2010-12-16-2010-11-17
To buy ownership interest in Encore Energy Partners LP with interest in TX, MT, WY, NM, AR, OK & NM, gaining 8,630 BOE/d, 43.4 MMBOE proved.
The MLP Vanguard Natural Resources LLC, Houston, (NYSE: VNR) plans to acquire all ownership interests in the Dallas-based MLP Encore Energy Partners LP (NYSE: ENP) held by Encore parent company Denbury Resources Inc. (NYSE: DNR) for $380 million in cash and stock.
Denbury, which acquired the interests in the MLP when it merged with parent company Encore Acquisition Co. in November 2009, owns 100% of Encore Energy Partners general partner's interest and approximately 46% of Encore Energy's outstanding common units.
"This acquisition furthers our plan to increase exposure to oil-focused assets and it does so in a manner which creates value for our unit holders," says Scott W. Smith, Vanguard president and chief executive. "Additionally, the acquisition accomplishes our strategic goal of increasing scale, enhancing our presence in the market, diversifying our reserves and geographical footprint and increasing the stability of our cash flows."
Encore Energy properties are in four core areas, including the Big Horn Basin in Wyoming and Montana; the Permian Basin in West Texas and New Mexico; the Williston Basin in North Dakota and Montana; and the Arkoma Basin in Arkansas and Oklahoma.
Vanguard estimates proved reserves as of Sept. 30 at approximately 43.4 million barrels of oil equivalent (67% oil and gas liquids; 91% proved developed). Average production is approximately 8,630 BOE per day. Assets include 2,743 gross producing oil and gas wells as of year-end 2009 and 145,170 gross acres (103,535 net). The estimated R/P ratio is approximately 14 years.
Approximately 56% of expected gas production is hedged through 2013.
Vanguard will fund the deal with $175-million acquisition term loan being led by BNP Paribas, RBC Capital Markets, Credit Agricole and Citi, with its senior secured credit facility, and up to $80 million in Vanguard common units valued at $25.50.
Vanguard will continue to operate the entities independently after closing. The companies will also continue to maintain separate boards with independent directors representation on each board and will pursue commercial opportunities and execute growth strategies in consistent with past practices.
Denbury plans to use proceeds to pay debt and to fund any capex shortfall.
RBC Capital Markets is financial advisor to Vanguard and Vinson & Elkins LLP is legal advisor. Wells Fargo Securities LLC is advisor to Denbury.
The transaction is expected to close by year end.
Vanguard operates in the southern portion of the Appalachian Basin, the Permian Basin, South Texas and Mississippi.
Barclays Capital analyst Gary Stromberg estimates Vanguard is paying $4.09 per Mcfe on proved reserves, and $20,390 per Mcfe per day on production. "The transaction helps de-lever (Denbury's) balance sheet, improves liquidity, and completes all of Denbury's planned asset sales following the combination with Encore Acquisition."