Vanguard Natural Resources reported financial and operational results for the full year and fourth quarter ended December 31, 2009 and provided financial and operational guidance for 2010.
Mr. Scott W. Smith, President and CEO, commented, "In the face of a very challenging environment for the domestic oil and gas sector and the overall economy, Vanguard achieved excellent results on behalf of its unitholders in 2009. During the year we successfully closed two accretive acquisitions in our core operating areas, both of which were funded primarily with proceeds from equity offerings. With these acquisitions in place, we were pleased to announce in January 2010 the 5% increase in our quarterly distribution to $0.525 or $2.10 on an annual basis. Looking forward, we feel well positioned to continue the growth we saw last year as we currently have ample liquidity on our credit facility and access to the capital markets to help fund the acquisition opportunities we believe will be available during the year."
Full Year 2009 Highlights:
Fourth Quarter 2009 Highlights:
Year-End 2009 Proved Reserves
As provided by our outside reserve engineering firms, Vanguard's year-end 2009 proved reserves consist of 142.9 Bcfe, 32% more than the 2008 year-end reserves of 108.5 Bcfe. Of these proven reserves, 68% are proved developed. During 2009, Vanguard replaced 571% of its production, primarily with reserves added through acquisitions. Vanguard added 74.7 Bcfe through acquisitions and 3.6 Bcfe through other reserve adds, while price revisions, performance revisions and production reduced proved reserves by 43.9 Bcfe. Vanguard's proved reserves are 58% natural gas, 27% crude oil and 15% natural gas liquids.
For year-end 2009, new Securities and Exchange Commission (SEC) rules require that the value of proved reserves be based on the unweighted arithmetic average of the first-day-of-the-month commodity prices over the preceding 12-month period (the "12-month average price") rather than the previous method which required the reserve calculation to be computed using end-of-period spot prices (both methods holding pricing constant). The 12-month average price for natural gas and oil is $3.87 per million British thermal units (MMBtu) and $61.04 per barrel of crude oil, compared to year-end 2009 spot prices of $5.79 per MMBtu and $79.39 per barrel of crude oil. The SEC's new pricing requirements negatively affected the volume of reportable proved reserves and the estimated future net cash flows from the proved reserves as there were lower natural gas and oil prices during the first half of 2009. The Company believes a reserve valuation which incorporates forward market pricing over the long term better reflects the current value of its proved reserves when compared to valuations arrived at using a constant pricing model.
On February 12, 2010, the Company paid its 2009 fourth-quarter cash distribution of $0.525 per unit to its unit holders of record. This quarterly distribution payment was an increase of $0.025 per unit over the amount distributed for the third quarter of 2009 and represented an increase of $0.100 per unit, or 24%, over the $0.425 distribution initially set when our initial public offering was completed on October 29, 2007.
Our capital expenditures were $109.3 million in the year ended December 31, 2009 compared to $119.5 million for the year ended December 31, 2008. The expenditures included $103.9 million and $100.7 million in 2009 and 2008, respectively, for the acquisition of natural gas and oil properties in the Permian Basin and South Texas. It also included $5.0 million for the drilling and development of natural gas and oil properties as compared to $18.2 million for the year ended December 31, 2008. We currently anticipate a capital budget for 2010 of between $12.5 million and $13.5 million, which consists of a new well drilling program and recompletions and workovers of existing wells. All capital expenditures are expected to be funded through cash from operations.
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