After preliminary purchase price adjustments based on an effective date of October 1, 2009, Vanguard paid $55m in cash. The purchase price was funded from borrowings under the company’s reserve-based credit facility.
The acquired properties have total estimated proved reserves of 3.2 million barrels of oil equivalent as of October 1, 2009. Vanguard will operate all but one of the wells acquired in this transaction, which are located in Ward County, Texas. Based on the current net daily production of approximately 780 Boepd, the properties have a reserve to production ratio of approximately 11 years.
Scott Smith, president and CEO of Vanguard, said: “With the closing of this acquisition, we will have increased our current total production by approximately 20% and increased our oil reserves by 74%. After consideration of the oil hedges that we have put in place through 2013, these assets will be a meaningful contributor to our cash flows for years to come.”
In an effort to support stable cash flows from this transaction, Vanguard entered into crude oil swaps based on NYMEX pricing for approximately 90% of the estimated oil production from existing producing wells in the acquired properties for the period beginning January 2010 through December 2013.
