Vital Energy’s Permian Basin expansion continues with the announcement of three acquisitions – including two Midland companies – totaling $1.165 billion.
One of those acquisitions is Henry Energy and Henry Resources. Vital is purchasing substantially all of Henry’s Midland and Delaware basin assets in an all-equity transaction consisting of 3.72 million common shares and 4.54 million shares of perpetual mandatorily convertible preferred securities, net of customary closing price adjustments.
“Henry is the biggest part of this transaction,” David Bledsoe, Henry Resources president, told the Reporter-Telegram by email. “This is a great opportunity for Henry to transition from an operating company to a non-operating company. We are retaining some non-operating working interest in most of the properties we are selling. Therefore, we are selling the majority of the interest and operations.”
The company has one remaining property to drill, complete and operate, but that is all Henry will be operating, he wrote.
“The vast majority of our oil and gas value will be in non-operated properties. This process is being done to reduce the risk for the Henry family and is therefore a great move for us. We think Vital is a top operator and look forward to working with them not only on projects we retained interest in, but also on new projects we generate. Additionally, Henry will own a significant amount of their stock, so we certainly want them to be successful,” Bledsoe continued.
In the second Midland-based transaction, Vital is purchasing all of Tall City Property Holdings III’ Delaware Basin assets for $285 million in cash and 1.58 million common shares, net of customary closing price adjustments.”
The third transaction is the purchase of Houston-based Maple Energy Holdings’ Delaware Basin assets in an all-equity transaction consisting of 3.31 million common shares, net of customary closing price adjustments.
The three transactions will give Vital added scale in the Permian Basin, increase free cash flow, enhance capital efficiency and significantly reduce leverage. It will add nearly 53,000 net acres and proved reserves of 248 million barrels of oil equivalent, estimated as of year-end 2022. Vital’s current production will be increased by approximately 35,000 barrels of oil. The new assets will also add approximately 150 gross high-value locations with an average break-even price of about $50 per barrel. Vital will maintain more than eight years of oil-weighted drilling inventory at its expected four-rig pace of development.
Upon closing, Vital Energy expects to operate one drilling rig on the acquired acreage and utilize a spot completions crew for approximately one month to complete four “in-process” wells.