June 25, 2012 Global Hunter Securities 100 Energy Conference NYSE: VNR
Overview of Vanguard Natural Resources Upstream oil & gas LLC, headquartered in Houston, Texas Initial Public Offering VNR October 2007 (Total Enterprise Value of 240mm) Thirteen 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 Proved Reserves: 26.5 MMBoe Williston Basin 73.2 MMBoe Proved Reserves Proved Reserves: 5.4 MMBoe 82% oil and 97% Proved 71% liquids and 88% Proved…
Diversified 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 38%…
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…
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…
Pending Woodford/Fayetteville Acquisition Woodford Shale Fayetteville Shale Operated Acreage Non-operated Acreage Assets located in the Woodford Shale and Fayetteville Shale plays Total proved reserves of 420 Bcfe (58%…
Reserve Summary Total Reserves of 420 Bcfe PDP reserves of 245 Bcfe is 58% of total reserves Additional upside of 1,100 gross wells if prices increase to 4-5 that were not allocated any value (not included in total reserves…
Woodford Shale Overview Acreage overview 66,000 net acres Operated acreage WI: 25.3% - 100.0% (average WI of 67%) Non-operated acreage WI: 0.1% - 42.7% (average WI of 11%) 90% of position is held by production Btu content ranges…
Fayetteville Shale Overview Acreage overview 5,300 net acres All non-operated Non-operated acreage WI: 0.01% - 38.85% (average WI of 6%) 70% of lease position is held by production (expirations in 2015+) Btu content ranges from…
Pro Forma Reserve Summary Total Reserves of 143 MMBoe (858 Bcfe) PDP reserves of 102 MMBoe (610 Bcfe) is 71% of total reserves Oil NGL Gas Total (MMBl) (MMBl) (Bcf) (MMBoe) PDP 39 9 324 102 PDNP 1 0 12 3 PUD 5 10 139 38 Total…
Acquisition Hedging Overview Existing natural gas hedge book currently valued at approximately 100 million At closing, we intend to restructure to cover 100% of expected proved production through 2017 at prices significantly higher…
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)…
Senior Notes Transaction Overview Sources & Uses of Funds ( in m illions) S o u rces o f F u n d s Am o u n t U ses o f F u n d s Am o u n t S enior N otes Issuance 347 R educe R evolver B orrowings 283 R epay T erm Loan 57 F ees…
Disciplined Financial Strategy Maintain conservative capital structure and sufficient liquidity Availability under Revolver at closing of Senior Notes offering of 374 million Target Debt / EBITDA of less than 2.5x provides sufficient…
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 Does not include the natural gas hedges…
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% +340.8% 400% Price Performance (%) 300% +144.2% 200%…
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…
Appendix
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…
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…
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…
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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