Vanguard to acquire natural gas properties in Colorado

Vanguard Natural Resources, LLC hasannounced it has entered into a definitive agreement to acquire natural gas, oil and natural gas liquids  assets in the Piceance Basin in Colorado for a purchase price of US$ 525 million from Bill Barrett Corporation. The properties consist of approximately 12 000 net acres that are currently producing approximately 67 million ft³/d, after consideration of ethane rejection, with approximately 76% natural gas, 5% oil and 19% NGLs. The effective date of the acquisition is July 1^st, 2014 and the Company anticipates closing this acquisition on or before October 1^st, 2014.

Scott W. Smith, President and Chief Executive Officer, commented, “With this acquisition we are acquiring the balance of the working interest in properties where we first established a non-operated position in December of 2012. We will be taking over operations of 950 producing wells in a very large, prolific natural gas basin with an established infrastructure in place and multiple pipeline outlets to market our production. As the operator and majority interest owner in the assets, we can now govern the pace of development of both recompletion opportunities and development drilling projects to take advantage of positive changes in market conditions. This is an excellent addition to our Rockies natural gas platform and we look forward to continuing to grow in this area in the future.”

Richard A. Robert, Executive Vice-President and Chief Financial Officer, added, “We are anticipating significant benefits from this transaction including improved distribution coverage and accelerating our ability to resume our slow and steady distribution growth policy.”

Highlights of the acquisition include:

• Immediately accretive to distributable cash flow at closing.
• Estimated reserve life of approximately 16 years based on internally estimated proved reserves of approximately 389 billion ft³ (79% proved developed and 77% natural gas).
• Current net production of approximately 67 million ft³/d (after consideration of ethane rejection).
• An average working interest of 78% in approximately 950 producing wells, 119 recompletion projects and 94 proved undeveloped vertical drilling locations.
• Projected proved developed production three-year average annual decline rate of approximately 11%.
• LOE costs forecasted to average approximately US$ 0.80 per million ft³ over the next three years and production and ad valorem taxes forecasted at 5% of revenue.
• Forecasted natural gas realization of 80% of NYMEX Henry Hub, oil differential of US$ (12.00) per Bbl off of WTI and an average NGL realisation of 47% of WTI (after consideration of ethane rejection).
• Vanguard has hedged a portion of the natural gas production through 2017 and intends to opportunistically hedge the remaining expected natural gas, oil and NGL production for 2015 through 2017.

The Company intends to fund this acquisition with borrowings under its existing reserve-based credit facility. Vanguard is currently going through its semi-annual borrowing base redetermination to include the recently acquired assets in North Louisiana and East Texas and the pending Piceance assets, and expects that after closing, will have ample liquidity to continue its growth through acquisitions strategy.

Adapted from press release by Hannah Priestley-Eaton

Read the article online at: https://www.worldpipelines.com/business-news/16092014/vanguard-to-acquire-natural-gas-properties-in-colorado/