HIGHLIGHTS
- Following closing, acquisition of Lucero is expected to be immediately accretive to Vitesse’s earnings, operating cash flow, free cash flow and net asset value
- Subject to board approval and closing the transaction, Vitesse expects to increase its cash dividend from $2.10 to $2.25 per share on an annualized basis
- Upon closing, this acquisition strengthens Vitesse’s financial position with expected near-term Net Debt to Adjusted EBITDA ratio of ~0.3x
- The acquisition of Lucero provides Vitesse with an operational component to its strategy, as Lucero currently operates more than 65 producing wells
- Lucero operations provide flexibility in future capital spending with 2 gross (1.9 net) drilled uncompleted wells and up to 50 gross (25 net) locations in the core of the Bakken
- Vitesse is hedging a significant portion of the acquired oil production through the end of 2026
- After giving effect to the transaction, Vitesse would have had two-stream production of approximately 19.4 Mboe/d during the third quarter of 2024
- Gary Reaves, Managing Partner at First Reserve Management, LP, which owns 37% of Lucero, and director of Lucero, and M. Bruce Chernoff, Lucero’s Chairman, who owns 22% of Lucero, to be nominated to join the Vitesse Board
- The Company will continue to be led by the Vitesse executive team
GREENWOOD VILLAGE, Colo. and CALGARY, AB, Dec. 16, 2024 /CNW/ – Vitesse Energy and Lucero Energy today announced they have entered into a definitive agreement under which Vitesse will acquire Lucero in an all-stock transaction with a fully diluted equity value of US$222 million. Under the terms of the agreement, Lucero shareholders will receive 0.01239 of a share of Vitesse common stock for each common share of Lucero. The addition of Lucero’s operations will provide additional scale to Vitesse’s assets across the Bakken, where Lucero had approximately 6.4 Mboe per day of two-stream net production during the third quarter of 2024. Lucero had no outstanding debt and US$56 million of cash as of September 30, 2024, and Vitesse expects to use a portion of the cash held by Lucero at closing to reduce outstanding borrowings under Vitesse’s revolving credit facility. Vitesse is targeting about US$3 million of general and administrative synergies annually.
MANAGEMENT COMMENTS
“We are acquiring a high-quality company that has been very well managed and will be a terrific complement to our existing business. We are excited to add an operated leg to our strategy, while keeping our emphasis primarily on non-op,” commented Bob Gerrity, Vitesse’s Chairman and Chief Executive Officer. “This opens the door to acquiring operated and non-operated packages that are accretive to our dividend, while giving us proportionately more control over our future capital spending. In addition, this transaction supports our ability to pay the dividend, and the anticipated increased liquidity furthers our ability to make future acquisitions.”
Brett Herman, President & CEO of Lucero commented, “We are very proud of the significant steps we have taken to enhance Lucero’s asset base, operational performance, and balance sheet over the past several years. Combining with Vitesse will provide Lucero shareholders with immediate value for their investment and the opportunity to participate in the future upside from ownership in a stronger, larger company with enhanced shareholder returns. The transaction creates a unique oil weighted company with assets in the core of the Williston Basin exhibiting lower production declines, high operating netbacks, and strong capital efficiencies. I want to thank our employees for their dedication and hard work over the years that allowed us to build such a great organization and reach this exciting milestone.”
TRANSACTION DETAILS
In this all-stock transaction, each outstanding common share of Lucero will be exchanged for 0.01239 of a share of Vitesse common stock, with approximately 8,175,000 shares of common stock expected to be issued at closing. After closing, existing Vitesse stockholders are expected to own approximately 80% and existing Lucero shareholders are expected to own approximately 20% of the Company on a fully diluted basis.
The transaction will be structured as a plan of arrangement under the Business Corporations Act (Alberta) and is subject to the approval of (i) at least two-thirds of the votes cast by holders of Lucero common shares at a meeting to be called to consider the transaction and (ii) if required under applicable Canadian securities laws, a majority of the votes cast by Lucero shareholders at such meeting (excluding the votes held by Lucero shareholders whose votes are required to be excluded under Multilateral Instrument 61-101 – Protection of Minority Securities Holders in Special Transactions). The issuance of shares of Vitesse common stock as consideration in the transaction is subject to the approval of the majority of votes cast at a meeting by holders of shares of Vitesse common stock in connection with the transaction, pursuant to the rules of the New York Stock Exchange (“NYSE”).
GOVERNANCE AND LEADERSHIP
Following the closing of the transaction, the board of directors of Vitesse will increase to nine members and will comprise the seven current members of Vitesse’s board and two nominees currently serving on Lucero’s board, namely Messrs. Reaves and Chernoff. Vitesse’s leadership team will continue to serve in their respective capacities in the company.
COMMODITY HEDGING
Vitesse expects to promptly hedge a significant portion of the commodity risk associated with this transaction through 2026 and has hedged a meaningful portion of its own production into 2026. Vitesse historically hedges a portion of its expected oil production volumes to increase the predictability and certainty of its cash flow and to help maintain a strong financial position to support its dividend. Vitesse does not currently have hedges in place on its expected natural gas production volumes.
TIMING AND APPROVALS
The transaction has been unanimously approved by the boards of directors of both companies. The transaction is expected to close by the second quarter of 2025. The transaction is subject to customary closing conditions in the United States and Canada, as well as the approvals by Vitesse’s and Lucero’s shareholders described above, the approval of the Court of King’s Bench of Alberta, the listing of shares of Vitesse’s stock to be issued in the transaction on NYSE and certain other approvals.
Further information regarding the transaction will be contained in a management information circular that Lucero will prepare, file and mail to Lucero shareholders in advance of its shareholder meeting and a proxy statement that Vitesse will file with the Securities and Exchange Commission (the “SEC”) and mail to Vitesse stockholders in advance of its stockholders meeting. Copies of the arrangement agreement and management information circular will be available on Lucero’s profile on SEDAR+ at www.sedarplus.ca and the arrangement agreement and proxy statement will be available on the SEC’s website at www.sec.gov under Vitesse’s profile.
The board of directors of Lucero has unanimously determined that the arrangement and the other transactions contemplated by the arrangement agreement are in the best interests of Lucero and fair to holders of the shares of Lucero, authorized and approved the entering into of the arrangement agreement and the performance by Lucero of its obligations under such agreement, and recommend that holders of Lucero shares vote in favor of a special resolution to approve the arrangement. FR XIII PetroShale Holdings L.P, and each of the directors and executive officers of Lucero who hold shares of Lucero, representing in aggregate approximately 63% of the outstanding shares of Lucero (on a non-diluted basis), have entered into support agreements with Vitesse and have agreed, among other things, to support and vote in favor of the transaction, subject to the provisions of such agreements.
ADVISORS
Jefferies LLC initiated this transaction and is serving as lead financial advisor and Evercore is also acting as financial advisor to Vitesse and provided a fairness opinion to Vitesse’s Board of Directors. Baker Botts L.L.P. and Blake, Cassels & Graydon LLP are serving as legal advisors to Vitesse.
RBC Capital Markets is serving as financial advisor to Lucero and has also provided a verbal opinion to Lucero’s board to the effect that, as of the date of such opinion and based upon and subject to the assumptions, limitations and qualifications set forth therein, the consideration to be received by shareholders of Lucero pursuant to the transaction, is fair from a financial point of view, to the shareholders of Lucero. Peters & Co. is serving as financial advisor and has also provided a verbal opinion to Lucero’s board to the effect that, as of the date of such opinion and based upon and subject to the assumptions, limitations and qualifications set forth therein, the consideration to be received by shareholders of Lucero pursuant to the transaction, is fair from a financial point of view, to the shareholders of Lucero. Burnet, Duckworth & Palmer LLP and Davis Graham & Stubbs LLP are serving as legal advisors to Lucero.
CONFERENCE CALL AND ADDITIONAL MATERIALS
Vitesse will hold a conference call to discuss the transaction today, December 16, 2024 at 10:00 AM Eastern Time.
An investor presentation regarding the transaction can also be found at www.vitesse-vts.com.
Those wishing to listen to the conference call may do so via the Company’s website or by phone as follows:
Website: https://event.choruscall.com/mediaframe/webcast.html?webcastid=I5trRi8k
Dial-In Number: 877-407-0778 (US/Canada) and +1 201-689-8565 (International)
Conference ID: 13750624 – Vitesse Business Update
ABOUT VITESSE ENERGY, INC.
Vitesse Energy, Inc. is focused on returning capital to stockholders through investments in non-operated and operated oil and gas wells.
More information about Vitesse can be found at www.vitesse-vts.com.
ABOUT LUCERO ENERGY CORP.
Lucero is a pure-play North Dakota Bakken / Three Forks producer with an ideal asset platform targeting high-netback light oil production. The Company is positioned for disciplined growth, pursuing the acquisition, development and production of high-quality oil and natural gas assets.
More information about Lucero can be found at www.lucerocorp.com.
