Exploration & Production | Quarterly / Earnings Reports | First Quarter (1Q) Update
Vanguard Talks Big Pinedale Acquisition, Future Development Plans
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Vanguard Natural Resources, LLC reported financial and operational results for the quarter ended March 31, 2014.
Mr. Scott W. Smith, President and CEO, commented, "Our quarter was highlighted by our $581 million acquisition in the Pinedale field in Wyoming. With this purchase we now have a position in one of the country's most prolific gas properties with many years of development activity ahead. This transaction is a great platform to initiate our growth capital strategy which will enhance our ability to compete for quality assets in the future."
First Quarter 2014 Highlights:
- Adjusted EBITDA increased 24% to $89.9 million in the first three months of 2014 from $72.4 million in the first three months of 2013 and increased 21% from $74.3 million recorded in the fourth quarter of 2013.
- Distributable Cash Flow Available to Common and Class B Unitholders (a non-GAAP financial measure defined below) for the first quarter of 2014 increased 1% to $41.8 million from the $41.4 million generated in the first quarter of 2013 and decreased 2% from $42.7 million generated in the fourth quarter of 2013.
- We reported net income attributable to common and Class B unitholders for the first quarter of 2014 of $13.2 million or $0.17 per basic unit compared to a reported net loss of $27.0 million or $(0.42) per basic unit in the first quarter of 2013.
- Adjusted Net Income Attributable to Common and Class B Unitholders was $24.6 million for the first three months of 2014, or $0.31 per basic unit, as compared to $16.9 million, or $0.26 per basic unit, in the comparable period of 2013. The 2014 results include net non-cash charges of $11.4 million that are adjustments to arrive at Adjusted Net Income Attributable to Common and Class B Unitholders. Results for the first quarter of 2013 included net non-cash charges of $43.3 million.
- Reported average production of 268 MMcfe per day in the first three months of 2014, up 35% over 199 MMcfe per day produced in the first three months of 2013. On an Mcfe basis, crude oil, natural gas and NGLs accounted for 19%, 67%, and 14% of our production for the first three months of 2014, respectively.
During the first quarter of 2014, we produced 16,040 MMcf of natural gas, an increase of 34% from the 11,990 MMcf of natural gas produced in the first quarter of 2013, 775 MBbls of oil, an increase of 7% from the 725 MBbls of oil produced in the first quarter of 2013, and 572 MBbls of NGLs, an increase of 123% from the 257 MBbls of NGLs produced in the first quarter of 2013.
Including the impact of our natural gas hedges in the first three months of 2014, we realized an average price of $3.42 per Mcf on natural gas sales, compared to the unhedged realized average price of $3.96 per Mcf. Our hedged realized average price for oil was $84.32 per barrel, compared to the unhedged realized average price of $87.99 per barrel. The impact of our NGL hedges resulted in an average realized price of $35.87 per barrel of NGLs sales, compared to the unhedged realized average price of $36.72 per barrel.
Capital Expenditures
Total capital expenditures for the drilling, capital workover and recompletion of oil and natural gas properties were approximately $31.2 million in the first quarter of 2014 compared to $14.6 million for the comparable quarter of 2013 and $14.5 million for the fourth quarter of 2013. Maintenance capital expenditures in the first quarter of 2014 totaled $28.8 million. The balance of $2.4 million was attributable to growth capital expenditures associated with the Pinedale Acquisition in the Green River Basin.
During 2014, we intend to concentrate our drilling on low-risk development opportunities with the majority of drilling capital focused on high Btu gas wells and oil wells. We currently anticipate a capital budget for the remainder of 2014 to range between $105.0 million and $110.0 million, excluding any potential future acquisitions. We expect to spend 71% of the remaining 2014 capital budget on the newly acquired assets in the Pinedale Acquisition in the Green River Basin, participating as a non-operated partner in the drilling and completion of vertical natural gas wells. Additionally, we expect to spend 8% of the remaining 2014 capital budget in the Permian Basin, 2% in the Big Horn Basin and the balance in our other operating areas.
Recent Activities
On March 31, 2014, Vanguard entered into an asset exchange deal with Marathon Oil Corp., which can be accessed here via Shale Experts' A&D Database.
Hedging Activities
We enter into derivative transactions in the form of hedging arrangements to reduce the impact of oil and natural gas price volatility on our cash flow from operations. We have mitigated some of the volatility on our cash flow price with derivative contracts through 2017 for oil and natural gas production and through 2015 for NGLs production. Specifically, we have implemented a hedging program for approximately 80% of our anticipated production of crude oil through 2015, approximately 80% of our natural gas production through 2017 and approximately 7% of our NGLs production through 2015. At March 31, 2014, the fair value of commodity derivative contracts was an asset of approximately $29.4 million, of which $17.6 million of net current liability settles during the next twelve months. Currently, we use fixed-price swaps, basis swap contracts, collars, three-way collars, swaptions, call options sold, put spread options, put options sold and range bonus accumulators to hedge oil, natural gas and NGLs prices.
Liquidity Update
At March 31, 2014, we had indebtedness under our reserve-based credit facility totaling $761.0 million with a borrowing base of $1.3 billion, which provided for $536.2 million in undrawn capacity, after consideration of a $2.8 million reduction in availability for letters of credit.
As of April 29, 2014, there were $761.0 million of outstanding borrowings and $536.2 million of borrowing capacity under the reserve-based credit facility, after consideration of a $2.8 million reduction in availability for letters of credit and a $1.3 billion borrowing base. We also have approximately $10.0 million in available cash. On April 30, 2014, our borrowing base is expected to increase from $1.3 billion to $1.525 billion pursuant to our semi-annual borrowing base redetermination.
Cash Distributions
On April 17, 2014, our board of directors declared a cash distribution for our common and Class B unitholders attributable to the month of March 2013 of $0.21 per common and Class B unit ($2.52 on an annualized basis) expected to be paid on May 15, 2014 to Vanguard unitholders of record on May 1, 2014.
Also on April 17, 2014, our board of directors declared a cash distribution for our preferred unitholders of $0.1641 per Series A Preferred Unit and $0.33889 per Series B Preferred Unit to be paid on May 15, 2014 to Vanguard preferred unitholders of record on May 1, 2014. This marks the initial distribution payment of our Series B Preferred Units for the period March 11, 2014 through May 15, 2014. Future monthly cash distributions for our Series B Preferred Units will be $0.15885 per unit.