Vanguard Natural Resources has consummated its previously announced acquisition of oil and natural gas producing properties from Apache Corporation for an adjusted purchase price of $73.4 million, subject to customary post-closing adjustments. The effective date of the acquisition was October 1, 2007.
The acquired properties are all located in the Permian Basin of West Texas and Southeast New Mexico, and include an estimated proved reserves of 4.4 MMboe, 90% proved developed, 83% oil, reserve to production ration of approximately 15 years, and approximately 800 BOEPD of net daily production.
Scott W. Smith, President and Chief Executive Officer, commented, "We are excited to get this first major acquisition closed and are looking forward to building upon this asset base by expanding our interests in the Permian Basin. As part of this transaction, we have assumed oil hedges covering approximately 90% of the estimated proved developed producing oil reserves through 2011 at a weighted average price of $87.29. This hedging strategy ensures a stable cash flow from these assets and we intend to recommend an increase in the quarterly distribution rate at our next Board meeting at the end of February."
This acquisition was funded with borrowings under Vanguard’s existing credit facility. After consideration of this acquisition, borrowings under the credit facility total $100.5 million. In conjunction with this new borrowing, the Company entered into interest rate swaps which effectively fix the LIBOR rate at 3.0% on $30 million of borrowings. The Company had entered into an interest rate swap in December which fixed the LIBOR rate at 3.875% on $20 million of its borrowings which results in a weighted average LIBOR rate of 3.35% on $50 million of borrowings. Depending on the percent utilization of its borrowing base, an additional margin of between 1.0% and 1.75% is added to the LIBOR rate to arrive at the Company's entire interest rate cost.
Vanguard will be paying its first quarterly distribution to holders of record as of February 7, 2008 on February 14, 2008. It is important to note that the initial quarterly distribution rate of $.425 per unit ($1.70 annually) will be pro-rated from the closing of the initial public offering on October 29, 2007 through December 31, 2007, which results in a distribution of $0.291 per unit.
Vanguard Natural Resources, LLC is a partnership focused on acquiring, producing and developing oil and natural gas properties.
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