The properties consist of approximately 23,000 net acres that are currently producing approximately 17.5 MMcfe per day with approximately 67% natural gas and 33% oil and NGLs. The effective date of the acquisition is June 1, 2014 and the Company anticipates closing this acquisition on or before October 1, 2014. The Company intends to fund this acquisition with borrowings under its existing reserve-based credit facility.
Scott W. Smith, President and Chief Executive Officer, commented, "This acquisition of mature, long life natural gas and oil properties is an excellent addition to our current portfolio of assets. Along with an established base of producing assets, this acquisition features an inventory of behind pipe and low risk vertical drilling projects that we will begin to develop in 2015. In addition, based on our initial evaluation work, we believe there is the potential for meaningful horizontal drilling opportunities across some of the operated assets. With this transaction, we have established another core area from which we can continue to build upon in the future."
Highlights of the acquisition include:
- Immediately accretive to distributable cash flow at closing;
- Estimated reserve life of over 23 years based on internally estimated proved reserves of approximately 150 Bcfe;
Current net production of approximately 17.5 MMcfe/d is divided geographically and by commodity as follows:
- Working interest in more than 290 producing wells and 78 proved undeveloped vertical drilling locations;
- Proved developed production average decline rate of approximately 10%;
- LOE costs forecasted to average approximately $1.00 per Mcfe over the next 3 years and production taxes forecasted at 7.75% of revenue;
- Forecasted natural gas realization of 115% of NYMEX Henry Hub, oil differential of $(2.50) per Bbl off of WTI and an average NGL realization of 55% of WTI; and
- Vanguard intends to opportunistically hedge the expected natural gas and oil production for 2015 through 2017; management will continue to evaluate hedging the natural gas liquids component and act prudently and swiftly should the NGL pricing market justify a hedged component.