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Latest U.S. News: Vital Energy, NOG $1.1B Acquisition of Point Energy in Delaware Basin
07/30/2024
Vital Energy is joining forces with Northern Oil and Gas (NOG) to acquire Point Energy Partners’ Delaware Basin assets for $1.1 billion.
As part of the agreement, Vital and NOG will purchase Point Energy’s assets in an all-cash deal. Vital Energy will take 80% of the assets, while NOG will acquire 20%. Vortus Investments currently own Point Energy.
Closing price adjustments are estimated at around $75 million, reducing the total consideration to approximately $1.025 billion.
Vital Energy plans to fund its $820 million portion of the transaction—net of expected purchase price adjustments—using its credit facility, which was recently increased to $1.5 billion. Wells Fargo, National Association has committed to the higher elected commitment upon closing of the transaction.
NOG will pay around $220 million for its 20% stake in Point Energy. Northern will acquire assets mainly located in Ward County, Texas. These include roughly 4,000 net leasehold and mineral acres, 26.4 net producing wells, 1.6 net wells-in-process, and about 12.1 low-breakeven net undeveloped locations. Upon closing, Vital will operate the assets, and NOG will collaborate in development based on cooperation and joint operating agreements with Vital.
This acquisition will add 68 gross (49 net) inventory locations to Vital’s portfolio, with an estimated average WTI breakeven oil price of $47 per barrel. Point Energy’s assets cover approximately 16,300 net acres and produce an average of 30,000 barrels of oil equivalent per day (boe/d), 67% of which is oil. Vital is paying $1.4 million per undeveloped location, according to their acquisition presentation.
For Northern, this marks their second large-scale transaction this year as a third-party participant. In June, Northern was part of a three-way deal with SM Energy Co., acquiring Uinta Basin operator XCL Resources for about $2.55 billion. Northern’s share was a 20% undivided interest in XCL’s oil and gas assets for $510 million.
Over the past 15 months, Vital Energy has established a strong operating position in the Delaware Basin, complementing its substantial Midland Basin leasehold. The Point Energy deal will boost Vital’s Delaware position by about 25%, bringing it to 84,000 net acres. Post-acquisition, Delaware Basin production will account for over one-third of Vital’s oil output.
"This bolt-on is a perfect fit for us, adding high-value inventory and production in the heart of our core operating areas,” said Vital President and CEO Jason Pigott in a July 28 press release. “It also expands our growing Delaware Basin position and balances our Permian operations.”
Pigott added that the company expects to keep demonstrating its ability to “capture, integrate, and create substantial value on acquired assets through optimized development plans, lower capital costs, and proven operating practices, leading to higher future cash flows."
NOG CEO Nick O’Grady said the deal further proves the company’s role as the “most reliable and consistent partner for the purchase and development of high-quality properties.”
“The Point Assets are directly in our area of interest and close to our existing Delaware holdings,” said Adam Dirlam, NOG’s President. “With our partners at Vital, we plan to develop these assets responsibly, following a plan that will deliver strong returns for our stakeholders over the coming years.”
Vital stated the transaction is priced at approximately 2.4 times the company’s next 12 months (NTM) consolidated EBITDAX. The price “compares favorably” with Vital Energy’s current valuation and recent transactions in the basin.
The purchase price is largely supported by the value of proved developed producing (PDP) reserves and eight work-in-process wells. According to third-party reserve engineer Ryder Scott, based on SEC pricing, the PDP reserves are valued at $742 million, and the work-in-process wells at $71 million.
The deal is expected to close by the end of the third quarter of 2024, with an effective date of April 1, 2024, pending customary closing conditions.
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