March 20, 2012 / 7:52 PM / 5 years ago

Vanguard Natural eyes $400 million in deals, nat gas assets

(Reuters) - Vanguard Natural Resources VNR.N will spend at least $400 million on acquisitions this year and is looking to snap up natural gas properties as weak prices for the fuel knock down the value of these assets, the U.S. oil and gas company's finance chief said.

Soaring supplies from shale fields in the United States and a mild winter pushed natural gas prices to their lowest in a decade in January, leading several companies, including Chesapeake (CHK.N) and Encana (ECA.TO), to cut back on drilling.

"We can buy gas assets at these depressed price levels and still make a good return over the next three to four years," Vanguard Chief Financial Officer Richard Robert told Reuters in a telephone interview on Tuesday.

Natural gas prices, which were trading at $2.33 per million British thermal units on Tuesday, could hit $5 by 2016, Robert said. At that price, natural gas drilling is widely believed to be viable for most producers.

"The beauty of buying gas production today is that most of it is not economical to drill, so people do not expect to get paid for all the undeveloped locations. All you are paying for is current production," Robert said.

Robert -- who was formerly vice president of finance for Enbridge US, a unit of Canada's No.2 pipeline company Enbridge Inc (ENB.N) (ENB.TO) -- said Vanguard would close at least one natural gas deal this year.

However, he did not specify how much the company expects to spend solely on natural gas acquisitions this year.

Houston-based Vanguard, whose asset-base stretches across the Permian Basin, Texas, Kentucky, Tennessee and Mississippi, has seen its stock gain 11 percent in the past three months, pegging the company's market value at $1.58 billion.

The company had $2.9 million in cash and cash equivalents at the end of 2011, while its long-term debt was $771 million.

Linn Energy LINE.O, another Houston-based oil and gas company, has also been coveting natural gas properties and recently struck a $1.2 billion deal to buy assets in Kansas from BP Plc (BP.L).

Vanguard recently reported a better-than-expected quarterly profit and forecast higher production for this year as it benefits from its acquisition of Encore Energy.

Last July, Vanguard struck a $545 million deal to buy all the shares in Encore Energy it did not already own.

Reporting by Swetha Gopinath in Bangalore; Editing by Viraj Nair

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