Vital Energy just expanded its holdings in the Permian Basin with a $378 million acquisition of assets from Forge Energy II Delaware LLC, an EnCap portfolio company.
The Tulsa company said the acquisition will expand its Permian Basin leasehold to 198,000 net acres and also establish core operating positions in Pecos, Reeves and Ward Counties.
Vital acquired 70% of Forge Energy’s assets while a third unnamed party purchased the remaining 30% for $162 million.
Vital said it plans to fund the all-cash acquisition through the use of its credit
“This accretive acquisition is attractively priced and significantly expands Vital Energy’s Permian focus, adding a core operating area in the Delaware Basin,” stated Jason Pigott, President and Chief Executive Officer.
“We have a proven track record of building value through our disciplined acquisition strategy. Today’s deal significantly enhances our outlook for Free Cash Flow generation which we will use to pay down debt and strengthen our balance sheet.”
The transaction will also add nearly 100 gross high-value oil locations in the 2nd and 3rd Bone Spring and Wolfcamp A with an average breakeven oil price of approximately $50 NYMEX WTI.
It also means an additional 42,000 gross acres and current production of about 9.5 thousand barrels of oil equivalent a day, 65% oil, net to Vital Energy. The company said it plans to operate one rig on the acquired properties increasing its total Permian Basin rig count to three rigs.
Upon closing, Vital Energy plans to operate one rig on the acquired leasehold, reduced from two rigs operated by the current owner. This disciplined approach will keep production levels on the asset relatively flat while maximizing Free Cash Flow. Additional details outlining development plans for the asset and impact to full-year 2023 guidance will be provided upon closing of the transaction.
Houlihan Lokey and KeyBank are serving as financial advisors to Vital Energy and Latham & Watkins is serving as legal counsel. RBC Richardson Barr is serving as financial advisor to Forge and O’Melveny & Myers is serving as legal counsel.