8-K 1 form8-k0217mor033017.htm 8-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 30, 2017
Vanguard Natural Resources, LLC
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation)
001-33756
(Commission File Number)
61-1521161
(IRS Employer Identification No.)
5847 San Felipe, Suite 3000
Houston, Texas 77057
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code (832) 327-2255
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant
under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e4(c))
Item 7.01 Regulation FD Disclosure.
As previously disclosed, Vanguard Natural Resources, LLC (the “Company”) and certain subsidiaries (such subsidiaries,
together with the Company, the “Debtors”) filed voluntary petitions for relief (the cases commenced thereby, the “Chapter 11 Cases”)
under chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the
Southern District of Texas (the “Bankruptcy Court”). The Chapter 11 Cases are being administered under the caption In re Vanguard
Natural Resources, et al.
On March 30, 2017, the Debtors filed their monthly operating report, which included financial information as of February 28,
2017 and for the period covering February 1, 2017 through February 28, 2017 (the “Monthly Operating Report”) with the Bankruptcy
Court. The Monthly Operating Report is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
The information in this Item 7.01 of this Current Report on Form 8-K, including the attached Exhibit 99.1, is being
“furnished” pursuant to General Instruction B.2 of Form 8-K and shall not be deemed to be “filed” for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), is not subject to the liabilities of that section and is not deemed
incorporated by reference in any of the Company’s filings under the Securities Act of 1933, as amended, unless specifically identified
therein as being incorporated therein by reference.
Cautionary Note Regarding the Monthly Operating Report
The Company cautions investors and potential investors not to place undue reliance upon the information contained in the
Monthly Operating Report which was not prepared for the purpose of providing the basis for an investment decision relating to any of
the securities of the Company. The Monthly Operating Report is limited in scope, covers limited time periods, and has been prepared
solely for the purpose of complying with the monthly reporting requirements of the Bankruptcy Court. The Monthly Operating Report
was not audited or reviewed by independent accountants, was not prepared in accordance with U.S. generally accepted accounting
principles, is in a format prescribed by applicable bankruptcy laws, and is subject to future adjustment and reconciliation. There can be
no assurance that, from the perspective of an investor or potential investor in the Company’s securities, the Monthly Operating Report
is complete. The Monthly Operating Report also contains information for a period which is shorter and otherwise different from those
required in the Company’s periodic reports pursuant to the Exchange Act, and such information might not be indicative of the
Company’s financial condition or operating results for a period that would be reflected in the Company’s financial statements or in its
reports pursuant to the Exchange Act. Information set forth in the Monthly Operating Report should not be viewed as indicative of
future results.
Forward-Looking Statements
Statements in this Current Report on Form 8-K that relate to future results and events are not facts and constitute forwardlooking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are
based on the Company’s current expectations, estimates and assumptions and, as such, involve certain risks and uncertainties. The
ability of the Company to predict results or the actual effects of its plans and strategies is subject to inherent uncertainty. Actual results
and events in future periods may differ materially from those expressed or implied by these forward-looking statements because of a
number of risks, uncertainties and other factors. All statements other than statements of historical fact, including statements containing
the words “intends,” “believes,” “expects,” “will,” and similar expressions, are statements that could be deemed to be forward-looking
statements. In addition, the forward-looking statements represent the Company’s views as of the date as of which they were made. The
Company anticipates that subsequent events and developments may cause its views to change. However, although the Company may
elect to update these forward-looking statements at some point in the future, it specifically disclaims any obligation to do so. These
forward-looking statements should not be relied upon as representing the Company’s views as of any date subsequent to the date
hereof. Additional factors that may cause results to differ materially from those described in the forward-looking statements are set
forth in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, which was filed with the Securities
and Exchange Commission on March 15, 2017, under the headings “Risk Factors” and “Forward-Looking Statements.” Additional
risks include, but are not limited to, those associated with the Company’s filing for relief under Chapter 11 of the Bankruptcy Code.
Item 8.01
The Company cautions that trading in the Company’s securities during the pendency of the anticipated Chapter 11 Cases is
highly speculative and poses substantial risks. Trading prices for the Company’s securities may bear little or no relationship to the
actual recovery, if any, by holders of the Company’s securities in the Chapter 11 Cases.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit
Number
99.1
Description
Monthly Operating Report as of February 28, 2017 and for the period covering February 1, 2017 through
February 28, 2017, as filed with the United States Bankruptcy Court for the Southern District of Texas,
Houston Division on March 30, 2017.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
VANGUARD NATURAL RESOURCES, LLC
By:
Name:
Title:
Dated: March 30, 2017
/s/ Richard A. Robert
Richard A. Robert
Executive Vice President and Chief Financial Officer
(Principal Financial Officer and Principal Accounting
Officer)
EXHIBIT INDEX
Exhibit Number
99.1
Description
Monthly Operating Report as of February 28, 2017 and for the period covering February 1, 2017 through
February 28, 2017, as filed with the United States Bankruptcy Court for the Southern District of Texas,
Houston Division on March 30, 2017.
Case 17-30560 Document 48 4 Filed in TXSB on 0 3/30 /17 Page 1 of 1 4 /s/ Richard Robert
CASE NA ME: Vang uard Natural Resources, LLC, et al . CASE NU MBER: 17-30560 COMPA RATIVE BALAN CE SHEET S A SSET S ($ in thou sands) FILING DATE MONTH MONTH MONTH MONTH MONTH MONTH 1-Feb-17 February -17 March-17 April-17 May -17 June-17 July -17 CURRE NT ASSETS Cash 32 ,197.47 51,154 .24 Restricted Cas h 0.00 5 08.45 Accounts Receivable, Net 91 ,213.20 82,505 .93 Other Current Assets 7,610.5 4 5,480. 04 TOTAL CURRENT A SSETS 131,02 1.21 13 9,648.6 6 0.00 0 .00 0.0 0 0.00 0 .00 OIL AND GA S PROPERTIE S, NET 4,723,6 27.75 4, 729,20 5.25 Les s Accumulated Depletion (3,874, 146.30) (3,8 80,745. 72) NET BOOK VALUE O F O&G PROPERTIES 849,481 .45 848 ,459.52 0.00 0. 00 0.00 0.00 0. 00 OTHE R ASSET S 1. Go odwill 253, 370.44 253,37 0.44 2. O ther Property , Plant, and Equipment, Net 2,078. 15 1,96 5.08 3. O ther Long-Term Assets 62,2 9 1.34 62,98 8.54 TOTAL A SSET S $1,29 8,242.5 8 $1,30 6,432.2 5 $0.00 $0.00 $0.00 $ 0.00 $0. 00 MO R-2 2 Case 17-30560 D ocument 484 Filed in TXSB on 03/30 /17 Page 2 of 14
CASE NA ME: Vang uard Natural Resources, LLC, et al . CASE NU MBER: 17-30560 COMPA RATIVE BALAN CE SHEET S LIABILITIE S & OWNER'S FILING DATE MONTH MONTH MONTH MONTH MONTH MONTH EQUITY ($ in thousand s) 1-Feb-17 February -17 March-17 April-17 May -17 June-17 Ju ly -17 LIABILITIES POST-PETITION LIABILITIES(MO R-4) 0.00 20,032. 10 LIABILITIES SU BJE CT TO COMPRO MISE (PRE-PETITION) Secured Debt (1) 1,251,8 57.99 1 ,248,79 5.00 Capital Lease 19,7 83.46 1 9,398.5 3 Second L ien Secured Debt 78,0 60.59 7 8,501.7 9 Senior Unsecured Notes 443,6 86.59 4 43,686. 59 Asset Retirement Obligation (2) 26 6,928.0 1 266,9 28.01 O ther Liabilities (3) 134 ,836.58 119,27 8.97 0. 00 0.00 0.00 0. 00 0.00 TOTAL LIABILITIE S SU BJE CT TO COMPRO MISE 2 ,195,15 3.21 2, 176,588 .89 0.0 0 0.00 0 .00 0.0 0 0.00 TOTA L LIABILITIES 2,195,1 53.21 2 ,1 96,620.99 0.00 0. 00 0.00 0.00 0. 00 OWNER'S EQUITY (DEFICIT) PRE FE RRED UNITS 33 5,443.9 0 335,4 43.90 RE STRI CTED UNITS 7,615.0 1 7,615 .01 (1,23 9,969.5 4) (1,239,969 .54) RE TAINED EARNING S: Post Filing Date 0.00 5,9 03.89 5, 903.89 5,903.8 9 CHANGE IN COM MON UNITS: Post Filing Date 0.00 817.99 TOTAL OWNER' S EQUITY (NET WORTH) (896 ,910.63) (89 0,188.7 5) 5,903.8 9 5,903 .89 0.0 0
0.00 0.00 $1,298, 242.58 $1,306, 432.25 $5,903. 89 $5,9 03.89 $ 0.00 $0. 00 $0.0 0 Fo otno tes: (1) Unused Letters of Credit totaling $1 50,000 have not been inclu ded in the Secured Debt balance. (2) Company records ARO liability quarterly . (3) Other Liabilities inclu de accounts pay able, oil and gas revenue pay able, and other liability acc ruals. MOR-3 RETAINED EARNING S (LOSSE S) and CO MMON UNIT S: Filing Date TOTAL LIA BILITIES & OWNERS EQUITY 3 Case 17-30560 D ocument 484 Filed in TXSB on 03/30 /17 Page 3 of 14
CASE NA ME: Vang uard Natural Resources, LLC, et al . CASE NU MBER: 17-30560 SCHEDULE O F POST-PETITION LIABILITIES ($ in th ousands) MONTH MONTH MONTH MON TH MONTH MONTH February -17 March-17 April-17 May -17 June-17 July -17 ACCOUNT S PAYABLE 2,304. 25 PRODUCTION AND AD VALO REM TAXES PAYA BLE 1,69 5.40 SECU RED DE BT POST-PETITION 0.00 A CCRUED INTE RE ST PAYABLE 3 ,626.56 OTHER LIA BILITIES 1. Lease Operating and Capital Accrued Expenses (1) 8,594.1 2 2. Revenue Pay able 2,898.29 3. General, Adminis trative, a nd Other Accruals 913.49 TOTAL POST-PETITION LIABILITIES (MO R-3) $20,0 32.10 $ 0.00 $0. 00 $0.0 0 $0.00 $0.00 Foo tnote: (1) Inclu des amounts for unbilled JI B. MO R-4 4 Case 17-30560 D ocument 484 Filed in TXSB on 03/30 /17 Page 4 of 14
CASE NA ME: Vang uard Natural Resources, LLC, et al . CASE NU MBER: 17-30560 AGING OF POST-PETITION LIABILITIES MONTH February ($ in thousands) DAY S TOTAL TRADE PRO DUCTION AND AD L EASE OPE RATING & REVENUE OTHE R A CCOUNT S VALO REM TAX ES CAPITAL ACCRUA L PAYABLE 0 -30 (1) 2 0,032.1 0 2,304 .25 1,6 95.40 8, 594.12 2,898.2 9 4,540 .05 31-60 0.00 6 1-90 0.00 91+ 0.00 TOTAL $20,03 2.10 $2 ,304.25 $1,695 .40 $8, 594.12 $2,898. 29 $4,5 40.05 AGING O F ACCOUNT S RECEIVA BLE ($ in thousan ds) MONTH February -17 March-17 April-17 May -17 June-17 July -17 0-30 DAYS 10,599. 67 31-60 DAY S 30 ,999.63 61-90 DAY S 11,7 68.89 9 1+ DAYS 35 ,198.78 TOTAL (2) $88, 566.96 $0.00 $ 0.00 $0. 00 $0.0 0 $0.00 Fo otnote: (1) This may include dispu ted pay ables. (2) Account Receivable include oil and gas receivables, JIB receivables, and o ther miscellaneous receivables. This aging report does not include an allowance for doubtful accounts. MOR-5 5 Case 17-30 560 Document 484 Filed in TX SB on 03 /30/1 7 Page 5 of 14
CASE NA ME: Vang uard Natural Resources, LLC, et al . CASE NU MBER: 17-30560 STATE MENT O F INCO ME (LOSS) ($ in thousan ds) MONTH MONTH MONTH MONTH MONTH MONTH FILING TO February -17 March-17 April-17 May -17 June-17 July -17 DATE REVENUE S (MO R-1) 44,4 97.16 44,4 97.16 GATHE RING, PRO CE SSING AND T RAN SPORT (6,616 .78) (6,616.7 8) GRO SS P ROFIT 3 7,880.3 8 0.00 0.00 0.0 0 0.00 0.00 37, 880.38 OPE RATING EXPENSE S: Lease Operating E xpenses 13,2 56.28 1 3,256.2 8 Ad Valorem and Severance Taxes 3,814.43 3,81 4.43 General & Administrative 3,258.63 3 ,258.63 Other 0.00 0 .00 TOTAL OPE RATING EXPENSE S 20, 329.34 0.00 0.0 0 0.00 0.00 0.0 0 20,32 9.34 INCOME BEFO RE INT, DEPR/TAX (MO R-1) 17,551 .04 0.0 0 0.00 0 .00 0.0 0 0.00 1 7,551.0 4 INTERE ST EXPEN SE 4,59 2.84 4, 592.84 DEP RECIATION 6,6 56.60 6,656.6 0 OTHE R (INCOME) EXPEN SE (12.55) (12. 55) OTHER ITE MS* (1) 410.26 410.26 TOTAL INT, DEPR & OTHE R ITEM S 11,6 47.15 0 .00 0.0 0 0.00 0 .00 0.0 0 11,64 7.15 NET IN COME BE FORE TAX ES 5, 903.89 0.00 0. 00 0.00 0.00 0. 00 5,90 3.89 FEDERA L INCOM E TAXES 0.00 0. 00 NET IN COME (LO SS) (MO R-1) $5,90 3.89 $0 .00 $0. 00 $0.0 0 $0.00 $0.00 $ 5,903.8 9 Accrual Accounting Required, Otherwise Footnote with
Explanation. * Unusual and/or infrequent item(s) outside the ordinary course of business requires footn ote. Footno te: (1) Other Items include restructuring professional fees and other reorganization expenses . MO R-6 6 Case 17-3 0560 Document 484 Filed in TX SB on 03 /30/17 Page 6 of 14
CASE NA ME: Vang uard Natural Resources, LLC, et al . CASE NU MBER: 17-30560 CA SH RE CEIPTS AND MONTH MONTH MONTH MONTH MON TH MONTH FILING TO DISBURSE MENTS ($ in thousands) February -17 March-17 April-17 May -17 June-17 July -17 DATE 1. CASH- BEGINNING OF MONTH (1) $3 2,197.4 7 $51,6 62.69 $ 51,662. 69 $51, 662.69 $51,66 2.69 $5 1,662.6 9 $32,1 97.47 RECEIPT S: 2. COLLE CTION O F A CCOUNTS RE CEIVABLE 62,184. 06 62,1 84.06 3 . LOANS & ADVAN CES (attach list) 0 .00 4. SALE O F A SSET S 0. 00 5. OTHE R (attach list) 0.00 TOTAL RE CEIPTS** 6 2,184.0 6 0.00 0 .00 0.0 0 0.00 0 .00 62, 184.06 0.00 DISBU RSE MENT S: 6. A CCOU NTS PAYA BLE 27,3 68.18 2 7,368.1 8 7. SALARIE S & BENE FITS 3,259.6 6 3,259 .66 8. OTH ER E MPLOYEE CO MPENSATION 0.0 0 0.00 9. PRODU CTION TAX PAYMENT S 2,769 .89 2,7 69.89 1 0. OTH ER DISBURSEM ENTS 3,419.3 0 3,419. 30 11. INTE RE ST & FEE S 3,52 7.33 3, 527.33 12. OTHE R 0.00 0.00 TOTAL DISBU RSEMENT S FRO M OPERATION 40 ,344.35 0.00 0. 00 0.00 0.00 0. 00 40,3 44.35 1 3. PRO FESSIONAL FEES 0.00 0. 00 14. U. S. T RU STEE FEES 0.00 15 . OTHER REO RGANI ZATION EXPENSES (attac 2,3 74.48 2, 374.48 TOTAL DISBURSE MENTS** 42,7 18.83 0 .00 0.0 0 0.00 0 .00 0.0 0 42,71 8.83
16. NET CA SH FLOW 19,4 65.22 0. 00 0.00 0.00 0. 00 0.00 19,465 .22 17. CA SH - END O F MONTH (MO R-2) (1) $51,6 62.69 $ 51,662. 69 $51, 662.69 $51,662 .69 $51 ,662.69 $51,66 2.69 $5 1,662.6 9 **Numbers for the current month sho uld balance (match) RECEIPTS and CHE CKS/O THER DI SBU RSE MENTS lines on MO R-8 Fo otno te: (1) This balance includes restricted and unrestricted cash. MOR-7 7 Case 17-305 60 Document 484 Filed in TX SB on 03/30/17 Page 7 of 14
In re: Vanguard Natural Resources, LLC, et al. Case No. 17-3 0560 Debtors Reporting Period: February 28, 2017 Other Reorganizatio n Expenses Supp ort ($ in thousand s) FILING TO Ex pense February -17 March-17 April-17 May -17 June-17 July -17 DATE DIP Fees 2,274. 48 $2,2 74.48 W D V on Gonten & Co 100.00 $100.00 TOTAL $2, 374.48 $2,374. 48 MO R - 7a MO R-7a 8 Case 17-30 560 Document 484 Filed in TX SB on 03 /30/1 7 Page 8 of 14
CASE NA ME: Vang uard Natural Resources, LLC, et al . CASE NU MBER: 17-30560 CA SH ACCOUNT RECON CILIATION MONTH O F FEBRUARY ($ in thousands) BANK NAM E Capital One Cap ital One Cap ital One Citizens Ban k Ca pital One Wells Fargo A CCOUN T NUM BER x4917 x 1814 x 4984 x788 1 x537 9 x1301 ACCOUNT TYPE (1) MAIN OPERATING SECONDARY OPE RATING ZB A CCOUN T INVEST MENT ADEQUATE A SSURAN CE VENDO R TOTAL BANK BALANCE 58,828. 28 250. 00 0.00 100.09 508.45 10.73 $ 59,697. 55 DEPOSIT S IN TRAN SIT 0.1 9 $0.19 OUTSTANDING CHECK S 8,0 17.02 1 8.03 $8 ,035.05 ADJUSTED BANK BALAN CE $50, 811.45 $231.9 7 $0.00 $100.0 9 $508. 45 $10. 73 $51, 662.69 BEGINNING CA SH - PER BOOK S 31,86 4.19 21 2.64 0.0 0 100.0 6 0.00 20.58 $ 32,197. 47 RE CEIPTS* 62,177 .49 6.5 3 0.00 0 .03 0.0 0 0.00 $ 62,184. 06 TRANSFER S BETWEEN ACCOUNT S (10,78 8.66) 10,2 80.22 0 .00 0.0 0 508.4 5 0.00 $ 0.00 0. 00 0.00 0.00 0. 00 0.00 0.00 $0 .00 CHECK S/OTHE R DISBU RSE MENT S* (32,44 1.57) (10,267 .42) 0.00 0.00 0. 00 (9.84) ($42,7 18.83) ENDING CASH - PE R BOOK S $5 0,811.4 5 $231. 97 $0.0 0 $100. 09 $508 .45 $10 .7 3 $51,662. 69 Footno te: (1) Does no t include the segregated bank account held at U S Ban k (x 7000), which has a balance of
$1,067,40 3. MO R-8 *Numbers shou ld balance (match) TOTAL RECEIPTS and TO TAL DISBURSEM ENTS lines o n MO R-7 (WITHDRAWAL) OR CONTRI BUTION BY D EBTO R 9 Case 17-30560 D ocument 484 Filed in TXSB on 03/30 /17 Page 9 of 14
In re: Vanguard Natural Resources, LLC, et al. Case No. 17-3 0560 Debtors Reporting Period: February 28, 2017 Debtor Entity Case No. Current Period Cumulative Vanguard Natural Resources, LLC 17-3056 0 -$ -$ Eagle Roc k E nergy Acquisition Co., Inc. 1 7-30565 - - Eagle Roc k Energy Acquisition Co . II, Inc. 17-30566 - - Eagle Roc k Acqu isition Partnership, L.P. 1 7-30570 - - Eagle Roc k Acquis itio n Partnership II, L.P. 17-30571 - - Eagle Roc k Ups tream Development Company , Inc. 17-30568 - - Eagle Rock Up stream Development Company II, Inc. 17-30569 - - Encore Clear Fork Pipeline LLC 1 7-30 572 - - Escambia Asset Co. LL C 17-3 0573 - - Escambia Operating Co . LLC 17-30574 - - Vanguard Natural Gas, L LC 17-3 0562 (10, 277.26) (10, 277.26) Vanguard Operating, LLC 17-30561 (3 2,441.5 7) (32,441.57) VN R Finance Corp. 17-30563 - - VN R Hold ings, LLC 1 7-30564 - - Subtotal (42,71 8.83)$ (42,718.83)$ Less : Transfers to Debtor in Possess ion Accounts - - Plu s: Es tate Disbursements Made by Outs ide Sources - - Total D isbursements for Calcu lating U. S. Trus tee Quarterly Fees (42,718.83)$ (42,718 .83)$ MO R - 8a Total D isbursements MOR-8a Schedu le of Disbursements by Debtor Entity Fo r the Period February 1, 2017 through February 28, 2017 ($ in thousand s) (Unaudited) 10 Case 17-30560 Document 484
Filed in TX SB o n 03/3 0/17 Page 10 of 14
CASE NA ME: Vang uard Natural Resources, LLC, et al. CASE NU MBE R: 17-30560 PAYM ENTS TO INSIDERS AND P ROFE SSIONALS Of the total d isbursements sh own for the month, lis t the amount paid to in siders (as defined in Section 101(31)(A)-(F) of the U. S. Ban krup tcy Code) and the professionals. MONTH MONT H MONTH MONTH MONTH MONTH IN SIDER NA ME February -17 March-17 April-17 May -17 June-17 July -17 ($ in thousand s) 1. Scott W. Smith 54 .17 2. Richard A. Robert 40.83 3. Doug las B. Pence 37.50 4 . Richard Anderson 0.00 5. Bruce W. McCu llou gh 0.00 6. Loren Sing letary 0.00 TOTAL INSIDERS (MO R-1) $132.5 0 $0.00 $0.00 $0.00 $ 0.00 $0. 00 MONTH MONTH MONTH MONTH MONTH MONTH PRO FESSIONAL S / O RDER DAT E February -17 March-17 April-17 May -17 June-17 July -17 ($ in thousand s) 1. Evercore Group LLC 3 /20/2 017 0.0 0 2. Paul Hastings LLP 3 /1/20 17 0.00 3. Opportune LLP 3/1/2017 0. 00 4. Prime Cler k LL C 2/2 /2017 0.00 TOTAL P ROFE SSIONALS (MO R-1) $0.0 0 $0.00 $0.00 $ 0.00 $0 .00 $0. 00 MO R-9 11 Case 17-30560 Document 484 Filed in TXSB on 03/3 0/17 Page 11 of 14
UNITED STATE S BANK RUPTCY COURT SOUTH ERN DI STRI CT OF TEXAS CA SE NAME : Vanguard Natural Reso urces, LLC, et al. PETITION DATE: 2/1 /2017 CA SE NUM BER: 17-305 60 MONTHLY OPERATING REPO RT NOTE S FO R FEBRUA RY 28, 20 17 Bas is of Presentation HOU ST ON DIVISION The accompany ing consolidated financial statements of the Debtors have been prepared solely for the purpose of comply ing with the monthly reporting requirements of the U. S. Ban kruptcy Court for the Southern District of Texas (the “Month ly Operating Report”). The Mon thly Operating Report is limited in scope, covers a limited time period and the schedules con tained herein were not audited or reviewed by independent accountants nor are they intended to reconcile to any financial statements otherwise prepared or distr ibuted by the Debtors or any of the Debtors ’ affiliates. The u naudited financial statements have been derived from the boo ks and rec ords of the Debtors. Because the Debtors ’ accounting sy stems, policies, and practices were developed with a v iew to producing conso lidated financial reporting on a quarterly basis, rather than by legal entity on a monthly basis, it is po ssib le tha t not all assets or liabilities have been recorded at the correct legal entity of either the Debtors or the no n-Debtor affiliates.
The Debtors reserve all rights to supp lement or amend any schedules contained in this Monthly Operating Report. T he information prese nted here is unaud ited, su bject to further review and material adjustments, and has not been su bject to all procedures that wou ld ty pically be applied to financial information presented in accordance with generally accepted accounting principles in the Un ited States of America (“U.S. GAAP”), including, bu t not limited to, accruals, impairment adjustments, fair value assessments, tax provis ion, and o ther recurring adjustments considered necessary by management to fairly state the financial position and resu lts of o perations for the interim period(s) presented. Upon the application of such procedures, the Debtors be lieve that the financial information could be subject to changes, and these changes could be material. The information furnished in this Mo nthly Operating Report in cludes normal recurring adjustments, but does not include all of the adjustments that wo uld ty pically be made for interim financial statements in accordance with U.S. GAAP. As part of their restructuring efforts, the Debtors are reviewing their assets and liabilities on an ong oing basis, including without limitation w ith respect to intercompany claims and obligations , and nothing con tained in this Monthly Operating Report shall
constitu te a waiver of any of the Debtors’ rights with respect to such assets, liabilities, claims and ob ligations that may e xist. The Debtors caution readers not to place undue reliance upon the information contained in this Mo nthly Operating Report. The results herein are not necessarily indicative of results which may be expected from any other period or for the full y ear and may not necessarily reflect the combined results and financial pos ition of the Debtors in the future. 12 Case 17-3 0560 Document 484 Filed in TX SB on 03 /30/17 Page 12 of 14
UNITED STATE S BANK RUPTCY COURT SOUTH ERN DI STRI CT OF TEXAS CA SE NAME : Vanguard Natural Reso urces, LLC, et al. PETITION DATE: 2/1 /2017 CA SE NUM BER: 17-305 60 MONTHLY OPERATING REPO RT NOTE S FO R FEBRUA RY 28, 20 17 HOU STON DIVISION Treatment of Intercompany Transactions Treatment of Certain Liabilities and GAAP Disclo sures The Debtors have not made any determination that tax refunds or attr ibutes are assets or liabilities of a particular Debtor and the Debtors reserve all of their righ ts on this iss ue. Pursuant to the Interim Order (I) Authorizin g Co ntin ued Use of Exis ting Ban k Accounts, Bu siness Forms, and Cash Management Sy stem, (II) Addressing Requirements of Section 345 of the Ban krup tcy Code, and (III) Authorizing Continuation of Intercompany Transfers [Docket No. 57], the Debtors have kept detailed information on all pos t-Petition Date transfers of cash among the Debtors for the period covered by the Mon thly Operating Report, as described in further detail in this Report. As a result of the chapter 11 filings , the pay ment of prepetition in debtedness is subject to compromise or other treatment under a plan of rorganization. Th e determination of how liabilities will ultimately be settled or treated cannot be made until the Ban kruptcy Court approves a
chapter 11 plan of reorganizatio n. Accordingly , the ultimate amount of such liab ilities is not determinable at th is time. ASC 8 52 requires prepetition liabilities that are subject to compromise to be reported at the amounts expected to be allowed as claims, even if they may be settled for lesser amounts. The amounts currently classified as liabilities subject to compromise are preliminary and may be subject to future adjustments depending on Court actio ns, further developments with respect to d ispu ted claims, determinations of the secured status of certain claims, the values of any collateral securing such claims , rejection of executory contracts, continued reconciliation or other events. The Month ly Operating Report does not con tain all d isclos ures that wou ld be required for presentation in accordance with US GAAP and there can be no assurance that, from the perspective of an investor or potentia l inves tor, the Month ly Operating Report contain s information that wou ld be ty pical of financial statements filed w ith the Securities and Exchange Commissio n. For ins tance, for the period commencing on the Petition Date and thereafter, the company stopped accrued interest on both series of the Convertible Notes until further review of these obligatio ns is completed. The Debtors ’ consolidated financial s tatements in th is report have been
prepared on a going concern basis, which con templates continu ity of operations, realization of as sets and liquidation of liabilities in the ord inary course of business. Certain prepetition liabilities have been reclassified as liabilities subject to compromise. Liabilities su bject to compromise currently include, among other thing s, funded debt obligation s and amounts due to th ird parties for good s and services received prior to the Petition Date. The Debtors contin ue to analy ze and reconcile these amounts, and, therefore, the amounts reflected herein are current estimates and subject to material change as additional analy sis and decisions are completed. 13 Case 17-3 0560 Document 484 Filed in TX SB on 03 /30/17 Page 13 of 14
UNITED STATE S BANK RUPTCY COURT SOUTH ERN DI STRI CT OF TEXAS CA SE NAME : Vanguard Natural Reso urces, LLC, et al. PETITION DATE: 2/1 /2017 CA SE NUM BER: 17-305 60 MONTHLY OPERATING REPO RT NOTE S FO R FEBRUA RY 28, 20 17 HOU STON DIVISION Treatment of Reorganization Co sts Treatment of Non-Debtor En tities Reservation of Rights Reservation of Rig hts: G iven the complexity of the Debtors’ b usines s, inadvertent error s, omiss ions or over inclusion of contracts or leases may have occurred. Accordingly , the Debtors hereby reserve all of their rights to dispu te the valid ity , status, enforceability , or executory nature of any claim amount, representation or other statement in th is Mo nthly Operating Report and reserve the right to amend or supplement this Mon thly Operating Rep ort, if necessary , but shall be un der no obligation to do so. A SC 8 52 requires expenses and income directly associated with the chapter 11 filing s to be reported separately in the income statement as reorganization items. Reorganization items includes write off of discount, premium, debt is suance costs, and deriva tives associated with long- term debt, expenses related to legal adv isory and representation services, other professional con sulting and adv isory services, estimates of claims allowed related to legal
matters and rejected executory contracts and changes in liabilities su bject to compromise recognized as there are changes in amounts expected to be allowed as claims. Vanguard Natural Re sources, LL C owns beneficial interest in Potato Hills Gas Gathering Sy stem (“Potato Hills”). The financial statements stated within this Monthly Operating Report exclu de the impact of Potato Hills as it is not a debtor entity in these Chapter 11 cases. In addition, the financial statements and the supplemental information con tained herein represent the financial information for the Debtors on ly . Non-Debtor affiliates are not included in the financial s tatements and supp lemental information contained in this Mon thly Operating Report. 14 Case 17-30560 Document 484 Filed in TXSB on 03/30 /17 Page 14 of 14