Vital Energy again upped its interests in producing Permian Basin assets that the E&P scooped up through acquisitions last year.
Vital closed a second acquisition of additional working interests from Henry Energy LP, Moriah Henry Partners LLC and Henry Resources LLC for approximately $78 million, according to a Feb. 5 news release.
The transaction increases Tulsa-based Vital’s working interest in 54 producing wells by an average of 67%.
The deal boosts the company’s estimated 2024 production by 1,850 boe/d (51% oil).
Truist Managing Director Neal Dingmann said Vital had made “another highly accretive addition” with the transaction, according to a Feb. 5 research report.
The purchase price works out to about $40,000 per flowing barrel and is expected to add about $25 million to free cash flow in fiscal year 2024.
“Not only is the purchase price discounted vs recent deals, but in our view working interest additions are among the most attractive deals given the minimal incremental costs,” Dingmann and Truist analysts wrote, adding that the firm is raising its target price for Vital to $86 from $81.
Vital funded the deal by issuing approximately 879,000 shares of its common stock and approximately 980,000 shares of its 2.0% cumulative mandatorily convertible preferred securities.
It’s the second transaction associated with the exercise of tag-along rights by owners of certain assets in the Henry acquisition.
“We are pleased to have closed our second transaction to increase our working interests in high-value properties associated with the Henry acquisition,” said Vital’s President and CEO Jason Pigott. “Both transactions were attractively priced, accretive to free cash flow per share and highly supportive of our deleveraging goals.”
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Vital Energy acquired Henry Resources, Tall City and Maple Energy, adding 53,000 net acres for a total of $1.165 billion. The Henry portion of the deal was all equity for $517 million.
Vital added working interests in the acquired Henry assets last year in a deal valued at $55 million.
Tag-along rights were exercised by Granite Ridge Resources on the same terms as the purchase and sale agreement between Vital and Henry, Granite Ridge said in a Feb. 2 release. The assets Granite Ridge sold included approximately 1,658 net acres and 45 gross (9.9 net) producing wells.
Vital issued 561,752 shares of common stock and 541,155 shares of the 2.0% cumulative mandatorily convertible preferred securities as consideration to Granite Ridge.
"This transaction demonstrates one of the many ways to win in the non-op model, in this case selling at an operator premium due to a long-term strategic partnership with the Henry family," said Luke Brandenberg, president and CEO of Granite Ridge.
"While we are not typically a seller, the consideration offered was attractive, and the acceleration of cash flow from these producing assets will allow us to compound returns for our investors by recycling capital into development opportunities with higher rates of return,” Brandenberg said.
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