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
Vitesse Energy, Inc. (NYSE: VTS) (“we,” “Vitesse,” or the
“Company”) and Lucero Energy Corp. (TSXV: LOU, OTCQB: PSHIF)
(“Lucero”) 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.
NOTICE REGARDING INFORMATION CONTAINED IN THIS NEWS
RELEASE
All amounts in this news release are stated in U.S. dollars
unless otherwise specified.
This news release contains references to "Boe" (barrels of oil
equivalent) and "Mboe" (one thousand barrels of oil equivalent).
The parties have adopted the standard of six thousand cubic feet of
gas to one barrel of oil (6 Mcf: 1 Bbl) when converting natural gas
to Boes. Boe and Mboe may be misleading, particularly if used in
isolation. The foregoing conversion ratios are based on an energy
equivalency conversion method primarily applicable at the burner
tip and do not represent a value equivalency at the wellhead. Given
that the value ratio based on the current price of oil as compared
to natural gas is significantly different from the energy
equivalent of 6:1, utilizing a conversion on a 6:1 basis may be
misleading. Disclosure regarding anticipated wells and drilling
locations has been prepared by Vitesse in accordance with U.S.
disclosure standards.
All production volumes presented in this news release are
reported on a "net" basis (a company's working interest share after
deduction of royalty obligations, plus the company's royalty
interests), which differs from "gross" basis (a company's working
interest before deduction of royalties) for reporting production
under National Instrument 51-101 and industry practice in
Canada.
All references to "oil" in this news release include light and
tight crude oil.
FORWARD-LOOKING STATEMENTS
Certain statements in this news release are forward-looking
statements within the meaning of the applicable Canadian securities
laws and the Private Securities Litigation Reform Act of 1995.
Examples of forward-looking statements include statements
concerning the proposed transaction, including any statements
regarding the expected timetable for completing the transaction,
the results, effects, benefits and synergies of the transaction,
future opportunities for Vitesse, future financial performance and
condition, guidance and any other statements regarding Vitesse’s or
Lucero’s future expectations, beliefs, plans, objectives, financial
conditions, assumptions or future events or performance that are
not historical facts. Forward-looking statements can be identified
by words such as “anticipate,” “believe,” “expect,” “if,” “intend,”
“estimate,” “probable,” “project,” “forecast,” “predict,”
“outlook,” “target,” “aim,” “will,” “could,” “should,” “would,”
“potential,” “may,” “might,” “likely” “plan,” “positioned,”
“strategy,” and similar words and expressions. Specific
forward-looking statements include statements regarding Vitesse's
or Lucero's plans and expectations with respect to the transaction,
the timing of closing, the anticipated cash to be acquired as part
of the transaction and its use to repay borrowings under Vitesse’s
revolving credit facility, the anticipated impact of the
transaction on Vitesse’s results of operations, financial position,
growth opportunities, operational flexibility and competitive
position, Vitesse’s hedging strategy, returns to stockholders and
enhanced stockholder value and the anticipated increase to
Vitesse’s dividend following the closing of the transaction,
expense synergies resulting from the transaction, and the
composition of the board of directors of Vitesse following the
closing.
Forward-looking statements involve significant risks and
uncertainties that could cause actual results to differ materially
from those anticipated, including, but not limited to, the
possibility that stockholders of Vitesse may not approve the
issuance of new shares of Vitesse common stock in the transaction
or that shareholders of Lucero may not approve the transaction; the
risk that a condition to closing of the transaction may not be
satisfied; that either party may terminate the arrangement
agreement or that the closing of the transaction might be delayed
or not occur at all; potential adverse reactions or changes to
business or employee relationships of Vitesse or Lucero, including
those resulting from the announcement or completion of the
transaction; the diversion of management time on
transaction-related issues; the ultimate timing, outcome and
results of integrating the operations of Vitesse and Lucero; the
effects of the transaction, including Vitesse’s future financial
condition, results of operations, strategy and plans; the ability
of Vitesse to realize anticipated synergies in the timeframe
expected or at all; changes in capital markets; regulatory approval
of the transaction; the effects of commodity prices, including any
resulting impact on Vitesse’s ability to sustain its anticipated
dividend following the closing of the transaction; the risks of oil
and gas activities; and the fact that operating costs and business
disruption may be greater than expected following the public
announcement or consummation of the transaction. Expectations
regarding business outlook, including changes in revenue, pricing,
capital expenditures, cash flow generation, strategies for the
company's operations, oil and natural gas market conditions, legal,
economic and regulatory conditions, and environmental matters are
only forecasts regarding these matters.
Additional factors that could cause actual results to differ
materially from those anticipated can be found in Vitesse's Annual
Report on Form 10-K for the year ended December 31, 2023, and
subsequent Quarterly Reports on Form 10-Q, which are on file with
the SEC and available from Vitesse's website at ir.vitesse-vts.com,
and in other documents Vitesse files with the SEC; and in Lucero's
annual information form for the year ended December 31, 2023, which
is on file with the TSX Venture Exchange (“TSXV”) and on SEDAR+ and
available from Lucero’s website at www.lucerocorp.com/investors/,
and in other documents Lucero files with TSXV or on SEDAR+.
All forward-looking statements speak only as of the date they
are made and are based on information and assumptions believed to
be valid at that time. Neither Vitesse nor Lucero assumes any
obligation to update forward-looking statements to reflect
circumstances or events that occur after the date the
forward-looking statements were made or to reflect the occurrence
of unanticipated events except as required by applicable securities
laws. As forward-looking statements involve significant risks and
uncertainties, caution should be exercised against placing undue
reliance on such statements.
NO OFFER OR SOLICITATION
This news release does not constitute an offer to sell or the
solicitation of an offer to subscribe for or buy any securities or
a solicitation of any vote or approval with respect to the proposed
transaction between Vitesse and Lucero or otherwise, nor shall
there be any offer or solicitation in any jurisdiction in which
such offer or solicitation would be unlawful under the securities
laws of any such jurisdiction.
ADDITIONAL INFORMATION AND WHERE YOU CAN FIND IT
In connection with the proposed transaction, Vitesse and Lucero
intend to file materials with the SEC and on SEDAR+, as applicable.
Vitesse intends to file Proxy Statement (the "Proxy Statement")
with the SEC in connection with the solicitation of proxies to
obtain Vitesse stockholder approval for the issuance of stock in
the proposed transaction, and Lucero intends to file an information
circular and proxy statement (the "Circular") with TSXV and on
SEDAR+, in connection with the solicitation of proxies to obtain
Lucero shareholder approval of the proposed transaction. Vitesse
intends to mail or otherwise provide a Proxy Statement to the
stockholders of Vitesse. This news release is not a substitute for
the Proxy Statement, the Circular or for any other document that
Vitesse or Lucero may file with the SEC or on SEDAR+ and/or send to
Vitesse's stockholders and/or Lucero's shareholders in connection
with the proposed transaction. INVESTORS AND SECURITY HOLDERS OF
VITESSE AND LUCERO ARE URGED TO CAREFULLY AND THOROUGHLY READ THE
PROXY STATEMENT AND THE CIRCULAR, RESPECTIVELY, AS EACH MAY BE
AMENDED OR SUPPLEMENTED FROM TIME TO TIME, AND OTHER RELEVANT
DOCUMENTS FILED BY VITESSE AND/OR LUCERO WITH THE SEC OR ON SEDAR+,
WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT VITESSE, LUCERO, THE PROPOSED TRANSACTION, THE
RISKS RELATED THERETO AND RELATED MATTERS.
Shareholders of Vitesse and Lucero will be able to obtain free
copies of the Proxy Statement and the Circular, as each may be
amended from time to time, and other relevant documents filed by
Vitesse and/or Lucero with the SEC or on SEDAR+ when they become
available through the website maintained by the SEC at www.sec.gov
or on SEDAR+ at www.sedarplus.ca, as applicable. Copies of
documents filed with the SEC by Vitesse will be available free of
charge from Vitesse’s website at ir.vitesse-vts.com or by
contacting Vitesse’s Investor Relations Department at (720)
532-8232. Copies of documents filed on SEDAR+ by Lucero will be
available free of charge from Lucero’s website at
www.lucerocorp.com/investors/ or by contacting Lucero’s Investor
Relations Department at (877) 573-0181.
PARTICIPANTS IN THE SOLICITATION
Vitesse and its directors, executive officers and certain other
members of management and employees may be deemed, under SEC rules,
to be participants in the solicitation of proxies from Vitesse’s
stockholders in connection with the proposed transaction.
Information regarding the interests of the persons who may, under
the rules of the SEC, be considered participants in the
solicitation of the stockholders of Vitesse in connection with the
proposed transaction, will be set forth in the Proxy Statement and
the other relevant documents to be filed with the SEC. Stockholders
can find information about Vitesse and its directors and executive
officers and their ownership of Vitesse common stock in the Proxy
Statement for Vitesse’s 2024 Annual Meeting, filed with the SEC on
March 20, 2024, and additional information about the ownership of
Vitesse common stock by Vitesse directors and executive officers is
included in their Forms 3, 4 and 5 filed with the SEC.
NON-GAAP FINANCIAL MEASURES
Disclosure regarding Free Cash Flow and the ratio of Net Debt to
Adjusted EBITDA has been prepared by management of Vitesse. These
financial measures are not defined under U.S. GAAP or International
Financial Reporting Standards.
Vitesse defines Free Cash Flow as cash flow from operations,
adjusting for changes in operating assets and liabilities, less
development of oil and gas properties.
Vitesse calculates Net Debt by deducting cash on hand from the
amount outstanding on the revolving credit facility as of the
balance sheet or measurement date.
Vitesse defines Adjusted EBITDA as net income before expenses
for interest, income taxes, depletion, depreciation, amortization
and accretion, and excludes non-cash equity-based compensation and
non-cash gains and losses on unsettled derivative instruments in
addition to certain other items.
Management of Vitesse believes the use of these non-GAAP
financial measures provides useful information to investors to gain
an overall understanding of financial performance. Specifically,
Vitesse management believes the non-GAAP financial measures
included herein provide useful information to both management and
investors by excluding certain items that management believes are
not indicative of Vitesse’s core operating results. In addition,
these non-GAAP financial measures are used by Vitesse management
for budgeting and forecasting as well as subsequently measuring
Vitesse’s performance, and Vitesse management believes it is
providing investors with financial measures that most closely align
to its internal measurement processes. Vitesse is not able to
reconcile forward-looking non-GAAP financial measures and ratios
included in this news release because it is unable to predict
without unreasonable effort the exact amount or timing of the
reconciling items. The variability of these items could have a
significant impact on future GAAP financial results.
Neither the TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241216042941/en/
INVESTOR AND MEDIA CONTACTS
Ben Messier, CFA Director – Investor Relations and
Business Development Vitesse Energy, Inc. (720) 532-8232
benmessier@vitesse-vts.com
Brett Herman President & CEO Lucero Energy Corp.
(877) 573-0181 info@lucerocorp.com
Marvin Tang Vice President, Finance and Chief Financial
Officer Lucero Energy Corp. (877) 573-0181 info@lucerocorp.com
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