Vital Energy, Inc. (NYSE: VTLE) has announced a joint purchase and sale agreement with Northern Oil and Gas, Inc. (NYSE: NOG) to acquire the assets of Point Energy Partners, a Vortus Investments portfolio company. The transaction, valued at $1.1 billion, will significantly expand Vital Energy’s operations in the Delaware Basin, adding high-value development inventory and increasing operational scale.
Key Details of the Transaction:
- Acquisition Structure: Vital Energy will acquire 80% of Point’s assets, with NOG acquiring the remaining 20%.
- Total Consideration: $1.1 billion in an all-cash transaction, expected to close by the end of Q3 2024. Adjustments reduce this to approximately $1.025 billion.
- Funding: Vital Energy will fund its $820 million portion through its expanded $1.5 billion credit facility, with Wells Fargo, National Association, committing to the increased commitment.
Financial Highlights:
- Accretive Transaction: Priced at 2.4x NTM Consolidated EBITDAX, immediately accretive to key financial metrics.
- High-Return Inventory: Adds 68 gross (49 net) inventory locations with an estimated breakeven oil price of $47/barrel NYMEX WTI.
- Production Increase: Adds approximately 16,300 net acres and 30.0 MBOE/d (67% oil) net production.
Operational Impact:
- Delaware Basin Expansion: Increases Vital Energy’s Delaware Basin position by 25% to 84,000 net acres, making up over one-third of the company’s oil production.
- Hedging Strategy: Robust hedges ensure cash flow stability and support leverage reduction targets. Leverage expected to reduce to approximately 1.3x within 12 months.
Development Plans:
- Post-Closing Development: Vital Energy will moderate development activities, investing around $45 million in Q4 2024 with one drilling rig, completing seven wells.
- 12-Month Outlook: A one-rig program is expected to drill and complete 12 wells, resulting in 15.0 MBOE/d (64% oil) production and $100 million in capital investments.
Management Commentary:
Jason Pigott, President and CEO, highlighted the strategic fit of the acquisition, enhancing Vital Energy’s core operating areas and balancing Permian operations. He emphasized the company’s capability to capture, integrate, and create value through optimized development plans and lower capital costs.
Advisors:
- Vital Energy: Houlihan Lokey (lead financial advisor), Citi (co-advisor), Gibson, Dunn & Crutcher LLP (legal counsel), Wells Fargo Securities, LLC (credit facility advisor), DrivePath Advisors (financial communications advisor).
- NOG: Kirkland & Ellis LLP (legal counsel).
- Point and Vortus: Jefferies LLC (financial advisor), Akin Gump Strauss Hauer & Feld LLP (legal counsel).
Conference Call:
Vital Energy will host a conference call on July 29, 2024, at 8:00 a.m. CT. The call can be accessed via the company’s website under the “Investor Relations” section.
For further details, refer to Vital Energy’s website: Vital Energy.
