Vital Energy expands Permian basin focus with $540 million Delaware basin acquisition

World Oil Staff May 12, 2023

(WO) –  Vital Energy, Inc. announced the signing of a definitive joint purchase and sale agreement to acquire the assets of Forge Energy II Delaware, LLC ("Forge"), an EnCap portfolio company, further expanding the company’s Permian basin focus and establishing a core operating position in the Delaware basin.

The agreement was signed in partnership with a third party, with the companies jointly agreeing to acquire Forge’s assets in an all-cash transaction for total consideration of $540 million. Vital Energy agreed to acquire 70% of the assets for $378 million and will operate the asset, with the third party acquiring the remaining 30% for $162 million.

Expands Permian basin focus: The transaction will expand Vital Energy’s Permian basin leasehold to roughly 198,000 net acres and establish core operating positions in Pecos, Reeves and Ward counties. The company has a track record of successfully integrating acquired assets and enhancing profitability through application of its proven processes and proprietary technologies.

Extends high-value, oil-weighted inventory: The transaction to add approximately 100 gross high-value oil locations in the 2nd and 3rd Bone Spring and Wolfcamp A with an average breakeven oil price of approximately $50 NYMEX WTI, with potential upside in additional stacked formations.

Increases scale: The acquisition adds nearly 42,000 gross acres (24,000 net) and current production of approximately 9.5 thousand boed, 65% oil, net to Vital Energy. The company plans to operate one rig on the acquired properties, increasing the company’s total Permian basin rig count to three rigs.

Disciplined development: Upon closing, Vital Energy plans to operate one rig on the acquired leasehold, reduced from two rigs operated by the current owner. This disciplined approach will keep production levels on the asset relatively flat while maximizing Free Cash Flow.


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