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Vanguard Natural Resources Reports Third Quarter 2012 Results

Vanguard Natural Resources, LLC (NYSE:VNR) ("Vanguard" or "the Company") today reported financial and operational results for the quarter ended September 30, 2012.

Scott W. Smith, President and CEO, commented, “With the announcement of our agreement for the acquisition of natural gas and natural gas liquids properties in Colorado and Wyoming from Bill Barrett Corporation, we are on track to invest over $800 million in oil and gas assets in 2012. These acquisitions will drive our production and distribution growth as we head into 2013.”

Selected Financial Information

A summary of selected financial information follows. For consolidated financial statements, please see accompanying tables.

        Three Months Ended         Nine Months Ended
September 30, September 30,
2012         2011 2012         2011
($ in thousands, except per unit data)
Production (Boe/d) (1) 24,367 13,371 16,786 13,312
Oil, natural gas and natural gas liquids sales (1) $ 78,871 $ 74,429 $ 228,029 $ 226,838
Realized gain (loss) on commodity derivative contracts (1) $ 318 $ 1,902 $ (756 ) $ 4,474
Unrealized gain (loss) on commodity derivative contracts (1) $ (51,332 ) $

109,639

$ 9,243 $ 68,625
Operating expenses (1) $ 26,567 $ 21,923 $ 75,918 $ 63,002
Selling, general and administrative expenses (1) $ 5,499 $ 6,493 $ 15,298 $ 18,713
Depreciation, depletion, amortization, and accretion (1) $ 31,245 $ 21,419 $ 73,897 $ 62,797
Impairment of oil and natural gas properties $ 18,029 $ 18,029
Net Income (Loss) attributable to Vanguard unitholders (1) $ (68,727 ) $ 75,884 $ 32,696 $ 77,271
Adjusted Net Income attributable to Vanguard unitholders (2) $ 17,932 $ 14,137 $ 48,153 $ 46,472
Adjusted Net Income per unit attributable to Vanguard unitholders (2) $ 0.34 $ 0.47 $ 0.92 $ 1.54
Adjusted EBITDA attributable to Vanguard unitholders (2) $ 66,277 $ 37,028 $ 163,965 $ 111,105
Interest expense, including realized losses on interest rate derivative contracts (1) $ 12,857 $ 8,173 $ 29,158 $ 23,306
Drilling, capital workover and recompletion expenditures (1) $ 16,925 $ 15,000 $ 40,285 $ 23,729
Distributable Cash Flow (2) $ 36,640 $ 19,029 $ 100,044 $ 72,999
Distributable Cash Flow per unit (2) $ 0.67 $ 0.63 $ 1.89 $ 2.42
(1)       The operating results and production of the subsidiaries we acquired in the ENP Purchase through the date of the completion of the ENP Merger on December 1, 2011 were subject to a 53.4% non-controlling interest.
(2) Non-GAAP financial measures. Please see Adjusted Net Income, Adjusted EBITDA and Distributable Cash Flow tables at the end of this press release for a reconciliation of these measures to their nearest comparable GAAP measure.

Proved Reserves

Total proved oil and natural gas reserves at September 30, 2012 were 138.6 million barrels of oil equivalent, consisting of 62.7 million barrels of crude oil, condensate, and natural gas liquids and 455.4 billion cubic feet of natural gas. Natural gas reserves accounted for 55% of total proved reserves. Sixty nine percent of our total reserves are proved developed.

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