Vanguard Natural Resources, LLC Announces Common Unit Buyback Program and Provides Estimate of 2015 Distribution Coverage Sensitivities

HOUSTON--()--Vanguard Natural Resources, LLC (NASDAQ: VNR) (“Vanguard” or “the Company”) announced today that due to overall market conditions and the current price of the Company’s common units, the Company’s Board of Directors authorized a $10 million dollar common unit buyback program. The program was approved for an initial three month period which authorizes the Company to make open market purchases pursuant to the Securities and Exchange Commission guidelines of Rule 10B-18. The Company intends to hold the common units to fund the Company’s long-term incentive plan as directed by the Compensation Committee.

Executive Vice-President & CFO, Richard A. Robert commented today on the stock price fluctuations in the market place stating, “Companies in the energy sector as a whole and particularly the upstream MLP space have experienced large declines in stock price within the last 30 days in tandem with declines in crude oil prices. While Vanguard has experienced an approximate 24% drop in the unit price in the last 30 days we felt it is important to remind our investor base the risk mitigation strategies Vanguard employs to protect cash flow and maintain the monthly cash distributions to our investors which currently yields 11.4% on an annualized basis. These strategies include:

  • Commodity Price Hedging: A key piece of Vanguard’s business strategy is to put hedges in place to lock in stable cash flow during commodity price fluctuations. Inclusive of the anticipated production increases related to our recently acquired assets and estimated capital spending in future years, Vanguard’s estimated hedge profile is as follows:
    2015E     2016E     2017E
Oil Production Hedged:
% Hedged 70% 31% 2%
Weighted Average Floor Price ($/Bbl) $91.95 $90.60 $86.60
 
Natural Gas Production Hedged:
% Hedged 77% 59% 33%
Weighted Average Floor Price ($/MMBtu) $4.35 $4.41 $4.26
 
  • Geographic Diversity: We own mature, long-life producing properties and reserves located in nine different operating basins.
  • Commodity Diversity: Our anticipated production mix for 2015 is 70% natural gas, 15% oil and 15% natural gas liquids.
  • Interest Rate Mitigation: We have reduced our interest rate risk by entering into $360 million dollars of LIBOR swaps with varying maturities in 2016 which effectively converts floating rate debt into fixed rate debt for the duration of the swap. In addition, another $550 million dollars of our debt is public bonds which carry a fixed interest rate through their maturity in April 2020.

When taking all of these and other risk mitigation strategies that we employ into account, we generate a cash flow stream that is less susceptible to changes in commodity prices. Our ability to generate enough distributable cash flow to cover our monthly distribution on an annual basis is one of our highest priorities and of paramount importance to our equity investors. As such, we are providing a distribution coverage table which reflects our best estimate of our annual distribution coverage for 2015 based on varying oil and natural gas prices.

Estimated 2015 Distribution Coverage Sensitivity Matrix

   

 

Natural Gas Prices ($/Mcf)

Oil Prices ($/Bbl)   $2.50     $3.00     $3.50     $4.00     $4.50
$70.00 0.80x 0.88x 0.97x 1.01x 1.07x
$75.00 0.86x 0.95x 1.03x 1.07x 1.13x
$80.00 0.88x 0.97x 1.06x 1.09x 1.16x
$85.00 0.90x 0.99x 1.08x 1.11x 1.17x
$90.00 0.92x 1.01x 1.10x 1.13x 1.19x
$95.00 0.97x 1.06x 1.15x 1.18x 1.24x
$100.00 1.00x 1.09x 1.18x 1.21x 1.27x
 

The following major assumptions were made in calculating the above chart illustration:

        1.   A preliminary 2015 capital expenditure program of $215 million comprised of $156 million of maintenance capital and $59 million of growth capital.
2. Average 2015 NGL basket price of $24.44 per barrel (Ethane $0.24/gallon, Propane $0.91/gallon, Normal Butane $1.10/gallon, Iso-Butane $1.13/gallon and Natural Gasoline $1.73/gallon)
3. Assumes a 25 basis point LIBOR interest rate increase effective July 1, 2015

Finally, it is important to note that we have the flexibility to reduce our capital spending at any time should unfavorable market conditions exist. It is our intention to adhere to strict profitability guidelines in approving capital and should commodity prices fall to uneconomic levels for an extended period of time we will reduce our capital budget accordingly which would serve to increase our distributable cash flow in the near term.

We hope this information is helpful to the investing public.

About Vanguard Natural Resources, LLC

Vanguard Natural Resources, LLC is a publicly traded limited liability company focused on the acquisition, production and development of oil and natural gas properties. Vanguard's assets consist primarily of producing and non-producing oil and natural gas reserves located in the Green River Basin in Wyoming, the Arkoma Basin in Arkansas and Oklahoma, the Permian Basin in West Texas and New Mexico, the Big Horn Basin in Wyoming and Montana, the Piceance Basin in Colorado, the Gulf Coast Basin in Texas, Louisiana and Mississippi, the Williston Basin in North Dakota and Montana, the Wind River Basin in Wyoming and the Powder River Basin in Wyoming. More information on Vanguard can be found at www.vnrllc.com.

Forward-Looking Statements

We make statements in this news release that are considered forward-looking statements within the meaning of the Securities Exchange Act of 1934. These forward-looking statements are largely based on our expectations, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors. Although we believe such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control. In addition, management's assumptions about future events may prove to be inaccurate. Management cautions all readers that the forward-looking statements contained in this news release are not guarantees of future performance, and we cannot assure you that such statements will be realized or the forward-looking events and circumstances will occur. Actual results may differ materially from those anticipated or implied in the forward-looking statements due to factors listed in the "Risk Factors" section in our SEC filings and elsewhere in those filings. All forward-looking statements speak only as of the date of this news release. We do not intend to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise.

Contacts

Vanguard Natural Resources, LLC
Lisa Godfrey, 832-327-2234
Director, Investor Relations
investorrelations@vnrllc.com

Contacts

Vanguard Natural Resources, LLC
Lisa Godfrey, 832-327-2234
Director, Investor Relations
investorrelations@vnrllc.com