Vanguard Natural Resources LLC, Houston, (NYSE: VNR) has closed the acquisition of producing oil and gas assets in Mississippi, Texas and New Mexico from an undisclosed private seller for $114.6 million. The deal was originally announced for $113.1 million.
The acquired assets include estimated total proved reserves of 4.7 million barrels of oil equivalent, of which approximately 96% are oil reserves and 61% are proved developed. Production is approximately 850 barrels of oil equivalent per day.
In conjunction with the acquisition, the company has entered new oil hedges covering about 56% of the expected production from proved producing reserves through 2013 at a weighted average price of $91.70 per barrel.
Vanguard president and chief executive Scott Smith says, “This acquisition of primarily oil properties has all the attributes we are looking for…the margins associated with the oil production are extremely high due to the very low operating costs and we have an inventory of proven behind-pipe opportunities and proved undeveloped locations that we and our operating partners intend to develop over the next three to four years.”
He adds, “We…look forward to building upon the platform we now have established in Mississippi.”
The acquisition was funded with $71.5 million in net proceeds from a recent equity offering and with borrowings from the company’s existing credit facility, which currently totals $179.2 million. Vanguard expects having an amended credit facility in place by June 1, which will reflect an increase to the current $195 million borrowing base.
Jefferies & Co. analyst Subash Chandra previously valued the acquisition metrics at $4 per Mcfe for proved reserves and $22,000 per flowing Mcfe. “The deal metrics are north of both the last six-month average for oily M&A transactions of $2.96 per Mcfe and $17,900 per flowing Mcfe,” he said, “as well as Vanguard’s November 2009 Permian acquisition at $2.90 per Mcfe for proved reserves and $11,800 per flowing Mcfe.”
Vanguard has producing and nonproducing gas and oil reserves in the Appalachian Basin, the Permian Basin and South Texas.
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