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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2023
 or
     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from                             to                            
Commission File Number: 001-35380
https://cdn.kscope.io/41f7085e624a6b21931c68498b97279d-vital_logo_rgb.jpg
 Vital Energy, Inc.
(Exact name of registrant as specified in its charter)
Delaware45-3007926
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
521 E. Second StreetSuite 1000 
TulsaOklahoma74120
(Address of principal executive offices)(Zip code)
(918513-4570
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each classTrading symbolName of each exchange on which registered
Common stock, $0.01 par value per shareVTLENew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No 
Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. 
Large accelerated filerAccelerated filer Non-accelerated filerSmaller reporting companyEmerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No  
Number of shares of registrant's common stock outstanding as of October 31, 2023: 24,760,683



VITAL ENERGY, INC.
FOR THE QUARTER ENDED SEPTEMBER 30, 2023
TABLE OF CONTENTS
 Page

ii


Glossary of Oil and Natural Gas Terms and Certain Other Terms
The following terms are used throughout this Quarterly Report on Form 10-Q (this "Quarterly Report"):
"Argus WTI Midland"—An index price reflecting the weighted average price of WTI at the pipeline and storage hub at Midland.
"Argus WTI Formula Basis"—The outright price at Cushing that is used as the basis for pricing all other Argus US Gulf coast physical crudes.
"Basin"—A large natural depression on the earth's surface in which sediments, generally brought by water, accumulate.
"Bbl" or "barrel"—One stock tank barrel, of 42 U.S. gallons liquid volume, used herein in reference to crude oil, condensate, natural gas liquids or water.
"Bbl/d"—Bbl per day.
"Benchmark Prices"—The unweighted arithmetic average first-day-of-the-month price for each month within the 12-month period prior to the end of the reporting period before differentials, as required by SEC guidelines.
"BOE"—One barrel of oil equivalent, calculated by converting natural gas to oil equivalent barrels at a ratio of six Mcf of natural gas to one Bbl of oil.
"BOE/d"—BOE per day.
"Btu"—British thermal unit, the quantity of heat required to raise the temperature of a one pound mass of water by one degree Fahrenheit.
"Completion"—The process of treating a drilled well followed by the installation of permanent equipment for the production of oil or natural gas, or in the case of a dry hole, the reporting of abandonment to the appropriate agency.
"Dry hole"—A well found to be incapable of producing hydrocarbons in sufficient quantities such that proceeds from the sale of such production exceed production expenses and taxes.
"Exchange Act" —The Securities Exchange Act of 1934, as amended.
"Formation"—A layer of rock which has distinct characteristics that differ from nearby rock.
"Fracturing" or "Frac"—The propagation of fractures in a rock layer by a pressurized fluid. This technique is used to release petroleum and natural gas for extraction.
"GAAP"—Generally accepted accounting principles in the United States.
"Gross acres"—The total acres or wells, as the case may be, in which a working interest is owned.
"Henry Hub"—A natural gas pipeline delivery point in south Louisiana that serves as the benchmark natural gas price underlying NYMEX natural gas futures contracts.
"Horizon" —A term used to denote a surface in or of rock, or a distinctive layer of rock that might be represented by a reflection in seismic data.
"Initial Production"The measurement of production from an oil or gas well when first brought on stream. Often stated in terms of production during the first thirty days.
"Liquids"—Describes oil, condensate and natural gas liquids.
"MBbl"—One thousand barrels of crude oil, condensate or natural gas liquids.
"MBOE"—One thousand BOE.
"Mcf"—One thousand cubic feet of natural gas.
"MMBtu"—One million Btu.
"MMcf"—One million cubic feet of natural gas.
"Natural gas liquids" or "NGL"—Components of natural gas that are separated from the gas state in the form of liquids, which include propane, butanes and ethane, among others.
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"Net acres"—The percentage of gross acres an owner has out of a particular number of acres, or a specified tract. An owner who has 50% interest in 100 acres owns 50 net acres.
"NYMEX"—The New York Mercantile Exchange.
"OPEC"—The Organization of the Petroleum Exporting Countries.
"Proved reserves"—The estimated quantities of oil, natural gas and natural gas liquids that geological and engineering data demonstrate with reasonable certainty to be commercially recoverable in future years from known reservoirs under existing economic and operating conditions.
"Realized Prices"—Prices which reflect adjustments to the Benchmark Prices for quality, transportation fees, geographical differentials, marketing bonuses or deductions and other factors affecting the price received at the delivery point without giving effect to our commodity derivative transactions.
"Reservoir"—A porous and permeable underground formation containing a natural accumulation of producible oil and/or natural gas that is confined by impermeable rock or water barriers and is separate from other reservoirs.
"SEC" — The U.S. Securities and Exchange Commission.
"Securities Act" — The Securities Act of 1933, as amended.
"Senior Secured Credit Facility" — The Fifth Amended and Restated Credit Agreement among Vital Energy, Inc., as borrower, Wells Fargo Bank, N.A., as administrative agent, Vital Midstream Services, LLC, as guarantor, and the banks signatory thereto.
"Spacing"—The distance between wells producing from the same reservoir.
"Standardized measure"—Discounted future net cash flows estimated by applying Realized Prices to the estimated future production of year-end proved reserves. Future cash inflows are reduced by estimated future production and development costs based on period end costs to determine pre-tax cash inflows. Future income taxes, if applicable, are computed by applying the statutory tax rate to the excess of pre-tax cash inflows over our tax basis in the oil and natural gas properties. Future net cash inflows after income taxes are discounted using a 10% annual discount rate.
"WAHA"—Waha West Texas Natural Gas Index price as quoted in Platt's Inside FERC.
"Working interest" or "WI"—The right granted to the lessee of a property to explore for and to produce and own crude oil, natural gas liquids, natural gas or other minerals. The working interest owners bear the exploration, development and operating costs on either a cash, penalty or carried basis.
"WTI"—West Texas Intermediate grade crude oil. A light (low density) and sweet (low sulfur) crude oil, used as a pricing benchmark for NYMEX oil futures contracts.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Various statements contained in or incorporated by reference into this Quarterly Report are forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These forward-looking statements include statements, projections and estimates concerning our operations, performance, business strategy, oil, NGLs and natural gas reserves, drilling program capital expenditures, liquidity and capital resources, the timing and success of specific projects, outcomes and effects of litigation, claims and disputes, derivative activities and potential financing. Forward-looking statements are generally accompanied by words such as "estimate," "project," "predict," "believe," "expect," "anticipate," "potential," "could," "may," "will," "foresee," "plan," "goal," "should," "intend," "pursue," "target," "continue," "suggest" or the negative thereof or other variations thereof or other words that convey the uncertainty of future events or outcomes. Forward-looking statements are not guarantees of performance. These statements are based on certain assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments as well as other factors we believe are appropriate under the circumstances. Among the factors that significantly impact our business and could impact our business in the future are:
moderating but continuing inflationary pressures and associated changes in monetary policy that may cause costs to rise;
changes in domestic and global production, supply and demand for oil, NGL and natural gas and actions by the Organization of the Petroleum Exporting Countries members and other oil exporting nations ("OPEC+");
the volatility of oil, NGL and natural gas prices, including our area of operation in the Permian Basin;
reduced demand due to shifting market perception towards the oil and gas industry;
our ability to optimize spacing, drilling and completions techniques in order to maximize our rate of return, cash flows from operations and shareholder value;
the ongoing instability and uncertainty in the U.S. and international energy, financial and consumer markets that could adversely affect the liquidity available to us and our customers and the demand for commodities, including oil, NGL and natural gas;
competition in the oil and gas industry;
our ability to execute our strategies, including our ability to successfully identify and consummate strategic acquisitions at purchase prices that are accretive to our financial results and to successfully integrate acquired businesses, assets and properties; our ability to realize the anticipated benefits of acquisitions, including effectively managing our expanded acreage;
our ability to discover, estimate, develop and replace oil, NGL and natural gas reserves and inventory;
insufficient transportation capacity in the Permian Basin and challenges associated with such constraint, and the availability and costs of sufficient gathering, processing, storage and export capacity;
a decrease in production levels which may impair our ability to meet our contractual obligations and ability to retain our leases;
risks associated with the uncertainty of potential drilling locations and plans to drill in the future;
the inability of significant customers to meet their obligations;
revisions to our reserve estimates as a result of changes in commodity prices, decline curves and other uncertainties;
the availability and costs of drilling and production equipment, supplies, labor and oil and natural gas processing and other services;
the effects, duration and other implications of, including government response to widespread epidemic or pandemic diseases;
ongoing war and political instability, such as the conflict in Ukraine and Russian efforts to destabilize the global hydrocarbon market and the conflict in the Gaza strip;
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loss of senior management or other key personnel;
risks related to the geographic concentration of our assets;
capital requirements for our operations and projects;
our ability to hedge commercial risk, including commodity price volatility, and regulations that affect our ability to hedge such risks;
our ability to continue to maintain the borrowing capacity under our Senior Secured Credit Facility (as defined herein) or access other means of obtaining capital and liquidity, especially during periods of sustained low commodity prices;
our ability to comply with covenants and other terms and conditions contained in our debt agreements, including our Senior Secured Credit Facility and the indentures governing our senior unsecured notes, as well as debt that could be incurred in the future;
our ability to generate sufficient cash to service our indebtedness, fund our capital requirements and generate future profits;
drilling and operating risks, including risks related to hydraulic fracturing activities and those related to inclement or extreme weather, impacting our ability to produce existing wells and/or drill and complete new wells over an extended period of time;
physical and transition risks relating to climate change;
the impact of legislation or regulatory initiatives intended to address induced seismicity, including restrictions on the use of water, produced water and produced water wells, on our ability to conduct our operations;
United States ("U.S.") and international economic conditions and legal, tax, political and administrative developments, including the effects of energy, trade and environmental policies and existing and future laws and government regulations;
our ability to comply with federal, state and local regulatory requirements;
the impact of repurchases, if any, of securities from time to time;
our ability to maintain the health and safety of, as well as recruit and retain, qualified personnel necessary to operate our business;
our ability to secure or generate sufficient electricity to produce our wells without limitations; and
our belief that the outcome of any legal proceedings will not materially affect our financial results and operations.
These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Forward-looking statements should, therefore, be considered in light of various factors, including those set forth under "Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this Quarterly Report, and under "Part I, Item 1A. Risk Factors" and "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the "2022 Annual Report") and those set forth from time to time in our other filings with the SEC. These documents are available through our website or through the SEC's Electronic Data Gathering and Analysis Retrieval system at https://www.sec.gov. In light of such risks and uncertainties, we caution you not to place undue reliance on these forward-looking statements. These forward-looking statements speak only as of the date of this Quarterly Report, or if earlier, as of the date they were made. We do not intend to, and disclaim any obligation to, update or revise any forward-looking statements unless required by securities law.
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Part I

Item 1.    Consolidated Financial Statements (Unaudited)

Vital Energy, Inc.
Consolidated balance sheets
(in thousands, except share data)
(Unaudited)
September 30, 2023December 31, 2022
Assets  
Current assets:  
Cash and cash equivalents$589,695 $44,435 
Accounts receivable, net199,838 163,369 
Derivatives3,775 24,670 
Other current assets20,900 13,317 
Total current assets814,208 245,791 
Property and equipment: 
Oil and natural gas properties, full cost method: 
Evaluated properties10,512,608 9,554,706 
Unevaluated properties not being depleted199,490 46,430 
Less: accumulated depletion and impairment(7,616,830)(7,318,399)
Oil and natural gas properties, net3,095,268 2,282,737 
Midstream and other fixed assets, net129,115 127,803 
Property and equipment, net3,224,383 2,410,540 
Derivatives27,163 24,363 
Operating lease right-of-use assets116,634 23,047 
Deferred income taxes220,382  
Other noncurrent assets, net23,482 22,373 
Total assets$4,426,252 $2,726,114 
Liabilities and stockholders' equity 
Current liabilities: 
Accounts payable and accrued liabilities$106,376 $102,516 
Accrued capital expenditures74,149 48,378 
Undistributed revenue and royalties165,027 160,023 
Derivatives106,767 5,960 
Operating lease liabilities47,399 15,449 
Other current liabilities71,984 82,950 
Total current liabilities571,702 415,276 
Long-term debt, net1,926,966 1,113,023 
Derivatives5,885  
Asset retirement obligations75,416 70,366 
Operating lease liabilities66,366 9,435 
Other noncurrent liabilities6,853 7,268 
Total liabilities2,653,188 1,615,368 
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized and zero issued as of September 30, 2023 and December 31, 2022
  
Common stock, $0.01 par value, 40,000,000 shares authorized, and 21,751,758 and 16,762,127 issued and outstanding as of September 30, 2023 and December 31, 2022, respectively
218 168 
Additional paid-in capital3,002,709 2,754,085 
Accumulated deficit(1,229,863)(1,643,507)
Total stockholders' equity1,773,064 1,110,746 
Total liabilities and stockholders' equity$4,426,252 $2,726,114 

The accompanying notes are an integral part of these unaudited consolidated financial statements.
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Vital Energy, Inc.
Consolidated statements of operations
(in thousands, except per share data)
(Unaudited)
 Three months ended September 30, Nine months ended September 30,
 2023202220232022
Revenues:
Oil sales$375,166 $311,740 $940,982 $1,069,542 
NGL sales38,303 59,377 97,196 197,037 
Natural gas sales21,234 73,831 48,260 179,026 
Sales of purchased oil3 18,371 14,192 106,030 
Other operating revenues808 795 2,453 5,030 
Total revenues435,514 464,114 1,103,083 1,556,665 
Costs and expenses:
Lease operating expenses66,040 44,246 173,939 127,136 
Production and ad valorem taxes27,360 29,024 69,498 89,512 
Oil transportation and marketing expenses10,795 13,285 32,391 39,022 
Gas gathering, processing and transportation expenses371  371  
Costs of purchased oil101 18,772 14,856 108,516 
General and administrative28,641 11,857 73,053 50,800 
Organizational restructuring expenses 10,420  10,420 
Depletion, depreciation and amortization120,499 74,928 310,618 226,555 
Other operating expenses, net1,703 2,616 4,538 6,973 
Total costs and expenses255,510 205,148 679,264 658,934 
Gain on disposal of assets, net149 4,282 540 4,952 
Operating income180,153 263,248 424,359 902,683 
Non-operating income (expense):
Gain (loss) on derivatives, net(135,321)100,748 (132,875)(290,995)
Interest expense(39,305)(30,967)(99,388)(96,251)
Gain (loss) on extinguishment of debt, net 553  (245)
Other income, net1,739 173 3,697 543 
Total non-operating income (expense), net(172,887)70,507 (228,566)(386,948)
Income before income taxes7,266 333,755 195,793 515,735 
Income tax benefit (expense):
Current(464)960 (2,298)(4,771)
Deferred(1,909)2,808 220,149 2,324 
Total income tax benefit (expense)(2,373)3,768 217,851 (2,447)
Net income $4,893 $337,523 $413,644 $513,288 
Net income per common share:
Basic$0.27 $20.27 $23.44 $30.64 
Diluted$0.26 $20.08 $23.32 $30.26 
Weighted-average common shares outstanding:
Basic18,455 16,650 17,646 16,750 
Diluted18,569 16,809 17,740 16,963 

The accompanying notes are an integral part of these unaudited consolidated financial statements.
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Vital Energy, Inc.
Consolidated statements of stockholders' equity
(in thousands)
(Unaudited)
Common stockAdditional
paid-in capital
Treasury stock
(at cost)
Accumulated deficit 
 SharesAmountSharesAmountTotal
Balance, December 31, 202216,762 $168 $2,754,085  $ $(1,643,507)$1,110,746 
Restricted stock awards315 3 (3)— — —  
Restricted stock forfeitures(3)— — — — — — 
Stock exchanged for tax withholding— — — 49 (2,459)— (2,459)
Retirement of treasury stock(49)(1)(2,458)(49)2,459 —  
Share-settled equity-based compensation— — 3,141 — — — 3,141 
Net income— — — — — 113,940 113,940 
Balance, March 31, 202317,025 170 2,754,765   (1,529,567)1,225,368 
Restricted stock awards6   — — —  
Restricted stock forfeitures(9)— — — — — — 
Stock exchanged for tax withholding— — — 7 (385)— (385)
Retirement of treasury stock(7) (385)(7)385 —  
Share-settled equity-based compensation— — 3,711 — — — 3,711 
Equity issued for acquisition of oil and natural gas properties1,579 16 80,052 — — — 80,068 
Net income— — — — — 294,811 294,811 
Balance, June 30, 202318,594 186 2,838,143   (1,234,756)1,603,573 
Restricted stock awards6   — — —  
Restricted stock forfeitures(7)  — — —  
Stock exchanged for tax withholding— — — 4 (212)— (212)
Retirement of treasury stock(4) (212)(4)212 —  
Share-settled equity-based compensation— — 3,807 — — — 3,807 
Issuance of common stock, net of costs3,163 32 160,971 — — — 161,003 
Net income— — — — — 4,893 4,893 
Balance, September 30, 202321,752 $218 $3,002,709  $ $(1,229,863)$1,773,064 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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Vital Energy, Inc.
Consolidated statements of stockholders' equity
(in thousands)
(Unaudited)
 Common stockAdditional
paid-in capital
Treasury stock
(at cost)
Accumulated deficit 
 SharesAmountSharesAmountTotal
Balance, December 31, 202117,075 $171 $2,788,628  $ $(2,275,019)$513,780 
Restricted stock awards232 2 (2)— — —  
Restricted stock forfeitures(4)— — — — — — 
Stock exchanged for tax withholding— — — 76 (5,847)— (5,847)
Retirement of treasury stock(76)(1)(5,846)(76)5,847 —  
Share-settled equity-based compensation— — 2,636 — — — 2,636 
Performance share conversion75 1 (1)— — —  
Net loss— — — — — (86,781)(86,781)
Balance, March 31, 202217,302 173 2,785,415   (2,361,800)423,788 
Restricted stock awards5  — — — —  
Restricted stock forfeitures(3)— — — — — — 
Share repurchases— — — 85 (9,071)— (9,071)
Stock exchanged for tax withholding— — — 7 (742)— (742)
Retirement of treasury stock(92)(1)(9,812)(92)9,813 —  
Share-settled equity-based compensation— — 2,935 — — — 2,935 
Net income— — — — — 262,546 262,546 
Balance, June 30, 202217,212 172 2,778,538   (2,099,254)679,456 
Restricted stock awards9   — — —  
Restricted stock forfeitures(50)(1)1 — — —  
Share repurchases— — — 245 (17,515)— (17,515)
Stock exchanged for tax withholding— — — 11 (853)— (853)
Retirement of treasury stock(256)(2)(18,366)(256)18,368 —  
Share-settled equity-based compensation— — 2,059 — — — 2,059 
Net income— — — — — 337,523 337,523 
Balance, September 30, 202216,915 $169 $2,762,232  $ $(1,761,731)$1,000,670 

The accompanying notes are an integral part of these unaudited consolidated financial statements.
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Vital Energy, Inc.
Consolidated statements of cash flows
(in thousands)
(Unaudited)
Nine months ended September 30,
20232022
Cash flows from operating activities:  
Net income$413,644 $513,288 
Adjustments to reconcile net income to net cash provided by operating activities:
Share-settled equity-based compensation, net8,402 6,295 
Depletion, depreciation and amortization310,618 226,555 
Gain on disposal of assets, net(540)(4,952)
Mark-to-market on derivatives:
Loss on derivatives, net132,875 290,995 
Settlements paid for matured derivatives, net(14,320)(423,668)
Loss on extinguishment of debt, net 245 
Deferred income tax benefit(220,149)(2,324)
Other, net8,851 25,932 
Changes in operating assets and liabilities:
Accounts receivable, net(38,807)(11,069)
Other current assets(9,589)7,574 
Other noncurrent assets, net1,266 1,450 
Accounts payable and accrued liabilities4,243 15,084 
Undistributed revenue and royalties199 131,356 
Other current liabilities(12,846)(41,362)
Other noncurrent liabilities(4,625)(14,697)
Net cash provided by operating activities579,222 720,702 
Cash flows from investing activities:
Acquisitions of oil and natural gas properties, net(540,129)(5,581)
Capital expenditures:
Oil and natural gas properties(455,046)(432,124)
Midstream and other fixed assets(10,692)(10,264)
Proceeds from dispositions of capital assets, net of selling costs2,343 2,939 
Settlements received for contingent consideration2,082 1,555 
Net cash used in investing activities(1,001,442)(443,475)
Cash flows from financing activities:
Borrowings on Senior Secured Credit Facility630,000 335,000 
Payments on Senior Secured Credit Facility(700,000)(400,000)
Issuance of senior unsecured notes897,710  
Extinguishment of debt (182,319)
Proceeds from issuance of common stock, net of offering costs161,003  
Share repurchases (26,586)
Stock exchanged for tax withholding(3,056)(7,442)
Payments for debt issuance costs(16,331)(1,725)
Other, net(1,846)(1,012)
Net cash provided by (used in) financing activities967,480 (284,084)
Net increase (decrease) in cash and cash equivalents545,260 (6,857)
Cash and cash equivalents, beginning of period44,435 56,798 
Cash and cash equivalents, end of period$589,695 $49,941 
 The accompanying notes are an integral part of these unaudited consolidated financial statements.
5

Vital Energy, Inc.
Condensed notes to the consolidated financial statements
(Unaudited)
Note 1—Organization and basis of presentation
Organization
Vital Energy, Inc. ("Vital" or the "Company"), together with its wholly-owned subsidiaries, is an independent energy company focused on the acquisition, exploration and development of oil and natural gas properties in the Permian Basin of West Texas. The Company has identified one operating segment: exploration and production. In these notes, the "Company" refers to Vital and its subsidiaries collectively, unless the context indicates otherwise. All amounts, dollars and percentages presented in these unaudited consolidated financial statements and the related notes are rounded and, therefore, approximate.
Basis of presentation
The unaudited consolidated financial statements were derived from the historical accounting records of the Company and reflect the historical financial position, results of operations and cash flows for the periods described herein. The unaudited consolidated financial statements have been prepared in accordance with GAAP. All material intercompany transactions and account balances have been eliminated in the consolidation of accounts.
The unaudited consolidated financial statements have not been audited by the Company's independent registered public accounting firm, except that the consolidated balance sheet as of December 31, 2022 is derived from the Company's audited consolidated financial statements. In the opinion of management, the unaudited consolidated financial statements reflect all necessary adjustments to present fairly the Company's interim financial position, results of operations and cash flows. All adjustments are of a recurring nature unless otherwise disclosed herein.
Certain disclosures have been condensed or omitted from the unaudited consolidated financial statements. Accordingly, the unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the 2022 Annual Report.
Significant accounting policies
There have been no material changes in the Company's significant accounting policies during the nine months ended September 30, 2023. See Note 2 in the 2022 Annual Report for discussion of significant accounting policies.
Use of estimates
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although management believes these estimates are reasonable, actual results could differ.
See Note 2 in the 2022 Annual Report for further information regarding the use of estimates and assumptions.
Note 2—New accounting standards
The Company considered the applicability and impact of all accounting standard updates ("ASU") issued by the Financial Accounting Standards Board to the Accounting Standards Codification and has determined there are no ASUs that are not yet adopted and meaningful to disclose as of September 30, 2023. Additionally, the Company did not adopt any new ASUs during the nine months ended September 30, 2023.
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Vital Energy, Inc.
Condensed notes to the consolidated financial statements
(Unaudited)
Note 3—Acquisitions and divestitures
2023 Acquisitions
Henry Acquisition
On September 13, 2023, the Company entered into a purchase and sale agreement (the “Henry PSA”) with Henry Resources, LLC, Henry Energy LP and Moriah Henry Partners LLC (collectively, “Henry”), pursuant to which the Company agreed to purchase (the “Henry Acquisition”) Henry’s oil and gas properties in the Midland and Delaware Basin, including approximately 15,900 net acres located in Midland, Reeves and Upton Counties, equity interests in certain subsidiaries and related assets and contracts, for consideration comprising (i) approximately 3.72 million shares of the Company’s common stock, par value $0.01 per share (“Common Stock”), and (ii) approximately 4.98 million shares of the Company’s 2.0% Cumulative Mandatorily Convertible Series A Preferred Stock, par value $0.01 per share ("Preferred Stock"), each subject to purchase price adjustments and customary closing adjustments. Upon entering into the Henry PSA, the Company issued Preferred Stock as a deposit to be held in escrow until the closing of the Henry Acquisition, which shares may remain in escrow post-closing to satisfy potential title defect claims under the Henry PSA. See Note 5 for additional information. The Company expects the Henry Acquisition to close in the fourth quarter of 2023, subject to customary closing conditions.
Upon execution of the Henry PSA, the "tag-along" sales rights of certain parties unrelated to Henry (the "Third Parties") to sell their non-operated working interest in the oil and natural gas properties were triggered and Henry gave notice to such Third Parties (the "Potential Acquisitions"). The elections of such "tag-along" sales rights by the Third Parties are ongoing and therefore the terms of the Potential Acquisitions are still subject to negotiation and due diligence is still in process. The amount and mix of consideration to be received by the Third Parties (which may consist of cash, Common Stock and/or Preferred Stock) has not been determined yet. The number of shares of Common Stock to be issued to Henry may decrease to approximately 2.1 million shares, and the number of share of Preferred Stock to be issued to Henry may increase to approximately 6.6 million shares to reserve shares of Common Stock for the Potential Acquisitions. There can be no assurance that the Company will enter into purchase and sale agreements with any of the Third Parties. The Henry Acquisition and the Potential Acquisitions are not contingent on each other, and the Henry Acquisition is expected to be consummated regardless of whether or not the Company enters into purchase and sale agreements with any of the Third Parties.
The Company expects to account for the Henry Acquisition as a business combination and, accordingly, will estimate the fair values of assets acquired and liabilities assumed, while transaction costs associated with the acquisition will be expensed.
Maple Acquisition
On September 13, 2023, the Company entered into a purchase and sale agreement (the “Maple PSA”) with Maple Energy Holdings, LLC (“Maple”), pursuant to which the Company agreed to purchase (the “Maple Acquisition”) Maple’s oil and gas properties in the Delaware Basin, including approximately 15,500 net acres located in Reeves County and related assets and contracts, for consideration comprising approximately 3.58 million shares of Common Stock, subject to purchase price adjustments and customary closing adjustments. Upon entering into the Maple PSA, the Company issued Common Stock as a deposit to be held in escrow until closing of the Maple Acquisition, which shares will remain in escrow post-closing to satisfy potential indemnification claims arising under the Maple PSA during the 12-month period following the closing of the Maple Acquisition. See Note 5 for additional information. See Note 15 for discussion of the October 31, 2023 closing of the Maple Acquisition. The Company's analysis of the accounting treatment determination for the Maple Acquisition is ongoing and not yet complete.
Tall City Acquisition
On September 13, 2023, the Company entered into a purchase and sale agreement (the “Tall City PSA”) with Tall City Property Holdings III LLC and Tall City Operations III LLC (collectively, “Tall City”), pursuant to which the Company agreed to purchase (the “Tall City Acquisition” and, together with the Henry Acquisition and Maple Acquisition, the “Acquisitions”) Tall City’s oil and gas properties in the Delaware Basin, including approximately 21,450 net acres located in Reeves County and related assets and contracts, for consideration comprising (i) $300.0 million payable to Tall City in cash and (ii) approximately 2.27 million shares of Common Stock, each subject to purchase price adjustments and customary closing adjustments. Upon entering into the Tall City PSA, the Company issued Common Stock as a deposit to be held in escrow until closing of the Tall City Acquisition, which shares will remain in escrow to satisfy potential indemnification claims under the Tall City PSA. See
7

Vital Energy, Inc.
Condensed notes to the consolidated financial statements
(Unaudited)
Note 5 for additional information. The Company expects the Tall City Acquisition to close in the fourth quarter of 2023, subject to customary closing conditions. The Company's analysis of the accounting treatment determination for the Tall City Acquisition is ongoing and not yet complete.
Forge Acquisition
On June 30, 2023 ("Forge Closing Date"), the Company purchased certain oil and natural gas properties located in the Delaware Basin, including approximately 34,000 net acres in Pecos, Reeves and Ward Counties, and related assets and contracts, with an effective date of March 1, 2023 (the "Forge Acquisition") from Forge Energy II Delaware, LLC ("Forge").
The aggregate purchase price of $398.2 million consisted of (i) $391.6 million in cash, inclusive of customary closing price adjustments, subject to post-closing adjustments, and (ii) $6.6 million in transaction related expenses. The Forge Acquisition was accounted for as an asset acquisition, as substantially all the gross assets acquired are concentrated in a group of similar identifiable assets. Based on the relative fair values on the Forge Closing Date, the acquired assets and liabilities assumed were allocated as follows: i) $250.3 million to evaluated properties, ii) $149.8 million to unevaluated properties, iii) $4.1 million to equipment inventory, iii) $4.3 million to revenue suspense liabilities and iv) $1.7 million to asset retirement obligation liabilities.
Driftwood Acquisition
On April 3, 2023 ("Driftwood Closing Date"), the Company purchased certain oil and natural gas properties in the Midland Basin, including approximately 11,200 net acres located in Upton and Reagan Counties and related assets and contracts, inclusive of derivatives (the "Driftwood Assets") with an effective date of January 1, 2023 (the "Driftwood Acquisition") from Driftwood Energy Operating, LLC ("Driftwood").
The aggregate purchase price of $201.3 million consisted of (i) $117.0 million of cash, inclusive of post-closing adjustments, (ii) 1,578,948 shares of Common Stock based upon the share price as of the Driftwood Closing Date and (iii) $4.2 million in transaction related expenses. The Driftwood Acquisition was accounted for as an asset acquisition, as substantially all the gross assets acquired are concentrated in a group of similar identifiable assets. Based on the relative fair values on the Driftwood Closing Date, the acquired assets and liabilities assumed were allocated as follows: i) $148.4 million to evaluated properties, ii) $58.3 million to unevaluated properties, iii) $0.5 million to revenue suspense liabilities, iv) $4.2 million to derivative liabilities and v) $0.7 million to asset retirement obligation liabilities.
During the second quarter of 2023, in connection with the Driftwood Acquisition, the Company acquired additional interests in the Driftwood Assets through additional sellers that exercised their "tag-along" sales rights, for total cash consideration of $8.6 million, excluding customary purchase price adjustments. These acquisitions were accounted for as asset acquisitions.
2022 Divestiture
On August 16, 2022, the Company entered into a purchase and sale agreement with NOG, pursuant to which the Company agreed to sell to NOG the Company's working interests in certain specified non-operated oil and gas properties (the "NOG Working Interest Sale").
On October 3, 2022, the Company closed the NOG Working Interest Sale for an aggregate sales price of $106.1 million, inclusive of post-closing adjustments.
8

Vital Energy, Inc.
Condensed notes to the consolidated financial statements
(Unaudited)
Note 4—Debt
Long-term debt, net
The following table presents the Company's long-term debt and unamortized debt issuance costs, discounts and premiums included in "Long-term debt, net" on the consolidated balance sheets as of the dates presented:
(in thousands)September 30, 2023December 31, 2022
January 2025 Notes$455,628 $455,628 
January 2028 Notes700,309 300,309 
July 2029 Notes 298,214 298,214 
September 2030 Notes500,000  
Senior Secured Credit Facility(1)
 70,000 
Total long-term debt1,954,151 1,124,151 
Unamortized debt issuance costs(24,895)(11,128)
Unamortized discounts(6,290) 
Unamortized premiums4,000  
Total long-term debt, net$1,926,966 $1,113,023 
______________________________________________________________________________
(1)Unamortized debt issuance costs related to the Senior Secured Credit Facility of $5.1 million and $7.3 million as of September 30, 2023 and December 31, 2022, respectively, are included in "Other noncurrent assets, net" on the consolidated balance sheets.
Senior unsecured notes repurchases
The following table presents the Company's repurchases of its senior unsecured notes and the related gain or loss on extinguishment of debt during the periods presented:
(in thousands)Three months ended September 30, 2022Nine months ended September 30,2022
January 2025 Notes$48,449 $48,449 
January 2028 Notes28,038 34,288 
January 2029 Notes76,010 101,786 
Total principal amount repurchased$152,497 $184,523 
 Less:
Consideration paid$149,986 $182,320 
Write off of debt issuance costs1,958 2,448 
Gain (loss) on extinguishment of debt, net(1)
$553 $(245)
______________________________________________________________________________
(1)Amounts are included in "Gain (loss) on extinguishment of debt, net" on the consolidated statements of operations.

No senior unsecured notes were repurchased during the three and nine months ended September 30, 2023.
Senior Secured Credit Facility
As of September 30, 2023, the Senior Secured Credit Facility, which matures on July 16, 2025 (subject to a springing maturity date of July 29, 2024 if any of the January 2025 Notes are outstanding on such date), had a maximum credit amount of $2.0 billion, a borrowing base and an aggregate elected commitment of $1.3 billion and $1.0 billion, respectively, with no balance outstanding. The Senior Secured Credit Facility contains both financial and non-financial covenants, all of which the Company was in compliance with for all periods presented. Additionally, the Senior Secured Credit Facility provides for the issuance of letters of credit, limited to the lesser of total capacity or $80.0 million. As of September 30, 2023 and December 31, 2022, the Company had no letters of credit outstanding under the Senior Secured Credit Facility. For additional information see Note 7 in the 2022 Annual Report. See Note 15 for discussion of changes to the Senior Secured Credit Facility in connection with the closing of the Maple Acquisition subsequent to September 30, 2023.
9

Vital Energy, Inc.
Condensed notes to the consolidated financial statements
(Unaudited)
On September 13, 2023 (the "Eleventh Amendment Effective Date"), the Company entered into the Limited Consent and Eleventh Amendment to the Senior Secured Credit Facility (the "Eleventh Amendment"). The Eleventh Amendment, among other things, (i) provides for consent to the Acquisitions and (ii) upon consummation of at least one of the Acquisitions, further amends the Senior Secured Credit Facility to provide for increases to the borrowing base and revolving elected commitments (as so amended, the "Amended Senior Secured Credit Facility"). The Amended Senior Secured Credit Facility will mature on September 13, 2027, subject to a springing maturity date of July 19, 2024 if more than a certain amount of the Company's January 2025 Notes relative to the availability under the Amended Senior Secured Credit Facility are outstanding on such date. The Amended Senior Secured Credit Facility will have a maximum credit amount of $3.0 billion, a borrowing base of up to $1.5 billion (consisting of an initial borrowing base of $1.3 billion, which would increase by $75.0 million at the closing of the Henry Acquisition, $50.0 million at the closing of the Maple Acquisition and $75.0 million at the closing of the Tall City Acquisition) and an aggregate revolving elected commitment of up to $1.25 billion (consisting of an initial revolving elected commitment of $1.0 billion, which would increase by $150.0 million at the closing of the Henry Acquisition and $100.0 million at the closing of the Maple Acquisition) and a term loan commitment of $250.0 million (as such amount may be reduced by the proceeds of debt and equity on and after the Eleventh Amendment Effective Date), and such other term loan commitments as the Company and the applicable term loan lenders may agree from time to time in an aggregate amount not to exceed the lesser of (i) the excess of the borrowing base over the revolving elected commitments, in each case, then in effect and (ii) one-third of the sum of the total revolving commitments plus the aggregate term loan exposure then outstanding. The borrowing base will be subject to a semi-annual redetermination occurring by May 1 and November 1 of each year based on the lenders’ evaluation of the Company’s oil and gas reserves, beginning May 1, 2024.
2023 Issuance of Notes
January 2028 Notes
On January 24, 2020, the Company completed an offering and sale of $400.0 million in aggregate principal amount of 10.125% senior unsecured notes due 2028 (the "Original January 2028 Notes"). Interest for the Original January 2028 Notes is payable semi-annually, in cash in arrears on January 15 and July 15 of each year.
On September 18, 2023, the Company completed an offering and sale of $400.0 million in aggregate principal amount of new 10.125% senior unsecured notes due 2028 (the "New January 2028 Notes" and, together with the Original January 2028 Notes, the "January 2028 Notes") as additional notes under, and subject to the terms of, the indenture governing the January 2028 Notes. The New January 2028 Notes were issued at 101.000% of par value, which resulted in a premium upon issuance of $4.0 million. The Company received net proceeds of approximately $396.7 million from the New January 2028 Notes, after issuance premiums and deducting underwriting discounts and commissions and offering costs.
September 2030 Notes
On September 18, 2023, the Company completed an offering and sale of $500.0 million in aggregate principal amount of 9.750% senior unsecured notes due 2030 (the "September 2030 Notes"). Interest for the September 2030 Notes is payable semi-annually, in cash in arrears on April 15 and October 15 of each year, commencing October 15, 2023 with interest from closing to that date. If the Henry PSA is terminated prior to the closing of the Henry Acquisition, or if the closing of the Henry Acquisition does not otherwise occur on or prior to January 11, 2024, the Company will redeem all of the September 2030 Notes at a redemption price equal to 100% of the aggregate issue price of the September 2030 Notes, plus accrued and unpaid interest to, but not including, the redemption date. The September 2030 Notes were issued at 98.742% of par value, which resulted in a discount upon issuance of $6.3 million. The Company received net proceeds of approximately $484.7 million from the September 2030 Notes, after deducting issuance discounts, underwriting discounts and commissions and offering costs.
The terms of the Company's January 2028 Notes and September 2030 Notes include covenants, which are in addition to but different than similar covenants in the Senior Secured Credit Facility, which limit the Company's ability to incur indebtedness, make restricted payments, grant liens and dispose of assets. The January 2028 Notes and September 2030 Notes are fully and unconditionally guaranteed on a senior unsecured basis by Vital Midstream Services, LLC and certain of the Company's future restricted subsidiaries, subject to certain automatic customary releases, including the sale, disposition or transfer of all of the capital stock or of all or substantially all of the assets of a subsidiary guarantor to one or more persons that are not the Company or a restricted subsidiary, exercise of legal defeasance or covenant defeasance options or satisfaction and discharge
10

Vital Energy, Inc.
Condensed notes to the consolidated financial statements
(Unaudited)
of the applicable indenture, designation of a subsidiary guarantor as a non-guarantor restricted subsidiary or as an unrestricted subsidiary in accordance with the applicable indenture, release from guarantee under the Senior Secured Credit Facility, or liquidation or dissolution.
Note 5—Stockholders' equity
Equity offering
On September 19, 2023, the Company completed the sale of 2,750,000 shares of its common stock for net proceeds of $140.0 million, after underwriting discounts, commissions and offering expenses. On September 29, 2023, the underwriters exercised their option to purchase an additional 412,500 shares of common stock, which resulted in net proceeds to the Company of $21.0 million, after underwriting discounts, commissions and offering expenses.
Equity issued for acquisitions of oil and natural gas properties
On September 13, 2023, in connection with the signing of the Henry PSA, the Company issued 869,419 shares of Preferred Stock as a deposit to be held in escrow until closing of the Henry Acquisition, which shares may remain in escrow post-closing to satisfy potential title defect claims under the Henry PSA. Additionally, on September 13, 2023, in connection with the signing of the Maple PSA, the Company issued 357,500 shares of its common stock as a deposit to be held in escrow until closing of the Maple Acquisition, which shares will remain in escrow post-closing to satisfy potential indemnification claims arising under the Maple PSA during the 12-month period following the closing of the Maple Acquisition. Further, on September 13, 2023, in connection with the signing of the Tall City PSA, the Company issued 579,968 shares of its common stock as a deposit to be held in escrow until closing of the Tall City Acquisition, which shares will remain in escrow to satisfy potential indemnification claims under the Tall City PSA. During the escrow period, the issued shares of the Company's preferred stock and common stock held in escrow are not considered outstanding for accounting purposes as they are subject to recall and other conditions, and under the escrow agreements for the Henry Acquisition and Maple Acquisition, the Company retains certain rights, including voting and dividend rights, as applicable.
On April 3, 2023, in connection with the Driftwood Acquisition, the Company issued 1,578,948 shares of its common stock as part of the purchase price.
See Note 3 for additional information on the Henry Acquisition, the Maple Acquisition, the Tall City Acquisition and the Driftwood Acquisition. See Note 15 for discussion of the October 31, 2023 closing of the Maple Acquisition.
Authorized shares increase
On May 26, 2022, upon recommendation of the Company's board of directors, stockholders approved an amendment to the Company's Amended and Restated Certificate of Incorporation to increase the number of authorized shares of its common stock from 22,500,000 shares to 40,000,000 shares.
Share repurchase program
On May 31, 2022, the Company's board of directors authorized a $200.0 million share repurchase program. The repurchase program commenced in May 2022 and expires in May 2024. Share repurchases under the program may be made through a variety of methods, which may include open market purchases, including under plans complying with Rule 10b5-1 of the Exchange Act, and privately negotiated transactions. The timing and actual number of share repurchases will depend upon several factors, including market conditions, business conditions, the trading price of the Company's common stock and the nature of other investment opportunities available to the Company.
The following table presents the Company's open market repurchases of its common stock during the periods presented:
(in thousands, except for share and share price data)Three months ended September 30, 2022Nine months ended September 30, 2022
Shares of Company common stock repurchased244,687329,848
Average share price(1)
$71.58 $80.60 
Total$17,515 $26,586 
___________________________________________________________________________
(1)Average share price includes any commissions paid to repurchase stock.
11

Vital Energy, Inc.
Condensed notes to the consolidated financial statements
(Unaudited)
All shares were retired upon repurchase. No shares were repurchased during the nine months ended September 30, 2023. As of September 30, 2023, approximately $162.7 million remained available for future repurchases under the share repurchase program.
Note 6—Equity Incentive Plan
The Vital Energy, Inc. Omnibus Equity Incentive Plan (the "Equity Incentive Plan") provides for the granting of incentive awards in the form of restricted stock awards, stock option awards, performance share awards, performance unit awards, phantom unit awards and other awards. The Equity Incentive Plan allows for the issuance of up to 2,432,500 shares.
See Note 9 in the 2022 Annual Report for additional discussion of the Company's equity-based compensation awards.
The following table presents activity for equity-based compensation awards for the nine months ended September 30, 2023:
Equity AwardsLiability Awards
(in thousands)Restricted Stock AwardsStock Option AwardsPerformance Share Awards
Performance Unit Awards(1)(2)
Phantom Unit Awards(3)
Outstanding as of December 31, 2022
362 3 48 150 18 
Granted327 — — 75 — 
Forfeited(19)— — — — 
Vested(176)— — (67)(16)
Expired or canceled— (1)— — — 
Outstanding as of September 30, 2023
494 2 48 158 2 
_____________________________________________________________________________
(1)The performance unit awards granted on March 5, 2020 had a performance period of January 1, 2020 to December 31, 2022 and, as their market and performance criteria were satisfied, resulted in a 151% payout, or 101,368 units. As such, the granted awards vested and were paid out in cash on March 3, 2023 at $57.06 based on the Company's closing stock price on the vesting date.
(2)On February 15, 2023, the Company granted performance unit awards with a performance period of January 1, 2023 through December 31, 2025. The market criteria consists of: (i) annual relative total shareholder return comparing the Company's shareholder return to the shareholder return of the exploration and production companies listed in the Russel 2000 Index and (ii) annual absolute shareholder return. The performance criteria for these awards consists of: (i) earnings before interest, taxes, depreciation, amortization and exploration expense and three-year total debt reduction, (ii) growth in inventory and (iii) emissions reductions. Any units earned are expected to be paid in cash during the first quarter following the completion of the requisite service period, based on the achievement of market and performance criteria, and the payout can range from 0% to 225%.
(3)On March 1, 2023 and March 3, 2023, granted phantom unit awards vested and were paid out in cash at $52.56 and $57.06, respectively, based on the Company's closing stock price on the vesting date.
As of September 30, 2023, total unrecognized cost related to equity-based compensation awards was $27.0 million, of which $4.9 million was attributable to liability awards which will be settled in cash rather than shares. Such cost will be recognized on a straight-line basis over an expected weighted-average period of 1.92 years.
12

Vital Energy, Inc.
Condensed notes to the consolidated financial statements
(Unaudited)
Equity-based compensation
The following table reflects equity-based compensation expense for the periods presented:
Three months ended September 30,Nine months ended September 30,
(in thousands)2023202220232022
Equity awards:
Restricted stock awards$3,272 $1,818 $9,311 $6,428 
Performance share awards535 241 1,348 1,202 
Total share-settled equity-based compensation, gross3,807 2,059 10,659 7,630 
Less amounts capitalized(870)(421)(2,257)(1,335)
Total share-settled equity-based compensation, net2,937 1,638 8,402 6,295 
Liability awards:
Performance unit awards2,479 (4,311)4,069 1,595 
Phantom unit awards28 199 263 1,078 
Total cash-settled equity-based compensation, gross2,507 (4,112)4,332 2,673 
Less amounts capitalized  (45)(50)(247)
Total cash-settled equity-based compensation, net2,507 (4,157)4,282 2,426 
Total equity-based compensation, net$5,444 $(2,519)$12,684 $8,721 
Note 7—Net income per common share
Basic and diluted net income per common share are computed by dividing net income by the weighted-average common shares outstanding for the period. Diluted net income per common share reflects the potential dilution of non-vested equity-based compensation awards. See Note 9 in the 2022 Annual Report for additional discussion of these awards.
The following table reflects the calculations of basic and diluted (i) weighted-average common shares outstanding and (ii) net income per common share for the periods presented:
Three months ended September 30,Nine months ended September 30,
(in thousands, except for per share data)2023202220232022
Net income$4,893 $337,523 $413,644 $513,288 
Weighted-average common shares outstanding(1):
Basic18,455 16,650 17,646 16,750 
Dilutive non-vested restricted stock awards112 159 93 197 
Dilutive non-vested performance share awards(2)
2  1 16 
Diluted18,569 16,809 17,740 16,963 
Net income per common share:
Basic$0.27 $20.27 $23.44 $30.64 
Diluted$0.26 $20.08 $23.32 $30.26 
_____________________________________________________________________________
(1)Weighted-average common shares outstanding for the three and nine months ended September 30, 2023 does not include shares of Preferred Stock and common stock issued into escrow accounts in connection with the Acquisitions. See Notes 3 and 5 for additional information.
(2)The dilutive effect of the non-vested performance shares for the three and nine months ended September 30, 2022 and 2023 were calculated assuming each respective performance period ended on September 30, 2022 and 2023, respectively.
13

Vital Energy, Inc.
Condensed notes to the consolidated financial statements
(Unaudited)
Note 8—Derivatives
The Company has two types of derivative instruments as of September 30, 2023: (i) commodity derivatives and (ii) a contingent consideration derivative. In previous periods, the Company also engaged in an interest rate swap derivative, which concluded during the second quarter of 2022. See Note 9 for discussion of fair value measurement of derivatives on a recurring basis and Note 15 for discussion of derivatives subsequent events. The Company's derivatives were not designated as hedges for accounting purposes, and the Company does not enter into such instruments for speculative trading purposes. Accordingly, the changes in derivative fair values are recognized in "Gain (loss) on derivatives, net" under "Non-operating income (expense)" on the consolidated statements of operations.
The following table summarizes components of the Company's gain (loss) on derivatives, net by type of derivative instrument for the periods presented:
Three months ended September 30,Nine months ended September 30,
(in thousands)2023202220232022
Commodity$(138,946)$110,356 $(137,554)$(285,715)
Contingent consideration3,625 (9,608)4,679 (5,294)
Interest rate   14 
Gain (loss) on derivatives, net$(135,321)$