Vital Energy Inc. has entered into three acquisition agreements with subsidiaries of Henry Energy LP and Henry Resources LLC, Tall City Property Holdings III LLC and Maple Energy Holdings LLC that will increase its footprint in the Permian Basin by nearly 53,000 net acres.
The three deals have total consideration of approximately $1.165 billion, subject to customary closing price adjustments, Vital said in a recent press release, adding that all transactions are expected to close in the fourth quarter .
The combined transactions will add proven reserves of approximately 248 million barrels of oil equivalent that are 44 percent oil, estimated by the end of 2022, Vital said. The transactions will increase the company’s current production by approximately 35,000 barrels of oil equivalent per day (boepd).
Vital will purchase substantially all of Henry’s Midland and Delaware Basin assets in an all-equity transaction consisting of 3.72 million shares of common stock and 4.54 million shares of mandatorily perpetual convertible preferred stock, net of customary adjustments of the closing price. The effective date of the acquisition will be August 1.
Vital will purchase all of Tall City’s Delaware Basin assets for $285 million in cash and 1.58 million shares of common stock, net of customary closing price adjustments. The effective date of the acquisition will be July 1.
Vital will purchase all of Maple’s Delaware Basin assets in an all-equity transaction consisting of 3.31 million shares of common stock, net of customary closing price adjustments. The effective date of the acquisition will be August 1.
Vital plans to finance the transactions by issuing approximately 8.61 million shares of its common stock, 4.54 million shares of mandatory perpetual convertible preferred stock, approximately $285 million in borrowings with its senior secured line and approximately $100 million of estimated purchase price adjustments. according to the statement.
Following the closing of the transactions, Vital said it expects to have approximately 250,000 net acres and total estimated 2024 production of approximately 112,000 boepd, an increase of more than 25 percent compared to standalone expectations. The company’s average oil production in 2024 is expected to increase by about 30 percent to 55,000 boepd.
Vital projects the transactions to add approximately 150 high-value crude locations at an average breakeven price of approximately $50 per barrel based on the West Texas Intermediate benchmark. The company plans to hold more than eight years of oil-weighted inventory at its planned development rate of four rigs. Upon closing, Vital expects to operate a drilling rig on the acquired acreage and use spot completion equipment for approximately one month to complete four in-process wells.
“These transactions increase our scale in the Permian and fit with our proven strategy of creating value through disciplined acquisitions,” said Jason Pigott, president and CEO of Vital. “We have demonstrated our ability to effectively consolidate Permian assets and identify sustainable synergies to reduce costs, improve margins and improve free cash flow. These acquisitions will significantly strengthen our free cash flow outlook and allow us to quickly divest the our balance sheet”.
Vital said it has consistently used a balance of equity and debt to fund high-value acquisitions to strengthen the business. The company has made $1.7 billion in acquisitions that have leveraged a combined total of approximately 50 percent equity and 50 percent debt. The borrowing base of Vital’s credit facility and chosen commitment will increase to $1.5 billion and $1.25 billion, respectively, from $1.3 billion and $1.0 billion, respectively. The company will have access to its full $1.5 billion debt base through a $250 million committed term loan facility, according to the statement.
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