Vanguard Natural Resources LLC, Houston, (NYSE: VNR) plans to buy producing oil and gas assets in Mississippi, Texas and New Mexico from an undisclosed private seller for $113.1 million.
Production is approximately 850 barrels of oil equivalent (BOE) per day. The properties have estimated total proved reserves of 4.7 million BOE, of which approximately 96% are oil reserves and 61% are proved developed.
Vanguard president and chief executive Scott W. Smith says, “This acquisition of primarily oil properties has all the attributes we are looking for as we continue to profitably grow the company.
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.”
Smith adds that with this level of activity, the company believes it can invest a relatively small percentage of cash flow and still maintain production rates during the next four years.
“We intend to add hedges covering a substantial portion of the estimated production from this acquisition at attractive pricing for the next several years. These strategies will insure these properties will be a significant contributor to our cash flow for the balance of this year and several years thereafter.”
After closing, Vanguard management intends to recommend to the board an increase in the quarterly distribution rate for the second-quarter 2010 distribution payable on August 13, according to the company.
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