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Vital (Formerly Laredo) Expands in Midland, Purchases Acreage From Driftwood Energy
03/10/2023
Vital Energy Inc. has made a significant acquisition, purchasing 11,200 net acres in Upton and Reagan counties, Texas. The deal, which involved a combination of cash and stock, was worth almost $214 million. This move comes shortly after the company's rebranding from Laredo Petroleum just one month ago.
According to the announcement made on February 14, Vital Energy has purchased the acreage from Driftwood Energy Operating LLC, which is now producing an average of 5,400 barrels of oil equivalent per day (63% oil) with a decline rate of 50% over the next 12 months. This purchase will extend Vital Energy's oil-weighted inventory life, adding 23 net operating horizontal drilling locations in the Wolfcamp B Formation, including four net DUCs.
The majority of the acreage, production, and inventory is situated in a contiguous leasehold in Upton, making it an excellent strategic fit for Vital Energy. The acquisition and sale agreement includes Driftwood's leasehold interests and hedges for $127.6 million cash and 1.57 million shares of Vital Energy stock.
Jason Pigott, Vital Energy's president, and CEO remarked on the acquisition's financial benefits, which are accretive on key financial metrics, leverage neutral, and extend the company’s proven track record of completing disciplined transactions that add value for shareholders.
The acquisition is expected to close in April, subject to customary closing conditions, and will have an effective date of January 1, 2023. Houlihan Lokey is serving as financial advisor to Vital Energy in this transaction.
This latest acquisition showcases Vital Energy's commitment to maintaining capital discipline and maximizing free cash flow generation while expanding its footprint into Upton and adding high-return inventory in a new development area in the basin.
Vital Energy is an independent energy company based in Tulsa, Oklahoma, United States. The company is primarily focused on the exploration, development, and production of oil and natural gas in the Permian Basin, which is located in West Texas and southeastern New Mexico.
Vital Energy operates more than 163,000 net acres in the Permian Basin, with a significant portion of its production coming from the prolific Wolfcamp formation.
The company's operations are primarily focused on horizontal drilling and hydraulic fracturing techniques to extract oil and gas from shale rock. It has a total production of approximately 79,600 barrels of oil equivalent per day.
The company has also committed to reducing its greenhouse gas emissions and has set a target to achieve net-zero emissions from its operations by 2050.
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Diamondback Sells More After Hitting $1B Target
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Diamondback Energy sold more midstream assets in Q2 as part of a $1B plan to shed non-core assets, reducing debt in the Permian Basin. In July, Texas-based Diamondback Energy Inc. sold a 43% stake in the OMOG crude oil system, revealing this in its Q2 earnings on July 31. OMOG JV LLC, running 400 miles of pipelines and 350,000 bbl of storage in Midland, Martin, Andrews, and Ector counties, was detailed in Diamondback's filings. The sale provided $225 million in gross proceeds. Diamondback has announced or completed $1.1 billion in non-core asset sales since initiating the program. Initially aimed at raising $500 million, the 2023 target was increased to $1 billion.
$7 Billion Merger of Colgate and Centennial, the 2 Largest Permian Operators
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Despite the circulating rumors concerning Colgate’s attempt to launch an IPO, on May 19 the company decided to combine with Centennial Resource Development Inc. This merger of equals is estimated at $7 billion and will found the biggest pure-play E&P company in the Delaware Basin of the Permian. The transformative combination essentially enlarges companies’ potential and hastens the growth across all financial and operating metrics. According to Centennial CEO Sean Smith, the combined company is anticipated to furnish shareholders with quickened capital return program due to a fixed dividend coupled with a share repurchase plan. Due to a recent report, the merger would increase production 7%, to 145,000 boe/d by the fourth quarter would further ratchet up next year. By third-quarter 2023, the company predicted 160,000 boe/d based on a drilling program of 140 wells per year. Colgate Energy was reported to be getting an IPO last December that sources said would value the company at approximately $4 billion. The combined company will have over 15-years of drilling inventory, assuming its current drilling pace, the companies will produce over $1 billion of free cash flow in 2023 at current strip prices.
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Rangeland Energy has agreed to sell Rangeland Midstream Canada to Kingston Midstream Alberta and remains committed to future Canadian midstream investments. Texas-based Rangeland Energy, supported by financial partner EnCap Flatrock Midstream, has inked a deal to sell its Canadian subsidiary, Rangeland Midstream Canada Ltd., to Calgary's Kingston Midstream Alberta Ltd. for cash.
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The merger between ONEOK and Magellan received approval from Magellan shareholders, securing just 55% of the total votes at Magellan’s meeting on Sept. 21. ONEOK Inc. has successfully concluded the acquisition of Magellan Midstream Partners LP on Sept. 25. The deal will bring together their respective assets and expertise, resulting in a powerful entity boasting an extensive network of approximately 25,000 miles of pipelines primarily focused on transporting liquids.
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Viper Energy's deal, comprised of cash and equity, secures an additional 2,800 net royalty acres in the Midland Basin and 1,800 in the Delaware Basin. Viper Energy Partners LP, a Diamondback Energy Inc. subsidiary, has inked a deal to acquire mineral and royalty interests in the Permian Basin. The deal, valued at around $1 billion, is with Warwick Capital Partners and GRP Energy Capital. Viper was established by Diamondback with the purpose of owning, purchasing, and capitalizing on oil and natural gas assets in North America, specifically targeting mineral and royalty interests.