Q1 2025 Vitesse Energy Inc Earnings Call
Speaker Change: Greetings and welcome to the Vitesse Energy's first quarter 2025 earnings call. At this time, while participants are in a listen only mode, a question and answer session will follow the formal presentation.
Speaker Change: Please note, this conference is being recorded. I would now like to turn the conference over to the director, investor relations, and business development, advise tests, and messier. Thank you, you may begin.
Ben Messier: Good morning and thank you for joining. Today we will be discussing our financial and operating results for the first quarter of 2025 and Revive Annual Guidance.
Ben Messier: Our 10Q and earnings were released yesterday after market closed and an updated investor presentation can be found on the Vitesse website. I'm joined here this morning by Bob Gerrity, Vitesse's chairman and CEO , our president, Brian Cree, and our CFO , Jimmy Anderson.
Ben Messier: Before we begin, please be reminded that this call may contain estimates, projections, and other forward-looking statements within the meaning of the federal securities laws.
Ben Messier: Forward-looking statements are subject to several risks and uncertainties many of which are beyond our control. These risks and uncertainties can cause actual results to differ materially from our current expectations.
Ben Messier: Please review our earnings release and risk factors discussed in our filings with the SEC for additional information.
Ben Messier: In addition, today's discussion may reference non-GAAP financial measures. For reconciliation of historical non-GAAP financial measures to the most directly comparable gap measure, please reference our 10Q and earnings release. Now, I'll turn the call over to the testist chairman and CEO Bob Gerrity.
Bob Gerrity: Thanks, Ben, and good morning, everyone. Thank you for participating in today's earnings call.
Ben Messier: The first quarter of 2025 was a step change for Vitesse with the acquisition of Lucero.
Ben Messier: This operating leg gives us additional affirmative decision-making ability and further control over our capital spending. We can now toggle our activity in a new way.
Ben Messier: This complements our already dynamic business model which allows us to adapt quickly to the changing macro environment.
Ben Messier: Our business plan, which includes our long-duration asset, low leverage and discipline hedging strategy, positions us not only to withstand but to be opportunistic.
During Market Disruptions
Thank you.
New oil and gas industry is highly cyclical.
Ben Messier: Sometimes it's best to expand the asset and other times it is better to be highly disciplined and prudent with our spending.
Ben Messier: Our objective is to invest money at the highest rates of return possible.
Ben Messier: which allows us to return capital to our shareholders through all cycles.
Ben Messier: Reflecting the durability of our asset and business model. Last week our board reaffirmed our dividend at an annual rate of $2.25 per share.
Ben Messier: I will now hand the call over to our president, Brian Cree, to discuss our operations.
Good morning, everyone, and thanks, Bob.
Ben Messier: Production for the quarter averaged just under 15,000 barrels of oil equivalent per day which was at the top end of our first quarter expectations of 14,000 to 15,000 barrels of oil equivalent per day.
Production increased by 16% from the fourth quarter of 2024.
Ben Messier: As of March 31st, 2025, we had 25 net wells in our development pipeline including 9.5 net wells that were either drilling or completing and another 15.5 net locations that had been permitted for development.
Ben Messier: The overall pipeline is higher than ever, primarily as a result of our acquisition of Lucero. The pipeline includes 1.9 net wells that are waiting on completion at our discretion.
Ben Messier: We proactively decided to defer the completion of these drill but uncompleted wells due to recent commodity price volatility.
Ben Messier: Additionally, we chose not to close on $20 million of acquisitions in early April that were included in our original 2025 guidance.
to mitigate the impact of commodity price volatility.
Ben Messier: For the remainder of 2025, we have approximately 61% of our oil production hedged at a weighted average price of $70.75 per barrel.
and 30%...
Ben Messier: of Remaining 2025 Natural Gas Production Hege at a weighted average floor of $3.73 per MMBTU, both percentages based on the midpoint of our updated guidance.
Ben Messier: Additionally, we have over 2,500 barrels per day and 1,200 mm BTU per day of our 2026 oil and natural gas production hedged at roughly $67 per barrel and through a costless collar of $3.72, $3.72.
Ben Messier: by $5 per MBTU. Last week we added NGL hedges to the streams that trade attractively relative to recent averages.
Ben Messier: Thanks for your time. Now I'll turn the call over to our CFO , Jimmy Henderson.
Thanks, Brian . Good morning, everyone.
Ben Messier: Please refer to our earnings release in 10Q, which we filed last night for any further details.
Ben Messier: Our production for the quarter was $14,971 B.O.E. per day with a 68% oil cut.
Ben Messier: For the quarter adjusted EBITDAW was 39.9 million and adjusted net income was 8 million with gap net income of 2.7 million. You can see that reconciliation in our press release that we put out last night.
Ben Messier: Cash CapEx, including that position cost for the quarter, were 30.4 million. These costs were all funded within our operating cash flows.
Ben Messier: At the end of the first quarter, we had total debt of 117 million and net debt to adjusted annualized EBITDAW of 0.7 times.
Ben Messier: We are revising guidance for 2025 in response to current commodity price volatility to preserve returns and maintain financial flexibility.
Ben Messier: We now anticipate production in a range of 15,000 to 17,000 BOE per day for the full year with an anticipated oil cut of 64 to 68 percent.
Ben Messier: Cash CapEx for the years anticipated to be 80-110 Nyan.
Still waded towards the first half of the year.
Ben Messier: Dispwider Guidance reflects a 32% reduction in Catholics based on the midpoints.
Ben Messier: We will remain adaptable in navigating volatile markets to protect long-term, shareholder returns and value.
in the event that the commodity market firms
Ben Messier: Or we see the expected repricing facets and costs we are in a position to quickly react.
Ben Messier: Lastly, again, one to thank everyone for their hard work with closing the Lucero transaction. We are very eager to see what we can all achieve together.
Ben Messier: With that, let me turn the call over to the operator for Q&A.
Speaker Change: Thank you. You'll now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation, Noel will indicate your line is in the question too.
Ben Messier: You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
One moment please, Chloe Pull for questions.
Speaker Change: Thank you. Our first question comes to the line of Jeff Grant with Northland capital markets. Please proceed.
and all.
Jeff Gramp: I'm going to start first on the guidance front of things. Obviously acknowledging you guys have a little bit wider range than we had previously. Can you give us a little more detail on what drives things towards the higher end versus the lower end? What are the main factors there? Is it primarily would you say, I guess timing of wells and inventory or what other factors should we kind of keep an eye on that could drive you one end versus another? Thanks. Thanks.
Jeff Gramp: Hey Jeff, this is Brian , I'll take the first crack at that and let Bob and Jimmy jump in if they feel like it. Obviously, one of the key items is going to be the timing of the completion of our ducks. Obviously, from our standpoint, we have deferred those. We're very much driven by rates of return and we'll continue to watch both the
Jeff Gramp: Prices that we might receive and completion costs and so that will certainly dictate when we decide to complete those wells.
Jeff Gramp: That will have an impact on the lower to the versus the higher part of our range in production.
Jeff Gramp: The other aspect of that is we'll continue to look at acquisitions.
Jeff Gramp: We did back away from some acquisitions that we were planning to do at the beginning of April as prices started to go down a little bit in March. We did try to renegotiate those acquisitions, but we're unsuccessful. It doesn't mean that we will not be very, very active in the acquisition market over the course of this year. And if we find things that meet our hurdle rates of return, we're going to jump on them. Um, um,
Jeff Gramp: Timing of wealth coming online is certainly an impact. So with a lot of that uncertainty, we just decided that it would be more prudent to widen the range of our guidance.
Jeff Gramp: Jeff, this is Bob, just to add briefly to what Brian said.
Jeff Gramp: Before Liberation Day and the Saudi decision to add extra barrels, we had seen a meaningful decrease in the cost of AFEs from our operators.
Jeff Gramp: So, we haven't really seen another readjustment. We've only a month into that, but we're encouraged by that trend. So, you know, we with our data, we can see a lot of what's going on in the field almost real time.
Jeff Gramp: So, we're eager to look at the trend and we're ready to spend money.
Speaker Change: More of kind of a capital allocation question, you know, the stocks.
Jeff Gramp: Out of that levels we haven't seen since you guys first came public.
David Danielson, double digits [inaudible]
Jeff Gramp: and you can almost make an argument that buybacks are actually accreted to leverage in the long term. So I'm just wondering, you know, to what extent do buybacks make sense for you guys in the context of all be it lower operating cash flow, and then also just to what extent you can execute buybacks given any limitations on the credit facility. Thanks.
Speaker Change: Yeah, I'll take a shot at that Jeff. I think from the beginning our focus has been on the de-fixed to the downed and setting it at it.
at a prize that can be maintained.
And I'm,
Speaker Change: These commodity prices doesn't leave a lot of room for continuing our capital investment plus buying back shares in market but certainly we get the gist of that question and we're always looking at that and comparing buying back shares as compared to reinvesting in assets.
Speaker Change: and the cash flow that that generates to support the dividend. So it all goes into the mix in our couple of allocations, certainly.
Yeah, Jeff, this is Bob. We're investors.
Speaker Change: And we want to invest money where it gets the biggest rate of return. So we look at this all the time whether it's buying a making an acquisition.
Speaker Change: Buying AFEs, investing in AFEs, or buyer-owned stock. So it's a dynamic process. We do have room to buy back in our shares, but we're trying to always look at where we're going to make the most amount of money. [inaudible]
Understood. Sorry, thank you guys for the time.
Thanks, Chef.
Speaker Change: Thank you. Our next question comes to the line of MSWords with Jeffries. Please proceed.
Emma Swartz: Hi, Vitesse team. Thanks for taking my question today. I think the updated 2025 guidance makes a lot of sense in the current macro environment and enhances the resiliency of the business.
that we should know about.
Emma Swartz: No, wait a minute. Hi, this is Emma, this is Bob. We're not restricted.
at all with our, with our credit facility.
Emma Swartz: We, our product is our dividend. We feel very confident in our ability to pay the dividend in this pricing environment. So it, again, it's a decision that we make pretty much on a quarterly basis.
Emma Swartz: But our product is our dividend, we do everything we can to support the dividend and make the decisions to be able to grow the dividend.
Speaker Change: So, Jim, you want to add to that? Yeah, I would say that there are provisions in the credit facility that at some point would limit the ability to.
Speaker Change: But at current levels, and that certainly plays into our capital allocation to make sure that we're we've got plenty of buffer room underneath that and I think that that's what while speaking to that. We're in good shape on that front right now and we're comfortable with our capital allocation.
Speaker Change: Yeah, that's great to hear. It's a second question I want to ask on the Lucero acquisition. How are the assets been performing now that the deal is closed? I know it's non-op, but are there any potential like synergies or learnings that you're gained from Lucero?
Yes, sure, and this is Brian .
Speaker Change: Work in terms of using our non-op portfolio to enhance potentially the value of the operated portfolio. One of the advantages that we have with such a large non-op portfolio is the ability to trade back and forth with other companies that could very well enhance the undeveloped locations that we have on the operated side.
That's great to hear. Thank you so much.
Thanks everyone.
Speaker Change: Thank you. Our next question comes from the line of Noel Parks with two host, Toei Brothers. Please proceed.
Hi, good morning. I just took a couple things.
Speaker Change: I'm just a little curious as far as what you've been seeing with, I mean, in this early stage with the operator behavior,
Speaker Change: You know, I think so many of the companies out there, and I guess particularly if you're seeing any effects in them.
Speaker Change: in the AFE easier, the quality of AFE you're seeing.
Speaker Change: Just because, generally, you know, balance sheets are pretty good and capital discipline notwithstanding, your company is juicing to have a good bit of flexibility on their, their programs, their maintenance drilling. So just any, any early signs from your producing partners so far?
Yeah, I can't...
Speaker Change: between the 1st quarter and the 4th quarter of last year declined about 5%.
and the AFE costs on our 3 mile laterals.
Speaker Change: During that same time frame went down by about 8%. So, again though, the quality, we're not really seeing any change in that. Operators are continuing to develop wells and Rick Count was closer to 35 at the end of the first quarter. It's declined a little bit. I think as all of the operators and we're seeing a lot of people report earnings now and and we're seeing a lot of people report earnings now and we're seeing a lot of people report
Speaker Change: Talk about their guidance. I think everyone is taking a prudent perspective to the remainder of the year.
Speaker Change: I guess just wondering, and this is sort of an ongoing strategic question, in the event we see sort of a sustained pullback in.
in the commodity.
You know, there are. [inaudible]
and a number of companies and other basins that have...
Speaker Change: I've probably gotten a bit more extended on their balance sheet through cash acquisitions than they might have expected, just give them where the oil strip has been and I wonder if you were
of an unusual point in the cycle.
that
Speaker Change: I think we're seeing more stress out there, a lot of it from the private companies than I think a lot of people anticipate.
Speaker Change: to bolster our balance sheet to be in position to find a nice fat pitch.
Speaker Change: So again, we are looking at other basins as we have for the last couple of years and you know we're we're trying to be greedy and just try to pick off the one that is
Speaker Change: Most economic, but it is an interesting time, and there's a lot of discussion here about what opportunity set we would see if the price of oil went to $50 and stayed there through the rest of this year.
Speaker Change: with the situation where we wouldn't necessarily relish, but we were in a position to take advantage of.
Speaker Change: Great, exactly what I was wondering about. Thanks a lot.
Thank you.
Speaker Change: Thank you. Our next question comes from a line of Poe Fratt with Alliance Global Partners. Please proceed.
Hey, good morning. No, just 50 outside.
The back-end question, but-
Speaker Change: Can you highlight on your the range of capex that you have 80 to 110 and can you just talk a little more about whether they're still acquisition spilt in there? I think less quality quantified acquisitions of 20 million. Again.
Speaker Change: Those fell off because of the marking condition, but how much is built into the budget right now for acquisitions?
Speaker Change: Part of the reason we have such a wide range is because we want the flexibility to make acquisitions if they're attractive.
Speaker Change: We're underwriting about 10 million of base case acquisitions currently, but in past years we've got a little bit closer to 30 million, so if good opportunities come across our desk at rates of return that we can't turn down.
Speaker Change: which has been the scenario the last few years. You know, you can see that number go higher and that's why we built in a little bit more cushion on the upside on that cat-x there.
Speaker Change: As everyone mentioned earlier, we turned down a $20 million acquisition that we tried to renegotiate, but we saw prices drop, that acquisition didn't meet our return hurdles, and so that's a big contributing factor to why we reduced production and catbacks from our prior guidance.
Poe, this is Bob.
Speaker Change: You can take a look at our revised guidance and conclude that they cleared the decks of everything that's not super economical and they're looking to load it back up with stuff that's economic that works in the 50 to $60 oil price environment.
Speaker Change: So look, we're at a position with our capital structure to move very quickly to make other acquisitions, which is what our plan is, it's just we don't have that built into our guidance at this point.
Speaker Change: That's good. Thanks Bob. And then would you you commented Bob last quarter of
Speaker Change: You know, on the call last quarter about seeing chunkier assets, you know, larger transactions. Now, I assume that part of that was implying, you know, what was going on with the acquisition for 20 million that, you know, fell off, but are you seeing over the last month or, you know, called six weeks. [inaudible]
Speaker Change: Chunker Acquisitions, or has that sort of ebbed as people more batten down the hatches and sort of try to weight it out?
Good question. It is chunky time.
Speaker Change: You take a look at the Lucero acquisition we did, it was good for Lucero shareholders, good for the Vitesse shareholders.
So, you know, we'd like that as a template. But...
that's something that works for both parties. And we are…
Speaker Change: Very busy in our deal shop and we like the chunky acquisitions so don't be surprised if we revise the guidance in the future because we're looking we're definitely looking [inaudible]
Speaker Change: It's a lot of opportunities happen in $55 oil and a position to take advantage of it.
Speaker Change: Great, that's helpful, and just if I could squeeze one more and, you know, GNA expense was up because of the Lucero acquisition, I think he pointed at 4.6 million.
Speaker Change: You know, that added, it looks like, you know, just just about 350 to your GNA per BLB in the quarter.
Speaker Change: Can you give me an idea of how GNA is going to run for BOE for the rest of the year?
Jimmy Henderson: Yeah, poses, Jimmy. Yeah, I think kind of that $4 range per BLE is pretty good run rate for us. In addition to that to that position cost, we disclose that we also have some litigation costs where we're the plaintiff.
Speaker Change: I'm coming to fruition now so that I should drop off here in the future.
Speaker Change: Jimmy, was that 1.6 million on litigation? Did I read that correctly? Yeah, in the quarter, that's correct.
Speaker Change: And will there be any in the second quarter because I think there's a June trial date there?
Speaker Change: Yes, certainly the trial date looming. There's certainly be some more in the second quarter. Okay, great. That's helpful. Thank you so much.
Thanks, Bill.
Speaker Change: Thank you. There are no further questions up this time. I'd like to pass the call back over to Bob for any closing remarks.
Bob Gerrity: Thank you. Thanks everyone for joining and those are a great set of questions from our analysts, which we always appreciate. If you have any other questions, please feel free to contact Ben directly. Thank you. We'll see you next quarter.
Bob Gerrity: This concludes today's teleconference. You made disconnect your lines at this time. Thank you for your participation.