December b 7, 2010 Wells Fargo Conference New York City
Overview of Vanguard Natural Resources Upstream Energy LLC, headquartered in Houston Initial Public Offering VNR - October 2007 Fi strategic Five t t i acquisitions i iti ttotaling t li 350MM 350MM expanded d d geographic hi…
Company Profile Company Profile EQUITY MARKET CAP (1) 725 million TOTAL DEBT 54 million LESS CASH 3 million ENTERPRISE VALUE 776 million (1) Market pricing as of December 3, 2010; includes 420m Class B units Positive Cash…
Multiple Operating Areas Appalachia Proved Reserves: 50.4 Bcfe(1) 93% Gas Gas, 67% Proved Developed 10.0 MMcfe/d current net production Permian Basin Proved Reserves: 7.0 MMboe (1) 84% oil and 75% Proved Developed 1.3 1 3…
2009 - Growth in South Texas Acquisition from Lewis Energy, closed August 2009 for 52.3 million cash, funded with proceeds of equity offering Lewis to operate and conduct PUD drilling program through 2015 (7 wells per year)…
2009 - Growth in Permian Basin Acquisition of producing assets in Ward County closed December 2009 for 55 million cash, funded with equity proceeds Increased net oil production from the Permian by more than 100% High margin…
2010 Mississippi Acquisition Acquisition of producing assets in Mississippi, Texas and New Mexico closed May 2010 for 113.1 million cash, funded with equity proceeds p Inventory of infill PUD locations to develop oil reserves…
Asset and Location Diversification 12/31/07*: OIL, GAS AND NGL 9/30/10**: OIL, GAS AND NGL 1.5, 2% 21.3, 12% GAS, BCF 85.2, GAS, BCFE OIL, BCFE 49% OIL, BCFE 65.3, 68.8, NGL, BCFE 98% 39% 12/31/07*: BCFE BY AREA 9/30/10**:…
ENP Transaction Rationale Increased exposure to crude oil for VNR unitholders Significantly increases size and scale, overall operating reach and cash flow stability Improved ability to compete for acquisitions going forward…
Combined Asset Overview 12
Proved Reserves by Category (9/30/10) Standalone (1) 30.7 MMBoe Combined (1)(2) 74.1 MMBoe VNR VNR + ENP PUD 18% PDP PNP 78% 4% PUD 32% PDP 64% PNP 4% Substantial Increase in Size and Scale and Large % of PDP…
Proved Reserves by Commodity (9/30/10) Standalone (1) 30.7 MMBoe Combined (1)(2) 74.1 MMBoe VNR VNR + ENP NGLs Gas 5% Oil 40% 55% NGLs 12% Gas 49% Oil 39% Increased Exposure to Crude Oil for VNR Unitholders (1)…
Proved Reserves by Area (9/30/10) Standalone (1) 30.7 MMBoe Combined (1)(2) 74.1 MMBoe VNR VNR + ENP ANADARKO /ARK-LA-TEX MISS PERMIAN & 2% 6% GULF COAST WILLISTON 8% 38% PERMIAN & MISS GULF COAST 14% 27% BIG HORN SOUTH…
FINANCIAL OVERVIEW 16
Comparable Company Distribution Yields C S O YIELDS CURRENT DISTRIBUTION SOOF PEER G O GROUP 9.6% 10% 8.0% 8.1% 7.7% 7.8% 7.0% 7 0% 7.2% 6.0% 6.1% 6.1% 5% 2.00 2.64 3.03 1.56 2.08 2.20 2.00 0% US *USRT G& *PIPE *G&P…
Price Performance Since 2009 The results Th l hhave been b good. d VNR has h outperformed f d US Royalty R l Trusts, C-Corps and other E&P MLPs. The strategy works. 500% V NR: 342% 400% 300% E&P M LPs : 155%…
Unit Price History Since IPO Distribution Increases with Acquisition Growth 0.55 0 525 0.525 0.50 0.445 0.425 19
Yield Compression Continues A Average Yi Yield ld 2004 2005 2006 2007 2008 2009 YTD Current Liquids T&S 6.5% 6.2% 6.8% 6.1% 8.3% 8.2% 6.7% 6.3% Natural Gas T&S 6.8 6.4 6.7 6.1 7.8 8.1 6.4 6.1 Natural Gas G&P 6.8 5.9 6.2 5.5 12.1…
22 0% 50% 100% 150% 200% 250% (100%) (50%) APL 228.2% XTEX 146.6% BBEP 83.4% CQP 72.6% % EROC 70.4% % ARLP 65.5% WPZ 64.4% MWE 63.9% Note: Market data as of 12/2/2010. TOO 62.3% WES 56.3% TGP 53.9% EVEP…
Hedges Mitigate Distribution Risk Approximately 82% of expected natural gas production (total proved) through 2011 is hedged via a combination of swaps and collars at a weighted average floor price of 7.81 per MMBtu: 4th Qtr 2010…
Advantages of Vanguards LLC Structure LLC Partnership structure results in lower cost of capital No entity-level income tax; Competitive advantage in A&D market No Incentive Distribution Rights (IDRs) Investors share equally in all…
Major Taxation Points All investors receive a partnership K-1 at the end of the year K-1 allocates the partnerships income and expenses to individual investors based on their percentage ownership of the partnership Quarterly…
Key Investor Considerations High quality, long lived reserves Asset base generates stable cash flow Multi-year hedge program mitigates commodity risk G Geographic hi and d commodity di didiversity i LLC structure gives…
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