Vital Energy and NOG to Acquire Point Energy Partners

Vital Energy, Inc. has signed a joint purchase and sale agreement to acquire the assets of Point Energy Partners, a Vortus Investments portfolio company. The transaction will significantly increase the company’s operational scale and footprint in the Delaware Basin and add high-value development inventory.

The agreement was signed in partnership with Northern Oil and Gas (NOG) and under the terms of the agreement, the two companies will acquire Point Energy’s assets in an all-cash transaction for total consideration of $1.1 billion.

Vital Energy agreed to acquire 80% of Point’s assets, with NOG acquiring the remaining 20%. The transaction is expected to close by the end of the third quarter of 2024 with an effective date of 1 April 2024, subject to customary closing conditions.

This acquisition is expected to significantly enhance Vital’s inventory locations and oil production capacity. The company will add 68 gross inventory locations (49 net) to Vital’s portfolio, with an estimated average breakeven oil price of $47 per barrel. 

The acquired assets encompass approximately 16,300 net acres and net production of around 30,000 barrels of oil equivalent per day (67% oil).

Closing price adjustments are expected to total approximately $75 million, reducing total consideration to approximately $1.025 billion. Vital Energy expects to fund its $820 million portion, net of expected purchase price adjustments, through the use of its credit facility, which was recently expanded to $1.5 billion.

NOG’s share of the assets, primarily located in Ward County, Texas, includes around 4,000 net leasehold and mineral acres, 26.4 net producing wells, 1.6 net wells-in-process and approximately 12.1 low-breakeven net undeveloped locations. 

After the transaction closes, Vital will operate the assets, while NOG will collaborate in development through cooperation and joint operating agreements.

Great Fit

Vital Energy president and CEO Jason Pigott said that this bolt-on would be a great fit for them, adding high-value inventory and production in the heart of our core operating areas. Furthermore, it expands to the company’s growing Delaware Basin position and balances our Permian operations. 

“We expect to continue to demonstrate our ability to capture, integrate and create substantial value on acquired assets through optimised development plans, lower capital costs and proven operating practices, resulting in higher future cash flows,” he said.

Expanding Delaware Basin Position

Over the past 15 months, Vital Energy has built a high-quality, core operating position in the Delaware Basin, complementing its substantial Midland Basin leasehold. This transaction will increase the Company’s Delaware Basin position by approximately 25% to 84,000-net acres.

Post- closing, the Delaware Basin will comprise more than one third of the Company’s oil production.

Post-closing, Vital Energy plans to moderate development activities on the properties relative to Point’s recent program.

In March 2024, Point turned-in-line (TIL) a 15-well package, driving recent elevated production rates. No new TIL’s are planned prior to the closing of the transaction, leading to an estimated natural decline in daily production of approximately 50% from peak rates in April 2024.

With moderated activity levels and natural declines, fourth-quarter 2024 production on the Point asset is expected to average approximately 15.5 MBOE/d (64% oil). Vital Energy expects to invest approximately $45 million on the new properties during the fourth quarter of 2024, operating one drilling rig and completing seven wells.