Vanguard Natural Resources LLC (Nasdaq: VNR) has announced that on September 30, 2014 it consummated the previously announced acquisition of natural gas and liquids assets in the Piceance Basin in Colorado from Bill Barrett Corp. for an adjusted purchase price of $508.7 million, subject to customary final post-closing adjustments. The effective date of the acquisition is July 1, 2014. The debt financing for the acquisition will be included in the company’s September 30, 2014 balance sheet; however, the beneficial impact of the acquisition will not be reflected in the company’s results of operations until the fourth quarter of 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, oil and NGL production through 2017 and intends to continue to opportunistically hedge the remaining expected production for 2015 through 2017.

The company funded this acquisition with borrowings under its existing reserve-based credit facility. As anticipated, Vanguard’s borrowing base was increased from $1.525 billion to $2.0 billion in connection with a borrowing base redetermination to include the properties from this acquisition and the recently acquired assets in North Louisiana and East Texas. As of September 30, 2014, Houston-based Vanguard has more than $620 million in liquidity to continue its growth through acquisitions strategy.