Vital Energy Acquires Additional Working Interests in Recent High-Value Acquisitions in the Permian Basin
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Insights
The acquisition by Vital Energy, Inc. represents a strategic expansion, with a significant increase in working interest in 45 wells. This move is expected to boost the company's production by 1,400 barrels of oil equivalent per day (BOE/d), with a notable 57% being oil. The financial implications are substantial, as the transaction is projected to enhance the company's 2024 Free Cash Flow by approximately $20 million, aligning with its deleveraging strategy.
Financing through the issuance of common stock and convertible preferred securities is noteworthy, as it reflects a non-dilutive capital raise, which is typically well-received by the market. The terms of the transaction, including the exercise of tag-along rights, suggest a meticulously negotiated deal aimed at preserving shareholder value.
The emphasis on capital efficiency and the potential for stronger Free Cash Flow highlights the company's focus on profitability and operational excellence. However, investors should be aware of the inherent volatility in the energy sector, including fluctuations in oil prices, which could impact the projected financial outcomes.
Vital Energy's acquisition in the Permian Basin underscores the ongoing consolidation trend within the oil and gas industry, aimed at achieving economies of scale and operational synergies. The reference to longer laterals suggests technological advancements in drilling that can lead to more efficient extraction processes and cost savings.
The company's strategy to increase its operating footprint in the Midland and Delaware basins is indicative of the competitive landscape in these prolific oil-producing regions. The ability to drive new efficiencies through bolt-on transactions is a competitive advantage that can differentiate Vital Energy from its peers.
The transaction's impact on deleveraging goals is a critical aspect for stakeholders, as a stronger balance sheet can lead to improved credit ratings and lower borrowing costs. However, the integration of these acquisitions will be a test of the company's operational capabilities.
The transaction has broader implications for the energy sector, particularly in the context of global oil supply dynamics. An increase in production capacity for Vital Energy contributes to the overall supply-side factors that can influence oil prices. The company's reference to WTI and HH pricing assumptions for fiscal year 2024 provides insight into its revenue projections and risk management strategies.
The use of non-GAAP financial measures like Free Cash Flow is common in the industry to provide a clearer picture of a company's operational performance. However, stakeholders should examine these measures alongside GAAP results for a comprehensive understanding of the company's financial health.
The acquisition's timing and financing method also reflect the current state of the capital markets and investor appetite for energy sector equities. The successful integration of the acquired assets will be critical in realizing the projected efficiencies and Free Cash Flow improvements.
TULSA, OK, Dec. 21, 2023 (GLOBE NEWSWIRE) -- Vital Energy, Inc. (NYSE: VTLE) ("Vital Energy" or the "Company") today announced the acquisition of additional working interests in producing assets associated with the recent asset acquisition from Henry Energy LP, Moriah Henry Partners LLC and Henry Resources LLC (collectively "Henry") for total consideration of
The purchase will increase Vital Energy’s working interest in 45 wells by an average of
The transaction is associated with the exercise of tag-along rights by owners of certain assets in the Henry acquisition that enable Vital Energy to purchase and finance the assets on the same terms as the Henry purchase and sale agreement, in which the Company’s shares were issued at
"This transaction further demonstrates the opportunities provided by our increased scale in the Permian," stated Jason Pigott, President and Chief Executive Officer. "Our larger operating footprint across the Midland and Delaware basins continues to drive new efficiencies through bolt-on transactions that increase working interest or optimize our development plans by enabling longer laterals. As we successfully integrate these high-value acquisitions we expect to see continued gains in capital efficiency and stronger Free Cash Flow."
1Assumes VTLE December 21, 2023 closing price; 2Non-GAAP financial measure; please see supplemental discussion of GAAP to non-GAAP financial measures at the end of this release; 3Assumes
About Vital Energy
Vital Energy, Inc. is an independent energy company with headquarters in Tulsa, Oklahoma. Vital Energy's business strategy is focused on the acquisition, exploration and development of oil and natural gas properties in the Permian Basin of West Texas.
Additional information about Vital Energy may be found on its website at www.vitalenergy.com.
Forward-Looking Statements
This press release and any oral statements made regarding the subject of this release contain forward-looking statements as defined under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, that address activities that Vital Energy assumes, plans, expects, believes, intends, projects, indicates, enables, transforms, estimates or anticipates (and other similar expressions) will, should or may occur in the future are forward-looking statements. The forward-looking statements are based on management’s current belief, based on currently available information, as to the outcome and timing of future events. The forward-looking statements involve risks and uncertainties.
General risks relating to Vital Energy include, but are not limited to, continuing and worsening inflationary pressures and associated changes in monetary policy that may cause costs to rise; changes in domestic and global production, supply and demand for commodities, including as a result of actions by the Organization of Petroleum Exporting Countries and other producing countries and the Russian-Ukrainian or Israeli-Hamas military conflicts, the decline in prices of oil, natural gas liquids and natural gas and the related impact to financial statements as a result of asset impairments and revisions to reserve estimates, reduced demand due to shifting market perception towards the oil and gas industry; competition in the oil and gas industry; the ability of the Company to execute its strategies, including its ability to successfully identify and consummate strategic acquisitions at purchase prices that are accretive to its financial results and to successfully integrate acquired businesses, assets and properties, pipeline transportation and storage constraints in the Permian Basin, the effects and duration of the outbreak of disease, and any related government policies and actions, long-term performance of wells, drilling and operating risks, the possibility of production curtailment, the impact of new laws and regulations, including those regarding the use of hydraulic fracturing, including under the Inflation Reduction Act (the "IRA"), including those related to climate change, the impact of legislation or regulatory initiatives intended to address induced seismicity on the Company’s ability to conduct its operations; hedging activities, tariffs on steel, the impacts of severe weather, including the freezing of wells and pipelines in the Permian Basin due to cold weather, possible impacts of litigation and regulations, the impact of the Company’s transactions, if any, with its securities from time to time, the impact of new environmental, health and safety requirements applicable to the Company’s business activities, the possibility of the elimination of federal income tax deductions for oil and gas exploration and development and imposition of any additional taxes under the IRA or otherwise, and other factors, including those and other risks described in its Annual Report on Form 10-K for the year ended December 31, 2022 and those set forth from time to time in other filings with the Securities and Exchange Commission (the "SEC"). These documents are available through Vital Energy’s website at www.vitalenergy.com under the tab "Investor Relations" or through the SEC’s Electronic Data Gathering and Analysis Retrieval System at www.sec.gov. Any of these factors could cause Vital Energy’s actual results and plans to differ materially from those in the forward-looking statements. Therefore, Vital Energy can give no assurance that its future results will be as estimated. Any forward-looking statement speaks only as of the date on which such statement is made. Vital Energy does not intend to, and disclaims any obligation to, correct, update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.
Free Cash Flow
Free Cash Flow is a non-GAAP financial measure that the Company defines as net cash provided by operating activities (GAAP) before net changes in operating assets and liabilities and non-budgeted acquisition costs, less incurred capital expenditures, excluding non-budgeted acquisition costs. Management believes Free Cash Flow is useful to management and investors in evaluating operating trends in its business that are affected by production, commodity prices, operating costs and other related factors. There are significant limitations to the use of Free Cash Flow as a measure of performance, including the lack of comparability due to the different methods of calculating Free Cash Flow reported by different companies.
Investor Contact
Ron Hagood
918.858.5504
ir@vitalenergy.com
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