CEO: Vital Energy Sees ‘A Lot More Opportunity’ for Permian M&A
Vital Energy has pumped nearly $2 billion into Permian Basin acquisitions this year. To continue growing Vital’s oil weighting and inventory, CEO Jason Pigott sees opportunity for more deals.
Chris
Mathews
Hart Energy
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Vital Energy’s desire to get oilier in America’s hottest oil basin has led the company to fuel nearly $2 billion in Permian M&A just this year.
When Jason Pigott took the helm as CEO at Vital in 2019—then operating as Laredo Petroleum Inc.—the company’s average daily production was about a third oil, a third natural gas and a third NGL, regulatory filings show.
The company has pumped billions of dollars into Permian acquisitions in both the Midland and Delaware Basins to grow its oil weighting since that time.
“We’ve had to be very aggressive over the last four years to change our stars,” Pigott said during Hart Energy’s A&D Strategies & Opportunities Conference in early October.
In September, Vital announced $1.165 billion in Permian M&A across three deals with private E&Ps. The acquisitions from Henry Energy LP, Tall City Exploration III and Maple Energy Holdings will add thousands of net acres and dozens of drilling locations in the Midland and Delaware basins.
The company’s three latest deals are expected to close in early November, Pigott said.
In addition to growing the oil weighting of its production footprint, Vital wants to deepen its drilling inventory for the future.
The deals with Henry, Tall City and Maple are adding 115 gross locations with an average breakeven WTI price of approximately $50/bbl.
At the company’s expected four-rig development cadence, Vital will have more than eight years of drilling inventory if the three deals close later this year as expected.
Vital’s latest Permian deals add 115 net drilling locations with an average WTI breakeven price of approximately $50/bbl (Source: Vital Energy investor presentation)
Despite extending its runway by adding incremental drilling locations, building inventory depth is “the hardest thing” for Vital to do, Pigott said.
“We went from eight years of inventory on two rigs, to eight years on three [rigs], to eight years on four,” he said.
Vital could tap the M&A market again to continue deepening its inventory and growing its oil production.
The competitive Midland Basin is “getting pretty rough” from an availability standpoint in Vital’s price range, Pigott said.
With the blockbuster deal, Exxon is positioning itself as the global leader in the unconventional oil and gas space and adding more than a decade of premium drilling inventory in the core of the Midland Basin.
The Permian has seen a flurry of M&A activity this year—albeit on a relatively smaller scale than Exxon’s acquisition of Pioneer—as E&Ps jockey for running room.
