Vanguard Natural Resources has closed its previously announced acquisition of certain producing natural gas and oil properties in South Texas from an affiliate of Lewis Energy Group, L.P. ("Lewis") for a purchase price of $52.25 million in cash. After preliminary purchase price adjustments based on an effective date of July 1, 2009, Vanguard paid $50.5 million in cash. The purchase price was funded from borrowings under our reserve-based credit facility and proceeds from the sale of 3.5 million common units completed on August 12, 2009.
The properties acquired have total estimated proved reserves of 27 Bcfe as of July 1, 2009, of which 94% is natural gas and 70% is proved developed. Lewis will operate all of the wells acquired in this transaction. Based on the current net daily production of approximately 5,000 Mcfe, the properties have a reserve to production ratio of approximately 15 years.
Mr. Scott W. Smith, President and CEO of Vanguard commented, "We are pleased to announce the closing of this transaction with Lewis, our South Texas operating partner. These properties exemplify the characteristics we are looking for when adding assets to our portfolio. They have a low decline rate, a long productive life, and have predictable operating costs. In addition, these properties will substantially increase our production and reserves and the value of the collateral backing our reserve-based credit facility."
At closing, Vanguard assumed natural gas puts and swaps based on NYMEX pricing for approximately 61% of the estimated gas production from existing producing wells in the acquired properties for the period beginning August of 2009 through December 2010. In addition, concurrent with the execution of the purchase and sale agreement, Vanguard entered into a collar for certain volumes in 2010 and a series of collars for a substantial portion of the expected gas production for 2011 at a total cost to the Company of $3.1 million which was financed through deferred premiums. Inclusive of the hedges added, we expect that approximately 90% of the estimated gas production from existing producing wells in the acquired properties is hedged through 2011.
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