Vanguard Natural Resources, LLC (Nasdaq:VNR) ("Vanguard" or "the
Company") and LRR Energy, L.P. (NYSE:LRE) today announced that they
have entered into a Purchase Agreement and Plan of Merger pursuant
to which a subsidiary of Vanguard will merge into LRR Energy, L.P.
and, at the same time, Vanguard will acquire LRE GP, LLC, the
general partner of LRR Energy, L.P. (collectively, "LRR Energy", or
"LRE") for total consideration of $251 million in Vanguard common
units and the assumption of LRE's net debt of $288 million. As a
result of the transaction, LRR Energy and its general partner will
become wholly owned subsidiaries of Vanguard. The transaction,
which has been approved by the boards of directors of both
companies, including the Conflicts Committee of the Board of
Directors of LRR Energy, will be a tax-free unit-for-unit
transaction with an exchange ratio of 0.55 Vanguard common units
per LRE common unit. In addition, Vanguard will acquire all of the
limited liability company interests in LRE GP, LLC in exchange for
12,320 Vanguard common units. The consideration to be received by
LRE unitholders is valued at $8.93 per LRR Energy common unit based
on Vanguard's closing price as of April 20, 2015, representing a
13% premium to LRR Energy's closing price on April 20, 2015, and a
19% premium to LRR Energy's ten day volume weighted average price.
Vanguard and LRR Energy expect the transaction to close in the
third quarter of 2015. The merger is subject to customary closing
conditions, including the approval of the LRR Energy unitholders.
Affiliates of Lime Rock Resources, LRE's largest unitholder (owning
over 30 percent of its outstanding equity), have agreed to support
and vote in favor of the transaction.
Scott W. Smith, Vanguard's President and Chief Executive Officer
commented, "The transaction we announced today is a great
opportunity for the Company and our unitholders. The assets being
acquired are attractive bolt-ons to our Permian and Arkoma basin
operations and have an inventory of development projects that
generate good returns even in the current commodity environment. We
believe this transaction should have a positive impact on all
aspects of our business. We look forward to welcoming the existing
LRE unitholders into Vanguard."
Eric Mullins, Chairman and Co-Chief Executive Officer of LRR
Energy commented, "We are pleased to announce our pending merger
with Vanguard. We have great respect for Vanguard's management
team, which has a strong track record of creating value for its
unitholders." Charlie Adcock, Co-Chief Executive Officer of LRR
Energy, noted, "We believe the transaction is compelling for LRR
Energy unitholders for many reasons and that the strategic
combination will deliver significant value in the future for our
unitholders."
Transaction Highlights
- LRE's long-life, low-decline, mature assets are well-suited for
Vanguard's upstream MLP model;
- Proved R/P of approximately 14 years;
- Balanced production and reserves product mix of 39% oil; 48%
natural gas and 13% natural gas liquids;
- Assets add additional scale in Vanguard's existing Permian and
Arkoma Basins;
- Properties more than 85% operated as measured by proved
reserves;
- Significant potential for cost savings through G&A
synergies;
- Strong commodity price hedge book with approximately 89% of
natural gas and 80% of oil proved developed production hedged
through 2018;
- Production of approximately 40 MMcfe/d, increasing Vanguard's
current production by 10%;
- Proved reserves at December 31, 2014 (SEC pricing) of
approximately 203 Bcfe, increasing Vanguard's estimated proved
reserves by 10%;
- Approximately 1,290 gross producing wells and approximately
158,000 net acres; and
- The transaction is expected to be immediately accretive to
distributable cash flow per unit.
Transaction Benefits to LRE Unitholders
- Unit price premium;
- Significantly larger and more geographically diverse asset
base;
- Expected material operating and cost synergies;
- Stronger financial position and better access to capital
markets;
- Enhanced distribution stability, coverage and growth
potential;
- Ability to participate in the future growth and upside of the
combined company; and
- Improved unit trading liquidity.
Upon the closing of the transaction, LRR Energy will be
terminating the existing management services agreement with Lime
Rock Management LP and Lime Rock Resources Operating Company, Inc.
Offset by incremental corporate hires, Vanguard expects to generate
significant general and administrative expense savings. Coupled
with interest savings from the repayment of LRE's existing second
lien term loan, which is required to be repaid upon a change of
control, Vanguard expects that the transaction will be immediately
accretive to distributable cash flow per unit while also lowering
Vanguard's pro forma debt leverage.
Citigroup Global Markets Inc. acted as the exclusive financial
advisor to Vanguard and Paul Hastings LLP acted as legal counsel to
Vanguard. Tudor, Pickering, Holt & Co. acted as exclusive
financial advisor to LRR Energy, and Andrews Kurth LLP and
Richards, Layton & Finger, P.A. acted as legal counsel to LRR
Energy. Simmons & Company International provided a fairness
opinion to the Conflicts Committee of LRR Energy's Board of
Directors. Latham & Watkins LLP acted as legal counsel to the
Conflicts Committee of LRR Energy's Board of Directors.
In conjunction with the release, Vanguard has scheduled a
conference call on April 21, 2015 starting at 3:30 p.m. Eastern
Time (2:30 p.m. Central Time).
What: Vanguard Natural Resources, LLC Merger Conference Call
When: Tuesday, April 21, 2015- 3:30 p.m. Eastern Time
Where: Live via phone by dialing 1-888-428-9473 or 719-325-2448,
for international callers, and using access code 3867853 a few
minutes prior to the start time. Investors may also view the
supplemental powerpoint presentation on the Vanguard corporate
website at www.vnrllc.com.
For those unable to listen to the live call, a replay will be
available through May 21, 2015 by calling 1-888-203-1112 or
719-457-0820, for international callers, and using access code
3867853.
About Vanguard Natural Resources, LLC
Vanguard Natural Resources, LLC is a publicly traded limited
liability company focused on the acquisition, production and
development of oil and natural gas properties. Vanguard's assets
consist primarily of producing and non-producing oil and natural
gas reserves located in the Green River
Basin in Wyoming, the Arkoma
Basin in Arkansas and Oklahoma, the Permian
Basin in West Texas and New Mexico,
the Big Horn Basin in Wyoming and Montana,
the Piceance Basin in Colorado, the Gulf Coast
Basin in Texas, Louisiana and Mississippi,
the Williston Basin in North
Dakota and Montana, the Wind River
Basin in Wyoming and the Powder River
Basin in Wyoming. More information on Vanguard can be
found at www.vnrllc.com.
About LRR Energy, L.P.
LRR Energy is a Delaware limited partnership formed in April
2011 by affiliates of Lime Rock Resources to operate, acquire,
exploit and develop producing oil and natural gas properties in
North America. LRR Energy's properties are located in the
Permian Basin region in West Texas and Southeast New Mexico, the
Mid-Continent region in Oklahoma and East Texas and the Gulf Coast
region in Texas.
Important Information and Where to Find It
In connection with the proposed merger, Vanguard Natural
Resources, LLC ("Vanguard") intends to file with the Securities and
Exchange Commission (the "SEC") a Registration Statement on Form
S-4 that will include a preliminary proxy statement of LRR Energy,
L.P. ("LRR Energy") that also constitutes a preliminary prospectus
of Vanguard. A definitive proxy statement/prospectus will be
sent to security holders of LRR Energy seeking their approval with
respect to the proposed merger. Vanguard and LRR Energy also
plan to file other documents with the SEC regarding the proposed
transaction. INVESTORS AND SECURITY HOLDERS ARE URGED TO
CAREFULLY READ THE PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS
FILED WITH THE SEC WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION. Investors and security holders will
be able to obtain a free copy of the proxy statement/prospectus (if
and when it becomes available) and other documents filed by
Vanguard and LRR Energy with the SEC through the website maintained
by the SEC at http://www.sec.gov. Copies of the documents filed
with the SEC by Vanguard will be available free of charge on
Vanguard's internet website at http://www.vnrllc.com or by
contacting Vanguard's Investor Relations Department by email at
investorrelations@vnrllc.com or by phone at (832)
327-2234. Copies of the documents filed with the SEC by LRR
Energy will be available free of charge on LRR Energy's internet
website at http://www.lrrenergy.com or by contacting LRR Energy's
Investor Relations Department by email at info@lrrenergy.com or by
phone at (713) 345-2145.
Participants in the Solicitation
Vanguard, LRR Energy, and their respective directors, executive
officers and other members of their management and employees may be
deemed to be "participants" in the solicitation of proxies in
connection with the proposed merger. Investors and security holders
may obtain information regarding Vanguard's directors, executive
officers and other members of its management and employees in
Vanguard's Annual Report on Form 10-K for the year ended December
31, 2014, which was filed with the SEC on March 2, 2015, Vanguard's
proxy statement for its 2015 annual meeting, which was filed with
the SEC on April 20, 2015, and any subsequent statements of changes
in beneficial ownership on file with the SEC. Investors and
security holders may obtain information regarding LRR Energy's
directors, executive officers and other members of their management
and employees in LRR Energy's Annual Report on Form 10-K for the
year ended December 31, 2014, which was filed with the SEC on March
4, 2015, and any subsequent statements of changes in beneficial
ownership on file with the SEC. These documents can be
obtained free of charge from the sources listed above. Additional
information regarding the interests of these individuals will also
be included in the proxy statement/prospectus regarding the
proposed transaction when it becomes available.
Forward-Looking Statements
This document includes "forward-looking statements" as defined
by the SEC. All statements other than historical facts, including,
without limitation, statements regarding the expected benefits of
the proposed transaction to Vanguard and LRR Energy and their
unitholders, the anticipated completion of the proposed transaction
or the timing thereof, the expected future reserves, production,
financial position, business strategy, revenues, earnings, costs,
capital expenditures and debt levels of the combined company, and
plans and objectives of management for future operations, are
forward-looking statements. When used in this press release, words
such as we "may," "can," "expect," "intend," "plan," "estimate,"
"anticipate," "project," "believe," "will" or "should" or the
negative thereof or variations thereon or similar terminology are
generally intended to identify forward-looking statements. It is
uncertain whether the events anticipated will transpire, or if they
do occur what impact they will have on the results of operations
and financial condition of Vanguard, LRR Energy or of the combined
company. Such forward-looking statements are subject to risks and
uncertainties that could cause actual results to differ materially
from those expressed in, or implied by, such statements.
These risks and uncertainties include, but are not limited to:
the ability to obtain unitholder approval of the proposed
transaction; the ability to complete the proposed transaction on
anticipated terms and timetable; Vanguard's and LRR Energy's
ability to integrate successfully after the transaction and achieve
anticipated benefits from the proposed transaction; the possibility
that various closing conditions for the transaction may not be
satisfied or waived; risks relating to any unforeseen liabilities
of Vanguard or LRR Energy; declines in oil, NGL or natural gas
prices; the level of success in exploitation, development and
production activities; adverse weather conditions that may
negatively impact development or production activities; the timing
of exploitation and development expenditures; inaccuracies of
reserve estimates or assumptions underlying them; revisions to
reserve estimates as a result of changes in commodity prices;
impacts to financial statements as a result of impairment
write-downs; risks related to level of indebtedness and periodic
redeterminations of the borrowing base under Vanguard's and LRR
Energy's credit agreements; the ability of Vanguard and LRR Energy
to comply with covenants contained in the agreements governing
their indebtedness; ability to generate sufficient cash flows from
operations to meet the internally funded portion of any capital
expenditures budget; ability to obtain external capital to finance
exploitation and development operations and acquisitions; federal,
state and local initiatives and efforts relating to the regulation
of hydraulic fracturing; failure of properties to yield oil or gas
in commercially viable quantities; uninsured or underinsured losses
resulting from oil and gas operations; inability to access oil and
gas markets due to market conditions or operational impediments;
the impact and costs of compliance with laws and regulations
governing oil and gas operations; ability to replace oil and
natural gas reserves; any loss of senior management or technical
personnel; competition in the oil and gas industry; risks arising
out of hedging transactions; and other risks described under the
caption "Risk Factors" in Vanguard's and LRR Energy's Annual
Reports on Form 10-K for the period ended December 31,
2014. Readers are cautioned not to place undue reliance
on forward-looking statements, which speak only as of their
dates. Except as required by law, neither Vanguard nor LRR
Energy intends to update or revise its forward-looking statements,
whether as a result of new information, future events or
otherwise.
CONTACT: Vanguard Natural Resources, LLC
Investor Relations Contact
Lisa Godfrey, 832-327-2234
Director of Investor Relations
investorrelations@vnrllc.com
LRR Energy, L.P.
Investor Relations Contact
Jaime Casas, 713-345-2126
Chief Financial Officer
jcasas@lrrenergy.com