Vanguard Natural Resources transitions toward E&P operations

By Patrick C. Miller | August 20, 2018

In the second quarter, Vanguard Natural Resources, Houston, continued its transition from an upstream master limited partnership to an exploration and production company focused on organic growth.

Scott Sloan, Vanguard’s president and CEO, reported that the company is continuing to make progress in divesting of its non-core assets. “The end result will be a more focused portfolio and a strengthened balance sheet,” he said. “Additionally, we continue to make operational and organizational changes to align the company with this strategy and to set the company up for future success."

Vanguard's assets consist primarily of producing and non-producing oil and natural gas reserves located in the Green River Basin in Wyoming; the Piceance Basin in Colorado; the Permian Basin in west Texas and New Mexico; the Arkoma Basin in Arkansas and Oklahoma; the Gulf Coast Basin in Texas, Louisiana and Alabama; the Big Horn Basin in Wyoming and Montana; the Anadarko Basin in Oklahoma and north Texas; the Wind River Basin in Wyoming; and the Powder River Basin in Wyoming.

"Overall, our revised 2018 guidance considers more than $28 million in additional divestments with production of approximately 6 million cubic feet equivalent per day closing in August and a decrease in capital spend for the balance of the year,” Sloan said. “Because the horizontal Pinedale results have been variable to date, we are forecasting a slower pace of drilling and lower level of participation in that program.

Although Vanguard is forecasting lower production growth from Pinedale, the impact to cash flow has partially been mitigated by the recent improvement in Rockies basis pricing. The company has also added hedges in the near-term to lock in, according to Ryan Midgett, chief financial officer.

For the second quarter of the year, Vanguard’s reported average production of 363 million cubic feet equivalent (MMcfe) per day represents a 1 percent decrease compared to 368 MMcfe per day for the first quarter of 2018. This was at the mid-point of guidance when normalizing for divestitures closing sooner than expected.

The production decrease from the first quarter was attributed to the planned shutdown of a gas processing facility in Alabama and the closing of the Permian and Mississippi asset divestitures at the beginning of June. On a cubic-foot-equivalent basis, oil, natural gas, and NGL accounted for 14 percent, 71 percent and 15 percent, respectively, of second quarter production.

For the second quarter, Vanguard reported a net loss attributable to common stockholders of $57.8 million. This compares to a net loss of $32.7 million in the first quarter of 2018. The increase in Vanguard’s reported net loss for the second quarter of 2018 is primarily attributable to lower revenues due to lower realized natural gas prices combined with increased losses on commodity derivative contracts. This was partially offset by lower impairment expense and a realized gain on divestitures in the second quarter.