NAPTP Conference Scott W. Smith, President & CEO Richard Robert, EVP & CFO May 21, 2014
Overview of Vanguard Natural Resources Upstream oil & gas LLC, headquartered in Houston, TX; Initial Public Offering VNR October 2007 had a Total Enterprise Value of 240mm Asset Profile(2) Monthly distribution of 0.21(1) per unit…
Building Blocks of a Successful E&P MLP Experienced Management Team Extensive experience in acquisition integration, development and operation of oil and gas assets 48% Strong Credit Profile and Liquidity Distribution Not outspending…
Experienced Management Team Years of Name Title Prior Affiliations Experience Ensource Energy Scott W. Smith President and CEO The Wiser Oil Company 33 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 Basin 300MMBoe (1.8 Tcfe) proved reserves Proved Reserves: 21.2 MMBoe Proved Reserves: 3.5 MMBoe 85% oil and 96% Proved 66% gas and 34%…
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 Successful Acquisition Track Record Strong record of evaluating and integrating assets, completing over 3.4 billion since VNRs IPO in 2007 Designated business development and acquisition evaluation team We review between 125-150…
Pinedale/Jonah Acquisition a Strategy Shift Marks the first Vanguard acquisition to include a growth capital 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 strong and based on recent Ultra results and natural gas prices can achieve rates of return in excess of 25% EUR (Bcfe) 4.0 5.0 6.0 7.0 Well Cost (/MM) 22%…
Pinedale-Jonah Gas Flow Pinedale Jonah 13
An Evolving Reserve Base Acquisitions were driver of increased natural gas exposure since 2011 66% Natural gas assets are being sold for a better value than oil opportunities 34% 66% of estimated 2013 proved reserves are…
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…
Natural 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 -…
Natural 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…
Financial Overview 22
Summary Operating Performance (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 forma for exchange of…
Financial Profile ( in millions) March 31, 2014 Cash 10.0 Credit Facility 761.0 7.875% Senior Notes due 2020 550.0 Total Debt 1,311.0 Total Members' Equity (1) 1,439.1 Total Capitalization 2,750.1 Borrowing Base (2) 1,525.0…
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…
Hedges Mitigate Commodity Price Risk Approximately 75% 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 15% 75,000…
Hedges Mitigate Commodity Price Risk Approximately 85% of expected crude oil proved production hedged thru 2015 at a weighted average FLOOR price of 92.75 per barrel Use a combination of swaps, collars and three-way collars…
Mitigating Commodity Price Volatility Provides Stability to Distributions Our hedge portfolio has mitigated oil and natural gas price fluctuations as evidenced by our distribution increasing 48% since our IPO 160 16 140 14…
VNR Operating Costs versus 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% 26.5% 7.2% 25.6% 24.7% 6.8% 6.7% 24.1% 25.0%…
Risk Mitigation Acquisition Risk Measured and conservative approach to evaluating acquisitions Acquire quality assets, immediately accretive Focus on largely PDP assets with proved upside potential Commodity Risk Management seeks…
Vanguards Conservative Business Model Yields Distribution Growth Current trend of asset rationalization in E&P space is accelerating E&P companies looking to divest mature assets to fund their growth projects VNR is well positioned…
2014 Set to be an Exciting Year Pinedale acquisition closed in January Adds a growth capital component to VNRs strategy Significant amount of additional drilling locations not booked due to 5-year SEC rule Partnered with two of the…
Permian Development Opportunities Deal Pending (Vertical WB) Diamondback (Horizontal WC) 492GR/322 Net acres 7000 GR/2400 Net acres 4 Gross Wells, 20-25% WI 32-40 Gross Wells, 30-35% WI Athlon (Horizontal WC) 1040 GR/926 Net…
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…
Appendix 35
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…
High Quality Asset Base Oil Gas NGLs Total Net PV-10 Reserve Category (MMBbls) (Bcf) (MMBbls) (MMBoe) Liquids (%) ( MM) PV-10 % PDP 38.4 686.0 26.6 179.3 36% 1,790.82 78% PDNP 3.8 42.0 1.8 12.7 45% 187.38 8% PUD 8.3 465.2 21.9…
Arkoma (Woodford) OPERATIONS MAP 57.6 MMBOE Total Proved Reserves 55% proved developed 0% oil / 80% natural gas / 20% NGLs Current net production of 8.5 MBoe/d (2013Q4) 18.5 proved R/P 771 gross / 165 net producing wells…
Permian Basin 42.3 MMBOE Total Proved Reserves 84% proved developed 37% oil / 45% natural gas / 18% NGLs Current net production of 7.2 MBoe/d (2013Q4) 16.1 proved R/P OPERATIONS 1369 gross / 958 net producing wells MAP Developed…
Big Horn Basin OPERATIONS MAP 20.8 MMBOE Total Proved Reserves 96% proved developed 85% oil / 4% natural gas / 11% NGLs Current net production of 3.5 MBoe/d (2013Q4) 16.3 proved R/P 299 gross / 230 net producing wells…
Piceance Basin OPERATIONS MAP 19.0 MMBOE Total Proved Reserves 94% proved developed 4% oil / 69% natural gas / 26% NGLs Current net production of 6.1 MBoe/d (2013Q4) 8.5 proved R/P 950 gross / 200 net producing wells Developed…
Gulf Coast Basin OPERATIONS MAP 9.5 MMBOE Total Proved Reserves 92% proved developed 50% oil / 35% natural gas / 15% NGLs Current net production of 1.6 MBoe/d (2013Q4) 16.3 proved R/P 324 gross / 245 net producing wells…
Wind River Basin OPERATIONS MAP 9.1 MMBOE Total Proved Reserves 96% proved developed 16% oil / 68% natural gas / 16% NGLs Current net production of 2.4 MBoe/d (2013Q4) 10.4 proved R/P 265 gross / 216 net producing wells…
Williston Basin OPERATIONS MAP 5.8 MMBOE Total Proved Reserves 94% proved developed 90% oil / 10% natural gas / 0% NGLs Current net production of 1.4 MBoe/d (2013Q4) 11.3 proved R/P 202 gross / 84 net producing wells Developed…
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