Vital Energy to acquire three assets in Permian Basin for $1.17B, sees accretion

Vital Energy announced the signing of three definitive agreements that will add scale in the Permian Basin, increase free cash flow, enhance capital efficiency and reduce leverage. Combined, the transactions have a total consideration of approximately $1.17B, subject to customary closing price adjustments. The agreements were signed with affiliates of Henry Energy and Henry Resources, Tall City Property and Maple Energy. The transactions, which are subject to customary terms and conditions, are all expected to close in Q4. The combined transactions will add nearly 53,000 net acres and proved reserves of approximately 248M barrels of oil equivalent, or BOE, 44% oil, estimated as of year-end 2022. The transactions will increase Vital Energy’s current production by approximately 35 MBOE/d. Pro forma, Vital Energy will have approximately 250,000 net acres and estimated average full-year 2024 total production of approximately 112.0 MBOE/d, an increase of more than 25% versus stand alone expectations. Estimated average full-year 2024 oil production is expected to increase approximately 30% to 55.0 MBO/d. Transactions to add approximately 150 gross locations with an average breakeven price of approximately $50 per barrel WTI. Pro forma, Vital Energy will maintain more than eight years of oil-weighted inventory at its expected four-rig pace of development. The acquisitions and pro forma development plan are expected to increase the company’s FY24 free cash flow by approximately 90%, at $80 per barrel WTI. Improvements to capital efficiency are expected to be recognized in 2024 and be sustainable in the future. The combined transactions are priced at 2.9x next 12 months consolidated EBITDA, as of the effective dates. Post closing, Vital Energy plans to direct substantially all free cash flow to debt reduction and expects pro forma leverage, at $80 per barrel WTI, to be approximately 1.0x Net Debt/Consolidated EBITDA by year-end 2024. Total consideration for the transactions is approximately $1.17B. Vital Energy plans to fund the transactions through the issuance of approximately 8.61 million shares of its common stock, 4.54M shares of perpetual mandatorily convertible preferred securities, approximately $285M in borrowings under its senior secured facility and approximately $100M of estimated purchase price adjustments. Vital Energy agreed to purchase substantially all of Henry’s Midland and Delaware basin assets in an all-equity transaction consisting of 3.72M common shares and 4.54M shares of perpetual mandatorily convertible preferred securities, net of customary closing price adjustments. Effective date of the acquisition will be August 1. Vital Energy agreed to purchase all of Tall City’s Delaware Basin assets for $285M in cash and 1.58M common shares, net of customary closing price adjustments. Effective date of the acquisition will be July 1. Vital Energy agreed to purchase all of Maple’s Delaware Basin assets in an all-equity transaction consisting of 3.31M common shares, net of customary closing price adjustments. Effective date of the acquisition will be August 1.