NEWS RELEASE
 
Exhibit 99.1
 
Vanguard Natural Resources Reports Record Adjusted EBITDA,
Production and Proved Reserves for 2009 and
Provides Positive Outlook on 2010
 
 
HOUSTON—March 3, 2010--Vanguard Natural Resources, LLC (NYSE: VNR) ("Vanguard" or "the Company") today reported financial and operational results for the full year and fourth quarter ended December 31, 2009 and provided financial and operational guidance for 2010.
 
Mr. Scott W. Smith, President and CEO, commented, “In the face of a very challenging environment for the domestic oil and gas sector and the overall economy, Vanguard achieved excellent results on behalf of its unitholders in 2009. During the year we successfully closed two accretive acquisitions in our core operating areas, both of which were funded primarily with proceeds from equity offerings. With these acquisitions in place, we were pleased to announce in January 2010 the 5% increase in our quarterly distribution to $0.525 or $2.10 on an annual basis.  Looking forward, we feel well positioned to continue the growth we saw last year as we currently have ample liquidity on our credit facility and access to the capital markets to help fund the acquisition opportunities we believe will be available during the year.”
 
 Full Year 2009 Highlights:
 
·  
Achieved Adjusted EBITDA (a non-GAAP financial measure defined below) of $56.2 million, up 15% over $48.8 million in 2008.
 
 
·  
Generated Distributable Cash Flow (a non-GAAP financial measure defined below) of $45.1 million, representing an 80% increase over the $25 million generated in 2008.
 
 
·  
Reported average daily production of 20,010 thousand cubic feet equivalent (“Mcfe”) per day, up 23% over the average of 16,206 Mcfe/day reported in 2008.
 
 
·  
Proved reserves increased by 32% to 142.9 billion cubic feet equivalent (Bcfe). The additions to proved reserves in 2009 totaled 41.7 Bcfe (including purchases, extensions and revisions), replacing 571% of production.
 
 
·  
Reported a net loss of $95.7 million for 2009, which included a non-cash natural gas and oil property impairment charge of $110.2 million and included non-cash unrealized net losses from our commodity and interest rate derivative contracts of $18.3 million.  Excluding the impact of these charges and other non-cash adjustments which have no impact on our ability to make our cash distributions, our Adjusted Net Income (a non-GAAP financial measure defined below) was $26.1 million in 2009 compared to $19.3 million in 2008.
 
 
·  
Recognized as the best performing master limited partnership in terms of unit appreciation for 2009 at 274%.
 
Fourth Quarter 2009 Highlights:
 
 
·  
Generated Adjusted EBITDA (a non-GAAP financial measure defined below) of $14.7 million, up 17% over $12.6 million in the fourth quarter of 2008 but down 6% over third quarter 2009.
 
 
·  
Generated Distributable Cash Flow (a non-GAAP financial measure defined below) of $10.8 million, representing an 80% increase over the $6.0 million generated in the fourth quarter of 2008.
 
 
·  
Reported average production of 24,125 Mcfe/day, up 30% over 18,576 Mcfe/day produced in the fourth quarter of 2008 and up 18% over third quarter 2009 average volumes.
 
 
·  
Exited 2009 with average production at 25,768 Mcfe/day
 
 
·  
Recorded a net loss of $39.7 million compared to net loss of approximately $12.6 million in the 2008 fourth quarter.  The recent quarter included a non-cash natural gas and oil property impairment charge of $46.3 million under our full-cost accounting method and included non-cash unrealized net losses from our commodity and interest rate derivative contracts of $2.2 million.  Excluding the impact of these charges and other non-cash adjustments which have no impact on our ability to make our cash distributions, our Adjusted Net Income was $5.1 million in the fourth quarter of 2009 as compared to Adjusted Net Income of $4.0 million in the fourth quarter of 2008.
 
 
Year-End 2009 Proved Reserves
 
As provided by our outside reserve engineering firms, Vanguard’s year-end 2009 proved reserves consist of 142.9 Bcfe, 32% more than the 2008 year-end reserves of 108.5 Bcfe. Of these proven reserves, 68% are proved developed. During 2009, Vanguard replaced 571% of its production, primarily with reserves added through acquisitions.  Vanguard added 74.7 Bcfe through acquisitions and 3.6 Bcfe through other reserve adds, while price revisions, performance revisions and production reduced proved reserves by 43.9 Bcfe. Vanguard’s proved reserves are 58% natural gas, 27% crude oil and 15% natural gas liquids.
 
For year-end 2009, new Securities and Exchange Commission (SEC) rules require that the value of proved reserves be based on the unweighted arithmetic average of the first-day-of-the-month commodity prices over the preceding 12-month period (the “12-month average price”) rather than the previous method which required the reserve calculation to be computed using end-of-period spot prices (both methods holding pricing constant).  The 12-month average price for natural gas and oil is $3.87 per million British thermal units (MMBtu) and $61.04 per barrel of crude oil, compared to year-end 2009 spot prices of $5.79 per MMBtu and $79.39 per barrel of crude oil.  The SEC’s new pricing requirements negatively affected the volume of reportable proved reserves and the estimated future net cash flows from the proved reserves as there were lower natural gas and oil prices during the first half of 2009. The Company believes a reserve valuation which incorporates forward market pricing over the long term better reflects the current value of its proved reserves when compared to valuations arrived at using a constant pricing model.
 
The following table compares Vanguard’s year-end proved reserves, estimated future net cash flows from proved reserves discounted at an annual rate of 10% (PV-10) based on the 2009 twelve month average price required by the new SEC rules, spot prices at year-end 2009 and the NYMEX strip pricing through 2021 as of December 31, 2009:
 
Price Assumption
 
Proved Reserves, Bcfe
   
PV-10, $Million
 
SEC 2009 12-Month Average Price – As Reported
    143     $ 179  
End of Year Spot Price - December 31, 2009
    157     $ 331  
12 Year NYMEX Strip Pricing as of December 31, 2009
    165     $ 454  
 
 
Impairment Charge
 
We utilize the full cost method of accounting for our natural gas and oil properties.  Under the full cost method, substantially all costs incurred in connection with the acquisition, development and exploration of natural gas, natural gas liquids and oil reserves are capitalized and are subject to amortization and ceiling test limitations.  Prior to December 31, 2009, the ceiling was 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%.  At December 31, 2009, as a result of the SEC’s Final Rule, “Modernization of Oil and Gas Reporting,” which became effective December 31, 2009, we changed the price used to calculate the value of our natural gas and oil reserves to a 12-month average price rather than a year-end price.  Our capitalized costs must be equal to or less than this ceiling.
 
We recorded a non-cash ceiling test impairment of natural gas and oil properties for the year ended December 31, 2009 of $110.2 million. The impairment for the first quarter 2009 was $63.8 million as a result of a decline in natural gas and oil prices at the measurement date, March 31, 2009. This impairment was calculated based on prices of $3.65 per MMBtu for natural gas and $49.64 per barrel of crude oil.
 
As a result of declines in natural gas and oil prices during the first half of 2009 and the SEC’s new rule requiring the use of a 12-month average price, we recorded an additional impairment of $46.4 million in the fourth quarter of 2009. This impairment was calculated using the 12-month NYMEX average price of $3.87 per MMBtu for natural gas and $61.04 per barrel for crude oil.  The majority of the fourth quarter impairment was incurred on properties that we acquired in the last six months of 2009 when natural gas and oil prices were higher than the 12-month average price.  We were able to lock in the higher prices at the time of the acquisitions for a substantial portion of the expected production through 2011 for natural gas and 2013 for crude oil by using commodity derivative contracts.  However, 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.
 
 

The following information was filed by Vanguard Natural Resources, Llc (VNR) on Wednesday, March 3, 2010 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.

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