Tulsa, Okla.-based Vital Energy Inc. announced Sunday it agreed with Northern Oil and Gas Inc. to acquire the assets of Vortus Investments-backed Point Energy Partners for $1.1 billion, boosting its operational scale and footprint in the Delaware Basin and adding oil-weighted inventory.
Separately, Minnesota-based NOG said its share of the purchase price is $220 million for a 20 percent undivided stake. Vital will own the other 80 percent.
The transaction is expected to close by the end of the third quarter. Vital said closing price adjustments are expected to amount to around $75 million, reducing the total to about $1.025 billion. The company expects to fund its $820 million portion through its credit facility, which was recently expanded to $1.5 billion.
Houlihan Lokey was lead financial advisor to Vital Energy with Citi serving as a co-advisor and Wells Fargo Securities assisting on the senior secured credit facility. Jefferies was financial advisor to Point and Vortus.
Gibson, Dunn & Crutcher counseled Vital, including partners Michael Piazza and Rahul Vashi in Houston, and Akin Gump Strauss Hauer & Feld assisted Point and Vortus, most notably partners Cole Bredthauer in Fort Worth and Wes Williams in Dallas.
In addition to Piazza and Vashi, the Gibson team included counsel James Robertson and associates Chris Atmar, Samantha Astrich and Mariana Lozano. Partner Michael Cannon and associates Josiah Bethards and Duncan Hamilton are advising on tax and partner Krista Hanvey is on benefits. Partner Jonathan Whalen and associate Cody Wilson are advising on representations and warranties insurance and counsel Andrew Cline is advising on antitrust.
In addition to Bredthauer and Williams, the Akin team included Julia Pashin and David Quigley; counsel Eduardo Canales, Kevin Tsai and Matthew Schmitten; senior counsel Andrew Oelz and Brian Rafkin; and associate Brannen Caraway.
Kirkland & Ellis said Monday it advised NOG with a team led by corporate partners David Castro Jr. and Will Eiland and associates Isaac Bate and Mohammad Alkadhem.
Vital said the deal is attractively priced at 2.4 times next 12 months consolidated EBITDAX, which compares favorably with its own valuation and recent transactions in the basin, and immediately accretive, including a 30 percent increase to next 12 months adjusted free cash flow and a 20 percent boost to consolidated EBITDAX over the same period.
The transaction also is expected to add 68 gross inventory locations with an estimated average breakeven oil price of $47 per barrel NYMEX WTI. The assets include around 16,300 net acres.
Vital said it recently hedged a significant portion of its expected 2025 oil production to underpin cash flows and support leverage reduction targets. Leverage is expected to be 1.5 times at closing. At current strip commodity prices, the company expects to reduce its leverage to about 1.3 times within 12 months.
“This bolt-on is a great fit for us, adding high-value inventory and production in the heart of our core operating areas,” Vital CEO and president Jason Pigott said in a statement. “Furthermore, it expands our growing Delaware Basin position and balances our Permian operations.”
Nick O’Grady, NOG’s CEO, said the transaction further emphasizes its position as the most reliable and consistent partner for the purchase and development of high-quality properties.
“These assets will be easily funded on-balance sheet and their strong cash flows should provide for immediate growth and significant accretion to per share metrics, shareholder returns and the potential for compounding of growth in the years to come,” he said.