Vanguard Resets Borrowing Base to $240MM
Vanguard Natural Resources reported that the borrowing base on its reserve-based credit facility has been reset to $240 million in conjunction with its semi-annual redetermination as per the terms of the credit agreement and included the impact of the acquisition of oil properties from a private seller which closed on May 20, 2010. The borrowing base was previously set at $195 million. In addition, two key covenant limitations on commodity price hedging were amended.
Mr. Richard Robert, Executive Vice President and CFO, commented, "We are pleased to have this redetermination completed and appreciate the support of our bank group in getting our credit facility increased with the addition of our recent acquisition. As we stated on our first quarter earnings press release and conference call, we had anticipated a reduction in our borrowing base given the expiration of some of our hedges and the decline in commodity prices since our last semi-annual redetermination. However, with the recent acquisition we are pleased to report an increase to the borrowing base and two key amendments made to the credit facility. Under the terms of the amended credit facility, the Company may enter into commodity price hedges with respect to the acquired production upon signing a purchase and sale agreement. The Company will no longer have to wait until the acquisition is closed to enter into commodity price hedges; we can now lock in the expected cash flow from the acquisition and not have to bear the risk that commodity prices fall between signing the purchase and sale agreement and closing the acquisition. In addition, the amended credit agreement allows the Company to hedge up to 85% of the projected oil and gas production from total proved reserves. Previously, our hedging was limited to 95% of the projected oil and gas production from proved developed producing reserves. As a result, in addition to hedging our cash flow on existing producing wells, we can now hedge certain quantities of oil and natural gas that we anticipate producing from our drilling activities. In essence, we can now fix the commodity price that we will earn from anticipated production from our drilling activities which should provide for a more predictable cash flow in the future."