Vanguard Natural Resources, LLC (Nasdaq:VNR) ("Vanguard" or "the
Company") and Eagle Rock Energy Partners, L.P. (Nasdaq:EROC)
("Eagle Rock") today announced that they have entered into an
Agreement and Plan of Merger pursuant to which a subsidiary of
Vanguard will merge into Eagle Rock for total consideration of $474
million in Vanguard common units and the assumption of Eagle Rock's
net debt of $140 million as of March 31, 2015. As a result of the
transaction, Eagle Rock will become a wholly-owned indirect
subsidiary of Vanguard. The transaction, which has been approved by
the boards of directors of both companies, will be a tax-free
unit-for-unit transaction with an exchange ratio of 0.185 Vanguard
common units per Eagle Rock common unit. The consideration to
be received by Eagle Rock's unitholders is valued at $3.05 per
Eagle Rock common unit based on Vanguard's closing price as of May
21, 2015, representing a 24% premium to Eagle Rock's closing price
on May 21, 2015. Vanguard and Eagle Rock expect the
transaction to close in the third quarter of 2015. The merger
is subject to customary closing conditions, including the approval
by both the Vanguard and Eagle Rock unitholders.
Scott W. Smith, Vanguard's President and Chief Executive Officer
commented, "The transaction we announced today is another great
opportunity for the Company and our unitholders. The assets being
acquired are attractive bolt-ons to our Mid-Continent, Permian and
Gulf Coast basin operations. Eagle Rock has a meaningful
position in the SCOOP and STACK plays which will provide attractive
drilling opportunities for the next several years.
Considering the previously announced merger agreement with
LRR Energy, L.P. (NYSE:LRE), we believe that all three companies'
unitholders will benefit from a larger, more diversified entity
with lower financial leverage and strong positions in several key
U.S. basins. The all-unit nature of the transaction will
allow Vanguard, LRR Energy and Eagle Rock unitholders to jointly
reap the value growth in an improving commodity price
cycle."
Joseph A. Mills, the Chairman of the Board and Chief Executive
Officer of Eagle Rock commented, "We are pleased to announce our
pending merger with Vanguard. We are excited about the opportunity
to align with Vanguard which has a proven track record of creating
value for its unitholders. We believe the transaction is
compelling for Eagle Rock's unitholders by creating a significantly
larger and more diverse asset base, an attractive premium and an
opportunity to deliver significant value for our combined
unitholders in the future. We have been very impressed
with the Vanguard team and look forward to working together to
successfully combine our two companies."
Transaction Highlights
- Eagle Rock's long-life, low-decline, mature assets are
well-suited for Vanguard's upstream MLP model;
- Eagle Rock's low leverage will positively impact Vanguard's
debt metrics and credit profile;
- Eagle Rock's oil and gas production is approximately
80% and 70% hedged in 2015 and 2016 respectively, with
additional hedges in place through 2019;
- Proved R/P of approximately 12 years;
- Balanced reserves mix of 53% natural gas, 21% oil, and 26%
natural gas liquids;
- Assets add scale in Vanguard's existing East Texas and Permian
basins and establishes a new operating platform in the SCOOP/STACK
play in the Anadarko basin;
- Significant potential for cost savings through G&A
synergies;
- Opportunity to attract and retain experienced personnel from
Eagle Rock to expand Vanguard's employee base;
- Q1 2015 production of approximately 79.7 MMcfe/d, increasing
Vanguard's Q1 2015 production by 20%;
- Proved reserves at December 31, 2014 (SEC pricing) of
approximately 318 Bcfe, increases Vanguard's estimated proved
reserves by 16%;
- Adds approximately 1,778 producing wells and approximately
202,632 net acres; and
- The transaction is expected to be neutral to cash flow in 2015
and accretive in 2016 and beyond.
Transaction Benefits to Eagle Rock
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.
Pursuant to the terms and conditions of the recently announced
Purchase Agreement and Plan of Merger with LRR Energy, L.P. ("LRR
Energy"), Vanguard has obtained consent from the board of directors
of the general partner of LRR Energy to enter into, perform and
consummate the proposed merger with Eagle Rock.
Wells Fargo Securities acted as the exclusive financial advisor
and Paul Hastings LLP acted as legal counsel to Vanguard. Evercore
Group LLC acted as the exclusive financial advisor and Vinson &
Elkins LLP acted as legal counsel to Eagle Rock.
In conjunction with the release, Vanguard has scheduled a
conference call on May 26, 2015 starting at 11:00 a.m. Eastern Time
(10:00 a.m. Central Time).
What: Vanguard Natural Resources, LLC Eagle Rock Merger
Conference Call
When: Tuesday, May 26, 2015 - 11:00 a.m. Eastern Time Where:
Live via phone by dialing 1-888-430-8705 or 719-457-2645, for
international callers, and using access code 6168215 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 June 25, 2015 by calling 1-888-203-1112 or
719-457-0820, for international callers, and using access code
6168215.
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 Eagle Rock Energy Partners, L.P.
Eagle Rock Energy Partners, L.P. is a growth-oriented master
limited partnership engaged in (a) the exploitation, development,
and production of oil and natural gas properties and (b) ancillary
gathering, compressing, treating, processing and marketing services
with respect to its production of natural gas, natural gas liquids,
condensate and crude oil.
Information about the Proposed Merger and Where to Find
It
This communication does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any vote or approval. In connection with the proposed merger,
Vanguard intends to file with the Securities and Exchange
Commission (the "SEC") a Registration Statement on Form S-4 that
will include a preliminary joint proxy statement of Eagle Rock and
Vanguard that also constitutes a preliminary prospectus of
Vanguard. After the registration statement has been declared
effective by the SEC, a definitive joint proxy statement/prospectus
will be sent to (i) security holders of Eagle Rock seeking their
approval with respect to the proposed merger and (ii) security
holders of Vanguard seeking their approval with respect to the
issuance of Vanguard common units in connection with the proposed
merger. Vanguard and Eagle Rock also plan to file other
documents with the SEC regarding the proposed
transaction. INVESTORS AND SECURITY HOLDERS ARE URGED TO
CAREFULLY READ THE JOINT PROXY STATEMENT/PROSPECTUS (INCLUDING ALL
AMENDMENTS AND SUPPLEMENTS THERETO) AND OTHER DOCUMENTS FILED WITH
THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER. Investors and
security holders will be able to obtain a free copy of the joint
proxy statement/prospectus (if and when it becomes available) and
other documents, once such documents are filed by Vanguard and
Eagle Rock 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 Eagle Rock will be available
free of charge on Eagle Rock's internet website at
http://www.eaglerockenergy.com or by contacting Eagle Rock's
Investor Relations Department by email at info@eaglerockenergy.com
or by phone at (281) 408-1203.
Participants in the Solicitation
Vanguard, Eagle Rock, 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 Eagle Rock's
directors, executive officers and other members of their management
and employees in Eagle Rock's Annual Report on Form 10-K for the
year ended December 31, 2014, which was filed with the SEC on March
2, 2015, Eagle Rock's proxy statement for its annual meeting, which
was filed with the SEC on March 31, 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 direct
and indirect interests of these individuals will also be included
in the joint proxy statement/prospectus regarding the proposed
transaction when it becomes available.
Forward-Looking Statements
This communication includes "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933. All
statements other than historical facts, including, without
limitation, statements regarding the expected benefits of the
proposed transaction to Vanguard and Eagle Rock 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," "predict," "project," "foresee,"
"believe," "will," "should," "would" or "could," 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, Eagle Rock 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 Eagle Rock'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 Eagle Rock; 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 Eagle
Rock's credit agreements; the ability of Vanguard and Eagle Rock 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. Vanguard and Eagle Rock caution
that the foregoing list of factors is not
exclusive. Additional information concerning these and other
risk factors are contained in Vanguard's and Eagle Rock's Annual
Reports on Form 10-K for the period ended December 31, 2014,
subsequent Quarterly Reports on Form 10-Q, recent Current Reports
on Form 8-K and other SEC filings, which are available on the SEC's
website, http://www.sec.gov. 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 Eagle Rock 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
Eagle Rock Energy Partners, L.P.
Investor Relations Contact
Chad Knips, 281-408-1203
Director, Corporate Finance and Investor Relations
c.knips@EagleRockEnergy.com
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