Vanguard Natural Resources (VNR) Completes SCOOP/STACK Assets Sale; Updates on Hedging, FY16 Outlook
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Vanguard Natural Resources, LLC (Nasdaq: VNR) announced it consummated the previously announced sale of its natural gas, oil and natural gas liquids assets in the SCOOP/STACK area in Oklahoma to entities managed by Titanium Exploration Partners, LLC for an adjusted price of $272.5 million, subject to customary final post-closing adjustments. RBC Richardson Barr acted as exclusive advisor to Vanguard for this transaction.
Characteristics of the assets sold include:
- 239 MMcfe of 2015 year-end reserves with approximately 56% being natural gas, 13% oil and 31% natural gas liquids (“NGLs”);
- Properties consist of more than 20,000 total net acres in the SCOOP/STACK area in Oklahoma;
- Current production of approximately 50 MMcfe per day;
- Approximately 410 producing wells;
- No impact to Vanguard’s overall hedge volume;
- Proceeds from the sale immediately used to pay down borrowings under Vanguard’s reserve based credit facility; and
- Vanguard's 2016 Spring Borrowing Base Redetermination is scheduled to be completed on May 26, 2016.
2016 Outlook:Summary of Estimates
The following table sets forth certain estimates being used by Vanguard to model its anticipated results of operations for the fiscal year ending December 31, 2016. Estimates in the below guidance table include actual first quarter 2016 operating and financial results, and will include operating and financial results for the SCOOP/STACK assets, through May 18, 2016. These estimates do not include any future acquisitions or divestitures of oil or natural gas properties. In addition, the expectations below assume Vanguard's current capital structure and do not contemplate any future equity or debt offerings.
| Post SCOOP/STACK Sale GuidanceFY 2016E | Midpoint Of Previously Announced Guidance FY 2016E (1) | |||||||||||||||||||
| Net Production: | ||||||||||||||||||||
| Oil (Bbls/d) | 12,100 | - | 13,400 | 13,500 | ||||||||||||||||
| Natural gas (Mcf/d) | 272,000 | - | 300,000 | 295,000 | ||||||||||||||||
| Natural gas liquids (Bbls/d) | 9,700 | - | 10,700 | 11,400 | ||||||||||||||||
| Total (Mcfe/d) | 402,800 | 444,600 | 444,400 | |||||||||||||||||
| Costs: | ||||||||||||||||||||
| Lease operating expenses | $ | 160,000 | - | $ | 177,000 | $ | 170,750 | |||||||||||||
| Production taxes | $ | 37,000 | - | $ | 41,000 | $ | 36,500 | |||||||||||||
| G&A expenses (excluding non-cash compensation) | $ | 39,000 | - | $ | 43,000 | $ | 41,000 | |||||||||||||
| Depreciation, depletion, amortization and accretion | $ | 160,000 | - | $ | 180,000 | $ | 227,500 | |||||||||||||
| Costs per Mcfe: | ||||||||||||||||||||
| Lease operating expenses | $ | 1.05 | - | $ | 1.15 | $ | 1.05 | |||||||||||||
| Production taxes (% of revenue) | 10.0 | % | - | 12.0 | % | 11.5 | % | |||||||||||||
| G&A expenses (excluding non-cash compensation) | $ | 0.24 | - | $ | 0.28 | $ | 0.25 | |||||||||||||
| Depreciation, depletion, amortization and accretion | $ | 1.00 | - | $ | 1.20 | $ | 1.40 | |||||||||||||
| Cash Flow Calculation (in thousands): | ||||||||||||||||||||
| Adjusted EBITDA (2) | $ | 370,000 | $ | 360,000 | ||||||||||||||||
| Interest expense, including settlements paid on interest rate derivatives | $ | (104,000 | ) | $ | (105,000 | ) | ||||||||||||||
| Capital expenditures | $ | (73,000 | ) | $ | (63,000 | ) | ||||||||||||||
| Distributions to Preferred Unitholders (3) | $ | (2,230 | ) | $ | (2,230 | ) | ||||||||||||||
| Distributable cash flow | $ | 190,770 | $ | 189,770 | ||||||||||||||||
| Excess of net cash after distributions to unitholders (4) | $ | 150,000 | $ | 145,000 | ||||||||||||||||
| Mid-point adjusted net income per unit (2) | $ | 0.60 | $ | 0.10 | ||||||||||||||||
| Units outstanding (millions) | 131.4 | 131.0 | ||||||||||||||||||
| Assumed NYMEX Pricing (May 13, 2016) (5): | Q1 2016A | Q2 2016E | Q3 2016E | Q4 2016E | ||||||||||||||||
| Oil ($/Bbl) | $ | 33.23 | $ | 44.45 | $ | 47.37 | $ | 48.51 | ||||||||||||
| Natural gas ($/MMBtu) | $ | 2.10 | $ | 2.01 | $ | 2.22 | $ | 2.48 | ||||||||||||
| Average NYMEX Differentials: | ||||||||||||||||||||
| Oil ($/Bbl) | $ | (6.66 | ) | $ | (7.00 | ) | $ | (7.00 | ) | $ | (7.00 | ) | ||||||||
| Natural gas ($/MMBtu) | $ | (0.80 | ) | $ | (0.85 | ) | $ | (0.80 | ) | $ | (0.80 | ) | ||||||||
| NGL realization as a percentage of crude oil NYMEX price (6) | 24 | % | 25 | % | 25 | % | 25 | % | ||||||||||||
| Capital Expenditures Details (in thousands): | Q1 2016A | Q2 2016E | Q3 2016E | Q4 2016E | ||||||||||||||||
| Operated | $ | (3,000 | ) | $ | (8,000 | ) | $ | (8,000 | ) | $ | (7,000 | ) | ||||||||
| Non-Operated | $ | (17,000 | ) | $ | (14,000 | ) | $ | (10,000 | ) | $ | (6,000 | ) | ||||||||
| Total Capital Expenditures | $ | (20,000 | ) | $ | (22,000 | ) | $ | (18,000 | ) | $ | (13,000 | ) | ||||||||
(1) Previously announced guidance numbers released March 4, 2016. (2) Adjusted EBITDA and adjusted net income exclude the amortization of value on derivative contracts acquired (approximately $16.1 million for the FY 2016). (3) Reflects current monthly preferred distributions which were suspended effective with the February 2016 distribution and would have been paid in April 2016. (4) Excess of net cash after distributions is net of any expected working capital adjustments and cash reserves and does not consider the payment of any accrued preferred distributions. (5) NYMEX pricing includes actual settlements for January, February, March and April 2016, and NYMEX strip pricing on May 13, 2016 thereafter. (6) Assumes a weighted average product breakout of 21% ethane, 35% propane, 11% isobutane, 15% n-butane and 18% pentane.
Hedging Update
After taking into consideration the SCOOP/STACK sale, we have implemented a hedging program for approximately 84% and 69% of our natural gas production for the balance of 2016 and 2017, respectively, with 72% in the form of fixed-price swaps in 2016. Approximately 89% and 23% of our anticipated crude oil production for the balance of 2016 and 2017, respectively, is hedged with 42% in the form of fixed-price swaps in 2016. NGLs production is under fixed-price swaps for approximately 26% of anticipated production for the balance of 2016.
| Apr-Dec 31 2016 | Year 2017 | ||||||||
| Gas Production Hedged: | |||||||||
| % Anticipated Production Hedged | 84 | % | 69 | % | |||||
| Weighted Average Price ($/MMBtu) | $ | 4.17 | $ | 3.70 | |||||
| Oil Production Hedged: | |||||||||
| % Anticipated Production Hedged | 89 | % | 23 | % | |||||
| Weighted Average Price ($/Bbl) | $ | 66.43 | $ | 84.68 | |||||
| NGLs Production Hedged: | |||||||||
| % Anticipated Production Hedged | 26 | % | — | ||||||
| Weighted Average Price ($/Bbl) | $ | 30.31 | $ | — | |||||
The weighted average price for oil and natural gas will fluctuate based on the value of existing three-way collars and short puts as the respective prices settle. The above weighted average prices are calculated based on forward strip commodity prices as of May 13, 2016.
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