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Investing.com -- Vital Energy shares jumped 15% in premarket trading Monday after reports emerged that Crescent Energy is in advanced talks to acquire the company.
The potential acquisition was first reported by Reuters on Friday evening, citing people familiar with the matter. Crescent Energy shares edged up 0.2% in premarket trading.
Analysts at KeyBanc Capital Markets described the potential deal as surprising since Crescent isn’t currently operating in the Permian basin. However, KeyBanc analyst Tim Rezvan noted that such a move could position Crescent as a Texas shale consolidator.
"Devil is in the (pricing) details, but the theoretical deal makes sense if Crescent commits to selling legacy assets and leaning into shale," Rezvan stated.
The KeyBanc analyst, who maintains an overweight rating on Crescent with a $14 price target and a sector weight rating on Vital, predicted that Vital shares would rally and potentially trigger a short squeeze. Meanwhile, Crescent shares are expected to underperform as merger arbitrage traders establish positions.
Rezvan also indicated that the deal appears reasonable for Vital Energy, which is vulnerable to lower commodity prices and needs to reduce its debt levels.
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