Vital Energy, Inc. (NYSE: VTLE) has announced a significant expansion of its operational scale and footprint in the Delaware Basin through the acquisition of the assets of Point Energy Partners, a Vortus Investments portfolio company. The total consideration for the acquisition is $1.1 billion, with Vital Energy acquiring 80% of Point's assets and Northern Oil and Gas, Inc. (NYSE: NOG) acquiring the remaining 20%.
The transaction is projected to have a substantial impact on Vital Energy's key financial metrics. It is expected to be immediately accretive, with a more than 30% increase to next 12 months (NTM) adjusted free cash flow and a more than 20% increase to NTM consolidated EBITDAX. The purchase price is underwritten by the value of proved developed producing reserves and eight work-in-process wells, which have a PV-10 of $742 million and $71 million, respectively.
The acquisition is expected to add 68 gross inventory locations with an estimated average breakeven oil price of $47 per barrel NYMEX WTI. Additionally, the assets include approximately 16,300 net acres and net production of approximately 30.0 thousand barrels of oil equivalent per day (67% oil) as of the effective date.
To support leverage reduction targets, Vital Energy has recently hedged a significant portion of its expected 2025 oil production. The company expects its leverage to be approximately 1.5x at closing, which is anticipated to reduce to approximately 1.3x within 12 months at current strip commodity prices.
The transaction will increase Vital Energy's Delaware Basin position by approximately 25% to 84,000-net acres, with the Delaware Basin accounting for more than one third of the company's oil production post-closing.
Vital Energy plans to moderate development activities on the acquired properties relative to Point's recent program. It expects to invest approximately $45 million on the new properties during the fourth quarter of 2024, operating one drilling rig and completing seven wells. The company estimates that a one-rig development program would facilitate the drilling and completion of 12 wells over a 12-month period, resulting in total production of approximately 15.0 mboe/d (64% oil) and capital investments of approximately $100 million.
Houlihan Lokey is serving as the lead financial advisor to Vital Energy with Citi serving as a co-advisor. Gibson, Dunn & Crutcher LLP is serving as legal counsel, and Wells Fargo Securities, LLC advised on the senior secured credit facility.
Vital Energy plans to host a conference call to discuss the transaction on Monday, July 29, 2024. Interested parties can listen to the call via the company's website or participate by dialing a specified number with the provided conference code.
This acquisition marks a significant strategic move for Vital Energy, expanding its presence and potential in the Delaware Basin while enhancing its financial outlook and operational scale. Following these announcements, the company's shares moved 0.7%, and are now trading at a price of $43.45. Check out the company's full 8-K submission here.
