Editor’s note: This is a developing story. Check back for updates. 


Vital Energy Inc. will dramatically increase its scale in the Permian Basin with a trio of acquisitions, adding thousands of net acres and dozens of drilling locations across the Midland and Delaware basins for a total of $1.165 billion, the company said late Sept. 13.

The deal, by value, was worth more than the company’s market cap at the end of trading on Sept. 13.

Vital Energy’s acquisitions are the latest in a flurry of 2023 deals by Permian players looking to bulk up on inventory. The deal also follows Vital Energy’s earlier acquisition this year of Forge Energy II Delaware LLC’s assets in the Delaware Basin.

vital
(Source: Vital Energy investor presentation)

Combined, Vital Energy's three acquisitions add nearly 53,000 net acres in the Permian and proved reserves of approximately 248 MMboe (44% oil) to its portfolio, the company said.

Securities and Exchange Commission filings show that Vital Energy’s acquisitions include assets held by Henry Energy LP, Henry Resources LP and Moriah Henry Energy Partners LLC; Tall City Property Holdings III LLC, backed by private equity firm Warburg Pincus; and Maple Energy Holdings LLC, which is affiliated with private equity firm Riverstone Holdings LLC

The company’s current production will increase by approximately 35,000 boe/d (50% oil). Based on Vital Energy’s guidance, the acquisitions will cumulatively drive production up by about 17% in the fourth quarter. By fiscal year 2024, the company estimates a 27% increase in production at the midpoint of guidance.

Vital Energy Grows Permian Scale in Three Deals Worth $1.165B
(Source: Vital Energy investor presentation)

The acquisitions also adds 115 net drilling locations with an average WTI breakeven price of approximately $50/bbl. Vital Energy anticipates adding an average half rig to its drilling program after the deal closes in 2023 and increasing its rig count to 4 rigs from 3 in 2024.

At close, Vital Energy will hold about 250,000 net acres in the Permian. The company estimated its average full-year 2024 total production of approximately 112,000 boe/d, with crude oil averaging 55,000 bbl/d.

Vital Energy will foot the bill for the transactions through a mix of equity, cash and debt.

Vital purchased almost all of Henry's Midland and Delaware basin assets in an all-equity transaction consisting of 3.72 million common shares and 4.54 million shares of perpetual mandatorily convertible preferred securities.

For Tall City's Delaware Basin assets, Vital will pay $285 million in cash and 1.58 million common shares.

All of Maple's Delaware assets were bought in an all-equity transaction consisting of 3.31 million common shares. 

Vital Energy acquires trio of Permian companies
(Source: Vital Energy investor presentation)

Vital announced on Sept. 13 a public offering of at least 2.5 million shares of its common stock; separately, the company will place $300 million in unsecured notes.

After closing, Vital Energy plans to direct “substantially all free cash flow” to debt reduction and expects pro forma leverage, at $80/bbl WTI, to approximately 1x by year-end 2024.

The company will fund the transactions with the issuance of approximately 8.61 million shares of its common stock, 4.54 million shares of perpetual mandatorily convertible preferred securities, approximately $285 million in borrowings under its senior secured facility and approximately $100 million of estimated purchase price adjustments.

The three deals are expected to close in the fourth quarter of 2023. 

Houlihan Lokey is serving as lead adviser on the combined transactions. Mizuho and Truist Securities are serving as co-advisers on Henry and Maple. Key Bank is advising Tall City.

Akin Gump, Latham & Watkins and Vinson & Elkins are serving as legal advisers and DrivePath Advisors is serving as communications adviser.

Guggenheim Securities LLC, Citigroup and Kirkland & Ellis advised Tall City. Jackson Walker advised Henry and Vinson & Elkins advised Maple.