Disputed Delaware Basin Acres Excluded in Vital-Point Energy Deal

Leasehold in the prolific State Line area along the Texas-New Mexico border is excluded in Vital Energy’s plan to buy Point Energy Partners’ Delaware Basin property for $1.1 billion.

In it, Vital is picking up 80%, while non-op Northern Oil & Gas (NOG) will acquire a 20% undivided interest.

But Point Energy’s claims to 4,000 gross contiguous acres in northern Loving County, Texas, have been involved in a dispute with Matador Resources, which the Texas Supreme Court ruled 9-0 last year had lost its lease on the property in 2017.

“This transaction [with Vital] is completely separate from anything having to do with our State Line assets,” John Sabia, Point Energy’s CFO and a senior partner, told Hart Energy on July 30.

Vital Energy announced the deal on July 28. In a July 29 presentation to investors, Vital’s map of the to-be-acquired property excluded the northern Loving County leasehold. The Point Energy leasehold Vital and NOG are buying is approximately 21,000 net acres.

Expiration miscalculation

Matador miscalculated the lease expiration date on the northern Loving property as June 19 rather than May 21 under the continuous-drilling clause, the court ruled.

Matador had claimed force majeure, reporting the rig it planned to use had encountered problems at another site and could not be used in time. However, the court found that the problem resulted in a 30-hour delay and that the rig was sent to drill two wells on another lease instead.

Matador’s June 19 calculation was based on six months after release of the last rig on the lease. Instead, the lease required a new well be spud within six months—May 21—of the last well’s spud date, the court ruled.

Matador did not respond to a Hart Energy request for comment by press time.

John McFarland, an attorney at Austin, Texas-based firm Graves, Dougherty, Hearon & Moody, blogged in January that when Matador didn’t show up with a rig on the property by May 21, “the mineral owners leased the property to Point Energy Partners.”

Sabia told Hart Energy in June, “All of our acreage in Loving has been tied up in litigation with Matador for the past seven years.”

While the Supreme Court ruled in Point Energy’s favor, he said, “the case was partially remanded to clean up some of the smaller issues not reached by the [appeals] court, which were dependent on the force majeure question.”

Point Energy’s production

Formed in 2017 with backing from Fort Worth, Texas-based Vortus Investment Advisors, Point Energy produced 17,477 boe/d in May from Ward and Winkler counties, according to Texas Railroad Commission (RRC) data, mostly from Ward County.

Of that, 12,635 bbl/d was oil; 4,298 boe/d, casinghead gas; 148 boe/d, gas; and 401 bbl/d, condensate.

Production in the first four months of 2024 averaged 24,839 boe/d, according to the RRC.

In June, it had two rigs drilling, both in Ward.

Meanwhile, Matador is buying another State Line-area leaseholder, EnCap Investments-backed Ameredev II Parent LLC, for $1.9 billion in cash, it announced in June.

Ameredev’s position in northern Loving County is adjacent to the Point Energy lease. It expects third-quarter production to be approximately 25,500 boe/d.

Ameredev’s mostly contiguous 33,500 net acres are in southern Lea County, New Mexico, stretching into Loving in Texas.