Vital Energy, Inc. Unaudited pro forma condensed combined financial information

EXHIBIT 99.3

Vital Energy, Inc.

Unaudited pro forma condensed combined financial information

On February 14, 2023, Vital Energy, Inc., a Delaware corporation (“Vital” or the “Company”), as buyer, and Driftwood Energy Operating, LLC, a Delaware limited liability company, as seller, entered into a purchase and sale agreement (the “Purchase Agreement”). Pursuant to the Purchase Agreement, Vital acquired certain oil and gas properties in the Midland Basin, including approximately 11,200 net acres located in Upton and Xxxxxx Counties and related assets and contracts (the “Driftwood Acquisition”). On April 3, 2023, Xxxxx completed the Driftwood Acquisition pursuant to the Purchase Agreement.

The fair value of consideration paid to the seller on the close date of April 3, 2023 was $210.2 million, of which $120.4 million was paid in cash, and the remainder was in the form of stock consideration consisting of 1,578,948 shares of Vital common stock, based on the price of the Company's common stock on April 3, 2023. The cash portion of the purchase price was funded by $120.0 million in borrowings under the Company’s senior secured credit facility, with the remaining portion funded with cash on hand. In addition, Vital will assume revenue suspense of $0.5 million, as well as derivative liabilities of $4.3 million and asset retirement obligations of $1.0 million, both based upon fair value as of April 3, 2023.

The Driftwood Acquisition will be accounted for as an asset acquisition in accordance with Accounting Standards Codification Topic 805, Business Combinations (“ASC 805”). The fair value of the consideration paid by Xxxxx and the allocation of that amount to the underlying assets acquired is recorded on a relative fair value basis. Additionally, costs directly related to the Driftwood Acquisition are capitalized as a component of the purchase price. The unaudited pro forma condensed combined financial statements presented herein have been prepared to reflect the transaction accounting adjustments to Vital’s historical condensed consolidated financial information in order to account for the Driftwood Acquisition and include the assumption of liabilities as set forth in the Purchase Agreement.

The Unaudited Pro Forma Condensed Combined Balance Sheet as of March 31, 2023 gives effect to the Driftwood Acquisition as if it had been completed on March 31, 2023. The Unaudited Pro Forma Condensed Combined Statements of Operations for the three months ended March 31, 2023 and the year ended December 31, 2022 give effect to the Driftwood Acquisition as if it had been completed on January 1, 2022. Assumptions and estimates underlying the pro forma adjustments are described in the accompanying notes, which should be read in conjunction with the unaudited pro forma condensed combined financial statements.

The unaudited pro forma condensed combined financial information is provided for illustrative purposes only and does not purport to represent what the actual consolidated results of operations or the consolidated financial position of Vital would have been had the Driftwood Acquisition and related financing occurred on the dates noted above, nor are they necessarily indicative of future consolidated results of operations or consolidated financial position. Future results may vary significantly from the results reflected because of various factors. For income tax purposes, the Driftwood Acquisition will be treated as an asset purchase such that the tax bases in the assets and liabilities will generally reflect the allocated fair value at closing. In Vital’s opinion, all adjustments that are necessary to present fairly the unaudited pro forma condensed combined financial information have been made.

The unaudited pro forma condensed combined financial information does not reflect the benefits of potential cost savings or the costs that may be necessary to achieve such savings, opportunities to increase revenue generation or other factors that may result from the Driftwood Acquisition and, accordingly, does not attempt to predict or suggest future results.

The unaudited pro forma financial statements have been developed from and should be read in conjunction with:

•The audited financial statements and accompanying notes of Vital contained in Vital’s Annual Report on Form 10-K for the year ended December 31, 2022;

•The unaudited condensed financial statements and accompanying notes contained in Vital’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2023;

•The audited consolidated financial statements and related notes of Driftwood Energy Partners, LLC and its wholly-owned subsidiaries, Driftwood Energy Operating, LLC, Driftwood Energy Management, LLC and Driftwood Energy Intermediate, LLC (collectively, "Driftwood") for the year ended December 31, 2022, which are included elsewhere in this filing; and

•The unaudited consolidated financial statements and related notes of Driftwood for the three months ended March 31, 2023, which are included elsewhere in this filing.

Vital Energy, Inc.

Pro forma condensed combined balance sheets

As of March 31, 2023

(in thousands)

(Unaudited)

						Historical												Transaction accounting adjustments
																		Conforming						Driftwood						Pro forma
						Vital						Driftwood						and reclass						Acquisition						combined
Assets
Current assets:
Cash and cash equivalents						$	27,682					$	2,492					$	(2,492)		(a)			$	(120,367)		(c)			$	23,316
																								(3,999)			(i)
																								120,000			(j)
Accounts receivable, net						147,071						6,803						(6,803)			(a)			—						147,071
Derivatives						39,109						—						—						—						39,109
Other current assets						15,804						—						—						—						15,804
Prepaid expenses and other current assets						—						3,961						(3,961)			(a)			—						—
Total current assets						229,666						13,256						(13,256)						(4,366)						225,300
Property and equipment:
Oil and natural gas properties:
Evaluated properties – full cost method						9,735,559						—						—						120,367			(e)			9,945,763
																								80,068			(f)
																								4,277			(g)
																								3,999			(i)
																								1,020			(h)
																								473			(k)
Proved oil and natural gas properties – successful efforts method						—						203,956						(203,956)			(b)			—						—
Unevaluated properties not being depleted – full cost method						50,142						—						—						—						50,142
Unproved oil and natural gas properties – successful efforts method						—						10,253						(10,253)			(b)			—						—
Less: accumulated depletion and impairment						(7,401,480)						—						—						—						(7,401,480)
Accumulated depletion						—						(26,976)						26,976			(b)			—						—
Oil and natural gas properties, net						2,384,221						187,233						(187,233)						210,204						2,594,425
Midstream and other fixed assets, net						128,012						—						—						—						128,012
Property and equipment, net						2,512,233						187,233						(187,233)						210,204						2,722,437
Derivatives						26,448						—						—						—						26,448
Operating lease right-of-use assets						138,513						—						—						—						138,513
Other noncurrent assets, net						36,384						879						(879)			(a)			—						36,384
Total assets						$	2,943,244					201,368						$	(201,368)					$	205,838					$	3,149,082
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued liabilities						$	91,688					$	—					$	—					$	—					$	91,688
Accounts payable						—						3,545						(3,545)			(a)			—						—
Accrued expenses						—						225						(225)			(a)			—						—
Accrued capital expenditures						67,221						—						—						—						67,221
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1

						Historical												Transaction accounting adjustments
																		Conforming						Driftwood						Pro forma
						Vital						Driftwood						and reclass						Acquisition						combined
Undistributed revenue and royalties						148,199						—						—						473			(k)			148,672
Revenue payable						—						3,048						(3,048)			(a)			—						—
Derivatives						1,686						—						—						3,432			(g)			5,118
Current derivative liability						—						1,809						(1,809)			(a)			—						—
Current portion of asset retirement obligations						—						255						(255)			(a)			—						—
Operating lease liabilities						48,434						—						—						—						48,434
Other current liabilities						34,279						—						—						—						34,279
Total current liabilities						391,507						8,882						(8,882)						3,905						395,412
Long-term debt, net						1,163,807						—						—						120,000			(j)			1,283,807
Line-of-credit						—						49,461						(49,461)			(a)			—						—
Asset retirement obligations						71,308						515						(515)			(a)			1,020			(h)			72,328
Operating lease liabilities						87,301						—						—						—						87,301
Derivative liabilities						—						500						(500)			(a)			845			(g)			845
Other noncurrent liabilities						3,953						—						—						—						3,953
Total liabilities						1,717,876						59,358						(59,358)						125,770						1,843,646
Commitments and contingencies
Stockholders' equity:
Preferred stock						—						—						—						—						—
Common stock						170						—						—						16			(d)			186
Additional paid-in capital						2,754,765						—						—						80,052			(d)			2,834,817
Accumulated deficit						(1,529,567)						—						—						—						(1,529,567)
Members' equity						—						142,486						(142,486)			(a)			—						—
Members’ receivables						—						(476)						476			(a)			—						—
Total stockholders' equity						1,225,368						142,010						(142,010)						80,068						1,305,436
Total liabilities and stockholders' equity						$	2,943,244					$	201,368					$	(201,368)					$	205,838					$	3,149,082

2

Vital Energy, Inc.

Pro forma condensed combined statements of operations

For the three months ended March 31, 2023

(in thousands, except per share data)

(Unaudited)

						Historical												Transaction accounting adjustments
																		Conforming						Driftwood						Pro forma
						Vital						Driftwood						and reclass						Acquisition						combined
Revenues:
Oil sales						$	266,731					$	—					$	20,171		(a)			$	—					$	286,902
NGL sales						33,006						—						1,182			(a)			—						34,188
Natural gas sales						18,074						—						2,427			(a)			—						20,501
Oil and natural gas sales, net						—						23,780						(23,780)			(a)			—						—
Sales of purchased oil						13,851						—						—						—						13,851
Other operating revenues						845						—						—						—						845
Total revenues						332,507						23,780						—						—						356,287
Costs and expenses:
Lease operating expenses						50,181						3,396						727			(j)			—						54,304
Gathering and processing						—						727						(727)			(j)			—						—
Production and ad valorem taxes						20,531						998						—						—						21,529
Transportation and marketing expenses						10,915						—						—						—						10,915
Costs of purchased oil						14,167						—						—						—						14,167
General and administrative						25,930						884						—						—						26,814
Depletion, depreciation and amortization						86,779						—						5,069			(d)			628			(i)			92,476
Depletion expense						—						5,069						(5,069)			(d)			—						—
Accretion expense						—						12						(12)			(k)			—						—
Exploration						—						116						(116)			(b)			—
Other operating expenses, net						1,484						—						12			(k)			16			(i)			1,512
Total costs and expenses						209,987						11,202						(116)						644						221,717
Gain on disposal of assets, net						237						—						—						—						237
Operating income (loss)						122,757						12,578						116						(644)						134,807
Non-operating income (expense):
Gain on derivatives, net						20,490						—						2,967			(l)			—						23,457
Realized loss on derivatives						—						(1,916)						1,916			(l)			—						—
Unrealized gain on derivatives						—						4,883						(4,883)			(l)			—						—
Interest expense						(28,554)						(1,170)						1,170			(c)			(2,216)			(g)			(30,770)
Gain on sale of assets						—						1,301						(1,301)			(e)			—						—
Other income, net						854						—						—						—						854
Total non-operating income (expense), net:						(7,210)						3,098						(131)						(2,216)						(6,459)
Income (loss) before income taxes						115,547						15,676						(15)						(2,860)						128,348
Income tax expense:
Current						(1,331)						—						—						—			(h)			(1,331)
Deferred						(276)						—						—						—						(276)
Total income tax expense						(1,607)						—						—						—						(1,607)
Net income (loss)						$	113,940					$	15,676					$	(15)					$	(2,860)					$	126,741
Net income per common share:
Basic						$	6.93																							$	7.04
Diluted						$	6.89																							$	6.99
Weighted-average common shares outstanding:
Basic						16,431																		1,579			(f)			18,010
Diluted						16,545																		1,579			(f)			18,124

3

Vital Energy, Inc.

Pro forma condensed combined statements of operations

For the year ended December 31, 2022

(in thousands, except per share data)

(Unaudited)

						Historical												Transaction accounting adjustments
																		Conforming						Driftwood						Pro forma
						Vital						Driftwood						and reclass						Acquisition						combined
Revenues:
Oil sales						$	1,351,207					$	—					$	73,215		(a)			$	—					$	1,424,422
NGL sales						234,613						—						6,492			(a)			—						241,105
Natural gas sales						208,554						—						5,978			(a)			—						214,532
Oil and natural gas sales, net						—						85,685						(85,685)			(a)			—						—
Sales of purchased oil						119,408						—						—						—						119,408
Other operating revenues						7,014						—						—						—						7,014
Total revenues						1,920,796						85,685						—						—						2,006,481
Costs and expenses:
Lease operating expenses						173,983						10,453						—						—						184,436
Production and ad valorem taxes						110,997						4,757						—						—						115,754
Transportation and marketing expenses						53,692						—						—						—						53,692
Costs of purchased oil						122,118						—						—						—						122,118
General and administrative						68,082						3,333						—						—						71,415
Organizational restructuring expenses						10,420						—						—						—						10,420
Depletion, depreciation and amortization						311,640						—						11,019			(d)			8,188			(i)			330,847
Depletion expense						—						11,017						(11,017)			(d)			—						—
Depreciation expense						—						2						(2)			(d)			—						—
Accretion expense						—						42						(42)			(k)			—						—
Impairment expense						40						—						—						—						40
Impairment of oil and natural gas properties						—						1,005						(1,005)			(e)			—						—
Exploration						—						143						(143)			(b)			—						—
Other operating expenses, net						8,583						—						42			(k)			70			(i)			8,695
Total costs and expenses						859,555						30,752						(1,148)						8,258						897,417
Loss on disposal of assets, net						(1,079)						—						—						—						(1,079)
Operating income (loss)						1,060,162						54,933						1,148						(8,258)						1,107,985
Non-operating income (expense):
Loss on derivatives, net						(298,723)						—						(14,647)			(l)			—						(313,370)
Realized loss on derivatives						—						(18,855)						18,855			(l)			—						—
Unrealized gain on derivatives						—						4,208						(4,208)			(l)			—						—
Interest expense						(125,121)						(2,934)						2,934			(c)			(8,862)			(g)			(133,983)
Loss on extinguishment of debt, net						(1,459)						—						—						—						(1,459)
Other income, net						2,155						—						—						—						2,155
Total non-operating income (expense), net:						(423,148)						(17,581)						2,934						(8,862)						(446,657)
Income (loss) before income taxes						637,014						37,352						4,082						(17,120)						661,328
Income tax expense:
Current						(6,121)						—						—						—			(h)			(6,121)
Deferred						619						—						—						—						619
Total income tax expense						(5,502)						—						—						—						(5,502)
Net income (loss)						$	631,512					$	37,352					$	4,082					$	(17,120)					$	655,826
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						Historical												Transaction accounting adjustments
																		Conforming						Driftwood						Pro forma
						Vital						Driftwood						and reclass						Acquisition						combined
Net income per common share:
Basic						$	37.88																							$	35.93
Diluted						$	37.44																							$	35.55
Weighted-average common shares outstanding:
Basic						16,672																		1,579			(f)			18,251
Diluted						16,867																		1,579			(f)			18,446

5

Vital Energy, Inc.

Notes to unaudited pro forma condensed combined financial information

1. Basis of Presentation

The accompanying unaudited pro forma condensed combined financial statements were prepared based on the historical consolidated financial statements of Vital and the historical consolidated financial statements of Driftwood. The Driftwood Acquisition has been accounted for as an asset acquisition in accordance with ASC 805. The fair value of the consideration paid by Xxxxx and allocation of that amount to the underlying assets acquired, on a relative fair value basis, will be recorded on Vital’s books as of the date of the closing of the Driftwood Acquisition. Additionally, costs directly related to the Driftwood Acquisition are capitalized as a component of the purchase price. Certain of Driftwood’s historical amounts have been reclassified to conform to the financial statement presentation of Vital. Additionally, adjustments have been made to Driftwood’s historical financial information to remove certain assets and liabilities retained by Driftwood.

The Unaudited Pro Forma Condensed Combined Statements of Operations for the Three Months Ended March 31, 2023 and the Year Ended December 31, 2022 were prepared assuming the Driftwood Acquisition occurred on January 1, 2022. The Unaudited Pro Forma Condensed Combined Balance Sheet as of March 31, 2023 was prepared as if the Driftwood Acquisition had occurred on March 31, 2023.

The unaudited pro forma condensed combined financial information and related notes are presented for illustrative purposes only. If the Driftwood Acquisition and other transactions contemplated herein had occurred in the past, the Company’s operating results might have been materially different from those presented in the unaudited pro forma condensed combined financial information. The unaudited pro forma condensed combined financial information should not be relied upon as an indication of operating results that the Company would have achieved if the Driftwood Acquisition and other transactions contemplated herein had taken place on the specified date. In addition, future results may vary significantly from the results reflected in the unaudited pro forma condensed combined financial statement of operations and should not be relied upon as an indication of the future results the Company will have after the contemplation of the Driftwood Acquisition and the other transactions contemplated by the unaudited pro forma condensed combined financial information. In Vital’s opinion, all adjustments that are necessary to present fairly the unaudited pro forma condensed combined financial information have been made.  

2.Consideration and Purchase Price Allocation

The preliminary allocation of the total purchase price in the Driftwood Acquisition is based upon management’s estimates and assumptions related to the fair value of assets to be acquired and liabilities to be assumed as of the closing date of the transaction using currently available information and market data. Because the unaudited pro forma condensed combined financial information has been prepared based on these preliminary estimates, the final purchase price allocation and the resulting effect on financial position and results of operations may differ significantly from the pro forma amounts included herein.

The preliminary purchase price allocation is subject to change due to several factors, including but not limited to changes in the estimated fair value of assets acquired and liabilities assumed as of the closing date of the transaction, which could result from changes in future oil and natural gas commodity prices, reserve estimates, interest rates, as well as other factors.

6

Vital Energy, Inc.

Notes to unaudited pro forma condensed combined financial information

The consideration transferred and the relative fair value of assets acquired and liabilities assumed by Vital are as follows (in thousands, except share amounts and share stock price):

Consideration:
Cash consideration						$	127,647
Closing adjustments						(7,280)
Total cash consideration						$	120,367
Shares of Vital common stock issued						1,578,948
Vital common stock price as of April 3, 2023						$	50.71
Total share consideration						$	80,068
Direct transaction costs						3,999
Total consideration						$	204,434
Relative fair value of assets acquired:
Oil and natural gas properties						210,204
Amount attributable to assets acquired						$	210,204
Fair value of liabilities assumed:
Derivative liabilities						4,277
Asset retirement obligations						1,020
Undistributed revenue and royalties						473
Amount attributable to liabilities assumed						$	5,770

The fair value measurements of assets acquired and liabilities assumed excluding derivatives are based on inputs that are not observable in the market and therefore represent Level 3 inputs. The fair value measurements of derivative liabilities assumed are based quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the assets or liabilities and as such, represent Level 2 inputs. The fair value of oil and gas properties and asset retirement obligations were measured using the discounted cash flow technique of valuation.

Significant unobservable inputs included future commodity prices adjusted for differentials, projections of estimated quantities of recoverable reserves, forecasted production based on decline curve analysis, estimated timing and amount of future operating and development costs, and a weighted average cost of capital.

3.Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet and Unaudited Pro Forma Condensed Combined Statements of Operations

The unaudited pro forma condensed combined financial information has been compiled in a manner consistent with the accounting policies adopted by Xxxxx. Actual results may differ materially from the assumptions and estimates contained herein.

The pro forma adjustments are based on currently available information and certain estimates and assumptions that Xxxxx believes provide a reasonable basis for presenting the significant effects of the Driftwood Acquisition. General descriptions of the pro forma adjustments are provided below.

7

Vital Energy, Inc.

Notes to unaudited pro forma condensed combined financial information

Unaudited Pro Forma Condensed Combined Balance Sheet

The following adjustments were made in the preparation of the Unaudited Pro Forma Condensed Combined Balance Sheet as of March 31, 2023:

(a)Adjustment to remove assets and liabilities not acquired as part of the Driftwood Acquisition.                                                    

(b)Adjustment to eliminate the historical book value and accumulated depreciation, depletion and amortization of Driftwood's oil and gas properties as of March 31, 2023.                                                    

(c)Adjustment to reflect the total cash consideration paid for the Driftwood Acquisition.                                                    

(d)Adjustment to reflect the issuance of 1,578,948 shares of Vital common stock pursuant to the Purchase Agreement.                                                    

(e)Adjustment to reflect cash paid for the oil and natural gas properties acquired of Driftwood, on a relative fair value basis.                                                 

(f)Adjustment to reflect the fair value of equity consideration paid for oil and natural gas properties acquired, on a relative fair value basis.                                                    

(g)Adjustment to reflect the fair value of Driftwood’s derivative liabilities assumed as of April 3, 2023.                                                    

(h)Adjustment to reflect asset retirement obligations assumed with the Driftwood Acquisition.                                                    

(i)Adjustment for the payment of transaction costs incurred for the Driftwood Acquisition.                                                    

(j)Adjustment to record new borrowings under the Company's senior secured credit facility related to the cash consideration used in the Driftwood Acquisition.

(k)Adjustment to reflect revenues in suspense assumed with the Driftwood Acquisition.                                        

Unaudited Pro Forma Condensed Combined Statements of Operations

The following adjustments were made in the preparation of the Unaudited Pro Forma Condensed Combined Statements of Operations for the Three Months Ended March 31, 2023, and the Year Ended December 31, 2022:

(a)Adjustments to conform Driftwood’s revenue presentation to the presentation of revenues for Vital.                                                     

(b)Adjustment to remove exploration expense to align the presentation by Xxxxxxxxx with the full cost method of accounting utilized by Xxxxx.                                                         

(c)Adjustment to remove Xxxxxxxxx's historical interest expense prior to the Driftwood acquisition.                                                        

(d)Adjustments to conform Driftwood’s depletion and depreciation expense presentation to the presentation of depletion, depreciation and amortization expense for Vital.                                                         

(e)Adjustments to remove Driftwood’s unproved impairment of oil and natural gas properties and gain on sale of assets as Vital utilizes the full cost method of accounting.                                

(f)Adjustment to reflect the issuance of 1,578,948 shares of Vital common stock pursuant to the Purchase Agreement. The following table reconciles historical and pro forma basic and diluted earnings per share for the period indicated (in thousands, except share and per share amounts):    

8

Vital Energy, Inc.

Notes to unaudited pro forma condensed combined financial information

						Three Months Ended												Year Ended
						March 31, 2023												December 31, 2022
						Historical						Pro-Forma						Historical						Pro-Forma
Net income						$	113,940					$	126,741					$631,512						$	655,826
Weighted-average common shares outstanding:
Basic						16,431						18,010						16,672						18,251
Dilutive non-vested restricted stock						114						114						183						183
Dilutive non-vested performance awards						—						—						12						12
Diluted						16,545						18,124						16,867						18,446
Net income per share:
Basic						$	6.93					$	7.04					$	37.88					$	35.93
Diluted						$	6.89					$	6.99					$	37.44					$	35.55

(g)Adjustment to reflect the estimated interest expense in the periods presented with respect to the incremental borrowings necessary to finance the Driftwood Acquisition. The interest rate utilized as of April 3, 2023, was 7.385% for incremental borrowings. A one-eighth percent increase or decrease in the interest rate would not have had a material impact on interest expense for the three months ended March 31, 2023. A one-eighth percent increase or decrease in the interest rate would have changed interest expense by $0.2 million for the year ended December 31, 2022.

(h)Vital has not reflected any estimated tax impact related to the Driftwood Acquisition in the accompanying unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2023 and year-end December 31, 2022 as it does not anticipate the impact to be material due to the Company’s net operating loss carryforwards. As of March 31, 2023 and December 31, 2022, the Company had a full valuation allowance against its federal and Oklahoma net deferred tax assets.                                                         

(i)Adjustments to reflect depreciation, depletion, and amortization expense resulting from the change in basis of property and equipment acquired and accretion expense from new asset retirement obligations recognized as a result of the Driftwood Acquisition. The depletion expense adjustment was calculated using the unit-of-production method under the full cost method of accounting using estimated proved reserves and production volumes attributable to the acquired assets.                                                    

(j)Adjustment to align the presentation of lease operating and gathering and processing expenses for Driftwood to the presentation by Xxxxx.                                                         

(k)Adjustment to conform Xxxxxxxxx's historical accretion expense to the presentation by Xxxxx.

(l)Adjustment to conform Xxxxxxxxx's historical realized loss on derivatives and unrealized gain on derivatives to the presentation by Vital.

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Vital Energy, Inc.

Notes to unaudited pro forma condensed combined financial information

Supplemental Unaudited Pro Forma Combined Oil and Natural Gas Reserves and Standardized Measure Information

The following tables set forth information with respect to the historical and pro forma combined estimated oil and natural gas reserves as of December 31, 2022 for Vital and Driftwood. The reserve information of Vital and Driftwood have been prepared by independent petroleum engineers Xxxxx Xxxxx Company, L.P. and Xxxxxxxxxx, Xxxxxx & Associates, Inc., respectively. The following unaudited pro forma combined proved reserve information is not necessarily indicative of the results that might have occurred had the Driftwood Acquisition taken place on January 1, 2022, nor is it intended to be a projection of future results. The accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation and judgment. Periodic revisions or removals of estimated reserves and future cash flows may be necessary as a result of a number of factors, including reservoir performance, new drilling, crude oil and natural gas prices, changes in costs, technological advances, new geological or geophysical data, changes in business strategies, or other economic factors. Accordingly, proved reserve estimates may differ significantly from the quantities of crude oil and natural gas ultimately recovered. For both Vital and Driftwood the reserve estimates shown below were determined using the average first day of the month price for each of the preceding 12 months for oil and natural gas for the year ended December 31, 2022.

Estimated oil and natural gas reserves
						As of December 31, 2022
						Vital						Driftwood						Pro forma combined
Estimated proved developed reserves:
Oil (MBbl)						70,333						7,321						77,654
Natural gas (MMcf)						464,567						17,340						481,907
Natural gas liquids (MBbl)						75,156						4,503						79,659
Total equivalent reserves (Mboe)(1)						222,917						14,714						237,631
Estimated proved undeveloped reserves:
Oil (MBbl)						46,125						7,993						54,118
Natural gas (MMcf)						87,721						15,195						102,916
Natural gas liquids (MBbl)						18,656						4,003						22,659
Total equivalent reserves (Mboe)(1)						79,401						14,529						93,930
Estimated proved reserves:
Oil (MBbl)						116,458						15,314						131,772
Natural gas (MMcf)						552,288						32,535						584,823
Natural gas liquids (MBbl)						93,812						8,506						102,318
Total equivalent reserves (Mboe)(1)						302,318						29,243						331,561

______________________________________________________________________________

(1)BOE is calculated using a conversion rate of six Mcf per one Bbl.

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Vital Energy, Inc.

Notes to unaudited pro forma condensed combined financial information

The following table presents the Standardized Measure of Discounted Future Net Cash Flows relating to the proved crude oil and natural gas reserves of Vital and of the properties acquired in the Driftwood Acquisition on a pro forma combined basis as of December 31, 2022. The Pro Forma Combined Standardized Measure shown below represents estimates only and should not be construed as the market value of either Driftwood’s crude oil and natural gas reserves or the acquired crude oil and natural gas reserves attributable to the Driftwood Acquisition.

Standardized measure of discounted future cash flows
(in thousands)
						As of December 31, 2022
						Vital						Driftwood						Pro forma combined
Oil and gas producing activities:
Future cash inflows						$	16,343,468					$	1,837,188					$	18,180,656
Future production costs						(4,136,380)						(412,612)						(4,548,992)
Future development costs						(1,403,721)						(178,013)						(1,581,734)
Future income tax expense						(1,587,677)						(9,645)						(1,597,322)
Future net cash flows						9,215,690						1,236,918						10,452,608
10% discount for estimated timing of cash flows						(4,461,114)						(641,526)						(5,102,640)
Standardized measure of discounted future net cash flows						$	4,754,576					$	595,392					$	5,349,968

11

Vital Energy, Inc.

Notes to unaudited pro forma condensed combined financial information

The following table sets forth the changes in the Standardized Measure of discounted future net cash flows attributable to estimated net proved crude oil and natural gas reserves of Vital and Driftwood on a pro forma combined basis for the year ending December 31, 2022:

Changes in standardized measure of discounted future net cash flows
(in thousands)
						As of December 31, 2022
						Vital						Driftwood						Pro forma combined
Standardized measure of discounted future net cash flows, beginning of year						$	3,425,312					$	336,164					$	3,761,476
Changes in the year resulting from:
Sales, less production costs						(1,468,946)						(70,474)						(1,539,420)
Revisions of previous quantity estimates						(99,512)						(1,309)						(100,821)
Extensions, discoveries and other additions						667,859						264,981						932,840
Net change in prices and production costs						2,565,963						78,623						2,644,586
Changes in estimated future development costs						(165,579)						(16,792)						(182,371)
Previously estimated development incurred capital expenditures during the period						260,475						15,246						275,721
Acquisitions of reserves in place						—						—						—
Divestitures of reserves in place						(96,222)						(26,279)						(122,501)
Accretion of discount						371,625						33,888						405,513
Net change in income taxes						(418,537)						(2,019)						(420,556)
Timing differences and other						(287,862)						(16,637)						(304,499)
Standardized measure of discounted future net cash flows, end of year						$	4,754,576					$	595,392					$	5,349,968

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