Vitesse Energy, Inc. and Lucero Energy Corp. have announced a definitive agreement for Vitesse to acquire Lucero in an all-stock transaction valued at approximately $222 million on a fully diluted equity basis. This strategic move will bolster Vitesse’s presence in the Bakken region while enhancing operational scale and shareholder value.
Transaction Overview
Under the agreement, Lucero shareholders will receive 0.01239 shares of Vitesse common stock for each Lucero share, resulting in the issuance of approximately 8.175 million shares upon closing. The merger brings together complementary assets, including Lucero’s two-stream net production of approximately 6.4 thousand barrels of oil equivalent per day (Mboe/d) in Q3 2024, and a robust financial position with no debt and $56 million in cash as of September 30, 2024.
Vitesse plans to use a portion of Lucero’s cash reserves to reduce borrowings under its revolving credit facility. The acquisition is expected to generate annual general and administrative synergies of approximately $3 million.
Strategic Rationale
Vitesse Chairman and CEO Bob Gerrity highlighted the value of Lucero’s high-quality assets and operational excellence. “This acquisition complements our existing business and aligns with our strategy of focusing primarily on non-operated assets while adding an operated leg to our portfolio. This approach enables us to pursue accretive opportunities while maintaining control over future capital spending,” Gerrity stated.
Brett Herman, President and CEO of Lucero, emphasized the benefits for Lucero’s shareholders. “This transaction offers immediate value for our investors and provides an opportunity to benefit from a larger, stronger company. The combined entity will deliver enhanced shareholder returns through its high-quality assets in the Williston Basin, which exhibit low production declines and strong capital efficiencies,” Herman noted.
Governance and Leadership
Following the merger, Vitesse’s board of directors will expand to nine members, including two nominees from Lucero’s board, Messrs. Reaves and Chernoff. Vitesse’s current leadership team will remain in place to guide the combined entity’s strategic direction.
Financial and Operational Benefits
The merger strengthens Vitesse’s financial position and supports its commitment to delivering shareholder value through robust dividend payouts. Vitesse plans to hedge a significant portion of the combined entity’s oil production through 2026, ensuring predictable cash flows. The company has historically leveraged hedging strategies to maintain financial stability and sustain its dividend policy.
Details of the Transaction
The transaction will proceed under a plan of arrangement governed by the Business Corporations Act (Alberta). It requires approval from at least two-thirds of Lucero shareholders, as well as majority approval from Vitesse stockholders, in accordance with NYSE rules. Court approval from the Court of King’s Bench of Alberta and regulatory clearances in the U.S. and Canada are also required.
Upon closing, current Vitesse shareholders will own approximately 80% of the combined entity, while Lucero shareholders will hold the remaining 20%.
Advisors and Approvals
The boards of directors of both companies have unanimously approved the merger. Jefferies LLC served as lead financial advisor to Vitesse, with Evercore providing additional advisory services and a fairness opinion. Legal counsel for Vitesse includes Baker Botts LLP and Blake, Cassels & Graydon LLP.
Lucero’s advisors include RBC Capital Markets and Peters & Co., both of which provided fairness opinions to Lucero’s board. Burnet, Duckworth & Palmer LLP and Davis Graham & Stubbs LLP served as Lucero’s legal counsel.
Lucero’s largest shareholders, including FR XIII PetroShale Holdings L.P. and its directors and executive officers, representing approximately 63% of outstanding shares, have agreed to vote in favor of the transaction.
