Vital Energy, formerly known as Laredo Petroleum, announced the acquisition of assets of Driftwood Energy Operating, LLC in a $127.7 million cash deal that also included an exchange of 1,578,948 shares of Vital common stock.
The company said the transaction is expected to close in early April of this year with an effective date of Jan. 1, 2023.
Driftwood is an upstream oil and gas company focused on the acquisition and horizontal development of operated properties in the Permian Basin. Driftwood is based in Texas with offices in Dallas and Midland. It was founded in 2017 by the current management team and is partnered with Carnelian Energy Capital Management, L.P., a Houston-based energy investment firm.
Throughout their careers, the Driftwood executive team has drilled and completed hundreds of horizontal wells and has been instrumental in executing billions of dollars of acquisitions and divestitures in the Permian Basin.
- Accretive to Free Cash Flow1 and Net Asset Value1 per share and leverage neutral
- Current production of ~5,400 barrels of oil equivalent (“BOE”) per day (63% oil), ~50% next 12-month decline rate
- Extends Company’s oil-weighted inventory life, adding an estimated 30 gross (23 net) operated horizontal locations in the Wolfcamp B, including four gross (four net) drilled but uncompleted locations
- Approximately 16,500 gross (11,200 net) acres in Upton and Reagan counties (~91% held by production)
- Majority of acreage, production and inventory located in the prolific, contiguous Upton County leasehold (~85% of transaction value allocated to Upton County)
“This purchase strengthens Vital by expanding our footprint into Upton County, adding high-return inventory and a new development area in the Midland Basin,” stated Jason Pigott, President and Chief Executive Officer.
“Importantly, it is also accretive on key financial metrics, is leverage neutral and extends our proven track record of completing disciplined transactions that add value for shareholders. We plan to develop these assets over the next two to three years without increasing our current activity levels, highlighting our commitment to maintaining capital discipline and maximizing Free Cash Flow generation.”
1Non-GAAP financial measure; please see definitions of non-GAAP financial measures at the end of this release.
Houlihan Lokey is serving as financial advisor to Vital.