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TheStreet Open House

Vanguard Natural Resources Reports Record Adjusted EBITDA, Production And Proved Reserves For 2012 And 2013 Guidance

Vanguard Natural Resources, LLC (NYSE: VNR) ("Vanguard" or "the Company") today reported financial and operational results for the full year and fourth quarter ended December 31, 2012.

Mr. Scott W. Smith, President and CEO, commented, “We had a very busy year in 2012 as we closed almost $800 million in acquisitions and expanded our operating presence into new areas upon which we can continue to build in the future. In addition, with the announcement of the Range Permian acquisition, we are well on our way to having a successful 2013 on the acquisition front. Deal flow continues to be encouraging and with the liquidity we generated through our recent bond and equity offerings we have ample financial resources to be opportunistic. We are also proud that we delivered another year of increased distributions per unit to our unitholders and look forward to continuing this trend as we focus on growing the Company on their behalf."

Selected Financial Information

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

               

Three Months Ended December 31,

Year Ended December 31,
2012

2011 (1)

2012

2011 (1)

($ in thousands, except per unit data)
Production (BOE/d) 22,803 13,686 18,298 13,405
Oil, natural gas and natural gas liquids sales $ 82,327 $ 86,003 $ 310,356 $ 312,842
Realized gain on commodity derivative contracts $ 1,712 $ 5,038 $ 956 $ 7,205
Unrealized gain (loss) on commodity derivative contracts $ 26,647 $ (69,095 ) $ 35,890 $ (470 )
Operating expenses $ 27,817 $ 27,286 $ 103,735 $ 92,565
Selling, general and administrative expenses $ 7,168 $ 3,342 $ 22,466 $ 19,779
Depreciation, depletion, amortization, and accretion $ 30,645 $ 22,060 $ 104,542 $ 84,857
Impairment of oil and natural gas properties $ 229,693

$

-

$ 247,722

$

-

Net income (loss) attributable to Vanguard unitholders $ (201,511 ) $ (15,208 ) $ (168,815 ) $ 62,063
Adjusted net income attributable to Vanguard unitholders (2) $ 15,978 $ 27,575 $ 64,131 $ 74,046
Adjusted net income per basic unit attributable to Vanguard unitholders (2) $ 0.27 $ 0.76 $ 1.18 $ 2.33
Adjusted EBITDA attributable to Vanguard unitholders (2) $ 66,547 $ 53,498 $ 230,512 $ 164,603
Interest expense, including realized losses on interest rate derivative contracts $ 15,248 $ 8,562 $ 44,406 $ 31,868
Drilling, capital workover and recompletion expenditures $ 10,120 $ 10,367 $ 50,405 $ 34,096
Distributable cash flow (2) $ 41,179 $ 37,083 $ 141,223 $ 110,082
Distributable cash flow per basic unit (2) $ 0.70 $ 0.76 $ 2.60 $ 2.26
Distribution coverage (2)

1.15

x

1.39

x

1.08

x

1.40

x

 
(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.
 

2013 Guidance

Summary of Estimates

The following table sets forth certain estimates being used by Vanguard to model its anticipated results of operations for the fiscal year ending December 31, 2013 and includes the impact from the recently closed acquisition of natural gas and liquids properties in the Piceance Basin in Colorado and Powder River and Wind River Basins in Wyoming, but DOES NOT include the pending acquisition of properties in the Permian Basin from Range Resources Corp. ("Range Permian Acquisition") announced on February 28, 2013. These estimates do not include any additional acquisitions of oil or natural gas properties. In addition, the expectations below assume Vanguard's current capital structure and does not contemplate any future equity or high yield bond offerings. Actual results for the year ended December 31, 2012 have been provided for comparative purposes.

             
FY 2013E FY 2012
Net Production:
Oil (Bbls/d) 7,750 - 8,250 7,536
Natural gas (Mcf/d) 122,400 - 130,000 53,695
Natural gas liquids (Bbls/d) 3,200 - 3,400 1,813
Total (BOE/d) 31,350 - 33,317 18,298
 
Costs per BOE:
Lease operating expenses $8.25 - $9.25 $11.10
Production taxes (% of revenue) 8.5% - 9.5% 9.5%
G&A expenses $1.25 - $1.75 $2.34
Depreciation, depletion and amortization $12.25 - $13.25 $15.61
 
Cash Flow Calculation:
Adjusted EBITDA (1) $302,500 $230,512
Interest expense (64,000) (44,406)
Maintenance capital expenditures (2):
Operated (32,000) (16,544)
Non-operated (23,000)   (33,861)
Total maintenance capital expenditures (55,000) (50,405)
 
Distributable cash flow (3) $183,500 $141,223
 
Mid-point distributable cash flow per unit $2.69 $2.60
Mid-point distribution coverage ratio (4) 1.11x 1.08x
Mid-point adjusted net income per unit (1) $1.20 $1.18
Units outstanding (millions) 68.3 54.4
 
Assumed NYMEX Pricing (February 28, 2013) (5) : Q1 2013

Q2 - Q4 2013

FY 2012
Oil (Bbl) $94.03 $93.47 $94.19
Natural gas (MMBtu) $3.34 $3.63 $2.96
 
Average NYMEX Differentials:
Oil (Bbl) $(13.85) $(8.70) $(9.66)
Natural gas (MMBtu) $(0.85) $(0.90) $(0.55)
NGL realization of crude oil price (%) 42% 43% 48%
 
Maintenance Capital Expenditures: Q1 2013 Q2 2013   Q3 2013 Q4 2013
Operated $(5,000) $(12,500) $ (8,500 ) $ (6,000 )
Non-operated $(4,500) $(6,500) $ (3,000 ) $ (9,000 )
(1)   Adjusted EBITDA and adjusted net income (non-GAAP financial measures defined below) exclude the amortization of value on derivative contracts acquired (approximately $30.0 MM for the FY 2013).
(2) Additional detail regarding the maintenance capital breakout by quarter is listed below. Actual results for the year ended December 31, 2012 excludes the proceeds from the sale of leasehold interests.
(3) Includes $5.5 million in proceeds from the sale of leasehold interests in 2012.
(4) Assumes current monthly distribution rate of $0.2025 per unit for 2013 and no additional unit offerings.
(5) NYMEX pricing includes actual settlements for 2013.

Full Year 2012 Highlights:

  • The annualized monthly distribution of $2.43 per unit as of December 2012 represents a 5.2% increase over the annualized quarterly distribution of $2.31 per unit as of December 2011.
  • Record Adjusted EBITDA attributable to Vanguard unitholders (a non-GAAP financial measure defined below) increased 40% to $230.5 million from the $164.6 million generated in 2011.
  • Record Distributable Cash Flow attributable to Vanguard unitholders (a non-GAAP financial measure defined below) increased 28% to $141.2 million from the $110.1 million generated in 2011.
  • We reported net loss attributable to Vanguard unitholders for the year ended December 31, 2012 of $168.8 million or $(3.11) per basic unit compared to a net income of $62.1 million or $1.95 per basic unit in the year ended December 31, 2011. The 2012 results include net non-cash expenses of $232.9 million, the largest item of which is a $247.7 million impairment charge on our oil and natural gas properties. The 2011 results include non-cash expenses of $3.6 million and material transaction costs incurred on acquisitions and mergers of $2.0 million.
  • Adjusted Net Income attributable to Vanguard unitholders (a non-GAAP financial measure defined below) was $64.1 million in 2012, or $1.18 per unit, compared to Adjusted Net Income of $74.0 million, or $2.33 per unit, in 2011.
  • Reported average production of 18,298 BOE per day in 2012 was up 37% over 13,405 BOE per day produced in 2011. On a BOE basis, crude oil, natural gas and natural gas liquids (“NGLs”) accounted for 41%, 49% and 10% of our production, respectively.

During 2012 we produced 19,652 MMcf of natural gas, an increase of 89% from the 10,413 MMcf of natural gas produced in 2011, 2,758 MBbls of oil, an increase of 1% from the 2,726 MBbls of oil produced in 2011, and 664 MBbls of NGLs, an increase of 54% from the 432 MBbls of NGLs produced in 2011.

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