Vanguard Natural Resources has entered into a definitive agreement to acquire producing oil and gas assets in the Permian Basin for $55 million from a private seller. The properties to be acquired have estimated total proved reserves of 3.2 million barrels of oil equivalent, of which approximately 83% are oil reserves and 65% are proved developed. Current net production attributable to the assets being acquired is approximately 780 Boe/d. At closing, Vanguard will operate the majority of the producing wells located on the acquired properties. The effective date of the acquisition is October 1, 2009 and the Company anticipates closing this acquisition during December 2009.
Scott W. Smith, President and Chief Executive Officer, commented, "The assets being acquired in this transaction are an excellent addition to our existing Permian Basin operating platform. As the operator of the assets, we have plans for a development drilling program over the next several years that should maintain our production rates at or above current levels for these properties. These assets are primarily oil production and with the hedges we contemplate putting in place upon closing the acquisition, this acquisition should be a major contributor to our cash flow next year and for several years thereafter."
After closing this transaction, management intends to recommend to the Company's Board of Directors an increase in the quarterly distribution rate for the fourth quarter 2009 distribution payable on February 14, 2010. The Company is currently distributing $0.50 per quarter ($2.00 annualized).
The Company intends to fund this acquisition with borrowings under its existing reserve-based credit facility. Vanguard has requested that the banks perform an interim borrowing base redetermination to include the properties from this acquisition. We anticipate an increase to the current borrowing base of $170 million to take into account the additional value of the assets being acquired.
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