EXHIBIT 99.2
Vanguard Natural Resources, LLC and Subsidiaries
Unaudited Pro Forma Consolidated Balance Sheet
The Company acquired certain producing natural gas and oil properties and related assets and liabilities from Lewis on August 17, 2009, with an effective date of July 1, 2009. The following pro forma consolidated balance sheet has been prepared to reflect the acquisition as if it occurred on June 30, 2009. Additionally, the following pro forma consolidated balance sheet includes the effects of the Company’s public equity offering of 3.5 million common units and the borrowings under the Company’s reserve-based credit facility used in order to finance the acquisition. This unaudited pro forma balance sheet has been prepared for comparative purposes only and may not reflect what would have occurred if the Company had completed the acquisition at an earlier date. This pro forma balance sheet should be read in conjunction with the audited December 31, 2008 and unaudited June 30, 2009 consolidated financial statements of Vanguard Natural Resources, LLC. Pro forma statements of operations have not been provided as the use of forward-looking information regarding the revenues and expenses of the acquired natural gas and oil properties, as reorganized under our company structure and management, would be necessary to meaningfully present the effects of the acquisition.
Vanguard Natural Resources, LLC and Subsidiaries
Unaudited Pro Forma Consolidated Balance Sheet
As of June 30,
(in thousands)
| | Vanguard Historical | | Pro Forma | | | Vanguard Pro Forma As Adjusted | |
| | | | | | | | | |
| Assets | | | | | | | | |
| Current assets | | | | | | | | |
| Cash and cash equivalents | | $ | 3,715 | | $ | 53,683 (50,827) | (a) (b) | | $ | 6,571 | |
| Trade accounts receivable, net | | | 4,563 | | | | | | | 4,563 | |
| Derivative assets | | | 21,538 | | 3,717 | (b) | | | 25,255 | |
| Other receivables | | | 3,160 | | | | | | | 3,160 | |
| Other currents assets | | | 691 | | | 187 | (b) | | | 878 | |
| Total current assets | | | 33,667 | | | 6,760 | | | | 40,427 | |
| | | | | | | | | | | | |
| Natural gas and oil properties, at cost | | | 287,389 | | | 54,942 | (b) | | | 342,331 | |
| Accumulated depreciation | | | (172,303 | ) | | | | | | (172,203 | ) |
| Natural gas and oil properties, net – full cost method | | | 115,086 | | | 54,942 | | | | 170,028 | |
| Other assets | | | | | | | | | | | |
| Derivative assets | | | 10,824 | | | 411 | (b) | | | 11,235 | |
| Deferred financing costs | | | 709 | | | | | | | 709 | |
| Other assets | | | 1,015 | | | | | | | 1,105 | |
| Total assets | | $ | 161,301 | | $ | 62,113 | | | $ | 223,414 | |
| | | | | | | | | | | | |
| Liabilities and members’ equity | | | | | | | | | | | |
| | | | | | | | | | | | |
| Current liabilities | | | | | | | | | | | |
| Accounts payable – trade | | $ | 427 | | $ | — | | | $ | 427 | |
| Accounts payable – natural gas and oil | | | 1,113 | | | | | | | 1,113 | |
| Payables to affiliates | | | 829 | | | | | | | 829 | |
| Derivative liabilities | | | 156 | | | | | | | 156 | |
| Accrued expenses | | | 3,673 | | | 298 | (b) | | | 3,971 | |
| Total current liabilities | | | 6,198 | | | 298 | | | | 6,496 | |
| | | | | | | | | | | | |
| Long-term debt | | | 132,500 | | | 5,908 | (a) | | | 138,408 | |
| Derivative liabilities | | | 1,682 | | | | | | | 1,682 | |
| Asset retirement obligations | | | 2,185 | | | 2,254 | (b) | | | 4,439 | |
| Total liabilities | | | 142,565 | | | 8,460 | | | | 151,025 | |
| | | | | | | | | | | | |
| Commitments and contingencies | | | | | | | | | | | |
| | | | | | | | | | | | |
| Members’ equity | | | | | | | | | | | |
| Members’ capital, 12,145,873 pre-acquisition and 15,645,873 post-aquisition common units issued and outstanding at June 30, 2009 | | | 19,513 | | | 47,775 5,878 | (a) (b) | | | 73,166 | |
| Class B units, 420,000 issued and outstanding at June 30, 2009 | | | 5,784 | | | | | | | 5,784 | |
| Other comprehensive loss | | | (6,561 | ) | | | | | | (6,561 | ) |
| Total members’ equity | | | 18,736 | | | 53,653 | | | | 72,389 | |
| | | | | | | | | | | | |
| Total liabilities and members’ equity | | $ | 161,301 | | $ | 62,113 | | | $ | 223,414 | |
See notes to unaudited pro forma consolidated balance sheet
Vanguard Natural Resources, LLC and Subsidiaries
Notes to Unaudited Pro Forma Consolidated Balance Sheet
| (a) | To record the financing of the acquisition with proceeds from the Company’s public equity offering of 3.5 million common units and borrowings under the Company’s reserve-based credit facility. |
| (b) | To record the acquisition of certain producing natural gas and oil properties, condensate in storage ($0.2 million asset), ad valorem tax accrual ($0.3 million liability), assumption of natural gas puts and swaps derivative contracts for gas production from August 2009 through December 2010 ($4.1 million asset) from Lewis and asset retirement obligation ($2.3 million liability) associated with the natural gas and oil properties acquired. |
Total cash consideration was $50.5 million (after consideration of preliminary purchase price adjustments of approximately $1.8 million, which included the settlement of a derivative contract for the latter part of August in the amount of $0.3 million). The measurement of the fair value at acquisition date of the assets acquired as compared to the fair value of consideration transferred, adjusted for purchase price adjustments, resulted in a gain of $5.9 million, calculated in the following table. The gain resulted from the changes in natural gas and oil prices used to value the reserves.
| | | (in thousands) | |
| Fair value of assets and liabilities acquired: | | | |
| Natural gas and oil properties | | $ | 54,942 | |
| Derivative assets | | | 4,128 | |
| Other currents assets | | | 187 | |
| Accrued expenses | | | (298 | ) |
| Asset retirement obligations | | | (2,254 | ) |
| Total fair value of assets and liabilities acquired | | | 56,705 | |
| | | | | |
| Fair value of consideration transferred | | | 50,827 | |
| | | | | |
| Gain on acquisition | | $ | 5,878 | |
