Vanguard Natural Resources LLC (Nasdaq: VNR) has entered into a definitive agreement to acquire natural gas, oil and natural gas liquids (NGLs) assets in the Piceance Basin in Colorado for a purchase price of $525 million from Bill Barrett Corp. The properties consist of approximately 12,000 net acres that are currently producing approximately 67 MMcfe per day, after consideration of ethane rejection, with approximately 76% natural gas, 5% oil and 19% NGLs. The effective date of the acquisition is July 1, 2014 and the Company anticipates closing this acquisition on or before October 1, 2014.
Highlights of the acquisition include:
- Immediately accretive to distributable cash flow at closing;
- Estimated reserve life of approximately 16 years based on internally estimated proved reserves of approximately 389 Bcfe (79% proved developed and 77% natural gas);
- Current net production of approximately 67 MMcfe/d (after consideration of ethane rejection);
- An average working interest of 78% in approximately 950 producing wells, 119 recompletion projects and 94 proved undeveloped vertical drilling locations;
- Projected proved developed production three-year average annual decline rate of approximately 11%;
- LOE costs forecasted to average approximately $0.80 per Mcfe over the next three years and production and ad valorem taxes forecasted at 5% of revenue;
- Forecasted natural gas realization of 80% of NYMEX Henry Hub, oil differential of $(12.00) per Bbl off of WTI and an average NGL realization of 47% of WTI (after consideration of ethane rejection); and
- Vanguard has hedged a portion of the natural gas production through 2017 and intends to opportunistically hedge the remaining expected natural gas, oil and NGL production for 2015 through 2017.
The company intends to fund this acquisition with borrowings under its existing reserve-based credit facility. Vanguard is currently going through its semi-annual borrowing base redetermination to include the recently acquired assets in North Louisiana and East Texas and the pending Piceance assets, and expects that after closing, will have ample liquidity to continue its growth through acquisitions strategy.
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