Vanguard Natural Resources, LLC has entered into an agreement to acquire producing oil and natural gas properties in Texas and New Mexico for $78.3 million from Apache Corporation.
The properties to be acquired have total estimated proved reserves of 4.4 MMboe as of Oct. 1, 2007, of which approximately 83% is oil and 90% is proved developed and includes both operated and non-operated wells. Based on the current net daily production of approximately 810 BOEPD, the properties have a reserve to production ratio of approximately 15 years.
The acquisition is expected to close in the first quarter of 2008 and is subject to customary closing conditions and purchase price adjustments. At closing, Vanguard will assume WTI oil swaps for approximately 90% of the estimated 2008 through 2011 oil production which effectively fixes the sales price on that portion of the production at a weighted average price of $87.29 per barrel. Vanguard will finance this acquisition with borrowings under its existing credit facility.
After closing, management will review with the board of directors the impact of this acquisition on distributable cash flows and anticipates recommending an increase in the quarterly distribution rate beginning with the distribution for the first quarter of 2008 which is payable in May of 2008. In addition, the Company affirms that it will be paying its first quarterly distribution of $0.425 ($1.70 annually) per unit on February 14, 2008 to holders of record on February 7, 2008. However, it is important to note that this distribution will be prorated from the closing of the initial public offering of October 29, 2007 through December 31, 2007 which results in a distribution of $0.291 per unit.
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