Eagle Rock Energy Announces Restructuring Of Majority Of 2011 Natural Gas Liquids Hedge Portfolio Into Direct Product Hedges

HOUSTON, Nov. 29, 2010 (GLOBE NEWSWIRE) -- Eagle Rock Energy Partners, L.P. ("Eagle Rock" or the "Partnership") (Nasdaq:EROC) today announced it has terminated certain of its crude oil proxy hedges related to the expected natural gas liquids production from its Midstream business in 2011 and replaced them with direct natural gas liquids product hedges. As a result, Eagle Rock's expected 2011 natural gas liquids production (propane and heavier) from its Midstream business is 87% hedged, and 95% of these hedges are direct product hedges. Recent strength in the natural gas liquids futures market enabled the Partnership to enter into direct product hedges covering a significant percentage of its expected 2011 midstream natural gas liquids volumes (excluding ethane) while securing aggregate fixed price levels above those expected through proxy hedges.

Eagle Rock defines the hedge of one commodity with a closely-correlated commodity as a "proxy hedge." The Partnership enters into crude oil derivatives as proxy hedges for natural gas liquids in order to avoid the substantial discount in the forward curve for direct commodity products that usually exists because of a lack of liquidity in those markets. This liquidity discount is typically smallest for hedges covering near-term periods and increases for hedges covering periods further in the future. 

"The recent hedge transactions reflect our commitment to prudently reduce our commodity price risk," said Jeff Wood, Senior Vice President and Chief Financial Officer.  "The move into direct product hedges provides greater stability to our cash flows and greater certainty to our stated distribution objectives throughout 2011."

Details of the recent hedging transactions are included in the updated Commodity Hedging Overview presentation Eagle Rock posted today to its website. The latest presentation can be accessed by going to www.eaglerockenergy.com; select Investor Relations; then select Presentations.

About the Partnership

The Partnership is a growth-oriented master limited partnership engaged in two businesses: a) midstream, which includes (i) gathering, compressing, treating, processing and transporting natural gas; (ii) fractionating and transporting natural gas liquids; and (iii) marketing natural gas, condensate and NGLs; b) upstream, which includes acquiring, exploiting, developing, and producing hydrocarbons in oil and natural gas properties. Its corporate office is located in Houston, Texas.