Vital Energy Inc (VTLE.N) has announced its plan to acquire the Permian assets of Forge Energy II Delaware, a portfolio company of EnCap, for $540 million in an all-cash deal. This strategic move is aimed at increasing Vital’s inventory, as Permian remains a top target for oil producers due to its high productivity and large undeveloped reserves.
The Permian Basin, located between Texas and New Mexico, has the necessary infrastructure and favorable geology to make it an attractive destination for oil and gas exploration. By entering into this deal, Vital will acquire 70% of the assets for $378 million and operate the assets with its partner owning the remaining stake. The deal is expected to close in the late second-quarter and will add nearly 42,000 gross acres to Vital’s Permian Basin leasehold and 100 gross high-value oil locations.
Vital’s CEO, Jason Pigott, is excited about this acquisition, stating that “this accretive acquisition is attractively priced and significantly expands Vital’s Permian focus, adding a core operating area in the Delaware Basin.” The deal enhances Vital’s outlook for free cash flow generation, positioning the company for long-term success in the Permian.
EnCap invested approximately $400 million in Forge in 2018, and the company holds over 40,000 gross acres in the southern Delaware portion of the Permian, according to its website. This acquisition presents an opportunity for Vital to tap into these assets and leverage its expertise to drive value for shareholders.
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The Permian Basin has been the focus of many oil and gas companies in recent years, with its shale reserves attracting significant investment. According to a report by the Energy Information Administration, the Permian Basin accounts for over 40% of total U.S. crude oil production, making it the largest producing oil field in the country.
With Vital’s acquisition of the Forge Energy II Delaware assets, the company is poised to capitalize on the potential of the Permian Basin and increase its production levels. The 100 high-value oil locations with an average breakeven price of about $50 for West Texas Intermediate crude will provide Vital with a competitive advantage in the industry.
Vital’s strategic partnership with the unnamed company also presents a unique opportunity to combine expertise and drive value for shareholders. By jointly operating the assets, Vital can leverage the strengths of both companies to optimize production levels and maximize returns.
In conclusion, Vital Energy’s acquisition of the Forge Energy II Delaware assets in the Permian Basin is a strategic move that positions the company for long-term success in the oil and gas industry. With nearly 42,000 gross acres and 100 high-value oil locations, Vital is well-positioned to increase its inventory and drive value for shareholders. The deal is expected to close in the late second-quarter, and investors will be watching closely to see the impact it will have on Vital’s operations and financial performance.
