Key MLP Investor Benefits 4 Specific Investor Benefits High Current Income 6.1% average current yield for the AMZ MLP Index(1) Growth Potential 340.5% total return for the AMZ MLP Index over 10 year period (2) Tax Advantaged…
Overview of Vanguard Natural Resources Upstream oil & gas LLC, headquartered in Houston, Texas Initial Public Offering VNR October 2007 (Total Enterprise Value of 240mm) Twelve strategic acquisitions totaling 1.6bn expanded geographic…
Key Investment Highlights High quality, long-lived reserve base with low production decline rates and low capital reinvestment requirements Geographically diverse asset base comprised predominantly of oil properties Active…
Geographically Diversified Reserve Base Core Areas Overview Big Horn Basin Williston Basin 73.2 MMBoe Proved Reserves Proved Reserves: 26.5 MMBoe Proved Reserves: 5.4 MMBoe 82% oil and 97% Proved 71% oil and 88% Proved Developed…
Liquids Focused Reserve Base Total Proved 2011 Net % of Proved Developed % Proved Production % Liquids PV-10 Proved Operating Area (MMBoe) (MMBoe) Developed (MBoe/d) (Production) (mm) PV-10 Permian Basin 29.9 25.6 86% 5.1 57% 544…
Permian Basin Acquired producing assets from Apache in December 2007 Established Permian Basin as an operating area, with approximately 50 operated wells in 7 fields Encore acquisition added 16.9 MMBoe of proved reserves (37% oil,…
Big Horn Basin Majority of Big Horn Basin properties located in Elk Basin and Gooseberry Field Elk Basin Major producing horizons include Embar- Tensleep, Madison, Frontier Formations Gooseberry Field Active waterflood project…
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…
Our Successful Acquisition Track Record We acquire developed, proved properties in established oil and gas basins Recently we have focused on oily / liquids properties We review between 125-150 and evaluate approximately 50…
What Encore Did For Us Largest acquisition to date at 1.2 billion Increased exposure to crude oil for VNR unitholders Significantly increased size and scale, overall operating reach and cash flow stability Improved ability to…
Our Successful Execution of the E&P MLP Strategy Geographically diverse portfolio of long life assets, well positioned in most of the mature US basins 73.2 MMBoe total proved reserves, 88% proved developed and 17 year Proved R/P (1)…
Disciplined Financial Strategy Maintain conservative capital structure and sufficient liquidity Availability under Revolver at closing of Senior Notes offering of 364 million Target Debt / EBITDA of less than 2.5x provides sufficient…
Acquisition Financing Strategy Vanguards long-term strategy is to fund its acquisition program with approximately 60% equity and 40% debt, de-levering the company over time via equity issuances and utilizing excess cash flow to pay…
Hedging Philosophy Hedge commodity prices on estimated production from acquisitions for three to five years upon signing the Purchase and Sale Agreement to protect rate of return from price fluctuations Opportunistic hedging program…
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 100.00 92.82 92.27 93.42 90.00…
Hedges Mitigate Commodity Price Risk Approximately 80% of expected crude oil production (total proved) thru 2014 Approximately 75% of expected natural gas production (total proved) thru 2014 Weighted average floor price of 9,000…
Current Upstream MLP Distributions Vanguard currently has one of the highest distribution rates, yet still trading at a discount to many of its peers 2.90 40.00 2.76 2.70 38.46 35.00 Current Unit Price (/unit) Current…
Vanguards Value Proposition Vanguard is one of the more liquids-rich E&P MLPs and has the highest distribution growth rate since its IPO in October 2007 However, it is still trading at a higher yield than many of its peers At 71%…
Price Performance Since 2009 The results have been great. VNR has outperformed US Royalty Trusts, C-Corps and other E&P MLPs. The strategy works. 600% 500% +378.0% 400% Price Performance (%) 300% +182.5% +131.6%…
Key Investor Considerations Management and unitholders are well aligned High quality, long lived reserves Asset base generates stable cash flow Multi-year hedge program mitigates commodity risk Geographic and commodity…
Q&A 26
Appendix 27
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…
Where Are MLPs Today MLPs remain attractive for three key reasons 1) Attractive valuations Still within historical average yields and yield spreads Still within historical averages EV/EBITDA and Price/DCF multiples Attractive to…
MLP Yield Spreads Still at Attractive Levels AMZ MLP Index Spread Over 10-Year Treasury AMZ MLP Index Spread to S&P REIT Index 1,400 Current Spread 301bps 1,200 Historical Average: 168bps 1,000 MLPs currently at 70bps above…
Current Yields Across MLP Segments Current Yields 25.0% 22.1% 20.0% 17.4% 14.8% 15.0% 9.4% 7.8% 10.3% 11.1% 10.0% 9.0% 7.9% 6.3% 7.9% 5.8% 6.5% 7.5% 7.6% 6.8% 5.0% 3.2% 4.5% 4.6% 3.9% 2.7% 0.0% Public GP…
South Texas Acquired properties from Lewis Energy in July 2008 Webb County, TX and July 2009 Most of the South Texas properties are located in two fields Gold River North Field (Webb County, TX) Sun TSH Field (La Salle County, TX)…
Williston Basin Located in North Dakota and Montana Williston Basin properties include: Horse Creek, Charlson Madison Unit, Cedar Creek MT, Lookout Butte East, Pine, Beaver Creek and others Bakken activity began in 2011.…
Mississippi Acquired producing assets in Mississippi, Texas and New Mexico in May 2010 Inventory of PDNP opportunities and recompletions designed to maintain production in 2012 Majority of production comes from Parker Creek Field…
Arkoma Basin Arkoma properties include royalty interest and non-operated working interest properties Royalty interest properties include interests in over 1,700 wells in Arkansas, Texas and Oklahoma 10,300 unleased mineral acres…
Senior Notes Transaction Overview Sources & Uses of Funds ( in millions) Sources of Funds Amount Uses of Funds Amount Senior Notes Issuance 347 Reduce Revolver Borrowings 283 Repay Term Loan 57 Fees and Expenses 8 Total Sources…
Case 1 - E&P MLPs after Hedges Roll Off E&P MLP peer hedge books are supporting their EBITDA due to higher than market gas hedges and will require prices to increase to a much higher level in the outer years to maintain current cash…
Case 2 - E&P MLPs after Hedges Roll Off E&P MLP peer hedge books are supporting their EBITDA due to higher than market gas hedges and will require prices to increase to a much higher level in the outer years to maintain current cash…
Reconciliation to EBITDA ( in thousands) 2011 Net income (loss) attributable to Vanguard unitholders 62,063 Net income attributable to non-controlling interest 26,067 Net income (loss) 88,130 Plus: Interest expense, including…
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