Vanguard to Purchase Shale Assets in Arkoma Basin
Vanguard Natural Resources, LLC has entered into a definitive agreement to acquire natural gas and liquids assets in the Woodford Shale and Fayetteville Shale of the Arkoma Basin for a purchase price of $445 million from Antero Resources. The effective date of the acquisition is April 1, 2012 and the Company anticipates closing this acquisition on or before June 29, 2012.
Scott W. Smith, President and Chief Executive Officer, commented, "As we stated on our last conference call, we believe it’s a great time to purchase natural gas assets and we believe this transaction will prove to be an excellent addition to our portfolio. This acquisition is primarily natural gas with some associated liquids and has an existing hedge book that will allow us to achieve above market pricing for the next several years. With this acquisition, we have established a new operating area which we believe has potential for future growth through other acquisitions as well as development drilling as natural gas prices improve."
Significant benefits expected from the acquisition:
Immediately accretive to distributable cash flow;
- Proved reserves of approximately 420 Bcfe (58% proved developed and 82% natural gas);
- Reserve to production ratio of approximately 15 years;
- Current net production of approximately 76 MMcfe/d (91% natural gas) from 833 gross wells (134 producing wells to be operated by Vanguard in the Woodford Shale);
- Approximately 66,000 net acres in the Woodford Shale play and 5,300 net acres in the Fayetteville Shale play;
- Approximately 180 proved drilling locations with an average 22.5% working interest that are expected to generate superior returns even in a low gas price environment. We have also identified an additional 1,100 future proved drilling locations on acreage that is held by production that can be developed should natural gas prices return to the $4-$5 range; and
- Existing natural gas hedge book valued at approximately $100 million which at closing we intend to restructure to cover 100% of expected proved production through 2017 at prices significantly higher than current market.
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 and anticipate an increase of approximately $300 million to the current borrowing base to take into account the additional value of the assets being acquired. Pro forma for the borrowing base increase, the Company expects to have liquidity in excess of $200 million after closing.
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