Vital Energy to acquire Midland Basin operator Driftwood Energy Operating
Vital Energy (formerly Laredo Petroleum), an Oklahoma-based oil and gas company, will acquire the Permian Basin-focused Driftwood Energy Operating in a cash-stock deal.
Under the agreement, Driftwood Energy Operating, an upstream oil and gas company, will receive $127.6 million and 1,578,948 shares of Vital Energy, which is listed on the New York Stock Exchange (NYSE).
Driftwood Energy Operating’s current operations are located in the Midland Basin of West Texas. The company holds around 16,500 gross (11,200 net) acres in Upton and Reagan counties with approximately 91% held by production.
Approximately 85% of transaction value is said to have been allocated to Upton County, which has majority of acreage, production, and inventory.
Vital Energy to acquire Midland Basin operator Driftwood Energy Operating. Photo courtesy of drpepperscott230 from Pixabay.
Driftwood Energy Operating has thousands of acres conducive for long lateral horizontal Wolfcamp development.
With the proposed acquisition, Vital Energy anticipates to add to its oil-weighted inventory an estimated 30 gross (23 net) operated horizontal locations in the Wolfcamp B Shale formation. This includes four gross (four net) drilled but not completed locations.
Jason Pigott – Vital Energy President and CEO said: “This purchase strengthens Vital by expanding our footprint into Upton County, adding high-return inventory and a new development area in the Midland Basin.
“Importantly, it is also accretive on key financial metrics, is leverage neutral and extends our proven track record of completing disciplined transactions that add value for shareholders.
“We plan to develop these assets over the next two to three years without increasing our current activity levels, highlighting our commitment to maintaining capital discipline and maximizing Free Cash Flow generation.”
Vital Energy has appointed Houlihan Lokey as financial advisor in connection with the transaction.
The acquisition, with an effective date of 1 January 2023, is anticipated to complete in early April 2023, subject to customary closing conditions.
Last month, Vital Energy completed its rebranding from Laredo Petroleum.