VNR

Vanguard Natural Resources LLC (VNR)

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Exchange: NASDAQ
Industry: Energy
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Vanguard Natural Resources LLC (VNR)

Q1 2013 Earnings Call

May 01, 2013 11:00 am ET

Executives

Lisa Godfrey – Investor Relations

Scott Smith – President, Chief Executive Officer

Richard Robert – EVP, Chief Financial Officer

Britt Pence – Senior Vice President

Analysts

Kevin Smith – Raymond James

John Ragozzino – RBC Capital Markets

Michael Peterson – MLV

Amy Stepnowski – Hartford Investment Management

Mike – Robert W Baird

Presentation

Operator

Good morning, ladies and gentlemen, and thank you for standing by. And welcome to the Vanguard Natural Resources First Quarter 2013 Earnings Call.

During today’s presentation, all participants will be in a listen-only mode. (Operator Instructions) And as a reminder this call is being recorded today, May 1, 2013.

I would now like to turn the conference over to Lisa Godfrey, Director of Investor Relations. Please go ahead, ma’am.

Lisa Godfrey

Good morning everyone, and welcome to the Vanguard Natural Resources, LLC first quarter 2013 earnings conference call. We appreciate you joining us today.

On the call this morning are Scott Smith, our President and Chief Executive Officer; Richard Robert, our Executive Vice-President and Chief Financial Officer; and Britt Pence, our Senior Vice President of Operations.

If you would like to listen to a replay of today’s call it will be available through June 1, 2013 and may be accessed by dialing 303-590-3030 and using the passcode 4614057#. A webcast archive will also be available on the Investor Relations page of the company’s website at www.vnrllc.com and will be accessible online for approximately 30 days.

For more information, or if you would like to be on our email distribution list to receive future news releases, please contact me at 832-327-2234 or via email at lgodfrey@vnrllc.com. This information was also provided in Tuesday’s earnings release. Please note the information reported on this call speaks only as of today, May 1, 2013. And therefore you are advised that time-sensitive information may no longer be accurate as of the time of any replay.

I would also like to remind our investors that proxy ballot cards and notice and access information was mailed out on or about April 22, 2013 to all unit-holders of record as of April 5, 2013. Your vote is very important. Please keep in mind for special voting items the vote is required by the actual unit-holder and cannot be voted by your broker. Online voting is also available at www.proxyvote.com.

Before we get started, please note that some of the comments today could be considered forward-looking statements and are based on certain assumptions and expectations of management. For a detailed list of all the risk factors associated with our business, please refer to our 10-Q that will be filed tomorrow, May 2nd, and will be available on our website under the Investor Relations tab, and on EDGAR. Also on the Investor Relations tab of our website, under Presentations, you can find the Q1 2013 earnings results supplemental presentation.

As a reminder, the most recent record date of our monthly cash distribution is today May 1, with a May 15 payable date. Unit-holders of record will receive $0.2025 for each common unit held or $2.43 per common unit on an annualized basis.

Now I’d like to turn the call over to Scott Smith, President and Chief Executive Officer of Vanguard Natural Resources.

Scott Smith

Thanks, Lisa. And welcome, everyone, and thanks for joining us this morning on the first quarter 2013 call. This morning I’ll start with the summary of the Permian transaction we completed with Range Resources last month. Then we’ll review our operational results for the quarter. Richard will then proceed with the financial discussion and then we’ll finish up with the Q&A.

First I’ll discuss our acquisition activity in the first quarter. We started the year off by announcing and subsequently closing the acquisition of Permian properties from Range Resources for $275 million. These assets are mature, low risk properties of significant upside potential through the ongoing opportunities and infill development drilling and are an excellent addition to our current portfolio of Permian assets.

We believe we can deploy approximately 25% of the free cash flow from these assets and grow production and cash flow over the course of the next 4 to 5 years. I’d point out that although we have modeled this transaction using the slow in steady type of development plan we have the ability to accelerate capital spending on the assets through should we choose to do so.

We are continuing to evaluate the inventory of projects at our disposal and look to work on a total of 19 wells over the course of 2013 beginning this month. The total capital spends for the year is expected to be approximately $4 million on these assets.

We continue to see a lot of assets come to market both negotiated and marketed and we expect to be very active in this year on the acquisition front. We’re excited about our prospects and look forward to continue to create value on the unit holders through making accretive acquisitions.

We’ll now review our production results and capital spending for the quarter. First off, average daily production for the first quarter of 2013 was 33,123 BOE per day up 45% over the 22,803 BOE per day produced and the fourth quarter of 2012 and up 144% over the first quarter of 2012. This significant increase in production from 2012 is a direct result of the Arkoma acquisition completed on June 30 of last year from Antero Resources and the Barrett transaction which closed at the end of last year.

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