Vital Energy Inc., a Permian-focused oil and gas company, announced on Wednesday that it has signed three deals to acquire nearly 53,000 net acres in the Midland and Delaware basins for about $1.2 billion.
The deals will boost Vital’s production, reserves, and drilling inventory, and strengthen its free cash flow outlook.
The sellers are affiliates of Henry Energy LP and Henry Resources LLC, Tall City Property Holdings III LLC, and Maple Energy Holdings LLC. The transactions are expected to close in the fourth quarter and have effective dates of July 1 or August 1.
Vital will pay for the deals with a mix of equity and debt, issuing about 8.6 million shares of common stock, 4.5 million shares of preferred securities, and borrowing about $285 million under its senior secured facility. The company’s borrowing base and elected commitment will increase to $1.5 billion and $1.25 billion, respectively.
The deals will add about 248 million barrels of oil equivalent (boe) of proved reserves that are 44 percent oil, and increase Vital’s current production by about 35,000 boe per day. The company expects to have about 250,000 net acres and an average 2024 production of about 112,000 boe per day after the deals close, an increase of more than 25 percent versus standalone expectations.
The deals will also add about 150 gross high-value locations with an average breakeven price of about $50 per barrel. Vital plans to operate one drilling rig on the acquired acreage and complete four in-process wells with a spot completion crew.
“These transactions increase our scale in the Permian and fit with our proven strategy of creating value through disciplined acquisitions”, Vital President and CEO Jason Pigott said. “We have demonstrated our ability to effectively consolidate Permian assets and identify sustainable synergies to lower costs, improve margins, and enhance Free Cash Flow. These acquisitions will significantly strengthen our Free Cash Flow outlook and enable us to rapidly delever our balance sheet”.