Exhibit 99.1

 
Vanguard Natural Resources Reports Record Results For 2008 And Provides Positive Outlook For 2009

 
HOUSTON—March 5, 2009--Vanguard Natural Resources, LLC (NYSE Arca: VNR) ("Vanguard" or "the Company") today reported financial and operational results for the fourth quarter and full year ended December 31, 2008.
 
Mr. Scott W. Smith, President and CEO, commented, “During 2008, we successfully executed our business plan of making accretive acquisitions and growing our distributable cash flow and our distributions.  Primarily as a result of these successful acquisitions and secondarily through our  participation in this year’s development drilling program, we grew our proved reserves by 62% to 108.5 Bcfe and increased our production by 40%.  This growth positioned us to raise our annual distribution twice during 2008 to the current rate of $2.00 per unit on an annual basis, an increase of $0.30 per unit, or 18%, from the $1.70 rate set forth in our IPO prospectus.”  Mr. Smith continued, “While 2009 is likely to be a difficult year for the energy industry as a whole, we are well-positioned with our favorable commodity price hedging program and long-life assets to generate strong cash flows and maintain positive cash distribution coverage.”
 
Mr. Richard Robert, Executive Vice President and CFO, added, “As shown in the 2009 financial forecast included in this press release, we expect to generate a significant amount of cash flow in 2009, which along with our availability under our reserve-based credit facility, will provide us with the financial flexibility to pursue an active drilling program and potential acquisitions in the future.  However, in the current environment of depressed commodity prices, our strategy will be to focus our efforts on re-completions and enhancing production from our existing wells to maximize profit with a limited amount of new drilling.  Furthermore, we will continue to consider acquisitions that deliver returns that are immediately accretive to cash flow.  Absent acquisitions we will concentrate on reducing our debt with our excess cash.”
 
Full Year 2008 Highlights:
 
 
·  
Achieved Adjusted EBITDA (a non-GAAP financial measure defined below) of $48.8 million, up 61% over $30.4 million in 2007.
 
 
·  
Generated distributable cash flow (a non-GAAP financial measure defined below) of $25.0 million during 2008 representing a 163% increase over the $9.5 million generated in 2007.
 
 
·  
Reported average daily production of 16,206 thousand cubic feet equivalent (Mcfe) per day during 2008, up 40% over the average of 11,610 Mcfe/day generated in 2007.
 
 
·  
Proved reserves increased by 62% in 2008 to 108.5 billion cubic feet equivalent (Bcfe). The additions to proved reserves in 2008 totaled 47.3 Bcfe (including purchases, extensions and revisions), replacing 798% of production.
 
 
·  
Recorded a net loss of $3.8 million for the 2008 year, which included a non-cash natural gas and oil property impairment charge of $58.9 million taken in the fourth quarter offset by net unrealized gains from our commodity and interest rate derivative contracts of $35.9 million.  Excluding the impact of these non-cash charges, our Adjusted Net Income (a non-GAAP financial measure defined below) was $19.3 million compared to a $2.6 million in 2007. The 2007 Adjusted Net Income excludes the impact of the loss on extinguishment of debt.
 
 
Fourth Quarter 2008 Highlights:
 
 
·  
Generated Adjusted EBITDA of $12.6 million, up 77% over $7.1 million in the fourth quarter of 2007 and down 9% over third quarter 2008.
 
 
·  
Generated distributable cash flow of $6.0 million for the three months ended December 31, 2008 representing a 138% increase over the $2.5 million generated in the fourth quarter of 2007.
 
 
·  
Reported average production of 18,576 Mcfe per day, up 69% over 10,969 Mcfe/day produced in the fourth quarter of 2007 and up 10% over third quarter 2008 average volumes.
 
 
·  
Recorded a net loss of $12.6 million for the quarter ended December 31, 2008, compared to net income of approximately $1.0 million in the 2007 fourth quarter.  The recent quarter included $42.3 million of non-cash unrealized net gains in our commodity and interest rate derivative contracts and a non-cash natural gas and oil property impairment charge of $58.9 million under our full-cost accounting method.  Excluding the impact of these charges, our Adjusted Net Income was $4.0 million in the fourth quarter of 2008 as compared to $1.0 million in the fourth quarter of 2007.
 
 
Year End 2008 Proved Reserves
 
Vanguard’s year-end 2008 proven reserves were 108.5 Bcfe as provided by our outside reserve engineering firm, Netherland, Sewell & Associates, Inc. Approximately 75% of the proved reserves are natural gas and 75% of our reserves are considered proved developed.  At December 31, 2008, we owned working interests in 1,444 gross (958 net) productive wells. In addition to these productive wells, we own leasehold acreage allowing us to drill new wells.  Approximately 25% or 27.6 Bcfe of our estimated proved reserves were attributable to our working interests in undeveloped acreage.
 
 
In the Appalachian Basin, we have a 40% working interest in approximately 109,500 gross undeveloped acres surrounding or adjacent to our existing wells. In South Texas, we own working interests ranging from 45-50% in 5,300 undeveloped acres surrounding our existing wells. 
 
 
Impairment Charge
 
Our 2008 full-year and fourth-quarter results included a $58.9 million impairment charge related to the write-down of our capitalized costs under full-cost accounting.  Under full-cost accounting, our dry hole and geological costs are capitalized into the full cost pool, and are subject to amortization and ceiling test limitations.  The ceiling is based on the net present value of our estimated future revenues, as determined by the commodity spot prices at the end of each quarter, discounted at 10%.  Our capitalized costs must be equal to or less than this ceiling.  Because of the precipitous drop in both oil and gas prices at the end of the 2008 fourth quarter compared to the prior quarter, the net present value of our future revenues declined significantly.  As a result, as of December 31, 2008, we were required to write-down our full-cost pool down to the revenue ceiling.  This impairment was calculated based on prices of $5.71 per MMBtu for natural gas and $41.00 per barrel of crude oil.  The impairment calculation did not consider the positive impact of our commodity derivative positions as generally accepted accounting principles only allows the inclusion of derivatives designated as cash flow hedges.
 
 
Hedging Activities
 
We enter into derivative transactions in the form of hedging arrangements to reduce the impact of natural gas and oil price volatility on our cash flow from operations. As required by our reserve-based credit facility, we have mitigated this volatility through 2011 by implementing a hedging program on a portion of our total anticipated production.  Currently, we use fixed-price swaps and NYMEX collars and put options to hedge natural gas and oil prices.
 
The following table summarizes commodity derivative contracts in place at December 31, 2008:
 
   
2009
 
2010
 
2011
 
2012
 
Gas Positions:
                 
Fixed Price Swaps:
                 
Notional Volume (MMBtu)
    3,629,946     3,236,040     2,962,312      
Fixed Price ($/MMBtu)
  $ 9.42   $ 9.10   $ 7.82      
Puts:
                       
Notional Volume (MMBtu)
    840,143              
Floor Price ($/MMBtu)
  $ 7.50   $   $      
Collars:
                       
Notional Volume (MMBtu)
    1,000,000     730,000          
Floor Price ($/MMBtu)
  $ 7.50   $ 8.00   $      
Ceiling Price ($/MMBtu)
  $ 9.00   $ 9.30   $      
Total:
                       
Notional Volume (MMBtu)
    5,470,089     3,996,040     2,96,312      
                         
Oil Positions:
                       
Fixed Price Swaps:
                       
Notional Volume (Bbls)
    181,500     164,250     151,250     144,000  
Fixed Price ($/Bbl)
  $ 87.23   $ 85.65   $ 85.50   $ 80.00  
Collars:
                         
Notional Volume (Bbls)
    36,500              
Floor Price ($/Bbl)
  $ 100.00   $   $   $  
Ceiling Price ($/Bbl)
  $ 127.00   $   $   $  
Total:
                         
Notional Volume (Bbls)
    218,000     164,250     151,250     144,000  

 
In February 2009, we liquidated our 2012 oil swap and entered into new 2010 and 2011 natural gas swap and collar transactions.  Specifically, an $8.04 and $7.85 fixed price NYMEX natural gas swap for January through September 2010 and April through September 2011, respectively, was executed for 2,000 MMBtu/day. In addition, a 2,000 MMBtu/day NYMEX natural gas collar with a floor price of $7.50 and a ceiling price of $9.00 for October 2010 through March 2011 and October 2011 through December 2011 was executed.  These natural gas derivatives were set at prices above the current market by using the proceeds of the liquidation of the 2012 oil swap.
 
Considering the new derivatives mentioned above, based on our current drilling plans, approximately 100% of our 2009 natural gas production is hedged at a floor price of $8.77 per MMBtu and approximately 84% of our natural gas production is hedged at a three year weighted average floor price of $8.50 per MMBtu thru 2011.  Approximately 81% of our 2009 crude oil production is hedged at a floor price of $89.37 per barrel and approximately 72% of our crude oil production is hedged at a three year weighted average price of $87.13 per barrel thru 2011.
 
Cash Distributions
 
On February 14, 2009, the Company paid its 2008 fourth-quarter cash distribution of $0.50 per unit to its unitholders of record.  This quarterly distribution payment was the same amount distributed for the third quarter of 2008 and represented an increase of $0.075 per unit, or 18%, over the $0.425 distribution initially set when our initial public offering was completed on October 29, 2007.
 
Capital Expenditures
 
Our capital expenditures were $119.5 million in the year ended December 31, 2008 compared to $26.4 million for the year ended December 31, 2007.  The 2008 expenditures included $100.7 million for the acquisition of natural gas and oil properties in the Permian Basin and South Texas. It also included $18.2 million for the drilling and development of natural gas and oil properties as compared to $12.8 million for the year ended December 31, 2007.  We currently anticipate a capital budget for 2009 of between $6.0 million and $6.5 million, which predominantly consists of recompletions and workovers of existing wells and a limited number of new wells in South Texas in the second half of the 2009, all of which is expected to be funded through cash from operations.
 
Reserve-based Credit Facility

In October 2008, we amended our reserve-based credit facility which set our borrowing base under the facility at $175.0 million pursuant to our semi-annual redetermination and added a new lender.  As of December 31, 2008, our indebtedness under the reserve-based credit facility totaled $135.0 million. As of March 5, 2009, we had $37 million available for borrowing under our reserve-based credit facility and had approximately $4 million in cash. In February 2009, a third amendment was entered into which amended covenants to allow the Company to repurchase up to $5.0 million of its own units.
 
Conference Call Information
 
Vanguard will host a conference call today to discuss its 2008 full year and fourth quarter  results on Thursday, March 5, 2009 at 11:00 a.m. Eastern Time (10:00 a.m. Central). To access the call, please dial (800) 366-3908 or (303) 262-2075, for international callers and ask for the “Vanguard Natural Resources” call a few minutes prior to the start time. The conference call will also be broadcast live via the Internet and can be accessed through the investor relations section of Vanguard’s website, http://www.vnrllc.com.

A telephonic replay of the conference call will be available until March 19, 2009 and may be accessed by calling (303) 590-3000 and using the pass code 11126437#. A webcast archive will be available on the Investor Relations page at www.vnrllc.com shortly after the call and will be accessible for approximately 30 days. For more information, please contact Donna Washburn at DRG&E at (713) 529-6000 or email at dmw@drg-e.com.
 
About Vanguard Natural Resources, LLC
 
Vanguard Natural Resources, LLC is a publicly traded limited liability company focused on the acquisition, production and development of natural gas and oil properties. The Company's assets consist primarily of producing and non-producing natural gas and oil reserves located in the southern portion of the Appalachian Basin, the Permian Basin, and South Texas. More information on the Company can be found at www.vnrllc.com.
 
Forward-Looking Statements
 
We make statements in this news release that are considered forward-looking statements within the meaning of the Securities Exchange Act of 1934. These forward-looking statements are largely based on our expectations, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors. Although we believe such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control. In addition, management's assumptions about future events may prove to be inaccurate. Management cautions all readers that the forward-looking statements contained in this news release are not guarantees of future performance, and we cannot assure you that such statements will be realized or the forward-looking events and circumstances will occur. Actual results may differ materially from those anticipated or implied in the forward-looking statements due to factors listed in the "Risk Factors" section in our SEC filings and elsewhere in those filings. All forward-looking statements speak only as of the date of this news release. We do not intend to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise.
 

 
 
Vanguard Natural Resources, LLC
 
Operating Statistics
 
(Unaudited)
 
   
Three Months Ended
December 31,
   
Year Ended
December 31,
 
   
2008
   
2007
   
2008
   
2007
 
Net Natural Gas Production:
                       
Appalachian gas (MMcf)
    886       942       3,578       4,044  
Permian gas (MMcf)
    68       -       218
(a)
    -  
South Texas gas (MMcf)
    326       -       566
(b)
    -  
Total natural gas production (MMcf)
    1,280       942       4,362       4,044  
                                 
Average Appalachian daily gas production (Mcf/day)
    9,628       10,243       9,777       11,080  
Average Permian daily gas production (Mcf/day)
    736       -       650
(a)
    -  
Average South Texas daily gas   production (Mcf/day)
    3,545       -       3,602
(b)
    -  
Average Vanguard daily gas production (Mcf/day)
    13,909       10,243       14,029       11,080  
                                 
Average Natural Gas Sales Price per Mcf:
                               
Net realized gas price, including hedges
  $ 9.49
(c)
  $ 9.56
(c)
  $ 10.40
(c)
  $ 8.92
(c)
Net realized gas price, excluding hedges
  $ 7.26     $ 7.70     $ 10.30     $ 8.04  
                                 
Net Oil Production:
                               
Appalachian oil (Bbls)
    16,434       9,549       48,977       30,629  
Permian oil (Bbls)
    55,136       -       212,599
(a)
    -  
Total oil (Bbls)
    71,570       9,549       261,576       30,629  
                                 
Average Appalachian daily oil production (Bbls/day)
    179       104       134       84  
      Average Permian daily oil production
      (Bbls/day)
    599       -       635
(a)
    -  
Average Vanguard daily oil production (Bbls/day)
    778       104       769       84  
                                 
Average Oil Sales Price per Bbl:
                               
Net realized oil price, including hedges
  $ 80.57     $ 60.05     $ 85.69     $ 66.08  
Net realized oil price, excluding hedges
  $ 54.11     $ 60.05     $ 91.48     $ 66.08  

 
(a)  
The Permian Basin acquisition closed on January 31, 2008 and as such only eleven months of operations are included in the year ended December 31, 2008 and were not included in the operations of 2007.
 
(b)  
The South Texas acquisition closed on July 28, 2008 and as such only five months of operations are included in the year ended December 31, 2008 and were not included in the operations of 2007.
 
(c)  
Excludes amortization of premiums paid on non-cash settlement on derivative contracts.
 

 
 

 

VANGUARD NATURAL RESOURCES, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

   
Three Months Ended
December 31,
   
Year Ended
December 31,
 
  
 
2008
   
2007
   
2008 (a) (b)
   
2007
 
Revenues:
       
 
   
 
       
Natural gas and oil sales
  $ 13,157,223     $ 7,831,083     $ 68,850,004     $ 34,540,500  
Gain (loss) on commodity cash flow hedges
    (347,447 )     23,611       269,260       (701,675 )
Gain on other commodity derivative contracts
    48,929,093             32,476,472        
  Total revenues
    61,738,869       7,854,694       101,595,736       33,838,825  
                                 
Costs and expenses:
                               
Lease operating expenses
    3,312,128       1,258,245       11,111,849       5,066,230  
Depreciation, depletion, amortization and accretion
    4,569,211       2,393,840       14,910,454       8,981,179  
Impairment of natural gas and oil properties
    58,886,660             58,886,660        
Selling, general and administrative expenses
    1,871,539       1,206,055       6,715,036       3,506,539  
Bad debt expense
                      1,007,458  
Production and other taxes
    1,306,686       836,437       4,964,987       2,053,604  
Total costs and expenses
    69,946,224       5,694,577       96,588,986       20,615,010  
                                 
Income (loss) from operations
    (8,207,355 )     2,160,117       5,006,750       13,223,815  
                                 
Other income and (expense):
                               
Interest income
    959       14,182       17,232       61,621  
Interest expense
    (1,627,961 )     (1,190,359 )     (5,490,816 )     (8,134,600 )
Loss on interest rate derivative contracts
    (2,774,381 )           (3,284,514 )      
Loss on extinguishment of debt
                      (2,501,528 )
Total other expense, net
    (4,401,383 )     (1,176,177 )     (8,758,098 )     (10,574,507 )
                                 
Net income (loss)
  $ (12,608,738 )   $ 983,940     $ (3,751,348 )   $ 2,649,308  
                                 
Net income (loss) per unit:
                               
Common & Class B units – basic
  $ (1.00 )   $ 0.10     $ (0.32 )   $ 0.39  
                                 
Common & Class B units – diluted
  $ (1.00 )   $ 0.10     $ (0.32 )   $ 0.39  
                                 
Weighted average units outstanding:
                               
Common units – basic & diluted
    12,145,873       9,481,250       11,374,473       6,533,411  
Class B units – basic & diluted
    420,000       420,000       420,000       278,945  

(a)  
The South Texas acquisition closed on July 28, 2008 and as such only five months of operations are included in the year ended December 31, 2008 and were not included in the results of 2007.

(b)  
The Permian Basin acquisition closed on January 31, 2008 and as such only eleven months of operations are included in the year ended December 31, 2008 and were not included in the results of 2007.

 
 

 


 
VANGUARD NATURAL RESOURCES, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)

   
December 31,
2008
   
December 31,
2007
 
Assets
           
Current assets
           
Cash and cash equivalents
  $ 2,616     $ 3,109,563  
Trade accounts receivable, net
    6,083,479       3,875,078  
Derivative assets
    22,183,648       4,017,085  
Other receivables
    2,762,730       497,653  
Other current assets
    845,404       453,198  
Total current assets
    31,877,877       11,952,577  
                 
Property and equipment, net of accumulated depreciation
    184,224       166,455  
                 
Natural gas and oil properties, at cost
    284,446,984       135,435,240  
Accumulated depletion
    (102,178,304 )     (28,451,891 )
Natural gas and oil properties evaluated, net – full cost method
    182,268,680       106,983,349  
                 
Other assets
               
Derivative assets
    15,748,721       1,329,511  
Deferred financing costs
    881,996       941,833  
Non-current deposits
    45,963       8,285,883  
Other assets
    1,554,416       1,519,577  
Total assets
  $ 232,561,877     $ 131,179,185  
                 
Liabilities and members’ equity
               
                 
Current liabilities
               
Accounts payable - trade
  $ 2,147,664     $ 1,056,627  
Accounts payable – natural gas and oil
    1,327,361       257,073  
Payables to affiliates
    2,554,624       3,838,328  
Derivative liabilities
    486,576       -  
Accrued expenses
    1,247,606       203,159  
Total current liabilities
    7,763,831       5,355,187  
                 
Long-term debt
    135,000,000       37,400,000  
Derivative liabilities
    2,313,335       5,903,384  
Asset retirement obligations
    2,133,791       189,711  
Total liabilities
    147,210,957       48,848,282  
                 
Commitments and contingencies
               
                 
Members’ equity
               
Members’ capital, 12,145,873 and 10,795,000 common units issued and outstanding at December 31, 2008 and 2007, respectively
    88,550,178       90,257,856  
Class B units, 420,000 issued and outstanding at
December 31, 2008 and 2007
    4,605,463       2,131,995  
Accumulated other comprehensive loss
    (7,804,721 )     (10,058,948 )
Total members’ equity
    85,350,920       82,330,903  
                 
Total liabilities and members’ equity
  $ 232,561,877     $ 131,179,185  

 
 

 


 
Use of Non-GAAP Measures
 
Adjusted EBITDA
 
We present Adjusted EBITDA in addition to our reported net income in accordance with GAAP.  Adjusted EBITDA is a non-GAAP financial measure that is defined as net income (loss) plus:
 
·  
Net interest expense, including write-off of deferred financing fees and realized gains and losses on interest rate derivative contracts;
 
·  
Loss on extinguishment of debt;
 
·  
Depreciation, depletion and amortization (including accretion of asset retirement obligations);
 
·  
Impairment of natural gas and oil properties;
 
·  
Bad debt expenses;
 
·  
Amortization of premiums paid and non-cash settlements on derivative contracts;
 
·  
Unrealized gains and losses on other commodity and interest rate derivative contracts;
 
·  
Deferred tax liabilities;
 
·  
Unit-based compensation expense; and
 
·  
Realized gains and losses on cancelled derivatives.
 
Adjusted EBITDA is used by management as a tool to measure (prior to the establishment of any cash reserves by our board of directors, debt service and capital expenditures) the cash distributions we could pay our unitholders. Specifically, this financial measure indicates to investors whether or not we are generating cash flow at a level that can sustain or support an increase in our quarterly distribution rates. Adjusted EBITDA is also used as a quantitative standard by our management and by external users of our financial statements such as investors, research analysts and others to assess the financial performance of our assets without regard to financing methods, capital structure or historical cost basis; the ability of our assets to generate cash sufficient to pay interest costs and support our indebtedness; and our operating performance and return on capital as compared to those of other companies in our industry. Adjusted EBITDA is not intended to represent cash flows for the period, nor is it presented as a substitute for net income, operating income, cash flows from operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP.
 
Distributable Cash Flow
 
We present distributable cash flow in addition to our reported net income in accordance with GAAP.  Distributable cash flow is a non-GAAP financial measure that is defined as net income (loss) plus:
 
·  
Loss on extinguishment of debt;
 
·  
Depreciation, depletion and amortization (including accretion of asset retirement obligations);
 
·  
Impairment of natural gas and oil properties;
 
·  
Bad debt expenses;
 
·  
Amortization of premiums paid and non-cash settlements on derivative contracts;
 
·  
Unrealized gains and losses on other commodity and interest rate derivative contracts;
 
·  
Deferred tax liabilities;
 
·  
Unit-based compensation expense; and
 
·  
Realized gains and losses on cancelled derivatives;
 
 
Less:
 
·  
Drilling, capital workover and recompletion expenditures.
 
Distributable cash flow is used by management as a tool to measure (prior to the establishment of any cash reserves by our board of directors) the cash distributions we could pay our unitholders. Specifically, this financial measure indicates to investors whether or not we are generating cash flow at a level that can sustain or support an increase in our quarterly distribution rates.  While distributable cash flow is measured on a quarterly basis for reporting purposes, management must consider the timing and size of its planned capital expenditures in determining the sustainability of its quarterly distribution.  Capital expenditures are typically not spent evenly throughout the year due to a variety of factors including weather, rig availability, and the commodity price environment.  As a result, there will be some volatility in distributable cash flow measured on a quarterly basis.  Distributable cash flow is not intended to be a substitute for net income, operating income, cash flows from operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP.
 
Vanguard Natural Resources, LLC
 
Reconciliation of Net Income to Adjusted EBITDA (1) and Distributable Cash Flow
 
(Unaudited)
 

 
   
Three Months Ended
 December 31,
   
Year Ended
 December 31,
 
   
2008
   
2007
   
2008 (2)(3)
   
2007
 
                         
Net income (loss)
  $ (12,608,738 )   $ 983,940     $ (3,751,348 )   $ 2,649,308  
Plus:
                               
Interest expense, including realized loss on interest rate derivative contracts
    1,734,210       1,190,359       5,597,065       8,134,600  
Loss on extinguishment of debt
    -       -       -       2,501,528  
Depreciation, depletion, amortization and accretion
    4,569,211       2,393,840       14,910,454       8,981,179  
Impairment of natural gas and oil properties
    58,886,660       -       58,886,660       -  
Bad debt expense
    -       -       -       1,007,458  
Amortization of premiums paid and non-cash settlements on derivative contracts
    1,244,690       1,727,121       5,226,465       4,274,120  
Unrealized gains on commodity and interest rate derivative contracts
    (42,313,869 )     -       (35,851,133 )     -  
Deferred tax liability
    177,000       -       177,000       -  
Unit-based compensation expense
    868,177       817,217       3,576,558       2,131,995  
Realized loss on cancelled derivatives
    -       -       -       776,634  
Less:
                               
Interest income
    959       14,182       17,232       61,621  
Adjusted EBITDA
  $ 12,556,382     $ 7,098,295     $ 48,754,489     $ 30,395,201  
   Less:
                               
        Interest expense, net
    1,733,251       1,176,177       5,579,833       8,072,979  
        Drilling, capital workover and  recompletion expenditures
    4,814,478       3,394,709       18,174,285       12,821,192  
Distributable Cash Flow
  $ 6,008,653     $ 2,527,409     $ 25,000,371     $ 9,501,030  
                                 

 
(1)  
Our Adjusted EBITDA should not be considered as an alternative to net income, operating income, cash flows from operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP.  Our Adjusted EBITDA excludes some, but not all, items that affect net income and operating income and these measures may vary among other companies. Therefore, our Adjusted EBITDA may not be comparable to similarly titled measures of other companies.
 
(2)  
The South Texas acquisition closed on July 28, 2008 and as such only five months of operations are included in the year ended December 31, 2008 and were not included in the results of 2007.

(3)  
The Permian Basin acquisition closed on January 31, 2008 and as such only eleven months of operations are included in the year ended December 31, 2008 and were not included in the results of 2007.
 
Adjusted Net Income
 
We present Adjusted Net Income in addition to our reported net income in accordance with GAAP.  Adjusted Net Income is a non-GAAP financial measure that is defined as net income (loss) plus:
 
·  
Unrealized gains and losses on other commodity derivative contracts;
 
·  
Unrealized gains and losses on interest rate derivative contracts; and
 
·  
Impairment of natural gas and oil properties.
 
 
This information is provided because management believes exclusion of the impact of our unrealized derivatives not accounted for as cash flow hedges and non-cash natural gas and oil property impairment charge will help investors compare results between periods and identify operating trends that could otherwise be masked by these items and to highlight the impact that commodity price volatility has on our results.  Adjusted Net Income is not intended to represent cash flows for the period, nor is it presented as a substitute for net income, operating income, cash flows from operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP.
 
Vanguard Natural Resources, LLC
 
Reconciliation of Net Income to Adjusted Net Income
 
(Unaudited)
 
   
Three Months Ended
 December 31,
   
Year Ended
 December 31,
 
   
2008
   
2007
   
2008
   
2007
 
                         
Net income (loss)
  $ (12,608,738 )   $ 983,940     $ (3,751,348 )   $ 2,649,308  
Plus:
                               
Unrealized loss on interest rate derivative contracts
    2,758,496       -       3,178,265       -  
Impairment of natural gas and oil properties
    58,886,660               58,886,660          
    Less:
                               
Unrealized gain on other commodity derivative contracts
    (45,072,365 )     -       (39,029,398 )     -  
Total adjustments
    16,572,791       -       23,035,527       -  
                                 
Adjusted Net Income
  $ 3,964,053     $ 983,940     $ 19,284,179     $ 2,649,308  
                                 
                                 
Basic and diluted net income per unit:
  $ (1.00 )   $ 0.10     $ (0.32 )   $ 0.39  
   Plus:
                               
Impairment of natural gas and oil properties
    4.69       -       4.99       -  
    Less:
                               
Unrealized gain on commodity and interest rate derivative contracts, net
    (3.37 )     -       (3.04 )     -  
Basic and diluted adjusted net income per unit:
  $ 0.32     $ 0.10     $ 1.63     $ 0.39  
                                 
 
 
 
FINANCIAL GUIDANCE DISCLOSURES FOR 2009
 
Overview
 
Vanguard Natural Resources, LLC and its subsidiaries have prepared this document to provide public disclosure of certain financial and operating estimates in order to permit the preparation of models to forecast our operating results for the year ending December 31, 2009.  These estimates are based on information available to us as of the date of this filing, and actual results may vary materially from these estimates.  We do not undertake any obligation to update these estimates as conditions change or as additional information becomes available.
 
The estimates provided in this document are based on assumptions that we believe are reasonable.  Until our actual results of operations have been compiled and released, all of the estimates and assumptions set forth herein constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  All statements, other than statements of historical facts, included in this document that address activities, events or developments that we expect, project, believe or anticipate will or may occur in the future, or may have occurred through the date of this filing, including such matters as production of oil and gas, product prices, oil and gas reserves, drilling and completion results, capital expenditures and other such matters, are forward-looking statements.  Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from the results, performance, or achievements expressed or implied by such forward-looking statements.  Such factors include, among others, the following:  the volatility of oil and natural gas prices, the unpredictable nature of our drilling results; the reliance upon estimates of proved reserves; operating hazards and uninsured risks; competition; government regulation; and other factors referenced in filings made by us with the Securities and Exchange Commission.
 
As a matter of policy, we generally do not attempt to provide guidance on:
 
(a)           production which may be obtained through future drilling;
 
(b)           dry hole and abandonment costs that may result from future drilling;
 
(c)           the unrealized effects of Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities”;
 
(d)           gains or losses from sales of property and equipment unless the sale has been consummated prior to the filing of the financial guidance; and
 
(e)           capital expenditures related to acquisitions of proved properties until the expenditures are estimable and likely to occur;
 
Summary of Estimates
 
The following table sets forth certain estimates being used by us to model our anticipated results of operations for the fiscal year ending December 31, 2009 based on an average natural gas Henry Hub price of $5.14 per MMBtu and oil WTI Sweet price of $46.80 per barrel for 2009.   These estimates do not include any acquisitions of additional natural gas or oil properties.
 
When a single value is provided in the tables below, such value represents the mid-point of the approximate range of estimates.  Otherwise, each range of values provided represents the expected low and high estimates for such financial or operating factor.  See “Supplemental Information.”
 
 
 
2009 Range
 
Average Daily Production:
           
Appalachian Gas (Mcf)                                                                                  
  8,750   -     9,200  
Permian Gas (Mcf)                                                                                  
  580   -     610  
South Texas Gas (Mcf)                                                                                  
  4,150   -     4,370  
Appalachian Oil (Bbls)                                                                                  
  100   -     105  
Permian Oil (Bbls)                                                                                  
  595   -     630  
South Texas Oil (Bbls)                                                                                  
  n/a   -     n/a  
                 
Differentials:
               
Appalachian Gas (MMBtu)                                                                                   
$ 0.17   -   $ 0.23  
Permian Gas (MMBtu)                                                                                  
$ (0.30 ) -   $ (0.36 )
South Texas Gas (MMBtu)                                                                                  
$ (0.38 ) -   $ (0.44 )
Appalachian Oil (Bbls)                                                                                  
$ (9.93 ) -   $ (9.93 )
Permian Oil (Bbls)                                                                                  
$ (3.26 -   $ (3.26 )
                 
BTU Content:
               
Appalachian Gas                                                                                   
  1,170   -     1,170  
Permian Gas                                                                                  
  1,100   -     1,100  
South Texas Gas                                                                                  
  1,000   -     1,000  
                 
Costs Variable by Production ($/Mcfe):
               
Production expenses (including
               
  Severance & Ad Valorem taxes)                                                                                  
$ 2.15   -   $ 2.20  
DD&A – Oil and gas properties                                                                                  
$ 2.20   -   $ 2.25  
                 
Statement of Operations (in thousands):
               
                 
Total natural gas and oil sales                                                                                  
$ 38,000   -   $ 40,800  
Realized gains on commodity price derivative contracts 
  29,050   -     29,050  
Premiums paid on settled derivatives                                                                                  
  (3,500 ) -     (3,500 )
    Total Revenues                                                                                  
  63,550   -     66,350  
                 
Lease operating expenses                                                                                  
  (10,500 ) -     (11,000 )
Depreciation, depletion, amortization and accretion
  (14,500 ) -     (15,000 )
General and administrative                                                                                  
  (3,100 -     (3,600 )
General and administrative – unit-based compensation
  (2,580 ) -     (2,580 )
Production and other taxes                                                                                  
  (3,475 ) -     (3,675 )
   Total Costs and Expenses                                                                                  
  (34,155 ) -     (35,855 )
   Income from Operations                                                                                  
  29,395   -     30,495  
Interest expense, net                                                                                  
  (4,300 -     (4,300 )
      Realized losses on interest rate derivative contracts
  (1,500 ) -     (1,500 )
           Net Income                                                                                        
$ 23,595   -   $ 24,695  
                 
Reconciliation of Net Income to Adjusted EBITDA
and Distributable Cash Flow (in thousands):
               
      Net income                                                                                        
$ 23,595   -   $ 24,695  
      Plus:
               
      Interest expense including realized losses on interest rate derivatives
  5,800   -     5,800  
      Depreciation, depletion, amortization and accretion
  14,500   -     15,000  
      Amortization of premiums paid on derivative contracts
  3,500   -     3,500  
      Amortization of unit-based compensation expense
  2,580   -     2,580  
           Adjusted EBITDA                                                                                        
$ 49,975   -   $ 51,575  
       Less:
               
       Interest expense including realized losses on interest rate derivatives
  (5,800 ) -     (5,800 )
       Drilling, recompletions and other capital expenditures
  (6,000 ) -     (6,500 )
            Distributable Cash Flow                                                                                        
$ 38,175   -   $ 39,275  
                 
Weighted Average Units Outstanding (in thousands):
               
Basic and Diluted                                                                                  
  12,566   -     12,566  

 
Supplemental Information:
 
Accounting for Derivatives
 
The following summarizes information concerning our net positions in open commodity derivatives applicable to 2009.  This list does not include the Company’s open commodity derivatives for periods subsequent to 2009. The settlement prices of commodity derivatives are based on NYMEX futures prices for collars and put options and are based on the Columbia Gas Appalachian (“TECO”) Index or the Houston Ship Channel (“HSC”) Index as indicated for fixed price swaps.  When varying monthly prices are received through the year the price indicated below is a weighted average for the year.
 
Fixed Price Swaps:
 
   
Gas
 
Oil
   
MMBtu (a)
 
Price
 
Bbls
 
Price
Production Period:
               
 2009
 
2,663,046
 
$
8.85
TECO 
 
181,500
 
$
87.23
2009
 
966,900
 
$
10.99
HSC
         

 
Collars:
 
 
Gas
Oil
 
MMBtu (a)
 
Floor
 
Ceiling
Bbls
 
Floor
 
Ceiling
Production Period:
                   
 2009
1,000,000
 
$
7.50
 
$
9.00
36,500
 
$
100.00
 
$
127.00

 
Puts:
 
   
Gas
   
MMBtu (a)
 
Floor
Production Period:
       
 2009
   
840,143
 
$
7.50

 
 (a)
One MMBtu equals one Mcf at a Btu factor of 1,000.
 
Interest Rates
 
The following summarizes information concerning our positions in open interest rate swaps at December 31, 2008. 
 
   
 Notional  
  Amount
 
Fixed
Libor
Rates
Period:
         
January 1, 2009 to December 10, 2010
 
$
10,000,000
 
1.50
%
January 1, 2009 to December 20, 2010
 
$
10,000,000
 
1.85
%
January 1, 2009 to January 31, 2011
 
$
20,000,000
 
3.00
%
January 1, 2009 to March 31, 2011
 
$
20,000,000
 
2.08
%
January 1, 2009 to December 10, 2012
 
$
20,000,000
 
3.35
%
January 1, 2009 to January 31, 2013
 
$
20,000,000
 
2.38
%
January 1, 2009 to September 10, 2009 (Basis Swap)
 
$
20,000,000
 
LIBOR 1M vs. LIBOR 3M
 
January 1, 2009 to October 31, 2009 (Basis Swap)
 
$
40,000,000
 
LIBOR 1M vs. LIBOR 3M
 

 
 
 
CONTACT: Vanguard Natural Resources, LLC
 
Investor Relations
 
Richard Robert, EVP and CFO, 832-327-2258
 
investorrelations@vnrllc.com
 
DRG&E
Jack Lascar/Carol Coale, 713-529-6600


 
 

 


The following information was filed by Vanguard Natural Resources, Llc (VNR) on Friday, March 6, 2009 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

View differences made from one year to another to evaluate Vanguard Natural Resources, Llc's financial trajectory

Compare SEC Filings Year-over-Year (YoY) and Quarter-over-Quarter (QoQ)
Sample 10-K Year-over-Year (YoY) Comparison

Compare this 10-K Annual Report to its predecessor by reading our highlights to see what text and tables were  removed  ,   added    and   changed   by Vanguard Natural Resources, Llc.

Continue

Never Miss A New SEC Filing Again


Real-Time SEC Filing Notifications
Screenshot taken from Gmail for a new 10-K Annual Report
Last10K.com Member Feature

Receive an e-mail as soon as a company files an Annual Report, Quarterly Report or has new 8-K corporate news.

Continue

We Highlighted This SEC Filing For You


SEC Filing Sentiment Analysis - Bullish, Bearish, Neutral
Screenshot taken from Wynn's 2018 10-K Annual Report
Last10K.com Member Feature

Read positive and negative remarks made by management in their entirety without having to find them in a 10-K/Q.

Continue

Widen Your SEC Filing Reading Experience


Increased Reading Area for SEC Filings
Screenshot taken from Adobe Inc.'s 10-Q Quarterly Report
Last10K.com Member Feature

Remove data columns and navigations in order to see much more filing content and tables in one view

Continue

Uncover Actionable Information Inside SEC Filings


SEC Filing Disclosures
Screenshot taken from Lumber Liquidators 10-K Annual Report
Last10K.com Member Feature

Read both hidden opportunities and early signs of potential problems without having to find them in a 10-K/Q

Continue

Adobe PDF, Microsoft Word and Excel Downloads


Download Annual and Quarterly Reports as PDF, Word and Excel Documents
Screenshots of actual 10-K and 10-Q SEC Filings in PDF, Word and Excel formats
Last10K.com Member Feature

Export Annual and Quarterly Reports to Adobe PDF, Microsoft Word and Excel for offline viewing, annotations and analysis

Continue

FREE Financial Statements


Download Annual and Quarterly Reports as PDF, Word and Excel Documents
Screenshot of actual balance sheet from company 10-K Annual Report
Last10K.com Member Feature

Get one-click access to balance sheets, income, operations and cash flow statements without having to find them in Annual and Quarterly Reports

Continue for FREE

Intrinsic Value Calculator


Intrinsic Value Calculator
Screenshot of intrinsic value for AT&T (2019)
Last10K.com Member Feature

Our Intrinsic Value calculator estimates what an entire company is worth using up to 10 years of financial ratios to determine if a stock is overvalued or not

Continue

Financial Stability Report


Financial Stability Report
Screenshot of financial stability report for Coco-Cola (2019)
Last10K.com Member Feature

Our Financial Stability reports uses up to 10 years of financial ratios to determine the health of a company's EPS, Dividends, Book Value, Return on Equity, Current Ratio and Debt-to-Equity

Continue

Get a Better Picture of a Company's Performance


Financial Ratios
Available Financial Ratios
Last10K.com Member Feature

See how over 70 Growth, Profitability and Financial Ratios perform over 10 Years

Continue

Log in with your credentials

or    

Forgot your details?

Create Account