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Vanguard Pens $581M Deal

Zacks Equity Research

Upstream operator Vanguard Natural Resources LLC (VNR) has inked a deal with an undisclosed buyer.

Per the agreement, Vanguard will buy gas and oil resources in the Pinedale and Jonah fields located in Southwestern Wyoming. The company is anticipated to invest roughly $581.0 million for the acquisition and will likely finance the purchase with debt. Vanguard expects the transaction to close on or before Jan 31, 2014. It is the company’s first investment in the Pinedale and Jonah fields for drilling wells.

The assets comprise 14,000 net acres of land. Presently, the properties are producing roughly 113.4 million cubic feet of gas equivalent per day of which 80% is natural gas, 16% is natural gas liquid, and the rest 4% is oil. Moreover, the probable proved reserve of the resources is about 847.0 billion cubic feet of gas equivalent. Vanguard added that it will partner with Ultra Petroleum Corp. (UPL) and QEP Resources Inc. (QEP) to operate the 100% non-operated gas and oil assets. Ultra Petroleum is a natural gas producer while QEP Resources is a domestic energy explorer.

Vanguard believes that the deal will help the company boost its daily output by 55%. Additionally, Vanguard expects the purchase to benefit the company with immediate increase in cash flow.  

Houston, Texas-based Vanguard is primarily involved in the production, development and acquisition of domestic oil and gas resources. The company currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can look at better-ranked oil and gas exploration and production firm Harvest Natural Resources Inc. (HNR). The stock sports a Zacks Rank #1 (Strong Buy).

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