Raymond James Presentation February 19, 2013 Richard Robert EVP & CFO
Overview of Vanguard Natural Resources Upstream oil & gas LLC, headquartered in Houston, Texas Asset Profile* Initial Public Offering VNR October 2007 189 MMBoe total proved reserves (not (Total Enterprise Value of 240mm) SEC…
Where We Started Appalachia Basin Proved Reserves: 67 Bcfe Undeveloped gross acres: 106,000 Gross locations: 543 (326 proved) (1) Based on NSAI 12/31/07 Reserve Report 4
Geographically Diversified Reserve Base Core Areas Overview Big Horn Basin 189 MMBoe proved reserves (not SEC pricing) Proved Reserves: 24.2 MMBoe Williston Basin Proved Reserves: 5.3 MMBoe 61% gas and 72% proved developed 85% oil…
Experienced Management Team Years of Name Title Prior Affiliations Experience Ensource Energy Scott W. Smith President and CEO The Wiser Oil Company 32 San Juan Partners Enbridge USA Richard A. Robert EVP and CFO Midcoast…
The Building Blocks of a Successful E&P (Upstream) MLP Mature Reserve Diverse portfolio of mature, long life oil and gas properties Base Primarily proved developed producing reserves with a long reserve life Low drilling risk and…
How We Spend Capital Disciplined approach to capital spending focus on maintaining cash flow from mature, long lived fields By contrast, resource players invest in growth to support equity valuation The nature of our capital program…
Our Acquisition Strategy The U.S. has a large inventory of mature oil and natural gas basins which provide significant opportunity for future growth and consolidation Current E&P opportunity set is comprised of an estimated 1.5…
How VNR Fits in the Upstream Cycle Oil & Gas Company (C-Corp) Discovers new reserves via exploratory drilling (Shale and Resource) Oil & Gas Company Oil & Gas Company Develops reserves, Redeploys capital captures higher IP…
Our Successful Acquisition Track Record 1,200 1,021 1,000 783 800 600 494 liquids gas 400 127 106 200 - 2008 2009 2010 2011 2012* of Deals 2 2 2 8 3 11 * 2012 includes the recently closed natural gas and liquids…
Arkoma Basin Acquisition Woodford Shale Assets located in the Woodford Shale and Fayetteville Shale plays Total proved reserves of 402 Bcfe (57% PDP) Current net production of 70 MMcfe/d (includes 600 Bbl/d of NGLs) Reserve to…
Barrett Acquisition Wind River & Powder River, WY and Piceance Basin, CO Assets located in the Piceance Basin in Colorado and the Powder River and Wind River Basins in Wyoming Total proved reserves of 300 Bcfe (80% PDP) Current…
U.S. Natural Gas Reserves / Resource Life Shale development has significantly increased the natural gas reserves / resource in the United States Natural gas can now be viewed as a long-term energy solution 2,000 Tcf 100 Yr…
U.S. Oil & Liquids Reserves / Resources Increase in U.S. liquids production is reducing imports 300 270 250 Billions of Barrels 200 150 100 100 50 20 - U.S Existing U.S. Unconventional Saudi Arabia…
Future Shale Development Requires Massive Capital Average of 70 billion per year in capital requirements for the next 30 years Creates opportunities for E&P MLPs to acquire higher PDP assets as Shale players try to close the funding…
Capital Sources for North American E&P Companies Since 2007 (B) More than 500 billion raised since 2007 297 112 74 53 M&A (Asset Only) Debt Equity Joint Ventures 17 Source: Jefferies January 2013 IPAA luncheon…
Distribution Growth 3.00 2.50 2.19 2.31 2.43 1.89 2.03 2.00 1.70 1.50 1.00 0.50 0.00 (1) (2) 2007 2008 2009 2010 2011 2012 (1) Annualized quarterly distribution. (2) Annualized at the current monthly distribution of 0.2025…
Risk Mitigation Vanguard seeks to mitigate risk across all facets of its business Drilling and Operational Risk Rate of return disciplined approach to project selection Drill only onshore, proved undeveloped locations Commodity…
Hedges Mitigate Commodity Price Risk Approximately 80% of expected natural gas proved production hedged thru the first half of 2017 at a weighted average FLOOR price of 4.73 per MMBtu Primarily use NYMEX and basis swaps 50,000…
Hedges Mitigate Commodity Price Risk Approximately 90% of expected crude oil proved production hedged thru 2014 at a weighted average FLOOR price of 91.46 per barrel Use a combination of swaps, collars and three-way collars…
Hedging Through Acquisitions Significant hedge acquisitions for 4-5 years, allows VNR to increase its % of production hedged Prior to the Arkoma and Barrett acquisitions, VNR was only hedged through 2014 9,000 50,000 4.60…
Locking in Margins Provides Stability Through the use of hedging, Vanguard is able to lock in significant acquisition margins for the foreseeable future, helping to insure distribution stability 98.49 100.00 92.82 92.27 93.42…
Key MLP Investor Benefits 4 Specific Investor Benefits High Current Income 6.1% average current yield for the AMZ MLP Index(1) Growth Potential 387.8% total return for the AMZ MLP Index since 2003(2) Tax Advantaged…
Relative Price Performance Since 01/01/2001 AMZ MLP Index Spread Over 10-Year Treasury AMZ MLP Index Spread to MSCI REIT Index 1,400 Current Spread 334bps 1,200 Historical Average: 150bps 1,000 MLPs currently at 79bps above…
Vanguards Value Proposition Vanguard has the highest distribution growth rate since its IPO in October 2007 However, Vanguard is still trading at a higher yield than many of its peers Typically, MLPs with a track record of 50%…
Key Investor Considerations Management and unitholders well aligned High quality, long lived reserves Asset base generates stable cash flow Multi-year hedge program mitigates commodity risk Geographic and commodity diversity LLC…
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