuer of the Senior Notes, and San Pedro Bay Pipeline Company, which is an immaterial majority-owned subsidiary) jointly and severally on a senior unsecured basis. On May 23, 2013, the Issuers issued an additional $100.0 million aggregate principal amount of the Senior Notes at 102% of par. The Senior Notes will mature on May 1, 2021 with interest accruing at a rate of 7.625% per annum and payable semi-annually in arrears on May 1 and November 1 of each year, commencing November 1, 2013. The Senior Notes are governed by an indenture. The Senior Notes are subject to optional redemption at prices specified in the indenture plus accrued and unpaid interest, if any. The Issuers may also be required to repurchase the Senior Notes upon a change of control. The indenture contains customary covenants and restrictive provisions, many of which will terminate if at any time no default exists under the indenture and the Senior Notes receive an investment grade rating from both of two specified ratings agencies. The indenture also provides for customary and other events of default. In the case of an event of default arising from certain events of bankruptcy or insolvency with respect to either of the Issuers, all outstanding Senior Notes will become due and payable immediately without further action or notice. If any other event of default occurs and is continuing, the trustee or the holders of at least 25% in principal amount of the then outstanding Senior Notes may declare all the Senior Notes to be due and payable immediately. The Issuers have agreed pursuant to registration rights agreements to file an exchange offer registration statement or, under certain circumstances, a shelf registration statement with respect to the Senior Notes no later than April 17, 2014. In connection with the Senior Notes that were issued on May 23, 2013, the borrowing base of our revolving credit facility was automatically reduced to $480.0 million and outstanding indebtedness under this credit facility was reduced to $39.0 million.

F-45