Vanguard Natural Resources Reports Second Quarter 2013 Results

  Vanguard Natural Resources Reports Second Quarter 2013 Results

Business Wire

HOUSTON -- July 31, 2013

Vanguard Natural Resources, LLC (NASDAQ: VNR) ("Vanguard" or "the Company")
today reported financial and operational results for the quarter ended
June30, 2013.

Mr. Scott W. Smith, President and CEO, commented, "This quarter we reached
record levels of production as we continue to see the benefits of our
acquisition efforts in 2012 and in the first quarter of 2013. We are excited
about the early recompletion results we have seen on the Permian assets
recently purchased from Range Resources and our 2013 capital program is on
track to generate attractive returns for the Company. With over $850 million
of liquidity available, we are well positioned to be very competitive in what
we feel will be a very robust acquisition market in the second half of the
year."

Mr. Richard A. Robert, EVP and CFO, added, “This was an eventful quarter from
a capital markets perspective. Issuing a new publicly traded perpetual
preferred unit (NASDAQ: VNRAP) was an important step in creating another
source of financing to allow Vanguard to continue to execute its growth
through acquisitions strategy. We are also pleased to announce an increase to
our common unit distribution effective with our July 2013 distribution which
will be paid in September. This reflects a continuation of our slow but steady
approach to distribution growth.”

                         Three Months Ended           Six Months Ended
                                                 
                         June 30,                     June 30,
                         2013         2012           2013        2012
                         ($ in thousands, except per unit data)
Production (BOE/d)       36,477        12,338         34,809       12,953
Oil, natural gas and
natural gas liquids      $ 116,737     $ 66,441       $ 213,419    $ 149,158
sales
Realized gain (loss)
on commodity             $ (2,588  )   $ 2,165        $ 3,184      $ (1,074  )
derivative contracts
Unrealized gain on
commodity derivative     $ 61,183      $ 83,309       $ 26,136     $ 60,575
contracts
Operating expenses       $ 36,473      $ 23,932       $ 69,989     $ 49,351
Selling, general and
administrative           $ 6,900       $ 4,827        $ 13,449     $ 9,799
expenses
Depreciation,
depletion,               $ 42,911      $ 20,855       $ 81,604     $ 42,652
amortization, and
accretion
Net income available
to common                $ 81,149      $ 103,447      $ 54,126     $ 101,423
unitholders
Adjusted net income
available to common      $ 19,102      $ 8,726        $ 35,990     $ 30,338
unitholders ^(1)
Adjusted net income
available to common      $ 0.27        $ 0.17         $ 0.53       $ 0.58
unitholders, per
common unit ^(1)
Adjusted EBITDA^(1)      $ 80,282      $ 44,450       $ 152,714    $ 97,689
Interest expense,
including realized
losses on interest       $ 16,925      $ 10,396       $ 33,310     $ 16,301
rate derivative
contracts
Drilling, capital
workover and             $ 14,770      $ 15,147       $ 29,418     $ 23,360
recompletion
expenditures
Distributions to
preferred                $ 152         $ —            $ 152        $ —
unitholders
Distributable cash
flow available to        $ 48,435      $ 18,907       $ 89,834     $ 63,405
common unitholders
^(1)
Distributable cash
flow available to        $ 0.65        $ 0.36         $ 1.25       $ 1.21
common unitholders,
per common unit ^(1)
Common unit
distribution             1.05x         0.61x          1.03x        1.03x
coverage ^(1)
Weighted average
common units             71,218        52,031         68,021       52,259
outstanding

      Non-GAAP financial measures. Please see Adjusted Net Income, Adjusted
(1)  EBITDA and Distributable Cash Flow tables at the end of this press
      release for a reconciliation of these measures to their nearest
      comparable GAAP measure.

Second Quarter 2013 Highlights:

  *Adjusted EBITDA (a non-GAAP financial measure defined below) increased 81%
    to $80.3 million in the second quarter of 2013 from $44.5 million in the
    second quarter of 2012 and increased 11% from the $72.4 million recorded
    in the first quarter of 2013.
  *Distributable Cash Flow Available to Common Unitholders (a non-GAAP
    financial measure defined below) increased 156% to $48.4 million from the
    $18.9 million generated in the second quarter of 2012 and increased 17%
    from the $41.4 million generated in the first quarter of 2013.
  *We reported net income available to common unitholders for the quarter of
    $81.1 million or $1.14 per basic unit compared to a reported net income of
    $103.4 million or $1.99 per basic unit in the second quarter of 2012. The
    recent quarter includes net non-cash gains of $62.2 million that are
    adjustments to arrive at Adjusted Net Income available to common
    unitholders (a non-GAAP financial measure defined below). The second
    quarter of 2012 results included net non-cash gains of $94.7 million.
  *Adjusted Net Income available to common unitholders (a non-GAAP financial
    measure defined below) was $19.1 million in the second quarter of 2013, or
    $0.27 per basic unit, as compared to $8.7 million, or $0.17 per basic
    unit, in the second quarter of 2012.
  *Reported average production of 36,477 BOE per day in the second quarter of
    2013, up 196% over 12,338 BOE per day produced in the second quarter of
    2012 and a 10% increase over 33,122 BOE per day produced in the first
    quarter of 2013. On a BOE basis, crude oil, natural gas and natural gas
    liquids (“NGLs”) accounted for 24%, 66%, and 10% of our second quarter
    2013 production, respectively.

During the quarter we produced 13,176 MMcf of natural gas, an increase of 616%
from the 1,839 MMcf of natural gas produced in the second quarter of 2012, 798
MBbls of oil, an increase of 16% from the 687 MBbls of oil produced in the
second quarter of 2012, and 326 MBbls of NGLs, an increase of 153% from the
129 MBbls of NGLs produced in the second quarter of 2012.

Including the impact of our natural gas hedges in the second quarter of 2013,
we realized an average price of $3.17 per Mcf on natural gas sales, compared
to the unhedged realized average price of $2.73 per Mcf. Including the impact
of our oil hedges, we realized an average price of $86.31 per barrel on crude
oil sales, compared to the unhedged realized average price of $87.38 per
barrel. Including the impact of our NGL hedges, we realized an average price
of $34.23 per barrel, compared to the unhedged realized average price of
$33.85 per barrel.

2013 Six Month Highlights:

  *Adjusted EBITDA (a non-GAAP financial measure defined below) increased 56%
    to $152.7 million in the first half of 2013 from $97.7 million in the
    first half of 2012.
  *Distributable Cash Flow Available to Common Unitholders (a non-GAAP
    financial measure defined below) for the first six months of 2013
    increased 42% to $89.8 million from the $63.4 million generated in the
    first half of 2012.
  *We reported net income available to common unitholders for the first six
    months of 2013 of $54.1 million or $0.80 per basic unit compared to a
    reported net income of $101.4 million or $1.94 per basic unit in the first
    half of 2012. The 2013 results include net non-cash gains of $18.9 million
    that are adjustments to arrive at Adjusted Net Income available to common
    unitholders (a non-GAAP financial measure defined below). Results for the
    first half of 2012 included net non-cash gains of $71.1 million.
  *Adjusted Net Income available to common unitholders (a non-GAAP financial
    measure defined below) was $36.0 million for the first six months of 2013,
    or $0.53 per basic unit, as compared to $30.3 million, or $0.58 per basic
    unit, in the comparable period of 2012.
  *Reported average production of 34,809 BOE per day in the first half of
    2013, up 169% over 12,953 BOE per day produced in the first half of 2012.
    On a BOE basis, crude oil, natural gas and NGLs accounted for 24%, 67%,
    and 9% of our production for the first half of 2013 production,
    respectively.

During the first six months of 2013, we produced 25,167 MMcf of natural gas,
an increase of 490% from the 4,267 MMcf of natural gas produced in the first
six months of 2012, 1,523 MBbls of oil, an increase of 10% from the 1,379
MBbls of oil produced in the first six months of 2012, and 583 MBbls of NGLs,
an increase of 118% from the 267 MBbls of NGLs produced in the first six
months of 2012.

Including the impact of our natural gas hedges in the first half of 2013, we
realized an average price of $3.34 per Mcf on natural gas sales, compared to
the unhedged realized average price of $2.52 per Mcf. Including the impact of
our oil hedges, we realized an average price of $82.96 per barrel on crude oil
sales, compared to the unhedged realized average price of $84.19 per barrel.
Including the impact of our NGL hedges, we realized an average price of $37.41
per barrel, compared to the unhedged realized average price of $37.17 per
barrel.

Capital Expenditures

Capital expenditures for the drilling, capital workover and recompletion of
oil and natural gas properties were approximately $14.8 million in the second
quarter of 2013 compared to $15.1 million for the comparable quarter of 2012
and $14.6 million for the first quarter of 2013. The capital expenditures in
the second quarter were approximately $5.3 million lower than our budget due
to the acceleration of projects which resulted in higher capital spending
during the first quarter of 2013.

Excluding any potential future acquisitions, we currently anticipate an
approximate capital budget for the remainder of the year of $30.0 – $35.0
million. The increase to our 2013 capital budget is primarily attributable to
favorable results of our initial drilling program in the Woodford Shale in the
first half of the year that we will expand for the remainder of 2013.

Recent Activities

Acquisition of Oil and Natural Gas Properties

On April 1, 2013, we completed the acquisition of certain natural gas, oil and
NGLs properties in the Permian Basin in southeast New Mexico and West Texas
from Range Resources Corporation for an adjusted purchase price of $266.3
million. The purchase price was funded with borrowings under our reserve-based
credit facility and is subject to customary post-closing adjustments to be
determined based on an effective date of January 1, 2013. Based on internal
reserve estimates as of June 30, 2013, the interests acquired have estimated
total net proved reserves of 20.1 MMBOE, of which, 42% is natural gas, 26% is
oil, 32% is natural gas liquids and 85% is proved developed.

Equity offerings

On June 4, 2013, we completed a public offering of 7,000,000 of our common
units at a price of $28.35 per unit. Offers were made pursuant to a prospectus
supplement to our shelf registration statement filed with the Securities and
Exchange Commission (the "SEC") in January 2012. We received proceeds of
approximately $190.9 million from this offering, after deducting underwriting
discounts of $7.4 million and offering costs of $0.1 million.We used the net
proceeds from this offering to repay indebtedness outstanding under our
reserve-based credit facility. In July 2013, we received additional proceeds
of $8.9 million from the sale of an additional 325,000 of our common units
that were purchased by the underwriters to cover over-allotments.

On June 19, 2013, we completed a public offering of 2,520,000 7.875% Series A
Cumulative Redeemable Perpetual Preferred Units representing preferred equity
company interests ("Series A Preferred Units") at a price of $25.00 per unit.
The total of 2,520,000 Series A Preferred Units includes 320,000 Series A
Preferred Units purchased pursuant to the underwriters' over-allotment option.
Offers were made pursuant to a prospectus supplement to a shelf registration
statement filed with the SEC in January 2012. We received proceeds of
approximately $60.9 million from this offering, after deducting discounts of
$2.0 million and offering costs of $0.1 million. We used the net proceeds from
this offering to repay indebtedness outstanding under our reserve-based credit
facility.

Hedging Activities

We enter into derivative transactions in the form of hedging arrangements to
reduce the impact of oil and natural gas price volatility on our cash flow
from operations. We have mitigated some of the volatility by implementing a
hedging program for approximately 85% of our anticipated production of crude
oil through 2015, approximately 85% of our natural gas production through June
30, 2017 and approximately 10% of our NGLs production through 2014. At
June30, 2013, the fair value of commodity derivative contracts was an asset
of approximately $103.7 million, of which $38.6 million settles during the
next twelve months. Currently, we use fixed-price swaps, basis swaps,
swaptions, put spread options, put options sold, collars, three-way collars
and range bonus accumulators to hedge oil, natural gas and NGL prices.

New commodity derivative contracts put in place during the three months ended
June 30, 2013 are as follows:

                    Year         Year          Year          Year
                      2013           2014            2015            2016
Gas Positions:
Fixed-Price Swaps
^ (1)
Notional Volume       1,012,000      2,007,500       1,642,500       1,098,000
(MMBtu)
Fixed Price           $  4.10        $  4.10         $  4.12         $  4.14
($/MMBtu)
                                                                     
Oil Positions:
Fixed-Price Swaps
Notional Volume       —              —               365,000         —
(MMBtu)
Fixed Price           $  —           $  —            $  90.00        $  —
($/MMBtu)
Three-Way Collars
^(1)
Notional Volume       18,400         200,600         182,500         —
(Bbl)
Floor Price           $  90.00       $  90.00        $  90.00        $  —
($/Bbl)
Ceiling Price         $  98.55       $  96.91        $  96.75        $  —
($/Bbl)
Put Sold ($/Bbl)      $  75.00       $  75.00        $  75.00        $  —
Basis Swaps
Midland-Cushing
Notional Volume       —              182,500         365,000         —
(Bbls)
Fixed Price           $  —           $  (0.40  )     $  (0.90  )     $  —
($/Bbl)
Range Bonus
Accumulators
Notional Volume       —              365,000         —               —
(Bbls)
Bonus ($/Bbl)         $  —           $  7.10         $  —            $  —
Range Ceiling         $  —           $  98.50        $  —            $  —
($/Bbl)
Range Floor           $  —           $  70.00        $  —            $  —
($/Bbl)
Put Options Sold
Notional Volume       —              —               438,000         73,200
(Bbls)
Fixed Price           $  —           $  —            $  70.83        $  75.00
($/Bbl)

(1)  Year 2013 positions begin July 1, 2013.

For a summary of all commodity and interest rate derivative contracts in place
at June30, 2013, please refer to our Quarterly Report on Form 10-Q which is
expected to be filed on or about August 1, 2013.

Liquidity Update

At June30, 2013, we had indebtedness under our reserve-based credit facility
totaling $450.0 million with a borrowing base of $1.3 billion, which provided
for $848.3 million in undrawn capacity, after consideration of a $1.7 million
reduction in availability for letters of credit. On April 17, 2013, we entered
into the Fourth Amendment to the Third Amended and Restated Credit Agreement,
which provided for, among others, (a) the extension of the maturity date to
April 16, 2018, (b) the increase of our borrowing base from $1.2 billion to
$1.3 billion and (c) increased hedging flexibility. However, under the amended
agreement, we are only committed to and paying for a borrowing utilization of
$1.2 billion, but we have the flexibility to request the additional $100.0
million of availability if needed in the future.

As of July 31, 2013, there were $420.0 million of outstanding borrowings and
$878.3 million of borrowing capacity under the reserve-based credit facility,
after consideration of a $1.7 million reduction in availability for letters of
credit. We also have approximately $15.0 million in available cash.

Cash Distributions

On July 31, 2013, our board of directors approved an increase to our monthly
cash distribution from $0.2050 to $0.2075 per common unit ($2.46 to $2.49 on
an annualized basis) effective with our July distribution expected to be paid
on September 13, 2013.

On July18, 2013, our board of directors declared a cash distribution for our
common unitholders attributable to the month of June 2013 of $0.2050 per
common unit ($2.46 on an annualized basis) expected to be paid on August14,
2013 to Vanguard unitholders of record on August1, 2013.

Also on July18, 2013, our board of directors declared a cash distribution for
our preferred unitholders of $0.1641 per preferred unit expected to be paid on
August 15, 2013 to Vanguard preferred unitholders of record on August 8, 2013.
The initial distribution on the Series A Preferred Units was paid on July 15,
2013 amounting to $0.1422 per unit. This initial distribution rate was
prorated from the date of offering, June 19, 2013 through July 15, 2013.

Conference Call Information

Vanguard will host a conference call on Thursday (August 1, 2013) to discuss
its second quarter 2013 financial results, at 11:00 a.m. Eastern Time (10:00
a.m. Central). To access the call, please dial (877) 941-2332 or (480)
629-9773 for international callers and ask for the “Vanguard Natural Resources
Earnings Call.” The conference call will also be broadcast live via the
Internet and can be accessed through the Investor Relations section of
Vanguard's corporate website, http://www.vnrllc.com.

A telephonic replay of the conference call will be available until September
1, 2013 and may be accessed by calling (303) 590-3030 and using the pass code
4631199#. A webcast archive will be available on the Investor Relations page
at www.vnrllc.com shortly after the call and will be accessible for
approximately 30 days. For more information, please contact Lisa Godfrey at
(832) 327-2234 or email at investorrelations@vnrllc.com.

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 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, South Texas, the
Williston Basin in North Dakota and Montana, the Wind River Basin in Wyoming,
the Powder River Basin in Wyoming, and Mississippi. More information on
Vanguard can be found at www.vnrllc.com.

Forward-Looking Statements

This press release includes "forward-looking statements" within the meaning of
the federal securities laws. All statements, other than statements of
historical facts, included in this press release that address activities,
events or developments that the Company expects, believes or anticipates will
or may occur in the future are forward-looking statements. These statements
include but are not limited to statements about the acquisition announced in
this press release. These statements are based on certain assumptions made by
the Company based on management's experience and perception of historical
trends, current conditions, anticipated future developments and other factors
believed to be appropriate. Such statements are subject to a number of
assumptions, risks and uncertainties, many of which are beyond the control of
the Company, which may cause actual results to differ materially from those
implied or expressed by the forward-looking statements. These include risks
relating to financial performance and results, availability of sufficient cash
flow to pay distributions and execute our business plan, prices and demand for
oil, natural gas and NGLs, our ability to replace reserves and efficiently
develop our current reserves and other important factors that could cause
actual results to differ materially from those projected as described in the
Company's reports filed with the Securities and Exchange Commission. Please
see "Risk Factors" in the Company's public filings.

Any forward-looking statement speaks only as of the date on which such
statement is made and the Company undertakes no obligation to publicly correct
or update any forward-looking statement, whether as a result of new
information, future events or otherwise.

VANGUARD NATURAL RESOURCES, LLC
Operating Statistics
(Unaudited)
                                                 
                            Three Months Ended        Six Months Ended
                            June 30,                  June 30,
                            2013((a))  2012((a))     2013((a))  2012((a)(b))
Average realized
prices, excluding
hedges:
Oil (Price/Bbl)             $  87.38    $  81.69      $  84.19    $    87.39
Natural Gas (Price/Mcf)     $  2.73     $  2.49       $  2.52     $    3.45
NGLs (Price/Bbl)            $  33.85    $  44.47      $  37.17    $    52.00
Average realized
prices, including
hedges ^(c):
Oil (Price/Bbl)             $  86.31    $  82.67      $  82.96    $    84.67
Natural Gas (Price/Mcf)     $  3.17     $  5.32       $  3.34     $    5.71
NGLs (Price/Bbl)            $  34.23    $  44.47      $  37.41    $    52.00
Total production
volumes:
Oil (MBbls)                 798         687           1,523       1,379
Natural Gas (MMcf)          13,176      1,839         25,167      4,267
NGLs (MBbls)                326         129           583         267
Combined (MBOE)             3,319       1,123         6,300       2,358
Average daily
production volumes:
Oil (Bbls/day)              8,765       7,549         8,414       7,578
Natural Gas (Mcf/day)       144,795     20,203        139,043     23,443
NGLs (Bbls/day)             3,579       1,422         3,220       1,469
Combined (BOE/day)          36,477      12,338        34,809      12,953

      During 2013 and 2012, we acquired certain oil and natural gas properties
(a)  and related assets. The operating results of these properties are
      included with ours from the closing date of the acquisition forward.

      On March 30, 2012, we divested oil and natural gas properties in the
(b)   Appalachian Basin. As such, there are no operating results from these
      properties included in our operating results from the closing date of
      the divestiture forward.

(c)   Excludes amortization of premiums paid and amortization on derivative
      contracts acquired.

Proved Reserves

Total proved oil and natural gas reserves at June30, 2013 were 175.7 million
barrels of oil equivalent, consisting of 588.2 billion cubic feet of natural
gas, 47.8 million barrels of crude oil and 29.8 million barrels of natural gas
liquids. Natural gas, crude oil and natural gas liquids accounted for 56%,
27%, and 17%, respectively, of our total proved reserves. Of these total
estimated proved reserves, approximately 77% were classified as proved
developed.

VANGUARD NATURAL RESOURCES, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per unit data)
(Unaudited)
                                                
                       Three Months Ended            Six Months Ended
                       June 30,                      June 30,
                       2013         2012            2013         2012
Revenues:
Oil, natural gas       $ 116,737     $ 66,441        $ 213,419     $ 149,158
and NGLs sales
Realized gain
(loss) on
commodity              (2,588    )   2,165           3,184         (1,074    )
derivative
contracts
Unrealized gain on
commodity              61,183       83,309         26,136       60,575    
derivative
contracts
Total revenues         175,332      151,915        242,739      208,659   
                                                                   
Costs and
expenses:
Production:
Lease operating        26,509        16,681          50,682        35,240
expenses
Production and         9,964         7,251           19,307        14,111
other taxes
Depreciation,
depletion,             42,911        20,855          81,604        42,652
amortization, and
accretion
Selling, general
and administrative     6,900        4,827          13,449       9,799     
expenses
Total costs and        86,284       49,614         165,042      101,802   
expenses
                                                                   
Income from            89,048       102,301        77,697       106,857   
operations
                                                                   
Other income
(expense):
Interest expense       (15,963   )   (9,830    )     (31,401   )   (15,159   )
Realized loss on
interest rate          (962      )   (566      )     (1,909    )   (1,142    )
derivative
contracts
Unrealized gain
(loss) on interest     3,374         (2,623    )     4,036         (3,044    )
rate derivative
contracts
Gain on
acquisition of oil     5,827         14,126          5,827         13,796
and natural gas
properties, net
Other                  (23       )   39             28           115       
Total other income     (7,747    )   1,146          (23,419   )   (5,434    )
(expense)
Net income             $ 81,301      $ 103,447       $ 54,278      $ 101,423
Distributions to
Preferred              (152      )   —              (152      )   —         
unitholders
Net income
available to
Common and             $ 81,149     $ 103,447      $ 54,126     $ 101,423 

Class B
unitholders
                                                                   
Net income per
Common and Class B     $ 1.14       $ 1.99         $ 0.80       $ 1.94    
units – basic
Net income per
Common and Class B     $ 1.14       $ 1.98         $ 0.80       $ 1.94    
units – diluted
                                                                   
Weighted average
common units
outstanding:
Common units –         70,798       51,611         67,601       51,839    
basic
Common units –         70,798       51,781         67,601       51,892    
diluted
Class B units –        420          420            420          420       
basic & diluted

VANGUARD NATURAL RESOURCES, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
                                                            
                                               June 30,          December 31,
                                               2013              2012
                                               (Unaudited)
Assets
Current assets
Cash and cash equivalents                      $ 24,611          $ 11,563
Trade accounts receivable, net                 72,270            51,880
Derivative assets                              41,674            46,690
Other current assets                           3,957            3,858       
Total current assets                           142,512          113,991     
                                                                 
Oil and natural gas properties, at cost        2,476,504         2,126,268
Accumulated depletion, amortization and        (629,643    )     (550,032    )
impairment
Oil and natural gas properties evaluated,      1,846,861        1,576,236   
net – full cost method
                                                                 
Other assets
Goodwill                                       420,955           420,955
Derivative assets                              65,303            53,240
Other assets                                   34,117           35,712      
Total assets                                   $ 2,509,748      $ 2,200,134 
                                                                 
Liabilities and members’ equity
Current liabilities
Accounts payable:
Trade                                          $ 5,682           $ 8,417
Affiliates                                     266               32
Accrued liabilities:
Lease operating                                14,069            7,884
Development capital                            12,496            4,754
Interest                                       11,627            11,573
Production and other taxes                     18,100            12,852
Derivative liabilities                         5,378             5,366
Oil and natural gas revenue payable            12,031            8,226
Distribution payable                           16,072            11,919
Other                                          12,022           8,479       
Total current liabilities                      107,743          79,502      
                                                                 
Long-term debt                                 997,752           1,247,631
Derivative liabilities                         4,394             11,996
Asset retirement obligations, net of           70,452            60,096
current portion
Other long-term liabilities                    1,345            3,445       
Total liabilities                              1,181,686        1,402,670   
                                                                 
Commitments and contingencies
Members’ equity
Preferred units, 2,520,000 units issued        60,880            —
and outstanding at June 30, 2013
Common units, 77,090,911 units issued and
outstanding at                                 1,264,656         794,426
June 30, 2013 and 58,706,282 at December
31, 2012
Class B units, 420,000 issued and
outstanding at June 30, 2013 and December      2,526            3,038       
31, 2012
Total members’ equity                          1,328,062        797,464     
Total liabilities and members’ equity          $ 2,509,748      $ 2,200,134 

Adjusted EBITDA

We present Adjusted EBITDA in addition to our reported net income in
accordance with GAAP. Adjusted EBITDA is a non-GAAP financial measure that is
defined as net income plus the following adjustments:

  *Net interest expense, including write-off of deferred financing fees and
    realized gains and losses on interest rate derivative contracts;
  *Depreciation, depletion and amortization (including accretion of asset
    retirement obligations);
  *Amortization of premiums paid on derivative contracts;
  *Amortization of value on derivative contracts acquired;
  *Unrealized gains on other commodity and interest rate derivative
    contracts;
  *Gains on acquisition of oil and natural gas properties, net;
  *Taxes;
  *Compensation related items, which include unit-based compensation expense
    and unrealized fair value of phantom units granted to officers; and
  *Material transaction costs incurred on acquisitions.

Adjusted EBITDA is a significant performance metric used by management and by
external users of our financial statements such as investors, research
analysts and others to assess the financial performance of our assets without
regard to financing methods, capital structure or historical cost basis; the
ability of our assets to generate cash sufficient to pay interest costs and
support our indebtedness; and our operating performance and return on capital
as compared to those of other companies in our industry.

Adjusted EBITDA is not intended to represent cash flows for the period, nor is
it presented as a substitute for net income, operating income, cash flows from
operating activities or any other measure of financial performance or
liquidity presented in accordance with GAAP. Our Adjusted EBITDA excludes
some, but not all, items that affect net income and operating income and these
measures may vary among other companies. Therefore, our Adjusted EBITDA may
not be comparable to similarly titled measures of other companies.

Distributable Cash Flow Available to Common Unitholders

We present Distributable Cash Flow Available to Common Unitholders in addition
to our reported net income in accordance with GAAP. Distributable Cash Flow
Available to Common Unitholders is a non-GAAP financial measure that is
defined as net income plus the following adjustments:

  *Depreciation, depletion, amortization and accretion;
  *Amortization of premiums paid on derivative contracts;
  *Amortization of value on derivative contracts acquired;
  *Unrealized gains on commodity and interest rate derivative contracts;
  *Gains on acquisition of oil and natural gas properties, net;
  *Taxes;
  *Compensation related items, which include unit-based compensation expense
    and unrealized fair value on phantom units granted to officers; and
  *Material transaction costs incurred on acquisitions;

Less:

  *Drilling, capital workover and recompletion expenditures;
  *Distributions to Preferred unitholders;

Plus:

  *Proceeds from the sale of leasehold interests.

Distributable Cash Flow Available to Common Unitholders is used by management
as a tool to measure (prior to the establishment of any cash reserves by our
board of directors) the cash distributions we could pay our common
unitholders. Specifically, this financial measure indicates to investors
whether or not we are generating cash flow at a level that can sustain or
support an increase in our monthly distribution rate to our common
unitholders. While Distributable Cash Flow Available to Common Unitholders is
measured on a quarterly basis for reporting purposes, management must consider
the timing and size of its planned capital expenditures in determining the
sustainability of its monthly distribution to common unitholders. Capital
expenditures are typically not spent evenly throughout the year due to a
variety of factors including weather, rig availability, and the commodity
price environment. As a result, there will be some volatility in Distributable
Cash Flow Available to Common Unitholders measured on a quarterly basis.
Distributable Cash Flow Available to Common Unitholders is not intended to be
a substitute for net income, operating income, cash flows from operating
activities or any other measure of financial performance or liquidity
presented in accordance with GAAP.

VANGUARD NATURAL RESOURCES, LLC
Reconciliation of Net Income (Loss) to Adjusted EBITDA (a) and
Distributable Cash Flow Available to Common Unitholders
(Unaudited)
(in thousands, except per unit amounts)
                                                
                        Three Months Ended           Six Months Ended

                        June 30,                     June 30,
                        2013        2012            2013         2012
Net income              $ 81,301     $ 103,447       $ 54,278      $ 101,423
Plus:
Interest expense,
including realized
losses on interest      16,925       10,396          33,310        16,301
rate derivative
contracts
Depreciation,
depletion,              42,911       20,855          81,604        42,652
amortization and
accretion
Amortization of
premiums paid on        55           3,725           109           6,959
derivative
contracts
Amortization of
value on derivative     7,504        —               15,428        —
contracts acquired
Unrealized gains on
commodity and
interest rate           (64,557  )   (80,686   )     (30,172   )   (57,531   )
derivative
contracts
Gain on acquisition
of oil and natural      (5,827   )   (14,126   )     (5,827    )   (13,796   )
gas properties, net
Taxes                   76           (67       )     (241      )   (137      )
Compensation            1,775        906             3,503         1,818
related items
Material
transaction costs       119         —              722          —         
incurred on
acquisitions
Adjusted EBITDA         $ 80,282     $ 44,450        $ 152,714     $ 97,689
Less:
Interest expense,       (16,925  )   (10,396   )     (33,310   )   (16,301   )
net
Drilling, capital
workover and            (14,770  )   (15,147   )     (29,418   )   (23,360   )
recompletion
expenditures
Distributions to
Preferred               (152     )   —               (152      )   —
unitholders
Proceeds from sale
of leasehold            —           —              —            5,377     
interests
Distributable cash
flow available to       $ 48,435    $ 18,907       $ 89,834     $ 63,405  
common unitholders
                                                                   
Distributable cash
flow per common         $ 0.65       $ 0.36          $ 1.25        $ 1.21
unit
Common unit
distribution            1.05x        0.61x           1.03x         1.03x
coverage

      Our Adjusted EBITDA should not be considered as an alternative to net
      income, operating income, cash flows from operating activities or any
      other measure of financial performance or liquidity presented in
(a)  accordance with GAAP. Our Adjusted EBITDA excludes some, but not all,
      items that affect net income and operating income and these measures may
      vary among other companies. Therefore, our Adjusted EBITDA may not be
      comparable to similarly titled measures of other companies.

Adjusted Net Income Available to Common Unitholders

We present Adjusted Net Income Available to Common Unitholders in addition to
our reported net income available to common unitholders in accordance with
GAAP. Adjusted Net Income Available to Common Unitholders is a non-GAAP
financial measure that is defined as net income available to common
unitholders plus the following adjustments:

  *Unrealized gains on commodity derivative contracts;
  *Unrealized gains and losses on interest rate derivative contracts;
  *Unrealized fair value on phantom units granted to officers;
  *Amortization of value on derivative contracts acquired;
  *Gains on acquisition of oil and natural gas properties, net; and
  *Material transaction costs incurred on acquisitions.

This information is provided because management believes exclusion of the
impact of these items will help investors compare results between periods and
identify operating trends that could otherwise be masked by these items and to
highlight the significant fluctuations that commodity price volatility has on
our results, particularly as it relates to unrealized changes in the fair
value of our derivative contracts. Adjusted Net Income Available to Common
Unitholders is not intended to represent cash flows for the period, nor is it
presented as a substitute for net income, operating income, cash flows from
operating activities or any other measure of financial performance or
liquidity presented in accordance with GAAP.

VANGUARD NATURAL RESOURCES, LLC
Reconciliation of Net Income Available to Common Unitholders to
Adjusted Net Income Available to Common Unitholders
(in thousands, except per unit data)
(Unaudited)
                                                 
                         Three Months Ended           Six Months Ended
                         June 30,                     June 30,
                         2013        2012            2013        2012
Net income available
to common                $ 81,149     $ 103,447       $ 54,126     $ 101,423
unitholders
Plus (less):
Unrealized gain on
commodity derivative     (61,183  )   (83,309   )     (26,136  )   (60,575   )

contracts
Unrealized (gain)
loss on interest         (3,374   )   2,623           (4,036   )   3,044
rate derivative
contracts
Unrealized fair
value on phantom         714          91              1,713        242
units granted to
officers
Amortization of
value on derivative      7,504        —               15,428       —
contracts acquired
Gain on acquisition
of oil and natural
gas                      (5,827   )   (14,126   )     (5,827   )   (13,796   )

properties, net
Material transaction
costs incurred on        119         —              722         —         
acquisitions
Adjusted net income
available to common      $ 19,102    $ 8,726        $ 35,990    $ 30,338  
unitholders
Net income available
to common                $ 1.14       $ 1.99          $ 0.80       $ 1.94
unitholders, per
common unit
Plus (less):
Unrealized gain on
commodity derivative     (0.86    )   (1.60     )     (0.38    )   (1.16     )

contracts
Unrealized (gain)
loss on interest         (0.05    )   0.05            (0.06    )   0.06
rate derivative
contracts
Unrealized fair
value on phantom         0.01         —               0.02         —
units granted to
officers
Amortization of
value on derivative      0.11         —               0.23         —
contracts acquired
Gain on acquisition
of oil and natural
gas                      (0.08    )   (0.27     )     (0.09    )   (0.26     )

properties, net
Material transaction
costs incurred on        —           —              0.01        —         
acquisitions
Adjusted net income
available to common      $ 0.27      $ 0.17         $ 0.53      $ 0.58    
unitholders, per
common unit

Contact:

Vanguard Natural Resources, LLC
Lisa Godfrey, 832-327-2234
Investor Relations
investorrelations@vnrllc.com
 
Press spacebar to pause and continue. Press esc to stop.