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Constellation Energy Partners Reports Third Quarter 2008 Results

November 7, 2008

Constellation Energy Partners LLC (NYSE Arca: CEP) today reported third quarter results and updated its full 2008 forecast.

The company produced 4,477 MMcfe for the third quarter, up 42 percent from the third quarter of 2007 and one percent from the second quarter of 2008. Adjusted EBITDA was $18.8 million, an increase of 19 percent from the third quarter of 2007 and a decrease of 8 percent from the second quarter of 2008. Net income on a Generally Accepted Accounting Principles (GAAP) basis for the third quarter of 2008 was $26.9 million, up from $6.9 million from the third quarter of 2007 and up $35.7 million from the second quarter of 2008.

Third quarter results included an unrealized noncash mark-to-market (MTM) gain of $22.0 million from future period natural gas hedges primarily as a result of lower natural gas prices as of Sept. 30, 2008.

During the third quarter, the company completed 40 net wells and 14 net recompletions, bringing program results to 90 net wells and 32 recompletions for the first nine months of 2008. An additional 33 wells and recompletions were in progress, of which 15 to 20 are expected to flow to sales by the end of the year.

The company revised its expectations for the full year 2008 drilling program, as a result of drilling program delays experienced at the beginning of the year. The company indicated it expects to deliver 105 to 115 net wells, down from its original forecast of 115 to 130 net wells. Total net recompletions for the year are expected to range from 35 to 40, down from 85 to 100 net recompletions.

“Although we have reduced the number of wells and recompletions we intend to complete during the year, we have observed greater predictability in the results that we have delivered. We have demonstrated that our projections and expectations for well costs and performance are reasonable and the current level of maintenance capital spending is maintaining our production levels and offsetting decline rates,” said Stephen R. Brunner, president and chief executive officer of Constellation Energy Partners. “This knowledge gives us better control of our program and improves our decision-making capabilities. As we move forward, our ability to select higher rate of return investments and deliver more predictable production should allow us to ultimately improve our capital efficiency.”

The company also provided an update on its 2008 full year forecast. The company indicated it expects to spend between $40 million to $45 million in capital, compared to a forecast of $44.5 million. The company indicated it expects to deliver 17 to 18 Bcfe of production during the year, compared to a forecast range of 17 to 20 Bcfe. The company revised its operating expense forecast to $58 million to $59 million, up from $54.5 million to $57.5 million, among other things to reflect additional expenses related to the Torch arbitration and retention of a strategic advisor. The company also revised its Adjusted EBITDA forecast range to $70 million to $75 million, down from $94 million to $105 million, to reflect the impact of lower realized natural gas prices and production results and higher operating expenses.

“Based on our revised guidance for 2008, we anticipate that our full year distribution coverage ratio will be less than 1.0 times, a level we believe is not sustainable. We anticipate that our future distribution levels will be evaluated based on distribution coverage ratio, overall portfolio performance and market outlook, in conjunction with advice from our strategic advisor and approval from our Board of Managers,” said Brunner. “Once we finalize our 2009 business plan and gain approval from our Board of Managers, we will provide further guidance on both the plan and future distribution levels, which we anticipate doing prior to our next earnings call.”

Non-GAAP Measures

We present Adjusted EBITDA and Distributable Cash Flow in addition to our reported net income in accordance with GAAP. Adjusted EBITDA is a non-GAAP financial measure that is defined as net income (loss) plus interest (income) expense; depreciation, depletion and amortization; write-off of deferred financing fees; impairment of long-lived assets; (gain) loss on sale of assets; (gain) loss from equity investment; long-term incentive plan expense; accretion of asset retirement obligation; unrealized (gain) loss on natural gas derivatives; and realized (gain) loss on cancelled natural gas derivatives. Distributable Cash Flow is defined as Adjusted EBITDA less maintenance capital expenditures and cash interest expense. Maintenance capital expenditures are capital expenditures that we expect to make on an ongoing basis to maintain our asset base (including our undeveloped leasehold acreage) at a steady level over the long term. These expenditures include the drilling and completion of additional development wells to offset the expected production decline during such period from our producing properties, as well as additions to our inventory of unproved properties or proved reserves required to maintain our asset base.

Adjusted EBITDA and Distributable Cash Flow are used by management to indicate (prior to the establishment of any cash reserves by our Board of Managers) the cash distributions we expect to pay our unitholders. Specifically, these financial measures indicate to investors whether or not we are generating cash flow at a level that can sustain or support an increase in our quarterly distribution rates. Adjusted EBITDA and Distributable Cash Flow are also used as quantitative standards by our management and by external users of our financial statements such as investors, research analysts and others to assess the financial performance of our assets without regard to financing methods, capital structure or historical cost basis; the ability of our assets to generate cash sufficient to pay interest costs and support our indebtedness; and our operating performance and return on capital as compared to those of other companies in our industry, without regard to financing or capital structure. Adjusted EBITDA and Distributable Cash Flow are not intended to represent cash flows for the period, nor are they presented as a substitute for net income, operating income, cash flows from operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. We also provide our earnings forecast in terms of Adjusted EBITDA. We are unable to reconcile our forecast to GAAP net income or operating income because we do not predict the future impact of adjustments to net income (loss), such as (gains) losses on gas derivatives and equity investments or asset impairments, due to the difficulty of doing so.

SEC Filings

CEP intends to file its Form 10-Q for the quarter ended Sept. 30, 2008, on or about Nov. 7, 2008.

Forward-Looking Statements

We make statements in this news release that are considered forward- looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. These forward-looking statements are largely based on our expectations, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors. Although we believe such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control. In addition, management’s assumptions about future events may prove to be inaccurate. Management cautions all readers that the forward-looking statements contained in this news release are not guarantees of future performance, and we cannot assure you that such statements will be realized or the forward-looking events and circumstances will occur. Actual results may differ materially from those anticipated or implied in the forward-looking statements due to factors listed in the “Risk Factors” section in our SEC filings and elsewhere in those filings. All forward-looking statements speak only as of the date of this news release. We do not intend to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise.

Conference Call Information

The company will host a conference call today at 8:30 a.m. (CST) to review its financial results and discuss its business outlook for 2008.

To participate, analysts, investors, media and the public in the U.S. may dial (888) 322-9245 shortly before 8:30 a.m. (CST). The international phone number is (773) 756-0253. The conference password is PARTNERS.

A replay will be available approximately one hour after the end of the call by dialing (800) 294-3092 or (402) 220-9770 (international). A live audio webcast of the conference call, presentation slides and the earnings press release will be available on the Investor Relations page of Constellation Energy Partners’ web site (http://www.constellationenergypartners.com). A webcast replay, as well as a replay in downloadable MP3 format, will also be available on the site approximately one hour after the completion of the call.

Constellation Energy Partners LLC, (http://www.constellationenergypartners.com), is a limited liability company focused on the acquisition, development and exploitation of oil and natural gas properties, as well as related midstream assets.

  PRESS RELEASE Constellation Energy Partners LLC Operating Statistics  ------------------------   -------------------------- Three Months Ended           Nine Months Ended September 30,               September 30, 2008          2007         2008           2007 -----------   ----------   -----------   ------------ Net Production: Total production (MMcfe)              4,477        3,158        12,942        6,181 Average daily production (Mcfe/day)          48,663       34,326        47,234       22,641  Average Net Sales Price per Mcfe: Net realized price, including hedges               $7.83 (a)    $7.25 (a)     $7.96 (a)    $7.99(a) Net realized price, excluding hedges               $8.74        $5.63         $8.79        $6.46 (a) Excludes impact of mark-to-market losses and net of cost of sales.   Net Wells Drilled and Completed           40           34            90           54 Net Recompletions        14         17.5            32         20.5   Constellation Energy Partners LLC Condensed Consolidated Statements of Operations  ------------------------   -------------------------- Three Months Ended           Nine Months Ended September 30,               September 30, 2008          2007         2008           2007 -----------   ----------   -----------   ------------ ($ in thousands)            ($ in thousands)  Oil and gas sales   $37,674      $23,536      $109,056      $50,033 Gain/(Loss) from mark-to-market activities          21,976        2,635         3,987       (2,766) -----------   ----------   -----------   ------------ Total Revenues       $59,650      $26,171      $113,043      $47,267  Operating expenses: Lease operating expenses           9,428        5,077        27,701        9,822 Cost of sales       2,633          656         6,020          656 Production taxes              2,241          992         6,791        2,136 General and administrative     3,800        2,667        10,922        6,057 (Gain)/Loss on sale of equipment            (85)          (8)         (296)          86 Depreciation, depletion and amortization      11,318        7,619        32,340       13,162 Accretion expense              105           98           307          211 -----------   ----------   -----------   ------------ Total operating expenses        29,440       17,101        83,785       32,130  Other expenses: Interest (income) expense, net       3,218        2,216         8,596        3,906 Other (income) expense               53          (29)           49          (99)  -----------   ----------   -----------   ------------ Total expenses        32,711       19,288        92,430       35,937  -----------   ----------   -----------   ------------ Net income (loss)   $26,939       $6,883       $20,613      $11,330 ===========   ==========   ===========   ============  Adjusted EBITDA     $18,806      $15,832       $56,856      $32,946 ===========   ==========   ===========   ============  EPS - Basic           $1.21        $0.37         $0.92        $0.79 EPS - Basic Units Outstanding     22,351,667   18,398,146    22,350,239   14,289,600  EPS - Diluted         $1.21        $0.37         $0.92        $0.79 EPS - Diluted Units Outstanding     22,351,667   18,400,709    22,370,700   14,292,163 

  Constellation Energy Partners LLC Condensed Consolidated Balance Sheets  September 30, December 31, 2008          2007 ------------- ------------ ($ in thousands)  Current assets                                    $48,156      $45,873 Natural gas properties, net of accumulated depreciation, depletion and amortization         693,969      643,653 Other assets                                       19,941       17,129 ------------- ------------ Total assets                                 $762,066     $706,655 ============= ============  Current liabilities                               $24,181      $20,551 Debt                                              216,000      153,000 Other long-term liabilities                        19,789       16,702 ------------- ------------ Total liabilities                             259,970      190,253  Class D Interests                                   6,667        7,000  Common members' equity                            488,333      505,178 Accumulated other comprehensive income              7,096        4,224 ------------- ------------ Total members' equity                           495,429      509,402 ------------- ------------ Total liabilities and members' equity        $762,066     $706,655 ============= ============ 

  Constellation Energy Partners LLC Reconciliation of Net Income to Adjusted EBITDA to Distributable Cash  ----------------- ----------------- Three Months    Nine Months Ended Ended September    September 30, 30, 2008     2007     2008     2007 -------- -------- -------- -------- ($ in thousands)  ($ in thousands)  Reconciliation of Net Income to Adjusted EBITDA to Distributable Cash: Net income                         $26,939   $6,883  $20,613  $11,330 Add: Interest expense/(income), net     3,218    2,216    8,596    3,906 Depreciation, depletion and amortization                     11,318    7,619   32,340   13,162 Accretion of asset retirement obligation                          105       98      307      211 (Gain)/Loss on sale of asset         (85)      (8)    (296)      86 Loss from mark-to-market activities                      (21,976)  (2,635)  (3,987)   2,766 Long-term incentive plan             118       22      273       22 Unrealized (gain)/loss on natural gas derivatives/hedge ineffectiveness                    (831)   1,637     (990)   1,463 -------- -------- -------- -------- Adjusted EBITDA (1)                $18,806  $15,832  $56,856  $32,946 ======== ======== ======== ========  Maintenance capital (2)            7,417    3,314   21,584    6,071 Drilling fund                       (366)  (1,134)  (3,366)  (1,134) MSA Agreement                       (850)       -     (850)       - Interest expense (cash)            3,005    1,680    8,054    2,590  -------- -------- -------- -------- Distributable Cash                  $9,600  $11,972  $31,434  $25,419 ======== ======== ======== ========   Three Months    Six Months Ended Ended June 30,       June 30, 2008     2007     2008     2007 -------- -------- -------- -------- ($ in thousands)  ($ in thousands)  Reconciliation of Net Income to Adjusted EBITDA to Distributable Cash: Net income                         $(8,790)  $2,193  $(6,326)  $4,447 Add: Interest expense/(income), net     3,059    1,182    5,378    1,690 Depreciation, depletion and amortization                     11,489    3,584   21,022    5,543 Accretion of asset retirement obligation                          101       77      202      113 (Gain)/Loss on sale of asset           -       (1)    (211)      94 Loss from mark-to-market activities                       15,033    2,619   17,989    5,401 Long-term incentive plan              57        -      155        - Unrealized (gain)/loss on natural gas derivatives/hedge ineffectiveness                    (410)     223     (159)    (174) -------- -------- -------- -------- Adjusted EBITDA (1)                $20,539   $9,877  $38,050  $17,114 ======== ======== ======== ========  Maintenance capital (2)            7,417    1,519   14,167    2,757 Drilling fund                     (1,500)       -   (3,000)       - Interest expense (cash)            1,549      488    5,049      912  -------- -------- -------- -------- Distributable Cash                 $13,073   $7,870  $21,834  $13,445 ======== ======== ======== ======== 

  (1) Our Adjusted EBITDA should not be considered as an alternative to net income, operating income, cash flows from operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. Our Adjusted EBITDA excludes some, but not all, items that affect net income and operating income and these measures may vary among other companies. Therefore, our Adjusted EBITDA may not be comparable to similarly titled measures of other companies. We define Adjusted EBITDA as net income (loss) plus: -- interest (income) expense; -- depreciation, depletion and amortization; -- write-off of deferred financing fees; -- impairment of long-lived assets; -- (gain) loss on sale of assets; -- (gain) loss from equity investment; -- long-term incentive plan expense; -- accretion of asset retirement obligation; -- unrealized (gain) loss on natural gas derivatives; and -- realized loss (gain) on cancelled natural gas derivatives  (2) Maintenance capital expenditures are capital expenditures that we expect to make on an ongoing basis to maintain our asset base (including our undeveloped leasehold acreage) at a steady level over the long term. These expenditures include the drilling and completion of additional development wells to offset the expected production decline during such period from our producing properties, as well as additions to our inventory of unproved properties or proved reserves required to maintain our asset base.