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Vital Energy to acquire Permian assets in $540 million all-cash deal

Oil drilling in West Texas’s Permian Basin

(Reuters) -Vital Energy Inc said on Friday it would acquire Permian assets of Forge Energy II Delaware, an EnCap portfolio company, in a $540 million all-cash deal.

Permian is a major target for oil producers looking to increase their inventory. The shale patch, which lies between Texas and New Mexico, has the necessary infrastructure and is known for high productivity and large undeveloped reserves.

Vital entered into the deal, in partnership with an unnamed company, under which it will acquire 70% of the assets for $378 million and will operate the assets, with the partner owning the remaining stake.

The deal, expected to close in late second-quarter, will add nearly 42,000 gross acres to Vital's Permian Basin leasehold and 100 gross high-value oil locations with an average breakeven price of about $50 for West Texas Intermediate crude.

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"This accretive acquisition is attractively priced and significantly expands Vital's Permian focus, adding a core operating area in the Delaware Basin," said Chief Executive Jason Pigott, adding that the deal enhances Vital's outlook for free cash flow generation.

In 2018, EnCap invested about $400 million in Forge, which holds more than 40,000 gross acres in the southern Delaware portion of the Permian, according to its website.

(Reporting by Arshreet Singh; Editing by Anil D'Silva and Shweta Agarwal)