A month after rebranding as Vital Energy Inc., the company formerly known as Laredo Petroleum announced the acquisition of Midland Basin acreage in Upton and Reagan counties, Texas, in a cash and stock deal worth roughly $214 million.
Vital Energy said Feb. 14 that it had struck a deal with Driftwood Energy Operating LLC to acquire 11,200 net acres that are currently averaging production of 5,400 boe/d (63% oil) with a decline rate of 50% over the next 12 months.
Vital Energy, based in Tulsa, Okla., said the acquisition would extend its oil-weighted inventory life with the addition of 23 net operating horizontal drilling locations in the Wolfcamp B Formation. The deal includes four net DUCs. Most of the acreage, production and inventory is located in contiguous leasehold in Upton, the company said in a news release.
Under the terms of a purchase and sale agreement, Vital Energy acquire Driftwood’s leasehold interests and hedges for $127.6 million cash and 1.57 million shares of Vital Energy stock.
Vital Energy president and CEO Jason Pigott said the purchase expands its footprint into Upton, adding “high-return inventory” in a new development area in the basin.
"It is also accretive on key financial metrics, is leverage neutral and extends our proven track record of completing disciplined transactions that add value for shareholders,” Pigott said. “We plan to develop these assets over the next two to three years without increasing our current activity levels, highlighting our commitment to maintaining capital discipline and maximizing free cash flow generation."
The transaction is expected to close in April with an effective date of Jan. 1, 2023, subject to customary closing conditions, Vital Energy said. Houlihan Lokey is serving as financial adviser to Vital.