October 2012 200mm Senior Notes Add-on Offering NYSE: VNR
Offering Summary of Proposed Notes Issuers Vanguard Natural Resources, LLC and VNR Finance Corp. (the Issuers) Issue 200 million add-on to existing 7.875% Senior Notes due 2020 (the Notes) Maturity April 1, 2020 Coupon 7.875%…
Management Presenter Richard A. Robert EVP and CFO 4
Transaction Overview Sources ( in m illions) As Adjusted Capitalization As of June 30, 2012 (1) Add-on to 7.875% Notes 200.0 ( in millions) Actual Adj. As Adj. Cash and Cash Equivalents - - - (2) First Lien Credit Agreement 551.7…
Organizational Structure NYSE: VNR Existing Current 350mm Senior Notes 975mm Borrowing + Base Contemplated Add-on Revolver 200mm Senior Notes The Senior Notes will benefit from a guarantee from all wholly-owned…
Overview of Vanguard Natural Resources Upstream oil & gas LLC, headquartered in Houston, Texas Initial Public Offering VNR October 2007 (Total Enterprise Value of 240mm) Fifteen strategic acquisitions totaling 2.1bn expanded…
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 Proved Reserves: 24.0 MMBoe 136.2 MMBoe proved reserves Proved Reserves: 5.8 MMBoe 85% oil and 96% Proved 93% oil and 95% Proved 54% gas 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…
Our Successful Acquisition Track Record We acquire developed, proved properties in established oil and gas basins We review between 125-150 and evaluate approximately 50 acquisition candidates each year Adj. Effective Purchase…
Arkoma Basin Acquisition Woodford Shale Fayetteville Shale Operated Acreage Non-operated Acreage Assets located in the Woodford Shale and Fayetteville Shale plays Total proved reserves of 402 Bcfe (57% PDP) Current net…
Pro Forma Reserve Summary Total Proved Reserves of 136.2 MMBoe (817 Bcfe) PDP reserves of 95 MMBoe (570 Bcfe) is 69% of total Proved Reserves Oil NGL Gas Total (MMBl) (MMBl) (Bcf) (MMBoe) PDP 37 9 291 95 PDNP 2 0 11 4 PUD 5 10…
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…
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 High Quality, Low 136.2 MMBoe total proved reserves, 72% proved developed and 15…
Disciplined Financial Strategy Maintain conservative capital structure and sufficient liquidity Availability under Revolver as of 10/1/2012 of 405 million, pro forma for September follow-on offering Target Debt / EBITDA of less than…
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 98.49 100.00 92.82 92.27 93.42…
Hedges Mitigate Commodity Price Risk More than 80% of expected crude oil proved production hedged thru 2014 at a weighted average FLOOR price of 91.18 per barrel Use a combination of swaps, collars and three-way collars 3,500…
Hedges Mitigate Commodity Price Risk Three-way collars make up a large component of Vanguards oil hedge portfolio and allow for significant upside potential 1,400 135.00 124.53 1,200 120.00 1,000 107.94 108.86 104.23…
Hedges Mitigate Commodity Price Risk Approximately 85% of expected natural gas proved production hedged thru the first half of 2017 at a weighted average floor price of 5.11 per MMBtu Primarily use NYMEX and basis swaps 30,000…
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. 500% 400% 390.5% 300% Price Performance (%) 200% 179.4% 129.6%…
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…
Robust Asset Coverage PV-10 Value and Commodity Hedges NYMEX Strip Case (1)(2) Total Debt as adjusted for Senior Notes(3) Total PV-10 Value (mm) VNR PV-10 Asset Value (mm) 3,600 PDP Value 1,340 2,668 PDNP Value 985 2,533 135…
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…
Q&A
Appendix
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…
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…
Reconciliation to EBITDA LTM at ( in millions) 2011 6/30/2012 6/30/2011 6/30/2012 Net income attributable to Vanguard unitholders 62.1 101.4 1.4 162.1 Net income attributable to non-controlling interest 26.1 0.0 0.5 25.5 Net income…
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