Q2 2025 Vitesse Energy Inc Earnings Call
Greetings and welcome to the vets energy second quarter of 2025 earnings call.
At this time, all participants are in a listen-only mode.
A question and answer session will follow the formal presentation.
Please note that this conference is being recorded.
I will now turn the conference over to the director investor relations and business development at the test been Messier. Thank you. You may begin.
Good morning, everyone. And thanks for joining today. We will be discussing our financial and operating results for the second quarter of 2025. Our 10 q and earnings were released yesterday after market closed and an updated investor presentation can be found on the vitess website. I'm joined this morning by our chairman and CEO Bob gerity our president.
President Brian C and our CFO Jimmy Henderson.
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.
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,
Please review our earnings release in risk factors, discussed in our filings with the SEC for additional information. In addition to today's discussion, May reference non-gaap Financial measures for reconciliation of historical non-gaap Financial measures to the most directly comparable. Gaap measure, please reference, our 10q and earnings release. Now, I will turn the call over to the test is Chairman and CEO Bob Garrity.
Thank you, Ben and good morning everyone.
The second quarter demonstrated the resilience of our asset.
And the discipline of our team.
I want to thank our team members for the awesome job they continue to do.
Importantly, we are positioned to deliver in a subdued oil price Market while remaining well-prepared for when prices strengthen.
During the second quarter of 25.
We fully integrated the Lucero assets and certain employees into the tests.
With the accretive impact apparent in our financial metrics and balance sheet.
The asset is performing as expected, and we are realizing better.
GNA synergies than we underwrote.
The operated leg to our strategy. Provides another lever.
That we can pull at our discretion.
We successfully settled a multi-year lawsuit with one of our key operating partners.
Which resulted in a 1-time cash payment as well as entering into long-term, gas Gathering, processing and marketing agreements.
Kudos to our team for their diligent efforts in seeing this through.
We continue to invest Capital selectively.
While generating excess free cash flow, that was used to reduce debt.
We allocate Capital based on our returns driven hierarchy as noted in our investor presentation.
Posted on our website.
And again, we're not held to a fixed capital budget.
As I've said before, in addition to our organic drilling, we are always looking at both near-term development deals and larger asset acquisitions.
That will support the dividend.
But these deals must meet our strict return hurdles.
Additional Hedges were added in the quarter to take advantage of increased oil prices.
And we will continue to make decisions that bolster the dividend.
Last week, our board declared our third quarter dividend and an annual rate of $2.25 per share.
Hand the call over to our president.
My partner, Brian Cree. To discuss our operations.
Thanks Bob. Good morning everyone. And thank you for joining today's call.
Production for the quarter average just under 19,000 barrels of oil equivalent per day which was an increase of 27% from the first quarter.
This brings our year-to-date production to just under 17,000 barrels of oil equivalent per day.
As of June 30th 2025, we had 23 net wells in our development pipeline, including 7.9, net Wells that were either drilling or completing and another 15.1% that had been permitted for development.
As Bob touched on during the quarter, we resolved pending litigation with one of our largest operators related to post-production revenue deductions.
we received a 1-time cash, payment of 24 million, which was recorded to revenue, and to offset litigation costs previously expensed.
In addition to the one-time cash payment, we've elected to take virtually all of our gas production in kind from this operator's wells and simultaneously entered into long-term gas gathering, processing, and marketing agreements with the operator and its affiliates.
We capitalized on increased oil prices during the quarter by adding oil Hedges at Price levels that support our dividend.
For 2025, we have approximately 71% of our remaining oil production hedged at a weighted average price of $99.83 per barrel and nearly half of the remaining 2025 natural gas production. Hedged with attractively priced collars at a weighted average floor of 3.73 and ceiling of $5.85 per mmbtu.
Both percentages based on the midpoint of our guidance.
Additionally, we have over 3,300 barrels per day and 12,700 mmbtu per day of our 2026 oil and natural gas production, hedged at 66.43 cents per barrel, and through a Costless, collar of $3.72 by $4.99 per mmbtu.
In the first quarter of 2027, we have over 8,800 mmbtu per day of natural, gas production hedged with a $4 floor by 568 collar.
Additionally, we have over 207,000 barrels of NGL production, hedged in the second half of 2025 and 2026 at 2 cents per barrel.
Thanks for your time. Now, I will turn the call over to our CFO Jimmy Henderson. Thanks Brian. Good morning everyone. I just want to highlight a few items from our financial results for the second quarter of 2025.
You can refer to our earnings release in 10 Q which were filed last night for further details.
With the Lucero assets fully integrated, our production for the quarter was 18,950 Boe per day with a 65% oil cut.
For the quarter adjusted, EVA was $61.1 million adjusted. Net income was $18.4 million, and GAAP net income was $24.7 million.
All of these figures include the effect of the legal settlement as we've discussed earlier.
You can see the reconciliation in our press release filed last night.
Cash, capex and acquisition cost for the quarter were 35.7 million, which was almost entirely organic as we had minimal acquisition costs during the quarter.
These costs were funded with within our operating cash flows and excess. Cash flow was used to pay down debt
During the second quarter, we decreased our total debt to 106 million giving giving us.
Net debt to an adjusted annualized debe of just 0.4 times.
Our annual guidance for 2025 has not changed.
We anticipate production and range of 15 to 17,000 Boe per day for the full year with an anticipated oil cut of 64 to 68%.
Cash capex for the year is now anticipated to be $80 million to $110 million, weighted towards the first half of the year.
With that, let me turn the call over to the operator for Q&A.
Thank you. We will now be conducting a question and answer session.
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Our first question today comes from Jeff Gramp of Northland Capital Markets. Please proceed with your question.
Morning guys, thanks for the time.
Hey, Jeff.
Wanted to, um, first question on, um, on the production side of things, and you guys had, um, pretty nice performance in Q2. Um, guidance for the full year was maintained, which I guess kind of implies a fairly decent decline in production in the second half of the year. I know activity levels in the Basin have slowed down, so not too surprising, but just hoping to get a little more increased clarity on kind of what your guys' production expectations are for the remainder of the year. Thanks.
Yeah, Jeff. This is Brian. I'll take the first crack at that and anyone can add in. But, uh, uh, yeah, we kept our Guidance, the same for the year. Uh, obviously, our, our second quarter numbers were, were real strong. We we liked them, um, from that standpoint. Uh, we did have some, uh,
Wells that got turned on a little sooner than we had expected. Um, and we are constantly watching the amount of organic capex that we're seeing. We're very encouraged by, uh, the AFV activity that we've seen, um, with oil prices in the, the mid-60s. Um, we're we're pretty happy to see, uh, a lot more AF activity, than we were seeing earlier in the year actually. Um, we're not quite at the levels. We were last year from an AFP activity, but, uh, uh, certainly above the levels. We've seen on average, over the last few years. So something that that we're encouraged. But at this point in time, just with the visibility that we have, we've decided to keep that, uh, um, those, those estimates in terms of the second half production, uh, right in line, with where we were earlier.
Okay, thanks.
Brian. Um and for my follow-up on the acquisition side of things uh I know the did at least looking at the cash flow statement the uh kind of ground game acquisition. Um side of the business has been a little bit slower. I know you guys have been um seemingly pretty bullish. The last couple calls on acquisition deal, flow overall, um, both for small and and larger deals. So just hoping to get an update on, you know, what you guys kind of view as as the pipeline for Acquisitions, both for round game and barter deals.
Yeah, Jeff. I I'll take a cut at that. This is Jimmy. Um, yeah, definitely, you know we've seen as as Brian said with the or on the organic side, we've seen pretty robust activity. Um, and we've seen quite a bit into the pipeline on on intd or near-term development. Just nothing, that's really, um,
Achieved our hurdles that we have, we, we just haven't filled the um, inclination to change our hurdle rate and and um, except for returns to do some of these things. So, um, we just kind of feel pretty comfortable about where we're at, we
Continue to look at bigger, chunkier deals and, um, we got a lot of things that we're analyzing and really scrutinizing, um, but um, you know, we've as we've always said, as Bob said earlier, in the prepared remarks, we have pretty strenuous requirements when we look at these things. So, um, we're we're very optimistic. Give them the the number of, um, opportunities that are out there, and but then continue to be cautiously optimistic, that something will get to the finish line.
Understood. All right. Thank you, guys, for the time. I appreciate it.
Thanks chef.
The next question is from Poe frat of Alliance Global Partners, please proceed with your question.
Hey, good morning, uh, just to follow up on the guidance question. You look at the, if you could just help me, understand the chances that you're going to hit the low end of the guidance, that would be helpful. You know, what would it, what would have to happen to, to see 15,000, you know, BD Boe per day for the year. I mean it seems like an outlier example, but if you could just help me understand the the low end of the guidance, that'd be helpful.
Yeah, hello. This is Jimmy. Thanks for the question. Yeah, obviously. Um, the low end of the guidance is, um, pretty minimal chance that it's going to hit that that level. But um, I think Brian described it pretty well. We're um we're we're excited about the second quarter. There are some things that came and pulled forward uh, from the second half into the quarter. So we're, um,
Comfortable. You know, we've got a great momentum going in the second half so we're pretty excited but we're not quite to the point where we wanted to adjust that up. Yeah, Paul. I would, I would just add quickly to that that that uh, you know, even in the second quarter we did see some operators in the Basin, uh, curtail production. So, realistically to get to that lower end of the range. I think you have to see a pretty good drop in the price of oil in the price of oil. And you'd have to see operators, start to Trail production
Okay, that's really helpful. And then, can we just talk about the cost structure a little bit? It looked like eloe was up, um, quarter to quarter on on a Boe basis. And then I'd like to understand what your run rate on GNA is, um, you know, obviously the settlement had an impact there, but, um, on your reported GNA, if you can just help me understand sort of, those 2 factors going forward, that would be helpful.
Yeah, I'll take the first crack on eloe, and let Jimmy handle the GNA question, but, you know, look on our eloe. We we close the, the, the transaction and, and the acquisition of Lucero, uh, there were some things that we wanted to do out in the field in that uh in that first 3, 4 months of of getting those operations under our belt and and uh so we did a few things and and look I think you can also see that some of those uh additional eloe costs, probably drove our production, a little higher in the second quarter also. So, uh, those 2 kind of offset each other a little bit, but it was just
Really getting the the operator properties into the, uh, into the format that we want them to be in.
Yeah, pulling out on GNA. Um yeah.
Obviously, it's kind of hard to.
Get a run rate, given all the things that we've had running through there over the last few quarters with uh, legal cost, as well as, um, cost related to Lucero acquisition. But, um, I think if you, if you make the adjustment based on, um,
What is in there? This quarter with, um, the the legal, the reimbursement on the legal costs were sort of in the mid 3s per Boe. And I think we we're we finally believe that that will continue to decline as we scale up with. I think we'll have, um, a lot of Leverage with our existing team, um, and not, uh, a lot of ads on the GNA side as production scales up over time. So I think continue to see that ramped down
Okay. And then I should have congratulated you on the the settlement, um, you know, big cash payment obviously, but more importantly going forward, you know, can you help me understand the implications of taking your gas and kind and then also can you give me an appreciation for how the GPM
Contracts compared to what you've been paying historically.
Yeah, so this is Jim again. Yeah. So that um obviously they're better than what they were before. Um, we're
We have bespoke, uh, contractual Arielle, uh, situation now with the operator and their Affiliates to move our, our gas primarily. And so, um, it's definitely expect to be better going forward. I think if if just to give you a little guideposts that you know, if we look at say the first half, we probably we would have seen Improvement in in the 2 and a half 3 million dollar range for the first half of the year. So kind of give you an idea of what we expect to see as a run rate going forward.
Great. And then, um, Bob, you know, the last conference call you did talk about chunkier assets, you know, that might be available, um, has have those, and it sounds like you're optimistic, that something might happen over the second half of the year have. Have you actually pastored the client on any deals that are dead right now or is the is the, you know, acquisition pipeline still fairly active.
Yeah, thanks for the question po. Uh, this is Bob.
Uh, I will say that since we've been in business for 12 years, this is by far the most, um, uh, amount of deal flow. We have ever seen in the bigger, uh, chunkier um, realm. Uh, we have also had been able to add as the industry. Consolidates, we're able to add an engineer and an Ops guy, uh, to our evaluation team and they're completely busy. So again, we
Especially now that the transaction of the, the the the legal process is over, we are spending a lot of time, looking at deals. So, uh, we have very high hurdles, it's got to be dividend supportive or accretive
it's you know difficult to find that but believe me we would love to get 1 when we uh
Uh, when we can so um, it's we've got a war room. That's very busy, we'd love to do a deal. Uh thankfully our underlying asset is performing very well so anything we do we are very sensitive not to dilute uh that performance but
Uh, we're hunting.
Perfect, thank you.
Thanks Paul.
The next question is from Noel parks of Tui brothers. Please proceed with your question.
Uh, hi. Good morning. Uh, I apologize if you, um, already touched on this. But, um, I I just wonder, um, if you've, uh, gotten any sense from the finally completed, um, test transaction, uh, with Chevron. If, um, if over time there, you're going to see any, um,
uh, sort of changes to their planned, activity levels up there. And whether you think that, um,
Uh, would have the possibility of of changing sort of the Dynamics of of maybe blocking consolidation and so forth.
Yeah, this is Bob. I'll take a first crack at that. Uh, we don't know the specific plans that Chevron has for the Bachan, but we've got a paradigm to work with because.
Chevron came in and made a big purchase in the DJ. And we really are encouraged by how they've, uh, performed with Noble. And so, uh, if that's any indication, we're very much looking forward to Chevron taking control of the, the Hess.
Uh, the asset that the Hess asset up there is fantastic. And so, um, we are encouraged that Chevron will, uh, will actually increase the activity, but that's speculation, though.
sure, uh, fair enough and um I I guess um,
um, I feel like there is still a little bit of a, um,
A, a wagon, excuse me, in market perception around, sort of, um, the status of inventory in the back and remaining inventory. And, um, what is and still can be, uh, achieved through technical efficiency. Um, maybe even more hearing more about that with virus, or down home monitoring and, you know, AI and advanced technologies and so forth. And, uh, do you do you see that? Um, do you do you see any opportunities for maybe a little bit greater,
Awareness of the opportunity that still exists up there in the market.
I I this is Brian. I I can talk to it first and let others add in. But yeah, I mean the capital efficiency that we're seeing um it just continues to improve in the back and we're we're just very excited about what we see. You know, each month in terms of, uh, you know, the 3 Mile laterals. Now we're seeing a lot more 4 Mile, laterals, um, refracts. Uh, there's just so many things going on in the box and that we think continues to make that filled more and more productive over time. And certainly, from a
Capital efficiency standpoint.
Great. Thanks a lot.
Thanks. So
Just now concludes our question and answer session. I would like to turn the floor back over to Bob Gerrity for closing comments.
We'd like to thank you everyone for their continued support. Uh please reach out to the been if you have any specific questions and we look forward to talking to everybody again in 3 months, so thank you.
Ladies and gentlemen, thank you for your participation. This concludes today's teleconference, you may disconnect your lines and have a wonderful day.