Energy company, Vital Energy (NYSE: VTLE) declined in pre-market trading on Thursday even as it signed three definitive agreements with Henry Energy and Henry Resources, Tall City Property Holdings, and Maple Energy Holdings for a total consideration of $1.165 billion.
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The transactions are expected to close in the fourth quarter of this year. These combined transactions are expected to increase the scale of Vital Energy in the Permian Basin through 150 high-value locations and are estimated to add around 53,000 net acres and proved reserves of around 248 million barrels of oil equivalent (BOE). These assets in the Permian Basin are likely to increase the company’s current oil production by approximately 50%.
The company stated in its press release that “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 [thousands of barrels of oil equivalent per day], an increase of more than 25% versus stand-alone expectations.”
In FY24, Vital Energy expects estimated average oil production to increase by approximately 30% to 55 thousand barrels of oil per day.
These transactions are expected to be immediately accretive and is likely to increase the company’s free cash flows by 90% in 2024 at $80 per barrel West Texas Intermediate (WTI).
In order to finance these transactions, the company plans to issue around “8.61 million shares of its common stock, 4.54 million shares of perpetual mandatorily convertible preferred securities, approximately $285 million in borrowings under its senior secured facility and approximately $100 million of estimated purchase price adjustments.”
Analysts remained sidelined about VTLE stock with a Hold consensus rating based on three Buys, two Holds, and two Sells.
