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RBC CAPITAL MARKETS MLP CONFERENCE – Vanguard Natural Resources, Llc

Vanguard Natural Resources, Llc · Nov 20, 2009 · 23 slides

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Slides

  1. RBC CAPITAL MARKETS MLP CONFERENCE – Vanguard Natural Resources, Llc – slide 1
    RBC Capital Markets MLP Conference Irving, Texas November 19 & 20, 2009
  2. RBC CAPITAL MARKETS MLP CONFERENCE – Vanguard Natural Resources, Llc – slide 2
    Overview of Vanguard Natural Resources Upstream Energy LLC, headquartered in Houston Initial Public Offering VNR NYSE Arca October 2007 Moved to NYSE Big Board in May 2009 Three strategic acquisitions totaling 180MM expanded…
  3. RBC CAPITAL MARKETS MLP CONFERENCE – Vanguard Natural Resources, Llc – slide 3
    Company Profile Company Profile EQUITY MARKET CAP (1) 287 million TOTAL DEBT 124 million LESS CASH 2 million ENTERPRISE VALUE 409 million (1) Market data as of November 12, 2009; includes 420m Class B units Positive Cash…
  4. RBC CAPITAL MARKETS MLP CONFERENCE – Vanguard Natural Resources, Llc – slide 4
    Key Investor Considerations High quality, long lived reserves Asset base generates stable cash flow Multi-year hedge program mitigates commodity risk Geographic and commodity diversity LLC structure gives unit holders a voice…
  5. RBC CAPITAL MARKETS MLP CONFERENCE – Vanguard Natural Resources, Llc – slide 5
    Appalachian Asset Profile High degree of step out development success Targeting low-risk, multiple Brushy Branch Lewis Heirs Smepa producing horizons Premium pricing due to proximity to northeastern markets: Gausdale 0.23/MMbtu…
  6. RBC CAPITAL MARKETS MLP CONFERENCE – Vanguard Natural Resources, Llc – slide 6
    Permian Basin Asset Profile Acquisition of producing assets from Apache, closed January 2008 Established Permian Basin as an operating area, approx. 50 operated wells in 7 fields Assumed hedges covering 90% of PDP production…
  7. RBC CAPITAL MARKETS MLP CONFERENCE – Vanguard Natural Resources, Llc – slide 7
    South Texas Dos Hermanos Acquisition Acquisition from Lewis Energy, closed July 2008, 53.4 million (60/40 cash and stock transaction) Lewis to operate and conduct PUD drilling program through 2013 (6-8 wells per year) Assumed…
  8. RBC CAPITAL MARKETS MLP CONFERENCE – Vanguard Natural Resources, Llc – slide 8
    South Texas Sun TSH Acquisition Acquisition from Lewis Energy, closed August, 2009 for 52.3 million, all cash funded with proceeds of equity offering Lewis to operate and conduct PUD drilling program through 2015 (7 wells per…
  9. RBC CAPITAL MARKETS MLP CONFERENCE – Vanguard Natural Resources, Llc – slide 9
    VNR Assets Appalachian Reserves Proved Reserves: 55 Bcfe(1) 96% Gas, 70% PDP 10,200 Mcfe/d current net production Permian Basin Reserves Gross PUD and probable locations: 435 Proved Reserves: 3.6 MMboe (1) 87% oil and 87% PDP…
  10. RBC CAPITAL MARKETS MLP CONFERENCE – Vanguard Natural Resources, Llc – slide 10
    Vanguard Reserve Profile BY RESERVE CATEGORY: BY OIL, GAS AND NGL: 20.7 , 38.1 , 15% 28% PDP GAS, BCF 22.2 , PDNP 17% OIL, BCFE 92.5 , PUD 91.0 , NGL, BCFE 3.3 , 3% 69% 68% BY AREA: Appalachia 57.5 , 43% 54.9 , 41%…
  11. RBC CAPITAL MARKETS MLP CONFERENCE – Vanguard Natural Resources, Llc – slide 11
    VNR Reserve Growth 160 140 134 120 109 Reserves, Bcfe 100 80 67 60 40 20 0 12/31/07* 12/31/08* 6/30/09** * Netherland, Sewell & Associates reserve report ** Internal reserve report including Sun TSH…
  12. RBC CAPITAL MARKETS MLP CONFERENCE – Vanguard Natural Resources, Llc – slide 12
    VNR Production Growth Average Daily Production, MMcfed 25 18.8 - 19.8 20 16.2 15 11.6 10 5 0 2007 2008 2009E 13
  13. RBC CAPITAL MARKETS MLP CONFERENCE – Vanguard Natural Resources, Llc – slide 13
    Advantages of Vanguards LLC Structure LLC Partnership structure results in lower cost of capital No entity level income tax Tax Shield minimum 60% of distributions through 2011 will be tax deferred (2007 & 2008 -100%) Unit holders…
  14. RBC CAPITAL MARKETS MLP CONFERENCE – Vanguard Natural Resources, Llc – slide 14
    FINANCIAL OVERVIEW 15
  15. RBC CAPITAL MARKETS MLP CONFERENCE – Vanguard Natural Resources, Llc – slide 15
    Risk Management Significant percentage of expected natural gas production (total proved) through 2011 is hedged via a combination of swaps, collars and puts at a weighted average floor price of 8.18 per MMBtu: 2009 2010 2011 %…
  16. RBC CAPITAL MARKETS MLP CONFERENCE – Vanguard Natural Resources, Llc – slide 16
    Cash Distribution Coverage for 2009 Natural Gas Prices (/MMbtu) 3.00 4.00 5.00 6.00 7.00 30.00 1.80x 1.74x 1.68x 1.62x 1.56x Crude Oil Prices WTI 40.00 1.81x 1.75x 1.70x 1.64x 1.58x (/Barrel) 50.00 1.83x 1.77x 1.71x 1.65x…
  17. RBC CAPITAL MARKETS MLP CONFERENCE – Vanguard Natural Resources, Llc – slide 17
    2009 Calendar Year Guidance Pre Acquisition (1) Post Acquisition (1) TOTAL PRODUCTION (MMCFE) 6,442 - 6,785 6,785 7,100 AVERAGE DAILY PRODUCTION MCFE/D 17,650 - 18,590 18,815 19,845 LEASE OPERATING EXPENSES (000S) 10,500 - 11,000…
  18. RBC CAPITAL MARKETS MLP CONFERENCE – Vanguard Natural Resources, Llc – slide 18
    Comparable Company Distribution Yields CURRENT DISTRIBUTION YIELDS OF PEER GROUP 2.00 2.52 2.00 3.02 2.08 2.15 *CRT Canadian Royalty Trusts (AAV, BTE, ERF, HTE, PGH, PWE, PVX) **Yield calculated using the closing unit price…
  19. RBC CAPITAL MARKETS MLP CONFERENCE – Vanguard Natural Resources, Llc – slide 19
    MLP Yields by Subsector 50% Average Yield 2004 2005 2006 2007 2008 Current Liquids T&S 6.5% 6.2% 6.8% 6.1% 8.3% 7.7% Natural Gas T&S 6.8 6.4 6.7 6.1 7.8 7.6 Natural Gas G&P 6.8 5.9 6.2 5.5 12.1 9.9 Propane 8.3 8.1 8.2 7.5 9.8 8.4…
  20. RBC CAPITAL MARKETS MLP CONFERENCE – Vanguard Natural Resources, Llc – slide 20
    21 (50.0%) (25.0%) 0.0% 25.0% 50.0% 75.0% 100.0% 125.0% 150.0% 175.0% 200.0% 225.0% 250.0% 275.0% SGLP 251.2% CQP 236.4% MWE 196.2% VNR 195.1% DPM 169.9% NGLS 157.2% RGNC 133.2% WPZ 117.3% Note: Market data…
  21. RBC CAPITAL MARKETS MLP CONFERENCE – Vanguard Natural Resources, Llc – slide 21
    Existing Debt Summary ( in millions) June 30, 2009 Amended Facility Size 400 400 Borrowing Base 154 175 Amount Outstanding 132.5 129 Borrowing Availability 21.5 46 Maturity Date March 31, 2011 October 1, 2012 Interest Rate…
  22. RBC CAPITAL MARKETS MLP CONFERENCE – Vanguard Natural Resources, Llc – slide 22
    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…
  23. RBC CAPITAL MARKETS MLP CONFERENCE – Vanguard Natural Resources, Llc – slide 23
    Key Investor Considerations High quality, long lived reserves Asset base generates stable cash flow Multi-year hedge program mitigates commodity risk Geographic and commodity diversity LLC structure gives unit holders a voice…

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