Capital Link MLP Forum March 6, 2014 Richard Robert, EVP & CFO
Overview of Vanguard Natural Resources Upstream oil & gas LLC, headquartered in Houston, TX; Initial Public Offering VNR October 2007 had a Asset Profile(2) Total Enterprise Value of 240mm Monthly distribution of 0.21(1) per unit…
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, 1.8 Tcfe total proved reserves, 60% proved developed producing1 Low…
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 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 6
Geographically Diversified Reserve Base Core Areas Overview Big Horn Basin Powder River Proved Reserves: 21.2 MMBoe Proved Reserves: 3.5 MMBoe 85% oil and 96% Proved 100% natural gas and 86% 300MMBoe (1.8 Tcfe) proved reserves Green…
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 substantially more than the U.S.…
Our Business Strategies Acquire and produce mature, long lived oil and gas properties which are nearly fully developed and have established, predictable production profiles We have a diversified asset base, geographically, by…
Pinedale/Jonah Acquisition a Strategy Shift Marks the first Vanguard acquisition to include a growth capex component Management determined this was the best direction for Companys growth and cash flow stability because the deal…
Pinedale-Jonah Acquisition Pinedale and Jonah Fields in Green River Basin Wyoming Pinedale Jonah Natural gas and oil assets located in the Pinedale and Jonah Fields of Southwestern Wyoming in the Green River Basin Estimated…
Pinedale Well Economic Sensitivities Pinedale well economics are very strong and based on recent results and natural gas prices can achieve rates of return in excess of 50%+ EUR (Bcfe) 4.0 5.0 6.0 7.0 Well Cost (/MM) 22% 37%…
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…
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 19 Source: Jefferies January 2013 IPAA luncheon…
Nat Gas Supply/Demand Fundamentals Increase of 1.5 bcf/d from previous 12 Increase of 3.0 bcf/d from previous 12 months months Production is on the rise, mainly in the Demand is expected to grow 2.5 bcf/d per Marcellus - growth 2.0…
Nat Gas Supply/Demand Fundamentals Supply plus net imports versus demand are expected to reach equilibrium by 2016 Net imports are expected to fall as LNG exports rise 21 Source: Risked Revenue Energy Associates, Economic Outlook…
Financial Overview 22
Disciplined Financial Strategy Maintain conservative capital structure and sufficient liquidity Availability as of 02/28/14 under 1.3 billion borrowing base of 367 million Target Debt / EBITDA of approximately 3.0x Active management…
Risk Mitigation Vanguard seeks to mitigate risk across all facets of its business Drilling and Operational Risk Leverage other operators expertise in certain areas Rate of return disciplined approach to project selection Drill…
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…
Different Hedging Instruments Fixed Price Swap - where we will receive a fixed-price for our production and pay a variable market price to the contract counterparty Basis Swap where we fix the price differential between the NYMEX…
Hedges Mitigate Commodity Price Risk Approximately 80% of expected natural gas proved production hedged thru 2017 at a weighted average price of 4.42 per MMBtu Primarily use NYMEX and basis swaps 100,000 4.43 4.40 75,000 15%…
Hedges Mitigate Commodity Price Risk Approximately 80% of expected crude oil proved production hedged thru 2015 at a weighted average FLOOR price of 93.07 per barrel Use a combination of swaps, collars and three-way collars…
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 90.00…
VNR Operating Costs vs Peers VNR operating costs (% of total revenue) is significantly lower than other E&P MLP peers which equates to higher CASH margins 30.0% 8.0% 7.4% 7.3% 25.8% 25.6% 6.8% 6.7% 24.4% 24.6% 25.0% 21.3%…
Summary Operating Performance (2) (3) (2) (4) (5) (6) (1) Proved reserves as of 12/31/2013 based on SEC reserve report. (2) Amounts illustrated reflect ENP and VNR proved reserves and production on a consolidated basis. Pro…
Vanguards Value Proposition Vanguard has the highest distribution growth rate since its IPO in October 2007 50% 48% 45% 8.4% 40% 35% 31% 30% 28% 8.7% 25% 8.8% 20% 18% 10.6% 15% 15% 9.1% 11% 10% 9.7% 5% 0% VNR LGCY…
Key Investor Considerations Diversified and Balanced Portfolio of High Quality, Liquids Focused Assets Long Lived, Predictable Properties with Low Decline Rates Disciplined Acquisition Strategy Active Hedging Program, which…
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