Vital Energy, Inc. (NYSE: VTLE) ("Vital" or the "Company") today
announced the signing of a definitive purchase and sale agreement
to acquire the assets of Driftwood Energy Operating, LLC
("Driftwood"), inclusive of all leasehold interests and hedges, in
exchange for 1,578,948 shares of Vital common stock and $127.6
million of cash. The transaction is expected to close early April
2023 with an effective date of January 1, 2023, subject to
customary closing conditions.
Highlights:
- Accretive to Free Cash Flow1 and Net Asset Value1 per share and
leverage neutral
- Current production of ~5,400 barrels of oil equivalent ("BOE")
per day (63% oil), ~50% next 12-month decline rate
- Extends Company’s oil-weighted inventory life, adding an
estimated 30 gross (23 net) operated horizontal locations in the
Wolfcamp B, including four gross (four net) drilled but uncompleted
locations
- Approximately 16,500 gross (11,200 net) acres in Upton and
Reagan counties (~91% held by production)
- Majority of acreage, production and inventory located in the
prolific, contiguous Upton County leasehold (~85% of transaction
value allocated to Upton County)
"This purchase strengthens Vital by expanding our
footprint into Upton County, adding high-return inventory and a new
development area in the Midland Basin," stated Jason Pigott,
President and Chief Executive Officer. "Importantly, 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. 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."
1Non-GAAP financial measure; please see definitions
of non-GAAP financial measures at the end of this release.
Houlihan Lokey is serving as financial advisor to
Vital.
About Vital Energy Vital Energy,
Inc. is an independent energy company with headquarters in Tulsa,
Oklahoma. Vital'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 may be found on
its website at www.vitalenergy.com.
Forward-Looking Statements This
press release and any oral statements made regarding the contents
of this release, including in the conference call referenced
herein, 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 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. Such
statements are not guarantees of future performance and involve
risks, assumptions and uncertainties.
General risks relating to Vital include, but are
not limited to, 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, 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 and realize the anticipated
benefits of acquired businesses, assets and properties, oil
production quotas or other actions that might be imposed by the
Organization of Petroleum Exporting Countries and other producing
countries ("OPEC+"), the outbreak of disease, such as the
coronavirus ("COVID-19") pandemic, and any related government
policies and actions, changes in domestic and global production,
supply and demand for commodities, including as a result of the
COVID-19 pandemic, actions by OPEC+ and the Russian-Ukrainian
military conflict, long-term performance of wells, drilling and
operating risks, the increase in service and supply costs,
including as a result of inflationary pressures, increases to
interest rates as a result of the Federal Reserve's tightening
monetary policy, tariffs on steel, pipeline transportation and
storage constraints in the Permian Basin, the possibility of
production curtailment, hedging activities, 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 laws and
regulations, including those regarding the use of hydraulic
fracturing, 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 other factors,
including those and other risks described in its Annual Report on
Form 10-K for the year ended December 31, 2021 and those set forth
from time to time in other filings with the Securities and Exchange
Commission ("SEC"). These documents are available through Vital's
website at www.vitalenergy.com, "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's actual
results and plans to differ materially from those in the
forward-looking statements. Therefore, Vital 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 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.
This press release and any accompanying disclosures
include financial measures that are not in accordance with
generally accepted accounting principles (“GAAP”), such as Free
Cash Flow and Net Asset Value. While management believes that such
measures are useful for investors, they should not be used as a
replacement for financial measures that are in accordance with
GAAP.
All amounts, dollars and percentages presented in
this press release are rounded and therefore approximate.
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 changes in operating
assets and liabilities, net, 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.
Net Asset Value Net Asset Value is
a non-GAAP financial measure that the Company defines as the
present value of future revenues less future expenses, less Net
Debt. Net Asset Value does not represent the standardized measure
of discounted future net cash flows because it adjusts for Net Debt
and excludes adjustments for future income tax expense. However,
management believes Net Asset Value is useful to management and
investors in evaluating the value of the Company, which is affected
by the pace of capital expenditures and development of inventory,
future commodity prices and future prices of services utilized to
develop the Company’s inventory. There are significant limitations
to the use of Net Asset Value as a measure of value, including lack
of comparability to calculations of Net Asset Value by other
companies due to differences in assumptions utilized in the
calculations.
Investor Contact: Ron Hagood
918.858.5504 ron.hagood@vitalenergy.com
A map accompanying this announcement is available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/13fbec6c-9da7-4485-932f-c15b89a718f5
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