Vanguard Natural Resources (VNR) to Acquire LRR Energy in $539M Deal

Vanguard Natural Resources (NASDAQ: VNR) and LRR Energy, L.P. (NYSE: LRE) announced that they have entered into a Purchase Agreement and Plan of Merger pursuant to which a subsidiary of Vanguard will merge into LRR Energy, L.P. and, at the same time, Vanguard will acquire LRE GP, LLC, the general partner of LRR Energy, L.P. (collectively, "LRR Energy", or "LRE") for total consideration of $251 million in Vanguard common units and the assumption of LRE's net debt of $288 million. As a result of the transaction, LRR Energy and its general partner will become wholly owned subsidiaries of Vanguard. The transaction, which has been approved by the boards of directors of both companies, including the Conflicts Committee of the Board of Directors of LRR Energy, will be a tax-free unit-for-unit transaction with an exchange ratio of 0.55 Vanguard common units per LRE common unit. In addition, Vanguard will acquire all of the limited liability company interests in LRE GP, LLC in exchange for 12,320 Vanguard common units. The consideration to be received by LRE unitholders is valued at $8.93 per LRR Energy common unit based on Vanguard's closing price as of April 20, 2015, representing a 13% premium to LRR Energy's closing price on April 20, 2015, and a 19% premium to LRR Energy's ten day volume weighted average price. Vanguard and LRR Energy expect the transaction to close in the third quarter of 2015. The merger is subject to customary closing conditions, including the approval of the LRR Energy unitholders. Affiliates of Lime Rock Resources, LRE's largest unitholder (owning over 30 percent of its outstanding equity), have agreed to support and vote in favor of the transaction.

Scott W. Smith, Vanguard's President and Chief Executive Officer commented, "The transaction we announced today is a great opportunity for the Company and our unitholders. The assets being acquired are attractive bolt-ons to our Permian and Arkoma basin operations and have an inventory of development projects that generate good returns even in the current commodity environment. We believe this transaction should have a positive impact on all aspects of our business. We look forward to welcoming the existing LRE unitholders into Vanguard."

Eric Mullins, Chairman and Co-Chief Executive Officer of LRR Energy commented, "We are pleased to announce our pending merger with Vanguard. We have great respect for Vanguard's management team, which has a strong track record of creating value for its unitholders." Charlie Adcock, Co-Chief Executive Officer of LRR Energy, noted, "We believe the transaction is compelling for LRR Energy unitholders for many reasons and that the strategic combination will deliver significant value in the future for our unitholders."

Transaction Highlights

• LRE's long-life, low-decline, mature assets are well-suited for Vanguard's upstream MLP model;
• Proved R/P of approximately 14 years;
• Balanced production and reserves product mix of 39% oil; 48% natural gas and 13% natural gas liquids;
• Assets add additional scale in Vanguard's existing Permian and Arkoma Basins;
• Properties more than 85% operated as measured by proved reserves;
• Significant potential for cost savings through G&A synergies;
• Strong commodity price hedge book with approximately 89% of natural gas and 80% of oil proved developed production hedged through 2018;
• Production of approximately 40 MMcfe/d, increasing Vanguard's current production by 10%;
• Proved reserves at December 31, 2014 (SEC pricing) of approximately 203 Bcfe, increasing Vanguard's estimated proved reserves by 10%;
• Approximately 1,290 gross producing wells and approximately 158,000 net acres; and
• The transaction is expected to be immediately accretive to distributable cash flow per unit.

Transaction Benefits to LRE Unitholders

• Unit price premium;
• Significantly larger and more geographically diverse asset base;
• Expected material operating and cost synergies;
• Stronger financial position and better access to capital markets;
• Enhanced distribution stability, coverage and growth potential;
• Ability to participate in the future growth and upside of the combined company; and
• Improved unit trading liquidity.

Upon the closing of the transaction, LRR Energy will be terminating the existing management services agreement with Lime Rock Management LP and Lime Rock Resources Operating Company, Inc. Offset by incremental corporate hires, Vanguard expects to generate significant general and administrative expense savings. Coupled with interest savings from the repayment of LRE's existing second lien term loan, which is required to be repaid upon a change of control, Vanguard expects that the transaction will be immediately accretive to distributable cash flow per unit while also lowering Vanguard's pro forma debt leverage.

Citigroup Global Markets Inc. acted as the exclusive financial advisor to Vanguard and Paul Hastings LLP acted as legal counsel to Vanguard. Tudor, Pickering, Holt & Co. acted as exclusive financial advisor to LRR Energy, and Andrews Kurth LLP and Richards, Layton & Finger, P.A. acted as legal counsel to LRR Energy. Simmons & Company International provided a fairness opinion to the Conflicts Committee of LRR Energy's Board of Directors. Latham & Watkins LLP acted as legal counsel to the Conflicts Committee of LRR Energy's Board of Directors.

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