Vitesse Energy, Inc. Q1 FY2025 earnings call

• Acquisition of Lucero provided additional decision-making ability and control over capital spending, complementing the dynamic business model. • Production in Q1 was just under 15,000 BOE/day, up 16% from Q4 2024. • Development pipeline had 25 net wells, with 9.5 drilling/completing and 15.5 permitted; deferred completion of some drilled but uncompleted wells due to commodity price volatility. • Hedged 61% of 2025 oil production at $70.75/bbl and 30% of natural gas at $3.73/MMBtu; also hedged 2026 production. • Revised 2025 guidance: production range 15,000-17,000 BOE/day, oil cut 64%-68%, Cash CapEx $80M-$110M.

In the first quarter of 2025, Vitesse Energy's production averaged just under 15,000 barrels of oil equivalent per day (BOE/day) with a 68% oil cut. Adjusted EBITDA for the quarter was $39.9 million, adjusted net income was $8 million, and GAAP net income was $2.7 million. Cash CapEx including acquisition costs for the quarter was $30.4 million. At the end of the first quarter, total debt was $117 million and net debt to adjusted annualized EBITDA was 0.7 times.

• Revised 2025 production guidance to 15,000-17,000 BOE/day with an oil cut of 64%-68%. • Cash CapEx for 2025 revised to $80 million to $110 million, wider range reflecting 32% reduction in CapEx with only 9% decline in production. • Adaptable to market changes, ready to react if market firms or assets reprice.

• Commodity price volatility can impact production and CapEx decisions. • Credit facility provisions could limit certain actions, though currently in good shape. • Litigation costs could affect G&A expenses.

Q: Greetings, and welcome to the Vitesse Energy's First Quarter 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 this conference is being recorded. I would now like to turn the conference over to the Director, Investor Relations and Business Development at Vitesse, Ben Messier. Thank you. You may begin.

A: Good morning, and thank you for joining. Today, we will be discussing our financial and operating results for the first quarter of 2025 and revised annual guidance. Our 10-Q and earnings were released yesterday after market close and an updated investor presentation can be found on the Vitesse website. I'm joined here this morning by Bob Gerrity, Vitesse' Chairman and CEO; our President, Brian Cree; and our CFO, Jimmy Anderson. 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 and risk factors discussed in our filings with the SEC for additional information. In addition, today's discussion may reference non-GAAP financial measures. For a reconciliation of historical non-GAAP financial measures to the most directly comparable GAAP measure, please reference our 10-Q and earnings release. Now I'll turn the call over to Vitesse' Chairman and CEO, Bob Gerrity.

Q: I wanted 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 in inventory? Or what other factors should we kind of keep an eye on that could drive you one end versus another?

A: 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 DUCs. 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 prices that we might receive and completion costs. And so that will certainly dictate when we decide to complete those wells. That will have an impact on the lower versus the higher part of our range in production. The other aspect of that is we'll continue to look at acquisitions. 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 were 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 all day. So those are two things. Look, we're still waiting to see how the rest of our operators handle the decline in oil prices. Timing of wells 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.

Q: For my follow-up, more of kind of a capital allocation question. The stock is kind of at levels we haven't seen since you guys first came public, dividend yields in double digits. You could almost make an argument that buybacks are actually accretive to leverage in the long term. So I'm just wondering, to what extent do buybacks make sense for you guys in the context of, albeit lower operating cash flow. And then also just to what extent you can execute buybacks given any limitations on the credit facility?

A: Yeah. I'll take a shot at that, Jeff. I think from the beginning, our focus has been on the fixed dividend and setting it at a price that can be maintained. And that at these commodity prices doesn't leave a lot of room for continuing our capital investment plus buying back shares in the 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 and the cash flow that, that generates to support the dividend. So it all goes into the mix and our capital allocation, certainly.

Q: 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. Could you provide more details on your willingness to flex the balance sheet to maintain the dividend? Is there limitations on the credit facility that we should know about?

A: No -- Emma, this is Bob. We're not restricted at all with our credit facility. Our product is our dividend. We feel very confident in our ability to pay the dividend in this pricing environment. So again, it's a decision that we make pretty much on a quarterly basis. 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. So Jimmy, do you want to add to that?

A: Yeah. I would say that there are provisions in the credit facility that at some point would limit the ability to. But at current levels, and that certainly plays into our capital allocation to make sure that we've got plenty of buffer room underneath that. And I think that's what Bob was speaking to, that we're in good shape on that front right now, and we're comfortable with our capital allocation.

Q: As a second question, I wanted to ask on the Lucero acquisition. How have 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 gaining from Lucero?

A: Sure, this is Brian. I would say that the integration of the Lucero assets is going exactly how we would have expected them. The assets are performing just as we had underwritten them. We'll continue to 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.

Q: Hi, good morning. I just had a couple of things. I'm just a little curious as far as what you've been seeing with -- I mean, in this early stage with operator behavior, I think so many of the companies out there -- and I guess, particularly if you're seeing any effects in the AFEs or sort of the quality of AFEs you're seeing just because generally, balance sheets are pretty good and capital discipline notwithstanding companies do seem to have a good bit of flexibility on their programs and their maintenance drilling. So just any early signs from your producing partners so far?

A: Yeah. This is Brian. I'll start with this and let others add in. But certainly, from the quality aspect of our AFEs, we're really not seeing a change. I would say that we're starting to see more and more 4-mile laterals. It's an interesting development that's ongoing as all of the operators are looking to enhance their capital efficiency, and we are seeing more 4-mile laterals. As Bob mentioned earlier, we have seen some decline in AFE costs. Our 2-mile laterals between the first quarter and the fourth quarter of last year declined about 5% and the AFE costs on our 3-mile laterals 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 rig 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 talk about their guidance, I think everyone is taking a prudent perspective to the remainder of the year.

Q: In the event we see sort of a sustained pullback in the commodity, there are a number of companies in other basins that have probably gotten a bit more extended on their balance sheet through cash acquisitions than they might have expected just given where the oil strip has been. And I wonder if you were either getting inquiries from or had ideas about other basins that you might be looking at if we're headed into sort of an unusual point in the cycle?

A: Yeah. Thanks, Noel. This is Bob. Interestingly enough, we have been getting inbounds from companies that we were surprised that, yeah, 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. This is also one of the reasons why we took the measures with our CapEx to bolster our balance sheet to be in a position to find a nice fat pitch. So again, we are looking at other basins as we have for the last couple of years. And we're trying to be greedy and just try to pick off the one that is 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. That would be a situation where we wouldn't necessarily relish, but we were in a position to take advantage of.

Q: Hey, good morning. Noel just hit the outside the Bakken question. But can you highlight on your -- the range of CapEx that you have $80 million to $110 million. And can you just talk a little more about whether there are still acquisitions built in there. I think last call, you quantified the acquisitions at $20 million. Those fell off just because of market conditions. But how much is built into the budget right now for acquisitions?

A: Part of the reason, Poe, we have such a wide range is because we want the flexibility to make acquisitions if they're attractive. We're underwriting about $10 million of base case acquisitions currently. But in past years, we've gotten 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, which has been the scenario over the last few years, you could see that number go higher, and that's why we built in a little bit more cushion on the upside on that CapEx there. 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 CapEx from our prior guidance.

Q: Sounds good. Thanks, Bob. And then you commented, Bob, last quarter -- on the call last quarter about seeing chunkier assets, larger transactions. I assume that part of that was implying what was going on with the acquisition for $20 million that fell off. But are you seeing over the last month or, call it, six weeks, chunkier acquisitions? Or has that sort of ebbed as people were more batten down the hatches and sort of try to wait it out.

A: Good question. It is chunky time. And if you take a look at the Lucero acquisition we did, it was good for Lucero shareholders, good for the Vitesse shareholders. So we like that as a template. That's something that works for both parties. And we are 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. A lot of opportunities happen at $55 oil, and we're in a position to take advantage of it.

Q: Great. That's helpful. And just if I could squeeze one more in. G&A expense was up because of the Lucero acquisition. I think you quantified it at $4.6 million. That added, it looks like just about $3.50 to your G&A per BOE in the quarter. Can you give me an idea of how G&A is going to run per BOE for the rest of the year?

A: Yeah. Poe, this is Jim. Yes, I think kind of that $4 range per BOE is a pretty good run rate for us. In addition to that those acquisition costs, we disclosed that we also had some litigation costs where we're the plaintiff. And so that's coming to fruition now. So that should drop off here in the future.

Q: And Jimmy, was that $1.6 million on litigation? Did I read that correctly?

A: Yeah, in the quarter, that's correct.

Q: And will there be any in the second quarter because that -- I think there's a June trial date there?

A: Yes, certainly. The trial date looming, there'll certainly be some more in the second quarter.